Moller Maersk – Supreme Court of India finds that computer tracking-system charges of a Danish company to local agents were profits of its international shipping business
A Danish international shipping company (“Maersk”) charged local agents in India, who booked and tracked cargo, for their pro rata share of the costs of a Maersk computer and telecommunication system that was key to these functions. Article 13 of the India-Denmark Treaty permitted India to impose tax of 20% on the gross amount of fees for technical services (essentially defined, somewhat similarly to Art. 12(4) of the India-Canada Treaty, as “consideration for the services of technical or other personnel”), and Article 9 provided for a reduced rate of Indian tax on “profits derived from the operation of ships in international traffic.”
In finding that Maersk’s fees came within Article 9 rather than 13, Sikri J stated:
'[P]rofit' from operation of ships under Article…9 … would necessarily include expenses for earning that income and … [the] more so, when it is found that the business cannot be run without these expenses. This Court … has categorically held that use of [a] 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.
Neal Armstrong. Summary of Director of Income Tax v. A.P. Moller Maersk, Supreme Court Of India, Civil Appellate Jurisdiction, Civil Appeal No. 2960 of 2017 under Treaties – Art. 8.