Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI G. MANJUNATHA, HONBLE
PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Mumbai dated 14.08.2013 for the Assessment Year 2008-09.
2 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 2. Assessee in its appeal has raised the following grounds: -
1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)'] erred in confirming the action of the learned Additional Director of Income-tax (International Taxation) - 4 [ADIT] in denying the benefit of Article 8 of the India- Malaysia Double Taxation Avoidance Agreement (Tax Treaty) on freight income earned by the appellant from shippers for transporting cargo loaded on feeder vessels for onward transportation by vessels owned, leased or chartered by the Appellant.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not treating the freight income earned by the appellant from shippers for containers loaded on feeder vessels as income from use / maintenance / rental of containers, etc. and thereby erred in not granting the benefit of Article 8(3) of the Tax Treaty to such income.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned ADIT in holding Crescent Shipping Agencies (India) Ltd. ('Crescent) as a 'permanent establishment' ('PE') of the appellant in India under Article 5 of the Tax Treaty. 3(a) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned ADIT in holding Crescent as a Fixed Place PE under Article 5(1) of the Tax Treaty. 3(b) On the facts and in the circumstances of the case and in law, the learned ClT(A) erred in confirming the action of the learned ADIT in holding Crescent as an agency PE under Article 5(5) of the Tax Treaty. 3(c) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that Crescent is not a PE within the meaning of Article 5(7) of the Tax Treaty since 3 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad Crescent is an independent agent as the transactions between the appellant and Crescent are on an arm's length basis. Furthermore, the learned CIT(A) erred in not appreciating that Crescent is a legally and economically independent entity.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that no income of the appellant could be brought to tax in India as the arm's length commission paid to Crescent, which is taxable in India in the hands of Crescent, fully extinguishes the tax liability of the appellant in India.
5. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in estimating the freight attributable to the feeder voyage at 25% of the total freight from voyages involving feeder operations. 5(a) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating that even under the Income Tax Act, 1961, income from shipping operations is deemed at 7.5% of the total collections, and therefore, the freight attributable to the feeder voyage ought to have been computed by applying the rate 7.5% to the cost of feeder voyage. 5(b) without prejudice to Ground NO.5(a) above, the learned CIT(A) erred in not appreciating that the freight attributable to the feeder voyage should have been computed by applying the rate of 10% to the cost of feeder voyage even though this rate has been used by the learned ADIT himself for computing the taxable shipping income.
6. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned ADIT, in computing the taxable shipping income at ₹.15,502,690/- by applying deemed income rate of 10% (instead of 7.5% given under section 44B) to the freight attributable to feeder voyage.
4 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 3. There is a delay of 471 days in filing the appeal by the assessee and the assessee in its petition supported by the affidavit explained the reasons for the delay in filing the appeal as under:
1. 1. The appellant is shipping company incorporated in Malaysia and is, inter alia, engaged in business of operation of container ships in international traffic through owned/chartered/pooled ships.
2. For AY 2008-09, MISC Berhad filed its Return of Income on 21 August 2008 declaring total income of ₹.19,80,70,343 and claiming refund of ₹.95,98,054.
3. The learned Assessing Officer ('AO') vide order dated 22 December 2010, passed under section 144C(3) read with section 143(3) of the Income Tax Act, 1961 ('IT Act'), assessed the total income of the Company at ₹. 1,55,79,820 and consequently determined the refund at ₹.24.45,436. Being aggrieved by the order of the learned AO, the company filed an appeal before the learned Commissioner of Income Tax (Appeals) - 11, Mumbai ['CIT(A)']. The learned CIT(A), vide his order dated 14 August 2013, granted part relief to the Company and upheld the action of the learned AO on most of the grounds.
