SHELL INTERNATIONAL B.V.,NETHERLANDS V. THE ASSTT.CIT., CIRCLE(INTNL.TAXN.)-1, AHMEDABAD

ITA 1027/AHD/2023

AI Insights

The case involves Shell International B.V. appealing against the final assessment order by the Assistant Commissioner of Income Tax, which assessed the total income of the appellant and treated various cost recoveries from associated enterprises as FTS under the India-Netherlands DTAA. The Tribunal examined whether the services provided by the appellant made available technical knowledge, experience, skill, or know-how to the recipients, which is a prerequisite for classifying them as FTS under the DTAA. The Tribunal referenced previous decisions and the specific wording of the India-Netherlands DTAA to conclude that the services in question did not meet the 'make available' criterion, leading to the reversal of the taxability decision for those services.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 102458 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Other Referred Cases: GVK Industries Ltd. v. ITO, Raymond Ltd. v. Dy. CIT, Ad2pro Media Solutions (P.) Ltd. v. CIT, Intertek Testing v. CIT
• Laws Referred To: Income Tax Act, 1961, India-Netherlands Double Taxation Avoidance Agreement
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; TDS; Advance ruling; Double taxation relief; Permanent establishment
• Section: 195; 153; 22; 13; 234B; 9(1); 9(1); 9(1); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Shell International B.V., C/o Shell India Markets Private Limited BG House, Lake Boulevard, Hiranandani Business Park Powai, Mumbai-400076 India PAN No. AAHCS9360D (Appellant) Vs Assistant Commissioner of Income Tax, Circle(Internation al Taxation)-1, Ahmedabad (Respondent) Assessee Represented: Shri S.N.Soparkar, Sr. Adv. & Shri Parin Shah, A.R. Revenue Represented: Shri Prathvi Raj Meena, CIT-DR Date of hearing : 16-01-2025 Date of pronouncement : 15-04-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the final assessment order dated 18-10-2023 passed under section 143[3] rws 144C[13] of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’] by the Assistant Commissioner of Income Tax relating to the Assessment Year 2021-22. 2. The Assessee has raised the following Grounds of Appeal:- ITA No. 1027/Ahd/2023 Assessment Year. 2021-22 I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 2 1. The learned AO has erred on the facts and circumstances of the case and in law, in issuing the final assessment order dated 18 October 2023, beyond the time-limit as prescribed under section 153 of the Act. The final assessment order is, thus, time-barred and 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') for Internal Communication Fees as FTS under Article 12 of India-Netherlands DTAA. 5. 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 10,84,56,771 received from SIMPL, SEIPL, BGEIPL, and HPPL for Remuneration and Benefit fees as FTS under Article 12 of India-Netherlands DTAA. 6. The learned AO has erred on the facts and in law and learned DRIP has further erred in confirming the action of the learned AG on the facts and in law in treating the aggregate cost recovery of INR 17,81,78,981 received from SIMPL, SEIPL, BGEIPL, and HPPL for Talent and Development Fees as FTS under Article 12 of India-Netherlands DTAA. 7. 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 55,30,93,228 received from SIMPL, SEIPL and BGEIPL for Group Controller - External Information Services ('EIS') as FTS under Article 12 of India-Netherlands DTAA. 8. 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 cost recoveries of INR 26,19,90,281 received from SIMPL, BGEIPL, I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 3 Tata Consultancy Services Limited and Wipro Limited for Real Estate and Corporate Travel Services as FTS under Article 12 of India-Netherlands DTAA. 9. 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 cost recoveries from SIMPL of INR 2,10,15,342 received from SIMPL for Health Ecotox services as FTS under Article 12 of India-Netherlands DTAA. 10. 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 5,31,08,874 received SIMPL for IT services as FTS under Article 12 of India-Netherlands DTAA. 11. 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 1,51,58,312 received SIMPL for Brand advertising 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 recoveries of INR 12,81,147 received SIMPL. for Manage and Lead ER Function services as FTS under Anicle 12 of India- Netherlands DIAA Without prejudice to the above, the learned AO has erred in erroneously considering the nature of ER Strategy and Planning services while evaluating the taxability of Manage and Lead ER 16. Without prejudice to the above-mentioned grounds, the learned AO has erred on the facts and in law, in disregarding the fact that, the amount received for the I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 4 above-mentioned cost recoveries, is a mere reimbursement/allocation of cost incurred by the Appellant without markup and hence, the same is not chargeable to tax in India. 17 The learned AO has erred in levying interest under section 234A of the Act and incremental consequential interest under Section 234B of the Act. 18. The learned AO has erred on the facts and in circumstances of the case and in law in giving short credit of TDS to the extent of INR 12,344 ignoring the provisions of Section 199 of the Act read with Rule 37BA of the Income-tax Rules, 1962. 19. The learned AO has erred on the facts and in circumstances of the case on the facts and in law in increasing the tax payable amount by considering INR 20,91,385 as refund already issued when no such refund has been issued to the Appellant. 20. The learned AO has erred on the facts and in law in initiating penalty proceedings under section 270A of the Act against the Appellant. 3. At the outset Ld. Counsel for the assessee submitted that the case of the assessee is covered by orders passed in assessee’s own case by the Co-ordinate Benches of this Tribunal in ITA Nos.2788/Ahd/2017 & others relating to the Asst. Years 2009-10 to 2018-19 vide order dated 20.03.2024 and ITA Nos.688/Ahd/2023 relating to the Asst. Year 2020-21 vide order dated 25.11.2024. The Counsel for the assessee submitted that out of a total 13 services rendered by the assessee during the impugned assessment year, 5 services i.e. CHR Recruitment Fees – FTS, External Information Services – FTS, Real Estate Corporate Travel Services – FTS, Health Ecotox Services – FTS and IT Services – FTS have been dealt-with in the orders referred to above. Therefore, the taxability regarding these services are directly covered by the aforesaid orders. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 5 3.1. For the remaining 8 services, although the services are different, however, the legal contention that in the instant facts 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: I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 6 4. Ld. CIT DR appearing for the Revenue could not dispute above legal position and admitted that the issues are covered by Co- ordinate Bench decisions in assesse's own case for the earlier assessment years. 5. Now we deal each Ground raised by the assessee. 5.1. Regarding Ground No. 1 the Ld. 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 I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 7 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 services. Since in the instant facts, the Department has not been able to establish that “make available” clause has been satisfied in the facts of the instant cases, these services have been held not to qualify as FTS under the Income Tax Act (“Act”) read with India-Netherlands Tax Treaty. 7. It would be useful to reproduce the relevant portion of the order of the Co-ordinate Bench in ITA Nos.688/Ahd/2023 relating to the Asst. Year 2020-21 for ready reference: “Grounds 2, 3 and 4 of assessee’s appeal: Ld. AO erred in holding that CHR Recruitment Fees, External Information Services (license for online databases) and IT Migration Support Services qualify as fee for technical services under Section 9(1)(vii) of the Act read with Article 12 of Tax Treaty. 19. We shall first briefly discuss the nature of services performed by the assessee and the Assessing Officer’s position with respect to each of the respective services. Since largely common arguments have been taken by the Counsel for the assessee and DR with respect to the aforesaid services, therefore, all the three grounds of appeal raised by the assessee are taken up together. CHR recruitment services 20. Under the CHR recruitment services, the assessee manages the global recruitment and attraction team of Shell group. This team supports the regional recruitment team in the regular recruitment process apart from group related activities such as laying path to talent acquisition and presenting Shell as an attractive place. The cost I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 8 incurred by the global recruitment team is shared across various shell entities, which have availed the services of the recruitment team. The said receipts towards recruiting candidates for respective Shell entities and the cost charge out is based on the actual number of recruitments made. 21. The Assessing Officer was of the view that the services qualify as fee for technical services since under the CHR recruitment service, the expertise and experience of the global recruitment and attraction team of the assessee is being offered to its affiliates. The nature of work performed by the Shell group companies is highly technical in nature. To attract such highly technical staff, industry experience and expertise is a sine qua non. The global recruitment and attraction team has accumulated such experience and expertise in conducting recruitment of highly technical staff. This 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 such reports. The databases prepare and maintain standard reports, journals etc pertaining to the oil and gas sector. The group companies access the databases for the purpose of using it internally. The assessee has an arrangement with various Shell group entities for use of these EIS services. The cost incurred by assessee for EIS services is charged to Shell group entities based on their usage of EIS services. 23. The Ld. Assessing Officer was of the view that under the external information services, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of work performed by the Shell group companies is highly I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 9 technical in nature. This team provides consultancy and assists the regional team of the affiliates in providing standard research reports, newsletters and market data analysis. The costs incurred by the assessee company are shared across various Shell entities which have availed such information. Thus, the critical decision-making function has been performed by the affiliates through the assistance/consultancy of the assessee. Hence, it is established that identifiable and highly specialized services, requiring expertise and industrial experience have been provided by the assessee. IT migration services: 24. Under these services, the assessee has set up a “shared services Centre” to provide a shared services to Shell group. The services pertaining to guidance/support provided by the assessee in setting up IT infrastructure of the shared services centers. Also, IT services in relation to migration of certain operations from other similar centers over the globe to Indian Centre have also been provided by the assessee. Based on the time spent by the assessee’s personnel assisting SIMPL in setting up its IT hardware system, the assessee has recharged the cost incurred. 25. The Ld. Assessing Officer was of the view that under the Shell inter-com charges, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of expat services work performed by the Shell group companies is highly technical in nature. This team provides consultancy and assists the regional team of the affiliates in providing services in the nature of tax administration. The costs incurred by the assessee company are shared across various Shell entities which 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 I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 10 and therefore the amounts received are taxable as per the DTAA. The services are enduring and they help in promoting the business of the affiliates. The employees of the affiliates are in a position to and actually they are expected to use the knowledge gained, in the business of the affiliates. Thus, knowledge and know-how are made available to the affiliates. Hence, on an understanding of the overall effect of the services, it has to be held that the technical knowledge, experience, and skill are made available to the affiliates. Further on perusal of the nature of services, the Ld. Assessing Officer was of the view that the service provider possesses or have access to resources, know-how and expertise required to provide the covered services to service recipient. Thus, the assessee is providing services which require resources, know how, experience, skill and expertise and the service provider has been selected since it is capable of delivering such services which require resources, knowhow and expertise. Thus, the services are highly specialized services requiring expertise and skill. According to the Ld. Assessing Officer, a perusal of the services makes it obvious that the assessee provides highly technical services which are used by the affiliates of the assessee for taking important and strategic decisions. 27. The Ld. Assessing Officer further relied on the case of GVK Industries Ltd. v. ITO 54taxmann.com 347 (SC), where the assessee-company was incorporated for the purpose of setting up a 235 MW gas based power project. With the intention to utilize the expert services of qualified and experienced professionals who could prepare a scheme for raising the required finance and tieup the required loan, assessee sought services of a consultant and eventually entered into an agreement with NRC, a Switzerland based company. The Hon'ble Supreme Court held that payment made to Swiss company for rendering such consultancy services amounted to 'fee for technical service' liable to tax in India. The Hon'ble SC observed that as the factual matrix in the case at hand would exposit, NRC had acted as a consultant. It had the skill, acumen and knowledge in the specialized field i.e. preparation of a scheme for required finances and to tieup required loans. The nature of service rendered by the NRC, can be said with certainty would come within the ambit and sweep of the term 'consultancy service' and, therefore, it has been rightly held that the tax at 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. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 11 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 fee for technical services under the India-Netherlands tax treaty. Secondly, the Counsel for the assessee argued that reliance on the GVK industries case supra is misplaced for the simple reason that the aforesaid case was rendered in the context of domestic Income Tax law provisions and the interpretation of India-Switzerland tax treaty was not under consideration before the Hon’ble Supreme Court, since the same was never pressed into arguments. Thirdly, the Counsel for the assessee submitted that the aforesaid services have been rendered on cost to cost basis and without any mark up, and hence since, there is no income element while rendering the aforesaid services, in absence of income element/profit element, the services are not liable to taxed as fee for technical services in India. Fourthly, it was argued that these services qualify as “managerial services” and since the definition of fee for technical services under the India-Netherlands tax treaty does not contain the term “managerial services”, therefore, the services fall outside the ambit/scope of fee for technical services under the India-- Netherlands Tax Treaty and hence cannot be subject to tax in India. 29. In response, DR placed reliance on the observations made by the Assessing Officer/DRP in respect of the aforesaid services. The DR submitted that in the instant facts, the services are clearly technical in nature, under the Indian domestic taxation laws as well as under the tax treaty law. The DR submitted that in the instant facts, clearly, technology has been made available to the recipient of services, and since both these service provider recipients are working closely with each other over a period of time, there is a transmission of knowledge during the course of rendering the aforesaid services. Further, the argument of the Counsel for the assessee that the services qualify as managerial services is also flawed, since looking into the nature of services these are primarily technical/consultancy services and fall squarely within the definition of fee for technical services under the India-Netherlands tax treaty. Further, so far as the argument of services been rendered on a cost to cost basis is concerned, the assessee has not been able to establish that there is no profit element/income element during the course of rendering the services, even if the argument were to be accepted that in absence of any I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 12 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 terms managerial, technical and consultancy are not defined anywhere in the Income Tax Act, 1961. In the absence of definition under Income Tax Act the common and general meaning of these terns should be taken into consideration (GVK Industries v ITO supra). The ordinary meaning of the term “management” involves the application of knowledge, skill or expertise in the control or administration of the conduct of a commercial enterprise or organization. Thus, if the management of all or a significant part of an enterprise is contracted out to persons other than the directors, officers or employees of the enterprise, payments made by the enterprise for those management services, it would fall within the definition of managerial services, within the meaning of paragraph 3 (UN-MCC). However, in the instant facts, we observe that looking into the nature of services, these services are in the nature of technical/consultancy services, and in our considered view, the same do not qualify as “managerial” services, so as to take the services away from the ambit of fee for technical services. We observe that on analysis of various services which have been provided in later assessment years, the same also, going by the nature of services, do not qualify as ‘managerial services’. 32. Secondly, with regard to the arguments that the services are not liable to be taxed in India since only costs incurred in rendering the services have been recovered and in absence of any income element, the services are not taxable in India as FTS/royalty, as discussed and analysed even during the course of arguments, we observe that it is not a case where there is a clear case of cost to cost reimbursement I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 13 with respect to only costs having been recovered from the respective associated enterprises, which have been incurred by the assessee in rendering the services. In the instant case, though the assessee submitted/contended that while charging for the services rendered, the assessee has only recovered the cost incurred in rendering the aforesaid services and nothing over and above the cost which has been incurred for rendering the various services, has been recovered from it’s associated Enterprises. However, from the facts placed on record, the assessee, in our view (and as also noted by the Department for some of the Assessment Years under consideration) has not been able to establish that only 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” services in the first instance, and hence, they are falling outside the scope of technical services under the Act read with India-Netherlands tax treaty. However, on going to the nature of services for various Assessment Years under consideration before us, we are of the considered view that these services are clearly technical in nature, involving use of technology. The authority for advance rulings in the case of Intertek testing 175 Taxman 375 (AAR), while explaining the scope of the term “technical” has held that the expression 'technical' ought not to be construed in a narrow sense. It has received a wide interpretation in tune with its dictionary meaning in several cases. The AAR made the following relevant observations in this regard: “10.6 First, we shall consider the meaning and scope of technical and consultancy services. What is meant by the expression 'technical'? Should it be confined only to technology relating to engineering, manufacturing or other applied sciences ? We do not think so. The expression 'technical' ought not to be I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 14 construed in a narrow sense. It has received a wide interpretation in tune with its dictionary meaning in several cases. In Continental Construction Ltd. v. CIT [1992] 195 ITR 81 the Supreme Court observed that \"the expression 'technical services' has a very broad connotation and it has been used elsewhere in the Statute also so widely as to comprehend professional services : vide Section 9(1) (vii) \". The relevant meanings of the word 'technical' given in the New Shorter Oxford Dictionary (Thumb Index Edition) are 1. Of a person : having knowledge of or expertise in a particular art, science, or other subject. 2. pertaining to, involving, or characteristic of a particular art, science, profession, or occupation, or the applied arts and sciences generally. In CBDT v. Oberoi Hotels India (P.) Ltd. [1998] 97 Taxman 453, the Supreme Court reiterated the view that the term 'technical services' included professional services. In the case of Dean, Goa Medical College v. Dr. Sudhir Kumar Solanki [2001] 7 SCC 645, the question was whether the expression technical institutions' takes within its fold the medical colleges. The Supreme Court observed that \"the dictionary meaning of the word \"technical\" is also \"professional\" and is used in contradistinction with pure sciences 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 petitioner- company 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 it follows that 'success fees' fall in line with any other technical services within the ambit of Section 9(1) (vii) (b).” 34. Accordingly, given the wide interpretation to the term “technical” having been taken by the Courts, and looking into the nature of services which have been rendered by the assessee, we are of the considered view that the services involve extensive use of technology, and the same are “technical” in nature. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 15 35. However, we also observe that in the instant facts, the India- Netherlands Tax Treaty, contains a specific restriction in the form of “make available” clause, which restricts the definition of fee for technical services under the Treaty Law to only those cases where services have been rendered in a manner that the technology have been “made available” to the recipient of services, meaning thereby, the necessary information/knowledge has been imparted to the recipient of services in such manner, so that in the future, they have been enabled/ empowered to perform the services themselves, without any necessity of recourse to future services being provided by the assessee. It would be useful to reproduce the relevant extracts of the India-Netherlands tax treaty for ready reference: “5. For purposes of this Article, \"fees for technical services\" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : … … ... (b) make available technical knowledge, experience, skill, know- how or processes, or consist of the development and transfer of a technical plan or technical design.” 36. The scope of the term “make available” was discussed at length in the case of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791, in the following words: “Whereas Section 9(1)(vii ) stops with the ‘rendering’ of technical services, the DTA goes further and qualifies such rendering of services with words to the effect that the services should also make available technical knowledge, experience, skills, etc., to the person utilizing the services. The making available in DTA refers to the stage subsequent to the ‘making use of stage. The qualifying word is ‘which’- the use of this relative pronoun as a conjunction is to denote some additional function the ‘rendering of services’ must fulfil. And 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. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 16 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 High Court in the case of Star Rays 153 taxmann.com 226 (Gujarat), where the Assessee, a partnership firm, was engaged in business of cutting and polishing diamonds and export of diamonds. It had made remittances qua diamond testing service for certification of diamonds to GIA USA which set up a laboratory at Hong Kong as GIA Hong Kong and claimed that said sum was not tax deductible at source. The Assessing Officer held that assessee had made payment to GIA Hong Kong Laboratory and not GIA USA and, therefore, could not claim treaty benefit between India-USA and, that assessee was liable to deduct TDS from said remittance. Invoices for payment of fees were issued by GIA USA and accounts reflected that payment was received in offshore bank account of GIA USA. The High Court held that the assessee's case was protected under India-USA DTAA as mere rendering of services could not be roped into FTS when person utilizing services was unable to make use of technical knowledge etc. 38. Recently, the issue of “make available” came up before the Hon'ble Supreme Court in the case of Ad2pro Media Solutions (P.) Ltd. [2024] 158 taxmann.com 432 (SC). The facts were that the assessee was a private limited company engaged in business of providing graphic design solutions for advertising and marketing communications. It had remitted huge amounts to US based company for marketing services without deduction of TDS. The Assessing Officer held that assessee utilized services of US Company even in negotiations with customers and in finalizing contracts, and same could not be done without sharing technical knowledge, know-how, processes or experience, hence, payment was taxable in India as FTS. The Tribunal allowed assessee's appeal holding that payments made could not be considered as royalty or FTS and hence, no TDS was required to be deducted. It was found that US Company did not have any permanent establishment in India. Further Tribunal in its order had noted that scope of work was to generate customer leads using/subscribing customer data base, market research, analysis, and online research data and that service provider had not made available any technical knowledge, experience, know-how, process to develop and transfer I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 17 technical plan or technical design. The High Court by impugned order held that in view of admitted fact that services were utilized in USA, findings 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, by itself, without any requirement of recourse/further assistance from the assessee company. From the contents of the nature of services, we observe that neither has technology be made available to the recipient of services, nor there is any such intention to render services in a manner that the recipient of services is enabled to perform the services itself without recourse to the assessee. Accordingly, looking into the facts, we are of the considered view that the services have not “made available” technology to the recipient of services, so as to fall within the definition of FTS under the India-Netherlands tax treaty. 41. In the result, grounds 2, 3 and 4 of the assessee’s appeal are allowed. “ 7.1. Ground number 8: Taxability of Real Estate And Corporate Travel Services as fees for technical services under Section 9(1)(vii) of the Act read with article 12 of Tax Treaty 59. The brief facts relating to these services are that Shell group has business facilities across various countries which is managed by a real estate team of the assessee. During the impugned year under consideration, payments have been made to the assessee for the work done by the real estate team of the assessee in managing the Group's I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 18 property portfolio, corporate travel program, office facilities and business centers. During the year under consideration, the assessee was engaged in provision of general business support services and other services, with respect to real estate operations and inter- company services to SIMPL. 60. The AO was of the view that under the Real Estate and Corporate Travel Services, the assessee provides consultancy and assists the regional team of the affiliates in managing real estate transactions and leveraging of global relationships and contract management with key suppliers and real estate information technology tool. The critical decision-making function of real estate consultancy has been performed by the affiliates through the assistance/consultancy of the assessee. As per the Ld. Assessing Officer, identifiable and highly specialized services requiring expertise and industrial experience of the global support team of the assessee have been provided by the assessee and the nature of work performed by the Shell group companies is highly technical in nature The AO thus concluded that the assessee, through its personnel, provided 'technical services' 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, 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. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India Netherlands tax treaty. 63. In the result, ground number 5 of the assessee’s appeal is allowed for Assessment Year 2013-14. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 19 7.2. Ground Nos. 9 & 10: Taxability of Health Ecotox services as FTS under the Act, read with taxability of IT Services. IT Services 81. During the year under consideration, the assessee has rendered certain IT services to SIMPL, which includes certain services in relation to the Physical Access Control System ('PACS) being implemented at each location. In relation to these PACS related services, the fee comprises of the following components: a) Prowatch (Physical Access Control System) - a software which is being implemented at each location to read the EVI cards when any person swipe in and out of the building: b) Prowatch configuration - updating the card readers to Prowatch: c) Recovery of project management and other overhead costs – recovery of Manpower costs for the resources working on these projects. 82. In respect of these services, the Ld. Assessing Officer was of the view that the assessee accepts that the services are technical in nature and the only objection is that the same are not taxable as such services do not fall in the scope of make available clause. The assessee has rendered certain IT services to Shell India Markets Pvt. Ltd. (‘SIMPL’), a group entity, which inter alia, includes certain services in relation to the Physical Access Control System (‘PACS’) being implemented at each location. This requires experience and expertise of highly technical and trained staff. Thus, in such a scenario it cannot be said that technical knowledge, experience, skill etc has not been made available to the Indian entity. It is seen that the advice and assistance rendered by the assessee to the Indian entity are not transient in nature and are capable of being used by the Indian entity on its own. Health Ecotox services: 83. During the year under consideration, the assessee rendered Health Ecotox services to SIMPL which pertains to \"One Health IT System\". The One Health IT system is for keeping and maintaining confidential medical information of Shell employees. The 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 I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 20 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 by the Assessee. It is to be noted that allocation of costs is based on 'actual number of full time employee'. Accordingly, the assessee submitted that receipts for Health Ecotox Services are only reimbursement of expenses and as such not chargeable to tax. 84. The Ld. Assessing Officer observed that under the Health Ecotox services, the assessee has rendered these services to SIMPL which pertains to \"One Health IT system\". The One Health IT System is an add on to the Shell People system for keeping and maintaining confidential medical information of Shell employees. Here, it is seen that clearly identifiable and highly specialized services, requiring expertise and industrial experience have been provided by the assessee. 85. Further, in respect of both the above services, the Ld. Assessing Officer was of the view that it is clear that 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 have, through its personnel, undoubtedly 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 promoting the business of the affiliates. The employees of the affiliates are in a position to, actually they are expected to use the knowledge gained, in the business of the affiliates. Thus, knowledge and know- how are made available to the affiliates. Hence, on an understanding of the overall effect of the services, it has to be held that the technical knowledge, experience, and skill are made available to the affiliates. 86. 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. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 21 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 services and the assertion of the AO as to why the same qualifies as “fee for technical services” under the Act read with the Treaty. On going through the nature of services and the contentions of the AO, we concur with the view of the assessee that there is no specific reference as to how the “make available” under the India-Netherlands Tax Treaty has been satisfied while rendering the above services, so as to fall within the ambit of FTS under the India-Netherlands Tax Treaty. Accordingly, in view of co-ordinate Bench decisions we are of the considered view that the “make available” clause has not been satisfied in the instant facts and therefore, the services mentioned above do not qualify as FTS under India-Netherlands Tax Treaty. In the result, I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 22 we hold that the above services did not qualify as FTS under the India-Netherlands Tax Treaty, since the “make available” clause has not been satisfied in the instant facts. 9.1. In the result, Ground Nos. 4, 5, 6, 11, 12, 13, 14 and 15 of the assessee’s appeal are allowed, since the services do not qualify as “FTS” under the India-Netherlands Tax Treaty. 10. With respect to Ground No. 16 regarding the contention that the above mentioned services are merely cost allocation/reimbursement are taxable. Ld Counsel fairly accepted this Ground was decided against the assessee for previous assessment years, following the same ratio Ground No. 16. of the assessee’s appeal is dismissed. 11. Ground No. 17 is charging of interest u/s.234A & 234B of the Act, which is consequential in nature and hence does not require any specific adjudication and is dismissed. 12. With regards to Ground No.18 (Short Credit of TDS) and Ground No. 19 (Incorrect Adjustment of Refund), the issue is restored to the file of the Ld. AO to verify the facts, after giving due opportunity of hearing to the assessee to present the complete set of facts and thereafter pass an order, in accordance with law. 13. In the result, Ground Nos. 18 & 19 of the assessee’s appeal are allowed for statistical purposes. I.T.A No. 1027/Ahd/2023 A.Y. 2021-22 Page No Shell International B.V.. Vs. ACIT 23 14. Ground No. 20 is initiation of penalty, which is consequential in nature and hence does not require any specific adjudication and is dismissed. 15. In combined result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 15 -04-2025 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 15/04/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "