TaxTMI 
TaxTMI 
2017 (2) TMI 993
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....of Bombay, the appellant-Revenue has posed the issue that arises for consideration in the following manner: "Whether the High Court is correct in holding that the income from the use of Global Telecommunication Facility called 'Maersk Net' can be classified as income arising out of shipping business and not as fees for technical services?" 4. Similar question of law, according to the Revenue, arises in all these appeals and for the sake of convenience, we will take note of the facts of Civil Appeal No. 8040 of 2015. 5. The High Court has decided the aforesaid issue by common judgment dated 29.04.2015, which is under appeal. From the aforesaid, it becomes clear that the only issue that has to be decided by this Court is whether the income from the use of "Maersk Net" is an integral part of the shipping business and cannot be taxed in India as fees for technical service under the Indo-Danish Double Taxation Avoidance Agreement. 6. Seminal facts giving background of the dispute may be taken note of at this stage in order to understand the nuances of the aforesaid issue. The respondent assessee is a foreign company engaged in the shipping business and is a tax resident of....
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....nd other computer services in each of the countries of operation. These were all connected to Maersk Net Connecting Point (MCP) which were installed in each of the premises. This communication network enabled the agent concerned to access via the MCP the following services: "Global Customer Service System (GCSS); Global Schedule Information System (GSIS); Global Transportation Systems such as Customer Information and Cargo Tracking (Star Track), Transportation Schedule and Service Guide; Maersk Product Catalogue (MEPC); Maersk Shared Knowledge System (MSKS); EDI Data Quality Enhancement and Electronic Data Interchange; System for Documentation (RKDS), Equipment Management, Container Control (RKEM), Freight Invoicing (RKFR/RKIN/MLIS), Accounting and Performance (RRIS) Geography (GEO), Statistics (RKMS) and Tables (RKTS/RKST)." 8. Aggrieved by the order passed by the ITAT, the department filed ITA No. 1306 of 2013 before the High Court of Bombay. The High Court, by judgment dated 29.04.2015, has dismissed the Revenue's appeal holding that the ITAT has correctly observed that utilisation of the Maersk Net Communication System was an automated software based c....
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....ping business of the assessee and runs on a combination of mainframe and non-mainframe servers located in Denmark. Expenditure which is incurred for running this business is shared by all the agents. In this manner, the systems enable the agents to co-ordinate cargos and ports of call for its fleet. 11. Aforesaid are the findings of facts. It is clearly held that no technical services are provided by the assessee to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as fee for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. It is reemphasised that neither the AO nor the CIT (A) has stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Record shows that the assessee had given the calculations of the total costs and pro-rata division thereof among the agents for reimbursement. Not only that, the assessee have even submitted before the Transfer Pricing Officer that these payments were reimbursement in the hands o....
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....ion 2 comes in between the words "managerial and consultancy services"." 7. "Managerial and consultancy services" and, therefore, necessarily "technical services", would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd. [CIT v. Bharti Cellular Ltd., (2014) 6 SCC 401 : (2011) 330 ITR 239] However, it cannot be lost sight of that modern day scientific and technological developments may tend to blur the specific human element in an otherwise fully automated process by which such services may be provided. The search for a more effective basis, therefore, must be made. 8. A reading of the very elaborate order of the assessing officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant upgradation of the services made available and surveillance of the essential parameters connected with the trade including those of a particular/single transaction that would lead credence to its authenticity is provided for by the Stock Exchange. All such services, fully au....
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....ded by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services" as appearing in Explanation 2 to Section 9(1)(vii) of the Act." 13. In the present case, a common facility of using Maersk Net System is provided to all the agents across the countries to carry out thei....