JUDGMENT : ARINDAM SINHA, J. 1. These two writ petitions are at the instance of two partners of a partnership firm. The petitioner no.1 is the UK based partner while the petitioner no.2 is the partner based in the Netherlands. The partnership is the assessee known as P & O Nedlloyd which suffered issuance of notices under Section 148 of the Income Tax Act, 1961 relating to assessment years 2005-2006 and 2006-2007. The notices are annexures P-9 and P-13 to the respective writ petitions. The challenge in these writ petitions is to the said notices. 2. Mr. Kaka, learned senior Advocate appearing on behalf of the petitioners had drawn attention to the assessment order dated 10th November, 2008 relating to the notice’s assessment year 2006-07. In paragraph 5 of the said order the department was of the view that as per the provisions of the Double Taxation Avoidance Agreement (DTAA), income from operation of ships in international traffic is not liable to tax in India in the hands of either of the two corporate partners. However the department went on to say further that which the petitioners contend, cannot be sustained. “…PONP being a partnership firm based in U.K., it is fiscally transparent entity in U.K. and hence outside the ambit of the treaty between India and U.K. Its income is therefore, exigible to tax as per the provisions domestic law. On the other hand the income of a partner in firm is exempt under section 10(2A) of the Income-tax Act 1961.” 3. Mr. Kaka submitted, distinction between a partnership and its partners regarding the same income cannot be drawn for the purpose of taxing the partnership in India. He submitted, the DTAA had everything to do with income and avoidance of double taxation on it. The income sought to be made the subject matter of the assessment proposed by the impugned notices, was already accepted as nil in the hands of the partners. That same income could not thereafter be taken to be income exigible to tax in India in the hands of the partnership. He referred to Articles 9(5) and 8A (4) of the respective treaties that India has with the UK and Netherlands. He then submitted the position had been made clear by the Supreme Court in the case of ‘Union of India v. Azadi Bachao Andolan’ reported in (2003) 263 ITR 706. He referred to Articles 9(5) and 8A (4) of the respective treaties that India has with the UK and Netherlands. He then submitted the position had been made clear by the Supreme Court in the case of ‘Union of India v. Azadi Bachao Andolan’ reported in (2003) 263 ITR 706. He submitted the Supreme Court had interpreted the law on this aspect to be that it was crucial to define fiscal residence of a company very accurately. The State of residence is the one entitled to levy tax on the corporation’s worldwide profit. He relied on the following portions of the judgment: “……In our view, the contention of the respondents proceeds on the fallacious premise that liability to taxation is the same as payment of tax. Liability to taxation is a legal situation; payment of tax is a fiscal fact. For the purpose of application of article 4 of the DTAC, what is relevant is the legal situation, namely, liability to taxation, and not the fiscal fact of actual payment of tax. If this were not so, the DTAC would not have used the words, “liable to taxation”, but would have used some appropriate words like “Pays tax”. On the language of the DTAC, it is not possible to accept the contention of the respondents that offshore companies incorporated and registered under the MOBA are not “liable to taxation” under the Mauritius Income-tax Act; nor is it possible to accept the contention that such companies would not be “residence” in Mauritius within the meaning of article 3 read with article 4 of the DTAC…. xxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxx ……..In John N. Gladden v. Her Majesty the Queen, 85 D.T.C 5188 at 5190, the principle of liberal interpretation of tax treaties was reiterated by the Federal Court, which observed: “Contrary to an ordinary taxing statute a tax treaty or convention must be given a liberal interpretation with a view to implementing the true intentions of the parties. A literal or legalistic interpretation must be avoided when the basic object of the treaty might be defeated or frustrated in so far as the particular item under consideration is concerned.” xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx …...To the extent that an exemption is agreed to, its effect is in principle independent of both whether the other contracting State imposes a tax in the situation to which the exemption applies, and of whether that State actually levies the tax. Commenting particularly on the German Double Taxation Convention with the United States, Vogel comments: “Thus it is said that the treaty prevents not only ‘current’, but also merely ‘potential’ double taxation”. Further, according to Vogel, “only in exceptional cases, and only when expressly agreed to by the parties, is exemption in one Contracting State dependent upon whether the income or capital is taxable in the other Contracting State, or upon whether it is actually taxed there.” (see in this connection Klaus Vogel, Double Taxation Convention, pages 26-29, third edition). It is, therefore, not possible for us to accept the contentions so strenuously urged on behalf of the respondents that avoidance of double taxation can arise only when tax is actually paid in one of the Contracting States.” 