The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), held that Inland Haulage Charges (IHC) is part of income from operation of ships in International Traffic under India- France Double Taxation Avoidance Agreement (DTAA) and is not taxable in India.
During the year under consideration, out of the total revenue, the assessee, CMA CGM SA had collected a sum of Rs. 308 crores from its customers on account of IHC. These charges were collected towards transportation of goods from the exporter’s warehouse to the port of loading and vice versa.
As per the assessee, the IHC activity is directly connected to and ancillary to the transportation of cargo in international traffic and it falls under Article 9 of India France DTAA. The AO vide draft assessment order rejected the claim of the assessee and held that the IHC received for transportation of goods in domestic areas.
The AO further held that the handling charges are the charges paid for loading / unloading / stacking etc. of containers and that these charges are different than charges for transportation of goods. Accordingly, the AO held that IHC is taxable in India as business profit and these are not covered by Article 9 of DTAA or section 44B of the Income Tax Act.
In absence of details of expenditure incurred for IHC, the AO applied net profit rate of 10% on IHC receipts on conservative basis and accordingly added Rs. 30 crores to the total income of the assessee.Being aggrieved, the assessee is in appeal before the Tribunal.
A Bench consisting of Pramod Kumar, Vice President and Sandeep Singh Karhail, Judicial Member relied on the judgment in CMA CGM SA vs ACIT wherein it was observed that “IHC, since, forms part of income from operation of ships in International Traffic, is covered under Article-9 of the India-France Tax Treaty, accordingly, not taxable in India.”
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