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2022 (9) TMI 1403 - AT - Income TaxIncome deemed to accrue or arise in India - Executive search fee - taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 and under Articles 12(5)(a) and / or 12(5)(b) of the India-Netherlands tax treaty - alternative conclusion that the same was taxable as 'Royalty' under Article 12(4) of the India-Netherlands Tax Treaty read with clause (iv) of Explanation-2 to Sec. 9(1)(vi) of the Act - HELD THAT:- For Taxability of Search Fees in assessee’s own case for the A.Ys. 2014-15 & 2015-16 [2019 (8) TMI 979 - ITAT MUMBAI] and decided the issue in favour of the assesse and against the department. Assessing Officer erred in holding that the Executive search fee was in the nature of 'fee for technical services' under Article 12(5)(a) as well as 12(5)(b) of the India Netherlands Tax Treaty and also erred in his alternative conclusion that the same was taxable as 'Royalty' under Article 12(4) of the India-Netherlands Tax Treaty read with clause (iv) of Explanation-2 to Sec. 9(1)(vi) of the Act. Taxability of reimbursement of expenses - HELD THAT:- Issue decided in favour of assessee in immediately preceding Assessment Years i.e., A.Y.2014-15 and 2015-16 [2019 (8) TMI 979 - ITAT MUMBAI] held that payments were in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. Neither the Assessing Officer nor the Commissioner (Appeals) had stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Once the character of the payment was in the nature of reimbursement of the expenses, it could not be income chargeable to tax. Moreover, freight income generated by the assessee in the assessment years in question was accepted as not chargeable to tax as it arose from the operation of ships in international waters in terms of article 9 of the DTAA. Once that was accepted and was also found that the Maersk net system was an integral part of the shipping business which was allowed to be used by the agents of the assessee as well in order to enable them to discharge their role more effectively as agents, and the business could not be conducted without it, it could not be treated as any technical services provided to the agents. Appeals filed by the assessee are allowed.
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