TaxTMI 
TaxTMI 
2024 (11) TMI 1292
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....he Act') pursuant to the directions issued by the Dispute Resolution Panel ('DRP') on the following grounds, each of which is 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 amounting to INR 38,90,57,080/- as against loss claimed by the Appellant in the return of income filed for A.Y. 2020-21. Taxability of Management Service Fees of INR 38, 90, 57,080/- On the facts and in the circumstances of the case and in law, the learned AO / DRP have: 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 I....
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....statement) for the relevant assessment year. Erroneous levy of interest under section 234A of INR 16, 99,400/- On the facts and in the circumstances of the case and in law, the learned AO/ DRP have: 12. Erred in computing consequential interest of INR 16, 99,400/- under section 234A of the Act on the income assessed; Consequential levy of interest under section 234B of INR 1, 69, 94,000/- On the facts and in the circumstances of the case and in law, the learned AO/ DRP have: 13. Erred in levying consequential interest of INR 1, 69, 94,000/- under section 234B of the Act on the income assessed; Erroneous levy of surcharge of INR 19, 45,285/- and education cess of INR 16, 34,040/- 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 have: 14. erred in computing surcharge of INR 19,45,285/- and education cess of INR 16,34,040/- 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 ....
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.... The above services have been rendered entirely from outside India and no role is played by VODMC's Project Office, in rendering the said services. Since, VODMC's Project Office has not played any role in rendering the above services to VOIPL; the amount charged to VOIPL India has not been included in its books of accounts. For the above services, VODMC has charged Rs. 38, 90, 57,080/- on VOIPL". The assessee's main contention had been that, the services rendered in pursuance of the 'service agreement' are not in the nature of 'FTS' under the DTAA, because there is no "make available" of any technical knowledge, experience, skill, know how or process, etc. That apart, it was stated that VODMC's project office has not played any role in rendering of any of the above services, therefore, same are not attributable to its project office also and thus, on this ground also the same is not taxable in India. The assessee was required to furnish the details and the nature of business management services provided and the basis of allocation of cost of services to the Indian entity and was further required to justify, as to why the same should not be held taxable in India. In resp....
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....e Company will be advisory and consultative and the Service Recipient Company shall have the final authority for the implementation of a advice and assistance received. Further, in no case shall the Service Company be held responsible for outcome of the implementation emanating from any advice provided by the Service Company". It was also submitted by the assessee that, the assistance to the Indian company was given for the following stages in the dredging contracts namely:- (i) Pre-bid stage; (ii) Bidding stage; (iii) Project operation/Execution stage; (iv) Post project completion stage. It was further contended that, the cost of rendering the services is accounted by VODMC and is subsequently allocated to various group entities based on the turnover of each entity vis-à-vis the total turnover of Van Oord Group. It was thus stated that the 'services fees' are charged as a percentage of turnover carried out by VOIPL during the year without any mark up. 4. The Ld. Assessing Officer after analyzing the 'Service Agreement' and the submissions of the assessee, observed that, the Indian entity/VIOPL is totally dependent upon the ....
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....order of AO passed u/s. 143(3) r.w.s. 144C (13) of the Act, and order of the Ld. DRP passed u/s. 144C (5) of the Act alongwith submissions of the assessee and grounds raised by the assessee. 6. Issue raised by the assessee is identical and dealt in by the coordinate bench in assessee's own case vide ITA No. 1733/Mds/2011 (A.Y. 2003-04), ITA No. 7589/Mum/2012 (A.Y. 2009-10) and ITA No. 1146/Mum/2021 (A.Y: 2017-18) held as under: 9. "since the management service fees charged for the aforesaid services provided by the assessee are without any mark-up 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 has accordingly, held the same to be taxable as Royalty in India. The ld. AO held that the said issue is recurring in nature and on verification of the documents provided in the earlier years, it was held that the same evidence the fact that assessee was doing nothing but sharing of experience of Industrial, Commercial an....
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....y work and inspection plans etc. Similarly, for marketing, the assessee provides for marketing through its website and maintaining it, printing and publishing brochures which can be distributed to its potential clients. It also helps VOIPL to obtain certificate of approval from concerned organizations and obtained the contracts on the regular basis. Regarding quality health and safety environment services, the assessee merely conducts internal audits at regular intervals so that proper adherence to such quality standards and procedures are valid/ should remain valid. Similarly, in the estimating and engineering services and other services also, the assessee is mainly providing tender process, helping and preparing (estimates) and bids and plan consisting in local performance and other guarantees to the client of VOIPL etc. For rendering of these services, there is no element of imparting any "know how or there is transfer of any knowledge, skill or experience. Thus, in our opinion, we hold that 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, Manage....
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.... 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 this issue consistently have been allowed in favour of the assessee, holding that none of the services provided by the assessee in terms of service agreement falls within the scope of Royalty as defined in Article 12(4) of the India Netherlands DTAA and also that the payments received by the assessee are in the nature of reimbursement without any mark-up and therefore, the same cannot be held to be 'Royalty' and not taxable in India. Further, Management Services if represents the allocation of the actual cost incurred which has been certified by the auditors and the Tribunal has held that Management Services Fee are not taxed in India. Accordingly, this issue is decided in favour of the assessee." 7. In view of above findings of coordinate benches, we respe....