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TMI Blog2024 (8) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that there was no PE in India. Since the payment was in the nature of FTS, a show-cause notice was issued proposing to treat the transportation fee as FTS. Assessee filed a detailed reply explaining that it is overall responsible for operation and maintenance of the business at global level and since DIPL is part of such network it makes use of facilities like integrated supply chain management, freight forwarding network, Group IT for common platform for integrated and efficient operations. As explained that, assessee does not charge any separate charge for use of such facilities. 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 u/A 12 of India Netherlands Tax Treaty. It was strongly contended that such network fee receipts from DIPL are business income u/A 7 of India Netherlands Tax Treaty and in business of a PE, such network fee receipts are not taxable in India. The explanation of the assessee did not find favour with the AO who was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with customers, network pool of various service providers, such as freight insurance etc.. During the course of scrutiny assessment proceedings the AO noticed that, the assessee has earned its income from services provided to its Indian AE i.e., Damco India Private Limited (DIPL), as network transportation fee. The transportation fee received from DIPL, was subjected to TDS treating the remittance as FTS but in the return of income was not offered to tax treating the same as business income on the ground that there was no PE in India. Since the payment was in the nature of FTS, a show-cause notice was issued proposing to treat the transportation fee as FTS. The assessee filed a detailed reply explaining that it is overall responsible for operation and maintenance of the business at global level and since DIPL is part of such network it makes use of facilities like integrated supply chain management, freight forwarding network, Group IT for common platform for integrated and efficient operations. It was explained that, the assessee does not charge any separate charge for use of such facilities. The assessee explained the year-wise split of network fees and network income as per fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of the Tribunal were not accepted by the revenue, the DRP confirmed the action of the AO. 9. We have given a thoughtful consideration to the orders of the authorities below. The Co-ordinate Bench in ITA No. 7447/Mum/2017 for AY 2013-14; ITA No. 545/Mum/2022 ITA No. 2240/Mum/2022, for AYs 2018-19 2019-20 and ITA No. 909 937/Mum/2023, AYs 2017-18 and 2020-21, has deleted the impugned addition. The latest order being that for AY 2017-18 and 2020-21 in ITA Nos. 909 937/Mum/2023, the relevant finding of which read as under:- 7. Heard both the sides and perused the material on record. With the assistance of the ld. Representative we have perused all the three judicial pronouncements in the case of the assessee itself as referred supra. The relevant operating part of the decision of ITAT for assessment year 2018-19 vide ITA No. 545/Mum/2022 after considering the decision of ITAT for assessment year 2013-14 is reproduced as under: 9. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee s own case in Damco International BV vs DCIT, in ITA No. 7447/Mum./2017, for the assessment year 2013- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervation 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 the services and obligation of Damco India is contained in Clause -7 read with Appendix-3 of the agreement. As per the terms of Appendix 3, Damco India shall pay to the assessee network fee calculated as under: Network Fee = CMI (Company Costs+ Mark up) CM1 has been defined in the Definitions clause of the Net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 Netherland DTAA. For the sake of ready reference the relevant extract of Article -12 is reproduced herein below:- 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 incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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