ARC LINE,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAX 1(1)(2), MUMBAI

ITITA 516/MUM/2026Status: DisposedITAT Mumbai30 June 2026AY 2018-1928 pages
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What were the facts?

The appeals before the Income Tax Appellate Tribunal (ITAT) involved two assessees, Bay Lines and Arc Lines, and multiple assessment years (2015-16 to 2018-19 and 2023-24 for Bay Lines; 2016-17 to 2018-19 and 2022-23 for Arc Lines). The appeals arose from orders of the Commissioner of Income Tax (Appeals). The primary dispute concerned the applicability of Article 8 of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) and the existence of a Permanent Establishment (PE) in India. The Departmental Authorities held that the Place of Effective Management (POEM) was in Dubai, thus denying the benefit of Article 8. The Assessing Officer also contended that M/s Freight Connection India Pvt. Ltd. (FCIPL) constituted a Dependent Agent Permanent Establishment (DAPE) in India.

What did the Tribunal hold?

The Tribunal held that the assessee is not entitled to the benefit under Article 8 of the India-Mauritius DTAA, as the POEM was neither in Mauritius nor in India, respectfully following consistent ITAT decisions. Regarding the existence of a fixed place PE (Ground No. 2), the Tribunal found no fixed place PE in India in terms of Article 5(1) of the India-Mauritius DTAA, thus allowing the grounds and holding that no part of the receipts could be taxed in India in the absence of a PE. Consequently, grounds 4 and 5 became infructuous. For the issue of DAPE (Ground No. 3), the Tribunal held that FCIPL, being an agent of independent status working for various entities and not exclusively for the assessee, could not be considered a DAPE. The commission income earned by FCIPL from the assessee varied between 25.76% to 49% of FCIPL's total receipts, supporting its independent status. The Tribunal also found the reasoning of the CIT(A) that Bay Lines and Arc Lines are independent entities and their income cannot be aggregated to be unassailable. Furthermore, the Tribunal held that interest on income tax refund should be taxed at the rate specified under Article 11(2) of the India-Mauritius DTAA, citing ITAT and Bombay High Court precedents. The appeals by the assessees were partly allowed, and all appeals by the Department were dismissed.

What were the issues?

1. Whether the assessee is entitled to the benefit under Article 8 of the India-Mauritius DTAA, considering the Place of Effective Management (POEM) is neither in Mauritius nor in India, turning on the interpretation of Article 8 of the India-Mauritius DTAA. 2. Whether the assessee has a fixed place Permanent Establishment (PE) in India as per Article 5(1) of the India-Mauritius DTAA, concerning the attribution of profits to alleged business activities in India. 3. Whether M/s Freight Connection India Pvt. Ltd. (FCIPL) constitutes a Dependent Agent Permanent Establishment (DAPE) of the assessee in India under Article 5(4) of the India-Mauritius DTAA. 4. Whether the income of Bay Lines and Arc Lines can be aggregated for the purpose of attributing profit to a PE in India. 5. Whether the rate of tax on interest earned on income tax refund should be as per Article 11(2) of the India-Mauritius DTAA. Assessee's Contentions: The assessee conceded that the issue regarding Article 8 benefit was covered against them based on previous ITAT decisions. For Ground No. 2, they argued against the existence of a fixed place PE. For Ground No. 5, they contended that interest on income tax refund should be taxed at the rate specified in Article 11(2) of the India-Mauritius DTAA, citing ITAT and Bombay High Court decisions. Revenue's Contentions: The Revenue agreed with the assessee's concession on Article 8. They argued for the existence of a DAPE in India through FCIPL, citing the agent's role in concluding contracts and performing other functions. They also argued for the aggregation of income of Bay Lines and Arc Lines.

Which sections of the Income-tax Act were involved?

Section 44B,Section 234C

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Heard together (2 matters)

ITA Nos. 520/Mum/2026
ITA Nos. 583/Mum/20

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER

IT(IT)A Nos. Assessment Year 520/Mum/2026 2015-16 521/Mum/2026 2016-17 522/Mum/2026 2017-18 523/Mum/2026 2018-19 524/Mum/2026 2023-24

Bay Lines Deputy Commissioner of Income C/o. Freight Connection India Private Kautilya Bhavan, C-41 to C-42, Sion (East), Mumbai-400 022 G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400 005 PAN/GIR No. AABCB 5853 G (Assessee) : (Revenue) and ITA Nos. Assessment Year 593/Mum/2026 2015-16 525/Mum/2026 2016-17 594/Mum/2026 2017-18 595/Mum/2026 2018-19 596/Mum/2026 2023-24

Deputy Commissioner of Income Tax Bay Lines International Tax, Circle 1(2)(1) C/o. Freight Connection India 6TH Floor, Kautilya Bhavan, G Block, Private Limited Bandra Kurla Complex, Bandra (E), Vs. 3C Runwal and Omkar Esquare, Mumbai-400 005 Sion Chunnabatti Junction, Sion (East), Mumbai-400 022 PAN/GIR No. AABCB 5853 G (Revenue) : (Assessee)

2 ITA Nos. 520/Mum/2026 & others - Bay Lines ITA Nos. 583/Mum/20

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