4. He thus submitted the partners of the firm had fiscal domicile offshore and the income of it was taxed in their hands in the respective countries of residence of the partners, which was a situation better than the facts in Azadi Bachao Andolan (supra) where the companies operating out of Mauritius were not taxed in that State. The Revenue could not seek to make a distinction between the partners and the partnership to maintain the impugned notices against the firm. In any event, according to him, the reasons to believe also included the contention of the Revenue alleged to have been established in the case of the assessee firm for the assessment year 2002-03 which was negated by this Court in the case of ‘P&O Nedlloyd Ltd. & Ors. v. Assistant Director of Income-tax’ reported in (2014) 269 ITR 282 (Cal). Mr. Kaka submitted still further, fiscal domicile of the partnership based in the UK and constituted by the petitioners being offshore companies, was in that country. He relied on abstract of Section 12 (AA) of the Tax Management Act, 1970 of the UK which provides for partnership returns. He further relied on Article 3(1)(h) of the UK India DTAA for the definition of the term ‘enterprise of a contracting State’. The said definition provides that such an enterprise is one carried on by a resident of a contracting State. He then relied on Article 9 of the said convention in particular sub-Articles (1) and (5) to submit that the partnership being an enterprise of the UK was only taxable in that State. 5. Mr. Chakraborty assisted by Ms. The said definition provides that such an enterprise is one carried on by a resident of a contracting State. He then relied on Article 9 of the said convention in particular sub-Articles (1) and (5) to submit that the partnership being an enterprise of the UK was only taxable in that State. 5. Mr. Chakraborty assisted by Ms. Mamta Bhargav, learned Advocates appeared on behalf of the Revenue and had initially submitted the matter should be adjourned pending decision of the Supreme Court in the Appeal by Special Leave preferred against P & O Nedlloyd Ltd. & Ors. (supra) which submission was vehemently opposed and thereafter the matter heard. He then had submitted on instructions that the notices under Section 148, issued to the partnership, were good notices and should not be interfered with. Mr. Chakraborty relied on Article 3 of the Convention between the Government of the Republic of India and the Government of the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation in particular paragraphs 1(e) and 1(f) thereunder, to submit that the notice, being a partnership firm, was transparent to the fiscal laws of the UK. It cannot be said that the notice had fiscal domicile there. The partners having fiscal domicile elsewhere could not be taken to mean that the partnership though based in the UK also had fiscal domicile there. He submitted, furthermore the notice was not a person under the convention to be able to resist the issuance of the impugned notices to it. 6. Mr. Kaka, in reply reiterated that the argument of the Revenue stood negated by the decision in P & O Nedlloyd Ltd. & Ors. (supra). He submitted, another better interpretation of Article 3 of the said convention than the one given in P & O Nedlloyd Ltd. & Ors. (supra) was possible. According to him, the better interpretation of paragraph 2 of the said Article was that thereby, Indian partnerships were brought within the meaning of the term “person” defined by the treaty, to be covered by it, who, in the event did business in the UK, would be able to resist demands of income tax by that State under the treaty as having fiscal domicile in India. He added, the interpretation of Article 3, paragraph 1(f), according to him, was that partnerships per se were not persons thereunder and, therefore the said partnership not being an Indian partnership could not have had the impugned notices issued to it by the Revenue. 7. Two contentions were raised by the Revenue in seeking to resist the challenge made in the writ petitions. The first was that the writ petitions should be adjourned pending decision of the Supreme Court in the appeal by Special Leave Petition against P & O Nedlloyd Ltd. & Ors. (supra). That decision was rendered by this Court in two writ petitions containing challenge to notices issued under Section 148 of the Income-tax Act, 1961 against the said partnership relating to escapement of assessment of income for assessment years 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02. The assessments made of those years were of nil tax to be paid, reassessment by issuance of notices as aforesaid was sought and successfully challenged by the petitioners therein who are the petitioners herein also. 8. In these two writ petitions the petitioners have challenged the said notices relating to assessment years 2005-06 and 2006-07. The respective assessment orders dated 31st October, 2007 and 10th November, 2008 relating to those assessment years are annexures P-8 and P-10 to the writ petitions. Assessments made by both the orders were that income tax payable on income from the operation of ships by the partnership for the years of assessment was nil. Hence, the notices seeking reassessment. Since the said assessment orders are not the subject matter of the appeal pending before the Supreme Court, this Court accepted the vehement opposition on the part of the petitioners to adjournment of hearing of the writ petitions and had proceeded with the same on their submission that the points arising out of the challenge made were partly covered by the said earlier decision of this Court, pending adjudication in appeal. 9. The department has treated the notice as being a partnership firm based in the UK and transparent to the tax laws of that country. The notice is not a person under the treaty was also the submission made on behalf of both the parties. Its income is, therefore, exigible to tax as per the provisions of domestic law according to the Revenue. 10. The notice is not a person under the treaty was also the submission made on behalf of both the parties. Its income is, therefore, exigible to tax as per the provisions of domestic law according to the Revenue. 