TMI Blog2017 (2) TMI 1356X X X X Extracts X X X X X X X X Extracts X X X X ..... e, per se no separate royalty/FTS were rendered by the assessee. Hence, we allow this issue of assessee’s appeal. Income from Inland Haulage Charges [IHC] of cargo - whether covered under Article 9 of the tax treaty between India and Denmark and therefore not liable for tax in India and that section 44B - Held that:- As decided in assessee's own case the activities of the IHC are connected directly or an ancillary activity that provides minor contribution and should not be regarded as a separate business to the operations of ships. These activities are linked or connected to each other and as such one cannot say that one is to be conducted efficiently without the other and which have a nexus to the main business of the assessee of operations of ships should be considered as integral part of income from shipping operations. Accordingly, we allow the claim of assessee - repayment of money may be construed as “reimbursement” only if it is bereft of profits for the services rendered. There is no profit element in the pro rata costs paid by the agents of the assessee to the assessee and accordingly, we have no hesitation in holding that the amounts paid by the agents to utilize the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropos ground no. 1 At the outset in this case learned counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of this tribunal in assessee's own case in earlier assessment year's. Learned counsel claimed that the facts are identical and hence there is no infirmity in the directions of DRP in this regard. He pointed out that Ld. DRP has inter-alia followed the tribunal order for earlier years. Per Contra learned departmental representative did not dispute that this issue is covered in favour of the assessee as submitted by the learned counsel of the assessee. 4. Upon careful consideration, perusing the records we find that this tribunal in assessee own case ITA no. 1927 and 2054 for assessement year s 2010-11 as per its order dt. 7.10.2016 has adjudicated identical issue as under:- Brief facts leading to the above issue are that during the year assessee incurred certain expense towards operation, maintenance and upgradation of SAP based ERP solution (FACT), FACT has been procured by the assessee for efficient management of operations of its shipping business. This was done in order to streamline operations w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kabet, which merged into Svendborg, being the assessec (the merged entity, Svendborg, was renamed as A. P. Moller Maersk A/S post-merger) In this order dated 11.06.2010 of AY s 2001-02 to 2003-04, the Mumbai Tribunal has held that such recovery cannot be taxed in India, because, these systems are an integral part international shipping business, and without these systems, the international shipping business cannot be conducted, nor would the agents of the assessee across the world be able to discharge their role as agents of the assessee. Activities are directly connected to its business of operations of ships in international traffic and hence taxable only in Denmark tinder Article 9(1) of India Denmark Tax Treaty. The assessee is in the business of shipping and not in the business of providing any technical services While the system enables better and efficient conduct in the business, it does not mean that the assessee is providing technical services. The cost for setting tip the IT Global System is shared between the assessee and its agent across the globe. The payment received is nothing hut a payment by way of reimbursement of cost for providing a particular system. The perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that such cost is an integrated part of the Shipping business. Usage of such software by the CIS division, which handles tracking of the containers, accounting and in bills of freight receipts, warehouse functionality, etc. which in turn, helps the assessee in conducting its shipping business in more effective and efficient manner globally. This software in fact is a tool and integrated part of shipping operations only, usage of software cannot be segregated from such activities of overall shipping operations so as to hold it as rendering of any independent technical services. These activities are intrinsically linked to its business operation of ships in international traffic and therefore are a part of the business activity of the assessee. Which is operation of ships in international traffic. The FACT cost represent merely allocation of cost incurred and hence in the nature of reimbursement of expenses not having any element of profit embedded in it. Such recovery only includes proportionate cost incurred by the assessee for the development and maintenance of the system. Therefore, such recoupment of cost does not constitute income chargeable to tax in the hands of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the facts of this case and precedence discussed above, we are of the view that the entire IHC of the assessee is necessarily in connection with transport of containers either discharged or loadable at Indian ports for the purpose of delivery through international waters and is directly connected with such transportation will always be included within the term operations of ships'. The activities of the IHC are connected directly or an ancillary activity that provides minor contribution and should not be regarded as a separate business to the operations of ships. These activities are linked or connected to each other and as such one cannot say that one is to be conducted efficiently without the other and which have a nexus to the main business of the assessee of operations of ships should be considered as integral part of income from shipping operations. Accordingly, we allow the claim of assessee and hence, this common issue of assessee appeal is allowed and that of revenue dismissed. 9. Further more we note that Hon ble jurisdictional High Court in assessee's own case in income tax appeal number 1306 and others as per order dated 29/14/2015 has considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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