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Response Paper:

DIT vs. A. P. Moller Maersk AS

Bench: A.K. Sikri J., Abhay Manohar Sapre J

Judgment Delivered: February 17, 2017

The case deal with the concept whether the facility provided by the assessee to his agent and the
consideration received for the same is in the nature fee for technical service provided or is it
reimbursement for expenses. The answer need to be answered in order to determine whether the
assessee which is a Danish company need to pay tax for the same or not. The Supreme Court
stated that no tax need to be paid as the service provided by the assessee forms an important part
of business and the business cannot be conducted without the same. In this present paper I will
review the decision of the Supreme court.

With globalization the ease of doing business not within the country only but outside the country
also becomes easy. It helped in creating more jobs and people also get numerable varieties of
what they want, it helped in creating a better understanding among people of different countries
and in a way it helped in achieving the real purpose of humanization that is living together. But
there is also a dark side of it when one country does a business in another country problems
always surrounds which country will tax the following transaction, as tax is important source of
revenue to any state. As a result countries engage in double taxation avoidance agreement so that
the transaction may not be tax twice by both the countries as it will hinder free trade. Even when
the countries enter into treaty problem always monger around. The same was happen in this
particular case where India-Denmark entered into double taxation avoidance agreement treaty
but also conflicted arises as to which state will tax the income received by the assessee. The
assessee claimed that he provided a service which was essential for the conduct of the business
without which the business would not have been conducted properly and whatever received by
him in return by his agent was in the nature of reimbursement for expenses and not fee for
technical service provided.
I think that the global telecommunication service called Maersk Net System provided by the
assessee to his agents were essentially to help them to reduce the burden of work and moreover
to achieve the efficiency in the business, there was no profit motive behind the same. So, the
character of the payment is determined by looking facts and circumstances of particular case.
This Court in Commissioner of Income Tax, Mumbai v. Kotak Securities Limited1, has
categorically held that use of facility does not amount to technical services, as technical services
denote services catering to the special needs of the person using them and not a facility provided
to all. In the present case, a common facility of using Maersk Net System is provided to all the
agents across the countries to carry out their work using the said system. So by this we can
concluded there was no special need of the product as such but to increase the efficiency in the
business they did the following installment thus outside the ambit of the word technical service.
The facility provided by the assesse to his agents was common everywhere even where the
particular agent does not required the same thus it can be said that these are the services which
are provided on payments and essentially is not a technical fee.

Thus the approach taken by the court was correct otherwise the word technical fee would have
been given to broad meaning which would have been the clear violation of parliaments intention
and violation of the principle of nosictur a sociis; moreover people would then be not in the
position to take the full benefit of the treaty hence defeating the whole purpose of treaty.

(2016) 383 ITR 1 (SC)