Recently, ITAT Mumbai (the Tribunal) in case of ACIT Vs. ACM Shipping India Ltd (2011) ITA No. 5085/MUM/2009 held that the commission received by the UK company for assisting the taxpayer in arranging cargo transportation was taxable as business income by virtue of their business connection in India. The Tribunal observed that reliance cannot be placed on Circular No. 23 dated 23 July 1969 since it has been withdrawn. The circular was issued in the context of sale of goods and may not apply to the current case since it relates to rendering of services.
Facts
1. The taxpayer is a wholly-owned subsidiary of ACM Shipping India Ltd., UK (ACM UK). The taxpayer was involved in the business of ship broking and arranging for transportation of cargo from India to other countries.
2. ACM UK has an extensive worldwide network and connection with large number of international ship owners and has substantial experience in dealing with them. Since the taxpayer needed contact information of international ship owners for arranging international shipments, it entered into a service agreement dated 1 April 2008 with ACM UK.
3. As per the service agreement, ACM UK was to provide the following services to the taxpayer outside India on a commission basis:
