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2023 (5) TMI 540
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....he parties, the assessee's appeal for the assessment year 2018-19 is taken up as a lead case. ITA no.672/Mum./2022 Assessee's Appeal - A.Y. 2018-19 3. In its appeal, the assessee has raised the following grounds:- "On the facts and in the circumstances of the case and in law, Van Oord Dredging and Marine Contractors BV (hereinafter referred to as the Appellant) craves leave to prefer appeal against the order passed by the Assistant Commissioner of Income-tax, (International taxation), Range 4(3)(1), Mumbai (hereinafter referred to as the 'learned AO') under section 144C(13) read with section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act) pursuant to the directions of the Dispute Resolution Panel (DRP) on the following grounds, each of which are without prejudice to one another. General Ground On the facts and in the circumstances of the case and in law, the learned AO, based on directions of DRP- 1. Erred in making addition of Management service fees of Rs. 18,20,94,912/- to the loss claimed by the Appellant in the return of income. Taxability of Management service fees of Rs. 18,20,94,912/-....
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....ng of TDS to the extent of Rs. 16,04,554 as compared to TDS claimed by the Appellant in its return of income for AY 2018-19. 10. Erred in not appreciating the fact that TDS has been deducted on the amount of interest received during AY 2018-19 on the income tax refund pertaining to AY 2015-16. Erroneous levy of interest under section 234A of Rs.14.717 On the facts and in the circumstances of the case and in law, the learned AO/ DRP: 11. Erred in computing interest of Rs. 14,717 under section 234A of the Act on the income assessed despite the fact that the return of income was filed well before the due date prescribed under section 139(1) of the Act; Erroneous levy of interest under section 234B of Rs. 6,91,699 On the facts and in the circumstances of the case and in law, the learned AO/ DRP: 12. Erred in computing interest of Rs. 6,91,699 under section 234B of the Act on the income assessed; Erroneous levy of surcharge of Rs. 9,10,475 and education cess of Rs. 5,73.599 on tax computed as per rates prescribed under the India-Netherland DTAA On the facts and in the circumstances of the case and in law, t....
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..... Accordingly, the consideration received for business support services, i.e. Management Service Fees, is not taxable in India as per the provisions of the DTAA. During the assessment proceedings, the assessee was asked to submit the nature, the details, nature of business management services, and the basis of allocation of the services to the Indian entity and was asked as to why the same is not taxable in India. The assessee was also asked to show cause as to why the assessment proceedings on the issue of taxability of Management Services Fees, received during the year, should not be completed on the basis of the stand taken by the Revenue in earlier years and in accordance with the directions given by the learned DRP in earlier years. In response thereto, the assessee, inter-alia, submitted that the Tribunal has decided the issue in favour of the assessee in earlier years. The Assessing Officer ("AO") vide draft assessment order dated 28/04/2021 passed under section 144C of the Act after taking into consideration the provisions of the Service Agreement dated 01/04/2004 held that the payments made by the Indian company to the assessee are clearly for the use of information concer....
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....ent's appeals against the decisions of the Tribunal are currently pending before the Hon'ble jurisdictional High Court. 10. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee's own case in Van Oord Dredging and Marine Contractors BV vs ADIT, ITA no.7589/Mum/2012, for the assessment year 2009-10, vide order dated 07/10/2016, decided the similar issue in favour of the assessee and held that none of the services provided by the assessee in terms of the Service Agreement dated 01/04/2004 falls within the scope and ambit of "Royalty" as defined in Article 12(4) of the India Netherlands DTAA. The coordinate bench of the Tribunal also held that since the allocation of costs represents the actual expenditure, there cannot be any reason to hold that reimbursement of the cost can be reckoned as payment towards "Royalty". The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under:- "14. We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as material referred and relied upon before us....
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....enerally fall within other categories of intellectual property rights. It generally corresponds to un-divulged information of an industrial, commercial or scientific nature arising from previous experience, which has practical application in the operation of an enterprise and form the disclosure of which an economic benefit can be derived. Since the definition relates to information concerning previous experience, the Article does not apply to payments for new information obtained as result of performing services at the request of the payer; In the know-how contract, one of the parties agrees to impart to the other, so that he can use them for his own account, his special knowledge and experience which remain unrevealed to the public. It is recognized that the grantor is not required to play any part himself in the application of the formulas granted to the licensee and that he does not guarantee the result thereof. This type of contract thus differs from contracts for the provision of services, in which one of the parties undertakes to use the customary skills of his calling to execute work himself for the other party. Payments made under the latter contracts gen....
