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2020 (7) TMI 599 - AT - Income TaxRoyalty/ Fees for Technical Services - Receipt of Business Support Charges - whether what has been recovered from DIPL is the general maintenance and running cost of various global systems which does not amount to the definition of Royalty as prescribed under Explanation 2 to Section 9(1)(vi) ? - Whether appellant’s contention that business support charge receipt is reimbursement of cost incurred and hence not chargeable to tax ? - HELD THAT:- In the instant case, the appellant acts as the central coordinator for all Damco entities across the globe. As a central coordinator, the appellant procures from various service providers viz. insurance, procurement of various product and information technology related support services etc. needed by Damco entities across the globe. The appellant enters into ‘MSA’ with Damco operating entities and therefore, recovers the cost of procurement/provision from these entities. All these costs are only reimbursed to the appellant and there is no mark-up. Receipt of business support charge is not taxable as fees for technical services/royalty under the Act or the relevant DTAA as the same is purely in the nature of reimbursement of cost. Services/procurement rendered by the appellant are in the nature of coordinating services whereby various costs incurred are pooled together and charged/recovered as reimbursement costs on the basis of various allocation keys like number of Headcount/Headcount usages/Number of users/Country operational cost/Country revenue etc., which is uniformly applied across the group. Reimbursement of cost related to Global Service Centre is in effect provided to the group by Maersk Global Services Centre and is in the nature of low end BPO and hence cannot come in the field of managerial, technical and consultancy. Similarly, the business support services related to procurement and issuance are also reimbursement of cost incurred for the benefit of the group companies and not technical, managerial or consultancy in nature. Similarly, reimbursement of cost towards administrative services cannot be held to be in the nature of technical, managerial and consultancy in nature. Thus we hold that the receipt of business support charge is not taxable as fees for technical services/royalty under the Act or the relevant DTAA as the same is purely in the nature of reimbursement of cost.- Decided in favour of assessee.
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