10. The petitioners have annexed to their writ petitions a note on partnership provisions in the 1993 UK-India DTAA written by the Head of Tax Treaty Negotiations and Competent Authority, HM Revenue and Customs, London from which the following is extracted. “Under UK tax law, a partnership established in the UK is required to file a partnership return which includes a partnership statement disclosing the income received by the partnership from the partners’ joint business operations. The trading profit of the enterprise is then calculated in the hands of the partnership. However, once calculated, the trading profits are allocated to the partners according to their agreed shares and the partners are then subject to corporation tax on their share as if it derived from a trade carried on alone by that partner. It is the partners that are subject to UK tax on the partnership profits.” 11. Common contentions of the parties appear to be that:- (i) the notice is a partnership firm based in the UK; and (ii) the notice is not a person under the treaty. The relevant clauses of the treaty in this regard are reproduced below: “Article 3-General Definitions 1……. (a)…… (b)…… (c)…… (d)……. (e) the term “a Contracting State” and “the other Contracting State” mean India or the United Kingdom as the context requires: (f) the term “person” includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States, but subject in paragraph 2 of this article does not include a partnership: (g)….. (h) the term “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State: (i)……. (j)…… (k)…… 2. A partnership which is treated as a taxable unit under the Income tax Act, 1961 (43 of 1961) of India shall be treated as a person for the purposes of this Convention. Article 9-Shipping 1. (j)…… (k)…… 2. A partnership which is treated as a taxable unit under the Income tax Act, 1961 (43 of 1961) of India shall be treated as a person for the purposes of this Convention. Article 9-Shipping 1. Income of an enterprise of a Contracting State from the operation of ships In international traffic shall be taxable only in that State. 2….. 3….. 4….. 5. The provisions of this Article shall apply also to income derived from participation in a pool, a joint business or an international operating agency. 6….” 12. The contention of the Revenue appears to be that the notice is a fiscally transparent entity in the UK being outside the ambit of the treaty between India and that country as not being a person thereunder. Its income is exigible to tax in India under the Income-tax Act, 1961 while the partners thereof exempt under Section 10(2A) of the said Act. It follows that the Revenue has treated the notice as a person within the meaning of Section 2(31) of the said Act to apply the charging Section 4 thereof which is reproduced below: “4.(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions including provisions for the levy of additional income-tax of, this Act in respect of the total income of the previous year of every person: Provided…… (2)…………..” 13. Similar situation was dealt with in P & O Nedlloyd Ltd. & Ors. (supra) where this Court held the notice to be a person covered by the treaty. Applying that decision to the facts of this case the notice stands covered by the treaty as a person thereunder and being an enterprise of a Contracting State, taxable only in that State. 14. Nevertheless, since on behalf of the petitioner it was also submitted in the alternative that the notice is not a person covered by the treaty though such submission not made in agreement with the submission to the same effect made by the Revenue, the purportedly similar submissions must be considered. 14. Nevertheless, since on behalf of the petitioner it was also submitted in the alternative that the notice is not a person covered by the treaty though such submission not made in agreement with the submission to the same effect made by the Revenue, the purportedly similar submissions must be considered. At the first instance, if the notice is not covered by the treaty then the contention of the Revenue will be correct that it is tax transparent in the UK and, therefore, its income exigible to tax under domestic law. At the second instance if by application of Article 3, paragraph 2 of the treaty only Indian partnerships are to be covered thereby then such partnerships cannot be taxed in the UK as having fiscal domicile in India. That situation is not however borne out by the facts in this case. 15. This court is unable to take a different view than the one already taken P & O Nedlloyd Ltd. & Ors. (supra) on this issue as persuaded by the submissions made on behalf of the petitioners. Partnerships are not taxed in the UK, be it a partnership based there or here in India. Only partnerships established in the UK are required to file a return there as noted above. On the other hand, where a partnership based in the UK is treated as a person under domestic law as its income exigible to tax thereunder, it follows that paragraph 2 of Article 3 of the convention is to be given an interpretation so as to benefit such a partnership based in the UK which since not taxed under the laws there might be treated as liable to tax in India. Mr. Chakraborty had fairly submitted that there was a subsequent amendment made to the treaty and duly notified whereby similar issue would not arise in future against the notice. 16. For the reasons aforesaid, this Court is of the view that the notice is a person covered under the treaty and being an enterprise of the UK, the same has fiscal domicile in the UK where it is based. Its income from operation of ships in international traffic is not exigible to tax under domestic law. Consequently the impugned notices are set aside and the writ petitions disposed of. Urgent photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking. Its income from operation of ships in international traffic is not exigible to tax under domestic law. Consequently the impugned notices are set aside and the writ petitions disposed of. Urgent photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking. Writ Petition disposed of.