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

ITA 306/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3321 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: misc
• Appeal Filed On: 13-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Double taxation relief; Permanent establishment; Question of law
• Section: 143(3); 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 306 / MUM . /2017 ( ASSESSMENT YEAR : 20 1 3 14 ) A.P. MOLLER MAERSK A/S 12 TH FLOOR, TOWER A, URNI ESTATE GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AAECA4801C . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 1 ( 1 )(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI PORUS KAKA A/W SHRI DIVESH CHAWALA REVENUE BY : SHRI V. SREEKAR DATE OF HEARING 26 . 1 1 .201 8 DATE OF ORDER 15.02.2019 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ASSESSMENT ORDER DATED 15 TH NOVEMBER 2016, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 2013 14, IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 1 (DRP), MUMBAI . 2 A.P. MOLLER MAERSK A/S 2 . I N GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE TAXABILITY OF INLAND HAULAGE CHARGES (IHC) UNDER SECTION 44B OF THE ACT. 3 . B RIEF FACTS ARE, THE ASSESSEE IS A DANISH PUBLIC LIMITED COMPANY AND IS A TAX RESIDENT OF DENMARK. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS, CHARTERING AND OTHER RELATED ACTIVITIES OF SHIPPING IN INTERNATIONAL TRAFFIC. AS STATED BY THE ASSESSING OFFICER, THE ASSESSEE IS COVERED UNDER ARTICLE 9 OF INDIA DENMARK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). FOR THE ASSESSMENT YEAR UNDER DIS PUTE THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH NOVEMBER 2013 DECLARING TOTAL INCOME OF ` 2,03,33,948. DURING THE ASSESSMENT PROCEEDINGS, WHILE VERIFYING THE RETURN OF INCOME FILED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT IN THE RETURN OF INC OME THE ASSESSEE HAS CLAIMED THAT GROSS TRADE EARNING OF ` 6557,28,60,993 IS NOT TAXABLE IN INDIA AS PER ARTICLE 9(1) OF THE INDIA DENMARK TAX TREATY , SINCE , THE PROFIT DERIVED FROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC BY A DENMARK ENTERPRISE IS TAXABLE ONLY IN DENMARK AND NOT IN INDIA. AFTER VERIFYING THE RETURN OF INCOME AND OTHER DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE CLAIM OF EXEMPTION IN RESPECT OF FREIGHT CHARGES RECEIVED FOR INTERNATIONAL TRAFFIC ALSO INC LUDES IHC FOR TRANSPORTATION OF GOODS IN CASE OF IMPORT FROM PORTS TO CONTAINER FREIGHT STATION (CFS) OR INLAND CONTAINER DEPOT (ICD). SIMILARLY, IN RESPECT OF EXPORT OF CARGO, THE ASSESSEE HAS 3 A.P. MOLLER MAERSK A/S ALSO RECEIVED IHC FOR TRANSPORTATION OF CARGO FROM PORT TO THE IR DESTINATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT IHC COLLECTED BY THE ASSESSEE IS NOT PART OF REVENUE EARNED IN SHIPPING IN INTERNATIONAL TRAFFIC , WILL NOT BE EXEMPT UNDER ARTICLE 9 OF INDIA DENMARK TAX TREATY. ACCORDINGLY, HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN WHY THE IHC SHOULD NOT BE BROUGHT TO TAX IN INDIA. THOUGH, THE ASSESSEE FILED DETAI LED WRITTEN SUBMISSIONS STATING THAT IHC IS A PART OF REVENUE EARNED FROM SHIPPING OPERATIONS IN INTER NATIONAL TRAFFIC, HENCE, EXEMPT FROM TAXATION UNDER ARTICLE 9 (1) OF INDIA DENMARK TAX TREATY, H OWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND ULTIMATELY CONCLUDED THAT IHC RECEIVED BY THE ASSESSEE IS NOT PART OF SHI PPING REVENUE FROM INTERNATIONAL TRAFFIC, HENCE, NOT ELIGIBLE FOR EXEMPTION UNDER ARTICLE 9 OF INDIA DENMARK TAX TREATY. WHILE DOING SO, HE ALSO DISTINGUISHED THE DECISION OF THE TRIBUN AL CITED BY THE ASSESSEE IN SAFM ARINE CONTAINER LINES N.V., 314 ITR 15, BY STATING THAT TH E SAID DECISION WAS RENDERED IN THE CONTEXT OF INDIA BELGIUM TAX TREATY WHICH IS DIFFERENT FROM INDIA DENMARK TAX TREATY. ACCORDINGLY, HE TREATED THE IHC RECEIVED BY THE ASSESSEE AMOUNTING TO ` 425,71,26,189, AS IN COME OF THE ASSESSEE A ND TAXED IT UNDER SECTION 44B OF THE ACT. 4 . T HOUGH, THE ASSESSEE OBJECTED TO THE AFORESAID ADDITION BEFORE THE DRP, HOWEVER, LEARNED DRP UPHELD THE DECISION OF THE ASSESSING 4 A.P. MOLLER MAERSK A/S OFFICER. ACCORDINGLY, IN PURSUANCE TO THE DIRECTIONS OF LEARNED DRP, THE ASSESSING OFFICER PASSED THE IMPUGNED ASSESSMENT ORDER. 