Van Oord Dredging and Marine Contractors BV Vs ADIT(IT)-2(2) (ITAT Mumbai)
The assessee, a company incorporated in the Netherlands and engaged in international dredging activities, filed appeals before the ITAT Mumbai for Assessment Years 2005-06 and 2007-08 challenging the reopening of assessments, the validity of the assessment orders, and the taxation of management service fees as royalty.
The assessee had received management service fees from its Indian associated concern, Van Oord India Private Limited (VOIPL). It did not offer these receipts to tax, contending that the services rendered did not make available any knowledge, experience, skill, know-how, or processes to VOIPL and therefore were not taxable under Article 12 of the India–Netherlands Double Taxation Avoidance Agreement (DTAA) as fees for technical services. During the original assessments completed under Section 143(3), the Assessing Officer (AO) accepted the assessee’s position and made no addition in respect of the management service fees.
Subsequently, while completing the assessment for AY 2009-10, the AO treated similar management service fees as royalty and brought them to tax. Relying on that assessment order, the AO reopened the assessments for AYs 2005-06 and 2007-08 by issuing notices under Section 148 on 30.03.2012. In the reassessment proceedings, the AO taxed the management service fees as royalty. The CIT(A) upheld both the reopening and the additions, leading to the present appeals before the Tribunal.
