TaxTMI 
TaxTMI 
2023 (3) TMI 1519
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....d are being disposed off by way of this consolidated order. With the consent of the parties, the assessee's appeal for the assessment year 2018-19 is taken up as a lead case. ITA no.545/Mum./2022 Assessee's Appeal - A.Y. 2018-19 3. In its appeal, the assessee has raised the following grounds:- "The Grounds stated hereunder are independent of, and without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in directing the learned AO to treat, and the learned AO erred in treating, the Network Fee of Rs. 33,36,28,379/-, earned during the year by the Appellant, as royalty and fees for technical services under the Income-tax Act, 1961 (Act'). 2. On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel (DRP) erred in directing the learned Assessing Officer ('AO') to treat, and the learned AO erred in treating, the Network Fee of Rs. 33,36,28,379/-, earned during the year by the Appellant, as royalty and fees for technical services under Article 12 of the India-Netherlands Double Tax Avoidance Agreement (DTAA). 3. On the facts and in the cir....
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....30/11/2018, declaring a total income of Rs. 10,300. During the year, the assessee received network fees of Rs. 33,36,28,379, from Demco India Private Ltd. On this amount, TDS of Rs. 3,36,62,838, was withheld by treating the remittance as "Fees for Technical Services". In the return of income filed by the assessee, this amount was not offered to tax and the same was claimed as refund, treating it to be a business income on the basis that there was no Permanent Establishment in India. During the assessment proceedings, the assessee was asked to show cause as to why the aforesaid receipt be not treated as "Fees for Technical Services". In response thereto, the assessee submitted that the assessee act as central coordinator for the provision of services, such as insurance, procurement of various product and information technology-related support services, etc. needed by Damco entities across the globe. The assessee further submitted that in the network model, each local Damco entity enjoys the economies of global Damco network support, under the assumption of limited risk and with the security of business opportunities as well as arm's length return on the operational co....
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....thorised Representative ("learned AR") submitted that this issue has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal in assessee's own case for the preceding assessment year. The learned AR further submitted that even lower authorities have accepted that facts for the year under consideration are similar to the facts of the preceding assessment year, wherein this issue has been decided in favour of the assessee. 8. On the other hand, the learned Departmental Representative ("learned DR") vehemently relied upon the order of the authorities below. 9. 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 Damco International BV vs DCIT, in ITA No. 7447/Mum./2017, for the assessment year 2013-14, vide order dated 22/08/2022 held that network fees received by the assessee from Damco India are neither in the nature of Royalty nor Fees for Technical Services. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under:- "6. We have heard submissions made by the rival sides and have exa....
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....ty" and "Fee for Technical Services" under the provisions of the Act as well as under Indo-Netherland Tax Treaty. 7. We find that in the case of Damco International AS vs. DCIT in ITA No. 933 & 6465/Mum/2017 for assessment years 2012-13 and 2013-14, decided on 20/07/2020 the Tribunal has held that business support charges paid by Damco India are not taxable as FTS/Royalty under the Act or the relevant DTAA as the same is purely in the nature of reimbursement of cost. 8. We have thoroughly examined network agreement dated 01/01/2013. The remuneration clause for the services and obligation of Damco India is contained in Clause -7 read with Appendix-3 of the agreement. As per the terms of Appendix - 3, Damco India shall pay to the assessee network fee calculated as under: Network Fee = CMI - (Company Costs+ Mark up) CM1 has been defined in the Definitions clause of the Network Agreement as under: "1.2 "CM1" OR "GROSS MARGIN" is the result of the Company computed by deducting carriage and consolidation charges, including direct labour cost and related costs, from sales revenue;" In Addendum Network Agreement "Network Fee Basis" and "Mark Up" has been explained. F....
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....s not been rebutted by the Revenue. In fact, as pointed earlier, the DRP and the Assessing Officer has admitted this fact. The Ld. Counsel for the assessee has drawn our attention to the order passed under section 93CA(3) of the Act by the TPO for assessment year 2014-15 and 2015-16 in the case of Damco India, where Damco India has received minimum guaranteed network income of Rs. 32.41 crores in assessment year 2014-15 and Rs. 4.71 crores in assessment year 2015-16 from the assessee. 9. It has been further submitted that network fees received by the assessee does not fall within the meaning of FTS or Royalty under Article -12 of India - Netherland DTAA. For the sake of ready reference the relevant extract of Article -12 is reproduced herein below:- "4. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. 5. For purposes of this Article, "fees fo....
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.... Act, are consequential in nature. Therefore, grounds no.6 and 7 are allowed for statistical purposes. 13. Ground no.8 is pertaining to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 14. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA no.2240/Mum./2022 Assessee's Appeal - A.Y. 2019-20 15. In its appeal, the assessee has raised the following grounds:- "The Grounds stated hereunder are independent of, and without prejudice to one another. 1. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in directing the learned AO to treat, and the learned AO erred in treating, the Network Fee of Rs. 48,50,40,760/-, earned during the year by the Appellant, as fees for technical services and royalty under the Income-tax Act, 1961 (Act). 2. On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel (DRP) erred in directing the learned Assessing Officer (AO') to treat, and the learned AO erred in treating, the Network Fee of Rs. 48,50,40,760/-, earned during the year by the Appellant, as fees for tech....