5 . SHRI PORUS KAKA, THE LEARNED SR. COUNSEL FOR THE ASSESSEE REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT IHC IS DIRECTLY CONNECTED TO THE SHIPPING OPERATION OF THE ASSESSEE IN INTERNATIONAL TRAFFIC. THEREFORE, AS PER ARTICLE 9(1) OF THE INDIA DENMARK TAX TREATY IT IS EXEMPT FROM TAXATION IN INDIA. THE LEARNED SR. COUNSEL SUBMITTED , IDENTICAL ISSUE HAS CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PR ECEDING ASSESSMENT YEAR S AND THE TRIBUNAL IN A SERIES OF DECISION S HAS HELD THAT IHC RECEIVED BY THE ASSESSEE BEING PART OF REVENUE RECEIVED FROM SHIPPING OPERATION IN INTERNATIONAL TRAFFIC IS EXEMPT FROM TAXATION IN INDIA AS PER ARTICLE 9 OF INDIA DENMARK TAX TREATY. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE ORDERS PASSED BY THE TRIBUNAL FOR ASSESSMENT YEARS 2010 11, 2011 12 AND 2012 13. HE SUBMITTED , LIKE IN THE PRECEDING ASSESSMENT YEARS , IN THE IMPUGNED ASSESSMENT YEAR ALSO THE ASSESSEE HAS RAISED A SINGLE BILL OF LADING INCLUDING IHC. 6 . SHRI V. SHREE KAR, THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , AGREED THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR S , HOWEVER, HE RELIED UPON THE OBSER VATIONS OF THE DRP. 5 A.P. MOLLER MAERSK A/S 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. FROM THE FACTS ON RECORD, IT IS EVIDENT THAT THE ISSUE WHETHER IHC IS A PART OF SHIPPING REVENUE FROM INTERNATIONAL TRAFFIC IS A RECURRING DISPUTE BETWEEN THE PARTIES FROM THE PRECEDING ASSESSMENT YEAR S . HOWEVER, WHEN THE DISPUTE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR 2010 11 IN ITA NO.1927 AND 2054/MUM./2014, DATED 7 TH OCTOBER 2016, THE TRIBUNAL ALLOWED ASSESSEES CLAIM HOLDING AS UNDER: 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE DRP VIDE ITS DIRECTIONS DATED 23:122013 UPHELD THE AFORESAID ADDITIONS MADE BY THE AO IN HIS DRAFT ASSESSMENT ORDER BUT GRANTED RELIEF FOR THE IHC CHARGES RELATED TO MOVEMENT OF CARGO FROM PORTS TO ICD/CFS AND VICE VERSA UNDER ARTICLE 9(1) OF THE TAX TREATY. LET US ANALYSIS FACTS THAT THE ASSESSEE ENTERS INTO AN ARRANGEMENT WITH S HIPPERS TO CARRY CARGO ON BOARD SHIPS OWNED/CHARTERED BY IT. THESE SHIPS ARE OPERATED IN INTERNATIONAL TRAFFIC FROM A POINT OF ORIGIN IN INDIA TO A DESTINATION OUTSIDE INDIA OR VICE VERSA. IT WAS EXPLAINED BY LD. COUNSEL BEFORE US THAT IN INTERNATIONAL SHI PPING TRADE THE SHIPPERS OF CARGO REQUIRE TRANSPORTATION OF GOODS FROM MANUFACTURING FACILITY/WAREHOUSE AND DELIVERING IT TO THE CONSIGNEE'S FACTORY/ WAREHOUSE. THE FACTORY/WAREHOUSES OF THE SHIPPERS SOMETIMES ARE NOT AT PORT. THEREFORE, IT BECOMES IMPERAT IVE FOR THE SHIPPING LINE TO PROVIDE THESE INLAND TRANSPORTATION SERVICES WHICH ARE PART AND PARCELS OF THE SAME TRANSACTION OF TRANSPORTATION OF GOODS BY SEA IN INTERNATIONAL TRAFFIC. THERE IS SINGLE CONSOLIDATED BILL OF LADING (BL) ISSUED BY THE SHIPPER. IN CASE OF IMPORTS INTO INDIA, MAJOR PORTION OF INLAND HAULAGE ACTIVITY CARRIED OUT WITHIN INDIA RELATES TO MOVEMENT OF CARGO FROM INDIAN PORT TO CFS/ICD AND THEREAFTER FROM THE ICD TO THE CUSTOMER. IN ORDER TO AVOID CONGESTION AT INDIAN PORTS AS PER CUST OMS REQUIREMENT, ALL SHIPPING LINES ARE COMPULSORILY REQUIRED TO FIRST MOVE THEIR CONTAINERS TO CFS/ICD FROM WHERE THE SHIPPERS CAN CLEAR THEIR CARGO. THIS LEG OF INLAND TRANSPORTATION, THEREFORE, CANNOT BE SEGREGATED FROM THE LONGER INTERNATIONAL VOYAGE. THUS, IHC IS INEXTRICABLY LINKED TO THE 6 A.P. MOLLER MAERSK A/S MOVEMENT OF CARGO IN THE INTERNATIONAL TRAFFIC. IT WAS FURTHER EXPLAINED THAT IN CASE OF EXPERTS FROM INDIA, THE SHIPPERS OF CARGO REQUIRE DELIVERY OF CONSIGNMENT TO THE CONSIGNEES FACTORY / WAREHOUSE. THEREFORE, IT BECOMES IMPERATIVE FOR THE SHIPPING LINES TO PROVE THESE INLAND TRANSPORTATION SERVICES WHICH ARE PART OF PARCEL OF THE TRANSPORTATION OF GOODS BY SEA IN INTERNATIONAL TRAFFIC. 6. LD. COUNSEL FOR THE ASSESSEE FURTHER EXPLAINED THE BUSINESS MODEL THAT PUR SUANT TO SUCH BUSINESS EXIGENCIES, THE ASSESSEE ISSUES A SINGLE CONSOLIDATED BL TO SHIPPERS REQUIRING THE ASSESSEE TO LOAD THE GOODS ON OWNED / CHARTERED SHIP AND TRANSPORT IT TO CFS/ICD OR TO OTHER DESTINATION IN INDIA AND/OR DELIVERY THE SAME TO THE DEST INATION OF THE CONSIGNEE. 7. WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE ASSESSEE 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 THR OUGH INTERNATIONAL WATERS, A FACT WHICH IS UNDISPUTED, IHC EARNED BY THE ASSESSEE IS TAXABLE ONLY IN DENMARK AND NOT IN INDIA AS PER ARTICLE 9(1) OF THE INDIA DENMARK TAX TREATY. WE ALSO NOTED FROM THE FACTS THAT SINGLE BL IS ISSUED BY THE ASSESSEE TO ITS SHIPPERS FOR THE ENTIRE COMBINED TRANSPORT I.E., FROM THE PLACE OF ORIGIN IN INDIA TO FINAL DESTINATION OUTSIDE INDIA. IT IS ALSO A FACT ON RECORDS THAT THE ASSESSEE IS NOT CARRYING OUT SEPARATE BUSINESS ACTIVITY OF CARRYING CARGO BETWEEN MAINLAND AND A PO RT IN INDIA, WITHOUT ANY OBLIGATION OF ITS TRANSPORT ON ITS SHIP IN INTERNATIONAL WATERS. IN VIEW OF THE FACTS OF THE CASE WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION OF THE CO ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF D EPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) V. SAFMARINE CONTAINER LINES N.V. (2009) 314 ITR (AT) 15 (MUMBAI), WHICH WAS SUBSEQUENTLY AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT REPORTED IN (2014) 367 ITR 209 (BOMBAY), WHEREIN IT IS HELD AS UNDER: BY AVAILING THE FACILITY OF SLOT HIRE AGREEMENTS, THE ENTERPRISE DOES NOT ARRANGE THE SHIPMENT ON BEHALF OF THE OWNER OF THE SAID VESSEL, BUT DOES SO ON ITS OWN ACCOUNT ON A PRINCIPAL TO PRINCIPAL BASIS WITH ITS CLIENTS. SUCH CASES ALSO HAVE A NEXUS TO T HE MAIN BUSINESS OF THE ENTERPRISE OF THE OPERATION OF SHIPS. THEY ARE ANCILLARY TO AND COMPLEMENT THE OPERATION OF SHIPS BY THE ENTERPRISE. IF THEY ARE NOT MERELY ANCILLARY TO THE MAIN BUSINESS OF OPERATION OF SHIPS BUT CONSTITUTE THE PRIMARY AND MAIN ACT IVITIES OF THE ENTERPRISE, IT MAY BE A DIFFERENT MATTER WHICH WE ARE NOT CALLED UPON TO CONSIDER IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7 A.P. MOLLER MAERSK A/S 28. OUR VIEW IS SUPPORTED BY THE JUDGMENT OF A DIVISION BENCH OF THE DELHI HIGH COURT. IT IS ALSO IN CONSO NANCE WITH THE VARIOUS COMMENTARIES WHICH DEAL WITH SIMILAR PROVISIONS. WE WILL NOW REFER TO THE SAME. 29 MR. KAKA RELIED UPON THE JUDGMENT ALIBI? DELHI HIGH COURT IN DIRECTOR OF INCOME - TAX. VS KLM ROYAL DUTCH AIRLINES (2009) 178 TAXRNAN 291 ARTICLE 8 OF THE INDO - NETHERLANDS DTAA WHICH FELL FOR THE CONSIDERATION OF THE COURT READS AS UNDER: - AIR TRANSPORT 1. PROFITS FROM THE OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THE STATE IN WHICH THE PLACE OF EFFECTIVE MANAGEMENT OF THE ENTERPRISE IS SITUATED. ARTICLE 8(1) IS SIMILAR TO ART. 9(1). IN THAT CASE THE ASSESSEE HAD OBTAINED A LICENCE IN RESPECT OF PREMISES AT MUMBAI FROM THE AIRPORT AUTHORITY OF INDIA: THIS LICENCE WAS FOR THE PURPOSE OF CARGO HANDLING ONLY. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH CSC (P) LTD FOR CARGO HANDLING AT MUMBAI ON ITS BEHALF THE AGREEMENT PROVIDED FOR PAYMENT BY THE ASSESSEE TO CSC (P) LTD. FOR CARGO HANDLING AT MUM BAI. THE PAYMENT MADE BY THE ASSESSEE TO CSC WAS AFTER THE ADJUSTMENT OF THE LICENCE FEE/RENT PAID BY THE ASSESSEE TO THE AIRPORT AUTHORITY OF INDIA. THE ADJUSTMENT WAS CONSIDERED BY THE DEPARTMENT AS THE INCOME OF THE ASSESSEE CHARGEABLE TO LAX UNDER ART 6 OF THE JNDO - UK. DTAA. THE DIVISION BENCH UPHELD THE DECISION OF THE TRIBUNA L TO THE EFFECT THAT THE ADJUSTMENT WAS DIRECTLY AND INEXTRICABLY LINKED TO THE CARGO HANDLING BUSINESS OF THE ASSESSEE AND WAS NOT IN THE COURSE OF A SEPARATE BUSINESS OF RENTING OUT THE PREMISES. AS THE ASSESSEE ESTABLISHED A LINK BETWEEN THE RENTING OF THE PREMISES AND THE BUSINESS OF OPERATING AN AIRLINE IN INTERNATIONAL TRAFFIC, IT WAS HELD THAT ART WOULD APPLY.' 9. IN THIS VIEW OF THE MATTER, WE FIND THAT THE RELIANCE PLACED BY MR. PORUS KAKA ON THE ORDER OF THIS COURT DATED 17 TH JANUARY 2013, IN INC OME TAX APPEAL NO.952 OF 2011, WITH INCOME TAX APPEAL NO.147 OF 2009, IS FULLY JUSTIFIED AND SQUARELY COVERS THE ISSUE RAISED IN THE PRESENT APPEAL. WE THEREFORE, FIND, THAT THIS APPEAL DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AS PROJECTED BY THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANT. 8. MUMBAI TRIBUNAL IN THIS CASE OF SAFMARINE CONTAINER LINES N.V. (SUPRA) HAS ALSO HELD THAT IHC IS ALSO COVERED UNDER ARTICLE 8(2)(C) OF INDIA BELGIUM TAX TREATY WHICH PROVIDES THAT INCOME FROM T HE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC, INCLUDES 8 A.P. MOLLER MAERSK A/S INCOME DERIVED FROM THE USE, MAINTENANCE OR RENTAL CONTAINERS (INCLUDING TRAILERS AND RELATED EQUIPMENT FOR THE TRANSPORT OF CONTAINERS) IN CONNECTION WITH THE TRANSPORTATION OF GOODS OR MERCHANDISE IN INTERNATIONAL TRAFFIC. THE TRIBUNAL HELD THAT USE OF TRUCKS IN INLAND HAULAGE WOULD COME WITHIN THE WORDS TRAILERS AND RELATED EQUIPMENTS FOR THE TRANSPORT OF GOODS. WE FIND THAT THE LANGUAGE OF ARTICLE 9(4)(B) OF THE INDIA DENMARK TAX TREATY IS SIMI LAR TO ARTICLE 8(2)(C) OF INDIA BELGIUM TAX TREATY WHICH MERELY LISTS DOWN CERTAIN INCOME AS MERE EXAMPLE OF ITEMS COVERED UNDER THIS ARTICLE AND THEREFORE THE PRESENT ISSUES IS FULLY COVERED BY THE DECISION OF THE MUMBAI TRIBUNAL AND JURISDICTIONAL HIGH C OURT IN THE CASE OF SAFMARINE CONTAINER LINES N.V. (SUPRA). IN THE CASE OF SAFMARINE THE TERM OPERATIONS OF SHIPS WAS DEFINED UNDER ARTICLE 8(2) OF THE INDIA BELGIUM TAX TREATY SPECIFICALLY. THIS DEFINITION FIRST NARROWS THE DEFINITION AND THEN EXPANDS T O ADD ANY ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. UNDER THE INDIA DENMARK TAX TREATY (IDENTICAL TO THE INDIA UK TAX TREATY AS IN BALAJI SHIPPING), THERE IS NO DEFINITION AND HENCE ONE HAS TO INTERPRET ACCORDING TO THE INTERNATIONALLY ACCEPTED NORMS READ WITH THE COMMENTARY. THE RELEVANT PARA OF THE ORGANIZATION OF ECONOMIC COOPERATION AND DEVELOPMENT (OECD) COMMENTARY ON ARTICLE 8 READ AS FOLLOWS: 4. THE PROFITS COVERED CONSISTS IN THE FIRST PLACE OF THE PROFITS DIRECTLY OBTAINED BY THE ENTE RPRISE FROM THE TRANSPORTATION OF PASSENGERS OR CARGO BY SHIPS OR AIRCRAFT (WHETHER OWNED, LEASED OR OTHERWISE AT THE DISPOSAL OF THE ENTERPRISE) THAT IT OPERATES IN INTERNATIONAL TRAFFIC. HOWEVER, AS INTERNATIONAL TRANSPORT HAS EVOLVED, SHIPPING AND AIR T RANSPORT ENTERPRISES INVARIABLY CARRY ON A LARG VARIETY OF ACTIVITIES TO PERMIT, FACILITATE OR SUPPORT THEIR INTERNATIONAL TRAFFIC OPERATIONS. THE PARAGRAPH ALSO COVERS PROFITS FROM ACTIVITIES DIRECTLY CONNECTED WITH SUCH OPERATIONS AS WELL AS PROFIT FROM ACTIVITIES WHICH ARE NOT DIRECTLY CONNECTED WITH THE OPERATION OF THE ENTERPRISES SHIP OR AIRCRAFT IN INTERNATIONAL TRAFFIC AS LONG AS THEY ARE ANCILLARY TO SUCH OPERATION. ANY ACTIVITY CARRIED ON PRIMARILY IN CONNECTION WITH THE TRANSPORTATION BY THE EN TERPRISE OF PASSENGERS OR CARGO BY SHIPS OR AIRCRAFT THAT IT OPERATES IN INTERNATIONAL TRAFFIC SHOULD BE CONSIDERED TO BE DIRECTLY CONNECTED WITH SUCH TRANSPORTATION. 4.2 ACTIVITIES THAT THE ENTERPRISE DOES NOT NEED TO CARRY ON FOR THE PURPOSES OF ITS OWN OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC BUT WHICH MAKE A MINOR CONTRIBUTION RELATIVE TO SUCH OPERATION AND ARE SO CLOSELY RELATED 10 SUCH OPERATION THAT THEY SHOULD NOT BE REGARDED AS A SEPARATE BUSINESS OR SOURCE 0/ INCOME OF THE ENTERPRI SE SHOULD BE CONSIDERED TO BE ANCILLAR Y TO OPERATION OF SHIPS AND AIRCRAFT IN INTERNATIONAL TRAFFIC . 9 A.P. MOLLER MAERSK A/S 4.3 IN LIGHT OF THESE PRINCIPLES, THE FOLLOWING PARAGRAPHS DISCUSS THE EXTENT TO WHICH PARAGRAPH I APPLIES WITH RESPECT TO SOME PARTICULAR TYPES OF ACTIVI TIES THAT MAY BE CARRIED ON BY AN ENTERPRISE ENGAGED IN THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC. 5 . 6 PROFITS DERIVED BY AN ENTERPRISE FROM THE TRANSPORTATION OF PASSENGERS OR CARGO OTHERWISE THAN BY SHIPS OR AIRCRAFT THAT IT OPERATES IN INTERNATIONAL TRAFFIC ARE COVERED BY THE PARAGRAPH TO THE EXTENT THAT SUCH TRANSPORTATION IS DIRECTLY CONNECTED WITH THE OPERATION, BY THAT ENTERPRISE, OF SHIPS OR AIRCRAFT IN INTE RNATIONAL TRAFFIC OR IS AN ANCILLARY ACTIVITY. ONE EXAMPLE WOULD BE THAT OF AN ENTERPRISE ENGAGED IN INTERNATIONAL TRANSPORT THAT WOULD HAVE SOME OF ITS PASSENGERS OR CARGO TRANSPORTED INTERNATIONALLY BY SHIPS OR AIRCRAFT OPERATED BY OTHER ENTERPRISES, E.G . UNDER ABOVE SHARING OR SLOT CHARTERING ARRANGEMENTS OR TO TAKE ADVANTAGE OF AN EARLIER SAILING. ANOTHER EXAMPLE WOULD BE THAT OF AN AIRLINE COMPANY THAT OPERATES A BUS SERVICE CONNECTING A TOWN WITH ITS AIRPORT PRIMARILY TO PROVE ACCESS TO AND FROM THAT AIRPORT TO THE PASSENGERS OF ITS INTERNATIONAL FLIGHTS. 9. IN VIEW OF THE OECD COMMENTARY WE HAVE CONSIDERED THE ISSUE THAT INTERNATIONALLY AND BY THE TRIBUNAL AND HONBLE COURT ACCEPTED THAT ANY ACTIVITY DIRECTLY 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. FURTHER, THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BALAJI SHIPPING (UK) LTD.(2012) 253 CTR 460 (BORN) THE ISSUE WAS WHETHER RECEIPTS FROM SLOT CHARTERING CAN BE CONSIDERED AS SHIPPING INCOME ELIGIBLE TO THE BENEFICIAL PROVISION OF THE TAX TREATY BETWEEN INDIA AND UK. THE HONBLE HIGH COURT OBSERVED THAT THE SLOT HIRE AGREEMENTS ARE AT LEAST INDIRECTLY, IF NOT DIRECTLY CONNECTED AND INTERLINKED WITH AND IS AN INTEGRAL PART OF THE ENTERPRISE'S BUSINESS OF OPERATING SHIPS. THE HIGH COURT FURTHER OBSERVED THAT THE SLO T HIRE AGREEMENTS ALSO HAVE A NEXUS TO THE MAIN BUSINESS OF THE ENTERPRISE OF OPERATION OF SHIPS. THEY ARE ANCILLARY TO AND COMPLEMENT THE OPERATIONS OF SHIPS BY THE ENTERPRISE. ACCORDINGLY, HON'BLE BOMBAY HIGH COURT UPHELD THE VIEW THAT THE BENEFIT OF THE TAX TREATY WOULD EVEN BE EXTENDED TO INCOME FROM SUCH ACTIVITIES. NOTING THE OECD COMMENTARY THE HIGH COURT HELD AS FOLLOWS: - '35 PARAGRAPH 4 OF THE COMMENTARY INDICATES THAT ARTICLE APPLIES 10 A.P. MOLLER MAERSK A/S TO PROFITS DIRECTLY OBTAINED FROM THE TRANSPORTATION OF PASSENGERS OR CARGO BY SHIPS OWNED, LEASED OR OTHERWISE AT THE DISPOSAL OF A PERSON AS WELL AS THE PROFITS FROM THE ACTIVITIES WHICH ARE NOT DIRECTLY CONNECTED WITH THE ACQUISITION OF THE ASSESSEE 'S SHIPS. IN THE LATTER CASE HOWEVER, THE ACTIVITIES MUST B E ANCILLARY TO SUCH OPERATIONS VIZ, THE OPERATION OF SHIPS OWNED, LEASED OR OTHERWISE AT THE DISPOSAL OF THE ASSESSEE IN INTERNATIONAL TRAFFIC. IT INDICATES THAT THE PROVISION ALSO APPLIES TO THE ACTIVITIES THAT PERMIT, FACILITATE OR SUPPORT THE INTERNATIO NAL TRAFFIC OPERATIONS. 36. AS FAR AS THE FIRST TYPE OF CASE IS CONCERNED VIZ, WHERE THE SLOT HIRE FACILITY IS AVAILED OF FOR CARRIAGE OF GOODS FROM A PORT IN INDIA ONLY UP TO THE HUB PORT ABROAD AND IS THEREAFTER TRANSSHIPPED ON VESSELS ACTUALLY OPERATED BY THE ASSESSEE UP TO THE FINAL DESTINATION, IT IS IRRELEVANT WHETHER SLOT HIRE AGREEMENTS ARE CONSIDERED TO BE DIRECTLY CONNECTED WITH THE OPERATION OF SHIP OR NOT DIRECTLY CONNECTED WITH THE OPERATION OF SHIPS BY THE ENTERPRISE. IN SUCH CASES, THE SLOT HIRE AGREEMENTS ARE INEXTRICABLY INTERLINKED WITH AND CONNECTED TO THE OPERATION OF SHIPS BY THE ENTERPRISE. THE FIRST TYPE OF CASE WOULD IN FACT BE COVERED BY PARAGRAPHS 4 AND 4.1 OF THE COMMENTARY. THE HON'BLE HIGH COURT HAS CONCLUDED IN PARA 42 AS UND ER: 42. OUR VIEWS ON THE TWO TYPES OF CASES INVOLVED IN THE PRESENT APPEAL ARE IN CONSONANCE WITH THE VIEW OF THE DELHI HIGH COURT, THE OECD COMMENTARY AND THE COMMENTARIES REFERRED TO ABOVE. 10. WE FURTHER NOTED THAT HON'BLE BOMBAY HIGH COURT IN BALAJI'S CASE FOLLOWED THE DECISION OF THE HON'BLE DELHI HIGH COURT IN CASE OF DIRECTOR OF INCOME - TAX. VS. KLM ROYAL DUTCH AIRLINES (2009) 178 TAXMAN 291 (DEL.). HON'BLE DELHI HIGH COURT WHICH WAS FOLL OWED BY THE TRIBUNAL AND HON'BLE BOMBAY HIGH HAS HELD THAT WHERE THE ACTIVITIES ARE LINKED TO EACH OTHER, THERE IS NO SCOPE FOR DISSECTING THE ACTIVITIES. IN THAT CASE, THE RECOVERY OF RENT FROM THE INDIAN COMPANY WAS HELD TO BE INCOME FROM INTERNATIONAL A IR TRAFFIC AND NOT TAXABLE IN INDIA AS THE SAME WOULD CONSTRUE ACTIVITIES DIRECTLY AND INEXTRICABLY LINKED TO THE CARGO HANDLING BUSINESS OF THE ASSESSEE. AS PER THE RATIO OF THIS DECISION, ACTIVITIES WHICH ARE LINKED OR CONNECTED TO EACH OTHER SUCH THAT O NE CANNOT 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. AS INFORMED BY LD. COUNSEL THE FACT THAT THESE ISSUES ARE ALSO DECIDED IN FAVOUR OF THE ASSESSEE IN SUBSEQUENT YEAR EVEN BY THE DISPUTE RESOLUTION PANEL FOR AY 2011 - 12 BY PLACING RELIANCE ON THE DECISION OF HON'BLE MUMBAI 11 A.P. MOLLER MAERSK A/S TRIBUNAL AND JURISDICTIONAL HIGH COURT IN CASE OF SAFMARINE (SUPRA). 11. ALTER NATIVE ARGUMENT WAS ALSO MADE BY LD. COUNSEL FOR THE ASSESSEE THAT REVENUE ERRONEOUSLY TAXED EXPORT FREIGHT RELATING TO HAULAGE CHARGES CARRIED OUT IN FOREIGN COUNTRIES AS UNDER NO TAXABTION PRINCIPLE THIS CAN BE BROUGHT TO TAX IN INDIA. HE ARGUED THAT THE SE ARE PAYMENTS FOR ACTIVITY OUTSIDE INDIA AND NOT FOR OPERATIONS WITHIN INDIA AND HENCE EXCLUDED BY THE EXPLANATION 1(A) OF THE I.T. ACT WHICH READS AS FOLLOWS: EXPLANATION 1. FOR THE PURPOSE OF THIS CLAUSE (A) IN THE CASE OF A BUSINESS OF WHICH AL L THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA. IN VIEW OF THE ABOV E, HE ARGUED THAT UNDER THE TAX TREATY, ONLY THE INCOME WHICH IS ATTRIBUTABLE TO THE ACTIVITIES OF PERMANENT ESTABLISHMENT (PE) CAN BE TAXED IN INDIA AND THESE COULD NOT BE ACTIVITIES EITHER ATTRIBUTABLE OR CARRIED OUT BY ANY INDIAN PE AND HENCE CANNOT BE BROUGHT TO TAX. THESE WOULD BE CARRIED OUT BY FOREIGN SHIPPING AGENTS AND THEREFORE, THERE CAN BE NO CHARGE TO TAX IN INDIA. ACCORDING TO HIM THE MAERSK INDIA PRIVATE LIMITED (MIPL) DOES NOT CONSTITUTE A PE, SINCE IT IS NOT DISPUTED THAT SO CALLED PE IS RE MUNERATED AT ARM'S LENGTH, THERE CAN BE NO INCOME ASSESSED IN THE HANDS OF NON - RESIDENT AS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT VS B4IJ INTERNATIONAL HOLDINGS LIMITED (2015) 374 ITR 453 (BORN). 12. IN VIEW OF THE FACTS OF THIS CAS E 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 SH IPS 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 REVENUES DISMISSED. 12 A.P. MOLLER MAERSK A/S 8 . THE SAME VIEW WAS REITERATED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011 12 IN ITA NO.1798/MUM./ 2015, DATED 15 TH FEBRUARY 2017 AND FOR ASSESSMENT YEAR 2012 13 IN ITA NO.1743/MUM./2016, DATED 7 TH FEBRUARY 2018. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE CONS ISTENT VIEW OF THE TRIBUNAL ON THE DISPUTED ISSUE , AS REFERRED TO ABOVE, WE ALLOW THE CLAIM OF THE ASSESSEE. THIS G ROUND IS ALLOWED. 9 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE DEPARTMEN TAL AUTHORITIES IN BRINGING TO TAX THE AMOUNT RECEIVED BY THE ASSESSEE FROM TWO INDIAN ENTITIES TOWARDS I.T. SYSTEMS USAGE AND SUPPORT COST BY TREATING IT AS FEES FOR TECHNICAL SERVICES. 10 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER NOTICING THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF ` 14,80,242, FROM GUJARAT PIPAVAV PORT LTD. AND GATEWAY TERMINALS PVT. LTD. TOWARDS I.T. SYSTEMS SUPPORT SERVICES, WHEREAS , THE ASSESSEE HAS NOT OFFERED IT TO TAX CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS RELATING TO THE SERVICE PROVIDED AND ALSO EXPLAIN WHY THE AMOUNT RECEIVED SHOULD NOT BE TREATED AS ROYALTY OR FEES FOR TECHNICAL SERVICES. T HE ASSESSEE THROUGH SUBMISSI ONS DATED 13 TH AUGUST 2015, SUBMITTED THAT THE AMOUNT RECEIVED IS NOT TOWARDS ANY TECHNICAL SERVICE RENDERED , HENCE, DOES NOT CONSTITUTE FEES FOR TECHNICAL SERVICES AND 13 A.P. MOLLER MAERSK A/S FURTHER , SINCE SUCH PAYMENTS ARE NOT TOWARDS ANY USE OR RIGHT TO USE OF COPYRIGHT, PATE NT, TRADEMARK, DESIGN, MODEL, PLAN OR SECRET FORMULA OR PROCESS, ETC., IT CANNOT BE TREATED AS ROYALTY. HOWEVER, THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ULTIMATELY CONCLUDED THAT THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS R ECOVERY OF OTHER I.T. AND PROCUREMENT SUPPORT COST IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES, HENCE, TAXABLE IN INDIA. 11 . THOUGH, THE ASSESSEE OBJECTED TO THE AFORESAID DECISION BEFORE THE DRP, THE DRP ALSO UPHELD THE DECISION OF THE ASSESSING OFFICER AND HELD THAT THE AMOUNT RECEIVED IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES HENCE, IS TAXABLE IN INDIA UNDER ARTICLE 13 OF THE INDIA DENMARK TAX TREATY AS WELL AS UNDER THE ACT. 12 . THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED , THE AMOUNT RECEIV ED BY THE ASSESSEE IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AS NO TECHNICAL SERVICES WAS RENDERED OR PROVIDED BY THE ASSESSEE. THE LEARNED SR. COUNSEL SUBMITTED , IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES APPEAL IN ITA NO.1927 AND 2054/MUM./2014, DATED 7 TH OCTOBER 2016, FOR ASSESSMENT YEAR 2010 11. 13 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , EVEN IF THE AMOUNT RECEIVED BY THE ASSESSEE MAY NOT BE IN THE NATURE OF FEES FOR 14 A.P. MOLLER MAERSK A/S TECHNICAL SERVICES, HOWEVER , CERTAINLY IT IS IN THE NATURE OF ROYALTY AS PER ARTICLE 13(3) OF INDIA DENMARK DTAA AS WELL AS UNDER THE ACT SINCE THE SYSTEM PROVIDED BY THE ASSESSEE IS IN THE NATURE OF INDUSTRIAL OR COMMERCIAL EQUIPMENT. THUS, HE SUBMITTED THAT THE AMOUNT RECEIVED SHO ULD BE TREATED AS ROYALTY. 14 . IN REJOINDER, THE LEARNED SR. COUNSEL FOR THE ASSESSEE VEHEMENTLY OPPOSED THE AFORESAID CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND SUBMITTED THAT NEITHER THE ASSESSING OFFICER NOR THE DRP HAS TREATED THE AMOUNT RECEIVED AS ROYALTY. THEREFORE, A T THIS STAGE THE DEPARTMENT CANNOT ADVANCE OR TAKE A NEW GROUND THAT THE AMOUNT RECEIVED BY THE AS SESSEE IS IN THE NATURE OF ROYALTY. HE SUBMITTED , WHILE DECIDING ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001 02 TO 2005 06, THE HON'BLE SUPREME COURT IN CIVIL APPEAL NO.8040/2015 & ORS., HAS APPROVED THE DECISION OF THE TRIBUNAL AND THE HONBLE HIGH COURT THAT THE PAYMENT RECEIVED IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES. HE SUBMITTED , WHILE DOING SO, THE HON'BLE SUPREME COURT ALSO REFUSED TO ACCEPT THE FRESH ARGUMENT OF THE DEPARTMENT THAT THE PAYMENT RECEIVED SHOULD BE TREATED AS ROYALTY. FURT HER, THE HON'BLE SUPREME COURT HAS ALSO OBSERVED THAT WHEN THE REVENUE ITSELF HAS ACCEPTED THE FREIGHT INCOME TO BE EXEMPT UNDER ARTICLE 9 OF INDIA DANISH DTAA, THE I.T. SUPPORT SYSTEM COST BEING AN INTEGRAL PART OF THE SHIPPING BUSINESS CANNOT BE 15 A.P. MOLLER MAERSK A/S BROUGHT TO TAX. THUS, HE SUBMITTED , THE DEPARTMENTS ARGUMENTS CANNOT BE ACCEPTED. 15 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, THE ASSESSEE INCUR RED CERTAIN EXPENSES TOWARDS OPERATION, MAI NTENANC E AND UP GRADATION OF SAP BASED ERP SOLUTION. THE ASSESSEE HAS PROCURED THE AFORESAID SYSTEM FOR EFFICIENT MANAGEMENT OF OPERATION OF ITS SHIPPING BUSINESS. THE USAGE OF THE AFORESAID SYSTEM IS PROVIDED BY THE ASSESSEE TO ITS AGENTS ACROSS THE GLOBE INCLUD ING INDIA. TO STREAMLINE OPERATIONS OF ITS GROUP COMPANIES HAVING CONTAINER INLAND SERVICES AROUND THE WORLD, THE ASSESSEE REQUIRED THEM TO INSTALL AND USE THE AFORESAID I.T. SUPPORT SYSTEM SOFTWARE. UNDOUBTEDLY, THE ASSESSING OFFICER AND THE DRP HAVE TREA TED THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS USAGE OF THE AFORESAID SYSTEM AS FEES FOR TECHNICAL SERVICES. HOWEVER, WHILE DECIDING IDENTICAL NATURE OF DISPUTE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 11 IN THE ORDER REFERRED TO ABOVE, THE TRIBUNA L HAS HELD THAT SUCH AMOUNT CANNOT BE TREATED AS FEES FOR TECHNICAL SERVICES FOR THE DETAILED REASONING MENTIONED THEREIN. THERE BEING NO MATERIAL DIFFERENCE IN FACTS BROUGHT TO OUR NOTICE, THE AFORESAID DECISION O F THE TRIBUNAL IS SQUARELY APPLICABLE TO T HE PRESENT ASSESSMENT YEAR ALSO. AS REGARDS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE PAYMENT RECEIVED SHOULD BE 16 A.P. MOLLER MAERSK A/S TREATED AS ROYALTY, WE ARE UNABLE TO ACCEPT SUCH FRESH CONTENTION / ARGUMENT BY THE DEPARTMENT SINCE THE ISSUE WHETHER A PARTICULAR PAYMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES OR ROYALTY NOT ONLY IS A LEGAL ISSUE BUT ALSO REQUIRES VERIFICATION OF PRIMARY FACTS . S INCE , NEITHER THE ASSESSING OFFICER NOR THE DRP HAS EXAMINED THE PAYMENT RECEIVED BY THE ASSESSEE F ROM THE ANGLE OF ROYALTY , AT THIS STAGE WE CANNOT ENTERTAIN THE FRESH PLEA OF THE DEPARTMENT. IN ANY CASE OF THE MATTER, WHILE DECIDING ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001 02 TO 2005 06, THE HON'BLE SUPREME COURT , IN THE ORDER REFERRED TO ABOVE , H AS REFUSED TO ACCEPT THE FRESH PLEA TAKEN BY THE DEPARTMENT THAT SIMILAR PAYMENT RECEIVED BY THE ASSESSEE IS NOT FEES FOR TECHNICAL SERVICES BUT ROYALTY. I N VIEW OF THE AFORESAID, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. 16 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED TAXABILITY OF INTEREST ON INCOME TAX REFUND AMOUNTING TO ` 84,03,135. 17 . BRIEF FACTS ARE, IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE RECEIVED AN AMOUNT OF ` 84,03,135, TOWARDS INTEREST ON INCOME TAX REFUND GRANTED UNDER SECTION 244A OF THE ACT. THE ASSESSEE DID NOT OFFER THE AFORESAID AMOUNT TO TAX ON THE REASONING THAT IT ARISES OUT OF OPERATIONS OF SHIPS IN INTERNATIONAL TRAFFIC, HENCE, NOT TAXABLE IN INDIA UNDER ARTICLE 9(4)( A) OF INDIA 17 A.P. MOLLER MAERSK A/S DENMARK TAX TREATY. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CLAIM OF THE ASSESSEE AND HELD THAT IT IS AN INCOME DEEMED TO ARISE IN INDIA UNDER ARTICLE 12(6) OF THE INDIA DENMARK TAX TREATY AND BROUGHT IT TO TAX @ 15% AS PER AR TICLE 12(6) OF THE TAX TREATY. 18 . THE DRP ALSO UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 19 . THE LEARNED SR. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, FAIRLY CONCEDED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2005 06. 20 . THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED WITH THE AFORESAID SUBMISSIONS OF THE LEARNED SR. COUNSEL FOR THE ASSESSEE. 21 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005 06 IN ITA NO.7676/MUM./2 010, DATED 14 TH DECEMBER 2012, THE TRIBUNAL HAS HELD THAT INTEREST ON INCOME TAX REFUND GRANTED UNDER SECTION 244A OF THE ACT IS TAXABLE IN INDIA AS PER ARTICLE 12(6) OF THE INDIA DENMARK TAX TREATY. FOLLOWING THE AFORESAID DECISION OF THE CO ORDINATE BENC H IN ASSESSEES OWN CASE, WE DECIDE THE ISSUE AGAINST THE ASSESSEE. GROUND RAISED IS DISMISSED 18 A.P. MOLLER MAERSK A/S 22 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.02.2019 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 15.02.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI