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TMI Blog2025 (4) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... d liable to be quashed. 2 The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in assessing the total income of the Appellant at INR 185,49,51,884 by making total amount of impugned additions amounting to INR 147,18,47,338. 3. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recovery of INR 5,90,40,520 received from Shell India Markets Private Limited ('SIMPL"), and Shell Energy India Private Limited ('SEIPL') for CHR Recruitment fees as Fees for Technical Services ('FTS') under Article 12 of India-Netherlands Double Taxation Avoidance Agreement ('DTAA' or 'Tax Treaty'). 4. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recovery of INR 20,99,21,002 received from SIMPL, SEIPL., BG Exploration and Production India Limited ('BGEPIL') and Hazira Port Private Limited ('HPPL' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng services as FTS under Article 12 of India-Netherlands DTAA. 12. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 13,28,308 received SIMPL for Media relation services as FTS under Article 12 of India-Netherlands DTAA. 13. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 49,34,988 received SIMPL for Social Performance services as FTS under Article 12 of India-Netherlands DTAA. 14. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 43,39,584 received SIMPL for ER Strategy and Planning services as FTS under Article 12 of India-Netherlands DTAA. 15. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoverie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts the services do not qualify as Fee for Technical Services, since the services do not "make available" technology to the recipient of services has been upheld in favour of the assessee in the order passed by ITAT for A.Y. 2009-10 to 2018-19 and the assessee wishes to rely on the observations made by the ITAT qua the "make available" clause in the aforesaid order. Thus the Ld. Counsel filed a Comparative Chart for each grounds of appeal which reads as follows: Shell International B.V. AY 2021-22 Comparitive Chart of Grounds of Appeal for AY 2021-22 Sr. No Grounds of Appeal Outcome of ITAT Order of AY 2009-10 to AY 2018-19 Outcome of ITAT Order of AY 2020-21 Grounds of Appeal for AY 2021-22 Pg. and Para Number of Legal Compilaton Order Quantum of adjustment as per Final Assessment Order 1 barring assessment - Not Pressing - - Ground No. 1 NA NA 2 Time General Ground - - Ground No. 2 - - 3 CHR Recruitment Fees In Favor of appellant by ITAT In Favor of appellant by ITAT Ground No. 3 Facts - Para 20 of Pg. 11 Held - Para 40 of Pg. 25 59,040,520 4 Internal Communication Fees . In Favor of appellant by ITAT Ground No. 4 Para 9 and 10 of Pg. 66 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Counsel for the assessee submitted that the assessee is not pressing this Ground No.1 vide letter dated 23-12-2024 recording the same Ground No.1 is dismissed as NOT PRESSED. 5.2. Regarding Ground No. 2 is a general ground and does not require any specific adjudication and the same is dismissed. 6. We found that Ground No. 3 (Taxability of CHR Recruitment Fees), Ground No. 7 (Taxability of External Information Services), Ground No.8 (Taxability of Real Estate Corporate Travel Services), Ground No. 9 (Taxability of Health Ecotox Services) and Ground No. 10 (Taxability of IT Services) have been specifically dealt with in the order passed by the Co-ordinate Bench for A.Y. 2009-10 to 2018-19 in ITA Nos.2788/Ahd/2017 & others and followed in ITA Nos.688/Ahd/2023 relating to the Asst. Year 2020-21. Accordingly, in light of the observations related to these services, the above grounds raised by the assessee are allowed in favour of the assessee on the ground that since under the Tax Treaty Law, there is a specific requirement that in order to qualify as "Fee for Technical Services", the services should be rendered in a manner that "make available" technology to the recipient of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s team provides consultancy and assists the regional recruitment team of the affiliates in the regular recruitment process apart from the group related activities such as laying path to talent acquisition and presenting the Shell group as an attractive place. The costs incurred by the global recruitment team are shared across various Shell entities which have availed such consultancy services of the recruitment team possessing wide experience in the field. Thus, the critical decision-making function of recruitment has been performed by the affiliates through the assistance/consultancy of the assessee. Hence clearly identifiable and highly specialized services, requiring expertise and industrial experience have been provided by the assessee. External information services (license fees patent and subscription) 22. Under these services, the assessee subscribes to various EIS providers on behalf of Shell group and the cost for the same are pooled in by the assessee. The services provided by EIS service providers mainly consist of providing standard research reports, newsletters, market data analysis etc. The services are akin to providing access to online databases for obtaining s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch have availed such facilities. Thus, Shell intercom function has been performed by the affiliates through the assistance/consultancy of the assessee. Hence it is established that clearly identifiable and highly specialized services, requiring expertise and experience have been provided by the assessee. 26. Further, the Ld. Assessing Officer was of the view that in all the above three services, that providing of such services would invariably lead to imparting of suitable skill sets / knowledge in the hands of the affiliates in the area in which the services are rendered with consequent improvement in experience and skill set of local employees of the affiliates. In this case, the assessee has, through its personnel, provided 'technical' services to assessee, especially since the DTAA definition of FTS expressly includes the provision of the services of personnel. Further as per the definition of FTS in the DTAA, when imparting of suitable experience or skill possessed by the assessee to the affiliates takes place, it amounts to making available the FIS/FTS and therefore the amounts received are taxable as per the DTAA. The services are enduring and they help in promotin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source should have been deducted as the amount paid as fee could be taxable under the head 'fee for technical service. Accordingly, the Assessing Officer relied upon the aforesaid decision to come to the conclusion that the instant services were in the nature of consultancy services, and hence in the view of the aforesaid decision rendered in the context of India-Swiss tax treaty, the services qualified as fee for technical services. 28. The assessee is in appeal before us against the aforesaid services being taxed as fee for technical services under the Act, read with India Swiss Tax Treaty. The Counsel for the assessee took before us various arguments, which can be primarily summed up as Firstly, under the India-Netherlands Tax Treaty, there is a specific clause, which provides that unless the services which were provided "make available" technology to the recipient of services, such services do not qualify as fee for technical services under the Treaty Law. In the instant facts, looking into the nature of instant services, there is nothing on record which would establish that technology was "made available" to the recipients of services, so as to fall within the ambit of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in absence of any income element, the services are not taxable in India. The profit and loss account presented by the assessee is a self serving documents and nothing concrete has been placed on record to show that services have been rendered on cost to cost basis. Further, in absence of valid agreement in place for the period under consideration, the nature of services is also not clear to decide to what extent protection of "make available" clause is available to the assessee. 30. We have heard the rival contentions and perused the material on record. 31. One of the arguments which was taken before us was that the services are "managerial" in nature, and hence falling outside the scope of FTS as given under the India-Netherlands tax treaty, since the definition of FTS does not contain the term "managerial" in the India-Netherlands tax treaty. However, on going through the nature of services being rendered under consideration, we are of the considered view that the services do not qualify as "managerial services" and looking into the nature of services, these are regular technical/consultancy services being provided by the assessee towards group associate companies. The term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the cost which has been incurred for rendering the services through its various employees etc alone has been recovered from its group companies. It is not a case where the assessee has incurred certain costs in purchasing certain third party software or obtained these services from a third party etc, which have been reimbursed/recovered on cost to cost basis from its associated Enterprises India. In this case, we observe that the employees of the assessee are engaged in providing certain services, and the assertion of the assessee is that the precise cost incurred in rendering of these services have been recovered from its various addicted enterprise, on a cost basis. However, in our considered view, the assessee has not been able to demonstrate that only the precise cost incurred for rendering services has been recovered, and therefore, there is no income element at the India level, during the course of rendering of the services. Accordingly, we are not inclined to agree with the aforesaid argument of the assessee. 33. Thirdly, we observe that the Counsel for the assessee has for few years also taken the plea that the services in question/under consideration are "nontechnical" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to prepare the professionals in applied sciences". However, we would like to observe that it is not any or every professional service that amounts to technical service. Professionalism and an element of expertise should be at the back of such services. There is a decision of Andhra Pradesh High Court in which the ambit of expression 'technical service' was considered. In G.V.K. Industries Ltd. v. ITO [1997] 228 ITR 564 (AP), SSM Quadri, J. speaking for the Division Bench rejected the argument of the assessee's Counsel 'that the NRC did not render any technical or consultancy service to the petitionercompany and that it merely rendered advice in connection with the procurement of loans by it, which does not amount to rendering technical or consultancy service within the contemplation of the said clause and that the technical or consultancy service should relate to the core of the business of the petitioner-company'. It was observed. In our view advice given to procure loan to strengthen finances would be as much a technical or consultancy service as it would be with regard to management, generation of power or plant and machinery. From the above discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that is that it should also 'make available' technical knowledge, experience, skill, etc. Thus, the normal, plain and grammatical meaning of the language employed, is that a mere rendering of services is not roped in unless the person utilising the services is able to make use of the technical knowledge, etc., by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill, etc., must remain with the person utilising the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills, etc., from the person rendering the services to the person utilising the same is contemplated by the article. Some sort of durability or permanency of the result of the 'rendering of services' is envisaged which will remain at the disposal of the person utilising the services. The fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skills, etc." 37. The scope of the term "make available" came up for consideration recently before the Gujarat Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs returned by Tribunal did not call for any interference. The Hon'ble Supreme Court dismissed the SLP filed by revenue against said impugned order of High Court. 39. Further, in our considered view, the decision of GVK industries supra is also not relevant to the instant facts, since in such case, the issue for consideration before the Hon'ble Supreme Court was whether the services relating to obtaining loan qualifies as managerial services. The aforesaid decision, is not applicable to the instant case for the reason that Hon'ble Supreme Court did not have the occasion to discuss the relevant Tax Treaty provisions, and the decision was rendered on the domestic Income Tax provisions. Accordingly, in our view, since the aforesaid decision does not apply to the instant facts, much credence cannot be given to the observations made in the decision. 40. Now coming to the instant facts, looking into the nature of services, there is nothing on record to establish that during the course of rendering of services, the technology was "made available" to the recipient of services, in such a manner that the recipient of services were enabled to perform the services in the future, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices' to assessee, especially since the DTAA definition of FTS expressly includes the provision of the services of personnel. The AO further concluded that the services performed by the assessee would invariably lead to imparting of suitable skill sets / knowledge in the hands of the affiliates with consequent improvement in experience and skill set of the local employees of the affiliates. The Ld. Assessing Officer relied on various judicial precedents in support of the above contention. 61. The assessee is in appeal before us against the aforesaid order passed by Assessing Officer holding the services as fees for technical services under the Act read with the Tax Treaty. Before us, the arguments of the Counsel for the assessee remain the same as discussed in earlier paragraphs while dealing with other services which were held to be FTS for Assessment Year 2011-12. 62. In our considered view, in view of our observations made in the preceding paragraphs, we are of the considered view that in respect of the aforesaid services, the condition of "make available" is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e system is managed by Shell Health. The cost incurred for these services has been allocated between group companies using these services based on the actual number of full time employee per entity. As per the assessee, the fee is in relation to keeping and maintaining confidential medical information of Shell employees and therefore represents commercial / management / advisory services which are not technical in nature and therefore, the same is not taxable as FTS under Article 12 of India- Netherlands Tax Treaty. Without prejudice to the above and even for sake of argument it is assumed that the above services are technical in nature, the same does not make available any technical knowledge, experience, skills, know how, etc. and also do not consist of the development and transfer of technical plan or technical design and therefore, the revenue received by the Assessee for these services do not qualify as FTS under Article 12 of the India Netherland tax treaty and as such not taxable in India. Without prejudice to the above, the assessee submitted that the amounts received for Health Ecotox Services represents the cost allocations and no mark-up has been charged on the said cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices which were held to be FTS for Assessment Year 2011-12. 87. In our considered view, in view of our observations made in the preceding paragraphs, we are of the considered view that in respect of the aforesaid services, the condition of "make available" is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was "made available" to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. 88. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty. 89. In the result, Ground Nos. 5 and 7 of the assessee's appeal are allowed for Assessment Year 2015-16." 8. There is no change in facts for the present assessment year under consideration with that of the earlier years, therefore respectfully following the earlier decision of this Tribunal, Grounds 3, 7, 8, 9 & 10 of the appeal are allowed in favour of the assessee. 9. Now with respect to balance services which have been rendered for the first time during the previous asst. year 2020-21, which was discussed in detail on the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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