High Court Of Gujarat
DIT (International Taxation) vs. Venkatesh Karrier Ltd.
Section : 90
Bhaskar Bhattacharya, Actg. CJ. And J.B. Pardiwala, J.
Tax Appeal Nos. 172, 181, 191 & 192 Of 2011
March 20, 2012
ORDER
Bhaskar Bhattacharya, Actg. CJ. – As a common question is involved in all these appeals, they are heard together and are disposed of by this common order.
2. These appeals under section 260A of the Income Tax Act, 1961 [the Act, for short hereafter] are at the instance of the Revenue and are directed against orders passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot in ITA No. 626/Rjt/2010 and analogous appeals for different Assessment Years by which the Tribunal dismissed the appeals preferred by the Revenue against the order of the CIT [Appeals].
3. The only question that falls for determination in all these appeals is whether the Tribunal committed substantial error of law in holding that the assessee was not liable to tax in India as per Article 8 of the Double Taxation Avoidance Agreement [for short, DTAA hereafter] between India and UAE and accordingly was justified in deleting the tax levied by the Assessing Officer.
4. Tax Appeal No. 172 of 2011 is taken up as the lead matter for the purpose of discussion of facts, which are almost common in all these appeals except change of Assessment Years, amount involved, name of vessel, name of master and owner of the vessel etc.
5. The following facts are not in dispute.
[i] The assessee is working as an agent of the ship registered in UAE.
[ii] The assessee furnished Return as required under section 172(3) of the Act claiming that no tax was payable because final freight beneficiary was the shipping Company, a resident of UAE which was not liable to tax as per Article 8 of DTAA.
[iii] The Assessing Officer issued show-cause-notice but in the assessment order, no discussion was made as to why the assessee’s claim was not accepted and was levied tax at the normal rate.
[iv] Being dissatisfied, the assessee preferred appeal before the CIT [Appeals] and the said appellate authority, by relying upon the provisions contained in Article 8 of DTAA between India and UAE came to the conclusion that the Assessing Officer had no authority to tax the owner of the ship in India.
[v] Being dissatisfied, the Revenue preferred appeal before the Tribunal below and by the Tribunal affirmed the order passed by the CIT [Appeals].
6. Being dissatisfied, the Revenue has come up with the present appeals.
7. After hearing Mr. Bhatt, learned senior Advocate appearing on behalf of the Revenue and after going through the materials on record, we find that there is no dispute that tax has been assessed upon the assessee as agent of a shipping Company situated at UAE. In Tax Appeal No. 172 of 2011, according to the Assessing Officer, 31,500 MT of cargo was loaded at the rate of USD.15-25 and it fetched total income of Rs. 14,77,153 at 7.5% after conversion of the amount into Indian Rupees. Similar assessments were made by the Assessing Officer in the other matters also.
8. In order to appreciate the question involved in the present appeals, it will be profitable to refer to Article 8 of the DTAA, which is quoted below:
“1. Profits derived by an enterprise of a Contracting State from the operation by that enterprise of ships in international traffic shall be taxable only in that State.
2. For the purpose of this Article, profits from the operation of ships in international traffic shall mean profits derived by an enterprise described in paragraph (1) from the transportation by sea of passengers, mail, livestock or goods and shall include:
(a) the charter or rental of ships incidental to such transportation.
(b) the rental of containers and relates equipments used in connection with the operation of ships in international traffic.
(c) the gains derived from the alienation of ships, containers and related equipments owned and operated by the enterprise in international traffic.
3. For the purpose of this Article, interest of funds connected with the operation of ships in international traffic shall be regarded as profits, derived from the operation of such ships and the provisions of Article 11 shall not apply in relation to such interest.
4. The provisions of paragraphs (1), (2) and (3) shall apply to profits from the participation in a pool, a joint business or an international operating agency.”
9. At this stage, it will also be profitable to refer to the provisions contained in Circular No. 333 dated February 2, 1982 issued by the Board which states that the provisions made in DTAA would prevail over the general provisions of the Act. Circular No. 732 dated December 20, 1995 further clarifies that if ships are owned by an enterprise belonging to a country, with which India has entered into an agreement of avoidance of double taxation, and the agreement provides for taxation of shipping profits only in the country of which the enterprises is a resident, no tax is payable by such ships at the Indian ports.
10. After taking into consideration the above circulars issued by the Board and also the provisions contained in Article 8 of the DTAA, we find that both the Tribunal below and the CIT [Appeals] rightly held that in such a situation, the owner of the ship being admittedly a resident of UAE, there was no scope of taxing the income of the ship in any of the ports in India. The agreement between the two countries has ousted the jurisdiction of the taxing officers in India to tax the profits derived by the enterprise once it is found that the ship belongs to a resident of the other contracting country and such position has also been clarified by the Circulars issued by the Board as indicated above.
11. We thus find that no substantial question of law is involved in these appeals, and consequently, all these appeals are summarily dismissed.
[Citation : 349 ITR 124]
