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TMI Blog2024 (11) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope and ambit of royalty as defined in Article 12(4) of the DTAA. 16. Here again, Management services fees charged is an allocation of cost which is without mark-up, hence it has been stated that the same being in nature of reimbursements do not constitute Royalty as per India-Netherlands Double taxation avoidance agreement (DTAA'). Once this issue consistently have been allowed in favour of the assessee, holding that none of the services provided by the assessee in terms of service agreement falls within the scope of Royalty as defined in Article 12(4) of the India Netherlands DTAA and also that the payments received by the assessee are in the nature of reimbursement without any mark-up and therefore, the same cannot be held to be Royalty and not taxable in India. Further, Management Services if represents the allocation of the actual cost incurred which has been certified by the auditors and the Tribunal has held that Management Services Fee are not taxed in India. Accordingly, this issue is decided in favour of the assessee. Short grant of tax deducted at source - As it has been stated that in the return of income filed for A.Y.2017-18, assessee had claimed credit of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify as royalty, the same should provide know-how to the recipient. 5. Erred in not appreciating that the services provided by the Appellant are in the nature of business support and administration services and are not in the nature of sharing information concerning industrial, commercial and scientific experience. 6. erred in not following the order of the Hon'ble jurisdictional Income-tax Appellate Tribunal ('ITAT'), Mumbai for A.Y. 2009-10 in Appellant's own case which has also been relied upon and followed in subsequent orders passed by ITAT for A.Y.s 2005-06, 2007- 08, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, A.Y. 2017-18, A.Y. 2018-19 and A.Y. 2019-20. 7. Erred in not appreciating the fact the Hon'ble High Court of Bombay vide its order dated 9 February 2022 has dismissed the appeal filed by the Department against the ITAT order for A.Y. 2009-10. Set-off of management service fees treated as royalty with current year business loss as well as brought forward business loss not allowed Without prejudice to the above grounds, and on the facts and in the circumstances of the case and in law the learned AO / DRP has: 8. Erred in not setting off the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections are distinct and separate and without prejudice to each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of appeal, so as to enable the Hon'ble Tribunal to decide the appeal in accordance with the law. 2. The brief facts of the case are that assessee is a company registered in Netherlands, engaged in the activity of undertaking international dredging, maintenance dredging projects and other dredging related activities. Assessee filed its return of income on 03.02.2021 declaring total loss at Rs. 11,28,623/- and claiming refunds of Rs. 5,17,12,427/- out of taxes paid. Case of the assessee was selected for scrutiny under CASS. 3. During the year under consideration, assessee has not carried out any dredging related contracts in India. However, during the financial year ended 31.03.2020, assessee (VODMC) has provided certain business support services to M/s. Van Oord India Pvt. Ltd. (VOIPL), Associate Enterprise. Thus, assessee had not earned any income from contractual operations in India in the relevant assessment year. VODMC had entered into Services Agreement with Van Oor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Recipient Company with assistance and support in the field of personnel and organization, operation support, quality, health, safety and environment, designated personnel offshore, information technology, estimation and engineering, marketing and administrative services in connection with the operations of their business of marine construction and related activities. The services to be performed under this agreement shall include but not limited to:- Personnel and Organization Assistance and support in crew management, planning and administration functions and assistance in development of policies in respect of human resource; Operations support Assistance in ensuring that qualifying projects are commenced correctly through project co-ordination and costly errors are avoided or limited; Assistance in project execution and related activities; Quality, health, safety and environment Assistance in formulating business processes for organizational and project matters; Designated Personnel ashore Designating a person ashore to maintain contract the crew of the ship and the Service Recipient Company; Information Technology Providing information technology support during the performance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is also en-cashing on the brand name and experience of the assessee company not only for procuring business and for its successful implementation as well. During the course of assessment proceedings, the assessee was asked to furnish the documentary evidences in support of the business management services, in response to which the assessee vide letter has furnished all the evidences. On going through the same he observed that it is providing user manual having instructions along with technical design as to how the folders are to be maintained regarding logon instructions, work place securities, accessing network drives, how to open an archive along with technical designs and diagrams, etc. It also contains the standard procedures for inspection, checklist of main equipments, project plan, safety walk, safety work report, drawing solution along with drawing have also been given. The literature regarding marine engineering solutions, main equipments and dredging solutions have also been given in detail along with the terms and designs. This he inferred that it is nothing but sharing of experience of industrial, commercial and scientific in nature and hence payments received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ITA no. 7589/Mum/2012 dated 07/10/2016), pursuant to analyzing the nature of services envisaged in the service agreement between assessee and VOIPL has held that there is no imparting of any know-how or transfer of any knowledge, skill or experience and hence, none of services provided by assessee in terms of the service agreement falls within the scope of Royalty , as defined in Article 12(4) of India-Netherlands DTAA. Further, the ITAT has given a clear finding that the consideration received by assessee is purely on allocation of actual cost which has been certified by the auditors and hence, the same cannot be reckoned as payment towards Royalty . The relevant extract of the ITAT's order is reproduced as under: As highlighted above, with regard to various streams of services like providing of information technology, operational support marketing, quality, health, safety and environment, estimating and engineering and personal and organization, administration and legal services, it has been held that there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific which is made available to VOIPL. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by the ld. AO or by the Ld. DRP. The assessee has charged specified percentage of cost incurred by it for rendering aforesaid services which is based on turnover of each entity and the turnover of Van Oord Group as highlighted above which has been certified by the Auditors as given in the paperbook from pages 9 to 11. Once the auditors have certified that, such allocation of costs represents actual expenditures then, we do not find any reason to hold that reimbursement of the cost can be reckoned as payment towards royalty . Further, it is seen that the ITAT in Appellant's own case for the various years has followed the aforesaid ITAT order for AY 2009-10 by observing that the management service fees represent pure allocation of actual cost incurred which has been certified by the auditors and accordingly held that the said services are not taxable in India: Assessment year Appeal no. Date of order 2005-06 ITA no 495/Mum/2016 2007-08 ITA no. 496/Mum/2016 28 February 2018 2010-11 ITA no 4136/Mum/2016 5 September 2019 2011-12 ITA no 2029/Mum/2016 31 May 2019 2012-13 ITA no. 1382/Mum/2017 15 July 2022 ITA No. 1146/Mum/2021 M/s. Van Oord Dredging Marine Contractors B.V 11 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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