DCIT Vs COSCO Container Lines (ITAT Mumbai)
Dismisses Revenue Appeal Holding Inland Haulage Charges Covered Under Article 8 of India–China DTAA: ITAT Mumbai
The Mumbai ITAT dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2020-21. The principal issue was whether Inland Haulage Charges (IHC) received by the assessee, a tax resident of China engaged in international shipping, were exempt from tax in India under Article 8(1) of the India-China Double Taxation Avoidance Agreement (DTAA).
During the assessment proceedings, the Assessing Officer noted that the assessee had received Inland Haulage Charges of Rs.52,68,17,043 and incurred corresponding expenses of Rs.41,81,46,477, leaving Rs.10,86,70,566 claimed as exempt under Article 8(1). The Assessing Officer held that Article 8 exempted only profits from the operation of ships in international traffic and not inland transportation activities. He further treated Cosco Shipping Agencies (India) Pvt. Ltd. as the assessee’s dependent agency permanent establishment (PE) in India under Article 5 and attributed the profit of Rs.10,86,70,566 to the PE.
The Commissioner (Appeals) held that IHC formed part of the composite activity of transportation of goods in international traffic and, relying on judicial precedents, concluded that Article 8(1) covered such receipts. The issue relating to agency PE was treated as academic.
