AI Drafter 
TaxTMI 
TaxTMI 
2023 (6) TMI 1428
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.... the provisions of the Act. 2. 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. 29,53,69,631/-, earned during the year by the Appellant, as fees for technical services and royalty under the Income-tax Act, 1961 (Act). 3. 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. 29,53,69,631/-, earned during the year by the Appellant, as fees for technical services and royalty under Article 12 of the India Netherlands Double Tax Avoidance Agreement (DTAA). 4. Without prejudice to the above and on facts and in circumstances of the case and in law, the final assessment order dated January 24, 2023 passed by the Assessing Officer, having been passed beyond limitation provided in terms of section 144C read with 153 of the Act, is bad in law, void ab initio and is liable to be quashed. Your appellant most respectfully prays that the final asse....
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....nd that there was no PE in India during the year under consideration. However, the AO was of the view that the payment was in the nature of fees for technical services. During the assessment proceedings the show cause notice was issued to the assessee on 05.02.2022 as to why the aforesaid receipt be not treated as fees for technical services. 4. The assessee submitted that Damco BV is a company incorporated in the Netherland and is a tax resident of Netherland for tax purposes in terms of Article 4 of the India-Netherland Tax Treaty. During A.Y. 2017-18, Damco BV did not have any place of business (i.e branch office or any other place of management in India, further it did not satisfy any other conditions specified in Article 5 of the Tax Treaty in relation to constitution of Permanent Establishment (PE) in India. The assessee explained that 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 globe. The assessee further submitted that in the network model/local Damco entity enjoy the economy of global Damco network support under....
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....2.2022 rejected objections filed by the assessee and stated that they are of the opinion that the amount received by the assessee as business support charges is taxable as royalty and fees for technical services under the Act as well as under the Article 13 of India Denmark DTAA. The DRP also stated that the issue at hand was similar to those which was dealt with by the DRP -1, Mumbai for assessment year 2012-13 and assessment year 2013-14 on identical set of facts. The DRP also stated that the facts involved in this years were identical to those in assessment year 2018-19 and 2019-20, therefore, they saw no reason to deviate from the decision of DRP on the issue in the earlier years. 6. During the course of appellate proceedings before us the ld. Counsel at the outset submitted that similar issue on identical facts have been adjudicated by the ITAT, Mumbai in the case of the assessee for the assessment year 2013-14 and 2018-19 and assessment year 2019-20 vide ITA No. 545/Mum/2022, ITA No. 2240/Mum/2022 & ITA No. 7447/Mum/2017. On the other hand, the ld. Departmental Representative relied upon the order of authorities below. 7. Heard both the sides and perus....
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....ssessee, Damco International AS, a Danish entity was the assessee. In para 4.2 of the DRP directions, the DRP has categorically mentioned that the only change in the impugned assessment year is that instead of Damco International AS, the Damco India has entered into new agreement w.e.f. 01/01/2013 with Damco International BV (the assessee). Thereafter, the DRP has listed the general/ specific obligations of the assessee and Damco India as per the Network agreement . In the assessment order for assessment year 2013-14 the Assessing Officer while passing the final assessment order reiterated the observations made by the DRP. The Assessing Officer has made no observation that the facts or the agreement in the impugned assessment year are in any manner at variance with the facts of the earlier agreement between the assessee and Damco International AS. The Assessing Officer based on the observations made by DRP finally concluded that the amount of Rs. 8,46,91,990/- is taxable as "Royalty" 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.&nbs....
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....ued in advance by the parties, as penalty clause, in an amount such as to enable the Company to obtain EBT based on Cost Company, equivalent to the agreed Mark Up, as defined in the Network Agreement." From above clauses in the Network Agreement it is ambiguously clear that Damco India remunerates the assessee only in the event of surplus profits. In the event of insufficient receipts Damco India is entitled to retain "Cost + 10% Mark Up". In the impugned assessment year Damco India had surplus that was shared with the assessee in accordance with the terms and conditions of agreement. We observe that the entire risk is borne by the assessee and Damco India is insulated from the risk. It has been contended that the obligation under both the agreements i.e. agreement between Damco International AS and Damco India as was applicable in the assessment year 2012-13 and 2013-14 (from 01/04/2012 to 31/12/2012) and the subsequent agreement between the assessee and Damco India effective from 01/01/2013 to 31/03/2013 relevant to assessment year 2012-13 are similar. This fact has not been rebutted by the Revenue. In fact, as pointed earlier, the DRP and the Assessing Officer has admit....
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....ervations we hold that network fee received by the assessee from Damco India is neither in the nature of Royalty nor FTS. Consequently, the aforesaid amount received by the assessee is not exigible to tax under the provisions of the Act or India - Netherlands DTAA." 10. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee's own case cited supra, we uphold the plea of the assessee and direct the AO to delete the impugned addition on account of receipt of network fees from Damco India Private Ltd. As a result, grounds no.1-3 raised in assessee's appeal are allowed." Respectfully following the decision of coordinate bench of the Tribunal on similar fact and identical issue as supra we direct the assessing officer to delete the impugned addition on account of receipt of network fees from Damco India Pvt. Ltd. Therefore, ground of appeal No. 2 & 3 are allowed. 8. Ground No. 5 & 6 are not discussed before us by the ld. Counsel ther....