Payments for IT system not taxable as fees for technical services; Tribunal dismisses Revenue's appeal.

The Tribunal dismissed the Revenue's appeal, upholding the deletion of the addition made by the Assessing Officer regarding payments received for the shared IT Global Portfolio Tracking System. The Tribunal concluded that the payments were not taxable as fees for technical services but were reimbursements for providing a facility to agents without any profit element. Therefore, the reassessment proceedings' validity was deemed academic and not addressed, resulting in the Revenue's appeal being dismissed.

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Issues Involved:
1. Validity of reassessment proceedings.
2. Taxability of payments received by the assessee as Royalty or fees for technical services under section 9(1)(vi) & (vii) of the I.T. Act and Article 13(4) of DTAA.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings:
The Revenue contended that the reassessment proceedings were valid as there was a "reason to believe" that income had escaped assessment. However, the ld. CIT(A) held that the reassessment proceedings were not valid as it could not be said that there was escapement of income. The Tribunal, considering the deletion of the addition made by the A.O. on account of the amount received towards the shared IT Global Portfolio Tracking System, found this issue to be infructuous or academic and did not consider it necessary to adjudicate upon the same.

2. Taxability of Payments Received by the Assessee:
The core issue was whether the payments received by the assessee from M/s Maersk India Private Limited, M/s Maersk Logistics India Limited, and M/s Safmarine India Private Limited towards their share of IT Global Portfolio Tracking System were taxable as Royalty or fees for technical services.

The A.O. had brought to tax Rs. 7,49,84,869/- in the hands of the assessee company, treating it as fees for technical services. However, the ld. CIT(A) deleted the addition, following the Tribunal's order in the case of Dampskibsselskabet af 1912 Aktiesselskab for assessment years 2000-01 to 2003-04, where similar additions were deleted.

The Tribunal observed that the payments received were for providing a facility to its agents and were merely reimbursements of the cost for providing a particular facility. The Tribunal noted that the assessee maintained a global telecommunication facility essential for its international shipping business, and the costs were shared between the assessee and its agents. The payments did not involve any profit element and were certified by the assessee's Chartered Accountants at Denmark, M/S. KPMG, as reimbursements without any markup.

The Tribunal relied on the decision of the Hon'ble Madras High Court in the case of Skycell Communications Ltd. and the Hon'ble Delhi High Court in the case of CIT v. Bharati Cellular Ltd., concluding that the payments could not be considered fees for technical services. The Tribunal emphasized that the payments were for the use of a standard facility and did not involve any human skills or technical services provided by the assessee.

The Tribunal upheld the order of the ld. CIT(A) deleting the addition made by the A.O. and dismissed the Revenue's appeal on this ground.

Conclusion:
The appeal of the Revenue was dismissed. The Tribunal upheld the deletion of the addition made by the A.O. on account of the amount received towards the shared IT Global Portfolio Tracking System, treating it as fees for technical services. Consequently, the issue of the validity of reassessment proceedings became academic and was not adjudicated.

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