IN THE ITAT MUMBAI BENCH ‘L’
Delmas France S.A.
Versus
Assistant Director of Income-tax (International Taxation)
IT Appeal No. 8991 (Mum.) of 2010
[Assessment year 2007-08]
January 16, 2013
ORDER
Dinesh Kumar Agarwal, Judicial Member – This appeal preferred by the assessee is directed against the assessment order dtd. 25-10-2010 for the A.Y. 2007-08 passed by the A.O. u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act) after considering the directions dtd. 28-9-2010 of the Dispute Resolution Panel – I, Mumbai.
2. Briefly stated facts of the case are that the assessee, Delmas France, is a foreign company incorporated in France, engaged in the business of operation of ships in India. The assessee filed its return of income declaring taxable income at Rs. 128,33,554/- claiming tax and interest payable at ‘nil’ on the ground that it is a tax resident of France, entitled to the tax benefit of Double Taxation Avoidance Agreement (DTAA) between India and France. According to the assessee, Article -9 of the DTAA is for an enterprise engaged in shipping activity and since the assessee is in the business of shipping, it is entitled to the benefit of Article-9 and accordingly its income from shipping operation is taxable in France and cannot be taxed in the source country i.e. India. It was further contended that since the assessee does not have Permanent Establishment (PE) in India, its business profit cannot be taxed in India at all. However, the A.O. did not accept the assessee’s claim. The A.O. while observing that all the work of the assessee in India is carried out by its Agents namely Barwil and CMA CGM applied the ratio of the decision of the Tribunal in Asstt. CIT v. DHL Operations B.V. [2005] 142 Taxman 1 (Mum.) (Mag.) and held that there exists a PE of Delmas in India. He further observed that since the income shown by the assessee was not from the operations of the ships but the business income and since the assessee has a PE in India, the assessee’s case is not covered by section 44B of the Act as it is not in the business of operation of ships. He further observed that the assessee has shown gross receipts of Rs. 16,15,77,754/- under the head freight earning and Rs. 95,36,293/-under the head Import Thc, Export Thc, Inland Haulage and Detention charges totalling to Rs. 17,11,14,047/-. The A.O. after including the service tax amount of Rs. 9,21,957/- collected by the assessee during the year, computed the gross receipt of the assessee at Rs. 17,20,36,004/-and in the absence of any other details, the A.O. estimated assessee’s total income at 10% of the gross receipts as per Rule 10 of the Income tax Rules and determined the assessee’s total income at Rs. 17,20,36,004/-. The assessee filed objection before the DRP who has directed the A.O. to examine the fresh evidences and allow relief to the assessee if conditions are fulfilled. Pursuant to the directions of the DRP, the A.O. observed that the assessee has produced the details of transfer of cargo from feeder vessel to mother vessel owned/pooled/chartered by the assessee, however, no evidence has been produced in respect of the income of Rs. 66,947/- and, hence, computed the disallowance as under:-
