9911796707
TMI Blog2023 (6) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... make available condition. In the present case nothing has been brought on record by the Revenue to substantiate that any technical knowhow has been made available to Damco India by the assessee. Thus, in view of our above observations 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 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. Decided in favour of assessee. - Shri Amarjit Singh, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Appellant : Manish Kanth. For the Respondent : Chandip Singh. ORDER PER AMARJIT SINGH (AM) : These 2 appeals filed by the assessee are directed against the different final assessment orders of the assessing officer for A.Y. 2017- 18 and A.Y. 2020-21 respectively. Since, these two appeals are based on similar issues and identical facts therefore for the sake of convenience these two appeals are adjudicated together by taking IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore or at, the time of hearing of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law. 2. Fact in brief is that assessee filed return of income declaring total income of Rs. nil for the year under consideration on 30.11.2017 which was revised on 30.03.2018. The case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act issued to the assessee on 30.03.2021. The assessee company M/s Maersk Logistics Services International B.V. (Erstwhile DAMCO International B.V.) is incorporated in Netherland and was engaged in the business of logistics and freight forwarding across the globe. For the purpose of such business, the assessee company has various business infrastructure such as IT network E-commerce portal facilitating interface with customers network pool of various service providers, such as freight insurance etc. 3. During the year under consideration, the assessee company has earned income from services provided to its Indian associated enterprises i.e. Damco India Pvt. Ltd. (DIPL) as network transportation fee. The assessee had received network fees of Rs. 29,53,69,631/- from Damco India Pvt. Ltd.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to ensure that the group as a whole is benefitted the company acts as the central coordinator for all Damco entities across globe. As a coordinator the company acts with various service providers such as the Maersk Global Service Centre (I) Pvt. Ltd, TT Global Mutual Insurance Ltd. etc. for production of service such as insurance, procurement of various product and information technology related support services etc. needed by Damco entities across globe. The assessee company further submitted that said payment were nothing but business receipts for the company and in the absence of a permanent establishment in India, such receipts are not taxable in the light of Article 7 of India Netherland DTAA. However, the AO has not agreed with the submission of the assessee and he was of the view that services provided by Damco International BV to Damco India Pvt. Ltd. were managerial and technical in nature. The assessee has raised invoices to Damco India Pvt. Ltd. and the Damco India Pvt. Ltd. has deducted TDS of the payment to the assessee @ 10% treating this payment as FTS. Therefore, network fees of Rs. 29,53,69,631/- was treated as fees for technical services/royalties by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appeal was earned by the assessee for the period starting from 01/03/2013 to 31/03/2013. For the period starting from 01/04/2012 to 31/12/2012 falling under the same assessment year i.e. assessment year 2013-14, Damco India had agreement with Damco International AS, a Danish entity. Both the agreements i.e. agreement between Damco International AS - Damco India and assessee - Damco India are stated to be similar. A perusal of the directions of DRP dated 11/09/2017 would show that the DRP has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndix 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 Fee Payment has been explained, the same is reproduced herein below: NETWORK FEE PAYMENT Thus, Parties declare and confirm that in the event the calculation of Network Fee results in a negative figure, Company shall be entitled to receive from INTERNATIONAL a payment as compensation for damages for not having been able to obtain the committed results. By virtue of the foregoing, if the calculation of Network Fee is negative, INTERNATIONAL shall pay compensation as indemnity for damages to Company. Such compensation is valued in advance by the parties, as penalty clause, in an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 not fall within the meaning of Royalty. The clause -5 of Article 12 defines FTS. A reading of clause -5 shows that FTS is with respect to rendering of any technical or consultancy services. It does not include managerial services. Further, sub-clause (b) to clause (5) refers to make available condition. In the present case nothing has been brought on record by the Revenue to substantiate that any technical knowhow has been made available to Damco India by the assessee. 10. Thus, in view of our above observations 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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