A. P. MOLLER MAERSK A/S,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) 1(1)(2), MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

1.1 On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) 55 CIT(A) 55 and the Deputy Commissioner of Income Tax, International Taxation 1(1)(2). Mumbai A.Y.2014-15 [AO] has erred in denying the benefit of Article 9 of the Tax Treaty to the interest on income tax refund and taxing the same under Article 12 of the Tax Treaty. 1.2 The CIT(A) and the AO failed to appreciate that income tax refund has arisen from income earned from operation of ships in international traffic. Further, apart from operation of ship in international traffic, the Appellant does not have any separate business activity in India 1.3 The CIT(A) and the AO ought to have held that interest on income tax refund is covered by para 4(a) of Article 9 of the Tax Treaty, being interest on funds connected with the operation of ship in international traffic and therefore taxable only in Denmark and not in India.”

3. The brief facts of the case are that the assessee is a Danish public Limited company listed on the Stock Exchange of Copenhagen. The assessee is engaged in the business of shipping, chartering and related activities in international traffic and has earned revenue from such shipping operation with India. The assessee is a Danish Public Limited Company and is tax resident of Denmark. The assessee is engaged in operation of ships in international traffic, which is covered by Article 9 of the Double Taxation Avoidance Agreement (DTAA) between India and Denmark. In the return of income, assessee has submitted that the gross freight earnings of Rs.87,87,61,39,062/- is not taxable as per Article 9(1) of India- Denmark DTAA as the profits derived from the operations of ships in International traffic by an enterprises of Denmark are taxable only in Denmark and not in India. The assessee received the interest on income taxable refund which was found to be taxable under Aticle 12(2) of the Tax Treaty. The benefit u/s 9 of the Tax Treaty was denied. Thereafter, the assessee filed an appeal before the CIT(A) who also dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us.

ISSUE Nos. 1 to 3 2 A.Y.2014-15

Ground no. 6 is with regard to interest on income tax refund of Rs. 42,979,609/- received is not taxable as interest income under Article 12(2) of the Tax Treaty. The appellant submitted before me that in the instant case, the interest has arisen because some of the customers have erroneously deducted tax at source from freight income which is exempt under tax treaty. So in effect interest is received on funds which are generated from carrying on the business of operation of ships in international traffic. However, it is seen that this ground is covered against the appellant in his own case of A.Y. 2005-06 by Hon’ble Mumbai ITAT. Hence following the order of Hon'ble ITAT appellant's this ground is dismissed.

3 A.Y.2014-15