Aktieselskabet Dampskibsselskabet Svendborg v. ADIT (IT) (2013) 140 ITD 515 (Mum.) (Trib.)

S.9(1) (vii): Income deeded to accrue or arise in India- Fees for technical services-Effective management-

DTAA-India- Denmark-Payment for procuring a global telecommunications facility is not for fees for

technical services. (S.28(i), 115A)

Assessee a Denmark company was engaged in shipping business. It had procured a global telecommunication facility. It claimed that without this facility assessee could not conduct international shipping business nor would its agent be able to act as agent to the assessee. Since the assessee was recovering a share of total cost incurred for setting up system from its Indian agents, assessee contended that said amount just represented ‘cost sharing arrangement’ and hence payment so received was in nature of reimbursement of expenses. In light of judgement Dampskibsselskabet v. ADIT (IT) (2011) 130 ITD 59 (Mum), where it was held that such payment was only reimbursement of cost for shipping and not in business of providing any technical services, it was held that payment so made by assessee was not FTS. Issue was decided in favour of assessee. Assessee raised alternative plea to consider payments received from Indian agents for sharing assesse’s global telecommunications facility as income from business of shipping is not chargeable to tax in India by virtue of article 9. Following the judgment in Dampskibsselskabet v. ADIT (IT) (2011) 130 ITD 59 (Mum),the Tribunal held that amount received from Indian agents was part of income from shipping and hence not taxable in India as per article 9 since place of effective management of assessee company was situated in Denmark. Accordingly the addition was deled.(A.Ys. 2001-02 to 2004-05)