HapagLloyod Container Line Gmbh v. Addl. Director of Income Tax (Indernational Taxation)

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The Tax Publishers2012 TaxPub(DT) 2192 (Mum-Trib) : (2012) 146 TTJ 0279 : (2012) 051 SOT 0299 : (2012) 070 DTR 0393 INCOME TAX ACT, 1961 --Double taxation relief--Agreement between India and Germany Profit earned from operation of ships--The assessee was a non-resident company engaged in the operation of ships in international traffic. The assessee is a tax resident of Germany. The assessee filed its return of income on 23-10-2007 declaring total income of Rs. nil. The assessing officer noticed that the assessee was transporting goods by means of feeder vessels which were neither owned nor chartered by the assessee company. On being asked, the assessee explained that these vessels are under slot/pooling arrangements with various other operators and such activity is allowable under DTAA between India and Germany. The assessing officer, after examining the contentions of the assessee as well as considering the decisions of the Tribunal on the point, has observed that the total income shall be assessed under the provisions of section 44B of Income Tax Act @ 7.5 per cent. Alternatively, the claim of goods moved through feeder vessels may not qualify for the benefit of DTAA between Indian and Germany. Accordingly, the assessing officer issued the draft order dt. 31-12-2009 under section 144C(1) for the consideration of the DRP. The assessee filed its objection in Form 35A against the draft order. DRP has given part relief to the extent of the income earned on account of goods transported through feeder vessels, if there is linkage between feeder vessels and mother vessels owned or charted by the assessee. Consequently, the assessing officer passed the final assessment order dt 26-6-2010 whereby given a relief in respect of the freight and THC earnings on feeder vessels as per the directions of DRP. Held: Where assessee was carrying on business of opration of ships in India through an agent HLT Ltd., which concludes the contract of cargo transportation by issuing bill of lading thus, assessee is having PE in India in terms of article 5 of DTAA between India and Germany. Once it is clear that the assessee is carrying on business through PE in India, then remunerating the agent at arm's length is irelevant. Only such profit that is attributable to PE can be brought to tax in India. Neither assessing officer nor DRP has done this exercise, therefore, issue is set aside to assessing officer for de novo adjudication. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2192 (Mum-Trib) : (2012) 146 TTJ 0279 : (2012) 051 SOT 0299 : (2012) 070 DTR 0393

INCOME TAX ACT, 1961

--Double taxation relief--Agreement between India and Germany Profit earned from operation of ships--The assessee was a non-resident company engaged in the operation of ships in international traffic. The assessee is a tax resident of Germany. The assessee filed its return of income on 23-10-2007 declaring total income of Rs. nil. The assessing officer noticed that the assessee was transporting goods by means of feeder vessels which were neither owned nor chartered by the assessee company. On being asked, the assessee explained that these vessels are under slot/pooling arrangements with various other operators and such activity is allowable under DTAA between India and Germany. The assessing officer, after examining the contentions of the assessee as well as considering the decisions of the Tribunal on the point, has observed that the total income shall be assessed under the provisions of section 44B of Income Tax Act @ 7.5 per cent. Alternatively, the claim of goods moved through feeder vessels may not qualify for the benefit of DTAA between Indian and Germany. Accordingly, the assessing officer issued the draft order dt. 31-12-2009 under section 144C(1) for the consideration of the DRP. The assessee filed its objection in Form 35A against the draft order. DRP has given part relief to the extent of the income earned on account of goods transported through feeder vessels, if there is linkage between feeder vessels and mother vessels owned or charted by the assessee. Consequently, the assessing officer passed the final assessment order dt 26-6-2010 whereby given a relief in respect of the freight and THC earnings on feeder vessels as per the directions of DRP. Held: Where assessee was carrying on business of opration of ships in India through an agent HLT Ltd., which concludes the contract of cargo transportation by issuing bill of lading thus, assessee is having PE in India in terms of article 5 of DTAA between India and Germany. Once it is clear that the assessee is carrying on business through PE in India, then remunerating the agent at arm's length is irelevant. Only such profit that is attributable to PE can be brought to tax in India. Neither assessing officer nor DRP has done this exercise, therefore, issue is set aside to assessing officer for de novo adjudication.