VAN OORD DREDGING AND MARINE CONTRACTORS BV, MUMBAI V. DCIT (IT) 4(3)(1), MUMBAI

ITA 6726/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0436 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2015-2016
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH
• Assessee Lawyers: EARLIER ASSEMMENT YEARS
• Keywords: Double taxation relief; Application of stay; Set aside
• Section: 144; 143(3); 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI PROMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 6726/MUM/2018 ( ASSESSMENT YEARS: 2015-16 ) VAN OORD DREDGING AND MARINE CONTRACTORS BV 201, 2 ND FLOOR, CENTRAL PLAZA, 166 CST ROAD, KALINA, MUMBAI 400098 / VS. DCIT (IT) 4(3)(1) 16 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI. ./ ./ PAN/GIR NO. : AAACH3500M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NISHANT THAKKAR, AR / RESPONDENT BY : SHRI SANJAY SINGH, CIT- DR / DATE OF HEARING 16/12/2020 !'# / DATE OF PRONOUNCEMENT 24/12/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER U/S 144C(13)R.W.S143(3) OF THE ACT DATED 27.09.2018 PASSED IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP) ORDER DATED 16.08.2018. ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 2 - 2. AT THE TIME OF HEARING THE LD. AR SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED THE GROUNDS OF APPEA L 1 TO 14 BUT HAS NOT PRESSED GROUNDS OF APPEAL NO. 1 0- 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 THE ASSESSEE HAS FILED A LETTER OF WITHDRAWAL FOR GROUND OF APPEAL NO. 10-13 AND THE SAME IS TREATED AS WITHDRAWN AND DISMISSED.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 RS. 21,27,77,100/-. 2. ERRED IN NOT FOLLOWING THE ORDER OF THE HONBLE JURISDICTIONAL INCOME TAX APPELLATE TRIBUNAL, MUMBA I FOR THE A.Y 2009-10 IN APPELLANTS OWN CASE. TAXABILITY OF MANAGEMENT SERVICE FEES OF RS. 21,27,77,100/- 3. ERRED IN NOT APPRECIATING THAT THE MANAGEMENT SERVICE FEES RECEIVED BY THE APPELLANT CONSTITUTE P URE ALLOCATION OF COST WITHOUT ANY MAKE-UP AND HENCE, T HE SAME BEING REIMBURSEMENT OF COST, IS NEITHER TAXABL E AS ROYALTY NOR TAXABLE AS FEES FOR TECHNICAL SERVICES UNDER THE ACT AS WELL AS UNDER THE DOUBLE TAXATION AVOIDA NCE AGREEMENT BETWEEN INDIA AND NETHERLANDS. 4. ERRED IN TREATING THE MANAGEMENT SERVICE FEES RECEIVED BY THE APPELLANT AS ROYALTY UNDER ARTICLE 12(4) OF INDIA NETHERLANDS DTAA AS WELL AS FEE FOR TECH NICAL SERVICES UNDER ARTICLE 12(5) OF INDIA NETHERLANDS DTAA, ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 3 - THEREBY MAKING AN ADDITION OF RS. 21,27,77/- TO THE INCOME OF THE APPELLANT. 5. ERRED IN NOT APPRECIATING THAT FOR THE SERVICES RENDERED BY THE APPELLANT TO QUALIFY AS ROYALTY, TH E SAME SHOULD PROVIDE KNOW-HOW TO THE RECIPIENT. 6. ERRED IN NOT APPRECIATING THAT THE SERVICES PRO VIDED BY THE APPELLANT ARE IN THE NATURE OF BUSINESS SUPP ORT AND ADMINISTRATION SERVICES AND ARE NOT IN THE NATU RE OF SHARING INFORMATION CONCERNING INDUSTRIAL, COMMERCI AL AND SCIENTIFIC EXPERIENCE. 7. ERRED IN NOT APPRECIATING THAT THE SERVICES REN DERED BY THE APPELLANT ARE IN THE NATURE OF BUSINESS SUPP ORT AND ADMINISTRATION SERVICES AND NOT IN THE NATURE O F TECHNICAL OR CONSULTANCY SERVICES. 8. ERRED IN NOT APPRECIATING THAT THE SERVICES REN DERED BY THE APPELLANT DO NOT MAKE AVAILABLE ANY TECHNICA L KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES AND HENCE, IS NOT TAXABLE EVEN AS FEES FOR TECHNICAL SE RVICES IN VIEW OF ARTICLE 12(5) OF THE INDIA-NETHERLANDS DATT . SET-OFF OF MANAGEMENT SERVICE FEES TREATED AS ROYA LTY WITH BROUGHT FORWARD BUSINESS LOSS NOT ALLOWED. 9. ERRED IN NOT SETTING OFF THE BROUGHT FORWARD BU SINESS LOSS AGAINST THE ADDIT9ION OF MANAGEMENT SERVICE FE ES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND DREDGING ACTIVITIES. THE ASSESSEE FILED THE RETURN OF ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 4 - INCOME FOR THE A.Y 2015-16 ON 05.11.2015 DECLARING TOTAL INCOME OF RS. NIL. SUBSEQUENTLY, THE CASE WA S SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) AND 142 (1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE ISSUED. I N COMPLIANCE THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE DETAILS. THE A.O ON PERUSAL OF THE FINANCIAL DETAILS FOUND THAT THE ASSESSEE COMPANY WAS INCORPORATED IN NETHERLANDS AND IS AN INTERNATIONAL DREDGING CONTRACTOR AND EXECUTED SEVERAL CONTRACTS IN INDIA. DURING THE F .Y 2014-15 THE ASSESSEE HAS NOT EXECUTED ANY DREDGING CONTRACTS IN INDIA BUT MAINTAINED ITS PROJECT OFFIC E FOR MANAGING CERTAIN FORMALITIES IN CONNECTION WITH EARLIER PROJECTS. THE A.O ON PERUSAL OF THE FACTS AND THE FINANCIAL STATEMENTS FOUND THAT THE ASSESSEE HA S PROVIDED CERTAIN BUSINESS SUPPORT SERVICES TO VAN OORD INDIA PVT LTD AND HAS CHARGED RS. 21,27,77,100/- AND SUBMITTED THAT THE ABOVE MENTIONED SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE EXPERIENCE. THE SERVICES ARE NO T 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 ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 5 - 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 TH E INDIA AND NETHERLANDS TAX TREATY. ON THE SIMILAR ISSUE HONBLE TRIBUNAL FOR THE A.YS 2009-10, 2013-1 4 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 260 A OF THE ACT FOR THE A.Y.2009-10 AND REGARDING OTHER ASST YEARS STILL NO INFORMATION IS AVAILABLE ON REC ORD. 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 INCOM E AND TAXED AT TREATY RATE AND PASSED THE DRAFT ASSESSMENT ORDER U/S 144 C(1) R.W.S 143(3) OF THE A CT DATED 28.12.2017. 4. AGGRIEVED BY THE DRAFT ASSESSMENT ORDER THE ASSESSEE HAS FILED OBJECTIONS IN FORM 35A WITH TH E HONBLE DRP, DRP CONSIDERING THE GROUNDS OF OBJECTIONS AND ADDITIONAL GROUNDS RAISED ON THE DISPUTED ISSUE WITH RESPECT TO MANAGEMENT SERVICE ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 6 - FEES AND SET OFF OF MANAGEMENT FEES TREATED AS A ROYALTY AND THE BROUGHT FORWARD BUSINESS LOSS OF TH E EARLIER YEARS A.Y 2013-14, THE DRP HAS DIRECTED THE A.O TO VERIFY THE CLAIM. WHEREAS, IN RESPECT OF TAXABILITY AND TREATMENT OF THE MANAGEMENT SERVICE FEES AS ROYALTY INCOME, THE DRP HAS UPHELD THE VIE W OF THE A.O AND REJECTED THE GROUNDS OF OBJECTIONS AND PASSED THE ORDER U/S 144C(5) OF THE ACT ON 16.08.2018. SUBSEQUENTLY, A.O HAS PASSED THE ORDER UNDER 144C(13) R.W.S 143(3) OF THE ACT DATED 27.09.2018, CONSIDERING THE DIRECTIONS OF THE DRP H AS AFFIRMED THE MANAGEMENT FEE SERVICES AS A ROYALTY A ND WAS TAXED. AGGRIEVED BY THE ORDER, THE ASSESSEE HA S FILED AN APPEAL WITH THE TRIBUNAL. 5. AT THE TIME OF HEARING THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEES SOLE CONTENTION IS WI TH RESPECT TO MANAGEMENT SERVICE FEES RENDERED, WHICH IS NOT TAXABLE AND FILED THE PAPER BOOK. THE LD.AR EMPHASIZED THAT THE DISPUTED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ASSEMMENT YEARS ORDERS FOR THE A.Y 2009-10 TO A.Y. 2014-15 AND ALS O SUPPORTED HIS ARGUMENTS WITH THE APPEAL MEMO FILED BY THE REVENUE FOR THE A.Y 2009-10 AND 2011-12 ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 7 - BEFORE THE HONBLE HIGH COURT AND PRAYED FOR ALLOWI NG THE APPEAL. 6. CONTRA, LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE MATRIX OF THE DISPUTE D ISSUE AS ENVISAGED BY THE LD. AR IS WITH RESPECT TO MANAGEMENT SERVICES FEE CLAIM IN THE ASSESSEES OWN CASES WAS ALLOWED. WE CONSIDERING THE LATEST DECISI ON FOR THE A.Y 2013-14 AND 2014-15 IN ITA NO. 6140 & 6141/MUM/2017, THE HONBLE TRIBUNAL HAS RELIED ON THE EARLIER YEAR ORDERS AND HAS GRANTED THE RELIEF. WE CONSIDER IT APPROPRIATE TO REFER THE OBSERVATIONS OF THE HONBLE TRIBUNAL AT PAGE 3 PARA 5 TO 8 OF THE O RDER WHICH IS READ AS UNDER : 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE A.O HAD MADE IDENTICAL DISALLOWANCE IN A.Y 2009-10 AND THE TRIBUNAL, VIDE ITS ORDER REFERR ED SUPRA, HAS HELD THAT NONE OF THE SERVICES PROVIDED BY THE ASSESSEE IN THE TERMS OF SERVICE AGREEMENT FALLS UN DER THE SCOPE AND AMBIT OF ROYALTY AS DEFINED IN ARTICLE 12 (4) OF THE DTAA FOR THE SAKE OF CONVENIENCE, WE EXTRACT BE LOW OPERATION PORTION OF THE ORDER PASSED BY THE COORDI NATE BENCH OF TRIBUNAL IN A.Y 2009-10. ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 8 - 14. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WE LL AS MATERIAL REFERRED AND RELIED UPON BEFORE US. THE FI RST ISSUE FOR OUR ADJUDICATION IS, WHETHER THE FEES REC EIVED 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-D TAA OR NOT. THE ENTIRE GAMUT OF FACTS AND NATURE OF SERVIC ES PROVIDED BY THE ASSESSEE TO VOIPL IN THE TERMS OF S ERVICE AGREEMENT DATED 1ST APRIL, 2004 HAS ALREADY BEEN DISCUSSED ABOVE ELABORATELY. THE REVENUES CASE IS THAT, THE VOIPL IS COMPLETELY DEPENDENT ON ASSESSEE (VODM C) FOR ITS EXPERIENCE IN INDUSTRIAL, COMMERCIAL AND SC IENTIFIC FIELD. THE INDIAN ENTITY IS ENGAGED IN HIGHLY TECHN ICAL BUSINESS OF DREDGING ACTIVITIES FOR WHICH IT REQUIR ES 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-FIRM FOR RENDERING SUCH KIND OF SERVICES FALLS WITHIN THE RE ALM AND AMBIT OF ROYALTY AS DEFINED IN PARA (4) OF ARTICL E 12 OF THE DTAA. THE RELEVANT DEFINITION OF ROYALTY AS G IVEN IN ARTICLE 12(4) OF INDIA-NETHERLANDS-DTAA READS AS UN DER:- THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FO R THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MARK DESIGN OR MODEL, PAN SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. HERE, THE MAIN EMPHASIS OF THE REVENUE IS ON THE TE RM FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. THIS TERM MAINLY ALLUDES TO CONCEPT OF USE OF OR RIGHT TO USE OF PROVIDING OF KNOWHOW , WHERE ONE PARTY AGREES TO IMPART THE INFORMATION ON KNOWH OW ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 9 - CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE TO THE OTHER. OECD IN ITS COMMENTARY HAS EXPLAINED THESE TERMS IN PARA 11 IN THE FOLLOWING MANNER:- THE CLASSIFYING AS ROYALTIES PAYMENTS RECEIVED AS CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EXPERIENCE, PARAGRAPH 2 IS REFERRING TO THE CONCEPT OF KNOW-HOW. VARIOUS SPECIALIZED BODIES AND AUTHORS HAVE FORMULATED DEFINITIONS OF KNOW-HOW. THE WORDS PAYMENTS FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE ARE USED IN THE CONTEXT OF THE TRANSFER OF CERTAIN INFORMATION THAT HAS NOT BEEN PATENTED AND DOES NOT GENERALLY FALL WITHIN OTHER CATEGORIES OF INTEL LECTUAL PROPERTY RIGHTS. IT GENERALLY CORRESPONDS TO UN-DIV ULGED INFORMATION OF AN INDUSTRIAL, COMMERCIAL OR SCIENTI FIC NATURE ARISING FROM PREVIOUS EXPERIENCE, WHICH HAS PRACTICAL APPLICATION IN THE OPERATION OF AN ENTERP RISE AND FORM THE DISCLOSURE OF WHICH AN ECONOMIC BENEFIT CA N BE DERIVED. SINCE THE DEFINITION RELATES TO INFORMATIO N CONCERNING PREVIOUS EXPERIENCE, THE ARTICLE DOES NO T APPLY TO PAYMENTS FOR NEW INFORMATION OBTAINED AS RESULT OF PERFORMING SERVICES AT THE REQUEST OF THE PAYER; IN THE KNOW-HOW CONTRACT, ONE OF THE PARTIES AGREES TO IMPART TO THE OTHER, SO THAT HE CAN USE THEM FOR HI S OWN ACCOUNT, HIS SPECIAL KNOWLEDGE AND EXPERIENCE WHICH REMAIN UNREVEALED TO THE PUBLIC. IT IS RECOGNIZED T HAT THE GRANTOR IS NOT REQUIRED TO PLAY ANY PART HIMSELF IN THE APPLICATION OF THE FORMULAS GRANTED TO THE LICENSEE AND THAT HE DOES NOT GUARANTEE THE RESULT THEREOF. THIS TYPE OF CONTRACT THUS DIFFERS FROM CONTRACTS F OR THE PROVISION OF SERVICES, IN WHICH ONE OF THE PARTIES UNDERTAKES TO USE THE CUSTOMARY SKILLS OF HIS CALLI NG TO EXECUTE WORK HIMSELF FOR THE OTHER PARTY. PAYMENTS MADE UNDER THE LATTER CONTRACTS GENERALLY FALL UNDER ART ICLE 7. ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 10 - THE NEED TO DISTINGUISH THESE TWO TYPES OF PAYMENTS , I.E. PAYMENTS FOR THE SUPPLY OF KNOW-HOW AND PAYMENTS FO R THE PROVISION OF SERVICES, SOMETIMES GIVES RISE TO PRACTICAL DIFFICULTIES. THE FOLLOWING CRITERIA ARE RELEVANT F OR THE PURPOSE OF MAKING THAT DISTINCTION: CONTRACTS FOR THE SUPPLY OF KNOW-HOW CONCERN INFORM ATION OF THE KIND DESCRIBED IN PARAGRAPH 11 THAT ALREADY EXISTS OR CONCERN THE SUPPLY OF THAT TYPE OF INFORMATION A FTER ITS DEVELOPMENT OR CREATION AND INCLUDE SPECIFIC PROVIS IONS CONCERNING THE CONFIDENTIALITY OF THAT INFORMATION. IN THE CASE OF CONTRACTS FOR THE PROVISION OF SERVI CES, THE SUPPLIER UNDERTAKES TO PERFORM SERVICES WHICH MAY REQUIRE THE U SE, BY THAT SUPPLIER, OF SPECIAL KNOW LEDGE, SKILL AND EXPERTISE BUT NOT THE TRANSFER OF SUCH SP ECIAL KNOWLEDGE, SKILL OR EXPERTISE TO THE OTHER PARTY. IN MOST CASES INVOLVING THE SUPPLY OF KNOW-HOW, THE RE WOULD GENERALLY BE VERY LITTLE MORE WHICH NEEDS TO BE DONE BY THE SUPPLIER UNDER THE CONTRACT OTHER THAN TO SUPPLY EXISTING INFORMATION OR REPRODUCE EXISTING MATERIAL. ON THE OTHER HAND, A CONTRACT FOR THE PERFORMANCE OF SERVICES WOULD, IN THE MAJORITY OF C ASES, INVOLVE CONTRACTUAL OBLIGATIONS. FOR INSTANCE, THE SUPPLIER, DEPENDING ON THE NATURE OF THE SERVICES TO BE RENDE RED, MAY HAVE TO INCUR SALARIES AND WAGES FOR EMPLOYEES ENGAGED IN RESEARCHING, DESIGNING, TESTING, DRAWING AND OTHER ASSOCIATED ACTIVITIES OR PAYMENTS TO SUBCONTR ACTORS FOR THE PERFORMANCE OF SIMILAR SERVICES. EXAMPLES OF PAYMENTS WHICH SHOULD THEREFORE NOT BE CONSIDERED TO BE RECEIVED AS CONSIDERATION FOR THE PROVISION OF KNOW-HOW BUT, RATHER, FOR THE PROVISIO N OF SERVICES, INCLUDE: - PAYMENTS OBTAINED AS CONSIDERATION FOR AFTER-SALE S SERVICE; ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 11 - - PAYMENTS FOR SERVICES RENDERED BY A SELLER TO THE PURCHASER UNDER A WARRANTY; - PAYMENTS FOR PURE TECHNICAL ASSISTANCE; - PAYMENTS FOR A LIST OF POTE NTIAL CUSTOMERS, WHEN SUCH A LIST IS DEVELOPED SPECIFICAL LY FOR THE PAYER OUT OF GENERALLY AVAILABLE INFORMATION (A ) PAYMENT FOR THE CONFIDENTIAL LIST OF CUSTOMERS TO W HICH THE PAYEE HAS PROVIDED A PARTICULAR PRODUCT OR SERVICE WOULD, HOWEVER, CONSTITUTE A PAYMENT FOR KNOW-HOW AS IT WO ULD RELATE TO THE COMMERCIAL EXPERIENCE OF THE PAYEE IN DEALING WITH THESE CUSTOMERS), - PAYMENTS FOR AN OPINION GIVEN BY AN ENGINEER, AN ADVOCATE OR AN ACCOUNTANT, AND - PAYMENTS FOR ADVICE PROVIDED ELECTRONICALLY, FOR ELECTRONIC COMMUNICATIONS WITH TECHNICIANS OR FOR ACCESSING, THROUGH COMPUTER NETWORKS, A TROUBLE-SHO OTING DATABASE SUCH AS A DATABASE THAT PROVIDES USERS OF SOFTWARE NON-CONFIDENTIAL INFORMATION IN RESPONSE T O FREQUENTLY ASKED QUESTIONS OR COMMON PROBLEMS ARISE FREQUENTLY. FROM THE ABOVE CLARIFICATION, IT CAN BE OSTENSIBLY INFERRED THAT, TO QUALIFY AS PAYMENT TOWARDS INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, PERSON MUST PROVIDE KNOWHOW TO THE RECIPIENT, THAT IS, A STRONG EMPHASIS HAS BEEN GIVEN TO CONCEPT OF KNOWH OW. THERE IS AN ELEMENT OF IMPARTING OF KNOWHOW TO THE OTHER SO THAT OTHER CAN USE OR HAS RIGHT TO USE SUCH KNO WHOW. IN CASE OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, IF SERVICES ARE BEING RENDERED SIMPLY AS AN ADVISOR Y OR CONSULTANCY THEN IT CANNOT BE RECKONED AS ROYALTY BECAUSE THE ADVISORY OR ASSISTANCE DOES NOT CONNOTE S IMPARTING OF THE SKILL OR EXPERIENCE TO OTHER ALBEI T THE PERSON IS RENDERING THE SERVICES FROM HIS OWN KNOWH OW AND WHAT HE IS IMPARTING IS HIS CONCLUSION BASED ON HIS OWN SKILL AND EXPERIENCE. THE IMPARTING OF KNOWHOW ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 12 - ENVISAGES THAT THE RECIPIENT SHOULD BE ABLE TO MAKE USE OF SUCH KNOWHOW INDEPENDENTLY ON ITS OWN ACCOUNT WITHO UT RECOURSE OF THE PROVIDER OF THE KNOWHOW IN FUTURE. FOR BEING REGARDED AS ROYALTY THERE HAS TO BE ALIENAT ION OR USE OF OR RIGHT TO USE OF ANY KNOWHOW AND WITHOUT A NY TRANSFER OF ANY KNOWLEDGE, EXPERIENCE OR SKILL, IT CANNOT BE TERMED AS ROYALTY. IN THE CASE OF GECC ASIA LT D. VS. DDIT (SUPRA) HAD OCCASION TO DEAL WITH THE TERM INFORMATION CONCERNING TO INDUSTRIAL, COMMERCIAL O R SCIENTIFIC EXPERIENCE AND AFTER REFERRING TO VARIO US COMMENTARIES, OBSERVED AND HELD AS UNDER: THE ROYALTY PAYMENT RECEIVED AS CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL, SCIE NTIFIC EXPERIENCE ALLUDES TO THE CORRECT OF KNOWHOW. THERE IS AN ELEMENT OF IMPARTING OF KNOWHOW TO THE OTHER, SO TH AT THE OTHER PERSON CAN USE OR HAS RIGHT TO USE SUCH KNOWH OW. IN CASE OF INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE, IF SERVICES ARE BEING RENDERED SIMPLY A S AN ADVISORY OR CONSULTANCY, THEN IT CANNOT BE TERMED A S ROYALTY, BECAUSE THE ADVISOR OR CONSULTANT IS NOT IMPARTING HIS SKILL OR EXPERIENCE TO OTHER, BUT REN DERING HIS SERVICES FROM HIS OWN KNOWHOW AND EXPERIENCE. A LL THAT HE IMPARTS IS A CONCLUSION OR SOLUTION THAT DR AWS FROM HIS OWN EXPERIENCE. THE EMINENT AUTHOR KLAUS V OGEL I HIS BOOK KLAUS VOGEL ON DOUBLE TAX CONVENTION H AS REITERATED THIS VIEW ON DIFFERENCED BETWEEN ROYALTY AND RENDERING OF SERVICES THE THIN LINE DISTINCTION WHI CH IS TO BE TAKEN INTO CONSIDERATION WHILE RENDERING THE SER VICES ON ACCOUNT OF INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE IS, WHETHER TH ERE IS ANY IMPARTING OF KNOWHOW OR NOT. IF THERE IS NO ALIENATION OR THE USE OF OR THE RIGHT TO USE O F ANY KNOWHOW, THEN IT CANNOT BE TERMED AS ROYALTY. THE SERVICES MAY HAVE BEEN RENDERED BY A PERSON FROM OW N KNOWLEDGE AND EXPERIENCE BUT SUCH A KNOWLEDGE AND ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 13 - EXPERIENCE HAS NOT BEEN IMPARTED TO THE OTHER PERSO N AS THE PERSON RETAINS THE EXPERIENCE AND KNOWLEDGE OR KNOWHOW WITH HIMSELF, WHICH ARE REQUIRED TO PERFORM THE SERVICES TO ITS CLIENTS. HENCE, IN SUCH A CASE, IT CANNOT BE HELD THAT SUCH SERVICES ARE IN NATURE OF ROYALTY. THUS, IN PRINCIPLE WE HOLD THAT IF THE SERVICES HAVE BEEN RENDERED DE-HORS THE IMPARTING OF KNOWHOW OR TRANSF ER OF ANY KNOWLEDGE, EXPERIENCE OR SKILL, THEN SUCH SERVI CES WILL NOT FALL WITHIN THE AMBIT OF ARTICLE -12. . I F SUCH SERVICES DO NOT INVOLVE IMPARTING OF KNOWHOW OR TRA NSFER OF ANY KNOWLEDGE, EXPERIENCE OR SKILL, THEN IT CANN OT BE HELD TO BE TAXABLE AS ROYALTY 15. THUS, WHAT WE HAVE TO SEE IS, WHETHER THE VARIO US SERVICES PROVIDED BY ASSESSEE TO VOIPL CAN BE RECKO NED AS PROVIDING OF ANY KIND OF IMPARTING OF KNOWHOW OR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE OR NOT. AS HIGHLIGHTED ABOVE, WITH REGAR D TO VARIOUS STREAMS OF SERVICES LIKE PROVIDING OF INFOR MATION TECHNOLOGY; OPERATIONAL SUPPORT; MARKETING; QUALITY , HEALTH, SAFETY AND ENVIRONMENT; ESTIMATING AND ENGINEERING; AND PERSONAL AND ORGANIZATION, ADMINISTRATION AND LEGAL SERVICES, THERE IS NO IMPA RTING OF ANY KIND OF KNOWLEDGE, SKILL OR EXPERIENCE BY WAY O F INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC WHICH IS MADE AVAILABLE TO VOIPL. FOR INSTANCE, INFORMATION TECHNOLOGY SERVICES ARE PROVIDED FOR US E OF GROUP COMPANIES COMPUTER SYSTEM WHERE IT TEAMS PROVIDING MANUAL GENERAL INFORMATION WITHOUT PROVID ING ANY INFORMATION OR METHOD TO DESIGN OR CREATE A COM PUTER SYSTEM. IT IS MAINLY KIND OF HELP DESK AND TROUBLE- SHOOTING SERVICES WHICH ARE REQUIRED ON REGULAR BAS IS. FOR OPERATIONAL SUPPORT SYSTEM ALSO, IT MAINLY PROVIDES FOR CHECK-LIST FOR PROJECT PLANS, SAFETY WORK AND INSPE CTION PLANS ETC. SIMILARLY, FOR MARKETING, THE ASSESSEE P ROVIDES FOR E MARKETING THROUGH ITS WEBSITE AND MAINTAINING IT, ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 14 - PRINTING AND PUBLISHING BROCHURES WHICH CAN BE DISTRIBUTED TO ITS POTENTIAL CLIENTS. IT ALSO HELPS VOIPL TO OBTAIN THE CERTIFICATE OF APPROVAL FROM THE CONCERN ED ORGANIZATIONS AND OBTAINED THE CONTRACTS ON THE REG ULAR BASIS. REGARDING QUALITY HEALTH AND SAFETY ENVIRONM ENT SERVICES, THE ASSESSEE MERELY CONDUCTS INTERNAL AUD ITS ON REGULAR INTERVALS SO THAT PROPER ADHERENCE TO SUCH QUALITY STANDARD AND PROCEDURES ARE VALID/ SHOULD REMAIN VA LID. SIMILARLY, IN THE ESTIMATING AN ENGINEERING SERVICE S AND OTHER SERVICES ALSO, THE ASSESSEE IS MAINLY PROVIDI NG TENDER PROCESS, HELPING AND PREPARING (ESTIMATES) A ND BIDS AND PLAN CONSISTING IN LOCAL PERFORMANCE AND O THER GUARANTEES TO THE CLIENT OF VOIPL ETC. FOR RENDERIN G OF THESE SERVICES, THERE IS NO ELEMENT OF IMPARTING OF ANY KNOWHOW OR THERE IS TRANSFER OF ANY KNOWLEDGE, SK ILL OR EXPERIENCE. THUS, IN OUR OPINION, NONE OF THE SERVI CES PROVIDED BY THE ASSESSEE IN THE TERM OF SERVICE AGREEMENT FALLS WITHIN THE SCOPE AND AMBIT OF ROY ALTY AS DEFINED IN ARTICLE 12(4) OF THE DTAA. 6. THE COORDINATE BENCH OF TRIBUNAL HAS DEALT WITH THE PAYMENT RECEIVED BY THE ASSESSEE PURSUANT TO THE AGREEMENT DATED 01.04.2004. IN THE YEARS UNDER CONSIDERATION ALSO, THE ASSESSEE RECEIVED PAYMENTS PURSUANT TO VERY SAME AGREEMENT. THE LD. AR SUBMIT TED THAT THERE IS NO CHANGE IN FACTS BETWEEN BOTH THE Y EARS. BEFORE US, THE REVENUE COULD NOT BRING ANY MATERIAL IN ORDER TO COMPEL US NOT TO FOLLOW THE ORDER PASSED B Y THE COORDINATE BENCH IN A.Y 2009-10. SINCE, A PARTICUL AR VIEW HAS ALREADY BEEN TAKEN BY THE TRIBUNAL ON IDENTICAL PAYMENTS RECEIVED BY THE ASSESSEE, FOLLOWING THE SA ME, WE HOLD THAT THE PAYMENTS RECEIVED BY THE ASSESSEE IN TERMS OF SERVICE AGREEMENT DATED 01.04.2004 DO NOT FALL UNDER THE DEFINITION OF ROYALTY AS DEFINED IN ARTIC LE 12(4) OF INDIA NETHERLANDS DTAA. ACCORDINGLY WE SET ASID E THE ORDER PASSED BY THE A.O IN BOTH THE YEARS ON THIS I SSUE. ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 15 - 7. SINCE WE HAVE DISPOSED OF THE APPEALS FILED BY T HE ASSESSEE, THE STAY APPLICATION SHALL BECOME INFRUCT UOUS. ACCORDINGLY, WE DISMISS THEM AS INFRUCTUOUS. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE STAY APPLICATIONS ARE DISMISSED. 7.1 WE FOUND THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR AND IDENTICAL, TO THE EARLIER YEARS. ACCORDINGLY, WE FALLOW THE JUDICIAL PRECEDENCE AND RATIO OF THE DECISIONS THE HONBLE TRIBUNAL AND HOL D THAT THE PAYMENTS RECEIVED BY THE ASSESSEE AS PER T HE SERVICE AGREEMENT DATED 01.04.2004 DOES NOT COME INTO THE NATURE OF ROYALTY AS DEFINED ARTICLE 12(4) INDIA NETHERLANDS TAX TREATY. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.12.2020 SD/- SD/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 24/12/2020 ITA NO . `6726 /MUM/2018 VAN OARD DREDGING & MARINE CONTRACTORS BV., MUMBAI. - 16 - KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI