Income Tax Appellate Tribunal - Mumbai
Hapag-Lloyd Ag , Mumbai vs Dy Cit (International ... on 31 January, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL "I " BENCH, MUMBAI
BEFORE SHRI PRASHANT MAHARISHI, AM
And
SHRI PAVAN KUMAR GADALE, JM
ITA No. 972/mum/2021
(A.Y. 2017-18)
Hapag-Lloyd AG The Dy. Commissioner of
C/o Hapag-Lloyd India Pvt. Income-tax (International
Ltd. Taxation), Range -2(2)(2),
403 & 404, Satellite Gazebo, Vs. room No. 1606, 16 t h floor,
A W ing, 4 t h Floor, Guru Air India Building, Nariman
Hargoindji Marg, Andheri Point, Mumbai-400 021
(East), Mumbai-400 093
Appellant .. Respondent
PAN No. AACFE7262L
Assessee by : Shri Nishant Thakkar
Ms. Jasmin Amalsadvala,
Advocates,
Revenue by : Shri Milind Chavan, DR
Date of hearing : 08.12.2021
Date of Pronouncement: 31 .01.2022
ORDER
PER PRASHANT MAHARISHI, AM:
01. This appeal is filed by Hapag-Lloyd AG [ the Appellant/ Assessee] against the order dated 19th April, 2021 passed by The Dy. Commissioner of Income Tax (International Taxation) 2(2)(2), Mumbai (the Learned Assessing Officer/ AO ) u/s 143 (3) rws 144C (13) of The Income tax Act [ The Act] pursuance to the directions of The Dispute Resolution Panel-1, Mumbai (the learned DRP), issued on 13/3/2021 wherein the total income of the assessee Page | 2 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 was assessed at ₹ 1,29,14,700/- against returned income of Rs. Nil.
02. The assessee has raised the following grounds of appeal:-
"1. erred in assessing the income of the appellant at Rs. 1,29,14,700/- as against Rs Nil returned income Taxability of freight charges of INR 17,21,95,959/- from transportation of cargo through feeder vessels
2. erred in holding that freight income from transportation of cargo through feeder vessels is not eligible for benefit under Article 8 of India-Germany DTAA,
3. erred in holding that while income from feeder vessels would fall within the ambit of section 44B of the Act whereas the same shall not eligible for benefit under Article 8 of India-Germany DTAA:
4. erred in not taking cognizance of the decision of jurisdictional Bombay HC/ ITAT in the Assessees own case for AY 2005-06 to AY 2011-12, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17 wherein the Hon'ble HC/ Hon'ble ITAT has held that freight income from transportation of cargo through feeder vessels is eligible for benefit under Article 8 of the India-
Germany DTAA;
Hapag Lloyd India Private Limited (HLIPL') held to be agency permanent establishment ('PE') of the Assessee in India Page | 3 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18
5. erred in holding that HLIPL constitutes an agency PE of the Appellant in India, without providing cogent reasons for the same;
6. without prejudice to the above, erred in not appreciating that HLIPL is not a dependent agent of the Appellant as per Article 5 of India-Germany DTAA;
7. without prejudice to the above, failed to appreciate that even if it is held that HLIPL constitutes an agency PE of the Appellant in India, no further profits could be attributed to such PE since the Appellant has remunerated HLIPL on an arm's length basis;
Short grant of TDS credit of INR 25,06,606/-
8. erred in not adjudicating the ground and not following the directions of Hon'ble DRP wherein the Hon'ble DRP has clearly instructed the learned AO to verify the submissions and claims of the Appellant and accord TDS credit where legitimately due to the Appellant
9. failed to appreciate the written submissions and evidences filed by the Appellant before the learned AO;
10. erred in not granting TDS credit to the extent of INR 25,06606/- which was incorrectly deposited in the PAN No of the Agent of Appellant whereas Agent has not taken credit for the same;
Page | 4 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18
11. erred in not appreciating the fact that the corresponding receipts of INR 1194,94364/- on which the aforesaid tax has been deducted has been considered for claim of exemption under section 90(2) read with Article 8 of the India - Germany DTAA and forms a part of the total gross receipts of INR 24,92,37,10,917/-;"
Levy of interest u/s234 B of the Act
12 . erred in levying interest of ₹ 2,658,684/- u/s reboot B of the act as against rupees nil payable by the appellant initiation of penalty proceedings u/s 270A of the Act
13. erred in initiating penalty proceedings u/s 270 A of the Act 14 erred in law in levying penalty on account of furnishing inaccurate particulars of income which is not applicable u/s 270A of the Act
03. The fact shows that assessee is a limited liability company incorporated and is a tax resident of Germany. It is engaged in transportation of cargo to and from India. It also transports cargo on vessels owned/chartered/pooled on slot arrangement basis. The assessee has claimed that its income is not chargeable to tax in India as per the provisions of Double Taxation Avoidance Agreement [ DTAA] between India and Germany.
04. It filed original return of income on 30.11.2016, declaring a income of ₹186,92,78,320/- which was revised on Page | 5 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 30.03.2018 at ₹ Nil. The case of the assessee was selected for scrutiny. The learned Assessing Officer noted that assessee has claimed the benefit of Article 8 of India Germany DTAA with respect to the income from Feeder Vessel. The assessee was asked to show whether it has a permanent establishment in India or not. The assessee replied on 22.11.2019, submitted that it books space and slots on feeder vessels and transport cargo through such vessels. It also said that it is necessary for slot hire agreement, which are directly connected and inter linked with an integral part of the enterprise business of operation of ships. It is therefore, submitted that if DTAA is construed to include activity directly or indirectly connected with the operations of the ship, income from slot charters and feeder vessels are also covered for benefit. It also relied on the decision of Hon'ble Bombay High Court in the case of Balaji Shipping (UK) Ltd (77 DTR
361) and decision of the co-ordinate Bench in CGM France [27 SOT 367 (Mum)]. The assessee also submitted that identical issue in case of the assessee has been decided by the ITAT in favour of assessee, which has been confirmed by the Hon'ble Bombay High Court, where in appeal filed by the Assessing Officer is dismissed. Therefore, issue is squarely covered in favour of the assessee.
05. The learned Assessing Officer held that Revenue has not accepted the decision of Hon'ble Bombay High Court in the case of Balaji Shipping (supra) and in assessee's own case Page | 6 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 the decision of the Hon'ble Bombay High Court have been challenged before the Hon'ble Supreme Court in a SLP. The Assessing Officer even otherwise, stated that Article 8 of India Germany DTAA does not cover the issue as stated in the assessment order for Assessment Year 2007-08. The Assessing Officer also held that as assessee is carrying out of its business of operation of ship through its agent in India through Hapag - Lloyd India Ltd., who concludes the contract. Thus, it is a permanent establishment of assessee in India as per Article 5 of DTAA. Therefore, income of the assessee is also chargeable to tax in India. Therefore, he applied the provisions of section 44B of the Act. The learned Assessing Officer obtained details of total freight income and noted that freight earned from feeder to feeder vessels and freight earned from entire Journey of feeder vessels is ₹17,21,95,959/- . On this income relief as per Article 8 of India Germany DTAA is not available. Therefore, in terms of provisions of Section 44B of The Act, it is chargeable as income at 7.5% of total freight. Accordingly, the total income of the assessee was determined at ₹1,29,14,697/-by draft assessment order on 18.12.2019.
06. The assessee filed objection before the DRP, who rejected the objection of the assessee with respect to the taxability and applicability of Article 8 to the feeder vessels income. With respect to the permanent establishment, the learned DRP following its directions for Assessment Year 2016-17 Page | 7 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 upheld the view of the Assessing Officer that assessee has a permanent establishment in India in The form of a subsidiary Happag Lloyd India Pvt Ltd . The assessee also raised an additional ground of objection and also submitted additional evidence with respect for claiming tax credit of tax deducted at sources in the name of the subsidiary Indian Company. The learned DRP after obtaining the remand report of the Assessing Officer and rejoinder of the assessee thereon, directed Assessing Officer to carry out verification as directed by the ITAT in assessee's own case in earlier years and then grant credit of tax. Such directions were issued on 13.03.2021.
07. Based on these directions, the learned Assessing Officer passed a final assessment order under section 143(3) read with section 144C(13) of the Act on 19.04.2021 determining the total income of the assessee at ₹1,29,14,697/-. The directions with respect to the grant of credit of tax deducted at source in the name of subsidiary company to the assessee was not at all dealt with by the assessing officer. Therefore, the assessee is aggrieved with that order has preferred the appeal before us.
08. The learned Authorized Representative submitted that whether assessee is eligible for the benefit of article 8 of India Germany Double Tax Avoidance Agreement for its slot charter income is covered in favour of the assessee in assessee's own case for earlier years starting from Assessment Years 2006-07 to 2015-16. For Assessment Page | 8 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 Year 2007-08, the appeal against the order of the co- ordinate Bench filed by the learned Assessing Officer before Honourable High court has also been dismissed. In view of this, it was submitted that issue on taxability of freight charges of ₹17,21,95,959/- which has been taxed under section 44B determining the income of the assessee at ₹1,2,14,700/- is covered in favour of the assessee. He also submitted a chart showing the percentage of income from feeder vessels income to the total freight income earned by the assessee. He submitted that the total freight income of the assessee is ₹2492,37,10,917/- whereas, the feeder vessels income is merely ₹17,21,95,959/- which is just 0.69% of the total income. He extensively referred to several decision of the co- ordinate Benches in assessee's own case for earlier years as well as the decision of Hon'ble Bombay High Court in the case of Balaji Shipping UK Ltd (supra). He also took us through the Double Taxation Avoidance Agreement between India and federal republic of Germany and also between India and UK. He submitted that in assessee's own case for assessment year 2007 - 08, 2009 - 10 and 2011 - 12 the honourable High Court has already days decided this issue in favour of the assessee. He further referred to the decision of the coordinate bench in assessee's own case starting from assessment year 2005
- 06 to assessment year 2016 - 07 wherein identical issue has been decided in favour of the assessee. Therefore, It is submitted that ground No. 2 to 4 are covered in favour of assessee.
Page | 9 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18
09. It is submitted that as assessee is eligible for the benefit of Double Taxation Avoidance Agreement, other grounds of appeal number No. 5, 6 and 7, 12 and ground Nos. 13 and 14 becomes merely academic so, do not require any adjudication.
010. With respect to ground Nos. 8 to 11, it was stated that the learned Disputed Resolution Panel failed to appreciate the written submission of the assessee. He submitted that ₹25,06,606/- has been deposited in the PAN number of the agent of the assessee but agent of such assessee has not claimed credit of such tax as, it is deducted on freight payment which belongs to the assessee. Therefore, the credit of the same needs to be given to the assessee. He referred to the paper book filed containing 309 pages, which was part of the additional evidences filed before the learned Dispute Resolution Panel as well as the application before the learned Assessing Officer. He submitted that despite the direction of the learned dispute resolution panel the learned assessing officer has not carried out such directions. He further stated that on identical facts and circumstances in the case of the assessee for assessment year 2016 - 17 the coordinate bench vide its order dated 31st of January 2020 has set- aside the issue back to the file of the learned assessing officer as per paragraph number 16 of that order. He therefore submitted that with similar direction to the learned assessing officer this ground of appeal be allowed.
Page | 10 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18
011. The learned Departmental Representative vehemently supported the orders of the lower authorities. He specifically submitted that the decision of the Hon'ble Bombay High Court in case of Balaji Shipping (supra) issue was on India UK Double Taxation Avoidance Agreement, whereas the issue involved in this case is India German DTAA . It was submitted that Article 8 in case of India Germany Double Taxation Avoidance Agreement does not give any exemption as has been considered by the honourable High Court based on India UK Double Taxation Avoidance Agreement. He referred to both Double Taxation Avoidance Agreements to support his contentions.
012. The learned Authorised Representative submitted that issue has been considered and decided by the co-ordinate Bench in assessee's own case for earlier years.
013. We have carefully considered the rival contentions and perused the orders of the lower authorities.
014. Ground number 1 of the appeal is general in nature, no arguments advanced and therefore same is dismissed.
015. Ground number 2 - 4 is with respect to the taxability of freight charges amounting to ₹ 172,195,959/- from transportation of cargo through feeder vessels. During the year, assessee has earned total freight income of ₹ 24,923,710,917/-, out of which income from feeder vessels was ₹ 172,195,959/-. Which is approximately 0.69% of the total freight income earned by the assessee.
Page | 11 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 Undisputedly, assessee is a resident of Federal Republic of Germany and therefore the agreement for avoidance of double taxation and prevention of fiscal evasion between India and Germany is applicable for determination of taxability of income of the assessee. Article 8 of the DTAA relates to shipping and transport income provides as Under:-
ARTICLE 8 SHIPPING AND AIR TRANSPORT
1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the ship is a resident.
3. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the provisions of Article 11 shall not apply in relation to such interest.
Page | 12 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18
4. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.
016. On the basis of above it is required to be decided that whether the freight income received on account of transportation of cargo on vessel Under slot arrangement is eligible for benefit of exemption to the assessee or not. In assessee's own case for assessment year 2007 - 08, identical issue arose wherein the honourable Bombay High Court in (2013) 31 taxmann.com 64 (Bombay) following the decision in case of DIT (International taxation) versus Balaji shipping UK Ltd (2012) 211 taxmann 535/24 taxmann.com 229, per paragraph number 2, in appeal filed by the assessee against the order of the coordinate bench which held that the agreements among consortium members were not cool/joint men's business arrangements but were merely slot arrangements and that the freight income received on account of transportation of cargo on feeder vessel would be ineligible for benefit of article 8, the honourable High Court set aside the order of the coordinate bench and remanded the matter back to the coordinate bench for fresh consideration in the light of decision of the honourable court in case of Balaji sipping UK Ltd (supra).
017. Pursuant to above remand by the honourable High Court, the coordinate bench in ITA number 8854/MUM/2010 on 14/8/2013, while recording the fact of the order of the Page | 13 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 honourable High Court, as per para number 7 - 8.5 has held as Under:-
"7. We have perused the records and considered the rival contentions carefully. The dispute is regarding allowability of exemption of income Under the provisions of double taxation avoidance agreement. The assessee is a sipping company engaged in the operation of ships in the international traffic and is a tax resident of Germany. The assessee for the relevant year had declared gross freight collection of ₹ 6,879,957,893/- and the entire income was claimed as exempt Under the provisions of DTAA between India and Germany. Under article 8 of the India Germany treaty, profit from operation of ships or aircraft in international traffic is taxable only contracting State in which place of effective management of the enterprise is situated. Further clause 4 of article 8 also provides that these provisions will apply to the profit from participation in pool or a joint-venture business or in international operating agency. The AO took the view that the provisions of DTAA would apply only to income from operation of ships which were either owned or chartered by the assessee and not to income from other ship/vessels. AO noted that the freight in respect of Germany by the ship, owned, chartered by the assessee or through vessel was only to the extent of ₹ 3,007,821,923/-. He, therefore, granted Page | 14 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 relief only in respect of income arising from said freight. On objections filed by the assessee, the DRP took the view that the assessee was also entitled to exemption in respect of revenue from goods transported through feeder vessel owned or chartered by the assessee. He therefore, allowed relief in respect of further freight revenue earned by the assessee to the tune of ₹ 956,379,908/-. Thus income from balance freight revenue relating to feeder vessels amounting to ₹ 1,677,537,979/- has been taxed by AO u/s 44B of the income tax act on the ground that the revenue had been earned on the basis of slot sharing arrangement which was not eligible for relief Under the provisions of DTAA.
8. We find that the issue raised in this appeal as to whether the double taxation exemption provision will be available even in respect of sipping facilities used by the assessee on slot sharing arrangement basis has already been considered and decided by the honourable High Court of Delhi in case of Director Of Income Tax (International Taxation) Versus Balaji Shipping vide order dated 6 August 2012 in income tax appeal number 3024 and 3215 of 2009. In that case also the assessee in addition to own/chartered ships had also availed slot hire facilities Under connecting Agreements with owner/charter of feeder vessels. In some cases the cargo had been transported to the final international Page | 15 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 destinations/port on the vessels used on slot arrangement basis. In some other cases goods had been transported through feeder vessels availed on slot higher facilities to the international hub port from where they had been shipped to final destination to the vessels owned/chartered by the assessee. The honourable High Court noted that the AO had taxed such income from federal vessels u/s 44B of the income tax act which dealt with income from operation of ships , a provision similar to the provisions of article 9 (1) of the treaty which referred to profit and gains of business operation of ships . Therefore, the High Court held that the income arising from slot hire arrangement had to be considered as the income referred to Under article 9 (1) of the treaty as the phrase "operation of ship"
not being defined in the treaty, it must be given the same meaning as described in Section 44B. The High Court also held that are availing of slot hire facility had a close nexus with the business operation of ships in the international traffic as an enterprise may not be able to carry on business at all in many situations. The enterprise may not ply ships owned or chartered by it in respect of certain routes or on a particular route on a given day or for a particular period and, therefore, slot hire facility becomes necessary for carrying on the business and such cases have to be considered as having close nexus with the main business of enterprise of operation of Page | 16 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 ships. They are ancillary and complement the operation of the enterprise.
8.1 The High Court referred to judgement of Honourable High Court of Delhi in case of Director Of Income Tax versus KLM Royal Dutch airline (178 taxmann 241) in which assessee was engaged in the business of operating an airline in international traffic had obtained license in respect of premises at Mumbai from airport authority of India. The assessee had entered into an agreement with CSC (P) Ltd for cargo handling. The assessee had adjusted the license fee/rent paid to the airport authority against the payment made to CSC (P) Ltd. The High Court held that the rental income was inexicably [sic. inextricably] linked to cargo handling business of the assessee and, therefore, it was the part of the income from business of operating an airline in international traffic and was eligible for exemption Under the treaty.
8.2 The High Court also referred to OECD model convention on avoidance of double taxation which provides that the treaty provisions relating to shipping will also apply to the activities directly connected with the operation of ships and also to activities indirectly connected which were ancillary to such operations. The article 4.1 of the model convention provided that any activity carried out primarily in connection with transportation by ships Page | 17 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 or aircraft should be considered directly connected with such transportation and article 4.2 provided that other operations which are so closely related that they should not be regarded as separate business or source of income held to be considered as ancillary to the operation of ship and aircraft in international traffic. The High Court therefore held that slot sailing arrangement was covered by the provision of clause 4.1 and 4.2 of the model OECD Convention.
8.3 Thus after considering the OECD model convention as well as the judgement of Honourable High Court of Delhi in case of Director Of Income Tax versus KLM Royal Dutch airline (supra) the High Court held that both types of cases relating to direct transportation of cargo to the international destinations/port through the slot hire facility as well as the case where the cargo had been transported through the slot hire facility to the hub point and, thereafter, through the vessels owned/chartered by the assessee were eligible for exemption Under the treaty provisions. Though the said judgement was in the context of Indo UK treaty but we find that provision of treaty relating to income from operation of ships in international traffic are similar to the provisions of Indo German treaty with which we are concerned in this case.
8.4 The learned DR pointed out that the judgement in case of Balaji sipping UK Ltd (supra) was Page | 18 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 restricted to the facts of only those type of cases as held by the honourable High Court. In that case the revenue from slot hire arrangement was only 12% whereas in the present case revenue from slot hire arrangement was substantially high at a 29%. We have considered this aspect carefully. We find that in para 19 of the judgement, honourable High Court of Delhi clearly held that judgement would not apply to the assessee who are carrying on the business of shipping cargo only by availing slot hire facility is obtained by them. In the present case sipping revenue is not only from slot hire facilities. The revenue from owned/chartered ships constitutes more than 2/3rd of revenue and only 29% of the revenue from slot higher facility is. Therefore, the judgement of the honourable High Court of Delhi in case of Balaji sipping UK Ltd (supra) is applicable to the facts of the case of the assessee.
8.5 Considering the facts and circumstances of the case and for the reasons given earlier, we hold that the assessee will be eligible for exemption Under the treaty provisions in respect of revenue earned from feeder vessels obtained by the assessee on slot hire arrangement basis. We, therefore, set-aside the order of CIT (A) and allow the claim of the assessee."
018. The above order of the coordinate bench was subject matter of challenge before the honourable Bombay High Page | 19 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 Court in Income Tax Appeal number 602 of 2014, (which is reproduced at paragraph number 5 of the order of the honourable High Court in Income Tax Appeal number 1362 of 2017 for assessment year 2009 - 10 which is decided on 6 January 2020, placed at paper book page number 4 -
6). The honourable High Court held that the impugned order of the coordinate bench has allowed the appeal of the assessee by following the decision of honourable High Court in Director Of Income Tax, International taxation versus Balaji shipping UK Ltd (2012) 211 taxman 535 and further the learned counsel appearing for the revenue in that case stated that the issue stands concluded in the favour of the respondent assessee by the decision of honourable Bombay High Court in Balaji shipping UK (supra). Based on this the honourable High Court held that no substantial question of law arises and the appeal of the revenue was dismissed.
019. Further as the fact shows that for assessment year 2009 -
10 also the honourable High Court following its own order for assessment year 2007 - 08 and also on the submission made by the learned counsel for the revenue that the issue stands covered, the appeal filed by the learned assessing officer was not admitted by order dated 7 January 2020.
020. Further the coordinate bench for assessment year 2006 -
07 to assessment year 2011 - 12 (except assessment year 2007 - 08) as per order dated 22/7/2016, following the order of the coordinate bench for assessment year Page | 20 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 2007 - 08 dated 14/8/2013 allowed the claim of the assessee and dismissed appeals of the revenue. Further, for assessment year 2005 - 06 in ITA number 1776/2014 the coordinate bench wide order dated 21/9/2016 wherein the appeal was filed by the assessee was allowed as per paragraph number 7 holding that slot hire charges income is eligible for benefit as per article 8 of the treaty. Subsequently also for assessment year 2013 - 14 per order dated 31/10/2017, for assessment year 2014 - 15 per order dated 28/6/2019, for assessment year 2015 - 16 per order Dated 16/12/2019 and for assessment year 2016 - 17 per order dated 31/1/2020, the claim of the assessee for the benefit to the slot hire income Under article 8 of the treaty was allowed.
021. As per chart submitted by the learned authorised representative the percentage of income from feeder vessels to the total freight income for the impugned assessment year is merely 0.69%. All the arguments raised before us by the learned departmental representative has been considered in the decision of the coordinate benches as well as in the decision of the honourable High Court holding in favour of the assessee. Therefore, respectfully following the decisions of the honourable High Court and coordinate benches in assessee's own case, we allow ground number 2 - 4 of the appeal holding that freight charges of ₹ 172,195,959/- earned by assessee from transportation of cargo through feeder vessels is also eligible for benefit of Article 8 of the Page | 21 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 Double Taxation Avoidance Treaty between India and Germany.
022. In view of our decision in ground number 2 - 4 of the appeal, no adjudication is required on ground number 5 - 7 and 12 - 14 of the appeal of the assessee, hence those grounds become infructuous and hence dismissed.