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....an advocate or an accountant, and - payments for advice provided electronically, for electronic communications with technicians or for accessing, through computer networks, a trouble-shooting database such as a database that provides users of software non=confidential information in response to frequently asked questions or common problems arise frequently". From the above clarification, it can be ostensibly inferred that, to qualify as payment towards information concerning industrial, commercial or scientific experience, person must provide knowhow to the recipient, that is, a strong emphasis has been given to concept of "knowhow". There is an element of imparting of knowhow to the other so that other can use or has right to use such "knowhow". In case of industrial, commercial or scientific experience, if services are being rendered simply as an advisory or consultancy then it cannot be reckoned as "royalty" because the advisory or assistance does not connotes imparting of the skill or experience to other albeit the person is rendering the services from his own knowhow and what he is imparting is his conclusion based on his own skill and experience. The imparti....
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....in the ambit of Article -12. .... If such services do not involve imparting of knowhow or transfer of any knowledge, experience or skill, then it cannot be held to be taxable as royalty" 15. Thus, what we have to see is, whether the various services provided by assessee to VOIPL can be reckoned as providing of any kind of imparting of knowhow or information concerning industrial, commercial or scientific experience or not. As highlighted above, with regard to various streams of services like providing of information technology; operational support; marketing; quality, health, safety and environment; estimating and engineering; and personal and organization, administration and legal services, there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific which is made available to VOIPL. For instance, information technology services are provided for use of group companies" computer system where IT teams providing manual general information without providing any information or method to design or create a computer system. It is mainly kind of help desk and trouble-shooting services which are required ....
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.... services rendered by the assessee in terms of the "service agreement" and also analyzed the definition of "royalty" as given in Article 12(4) and have reached to a conclusion that the said services and reimbursement of cost does not fall under the realm of "royalty". Moreover here in this case, the revenue's main thrust is that the payment received by the assessee from VOIPL is "royalty" and here it is not the case of FTS by the department and, therefore, we are refraining ourselves from going into the aspect of FTS qua the services rendered in terms of the service agreement." 11. We further find that the coordinate bench of the Tribunal in assessee's own case in Van Oord Dredging and Marine Contractors BV vs DCIT, ITA no. 2029/Mum./2016, for the assessment year 2011-12, vide order dated 31/05/2019, rendered similar findings following the aforesaid decision rendered in the assessment year 2009-10. Similarly was held in assessment years 2012-13, 2013-14, 2014-15 and 2015-16 by the coordinate bench of the Tribunal in assessee's own case in ITA no.1382/Mum./2017, ITA no.6140 /Mum./2017, ITA no.6141/Mum./2017 and ITA no.6726/Mum./2018 vide orders dated 15/07/2022, 10/11/2017, a....
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....its appeal, the assessee has raised following grounds:- General Ground On the facts and in the circumstances of the case and in law, the learned AO, based on directions of DRP- 1. Erred in making addition of Management service fees amounting to INR 73,00,01,323/- as against loss claimed by the Appellant in the return of income filed for AY 2019-20. Taxability of Management Service Fees of INR 73,00,01,323/- On the facts and in the circumstances of the case and in law, the learned AO / DRP has: 2. erred in not appreciating the fact that the Management Service Fees received by the Appellant constitute pure allocation of cost without any mark-up and hence, the same being reimbursement of cost, is not taxable as Royalty under the Act as well as under the Double Taxation Avoidance Agreement (DTAA') between India and the Netherlands. 3. erred in treating the management service fees received by the Appellant as "Royalty" under Article 12(4) of India Netherlands DTAA, thereby making an addition of INR 73,00,01,323/- to the income of the Appellant. 4. erred in not appreciating that for the services rendered by the A....
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....ction 139(1) of the Act; Consequential levy of interest under section 234B of INR 3,10,89,279/- On the facts and in the circumstances of the case and in law, the learned AO/ DRP has: 12. erred in levying consequential interest of INR 3,10,89,279 under section 234B of the Act on the income assessed; Erroneous levy of surcharge of INR 36,50,007 and education cess of INR 30,66,006 on tax computed as per rates prescribed under the India-Netherland DTAA On the facts and in the circumstances of the case and in law, the learned AO/ DRP has: 13. erred in computing surcharge of INR 36,50,007 and education cess of INR 30,66,006 on the tax computed as per rates prescribed under the India-Netherlands DTAA; Penalty Without prejudice to the above, and on the facts and in the circumstances of the case and in law, the learned AO has: 14. erred in initiating penalty proceeding under section 270A of the Act, which is applicable in cases of Underreporting or misreporting of income, without considering the full and true disclosures made by the Applicant, both, in the Return of Income as well as during the assessment proce....