TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 1356
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....icle 9 of the DTAA between India and Denmark and not holding it as Royalty as per Article 13 and section 9(1)(vi) and (vii) of the LT. Act, as held by the 'AO' in the draft assessment order." ii. "Whether on the facts and in the circumstances of the case and in law, the DRP was justified in holding that income from Inland Haulage Charges of cargo was covered under Article 9 of the tax treaty between India and Denmark and therefore not liable for tax in India and that section 44B of the IT Act has no application in the facts of the case." iii. "Whether on the facts and circumstances of the case Article9 of the tax treaty between India and Denmark includes within its ambit the activity of Inland Haulage Charges of cargo?" iv. "Whether on the facts and circumstances of the case and in law, the DRP erred in not holding that the income from Inland Haulage Charges is deemed to accrue and arise in India in terms of section 9(1)(i) of the LT. Act." v. "The Appellant prays that the order of the DRP-4 be set Aside on the above grounds and that of the Assessing Officer he restored." vi. "The Appellant craves leave to amend or alter any ground or add a new ground which may be nece....
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....tion, the assessee recovered an amount of Rs. 2,23,27,783/- from MIPL, being MIPL's share of FACT system solution cost. This recovery is pursuant to a Service Level Agreement (SLA) entered into between MIPL and APMM and is without any mark-up and represents mere allocation of cost. The assessee claimed before the revenue that this amount recovered by the assessee is proportion the cost incurred and it is in the nature of reimbursement of cost not chargeable to tax in India as the same was without any mark-up and was a cost to cost basis. But the AP vide draft assessment order dated 26.03.2013 treated recovery of FACT cost as royalty/ Fees for Technical Services (FFS) and taxed the same under section 115A of the Act at the rate of 10%. The DRP vide its directions dates 23.12.2013 upheld the aforesaid additions made by the AO in his draft assessment order by treating such recovery as royalty/FTS. Aggrieved, assessee is in appeal before Tribunal. Before us it was explained that Mumbai Tribunal on a similar issue on taxability of recovery of cost towards IT Global Portfolio Tracking System has passes an order in the case of entity Dampskibsselskabet of 1912 A/s Aktieselskabet, wh....
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.... High Court, held that such recovery cannot be taxed in India since: - The system helps on conducting its shipping business in more effective and efficient manner globally. - The FACT software is art part of shipping operations and therefore any kind of receipts recovered by way of software usage / development cost cannot be taxed in India. - The FACT is a tool and integral part of shipping operations and the profits as per Article 9(1) of the Tax Treaty includes not only activities directly connected with shipping operations but also activities which facilitate or support such operations. - It was thus held that any kind of receipts by way of software usage! development cost cannot be taxed in India under Article 9(1) of Tax Treaty. - The receipts also cannot be taxed as royalty/FTS independently because in the present case, the Appellant is not rendering any services of managerial, technical or consultancy to its agents or group entities by allowing its group companies to be usage of software. - The assessee has been reimbursed at cost without any mark-up. We relying on the decision of the Hon'ble Bombay High Court are of the view that such cost is an integrat....
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....cost does not constitute income chargeable to tax in the hands of the assessee. It is undisputed that he assessee is in business of conducting operation of ships in international traffic and not engaged in the business of providing communication services, and therefore, per se no separate royalty/FTS were rendered by the assessee. Hence, we allow this issue of assessee's appeal." 5. Since facts in this regard are identical we do not find any infirmity in the direction of Ld. DRP in this regard. Accordingly, we uphold the same. Hence, the ground raised by the revenue on this issue stands dismissed. 6. Apropos ground no. 2-4 On this issue also Ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decisions of the tribunal in assessee own case and also Hon'ble Bombay High Court also for earlier year. Per Contra Ld. DR not dispute this proposition. 7. Up on careful consideration we find that similar issue was decided in favour of the assessee by this tribunal as per its order dated 7/10/2016 as above. 8. After elaborately considering the issue the tribunal concluded as under; "In view of the facts of this case and precedence dis....