023. Coming to ground number 8 - 11 wherein the claim of the assessee is with respect of tax credit of ₹ 2,506,606 which was directed by the learned dispute resolution panel to the learned assessing officer to verify the submission and then allow the TDS credit where legitimately due to the assessee. This ground was identical to ground number 8 in ITA number 5898/2019 for assessment year 2016 - 17 dated 31/1/ 2020 in assessee's own case wherein as per paragraph number 16 as Under:-
"16. We find that the assessee has also assailed before asked the failure on the part of the AO grant credit for TDS of ₹ 6,006,811/- for the reason, that the same was wrongly deposited in the PAN number of the agent of the assessee. It was submitted by the learned AR that the AO while concluding as hereinabove had overlooked the fact that the agent had not taken the credit for the said amount. We find that the aforesaid claim of the assessee would require verification of facts as they had been stated by the assessee before us. Accordingly, we restore the matter to Page | 22 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 the file of the AO for making necessary verification is. In case, the income of the core relating to the TDS of ₹ 6,996,811/- had been assessed in the hence of the assessee and no credit for the same was raised by the agent, then the AO after being satisfied shall allow the necessary credit for the same to the assessee. Needless to say, the AO shall in the course of the set-aside proceedings afford a sufficient opportunity of being heard to the assessee for substantiating its aforesaid claim. The ground of appeal number 8 is allowed for statistical purposes in terms of our aforesaid observations."
024. Facts related to short grant of TDS credit of ₹26,06,606/-
showed that the gross receipt of ₹11,94,94,364/- on which the tax has been deducted has already been considered for claim of exemption under section 90(2) read with Article 8 of Indo German Double Taxation Avoidance Agreement. The claim of the assessee is that the assessee has wholly owned subsidiary in India Hapag-Lloyd India Pvt. ltd. This company collected the freight from the customers of the assessee and therefore, the customers while making payment to an Indian entity deducts tax at source and certificates are issued in the name of Indian entity. The Indian entity arranges for vendor payments and the balance amount collected is remitted to assessee. The assessee's claim is that the income involved in the TDS certificate does not pertain to Indian entity but to the Page | 23 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 assessee. The TDS is claimed as credit by the assessee. The Indian entity did not claim any credit of the above TDS. The Tax Deducted At Source (TDS) in form No. 26 AS is shown in the name of the Indian entity. As the assessee has shown the income involved in this TDS certificates and in turn also claimed benefit of Article 8 and the benefit of DTAA, the credit for such tax should be granted to the assessee. The claim of the assessee is that Rule 37BA is required to be complied with. It is also submitted that merely because the deductor does not revise the TDS return, it cannot go against the assessee for the claim of the above refund. The assessee raised this additional ground before the learned Dispute Resolution Panel. The Dispute Resolution Panel admitted the above additional ground along with additional evidences. It also obtained the comments from the Assessing Officer and rejoinder of the assessee thereon. The learned Dispute Resolution Panel directed the learned Assessing Officer to carry out the necessary verification and to grant credit. The assessee was also directed to submit all relevant details and clarification thereon. But AO did not consider and carry out such directions.
025. As the issue identical facts emerged in earlier year, we respectfully following the order of the coordinate bench in assessee's own case for assessment year 2016 - 17 also direct the Assessing Officer similarly. Accordingly, the Assessing Officer may examine the same in accordance with law after granting sufficient opportunity to the Page | 24 ITA No. 972/Mum/2021 Hapag-Lloyd AG; AY 17-18 assessee. Accordingly, ground Nos. 8 to 11 of the appeal of the assessee is allowed with above directions.
026. Accordingly, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 31.01.2022
Sd/- Sd/-
(PAVAN KUMAR GADALE) (PRASHANT MAHARISHI)
(JUDICIAL MEMBER) (ACCOUNTANT MEMBER)
Mumbai, Dated: 31.01.2022
Sudip Sarkar, Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
Assistant Registrar
ITAT, MUMBAI