Cost reimbursed by Indian agents for utilizing global telecommunication facility not taxable: SC
MUMBAI: Ruling in the case between A.P. Moller Maersk A S, a Denmark based company and Director of Income-tax (IT) the Supreme Court said that cost reimbursed by Indian agents for utilizing global telecommunication facility cannot be treated as fees for technical services and therefore is not taxable.
A.P. Moller Maersk A S, shipping, chartering and related business company had appointed agents in various countries including India for certain services. For the sake of convenience of all the agents and to avoid unnecessary cost, a centralised IT system (global telecommunication facility) was maintained by the taxpayer, which enabled the agents to access information like tracking of cargo, transportation schedule, customer information, documentation system and several other information.
The IT system also comprised of booking and communication software, hardware and a data communications network. The agents reimbursed cost for the said system to the taxpayer on a pro-rate basis, a tax concept note by Deloitte India said.
The tax official took a view that these payments were taxable under the India-Denmark Tax Treaty ('Tax Treaty').
Supreme Court held that payments received by taxpayer towards reimbursement of costs incurred for global telecommunication facility provided to the Indian agents could not be termed as fees for technical services and accordingly, not taxable under the tax treaty.
A.P. Moller Maersk A S, shipping, chartering and related business company had appointed agents in various countries including India for certain services. For the sake of convenience of all the agents and to avoid unnecessary cost, a centralised IT system (global telecommunication facility) was maintained by the taxpayer, which enabled the agents to access information like tracking of cargo, transportation schedule, customer information, documentation system and several other information.
The IT system also comprised of booking and communication software, hardware and a data communications network. The agents reimbursed cost for the said system to the taxpayer on a pro-rate basis, a tax concept note by Deloitte India said.
The tax official took a view that these payments were taxable under the India-Denmark Tax Treaty ('Tax Treaty').
Supreme Court held that payments received by taxpayer towards reimbursement of costs incurred for global telecommunication facility provided to the Indian agents could not be termed as fees for technical services and accordingly, not taxable under the tax treaty.
