TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1050
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....Rs. 1,12,86,35,000, 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 DRP/ learned AO erred in treating, the Network Fee of Rs. 1,12,86,35,000, earned during the year by the Appellant, as fees for technical services and royalty under Article 13 of the India-Denmark Double Tax Avoidance Agreement (DTAA) (3). Without prejudice to the above, on the facts and circumstances of the case and in law, the final assessment order issued/passed by the learned Assessing Officer (AO') pursuant to directions passed by the Hon'ble Dispute Resolution Panel ('DRP") is bad in law, in excess of jurisdiction, void ab initio and liable to be quashed being barred by limitation under provisions of Section 144C read with Section 153 of the Income-tax Act, 1961 ('the Act'). (4). On the facts and in the circumstances of the case and in law, the learned AO erred in considering the tax rate as 20% instead of the correct rate of 10% as per the section 9(1)(vii) r.w.s. 115A of the Act while computing the tax on network fe....
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.... g) Various administrative services such as Human resources. 4.1. On the analysis of the above, ld. AO categorized these into three broad categories as - (i) Supply Chain Management; (ii) Forwarding and Groupage Services; (iii) IT System Usage and Support. 4.2. Ld. AO in his draft assessment order proposed these services are covered as fees for technical services both under the provisions of the Act as well as Article 12 of the DTAA. 5. Ld. DRP in its directions observed by referring to the decision given by it in the A.Y. 2021-22 in assessee's own case whereby, these services were held to be fees for technical services and royalty in para 5.4 of its order. Ld. DRP noted that the issue involved is pari materia to the one dealt in the earlier years as decided by it and hence, there is no material change in the facts to make any deviation from its decisions made in the earlier years. 6. Before us, ld. Counsel for the assessee submitted that the issue in the present appeal is squarely covered by the decision of the Co-ordinate Bench in assessee's own case as well as its other group company for A.Y. 2021-22 vide ITA Nos. 4345/Mum/2023 &....
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.... 3 2014-15 - 4,71,16,250 4 2015-16 1,03,25,977 - 5 2016-17 29,53,69,631 - 6 2017-18 33,36,28,382 - 7 2018-19 48,50,40,762 - 8 2019-20 64,97,23,323 - 9 2020-21 41,06,79,169 - 5. From the above chart it was explained that the gross margin in excess of operational costs + arm's length markup, if any, is remitted to the assessee as network fee. The network fee is designed to levy DIPL with the return which would be earned by a local stand-alone freight forwarding and logistics provider. At the same time, the network fee is intended to ensure that if profit of DIPL is less than the arm's length margin, the network income will be paid to DIPL which ensures that DIPL is insulated from the shortfall. From the above chart it was explained that in FY 2013-14 and 2014-15, DIPL has received network income in which it failed to earn profits less than arm's length margin. It was clarified that network fee/network income is not a charge and hence it thus comes under the purview of FTS under Article 12 of India Netherlands Tax Treaty. It was strongly contended that such network fee receipts from....
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.... 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 examined the orders of authorities below. We have also considered the documents on which rival sides have placed reliance in support of their respective submissions. The assessee during the period relevant to the assessment year under appeal has received network fees from Damco India. The services have been rendered by the assessee in accordance with Network Agreement dated 01/01/2013 (at page 3 of the paper book). The contentions of the assessee is that it does not have Permanent Establishment (PE) in India in terms of Article -5 of India- Netherland DTAA. And by virtue of Article-7 of India - Netherland DTAA, network fees earned by the assessee is not taxable in India. At the outset it would be pertinent to mention that the network fee which is subject matter of dispute in the present ....
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.... 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. For the sake of completeness the relevant extracts of Addendum Network Agreement are reproduced herein below: "3 NETWORK FEE BASIS As per Appendix 3 of the Network Agreement, the Network Fee shall be an amount equal to the CM1 in the accounts of the Company, reduced by the Company Costs and Mark-up. It is understood by Parties that the CM1 and Company Costs are determined on the basis of financials reported in the HFM accounting system (based on IFRS principles) as used by INTERNATIONAL and Company. 4. xxxxxxxx 5 MARK UP With reference to item (d) of Appendix 3 of the Network Agreement, Parties agree that the Mark-Up for the Territory will be set at 10% for 2013 and onwards- until otherwise agreed. In another addendum network agreement "Network F....
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....elow :- "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 for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received; or (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. A bare perusal of Article -12 of the DTAA defining the term „Royalty" would show that the nature of payment received by the assessee does n....