SHELL INTERNATIONAL PETROLEUM COMPANY LIMITED ,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION )-4(2)(1), MUMBAI

ITA 1751/MUM/2025

AI Insights

The case involves Shell International Petroleum Company Limited, a UK tax resident, appealing against the final assessment order for the Assessment Year 2022-23, which was passed following the directions of the Dispute Resolution Panel (DRP). The primary contention was regarding the taxation of receipts from Business Support Services (BSS) and IT services as 'Fees for Technical Services' (FTS) and 'Royalty'. The Tribunal considered previous rulings and the India-UK DTAA, particularly focusing on whether the services provided 'made available' technical knowledge or skills, which would qualify them as FTS or Royalty. The Tribunal's decision was influenced by the precedent set by the Bombay High Court in a related case and previous ITAT decisions favoring the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835478 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2022-2023
• Appeal Filed On: 13-03-2025
• Other Referred Cases: Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT, Shell India Markets Pvt Ltd vs. UOI
• Laws Referred To: Income-tax Act, 1961, India-UK Double Taxation Avoidance Agreement
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAPAL KUMAR
• Assessee Lawyers: MADHUR AGARWAL
• Keywords: TDS; Double taxation relief
• Section: 154; 271(1)(c); 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 1751/MUM/2025 (Assessment Year: 2022-23) Shell International Petroleum Company Limited C/o B S R & Co. LLP, 2nd Floor, LodhaExcelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalakshmi, Mumbai 400011 (PAN: AAICS0357B) vs Deputy Commissioner of Income Tax (International Taxation) 4(2)(1), Mumbai Appellant Respondent Present for: Appellant by : Shri Madhur Agarwal and Shreyas Sardesai, Advocates Respondent by : Shri Satya Pal Kumar, CIT DR Date of Hearing : 13.11.2025 Date of Pronouncement : 11.02.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the final assessment order passed pursuant to the directions of Id. Dispute Resolution Panel (DRP) vide DIN & Order No. ITBA/DRP/F/144C(5)/2024- 25/1071299337 (1) dated 17.12.2024 passed u/s. 144C(5) of the Income-tax Act, 1961 (hereinafter referred to as the \"Act\"),for AY 2022- 23. Printed from counselvise.com 2 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 2. Grounds taken by the assessee are reproduced as under: “1. Erred in assessing the total income at Rs. 287,67,98,112 as against income of Rs. 33,72,28,240 offered by the Appellant. Receipts from General Business Support Services ('General BSS') does not constitute 'income' 2. Erred in holding that the payments received of Rs. 242,07,82,584 by the Appellant constitutes 'income without appreciating the fact that the receipts from General BSS are in nature of cost-recharge pursuant to Cost Contribution Agreement ('CCA') which does not constitute income under section 2(24) of the Act and hence not taxable in India. Receipts from General BSS does not qualify as Fees for Technical Services ('FTS') 3 Erred in holding that the payments received by the Appellant for providing General BSS constitutes FTS under the Act as well as India-UK Double Taxation Avoidance Agreement ('India-UK DTAA'). 4. Failed in appreciating that the services provided by the Appellant are routine and not technical in nature and rendering of such services does not make available' any technical knowledge, skill, experience, etc. to the service recipient, which cannot be termed as FTS under Article 13(4)(c) of the India-UK DTAA and hence not subject to tax in India. Receipts towards software license charges does not constitute income 5. Erred in holding that the payments received by the Appellant towards software license charges of Rs. 47,98,230 constitutes 'income' without appreciating the facts that the said receipts are in nature of reimbursements and hence does not constitute income under section 2(24) of the Act and hence not taxable in India.” Receipts towards software license charges does not qualify as Royalty 6. Erred in holding that the payments received by the Appellant towards cost allocation for software license charges as 'Royalty under provisions of Section 9(1)(vi) of the Act as well as Article 13 of the India-UK DTAA Erred in not appreciating that the payments received were in nature of cost allocations of third-party vendor software license charges and not for 'use of right to use of copyright', 'use of process', 'use of property Printed from counselvise.com 3 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 similar to patent, invention, literary work, process, design, etc. accordingly does not qualify as \"Royalty under the Act as well as the India-UK DTAA. Receipts towards reimbursement of IT costs does not constitute income 7. Erred in holding that the payments received by the Appellant towards reimbursement of IT costs of Rs. 11,39,89,058 constitutes 'income without appreciating the facts that the said receipts are in nature of reimbursements and hence does not constitute income under section 2(24) of the Act and hence not taxable in India. Receipts towards reimbursement of IT costs does not qualify as FTS 8. Erred in holding that the payments received by the Appellant towards reimbursement of IT costs qualifies as 'FTS' the Act as well as Article 13 of the India-UK DTAA. 9. Erred in not appreciating that the payments were not for providing any technical services that are ancillary and subsidiary to the application or enjoyment of the right, property or information for a payment under Article 13 of the India UK DTAA and without prejudice not for any services that make available any technical knowledge, skill, experience, etc and accordingly such payments could not be considered as 'FTS' under the Act and under the Article 13(4) of India-UK DTAA Short granting of credit for TDS 10. Erred in not granting the TDS credit of Rs. 29,585 without appreciating the facts and circumstance of the case. Interest under section 234B of the Act 11. Erred in levying interest of Rs. 6,95,742 under section 234B of the Act without appreciating the facts and circumstance of the case. 12. Without prejudice to the above, while the AO has computed interest payable under Section 234B of the Act to be Rs. 6,95,742 subsequently AO has inadvertently computed total interest and fees payable as Rs. 2,68,73,252. Incorrect amount of refund issued Printed from counselvise.com 4 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 13. Erred in considering a refund amount of Rs. 8,81,47,619 issued to the Appellant wherein no refund was received by the Appellant without appreciating the facts and circumstance of the case. Penalty under section 270A of the Act 14. Erred in levying penalty under section 270A of the Act for underreporting of income without appreciating the facts and circumstances of the case.” 3. Brief facts of the case are that assessee is a Shell Group Company incorporated in the U.K. It is in the business of providing consultancy services to various Shell operating companies. It is engaged in provision of business support services and research & development/technical services. Since assessee is a tax resident of the U.K., in view of provisions of section 90(2) of the Act, it is entitled to the beneficial provisions of the India-UK Double Tax Avoidance Agreement (DTAA) which it had availed while filing its return of income. According to the Id. Assessing Officer, during the year under consideration, assessee was in receipt of the following which were not offered for taxation in its return of income: Sr. No. Nature of Receipts Amount in Rs. 1 Receipts towards cost allocation for Business Support Services ('BSS') 242,07,82,544 2 Receipts towards cost allocation for provision of IT services including GST scoping services and Local projects 11,39,89,058 3 Reimbursement of amount towards software license charges 47,98,230 4 Recovery of expenses 1. Performance Share Plan cost 2. Global business promotion cost 3. Commission charges for marketing support 60,76,77,193 99,71,010 9,46,526 Total 315,81,64,561 Printed from counselvise.com 5 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 3.1 Ld. Assessing Officer issued the draft assessment order dated 23.03.2024 by making additions of Rs. 242,07,82,584/ on account of receipts towards cost allocation for BSS taxed as fees for technical services (FTS); Rs. 11,39,89,058/ on account of receipts towards cost allocation for IT services taxed as FTS/Royalty and Rs. 47,98,230/- on account of receipts towards cost allocation for software licence charges taxed as Royalty. Against the draft order, assessee raised its grounds of objections before the Id. DRP which were dismissed and directions were issued to the Id. Assessing Officer who completed the assessment by passing final assessment order in conformity with the directions of ld. DRP by assessing total income as tabulated below: Particulars In Rs. Total Income as per Return of Income 33,72,28,240/- Additions/Disallowances to Income as discussed above: Receipts towards cost allocation for BSS taxed as FTS (taxable at 10%plus cess and surcharge) 242,07,82,584/- Receipts towards cost allocation for IT services taxed as FTS (taxable at 10%plus cess and surcharge) 11,39,89,058/- Receipts towards cost allocation for software licence charges taxed as Royalty (taxable at 10%plus cess and surcharge) 47,98,230/- Total Income 287,67,98,112/- 4. Facts relating to the issue of receipts from BSS held to be constituting income as FTS contested vide ground nos. 2, 3 and 4 are noted as under. BSS rendered by assessee under the Cost Contribution Agreement (CCA) primarily comprises of services in the nature of management support, development and provision of support and business tools, provision of marketing support, promotion of Printed from counselvise.com 6 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 professional competence, legal services, development, communication and audit of standards of performance, contracting and procurement services, taxation advice and services, general financial advice and services, employee relations and public affairs/media advice and other business support services. These are services to support its business operations and related issues. It does not provide any technical knowledge or skill to its AE. In this regard, the examples as furnished by the assessee of actual BSS rendered by it are tabulated below: Printed from counselvise.com 7 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 Printed from counselvise.com 8 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 Printed from counselvise.com 9 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 4.1. Based on the above sample data, assessee contended that said services do not involve any technical know-how or skill, etc. These are provided mainly for standardization and to support the day-to-day business operations. On this assessee contended that whereas under Explanation 2 to section 9(1)(vii) of the Act, mere rendering of technical services is enough for the services to be taxable as FTS, however, Article 13 of the India-UK DTAA requires that technical knowledge, experience, etc. should be made available' to the recipient. Assessee thus, availed Printed from counselvise.com 10 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 the treaty benefit as its BSS would not fall under Article 13(4)(a)/(b) of the said treaty. 4.2. Assessee strongly asserted before the ld. DRP that it has received a favourable order from the Hon'ble jurisdictional High Court of Bombay in the case of a group concern Shell India Markets Pvt Ltd in WP No. 10788 Of 2012 against the ld. AAR order wherein it was held that the receipts towards BSS do not ‘make available’ technical knowledge, experience etc and do not amount to fees for technical services as per Article 13 of India-UK DTAA. Thus, not taxable in India. Hon'ble Court held that technical services and consultancy services can be taxed in India only if the same are ‘made available’ as per Article 13 of the India- UK DTAA. According the Hon'ble High Court, services in question relate to managerial services not involving anything of a technical nature. It thus held that even if it is fees for technical or consultancy services, it can be brought to tax only where fees are paid in consideration for ‘making available’ technical knowledge or consist of development or transfer of a technical plan or technical design. 4.3. Ld. DRP while dealing with the objections of the assessee stated that identical objections had come up for its directions in AYs 2021-22, 2020-21, 2019-20 and earlier years, in assessee’s own case. It referred to its directions on this issue given in its order for AY 2014-15 and reproduced it in the impugned order. 4.3. Taking note of the factual position as stated above, we are of the considered view that the material facts and circumstances in the present year are same as the earlier years. The issue under consideration is squarely covered favourably for the assessee by the Printed from counselvise.com 11 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 order from the Hon'ble jurisdictional High Court of Bombay in the case of its group concern Shell India Markets Pvt Ltd (supra) wherein it was held that the receipts towards BSS do not 'make available' technical knowledge, experience etc, and do not amount to fees for technical services as per Article 13 of India-UK DTAA. Thus, not taxable in India. For this judgment, Id. DRP stated that Revenue is in the process of filing SLP before the Hon'ble Supreme Court. According to it, it is essential to maintain the issue legally alive in order to protect the interest of the revenue and thus, affirmed the approach of the Assessing Officer by not accepting the grounds of objections raised by the assessee. 4.4. We also note that this is a legacy issue and dealt by the Co- ordinate Bench in assessee's own case for past several assessment years including Assessment Year 2009-10, 2011-12, 2012-13 to 2021- 22, consistently holding in favour of the assessee. For the first time, this came up in Assessment Year 2009-10 in ITA no. 1253/Mum/2014 vide order dated 10.09.2024 and has been subsequently followed in all the other years. There being no material change in the factual matrix and the position of law, respectfully following the decision of the Hon'ble jurisdictional High Court of Bombay in Shell India Markets Pvt Ltd (supra) as well as decisions of the Coordinate Bench in assessee's own case for past several years, ground no. 3 and 4 raised by the assessee are allowed. Ground no. 2 mentions about 'cost recharge' for general BSS. The same is rendered academic and left open in view of our finding arrived at for ground nos. 3 and 4. 5. On the issue relating to receipt of IT service and software license charges treated as royalty under the provisions of section 9(1)(vi) of the Act and under Article 13 of the India - UK DTAA, factual position states Printed from counselvise.com 12 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 that assessee had received Rs 12,00,53,602/- towards IT services and Rs 25,93,419/- for software license charges on account of cost allocation from its AE towards usage of Permit Vision software' supplied by eVision Industry. Permit Vision software is a leading isolation management software in the Oil and Gas industry which enables the Shell group with a more effective way to comply with their business requirements. It enables the assessee to have a consistent tool and process for permitting and isolation management which provides a more effective way to comply with HSSE commitments and requirements. Assessee furnished invoices along with its explanation in this regard before the authorities below 5.1. Arguments of the assessee for not offering these receipts for taxation are two-fold - a) Both the receipts were received as cost allocation and are in the nature of reimbursements. There being no element of income and thus, not taxable; b) Receipts towards IT services provision and software license do not qualify as 'Royalty/FTS' under India-UK DTAA and also in view of decision of Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT [2023] 432 ITR 471 (SC). 5.2. This issue is also a recurring one and stands covered in assessee's favour in its own case by the decisions of the co-ordinate benches from AY 2011-12 to AY 2020-21. Further, the issue involved is covered by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Put. Ltd. V. CIT(A) [2023] 432 ITR 147, wherein it held that Printed from counselvise.com 13 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 consideration for use of computer software is not payment of royalty for use of copyright. Also, reliance placed by Id. DRP on the directions issued in the case of SITI BV for AY 2020-21 and 2017-18 is partially misplaced. Coordinate bench of ITAT vide order dated 04.04.2024 in ITA No. 3339 of 2023 and another order dated 11.05.2022 in ITA No. 1245 of 2021, while dealing with SITI BV's case, has left the issue of reimbursement/income open. Furthermore, it decided the issue in respect of IT services alleged to be FTS, in favour of SITI BV. In view of the above discussion and factual matrix remaining the same, respectfully following the decision of the Hon'ble Apex Court as well as of the Co-ordinate Bench in assessee's own case for past several years, ground no. 6 is allowed. Ground no. 5 mentions about 'reimbursement' for the concerned receipts. The same is rendered academic and left open in view of our finding arrived at for ground no. 6. 6. For the issue relating to IT costs treated as FTS, fact of the matter is that assessee received Rs. 11,39,89,058/- towards IT support services. According to the assessee, these receipts do not qualify as FTS under the provision of the Act as well as under the India - UK DTAA. These services are for downstream business in connection with IT, providing IT services to improve/facilitate the functioning of various software/systems including: a. Improvement to Customer Relationship Management system to integrate data in order to enable having a single view of the customer b. Transitioning of a real estate system to enable better customization and integration with Shell ecosystem Printed from counselvise.com 14 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 c. Establishment of Fuel Stock management system to enhance monitoring d. Enabling liaison interface for logistic service provider e. Vendor loyalty system f. Providing latest update patches into a particular system 6.1. We note the observation of Id. DRP whereby it is mentioned that this issue had come up for its directions in AY 20201-22 and earlier years. Ld. DRP in AY 2016-17 considered the issue and gave its directions to bring it to tax. Ld. AO has allegedly relied on the clause of service agreement which in fact was furnished for BSS, and treated the impugned services to be akin to BSS while holding that they are in the nature of FTS, taxable under the Act and under Article 13(4)(c) of the India-UK DTAA. On the alternative treatment as Royalty, Id. DRP followed its own directions for AY 2020-21 and earlier AYs, especially AY 2016-17 wherein it was held that question of taxing the same receipts as royalty becomes infructuous in the light of judgment of Engineering Analysis (supra). 6.2. From the discussion made and perusal of material on record, it is noted that cost allocation charges towards IT costs is treated akin to BSS by the Ld.AO/DRP. Issue with respect to treatment of BSS charges as FTS stands covered in favour of the assessee in ground nos. 3 and 4 Printed from counselvise.com 15 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 of the present appeal before us wherein the following has already been considered - (i) Shell India Markets Pvt Ltd vs. UOI (supra) (ii) AY 2016-17 to 2020-21 vide ITAT Mumbai order dt. 21.07.2025 (supra) 6.3. We are of the considered view that the material facts and circumstances as well as the applicable law have not undergone any change when compared to the earlier years Considering the discussion made in the above paragraphs, since BSS charges have already been held not to be FTS, ground nos. 8 and 9 are allowed. Ground no. 7 mentions about 'reimbursement' for the concerned receipts. The same is rendered academic and left open in view of our finding arrived at for ground no. 8 and 9. 7 Ground nos. 10 for grant of TDS credit, ground nos. 11 and 12 for levy of interest u/s. 234B and ground no. 13 for incorrect amount of refund issued to the assessee needs verification of records by the ld. Assessing Officer. Assessee has already moved an application u/s. 154 for rectification which is pending for disposal by the ld. Assessing Officer. Accordingly, for these stated grounds, ld. Assessing Officer is directed to verify the records and dispose the pending application, giving correct effect to the same. Printed from counselvise.com 16 ITA No. 1751/Mum/2025 Shell International Petroleum Company Pvt. Ltd. AY 2022-23 8. Ground no 14 for imposition of penalty u/s. 271(1)(c) is premature and consequential which does not need separate adjudication 9. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11.02.2026. Sd/- Sd/-/- [Amit Shukla] [Girish Agrawal] Judicial Member Accountant Member Dated: 11.02.2026. Divya Ramesh Nandgaonkar Stenographer Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "