A.P. MOLLER, MUMBAI V. DDIT (IT) 1(1), MUMBAI

ITA 8117/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8376 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-11-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 24-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASGHAR ZAIN
• Keywords: Double taxation relief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 8116 & 8117 / MUM/20 1 0 ( ASSESSMENT YEAR : 1998 - 99 & 200 0 - 01 ) A.P.MOLLER, C/O MAERSK LINE INDIA PRIVATE LIMITED, 12 TH FLOOR, TOWER A, URMI ESTATE, GANPATRAO KADAM MARG, LOWER PAREL (W), MUMBAI - 400 013 VS. THE DCIT (INTERNATIONAL TAXATION) - 1(1), MUMBAI - 400 038 PAN/GIR NO. : A A ACA 8917 F ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI DIVESH CHAWLA /ASSESSEE BY : SHRI ASGHAR ZAIN DATE OF HEARING : 2 7 TH NOVEMBER , 201 4 DATE OF PRONOUNCEMENT 27 TH NOVEMBER, 2014 O R D E R PER R.C.SHARMA (A.M) : BOTH THESE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 30 - 9 - 2010 FOR THE AS SESSMENT YEAR S 1998 - 99 & 2000 - 2001 , IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T. ACT . 2. SINCE COMMON GROUND IS INVOLVED IN BOTH THE APPEALS, THEREFORE, THE SAME ARE HEARD AND BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. AT THE OUTS ET, IT WAS SUBMITTED BY LEARNED AR THAT IN THE COURSE OF SCRUTINY ASSESSMENT THE AO MADE AN ADDITION ON ACCOUNT OF MANAGEMENT FEES FOR RENDERING MANAGERIAL SERVICES TREATING THE SAME AS TAXABLE FEE ITA NO. 8116&8117/2010 2 FOR TECHNICAL SERVICES U/S.9(1)(VII) (C) OF THE ACT. LD. AR DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN QUANTUM ADDITION MADE IN BOTH THE ASSESSMENT YEARS ON ACCOUNT OF SUCH MANAGEMENT FEE WAS DELETED BY THE TRIBUNAL AFTER HAVING THE FOLLOWING OBSERVATIONS : - 34. THUS, FOR TAXI NG THE ROYALTY AND FEES FOR TECHNICAL SERVICES IN CASE OF A NON - RESIDENT UNDER THE INDO DENMARK DTAA, THE BASIC CONDITION IS THAT THERE HAS TO BE A P .E. OR FIXED BASE IN CONNECTION WITH WHICH SUCH A LIABILITY HAS BEEN INCURRED. NOT ONLY THIS, SUCH ROYALTY OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH P.E. OR FIXED BASE. IF THAT IS NOT SO, THE SAME CANNOT BE TAXED IN THE HANDS OF THE NON - RESIDENT. IN THIS CASE, ADMITTEDLY, THIS PAYMENT HAS NOT BEEN MADE BY ANY P.E. TO THE ASSESSEE FIRM ALBEIT THE PAYMENT HAS BEEN MADE BY NON - RESIDENT COMPANY I.E. TWO DANISH COMPANIES TO ANOTHER NON - RESIDENT I.E. A PARTNERSHIP FIRM ESTABLISHED UNDER THE LAWS OF DENMARK. ONCE THE PAYMENT HAS BEEN MADE FROM ONE NON- RESIDENT TO ANOTHER NON - RESIDENT IN CONNECTION WITH THE EN TIRE GLOBAL BUSINESS IN DENMARK ONLY, THEN IT CANNOT BE HELD THAT SUCH A PAYMENT CAN BE TAXED IN INDIA EITHER AS FEES FOR TECHNICAL SERVICES OR AS ROYALTY, THUS, WE ARE OF THE OPINION THAT SUCH A PAYMENT CANNOT TAXED AS FTS IN CASE OF THE ASSESSEE. OTHERWI SE ALSO, BY VIRTUE OF ARTICLE - 13(6), SUCH A PAYMENT CANNOT BE TAXED IN INDIA, BECAUSE IT HAS NOTHING TO DO WITH THE MIPL AS THE MAIN CRITERIA THAT SUCH A PAYMENT HAS TO BE DEDUCTIBLE IN THE HANDS OF THE P,E. IS NOT AT ALL APPLICABLE IN THE PRESENT CASE. NE ITHER THERE IS ANY ECONOMIC LINK OF THE ASSESSEE WITH THE P.E. NOR ANY PAYMENT HAS BEEN DEDUCTED BY THE P.E. THUS, IN OUR CONCLUSION, THE PAYMENT OF MANAGEMENT FEE CANNOT BE SUBJECTED TO TAX IN INDIA BY VIRTUE OF ARTICLE - 13(6). INSOFAR AS THE ISSUE OF DENI AL OF TREATY BENEFIT, WE HAVE ALREADY DISCUSSED THIS ISSUE IN THE FORGOING PARAGRAPHS WHEREIN WE HAVE HELD THAT THE ASSESSEE FIRM IS ENTITLED FOR TREATY B ENEFIT. AS WE HAVE ALREADY HELD THAT THE PAYMENT OF MANAGEMENT FEE IS NOT TA XABLE IN INDIA AND BY VIRT UE OF ARTICLE - 13(6) AND THAT THE TREATY BENEFIT IS A VAILABLE TO THE ASSESSEE, WE ARE NOT DEALING WITH THE ARGUMENTS RAISED BY THE EITHER PARTY ON SECTIONS 9(1)(I) OR 9(1)(VII). THUS , THE THIRD ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE THAT THE MANAGE MENT FEE CANNOT BE TAXED IN INDIA IN THE HANDS OF THE ASSESSEE . 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 8 - 11 - 2013 IN ASSESSEES OWN CASE WHEREIN THE ADDITION MADE ON ACCOUNT OF MANAGEMENT FEE HAS B EEN DELETED BY ITA NO. 8116&8117/2010 3 THE TRIBUNAL IN BOTH THE YEARS. AS THE ADDITION ITSELF HAS BEEN DELETED, PENALTY LEVIED THEREON HAS NO LEGS TO STAND. 5 . IN THE RESULT, BOTH APPEAL S OF ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27/11/2014 . 27/11 / 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27/11 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//