MAIN POINT
When an assessee in shipping business uses a communication networking system ehich is integral; to the shipping business does not provide technical services to its agents. Payments made by the agents would be in the nature of reimbursement of cost for maintaining the system. Cannot be treated as income chargeable to tax.

JUDGMENT

A.K. SIKRI, J.

Delay condoned.

2. Leave granted in all SLPs.

3. In these appeals, which are filed by the Revenue challenging the validity of the judgment passed by the High Court 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 Denmark. There is a Double Taxation Avoidance Agreement (hereinafter referred to as the 'DTAA') between India and Denmark. The Assessing Officer (AO) assessed the income in the hands of the assessee and allowed the benefit of the said DTAA. However, while making the assessment, the AO observed that the assessee had agents working for it, namely, Maersk Logistics India Limited (MLIL), Maersk India Private Limited (MIPL), Safmarine India Private Limited (SIPL) and Maersk Infotech Services (India) Private Limited (MISPL). These agents booked cargo and acted as clearing agents for the assessee. In order to help all its agents, across the globe, in this business, the assessee had set up and was maintaining a global telecommunication facility called Maersk Net System which is a vertically integrated communication system. The agents were paying for said system on pro-rata basis. According to the assessee, it was merely a system of cost sharing and the payments received by the assessee from MIPL, MLIL, SIPL and MISPL were in the nature of reimbursement of expenses. The AO did not accept this contention and held that the amounts paid by these three agents to the assessee was consideration/fees for technical services rendered by the assesses and, accordingly, held them to be taxable in India under Article 13(4) of the DTAA and assessed tax @ 20% under Section 115A of the Income Tax Act, 1961.

7. The assessee preferred an appeal against the Assessment Order before the Commissioner of Income Tax (Appeals) (for short, 'CIT (A)'). The CIT(A) vide order dated 23.08.2010 dismissed the appeal. Aggrieved by the order passed by the CIT(A), the assessee preferred further appeal before the Income Tax Appellate Tribunal (ITAT). Here the assessee succeeded as the ITAT, by order dated 14.12.2012, allowed the appeal of the assessee following decisions of the Madras High Court in Skycell Communications Ltd. & Anr. v. Deputy Commissioner of Income Tax & Ors., (2001) 251 ITR 53 and the Delhi High Court in Commissioner of Income Tax v. Bharti Cellular Ltd., (2009) 319 ITR 139 The ITAT considered the nature of the costs incurred by the assessee and observed that the three agents were booking cargo and acting as clearing agents for the assessee and were entitled to utilisation of the Maersk Net facility which consisted of a communication system connected to a mainframe and 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 t