9911796707
Advanced Search 
TMI Blog2018 (2) TMI 1949X X X X Extracts X X X X X X X X Extracts X X X X ..... ring total income of Rs. 55.06 Lacs. The primary dispute under the present appeal is the nature of certain IT costs and Inland Haulage Charges [IHC] received by the assessee during the course of shipping business. 3.1 During Assessment Proceedings, it was noted that it had certain receipts of Rs. 20.53 Lacs on account of IT system support services to various entities which were not offered as income on the premises that the same represented reimbursement of certain IT related costs from group companies / agents based on the usage and incurred for effective conduct of its day-to-day shipping operations business. These costs were primarily in the nature of infrastructure support software, workspace management system, Remedy, Network cost, procurement cost & other IT support services incurred by the assessee for smooth running of its business, which was being charged to group entities / agents based on their usage. However, not convinced, Ld. AO opined that the same constituted Fees for Technical Services and hence, taxable @10% in terms of treaty provisions. 3.2 Similarly the assessee claimed certain Inland Haulage Charges [IHC] aggregating to Rs. 388.16 crores being part and par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016 was passed by Ld. AO determining 'Nil' total income. Aggrieved, the revenue is in further appeal before us. 5. The Ld. Sr. Counsel for Assessee [AR], at the outset, drew attention to the fact that both the issues stood squarely covered in assessee's favor by the judgment of various judicial authorities for several assessment years and therefore, the stand of DRP was quite justified. The Ld. Departmental Representative [DR] fairly conceded the settled legal positions and could not bring on record any contrary facts or judgments to controvert the same. 6. After perusal of rival contentions, we find that both the issues, on similar facts and circumstances, have already been settled in assessee's favor in his own case for several other years as per following judicial pronouncements:- (i) Hon'ble Apex Court in DIT(IT) Vs. A.P.Moller Maersk A/s [CA No. 8040 of 2015 17/02/2017 AYs 2001-02 to 2005-06] (ii) DCIT (IT) Vs. A.P.Moller Maersk A/s [ITA No. 1798/Mum/2015 AY 2011-12 15/02/2017 Mumbai Tribunal] (iii) DDIT (IT) Vs. A.P.Moller Maersk A/s [ITA No. 1927 & 2054/Mum/2014 AY 2010-11 07/10/2016 Mumbai Tribunal] (iv) DDIT (IT) Vs. A.P.Moller Maersk A/s [I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not chargeable to tax in India as the same was without any mark-up and was a cost to cost basis. But the AP vide draft assessment order dated 26.03.2013 treated recovery of FACT cost as royalty/ Fees for Technical Services (FFS) and taxed the same under section 115A of the Act at the rate of 10%. The DRP vide its directions dates 23.12.2013 upheld the aforesaid additions made by the AO in his draft assessment order by treating such recovery as royalty/FTS. Aggrieved, assessee is in appeal before Tribunal. Before us it was explained that Mumbai Tribunal on a similar issue on taxability of recovery of cost towards IT Global Portfolio Tracking System has passes an order in the case of entity Dampskibsselskabet of 1912 A/s Aktieselskabet, which merged into Svendborg, being the assessec (the merged entity, Svendborg, was renamed as A. P. Moller Maersk A/S post-merger) In this order dated 11.06.2010 of AY's 2001-02 to 2003-04, the Mumbai Tribunal has held that such recovery cannot be taxed in India, because, these systems are an integral part international shipping business, and without these systems, the international shipping business cannot be conducted, nor would the agents of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tax Treaty includes not only activities directly connected with shipping operations but also activities which facilitate or support such operations. - It was thus held that any kind of receipts by way of software usage! development cost cannot be taxed in India under Article 9(1) of Tax Treaty. - The receipts also cannot be taxed as royalty/FTS independently because in the present case, the Appellant is not rendering any services of managerial, technical or consultancy to its agents or group entities by allowing its group companies to be usage of software. - The assessee has been reimbursed at cost without any markup. We relying on the decision of the Hon'ble Bombay High Court are of the view that such cost is an integrated part of the Shipping business. Usage of such software by the CIS division, which handles tracking of the containers, accounting and in bills of freight receipts, warehouse functionality, etc. which in turn, helps the assessee in conducting its shipping business in more effective and efficient manner globally. This software in fact is a tool and integrated part of shipping operations only, usage of software cannot be segregated from such activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmity in the direction of Ld. DRP in this regard. Accordingly, we uphold the same. Hence, the ground raised by the revenue on this issue stands dismissed. 6. Apropos ground no. 2-4 On this issue also Ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decisions of the tribunal in assessee own case and also Hon'ble Bombay High Court also for earlier year. Per Contra Ld. DR not dispute this proposition. 7. Up on careful consideration we find that similar issue was decided in favour of the assessee by this tribunal as per its order dated 7/10/2016 as above. 8. After elaborately considering the issue the tribunal concluded as under; "In view of the facts of this case and precedence discussed above, we are of the view that the entire IHC of the assessee is necessarily in connection with transport of containers either discharged or loadable at Indian ports for the purpose of delivery through international waters and is directly connected with such transportation will always be included within the term "operations of ships'. The activities of the IHC are connected directly or an ancillary activity that provides mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use Maersk Net for the Maersk group's global shipping business and for no other reason. It related to shipment of cargo and their movement across the oceans. The views of the revenue that it amounted to technical service is misconceived. In fact, the Assessing Officer relied upon the decision of M/s. Arthur Anderson & Co. in ITA No. 9125/Mum/1995, Mumbai, 'D' Bench in which the Tribunal had observed that repayment of money may be construed as "reimbursement" only if it is bereft of profits for the services rendered. There is no profit element in the pro rata costs paid by the agents of the assessee to the assessee and accordingly, we have no hesitation in holding that the amounts paid by the agents to utilize the amount arose out of the shipping business cannot be brought to tax as sought to be done." 10. Thus from the above it is apparent that the issue involved is squarely covered in favour of the assessee. Accordingly, we uphold the direction of Ld. DRP in this regard also. Respectfully following the binding judicial precedents, taking the same stand, we confirm the directions of Ld. DRP and therefore, dismiss the revenue's appeal. 7. Resultantly, the revenue's appeal s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
