Freight Charges received from Transportation of Cargo through Feeder Vessels covered under India–France Tax Treaty, No TDS in India: ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that no TDS in India on freight charges received from the transportation of cargo through Feeder vessels is covered under the India–France Tax Treaty.

The appellant was represented by Shri M.P. Lohia and Nikhil Tiwari and the respondent was represented by Shri Miland Chavan and C.T. Mathews.

CMA CGM Agencies (India) Private Limited, the assessee challenged the assessment order dated 23/07/2019 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [ Act ] for the assessment year 2016-17 on various grounds.

The assessee is a tax resident of France who engaged in the business of operation of ships in international traffic.  The assessee has no branch office in India, and its management and affairs are controlled from France.  During the period relevant to the assessment year under appeal, the assessee earned income from the operation of ships in international traffic and the freight collected by it from its customers in India is not subject to tax in India by Article-9 of India-France DTAA. 

Shri M.P. Lohia appeared on behalf of the assessee and stated that the Assessing Officer has erred in making an addition on account of Inland Haulage Charges (IHC) on the ground that the same was chargeable to tax in India and levied tax @10% on deemed profit rate of taxable receipts.  The Assessing Officer / DRP failed to appreciate the fact that IHC is not taxable in India as per Article – 9 of India France DTAA.  Inland Haulage Charges (IHC) are directly connected to and ancillary to the transportation of cargo in international traffic. 

It was observed that IHC forms part of the income from the operation of Ships in international traffic and is covered by Article -9 of India-France DTAA.  Shri C.T. Mathews representing the Department vehemently defended the assessment order and the directions of the DRP. 

 A Coram of Shri Vikas Awasthy, judicial member & Shri M Balaganesh, accountant member has held that freight charges received from the transportation of cargo through feeder vessels being part of shipping income in International Traffic are covered under Article–9(1) of the India–France Tax Treaty and not taxable in India.

The assessee by way of additional evidence has supported the contentions raised in additional grounds of appeal. The assessee has changed its stand from offering income to tax in the return of income to claim the income as non-taxable under the provisions of DTAA. 

The Tribunal restored the issue to Assessing Officer for de-novo examination considering the additional evidence filed by the assessee and appeal by the assessee was partly allowed.

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