TMI Blog2020 (12) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 27.09.2018 passed in pursuance to the directions of the Dispute Resolution Panel (DRP) order dated 16.08.2018. 2. At the time of hearing the Ld. AR submitted that though the assessee has raised the grounds of appeal 1 to 14 but has not pressed grounds of appeal No. 10-13 and ground of appeal No.14 is raised prematurely. The assessee has filed a letter of withdrawal for ground of appeal No. 10-13 and the same is treated as withdrawn and dismissed. The effective grounds of appeal are as under: 1. erred in making addition of Management service fees of ₹ 21,27,77,100/-. 2. erred in not following the order of the Hon ble Jurisdictional Income tax appellate Tribunal, Mumbai for the A.Y 2009-10 in appellant s own case. Taxability of Management service fees of ₹ 21,27,77,100/- 3. erred in not appreciating that the management service fees received by the appellant constitute pure allocation of cost without any make-up and hence, the same being reimbursement of cost, is neither taxable as Royalty nor taxable as Fees for Technical services under the Act as well as under the Double taxation avoidance agreement between India and Netherlands. 4. err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Van Oord India Pvt Ltd and has charged ₹ 21,27,77,100/- and submitted that the above mentioned services do not make available any technical knowledge experience. The services are not in the nature of make available and are not taxable as fees for inclusive services under the provisions of India Netherlands Tax Treaty. The services are rendered entirely from outside the country and the assessee company has not played any role in rendering the services. Therefore, the business support services are not taxable in India as per the India and Netherlands Tax Treaty. On the similar issue Hon ble Tribunal for the A.Ys 2009-10, 2013-14 and 2014-15 held that the management service fees cannot be assessed as Royalty in terms of India Netherland Treaty and the assessee was granted relief. But the revenue has filed an appeal u/s 260A of the Act for the A.Y.2009-10 and regarding other Asst years still no information is available on record. But the A.O has calculated the total income of Rs. Nil after setting of brought forward loss. Whereas, the management service fees is treated as royalty income and taxed at treaty rate and passed the draft assessment order u/s 144 C(1) r.w.s 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ambit of royalty as defined in Article 12(4) of the DTAA for the sake of convenience, we extract below operation portion of the order passed by the coordinate Bench of Tribunal in A.Y 2009-10. 14. We have heard the rival submissions, perused the relevant f inding given in the impugned orders as well as material referred and relied upon before us. The f irst issue for our adjudication is, whether the fees received by the assessee from its Indian entity, VIOPL for management and support services is to be treated as royalty under Article 12(4) of India-Netherland-DTAA or not. The entire gamut of facts and nature of services provided by the assessee to VOIPL in the terms of service agreement dated 1st April, 2004 has already been discussed above elaborately. The revenue s case is that, the VOIPL is completely dependent on assessee (VODMC) for its experience in industrial, commercial and scientif ic field. The Indian entity is engaged in highly technical business of dredging activities for which it requires the information and experience of the VODMC right from the pre-bidding stage till the post project completion stage. Thus, the payment received by the assessee-f irm f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the formulas granted to the licensee and that he does not guarantee the result thereof. This type of contract thus differs from contracts for the provision of services, in which one of the parties undertakes to use the customary skills of his calling to execute work himself for the other party. Payments made under the latter contracts generally fall under Article 7. The need to distinguish these two types of payments, i.e. payments for the supply of know-how and payments for the provision of services, sometimes gives rise to practical difficulties. The following criteria are relevant for the purpose of making that distinction: Contracts for the supply of know-how concern information of the kind described in paragraph 11 that already exists or concern the supply of that type of information after its development or creation and include specific provisions concerning the confidentiality of that information. In the case of contracts for the provision of services, the supplier undertakes to perform services which may require the u se, by that supplier, of special knowledge, skill and expertise but not the transfer of such special knowledge, skill or expertise to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancy then it cannot be reckoned as royalty because the advisory or assistance does not connotes imparting of the skill or experience to other albeit the person is rendering the services from his own knowhow and what he is imparting is his conclusion based on his own skill and experience. The imparting of knowhow envisages that the recipient should be able to make use of such knowhow independently on its own account without recourse of the provider of the knowhow in future. For being regarded as royalty there has to be alienation or use of or right to use of any knowhow and without any transfer of any knowledge, experience or skill, it cannot be termed as royalty . In the case of GECC Asia Ltd. vs. DDIT (supra) had occasion to deal with the term information concerning to industrial, commercial or scientific experience and after referring to various commentaries, observed and held as under: The royalty payment received as consideration for information concerning industrial, commercial, scientific experience alludes to the correct of knowhow. There is an element of imparting of knowhow to the other, so that the other person can use or has right to use such knowhow. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nology services are provided for use of group companies computer system where IT teams providing manual general information without providing any information or method to design or create a computer system. It is mainly kind of help desk and troubleshooting services which are required on regular basis. For operational support system also, it mainly provides for check-list for project plans, safety work and inspection plans etc. Similarly, for marketing, the assessee provides for e marketing through its website and maintaining it, printing and publishing brochures which can be distributed to its potential clients. It also helps VOIPL to obtain the certificate of approval from the concerned organizations and obtained the contracts on the regular basis. Regarding quality health and safety environment services, the assessee merely conducts internal audits on regular intervals so that proper adherence to such quality standard and procedures are valid/ should remain valid. Similarly, in the estimating an engineering services and other services also, the assessee is mainly providing tender process, helping and preparing (estimates) and bids and plan consisting in local performance a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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