4. Pursuant to the aforesaid order, the appellant wishes to prefer an appeal before your Honors. As per section 253(3) of the IT Act, the last date for filing an appeal before your Honours is 60 days from the date of service of the learned CIT(A)'s order to the Company. However, due to sufficient cause, as explained in the ensuing paragraphs. the appellant was not able to file its appeal on or before the due date and would now like to make the following submissions before your Honours in order to enable you to consider our application for condonation of delay favorably: Petition for condonation: 4.1 The appellant is a foreign company having its registered office address in Malaysia. The appellant does not have any branch, place of office or 5 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad establishment or employees in India. The appellant had appointed an Indian company (Crescent Shipping Agency (I) Ltd. and MISC Agencies India Private Limited) as its agent to perform routine agency functions. However, the appellant discontinued its global container shipping operations from June 2012 due to continued losses. Consequently, the appellant terminated the agency agreement with its agent. Since 2012, MISC has no presence in India, even through its agent. It had filed its last return of income for Financial Year 2011-22 (AY 2012-13) in relation to shipping income earned from India. 4.2 For convenience sake, the correspondences related to the appellant are still being delivered to the office address of the erstwhile agent of the appellant in India i.e 4th floor, Geetmala complex, Near Shah Industrial Estate, Deonar, Govandi, Mumbai - 400 088. The concerned person who receives the correspondences at such address, on account of good faith, subsequently delivers the same to the appellant in Malaysia. Hence, there is always a delay in receiving the documents by the appellant. 4.3 In June 2014, the authorized representative of the appellant, was made aware by the Assessing Officer that the learned CIT(A) has disposed off the appeal for AY 2008-09 vide order dated 14 August 2013. Immediately thereafter, a copy of the same was obtained by the authorized representative and provided to us. 4.4 We understand from the office of the learned CIT(A) that the said order was served on 14 August 2013 at the agent’s address in India. The Appellant, subsequently checked with the erstwhile agent in this regard, but they denied of receipt of any such order. Your Honours may please note that, till date, the appellant/agent has not received the original order passed by the learned CIT(A).
6 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 4.5 From the above, Your Honours will appreciate that there is a sufficient cause which resulted in this delay of 471 days in filing of the appeal. As such, the delay in filing this appeal is not due to any malafide intention on the part of the appellant.
5. Here, we also wish to submit that section 253(5) of the IT Act grants powers to your Honours to admit appeals even after the expiration of the prescribed period if your Honours is satisfied that the appellant had "sufficient cause" for not presenting the appeal within that period. Accordingly, we request your Honours to condone the delay in filing of the subject appeal petition as there was, sufficient cause for not presenting the appeal on time.
6. In support of our submission above, we wish to bring to your Honours kind attention, that the appellate authorities and the Courts have been consistently adopting a liberal approach on the powers to condone delay, so that the ends of justice are sub-served. 6.1 In this regard, we refer to the decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition Anantnag and Anr. Vs Katiji and Ors, (167 ITR 471) (copy enclosed as Annexure A), wherein the Hon’ble Supreme Court has interpreted the term "sufficient cause" in the context of the power to condone delay under Section 5 of the Limitation Act, 1963. According to the Hon'ble Supreme Court, the expression "sufficient cause" employed by the Legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub-serves the ends of justice, that being the life-purpose of the existence of the institution of Courts. 6.2 In this case, the Hon'ble Supreme Court has advocated a liberal approach to this issue by laying down the following broad principles: • Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest 7 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad that can happen is that a cause would be decided on merits after hearing the parties. • When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. • There is no presumption that delay is occasioned deliberately', or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. • It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
In support of our submission, we also wish to place reliance on the merits of the following citations: • Babulal Jain vs ITO [2008] 205 Taxation 43 (HC Andhra Pradesh) • Bharat Auto Center vs CIT [2005] 282 ITR 366 (HC Allahabad) • Special Tehsildar, Land Acquisition, Kerala vs K.V.Ayisumaa, [1996] AIR (SC 2750) • N.Balakrishnan vs. M.Krishnamurthy (1998] 7SCC 123 • O.P.Kathpalia Vs. Lakhmir Singh (1984) AIR (SC 1744) • CIT vs. West Bengal Infrastructure Development Finance Corporation Ltd [2010] 334 ITR 269 (Supreme Court) 8. In view of the above factual and legal petition, it is humbly submitted that a liberal approach be adopted by your Honours as laid down by the Hon'ble Supreme Court in the 8 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad citations referred above, in exercising the powers conferred on your Honours under section 253(5) of the IT Act. the expression “sufficient cause” used in Section 253(5) of the IT Act, is adequately elastic to enable your Honour to allow the appeal be contested on merits rather than to dispose it on mere technicalities more so in a case where there was no malafide intention on the part of the appellant to cause the delay, as explained above. Accordingly, in the interest of natural justice, the appellant requests your Honours to kindly condone the delay in filing of the appeal and oblige.
Ld.DR vehemently opposed for condonation of delay.
On a perusal of the petition and the reasons explained therein for the delay in filing the appeal, we find the assessee is prevented with reasonable cause in filing the appeal with delay of 471 days. The assessee could properly explain the delay in filing the appeal thus we condone the delay of 471 days and admit the appeal for disposing off the same on merits.
Coming to the merits, Learned Counsel for the assessee submits that the main issue in appeal i.e. Ground no. 1 is relating to confirming the action of the Assessing Officer in denying the benefit of Article-8 of the India- Malaysia Double Taxation Avoidance Agreement on freight income earned by the assessee from shippers for transporting cargo loaded on feeder vessels for onward transportation by vessels owned, leased or chartered by the assessee. Ld. Counsel submits that this issue has been 9 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad decided in favour of the assessee by the Coordinate Bench in assessee’s own case in ITA.No. 6499/MUM/2012 (AY 2004-05), ITA.No. 6500/MUM/2012 (AY 2005-06), ITA.No.6431/MUM/2012 (AY 2005-06), ITA.No. 6501/MUM/2012 (AY 2006-07), ITA.No.6502/MUM/2012 (AY 2007-08), ITA.No. 6432/Mum/2012 (AY 2007-08) and ITA.No. 6503/MUM/2012 (AY 2009-10) dated 16.07.2014, holding that the entire profits derived from the transportation of goods carried on by the assessee is to be treated as profit from operation of ships and therefore the benefit of Article-8 cannot be denied to the assessee on the part of the freight from voyage for the feeder vessels.
7. Ld. DR supported the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below and the Coordinate Bench decision. There is no dispute that the facts are identical in the Assessment Year under appeal before us and in the immediately preceding Assessment Years 2004-05 to 2007-08. The Coordinate Bench had decided the issue in Ground No. 1 in favour of the assessee observing as under:
“23. We will now independently examine Article–8(1) and Article–8(2) of Indo–Malaysia DTAA. The crucial phrase or words which need to be analysed here are “operation of ships”, transportation by the “owner” or “lessees” or “charterers” of ships. First of all, the word “operation” is different from the word 10 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad “operate” or “operator”. The word “operate” means to control the functioning of machine, process or system. Here, the person in control is important. The word “operator” means, a person who operates the equipment or a machine. Here for our purpose operator of ship. Whereas, the word “operation” connotes the fact or condition of functioning or being active i.e., some kind of activity. The operation of ships cannot be understood merely as an operator of ships or a person who operates the ships. The word “operation of ships” has to be understood in a broader sense of carrying out shipping activity. The carrying of shipping activity could be as an owner of a ship or as a lessee of a ship or as a charterer of a ship. Here, the word “owner” has to be inferred as a person who owns a ship and the word “lessee” as a person who owns the ship for a given lease period. The word “charterer” has to be understood as a person who charters or hires a ship for a voyage. The Law Lexicon (P. Ramanatha Ayier, 2nd Edn.), defines the word “charterer” as “one who, by contract acquired the right to use a vessel belonging to another. One who charters or hires or engages the whole or part of a ship under an agreement of Charter Party for a voyage”. Here, the word “charterer” does not mean the owner or lessee of a ship. The word “charter Party” has been defined in Law Lexicon as “an indenture of covenants and agreements made between merchants and mariners concerning their sea affairs. It is a contract by which a ship or some principal part thereof, is let to a merchant for conveyance of goods on a determined voyage to one or more places”. From this definition, it is amply evident that the word “charterer” means hiring of a ship for a voyage, either whole of the ship or a part of a ship. The word “charter” completely eludes the concept of ownership. A charterer of a ship cannot be the owner of a ship. Therefore, the contention of the learned Departmental Representative that the word “charterer” has to be understood in the context of owner or lessee that is having control of the ship is perhaps not the correct understanding of the word “charterer”. The principle of noscitur–a–sociis i.e., the meaning of doubtful word may be ascertained by reference to the meaning of the words associated with it will also not apply here. In other words, the meaning of the word “charterer” cannot be imported from or to be understood from the meaning of the word “owner” or “lessee”. The learned counsel, before us, has also 11 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad filed various meaning of the term “charter” or “charterer”, which are as under: – i) Dictionary of International Business terms (Financial World Publishing), defines the term “Charter” as under: – “To rent an aircraft or vessel, or a part of its cargo space, for a particular journey or a period of time.” ii) Black’s Law Dictionary (9th Edition) defines the term “charter” which includes the term “space charter” which is defined as under: – “A charter for a part of a vessel’s capacity, such as a specified hold or deck or a specified part of the vessel’s carrying capacity.” iii) K.J. Aiyar‟s Judicial Dictionary (12th Edition) defines the term “charter party” as under: – “An agreement in writing by which a ship – owner agrees to let an entire ship or part thereof, to a merchant, for the carriage of goods on a specified voyage, or during a specified period, for a sum of money which the merchant agrees to pay as freight for their carriage.” iv) Concise Law Dictionary by P. Ramanatha Aiyar (Year 2005), defines the term “charterer” as under: – “One who charters or hires or engages the whole or part of a ship under an agreement of charter party for a voyage.” v) Chamber’s 20th Century dictionary defines the term “charterer” as under: – “to establish by charter: to let or hire, as a ship, on contract. vi) Modern legal usage dictionary defines the term “charterer” as under: – 12 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad “a person to whom a vessel is chartered in a charter party.” vii) Oxford dictionary defines the term “charterer” as under: – “A contract to hire an aircraft, ship, etc. for a special purpose.” viii) Maritime and Shipping Dictionary 2012, defines the term “charter” as under: “A voyage charter whereby the ship owner agrees to place a certain number of container slots (“TEU and/or FEU) at the charterer’s disposal.”
From the above definitions of the term “charter” or “charterer”, one thing is amply clear that it means hiring of vessels or a ship or a part of its space under an agreement for a voyage. Thus, even a part of a space in the vessels for a particular journey is also considered as “charter of ship” or “charterer”. In the decision of Balaji Shipping U.K. Ltd. (supra), while referring to the judgment of Tychy (supra), the High Court have noted that a “slot charter” and a “voyage charter” of a part of a ship are in a sense charterers of a space in a ship.
From the above discussion, the following inferences can be deduced: i) Firstly, the operation of a ship can be done as charterer which does not mean to own or control the ship either as an owner or as a lessee; ii) Secondly, charterer is a hirer of a ship under an agreement or arrangement to acquire the right to use a vessel or a ship for the transportation of a good on a determined voyage, either the whole of the ship or part of the ship or some space of the ship in a charter party agreement; and iii) Thirdly, the word “charterer” includes a voyage charter of a part of a ship or a slot, as it is also 13 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad arrangement or agreement to hire a space in a ship owned and leased by other persons. Thus, in our opinion, the word “charterer” should not be confused from the word “owner” or “lessee” or having control of the ship or as an operator of the ship. The operation of ship can be done as a charterer, which includes part of a ship or particular space in a ship.
Under the Income Tax Act, 1961, there is a separate code of shipping, Chapter–XIIG, which contains special provision relating to income of shipping companies. Section 115VB, defines operating ships in the following manner: – “Section 115VB: For the purposes of this Chapter, a company shall be regarded as operating a ship if it operates any ship whether owned or chartered by it and includes a case where even a part of the ship has been chartered in by it in an arrangement such as slot charter, space charter or joint charter : Provided that a company shall not be regarded as the operator of a ship which has been chartered out by it on bareboat charter-cum-demise terms or on bareboat charter terms for a period exceeding three years.”
27. Though the above definition of “operating of ships” is for the purpose of Chapter–XIIG, however, we are referring only for a limited inference for understanding the concept that “charterer of ships” includes even a part of the ship in an arrangement such as slot charter, space charterer or joint charter. The slot charterer or space charterer in a ship cannot be read in isolation or separate from the meaning of charterer. As held earlier by us, though the decision of the Hon'ble Jurisdictional High Court in Balaji Shipping U.K. Ltd. (supra), cannot be applied in a blanket manner in the present case, however, for the purpose of understanding the meaning of “charter” or “charterer” or “slot charterer”, the said decision gives in–depth analysis which can be adopted in the present case also only for the purpose of assigning the true meaning of the word “charterer”.
14 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 28. Another very important observation made by the High Court which is quite relevant to note is, how the slot charterer agreements or space charterer agreement are inextricably linked with the shipping business in the present day shipping business. The said observations are as under: – “26. An enterprise may not ply the ships owned or chartered or otherwise controlled or managed by it in respect of certain routes. It would however, on account of the business exigencies, be required to carry cargo on such routes. Business expediency could arise on account of a number of reasons and different situations such as obliging regular clients, or cultivating new ones. If it were not to do so, it may well loose clientele. Ships owned or chartered or otherwise controlled or managed by an enterprise may not be available on the particular route on a given day or for a particular period. The enterprise may already have entered into contracts or may even be required to enter into contracts for the carriage of goods on that route on that day or during that period. The trade would expect, the enterprise to perform its contracts and/or ensure there is no break in its services. This it can do by availing slot hire agreements. Their refusal or failure to do so, may well affect their business and reputation adversely.
By availing the facility of slot hire agreements, the enterprise does not arrange the shipment on behalf of the owner of the said vessel, but does so on its own account on a principal to principal basis with its clients. Such cases also have a nexus to the main business of the enterprise of the operation of ships. They are ancillary to and complement the operation of ships by the enterprise. If they are not merely ancillary to the main business of operation of ships but constitute the primary and main activities of the enterprise, it may be a different matter, which we are not called upon to consider in the facts and circumstances of the present case.”
15 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 29. From the above observations, it can be understood that the facility of slot hire agreement with the feeder vessels to complete the voyage is not merely an auxiliary or incidental activity to the operation of ships, but inextricably linked. If the transportation of cargo by feeder vessels belonging to other enterprise is only a part of main voyage by the mother ship i.e., owned or leased by the assessee enterprise, then it has to be taken as a part and parcel of the operation, which is inextricably linked with the completion of the entire voyage. The linkage between the transportation by feeder vessels, mother vessels of the ship owned by the assessee has to be established. In the present case, insofar as the issue of linkage between the voyage performed between the feeder vessels and mother vessels, the assessee has been able to establish before the A.O. which is evident from the observations of the A.O. in Para– 7 & 8, wherein he held that the freight earned from carriage of goods in international traffic by operation of ships including feeder vessels operated by 3rd party operator, the assessee has furnished documentary proof to substantiate the linkage between the voyage performed on feeder vessels and mother vessels. The Assessing Officer’s case rests upon the premise that voyage carried on by the feeder vessels has to be segregated for the purpose of allowing benefit under Article–8, because chartering of some space i.e., slot chartering, feeder vessels cannot be equated with chartering of complete ship. By this, the Assessing Officer means that the assessee must have complete control of such ships even under the charter agreement. Thus, the view taken by the Assessing Officer for denying the benefit under the present Article–8 is not tenable as per our discussion in the forgoing paragraphs, that chartering of some space or slot charterer in a ship is actually a part and parcel of charter of a ship. Under the charterer agreement, there is no ownership or control of entire ship because the risk under the charter party agreement or arrangement is upon the owner of the ship who generally assumes an operational risk for transporting the cargo of the person who has hired the ship and the hirer agrees to pay for conveyance of goods on a determined voyage. The risk of the assessee is towards its customers from whom he has agreed to transport the cargo / goods from the destination port of booking to the final destination port. Thus, in our opinion, such 16 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad a strict interpretation of the word “charterer” as adopted by the Department cannot be sustained.
Now coming to the decision of Cia–De–Navegacao Norsul (supra), we find that in the said decision, the assessee had failed to link and establish the voyage wise transportation, whether the feeder vessels were actually loading the goods into the mother vessels, which the assessee had claimed that it was operating. This is evident from Para– 2 of the said Tribunal order. Further, as pointed out by the learned counsel, the plea of the assessee that there was a slot charter agreement with the feeder vessel orally was not supported by any material or evidence. It was in this context that this plea of slot charter agreement with the feeder vessel was rejected. Further, in view of the meaning of the concept of charter and slot charter as explained by the Hon'ble Jurisdictional High Court in Balaji Shipping U.K. Ltd. (supra), the said decision may not apply here in this case, particularly when in the said decision, the Tribunal has not discussed what is meant by “charterer” as explained later on by the Hon'ble Bombay High Court. Regarding other decisions relied upon by the learned Departmental Representative which are mainly based on the decision of the Federal Express Corporation (supra), we find that in this case also, the plea of the assessee that it had booked space on Air India’s aircraft and such booking of space amounted to charter of aircraft partly, was rejected on the ground that this was not raised by the assessee before the lower authorities. The Tribunal thus, set aside the issue to the file of the Assessing Officer to examine when a space is booked with other airlines, the question, whether transportation through such airlines can be said to be transportation by aircraft chartered by the assessee or not with reference to the first part of the definition of Article–8(2) with Indo–U.S. treaty. Similarly, the decision of M/s. Simatech Shipping Forwarding LLC, as relied upon by the learned Departmental Representative, will not apply because in this case also, the matter was set aside to the file of the Assessing Officer to decide the case in the light of the decision of the Federal Express Corp. (supra). Similar was the case in United Parcel Service (supra) also. In none of the decisions, the true import or meaning of the word “charterer” has been taken into consideration as adopted by the subsequent decision of the Hon'ble Jurisdictional High Court.
17 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad 31. Thus, in our conclusion, we hold that transportation of cargo in the container belonging to the assessee from Indian Port i.e., Port of booking to the Hub Port through feeder vessel by way of space charter / slot charter arrangement, falls within the ambit of the word “charterer” and, therefore, it cannot be segregated form the scope of “operation of ships” as defined in Article–8(2) of the Indo–Malaysian treaty. In the present case, the voyage between the Indian Port to the Hub Port through feeder vessel and from Hub Port to final destination port through mother vessel owned / leased by the assessee are inextricably linked and there is complete linkage of the voyage and, therefore, the entire profits derived from the transportation of goods carried on by the assessee is to be treated as profits from operation of ships and, therefore, the benefit of Article–8, cannot be denied to the assessee on the part of the freight from voyage by the feeder vessels. Thus, ground No.2, raised by the assessee in all the years under appeal is allowed.
Facts and circumstances being identical, respectively following the said decision, we hold that the entire profits derived from the transportation of goods carried on by the assessee is to be treated as profits from operation of ships and therefore the benefit of Article-8 cannot be denied to the assessee on the part of the freight from voyage by the feeder vessels. Thus Ground No.1 raised by the assessee is allowed.
Since the benefit of Article-8 has been given to the assessee on the freight income earned by it, we are not adjudicating upon the plea for the benefit under Article-8(3). Similarly, the issue of permanent establishment Article-5 is also not adjudicated upon as the same will come into question once the benefit under Article-8 is denied and income is to be computed 18 ITA.No.574/MUM/2015 (A.Y: 2008-09) MISC Berhad as per Article-7. Thus the rest of the grounds of appeal are treated as academic in nature.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on the 22nd November, 2017.