TaxTMI 
TaxTMI 
2023 (10) TMI 1181
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....ged taxability of Management Service Fees (MSF) of Rs. 25,46,37,970/-. 3. Another issue which has been raised relates to set off of management services treated as 'Royalty' with current year losses as well as brought forward business losses not allowed and similarly set off of Management Services Fees treated as 'Royalty' with brought forward unabsorbed depreciation. The other two issues relates to short grant of TDS deducted at source of Rs. 12,57,756/- and levy of penalty u/s. 234B. 4. Before us ld. Counsel for the assessee submitted that this issue stands covered by series of decisions of the Tribunal in assessee's own case right from A.Y. 2009-10 to 2015-16. 5. The ld. DR though admitted that issue stands covered by the earlier decis....
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....dence, telephone, telex, facsimile, electronic mail, periodic visits by Applicant's personnel and such other means. 8. As per the said agreement, the entire costs incurred by the Appellant for undertaking the support activities are allocated/ shared between the affiliates based on an allocation key. Further, no mark-up is charged by the assessee on the cost allocated to its affiliates. The services rendered by assessee to VOIPL during the year under consideration as per the aforesaid agreement on an ongoing basis are summarized and tabulated as under: Sr. No. Particulars Benefits 1 Operational Support - Performance guarantee provided without pledging any security - Review and advice of legal contracts - Assistance in determinin....
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.... productivity of the project. - Regular access to research and other material available on the intranet which assists in estimating and engineering 6 Personnel and Organization, Administration and Legal - Providing training to the personnel of VOIPL by VODMC BV - Guidance on employment to be followed for staff 9. Since the management service fees charged for the aforesaid services provided by the assessee are without any markup and represents pure allocation of cost, the same have not been considered as taxable by the assessee. 10. However, the ld. AO in its draft assessment order dated 27/12/2019 has considered the said payments to be for the use of Information concerning industrial, commercial or scientific experience in India and ....
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....AA. Further, the ITAT has given a clear finding that the consideration received by assessee is purely on allocation of actual cost which has been certified by the auditors and hence, the same cannot be reckoned as payment towards "Royalty". The relevant extract of the ITAT's order is reproduced as under 15. 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, it has been held that there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific whic....
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.... none of the services provided by the assessee in the term of "service agreement" falls within the scope and ambit of "royalty" as defined in Article 12(4) of the DTAA. 16. Here again, Management services fees charged is an allocation of cost which is without markup, hence it has been stated that the same being in nature of reimbursements do not constitute Royalty as per India-Netherlands Double taxation avoidance agreement (DTAA'). We find that the aforementioned decision of the ITAT in assessee's own case for AY 2009-10 has also held that the payments received by the assessee are in nature of reimbursement without any markup and thereby, such reimbursements cannot be held to be royalty. 17. In any case, it is an admitted fact that,....
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....lso, the Tribunal in assessee's own case for AY 2018-19 (ITA no. 672/Mum/2022) and AY 2019-20 (ITA no. 1980/Mum/2022) has passed order dated 31/03/2023 relying upon the aforesaid orders and allowing the appeal in favour of the Assessee. 19. It is seen that the said service agreement continues in AY 2017-18 as well. Also, the fact that management service fees represents pure allocation of actual cost incurred has been certified by the auditors in AY 2017-18. Accordingly, management service fees are not taxable in India based on principles laid down and findings given by ITAT in assessee's own case for AY 2009-10, AY 2010-11, AY 2011-12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16, AY 2018-19 and AY 2019-20. 20. Accordingly, once thi....