DCIT (IT) 1(1)(2), MUMBAI V. A.P. MOLLER MAERSK A/S, MUMBAI

ITA 1743/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0566 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMUEL DARSELD
• Assessee Lawyers: DIVESH CHAWLALD ARS
• Keywords: Double taxation relief

Judgement Text

ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1743/MUM/2016 ( / ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) 1(1)(2) ROOM NO.117,1 ST FLOOR SCINDIA HOUSE, N.M.ROAD BALLARD ESTATE MUMBAI-400 038 / VS. A.P.MOLLER MAERSK A/S C/O MAERSK LINE INDIA PVT. LTD. 12 TH FLOOR, URMI ESTATE G.K.MARG,LOWER PAREL MUMBAI-400 013 !' ./ ./ PAN/GIR NO.AAECA-4801-C ( '$ /APPELLANT ) : ( %'$ / RESPONDENT ) REVENUE BY : SAMUEL DARSE,LD.CIT(DR) ASSESSEE BY : PORUS KAKA & DIVESH CHAWLA,LD.ARS / DATE OF HEARING : 23/01/2018 / DATE OF PRONOUNCEMENT : 07 /02/2018 2 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL FILED BY REVENUE FOR ASSESS MENT YEAR [AY]- 2012-13 CONTEST THE DIRECTIONS OF DISPUTE RESOLUTION PANEL-1 [DRP], MUMBAI, OBJECTION NO.248 DATED 9/12/2015 ON DIFFERENT GROUNDS OF APPEAL. 2. BRIEFLY STATED THE ASSESSEE BEING DANISH PUBLIC LIMITED COMPANY AND TAX RESIDENT OF DENMARK WAS ENGAGED IN OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC, THE TAXABILITY OF WHICH WAS COVERED BY ARTICLE-9 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA / TREATY] BETWEEN INDIA AND DENMARK. ACCORDINGLY, AS PER TREATY PROVISIONS, IT CLAIMED GROSS FREIGHT EARNING FOR RS.4881.71 CRORES AS TAXABLE ONLY IN DE NMARK AND NOT IN INDIA. THE RETURN OF INCOME FOR IMPUGNED AY WAS E-FILED ON 30/11/2012 DECLARING TOTAL INCOME OF RS.55.06 LACS. THE PRIMARY DISPUTE UNDER THE PRESENT APPEAL IS THE NATURE OF CERTAIN IT COSTS AND INLAND HAULAGE CHARGES [IHC] RECEIVED BY THE ASSESSEE DURING THE COURSE OF SHIPP ING BUSINESS. 3.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T IT HAD CERTAIN RECEIPTS OF RS.20.53 LACS ON ACCOUNT OF IT SYSTEM SUPPORT SERVICES TO VARIOUS ENTITIES WHICH WERE NOT OFFERED AS INCOME O N THE PREMISES THAT THE SAME REPRESENTED REIMBURSEMENT OF CERTAIN IT RELATED COSTS FROM GROUP COMPANIES / AGENTS BASED ON THE USAGE AND INCURRED FOR EFFECTIVE CONDUCT OF ITS DAY-TO-DAY SHIPPING OPERATIONS BUSINESS. THE SE COSTS WERE PRIMARILY IN THE NATURE OF INFRASTRUCTURE SUPPORT SOFTWARE, W ORKSPACE MANAGEMENT 3 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 SYSTEM, REMEDY, NETWORK COST, PROCUREMENT COST & OT HER IT SUPPORT SERVICES INCURRED BY THE ASSESSEE FOR SMOOTH RUNNIN G OF ITS BUSINESS, WHICH WAS BEING CHARGED TO GROUP ENTITIES / AGENTS BASED ON THEIR USAGE. HOWEVER, NOT CONVINCED, LD. AO OPINED THAT THE SAME CONSTITUTED FEES FOR TECHNICAL SERVICES AND HENCE, TAXABLE @10% IN TERMS OF TREATY PROVISI ONS. 3.2 SIMILARLY THE ASSESSEE CLAIMED CERTAIN INLAND HAULAGE CHARGES [IHC] AGGREGATING TO RS.388.16 CRORES BEING PART AND PARC EL OF THE SHIPPING BUSINESS AND HENCE NOT TAXABLE IN INDIA AS PER ARTI CLE-9 OF THE TREATY. IT WAS POINTED OUT THAT THE ASSESSEE UNDERTOOK TRANSPO RTATION OF GOODS ON BEHALF OF VARIOUS SHIPPERS ACROSS THE GLOBE ON SHIP S OWNED AND CHARTERED BY THE ASSESSEE, WHICH PLIED IN INTERNATIONAL WATER S. THESE CHARGES INCLUDED RS.128.24 CRORES FOR EXPORT CARGO AND RS.259.92 CRORES FOR IMPORT CARGO. IN CASE OF IMPORTS, MAJOR PORTION OF IHC WAS RELATED WITH MOVEMENT OF CARGO FROM INDIAN PORT TO CONTAINER FREIGHT STATION [CFS] OR INLAND CONTAINER DEPOT [ICD] AND THE ASSESSEE CONTENDED THAT IN ORDER TO AVOID CONGESTION ON INDIAN PORTS, ALL SHIPPING LINES WERE COMPULSORILY REQUIRED TO FIRST MOVE THEIR CONTAINERS TO CFS OR ICD FROM WHERE THE SHIPPERS COULD CLEAR THE CARGO AND THEREFORE, THE SAID ACTIVITY CO ULD NOT BE SEGREGATED FROM INTERNATIONAL VOYAGE AND THE SAME WAS INEXTRICABLY LINKED TO MOVEMENT OF CARGO IN THE INTERNATIONAL TRAFFIC. IT WAS FURTHER POINTED OUT THAT ONLY ONE CONSOLIDATED BILL OF LADING WAS ISSUED TO THE SHIPPERS FROM PLACE OF ORIGIN TO PLACE OF DESTINATION AGAINST COMPOSITE CHARGES AND COMPLETE RESPONSIBILITY TO MOVE THE GOODS UP-TO CFS / ICD/ FINAL DESTINATION LAY UPON THE ASSESSEE 4 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 AND THEREFORE, THE SAME WAS SINGLE COMPOSITE ACTIVI TY. IN CASE OF EXPORTS, THE ASSESSEE CONTENDED THAT THE CHARGES WERE MOSTLY RELATED WITH INLAND CLEARING FROM NEW YORK TO BOSTON AND THEREFORE, THE RESULTANT INCOME ACCRUED OUTSIDE INDIA AND THEREFORE, EVEN OTHERWISE , NOT TAXABLE IN INDIA. IN NUTSHELL, THE PRIMARY CONTENTION REVOLVED AROUND TH E FACT THAT IHC WAS NOT A SEPARATE OR DISTINCT ACTIVITY CARRIED OUT BY THE AS SESSEE BUT BEING INTEGRAL PART OF SHIPPING BUSINESS AND HENCE, TO BE TREATED UNDER ARTICLE-9 . HOWEVER, NOT CONVINCED, LD. AO OPINED THAT THE SAME DID NOT CONSTITUTE INCOME FROM INTERNATIONAL TRAFFIC IN TERMS OF ARTICLE-9 AND THEREFORE, THE SAME CONSTITUTED SHIPPING INCOME CHARGEABLE TO TAX U/S 44B AND ACCORDINGLY, ESTIMATED THE INCOME THEREUPON @7.5%, WHICH CAME TO RS.29.11 CRORES. 4. THE ASSESSEE RAISED OBJECTIONS AGAINST DRAFT ASS ESSMENT ORDER DATED 17/03/2015 BEFORE DRP WITH SUCCESS VIDE IMPUGNED DIRECTIONS DATED 09/12/2015 WHERE LD. DRP FOLLOWING THE ORDER OF DRP IN ASSESSEES OWN CASE FOR AY 2011-12 AND ORDER OF THIS TRIBUNAL FOR AY 2008-09 DECIDED BOTH THE ISSUES IN ASSESSEES FAVOR. PURSUANT TO THE DIR ECTIONS OF DRP, FINAL ASSESSMENT ORDER DATED 29/01/2016 WAS PASSED BY LD. AO DETERMINING NIL TOTAL INCOME. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. THE LD. SR. COUNSEL FOR ASSESSEE [AR], AT THE OU TSET, DREW ATTENTION TO THE FACT THAT BOTH THE ISSUES STOOD SQUARELY COVERE D IN ASSESSEES FAVOR BY THE JUDGMENT OF VARIOUS JUDICIAL AUTHORITIES FOR SE VERAL ASSESSMENT YEARS AND THEREFORE, THE STAND OF DRP WAS QUITE JUSTIFIED . THE LD. DEPARTMENTAL 5 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 REPRESENTATIVE [DR] FAIRLY CONCEDED THE SETTLED LEG AL POSITIONS AND COULD NOT BRING ON RECORD ANY CONTRARY FACTS OR JUDGMENTS TO CONTROVERT THE SAME. 6. AFTER PERUSAL OF RIVAL CONTENTIONS, WE FIND THAT BOTH THE ISSUES, ON SIMILAR FACTS AND CIRCUMSTANCES, HAVE ALREADY BEEN SETTLED IN ASSESSEES FAVOR IN HIS OWN CASE FOR SEVERAL OTHER YEARS AS PE R FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) HONBLE APEX COURT IN DIT(IT) VS. A.P.MOLLER M AERSK A/S [CA NO. 8040 OF 2015 17/02/2017 AYS 2001-02 TO 2005 -06] (II) DCIT (IT) VS. A.P.MOLLER MAERSK A/S [ITA NO. 1798/MUM/2015 AY 2011-12 15/02/2017 MUMBAI TRIBUNAL] (III) DDIT (IT) VS. A.P.MOLLER MAERSK A/S [ITA NO. 1927 & 2054/MUM/2014 AY 2010-11 07/10/2016 MUMBAI TRIBUNAL] (IV) DDIT (IT) VS. A.P.MOLLER MAERSK A/S [ITA NO. 1807/MUM/2012 AY 2008-09 08/11/2013 MUMBAI TRIBUNAL] FOR EASE OF REFERENCE, THE RELEVANT PORTION FROM TR IBUNALS ORDER ITA NO. 1798/MUM/2015 DATED 15/02/2017 IS EXTRACTED BELOW- 4. UPON CAREFUL CONSIDERATION, & PERUSING THE RECOR DS WE FIND THAT THIS TRIBUNAL IN ASSESSEE OWN CASE ITA NO. 1927 AND 2054 FOR ASSESSMENT YEARS 20 10-11 AS PER ITS ORDER DT. 7.10.2016 HAS ADJUDICATED IDENTICAL ISSUE AS UNDER:- BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT DU RING THE YEAR ASSESSEE INCURRED CERTAIN EXPENSE TOWARDS OPERATION, MAINTENANCE AND UPGRADAT ION 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 WITH ITS GROUP COMPANIES AROUND THE WORLD, AND FACT IS PROVIDED BY THE ASSESSEE TO ITS AGENTS ACROSS THE GLOBE INCLUDING INDIA. TO STREAMLINE OPERATIONS OF ITS GROUP COMPANIES HAVING CONTAINER INLAND SERVICES (CIS) OPERATIONS AROUND T HE WORLD, APMM REQUIRES THEM TO INSTALL AND USE FACT SYSTEM SOFTWARE. THE FACT SYST EM SOFTWARE IS USED BY CIS DIVISION OF MAERSK INDIA PVT. LTD. (MIPL.), AN INDIAN AGENT OF THE ASSESSEE. THE EXPLAINED BEFORE US THE BROAD NATURE OF ACTIVITIES CARRIED ON BY CIS DIVISION ARE AS UNDER;- CONTAINER FREIGHT STATION: THIS INCLUDES PROVISIONS OF WAREHOUSING FACILITIES TO THE CUSTOMERS OF AIMM BY MOVING AND STORING CONTAINER A T THE FACILITY MAINTAINED ON THE PORT. EQUIPMENT MAINTENANCE AND REPAIRS: THIS INCLU DES MAINTENANCE AND REPAIRS OF CONTAINERS USED BY AL 'MM IN ITS BUSINESS ACTIVITIE S FOR CARRIAGE OF CARGO FOR ITS CUSTOMERS TRUCKING: THIS INCLUDES CARRIAGE OF CONTA INERS FOR APMM'S CUSTOMERS FROM PORT TO THE ULTIMATE DESTINATION OF THE CUSTOMERS. 6 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 THE FACTS EXPLAINED BY THE ASSESSEE ARE THAT THE CO ST INCURRED BY THE ASSESSEE FOR OPERATION AND MAINTENANCE OF FACT SYSTEM SOLUTION, IS RECOVERED FROM THE AGENTS. DURING THE YEAR TINDER CONSIDERATION, THE ASSESSEE RECOVERED AN AMOUNT OF RS.2,23,27,783/- FROM MIPL, BEING MIPL'S SHARE OF F ACT SYSTEM SOLUTION COST. THIS RECOVERY IS PURSUANT TO A SERVICE LEVEL AGREEMENT ( SLA) ENTERED INTO BETWEEN MIPL AND APMM AND IS WITHOUT ANY MARK-UP AND REPRESENTS MERE ALLOCATION OF COST. THE ASSESSEE CLAIMED BEFORE THE REVENUE THAT THIS AMOUNT RECOVER ED BY THE ASSESSEE IS PROPORTION THE COST INCURRED AND IT IS IN THE NATURE OF REIMBURSEM ENT OF COST NOT CHARGEABLE TO TAX IN INDIA AS THE SAME WAS WITHOUT ANY MARK-UP AND WAS A COST TO COST BASIS. BUT THE AP VIDE DRAFT ASSESSMENT ORDER DATED 26.03.2013 TREATED REC OVERY OF FACT COST AS ROYALTY/ FEES FOR TECHNICAL SERVICES (FFS) AND TAXED THE SAME UND ER SECTION 115A OF THE ACT AT THE RATE OF 10%. THE DRP VIDE ITS DIRECTIONS DATES 23.12.201 3 UPHELD THE AFORESAID ADDITIONS MADE BY THE AO IN HIS DRAFT ASSESSMENT ORDER BY TRE ATING SUCH RECOVERY AS ROYALTY/FTS. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. B EFORE US IT WAS EXPLAINED THAT MUMBAI TRIBUNAL ON A SIMILAR ISSUE ON TAXABILITY OF RECOVE RY OF COST TOWARDS IT GLOBAL PORTFOLIO TRACKING SYSTEM HAS PASSES AN ORDER IN THE CASE OF ENTITY DAMPSKIBSSELSKABET OF 1912 A/S AKTIESELSKABET, WHICH MERGED INTO SVENDBORG, BE ING THE ASSESSEC (THE MERGED ENTITY, SVENDBORG, WAS RENAMED AS A. P. MOLLER MAERSK A/S P OST-MERGER) IN THIS ORDER DATED 11.06.2010 OF AYS 2001-02 TO 2003-04, THE MUMBAI T RIBUNAL HAS HELD THAT SUCH RECOVERY CANNOT BE TAXED IN INDIA, BECAUSE, THESE S YSTEMS 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 ASSES SEE. ACTIVITIES ARE DIRECTLY CONNECTED TO ITS BUSINESS OF OPERATIONS OF SHIPS IN INTERNATIONA L TRAFFIC AND HENCE TAXABLE ONLY IN DENMARK TINDER ARTICLE 9(1) OF INDIA DENMARK TAX TR EATY. THE ASSESSEE IS IN THE BUSINESS OF SHIPPING AND NOT IN THE BUSINESS OF PROVIDING AN Y TECHNICAL SERVICES WHILE THE SYSTEM ENABLES BETTER AND EFFICIENT CONDUCT IN THE BUSINES S, 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 PROVI DING A PARTICULAR SYSTEM. THE PERCENTAGE OF THE PAYMENTS RECEIVED BY THE ASSESSEE TOWARDS REIMBURSEMENT COMPARED TO THE TOTAL RECEIPTS IN THE FORM OF FREIGHT ETC., FRO M SHIPPING BUSINESS IN INDIA IS LESS THAN 1%. THE ABOVE ORDER OF THE HON'BLE TRIBUNAL HAS BEE N FOLLOWED BY TRIBUNAL IN ORDERS FOR SUBSEQUENT YEARS IN ASSESSEE'S OWN CASE IN AKTIESEL SKABET DAMPSKIBSSELSKABET SVENDBORG VS. ADIT ORDER DATED 31-08-2012 AND IN A.P. MOLLER MAERSK AJS VS. DDIT (INTERNATIONAL TAXATION) DATED 14/12/2012. THE ORDERS OF THE HONB LE TRIBUNAL REFERRED ABOVE HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT THE ORDER D ATED 29TH APRIL 2015 IN INCOME TAX APPEAL NO. 1306 OF 2013 IN DIT (INTERNATIONAL T AXATION VS. A.P. MOLLER MAERSK). NO PROFIT ELEMENT IN THE PRO-RATE COST PAID BY THE AGE NT TO THE ASSESSEE. PAYMENTS WERE MADE BY THE AGENT TO USE THE FACT OF THE ASSESSEE FOR TH E GLOBAL SHIPPING BUSINESS. FURTHER, THE MUMBAI TRIBUNAL HAS ALSO DECIDED THE I DENTICAL ON THE ISSUE OF FACT SOFTWARE SYSTEM IN ASSESSEE'S OWN CASE IN DY. DIREC TOR OF INCOME TAX (INTERNATIONAL TAXATION) VS. A.P. MOLLER MAERSK A/S IN ITA NO. 180 7/MUM/2012 DATED 08.11.2013, 7 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 FOLLOWING ITS EARLIER DECISION OF FILE MUMBAI TRIBU NAL, WHICH HAS NOW BEEN AFFIRMED BY THE HIGH COURT, HELD THAT SUCH RECOVERY CANNOT BE T AXED IN INDIA SINCE: - THE SYSTEM HELPS ON CONDUCTING ITS SHIPPING BUSIN ESS IN MORE EFFECTIVE AND EFFICIENT MANNER GLOBALLY. -THE FACT SOFTWARE IS ART PART OF SHIPPING OPERATIO NS AND THEREFORE ANY KIND OF RECEIPTS RECOVERED BY WAY OF SOFTWARE USAGE / DEVELOPMENT CO ST CANNOT BE TAXED IN INDIA. - THE FACT IS A TOOL AND INTEGRAL PART OF SHIPPING OPERAT IONS AND THE PROFITS AS PER ARTICLE 9(1) OF THE TAX TREATY INCLUDES NOT ONLY ACTIVITIES DIRE CTLY CONNECTED WITH SHIPPING OPERATIONS BUT ALSO ACTIVITIES WHICH FACILITATE OR SUPPORT SUC H OPERATIONS. - IT WAS THUS HELD THAT ANY KIND OF RECEIPTS BY WAY OF SOFTWARE USAGE! DEVELOPMENT COST CANNOT BE TAXED IN INDIA UNDER ARTICLE 9(1) OF TAX TREATY. - THE RECEIPTS ALSO CANNOT BE TAXED AS ROYALTY/FTS INDEPENDENTLY BECAUSE IN THE PRESENT CASE, THE APPELLANT IS NOT RENDERING ANY SERVICES O F MANAGERIAL, TECHNICAL OR CONSULTANCY TO ITS AGENTS OR GROUP ENTITIES BY ALLOWING ITS GRO UP COMPANIES TO BE USAGE OF SOFTWARE. - THE ASSESSEE HAS BEEN REIMBURSED AT COST WITHOUT ANY MARKUP. WE RELYING ON THE DECISION OF THE HONBLE BOMBAY HI GH COURT ARE OF THE 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 TU RN, HELPS THE ASSESSEE IN CONDUCTING ITS SHIPPING BUSINESS IN MORE EFFECTIVE AND EFFICIENT M ANNER GLOBALLY. THIS SOFTWARE IN FACT IS A TOOL AND INTEGRATED PART OF SHIPPING OPERATIONS O NLY, 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. TH ESE 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 OPERATI ON OF SHIPS IN INTERNATIONAL TRAFFIC. THE FACT COST REPRESENT MERELY ALLOCATION OF COST INCUR RED 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 RECO UPMENT OF COST DOES NOT CONSTITUTE INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESS EE. IT IS UNDISPUTED THAT THE ASSESSEE IS IN BUSINESS OF CONDUCTING OPERATION OF SHIPS IN INT ERNATIONAL TRAFFIC AND NOT ENGAGED IN THE BUSINESS OF PROVIDING COMMUNICATION SERVICES, A ND THEREFORE, PER SE NO SEPARATE ROYALTY/FTS WERE RENDERED BY THE ASSESSEE. WE ARE C ONSCIOUS OF THE FACT THAT FACT COST REPRESENTS MERE 0.07% OF THE TOTAL FREIGHT INCOME O F THE ASSESSEE DURING THE YEAR. FURTHER, THE DRP HELD THE FACILITIES/SYSTEMS IS A S OFTWARE AND THE PAYMENTS TO BE ROYALTY UNDER THE RETROSPECTIVELY AMENDMENT OF THE ACT. VAR IOUS JUDICIAL PRECEDENTS DECIDED THIS ISSUE BY HON'BLE DELHI HIGH COURT IN CASE OF DIT VS NOKIA NETWORKS 253 CTR 417, MUMBAI TRIBUNAL IN CASE OF ADIT VS BAAN CORP 71 TAX MANN.COM 213 AND WNS GLOBAL SERVICES (UK) LTD. VS ADIT 52 SOT 121 WHEREIN IT HA S BEEN HELD THAT ANY AMENDMENT IS CARRIED OUT UNDER DOMESTIC LAW, SAME CANNOT BE READ INTO THE TREATY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE FACT COST REPRESENT MERELY ALL OCATION 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 INCU RRED BY THE ASSESSEE FOR THE 8 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 DEVELOPMENT AND MAINTENANCE OF THE SYSTEM. THEREFOR E, SUCH RECOUPMENT OF COST DOES NOT CONSTITUTE INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. IT IS UNDISPUTED THAT HE ASSESSEE IS IN BUSINESS OF CONDUCTING OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC AND NOT ENGAGED IN THE BUSINESS OF PROVIDING COMMUNICATION SERVICES, AND THEREFORE, PER SE NO SEPARATE ROYALTY/FTS WERE RENDERED BY THE ASSESSEE. HENCE, WE ALLOW THIS ISSUE OF ASSESSEES APPEAL. 5. SINCE FACTS IN THIS REGARD ARE IDENTICAL WE DO N OT FIND ANY INFIRMITY IN THE DIRECTION OF LD. DRP IN THIS REGARD. ACCORDINGLY, WE UPHOLD THE SAME. HE NCE, THE GROUND RAISED BY THE REVENUE ON THIS ISSUE STANDS DISMISSED. 6. APROPOS GROUND NO. 2-4 ON THIS ISSUE ALSO LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE TRIB UNAL IN ASSESSEE OWN CASE AND ALSO HONBLE BOMBAY HIGH COURT ALSO FOR EARLIER YEAR. PER CONTRA LD. DR NOT DISPUTE THIS PROPOSITION. 7. UP ON CAREFUL CONSIDERATION WE FIND THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL AS PER ITS ORDER DATED 7/10/2016 AS A BOVE. 8. AFTER ELABORATELY CONSIDERING THE ISSUE THE TRIB UNAL CONCLUDED AS UNDER; IN VIEW OF THE FACTS OF THIS CASE AND PRECEDENCE D ISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ENTIRE IHC OF THE ASSESSEE IS NECESSARILY IN CO NNECTION WITH TRANSPORT OF CONTAINERS EITHER DISCHARGED OR LOADABLE AT INDIAN PORTS FOR T HE 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 MIN OR CONTRIBUTION AND SHOULD NOT BE REGARDED AS A SEPARATE BUSINESS TO THE OPERATIONS O F 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 MAI N BUSINESS OF THE ASSESSEE OF OPERATIONS OF SHIPS SHOULD BE CONSIDERED AS INTEGRA L PART OF INCOME FROM SHIPPING OPERATIONS. ACCORDINGLY, WE ALLOW THE CLAIM OF ASSE SSEE AND HENCE, THIS COMMON ISSUE OF ASSESSEE APPEAL IS ALLOWED AND THAT OF REVENUE DISM ISSED. 9. FURTHER MORE WE NOTE THAT HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE IN INCOME TAX APPEAL NUMBER 1306 AND OTHERS AS PER ORDER DATE D 29/14/2015 HAS CONSIDERED THE SAME ISSUE ELABORATELY AND CONCLUDED AS UNDER; THE TRIBUNAL IN THE MEANWHILE HAD ALSO DECIDED (IN THE CASE THE ASSESSEE'S OWN CASE) FOR THE PREVIOUS ASSESSMENT YEAR IN FAVOUR OF THE A SSESSEE AND, THEREFORE, UPHELD THE ORDER OF THE COMMISSIONER. THIS COURT VIDE ORDER DA TED 17' JULY, 2014 TO WHICH ONE OF US (S.C. DHARMADHIKARI, J.) WAS A PARTY HELD THAT T HE INLAND TRANSPORT OF CARGO WITHIN INDIA WAS COVERED UNDER ARTICLE 8(2)(B)(II) AND (C) OF DTAA BETWEEN INDIA AND BELGIUM AND, THEREFORE, NOT LIABLE TO TAX IN INDIA. THE PRI NCIPLES INVOLVED IN THE SAID DECISION ALSO GOVERN THE PRESENT CASE. THE MAERSK NET USED BY THE AGENTS OF THE ASSESSEE ENTAILED CERTAIN COSTS REIMBURSEMENT TO THE ASSESSEE. IT WAS PART OF THE SHIPPING BUSINESS AND COULD NOT HE CAPTURED UNDER ANY OTHER PROVISIONS OF THE INCOME TAX ACT EXCEPT UNDER DTAA. OUR ATTENTION IS ALSO DRAWN TO THE DECISION OF THI S COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V/S. SIEMENS AKTIONGESELLESCHAFT REPORTE D IN [2009] 310 ITR 320 (BOM), 9 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 WHEREIN THIS COURT HAS HELD THAT ONCE THERE IS A TR EATY BETWEEN TWO SOVEREIGN NATIONS, THOUGH IT IS OPEN TO A SOVEREIGN LEGISLATURE TO AME ND ITS LAWS, A DTAA ENTERED INTO BY THE GOVERNMENT, IN EXERCISE OF THE POWERS CONFERRED BY SECTION 90(1) OF THE ACT MUST BE HONOURED. THE PROVISIONS OF SECTION 9 INCOME TAX AC T WERE APPLICABLE AND THE PROVISIONS OF DTAA, IF MORE BENEFICIAL THAN THE IT ACT, THE PROVISIONS OF DTAA WOULD PREVAIL. THUS, IN THE INSTANT CASE ALSO, IT IS NOT POSSIBLE FOR THE REVENUE TO UNILATERALLY DECIDE CONTRARY TO THE PROVISIONS OF THE DTAA. WE A RE INFORMED THAT THE AGREEMENTS INTER PARTIES HAD BEEN PERFORMED AND THE PAYMENTS W ERE MADE BY THE AGENTS TO USE MAERSK NET FOR THE MAERSK GROUPS GLOBAL SHIPPING B USINESS AND FOR NO OTHER REASON. IT RELATED TO SHIPMENT OF CARGO AND THEIR MOVEMENT ACR OSS THE OCEANS. THE VIEWS OF THE REVENUE THAT IT AMOUNTED TO TECHNICAL SERVICE IS MI SCONCEIVED. IN FACT, THE ASSESSING OFFICER RELIED UPON THE DECISION OF M/S. ARTHUR AND ERSON & CO. IN ITA NO. 9125/MUM/1995, MUMBAI, D BENCH IN WHICH THE TRIBU NAL HAD OBSERVED THAT REPAYMENT OF MONEY MAY BE CONSTRUED AS REIMBURSEMENT ONLY I F IT IS BEREFT OF PROFITS FOR THE SERVICES RENDERED. THERE IS NO PROFIT ELEMENT IN TH E PRO RATA COSTS PAID BY THE AGENTS OF THE ASSESSEE TO THE ASSESSEE AND ACCORDINGLY, WE HA VE NO HESITATION IN HOLDING THAT THE AMOUNTS PAID BY THE AGENTS TO UTILIZE THE AMOUNT AR OSE OUT OF THE SHIPPING BUSINESS CANNOT BE BROUGHT TO TAX AS SOUGHT TO BE DONE. 10. THUS FROM THE ABOVE IT IS APPARENT THAT THE ISS UE INVOLVED IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE DIRECTION OF L D. DRP IN THIS REGARD ALSO. RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDE NTS, TAKING THE SAME STAND, WE CONFIRM THE DIRECTIONS OF LD. DRP AND THE REFORE, DISMISS THE REVENUES APPEAL. 7. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2018. SD/- SD/- (C. N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 07 .02.2018 SR.PS:- THIRUMALESH 10 ITA NO.1743/MUM/2016 A.P.MOLLER MAERSK A/S ASSESSMENT YEAR 2012-13 ! / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %'$ / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. '/ , / , / DR, ITAT, MUMBAI 6. 01 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI