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TMI Blog2023 (3) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... i G.S. Pannu, President, And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Manish Kanth. For the Revenue : Shri Soumendu Kumar Dash. ORDER PER BENCH The present appeals have been filed by the assessee challenging the separate impugned final assessment orders dated 25/01/2022 and 12/07/2022, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ), pursuant to the directions issued by the learned Dispute Resolution Panel, Mumbai, [ learned DRP ], under section 144C(5) of the Act, for the assessment years 2018-19 and 2019 20, respectively. 2. Since both appeals pertain to the same assessee and the issues involved are also common, therefore, as a matter of convenience, these appeals were heard together and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as Royalty and Fees for Technical Services under the India Netherlands Double Taxation Avoidance Agreement ( DTAA ) and the Act. 5. The brief facts of the case pertaining to this issue are: The assessee is a company incorporated in and is a tax resident of Netherlands. The assessee is engaged in the business of logistics and freight forwarding across the globe. For the purpose of such business, the assessee has various business infrastructures such as IT network, e-commerce portal facilitating interface with customers, network pool of various service providers, such as freight insurance, etc. For the year under consideration, the assessee filed its return of income on 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 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO. Vide directions dated 24/01/2022, issued under section 144C(5) of the Act, the learned DRP, inter-alia, by following its directions rendered in assessee s own case for the assessment years 2012-13 and 2013-14 rejected the objections filed by the assessee on this issue, after noting that there is absolutely no change in facts this year. In conformity with the directions issued by the learned DRP, the AO passed the impugned final assessment order treating the receipt of network fees taxable under the head Fees for Technical Services and Royalty . Being aggrieved, the assessee is in appeal before us. 7. During the hearing, the learned Authorised 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 ) veh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. In view of our findings rendered in respect of grounds no.1-3, the issue arising in grounds no.4 and 5 are rendered academic in nature and hence require no separate adjudication. 12. The issues arising in grounds no.6 and 7 are pertaining to the levy of interest under section 234D and recovery of interest granted under section 244A of the 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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