SHELL INTERNATIONAL PETROLEUM COMPANY LTD.,MUMBAI V. DCIT (IT) 4(2)(1), MUMBAI

ITA 2307/MUM/2022

AI Insights

The case involves multiple appeals by M/s Shell International Petroleum Co. Ltd. against the assessment orders passed by the Deputy Commissioner of Income Tax (International Taxation). The primary contention was whether certain receipts from Business Support Services and software maintenance charges constituted income taxable as Fees for Technical Services (FTS) or royalty under the Income Tax Act and the India-UK Double Taxation Avoidance Agreement (DTAA). The tribunal examined each category of receipts in light of previous rulings and the specific nature of the services provided, ultimately deciding that most of the receipts did not qualify as FTS or royalty, leading to a partial allowance of the appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126320 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2019-2020
• Other Referred Cases: CIT vs. Roca Bathroom Products (P) Ltd., Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, CIT(LTU) vs. Reliance Industries P. Ltd., CIT (International Taxation)-1, Delhi vs. M/s Biorad
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: MADHUR AGRAWAL
• Keywords: Set aside; Question of law; TDS; Advance ruling; Double taxation relief; Permanent establishment; Grounds of appeal; Management Support; Engineering Analysis Centre; Dismissed; Mechanical; Judgment; GST charges; Section 234B; HRA; Commissioner; Scientific Work; Commissioner of Income Tax; Included Services; AMP; TDS under section 195; Purchases; DRP order; Transfer; Transactions; Managerial services; Deleted; Income deemed to have accrued; Karnataka High Court; Services rendered; Admission; Directions; Department; Change in law; Deduction of tax at source; Explanation; Not pressed; Section 234A; Services; Distributor; Tax withholding; Maintenance Services
• Section: 143(3); 195; 22; 13; 234B; 9(1); 9(1); 9(1); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE MS PADMAVATHY S, AM & SHRI RAJ KUMAR CHAUHAN, JM I.T.A. No. 7499/Mum/2019 (Assessment Year: 2016-17) I.T.A. No. 1244/Mum/2021 (Assessment Year: 2017-18) I.T.A. No. 995/Mum/2022 (Assessment Year: 2018-19) I.T.A. No. 2307/Mum/2022 (Assessment Year: 2019-20) I.T.A. No. 3317/Mum/2023 (Assessment Year: 2020-21) M/s Shell International Petroleum Co. Ltd. , C/o B S R & Co. LLP, 5th Floor, Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalakshmi, Mumbai-400011. PAN: AAICS0357B Vs. DCIT (International Taxation)- 4(2)(1), 17th Floor, Room No. 1708, Air India Building, Nariman Point, Mumbai-400021. Appellant) : Respondent) Appellant /Assessee by : Shri Madhur Agrawal, Ms. Reema Garewal & Ms. Snigdha Gautam, AR Revenue / Respondent by : Shri Vivek Perampurna, CIT-DR Date of Hearing : 01.04.2025 Date of Pronouncement : 21.04.2025 2 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. O R D E R Per Bench : These appeals by the assessee are against the separate final assessment order of the Deputy. Commissioner of Income Tax (International Tax)-4(2)(1), Mumbai (in short \"the AO\") passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act) dated 10.10.2019 for Assessment Year (AY) 2016-17, dated 30.04.2021 for AY 2017-18, dated 18.05.2021 for AY 2018-19, dated 20.07.2022 for AY 2019-20 and dated 24.07.2023 for AY 2020-21. Since the issues contended in these appeals are common, these appeals are heard together and disposed of through common order. The issues contended by the assessee in these appeals through various grounds are tabulated below – Issue AY 2016- 17 AY 2017- 18 AY 2018- 19 AY 2019- 20 AY 2020- 21 General Ground No.1 Ground No.1 Ground No.1 Ground No.1&2 Ground No.1 Final assessment order passed by AO is bad in law. Ground No.2 Receipts from General Business Support Services ('BSS') does not constitute 'income' Ground No.2 Ground No.2 Ground No.2 Ground No.3 Ground No.3 Receipts from General BSS does not qualify as Fees for Technical Services ('FTS') Ground No.3 & 4 Ground No. 3 & 4 Ground No. 3 & 4 Ground No. 4 & 5 Ground No. 4 & 5 Receipts towards access to SUN / Ground No.5 & 9 3 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. GSAP software licence charges does not constitute income Receipts towards access to SUN / GSAP software licence charges does not qualify as Royalty Ground No.6 to 8 and 10 to 12 Receipts towards SUN / GSAP maintenance charges does not constitute income Ground No.13 Ground No.5 & 9 Ground No. 5 Ground No. 6 Ground No. 6 Receipts towards SUN/GSAP maintenance charges does not qualify as FTS Ground No.14 to 16 Ground No. 10 to 11 Ground No. 6 & 7 Ground No. 7 & 8 Ground No. 7 & 8 Receipts towards SUN / GSAP maintenance charges does not qualify as Royalty Ground No. 6 to 8 and 12 to 14 'Receipts towards cost allocations in respect of Global Terminal Automated System (‘GTAS’) product costs do not constitute income Ground No.17 Receipts towards cost allocations in respect of GTAS product costs do not qualify as FTS Ground No.18 & 19 'Receipts towards cost allocations Ground No.20 Ground No. 15 Ground No.8 Ground No.9 Ground 4 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. in respect of GST scoping charges do not constitute income No.9 Receipts towards cost allocations in respect of GST scoping charges do not qualify as FTS Ground No.21 to 23 Ground No. 16 Ground No.9 & 10 Ground No.10 & 11 Ground No.10 & 11 Receipts towards cost allocations in respect of GST scoping charges do not qualify as Royalty Ground No. 16 Receipts towards cost allocations in respect of IT service and local project costs do not constitute income Ground No.24 Ground No. 18 to 20 Ground No.11 Ground No.12 Reversal of receipts of GTAS Product cost Ground No. 21 Receipts towards cost allocations in respect of IT service and local project costs do not qualify as FTS Ground No.25 to 27 Ground No.12 & 13 Ground No.13 & 14 Short granting of TDS credit Ground No.28 Ground No.14 Ground No.12 Interest under section 234A/234B/234D Ground No.29 Ground No. 22 Ground No.15 Ground No.15 & 16 Ground No.13 & 14 5 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 2. The assessee in all these appeals also raised an additional ground on the legal issue that the final assessment order of the AO is barred by limitation by placing reliance on the decision of the Hon'ble Madras High Court in the case of CIT vs. Roca Bathroom Products (P) Ltd. (2022) 445 ITR 537 (Mad.). However, during the course of hearing, the ld. AR did not press for the admission of the additional ground and accordingly the same is not admitted for adjudication. ITA No.7499/Mum/2019 – AY 2016-17 3. The assessee is a Shell Group Company incorporated in UK and it is in the business of providing consultancy services to various Shell operating company. The assessee has entered into Cost Contribution Agreement (CCA) with various Shell concerns including Shell India Markets Pvt. Ltd. (SIMPL) for the provision of Business Support Services (BSS). The BSS are primarily in the nature of Management Support Services and the cost incurred towards rendering of such services is allocated among Shell Group concerns using the allocation key on a cost to cost basis. The AO held the BSS Arrangement as Fees for Technical Services (FTS) in the hands of the assessee and accordingly brought the same to tax. The AO in this regard placed reliance on the Ruling of Authority for Advance Ruling (AAR) in the case of SIMPL (application no. 833 of 2009 dated 17.01.2012). The AO further treated the amount received by the assessee towards usage charges of SUN Maintenance Software treating the same as royalty. The AO also treated the receipt towards cost allocation for GSAP license and Go-Live Incorrect amount of refund issued Ground No. 15 Penalty under section 271(1)(c)/270A Ground No.30 Ground No.16 Ground No.17 Ground No.16 6 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. application as royalty. The assessee raised further objections against the draft assessment order of the AO, before the DRP who confirmed the addition made by the AO towards BSS services based on the AAR Ruling. The DRP also confirmed the treatment of usage charges of SUN Maintenance Software and treatment of cost allocation for GSAP license and Go-Live application as royalty. The assessee is in appeal before the Tribunal against the final order of assessment passed by the AO as per the directions of the DRP. Treatment of BSS as FTS 4. We heard the parties and perused the material on record. With regard to treatment of BSS as FTS in the hands of the assessee the ld. AR submitted that the issue is squarely covered by the decision of the Co-ordinate Bench in assessee's own case for AY 2009-10 in ITA No. 1253/Mum/2014 dated 10.09.2024 since the facts for the year under consideration are identical. Accordingly, the ld. AR submitted that the decision of the Co-ordinate Bench is application for the year under consideration also. The ld. DR did not controvert the submissions of the ld. AR. We notice that the Co-ordinate Bench while considering the identical issues for AY 2009-10 has held that “10. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has entered into a Cost Contribution Agreement dated 01.04.2008 with SIMPL for general BSS which are in the nature of management support, development and provision of support and business tools, provision of marketing support, promotion of 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. The assessee contends that the cost incurred by the assessee is to be allocated amongst Shell operating companies based on cost allocation keys as per the terms of CCA and further the said costs are without mark up and are charged to the cost sharers on the basis of actual cost incurred by the assessee. It also 7 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. contended that the payments received without markup are in the nature of reimbursement and not in the character of income which is chargeable to tax in India. They are merely in the nature of cost-recharge as per the CCA. It is further observed that SIMPL filed an application before the Hon’ble AAR for determining its tax withholding obligation in respect of the cost contribution made by it to the assessee and the Hon’ble AAR vide its order dated 17.01.2012 held that the payments made by SIMPL to the assessee was in the nature of ‘fee for technical service’ as per Article 13 of India-UK DTAA for which SIMPL was liable to withhold taxes as per section 195 of the Act. Parallely the assessee’s case was picked up for scrutiny where the lower authorities made an addition on the impugned payment received by the assessee from SIMPL by extensively relying on the ruling of the Hon’ble AAR which held the same to be ‘fee for technical service’ in the case of SIMPL. Though the assessee during the assessment proceeding had objected for placing reliance on the ruling of the Hon’ble AAR as being not binding on the assessee, the lower authorities failed to agree with the assessee’s contention and held that as per section 245S of the I. T. Act, the ruling of the Hon’ble AAR had binding effect on the assessee unless there is a change in law or facts. The relevant extract of the Hon’ble AAR is cited herein under for ease of reference: \"We therefore rule on Que.No.(i) & (ii) that the payment made by the applicant to SIPCL for availing the General BSS under the CCA would constitute income in the hands of SIPCL and is in the nature of fees for technical services within the meaning of Article 13.4 (c) of the DTAC between India and UK; and not in the nature of royalty within the meaning of the term in Explanation 2 to Clause (vi) of Section 9(1) of the Act and under Article 13 of DTAC, while we rule on Que. No. (iii) & (iv). Based on answer to Que. No. (i) & (ii) that the payment received by SIPCL is chargeable to tax in India and the declaration provided by SIPCL that it does not have a Permanent Establishment (PE) in India in terms of Article 5 of DTAC, we rule that the applicant is under obligation to withhold tax under section 195 of the Act. \" 11. Pursuant to the said ruling SIMPL had filed a Writ Petition before the Hon'ble Jurisdictional High Court challenging the validity and legality of the order passed by the Hon’ble AAR and the Hon'ble High Court (in Writ Petition No. 10788 of 2012 vide order dated 01.03.2024), quashed the order of the Hon’ble AAR as being not sustainable by law and by holding that the payment received by the assessee from SIMPL is not in the nature of ‘fee for technical service’ and further held that the services are in the nature of managerial service and not technical service which are made available. The 8 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. relevant extract of the said decision is cited herein under for ease of reference: 15. Be that as it may, the crux of the matter lies in ascertaining whether the finding of the AAR that services availed by Petitioner from SIPCL or payments made by Petitioner to SIPCL are of/for ‘technical/’consultation’ services and secondly, whether such services are ‘made available’ to Petitioner. Article 13 of DTAA reads as under: “ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) in the case of royalties within paragraph (3)(a) of this Article, and fees for technical services within paragraph (4)(a) and (c) of this Article; (i) during the first five years for which this Convention has effect; (aa) 15 per cent of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Government of the first-mentioned Contracting State or a political subdivision of that State, and (bb) 20 per cent of the gross amount of such royalties or fees for technical services in all other cases; and (ii) during subsequent years, 15 per cent of the gross amount of such royalties or fees for technical services; and (b) in the case of royalties within paragraph (3)(b) of this Article and fees for technical services defined in paragraph (4)(b) of this Article, 10 per cent of the gross amount of such royalties and fees for technical services. 3. For the purposes of this Article, the term \"royalties\" means: (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematograph films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret 9 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic 4. For the purposes of paragraph (2) of this Article, and subject to paragraph (5), of this Article, the term \"fees for technical services\" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3)(a) of this Article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of this Article is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design.” 16. From the bare words of the Article, it is clear that income of Shivgan SIPCL will be chargeable to tax in India only if the payment by Petitioner is towards fees for ‘technical services’. Under Article 13(4), the term ‘fees for technical services’ means payments of any kind in consideration for the rendering of any technical or consultancy services. Sub-para (c) to Article 13(4) further restricts the meaning of the term to only that which makes available technical knowledge, experience, skill, know-how or processes, or consists of the development or transfer of a technical plan or technical design. 17. The principle of noscitur a sociis mandates that the meaning of a word is to be judged by the company of other words which it keeps. The word ‘consultancy’ services follows ‘technical’ which is further followed by the phrase “which make available technical knowledge, experience, skill, know-how or processes, or consist of development and transfer of a technical plan or technical design.” A clear reading indicates that even if consultancy services is 'stand alone', the bunch of words indicate that the said 'consultancy' necessarily relates to consultancy which makes available technical or any other knowledge, experience, skill, know-how or processes and does not relate to consultancy on managerial issues. 10 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 18. The Appendix 2 of CCA contains the General BSS. The list of services availed are as follows: EXAMPLES OF GENERAL BUSINESS SUPPORT SERVICES: •Management Support • Development and Provisions of Support and Business Tools • Provision of Marketing Support. • Development, Communication and Audit of Standards of • Performance Promotion of Professional Competence • Information Technology Advice and Services • General Financial Advice and Services • Taxation Advice and Services • Legal Services • Employee Relations and Public Affairs/Media Advice and Services • HR Advice and Services• Contracting and Procurement Services • Other Business Support Services A perusal of the list of services relate to managerial services not involving anything of a technical nature. The AAR has discussed the services appearing in the CCA and has concluded that these activities in a retail business are at the core of retail marketing and hence advice tendered in taking a decision of commercial nature is a consultancy service. The AAR has further considered the definition of the word ‘Consultancy’ as defined in the Oxford English dictionary and has observed that a consultant is a person who gives professional advice or services in a specialized field. However, the AAR failed to appreciate that the word ‘Consultancy’ appearing in the Article is to be interpreted in the context of consultancy which makes available technical knowledge, etc. and not of managerial nature. The reading of the Article clearly indicates that the consultancy service must be which makes available technical knowledge, etc. Sub-para (c) to Article 13(4) restricts such services to those which make available technical knowledge or consist of development and transfer of a technical plan or technical design. Thus, a harmonious reading of the provision of Article 13 in its entirety, clearly establishes the intent of the DTAA in making income chargeable to tax only if the services availed pertain to technical services or consultancy services. Technical services in this context mean services requiring expertise in a technology. By Consultancy Services, in this context, would mean advisory services. The categories of technical and consultancy services are to some extent, overlapping. Under paragraph 4, technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a 11 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. right, property or information for which a payment described in paragraph (3)(a) of Article 13 is received; (2) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of Article 13 is received; or (3) as described in paragraph 4(c), if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(c), consultancy services which are not of a technical nature cannot be included services. Thus, the services availed by Petitioner cannot be said to be technical services and Article 13 is wholly inapplicable in the facts and circumstances of the present case. 19. It will be useful to refer to a decision of the Madras High Court in the case of Skycell Communications Ltd and Anr. v. Deputy Commissioner of Income-Tax and Ors.8 which held as follows: “8. Thus while stating that \"technical service\" would include managerial and consultancy service, the Legislature has not set out with precision as to what would constitute \"technical\" service to render it \"technical service\". The meaning of the word \"technical\" as given in the New Oxford Dictionary is adjective 1. of or relating to a particular subject, art or craft or its techniques : technical terms (especially of a book or article) requiring special knowledge to be understood : a technical report. 2. of involving, or concerned with applied and industrial sciences : an important technical achievement. 3. resulting from mechanical failure : a technical fault. 4. according to a strict application or interpretation of the law or the rules : the arrest was a technical violation of the treaty. 9. Having regard to the fact that the term is required to be understood in the context in which it is used, \"fee for technical services\" could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with \"technical\" is \"involving or concerning applied and industrial science\". 10. In the modern day world, almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied 12 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. 11. When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having used it for travelling from one destination to another. When a person travels by bus, it cannot be said that the undertaking which owns the bus service is rendering technical service to the passenger and, therefore, the passenger must deduct tax at source on the payment made to the bus service provider, for having used the bus. The electricity supplied to a consumer cannot, on the ground that generators are used to generate electricity, transmission lines to carry the power, transformers to regulate the flow of current, meters to measure the consumption, be regarded as amounting to provision of technical services to the consumer resulting in the consumer having to deduct tax at source on the payment made for the power consumed and remit the same to the Revenue. 15.The use of the internet and the world wide web is increasing by leaps and bounds, and there are hundreds of thousands, if not millions, of subscribers to that facility. The internet is very much a product of technology, and without the sophisticated equipment installed by the internet service providers and the use of the telephone fixed or mobile through which the connection is established, the service cannot be provided. However, on that score, every subscriber of the internet service provider cannot be regarded as having entered into a contract for availing of technical services from the provider of the internet service, and such subscriber regarded as being obliged to deduct tax at source on the payment made to the internet service provider. 20. Thus, it is clear from the said decision that any service is construable as technical but one has to see the true import of the service actually rendered and the determination must be made in this context. There is no 13 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. such discussion in the Impugned order and the finding is based on a generic reference to the meaning of the word 'consultancy' as given in the Oxford English Dictionary. The AAR further holds that the list of services mentioned in the CCA is not an exhaustive list and may include other technical services. Thus Petitioner is correct in contending that the AAR has proceeded on conjectures and surmises to render the finding in the impugned order. 21. The AAR has further held that the services are made available to Petitioner since while providing General BSS, SIPCL works closely with the employees of the applicant and supports/advises them. It is held that Petitioner is able to use the know how/intellectual property generated from the General BSS independent of the service provider and hence the services under the agreement are clearly made available to Petitioner. In order to understand the import of the words 'made available' as used in the context of Article 13(4)(c), it will be useful to refer to a decision of the Karnataka High Court in CIT, Central Circle v. De Beers (Supra). Paragraph 22 reads as follows: “22. What is the meaning of “make available”. The technical or consultancy service rendered should be of such a nature that it “makes available” to the recipient technical knowledge, knowhow and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology \"make available\", the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered “made available” when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of 14 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. consideration would be regarded as \"fee for technical/included services\" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied.” (emphasis supplied) 22. Similarly, the Delhi High Court in the CIT (International Taxation)-1, Delhi v. M/s Biorad (Supra) has discussed the said concept accordingly. Paragraphs 14 and 15 read as under: 14. According to the Tribunal, the agreement between the respondent/assessee and its Indian affiliate had been effective from 01.01.2010, and if, as contended by the appellant/revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1 Notably, this aspect is adverted to in paragraphs 17 to 23 of the impugned order. For convenience, the relevant paragraphs are extracted hereafter: “17. A perusal of the aforementioned provision shows that in order to qualify as FTS, the services rendered ought to satisfy the ‘make available’ test. Therefore, in our considered opinion, in order to bring the alleged managerial services within the ambit of FTS under the India-Singapore DTAA, the services would have to satisfy the ‘make available’ test and such services should enable the person acquiring the services to apply the technology contained therein. “18. As mentioned elsewhere, the agreement is effective from 01.01.2010 and we are in Assessment Years 2018-19 and 2019- 120.[sic…..20]. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year since 2010? 19. This undisputed fact in itself demolishes the action of the Assessing Officer/DRP. Facts on record show that the recipient of the services is not enabled to provide the same service without recourse to the service provider, i.e, the assessee. 20. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the Assessing Officer/ld. CIT(A) is 15 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. the incidental benefit to the assessee which has been considered to be of enduring advantage. 21. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. ” [Emphasis is ours] 15. We tend to agree with the analysis and conclusion arrived at by the Tribunal.” (emphasis supplied) 23. Therefore, even if it is fees for technical or consultancy services, it can be only where fees are paid in consideration for making available technical knowledge, experience etc. Thus the view of the AAR that SIPCL works closely and advises the employees of Petitioner and hence makes available the services is not correct. This view in fact suffers from fallacy since the agreement continues to operate till date. If the view of AAR is to be held as correct then the contract must stand concluded as once the services and the know how, skill etc is transferred to Petitioner, the need of continuing to render said services must end. This is factually not so as the CCA is in effect till date. 24. Considering the above discussion it is clear that the AAR has interpreted the requirements to be satisfied for 'make available' based on its own general notion of the said term without appreciating the applicable law on the subject and also reached an erroneous conclusion that the services availed are technical services. 25. Moreover, the AAR has not dealt with the issue relating to the 'Permanent Establishment' of SIPCL and there is no determination on the same. Of course, that was not a subject of reference before AAR. 26. Thus, we have no hesitation in holding that the impugned order dated 17th January 2012 of AAR suffers from legal infirmity and is quashed and set aside. 27. During the course of the arguments, Mr. Mistry stated that Petitioner only seeks relief prayed in clauses (a) and (b) of the petition and does not press the other prayers. Rule is thus made absolute in terms of prayer clauses (a) and (b) which read as follows – 16 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. “a) That this Hon'ble Court be pleased to declare that the transactions under CCA do not amount to being technical in nature per Article 13 of DTAA between India and UK and therefore, would not be taxable in India; b) That this Hon'ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari and/or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records and papers of the Petitioner's case and after examining the legality and validity thereof quash and set aside the impugned order dated 17.01.2012 passed by the Authority in AAR No. 833/2009, in the case of the Petitioner and further.” 28. It is made clear that that the Department is at liberty to take necessary steps as available to it in law including as to whether the subject will be covered under Article 7 of the DTAA. We express no opinion. In such proceedings, if taken, the time taken in the present proceedings will stand excluded for the purpose of limitation. 12. From the above it is observed that the Hon'ble High Court has categorically held that the services rendered by the assessee are not in the nature of technical service and are merely managerial in nature, though in the case of SIMPL, the same has a binding effect on the assessee for the reason that it arises out of the same CCA for availing General BSS. As the ruling of Hon’ble AAR holding that the same is liable to be taxed in India as ‘fee for technical service’ has been reversed by the Hon'ble High Court, we find no reason to uphold the order of the ld. A.O. who in fact has relied on the Hon’be AAR’s ruling to decide the issue in hand. We, therefore, deem it fit to allow the grounds of appeal raised by the assessee. As the issue relating to permanent establishment of the assessee is not specifically raised before us by both the sides in the grounds of appeal, except for the arguments enhanced by the ld. DR at the time of hearing, we decline to adjudicate on the same.” 5. We notice that for the year under consideration also the revenue has placed reliance on the decision of the AAR in the case of SIMPL to hold that the receipts towards BSS is to be treated as FTS in the hands of the assessee which has not been reversed by the Hon'ble Jurisdictional High Court. Since the BSS rendered by the assessee is arising out of the same CCA as in the case of SIMPL, we are of the 17 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. view that the decision of the Hon'ble High Court has a binding precedence in assessee's case also. Further the facts for the year under consideration are identical to AY 2009-10 and the revenue did not bring anything on record to controvert the same. Therefore in our considered view the above decision of the Co-ordinate Bench on the impugned issue is applicable for the year under consideration also. Accordingly, we direct the AO to delete the addition made towards BSS in the hands of the assessee. Ground No.3 & 4 of the assessee raised in this regard are allowed. Ground No.2 has become academic in view of our decision on Ground No.3 & 4. Treatment of access & cost allocation towards SUN software and SAP / GSAP software application Royalty 6. We heard the parties and perused the material on record. At the outset the ld AR submitted that the issue is identical to the issue contended in AY 2012-13 and that the coordinate bench has held the issue in favour of the assessee. We notice in this regard the below observations of the coordinate bench in assessee's own case for AY 2012-13 vide order dated 27.02.2025 - 6. The next issue for our consideration is whether the amount received by the assessee on account of cost allocation of SUN Maintenance Software application and GSAP maintenance charges is royalty under the DTAA between India and UK. In this regard the ld AR submitted that the assessee has migrated to GSAP from SUN software during the year under consideration and that the assessee has paid maintenance charges towards both the applications. The ld AR argued that it is a settled position that the amount received towards maintenance of computer software is not a payment of royalty since the charges paid are towards use of copyrighted item and not for the use of copyright itself. Therefore the ld AR argued that the provisions of section 9(1)(v) is not applicable as has been held by the AO. Our attention in this regard was drawn to the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (2021) 125 taxmann.com 42 (SC). 18 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 7. We in this regard notice that a similar issue has been considered by the Hon'ble Jurisdictional High Court in the case of CIT(LTU) vs. Reliance Industries P. Ltd. (2024) 164 taxmann.com 10 (Bom.) by placing reliance on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd.(supra). The relevant observations of the Hon'ble High Court is extracted below – “6. We have heard the Learned Counsel for the parties. We have been taken through the impugned orders passed by the Tribunal. 7. The Tribunal considering the provisions of the IT Act, as also the position in law as laid down in various decisions has observed that the assessee had made purchases of computer software from the residents of Denmark and Finland. It was observed that such purchases would fall within the provisions of the Double Taxation Avoidance Agreement (\"DTAA\") entered between India and these countries. The Tribunal also observed that a co-ordinate Bench of the Tribunal in the assessee's own case in ITAS No.2529/Mum/2008 and ITAS No.4587/Mum/ 2010 had held that in such cases similar remittances made to the residents of Germany and France, were held to be not liable for deduction of tax at source. The Tribunal, following the decision of its co-ordinate Bench, in assessee's own case, dismissed the appeal filed by the Revenue by the impugned order. 8. At the outset, Learned Counsel for the parties would fairly state that the question of law as raised in the present appeals, is no more res integra in view of the authoritative pronouncement of the Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471 In the said case the Assessing Officer, applying Article 12(3) of the DTAA entered between India and U.S.A. as also the provisions of Section 9(1)(vi) of the IT Act to the transaction between the parties, held that the transaction involved copyright, which attracted the payment of royalty and accordingly, tax was required to be deducted at source by the Indian importer. Since this was not done, it was held that the assessee was liable to make good the payment of TDS which it had not deducted. Also interest under Section 201(1)(A) of the Act was levied. The Appeal before the Commissioner was also dismissed. 9. In these circumstances, the proceedings had reached the Tribunal at the instance of the assessee. The assessee succeeded in these proceedings, with the ITAT setting aside the concurrent findings of both the authorities below. On such backdrop, the proceedings reached the High Court 19 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 10. The High Court of Karnataka, in similar proceedings, on examination of the End User Licence Agreement (\"EULA\") involved in such transactions found that what was sold by way of computer software, including the right or interest in copyright, which gave rise to the payment of royalty, would be an income deemed to have accrued in India under Section 9(1)(vi) requiring deduction of tax at source. The orders passed by the High Court were assailed before the Supreme Court. It is also required to be noted that similar issues had arisen before the Delhi High Court interalia in the case of DIT v. Ericsson A.B [2011] 16 taxman.com 371/[2012] 204 Taxman 192/343 ITR 470 and DIT v. Nokia Networks OY [2012] 25 taxmann.com 225/212 Taxman 68/358 ITR 259 (Delhi) The Delhi High Court however took a view contrary to the view taken by the High Court of Karnataka. The Supreme Court examined the issues as arising from the decisions of both the High Courts in the case of Engineering Analysis Centre of Excellence (P) Ltd (supra). The Supreme Court in its decision rendered in the said case upheld the view taken by the Delhi High Court in interpreting such transactions in the context of Section 9(1)(vi) of the Act. The Supreme Court held that considering the provisions of DTAA, there was no obligation on the persons mentioned in Section 195(1) of the Act to deduct tax at source as the distribution agreements, in the facts of the case did not create any interest or right in such distributors/end users, which amounted to the use or right to use any copyright. It was held that the provisions of Section 9(1)(vi) of the Act along with Explanation 2 and 4 thereof which dealt with royalty, not being more beneficial to the assessee, had no application in the facts of the case. It would be appropriate to extract the conclusion as rendered by the Supreme Court in which reads thus:- \"168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(v), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. 169. Our answer to the question posed before us, is that the amounts paid by resident Indian end- users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income 20 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. 170. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the AAR in Citrix Systems (AAR) (pra) is set aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed.\" (emphasis supplied) 11. It is not in dispute that transactions in the present case are similar to what had fell for consideration of the Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd (supra). Also there is no dispute that there is a DTAA entered with the countries in question, with whose residents the transactions were entered into by the assessee. 12. In the aforesaid circumstances, it is clear that the approach of the Assessing Officer in the present case was against the correct position in law as held by the Tribunal, and now also endorsed by the Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd (supra). In this view of the matter, we are in agreement with Mr. Madhur Agarwal that these four Appeals would not give rise to the question of law as noted by us hereinabove.” 8. In assessee's case the payments are made towards cost allocation of of SUN Maintenance Software and GSAP maintenance charges therefore we are of the view that the ratio laid down by the Hon'ble Supreme Court and the Jurisdictional High Court are applicable to assessee also. Therefore respectfully following the said decisions we hold that the amount received towards cost allocation of SUN Maintenance Software and GSAP maintenance charges cannot be treated as royalty and the addition made in this regard is not sustainable. Ground No.6,7 & 9 raised by the assessee in this regard are allowed. Ground No.5 & 8 on the same issue has become academic and left open. 7. The facts for the year under consideration being identical, respectfully following the above decision we hold that the amount received towards access & cost allocation towards SUN software and SAP / GSAP software application cannot be treated as royalty and the addition made in this regard is not sustainable. 21 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. Ground No.6 to 8 & 10 to 12 raised by the assessee are allowed and Ground No.5 & 9 are left open. Treatment of cost allocations in respect of SUN / GSAP maintenance charges do not qualify as FTS 8. During the year under consideration the assessee received cost allocation charges towards maintenance of SUN / GSAP charges. The AO alleged that these services are 'ancillary and subsidiary' to GSAP software application and treated the receipts as FTS under Article 13(4)(a) and Article 13(4)(c) of the DTAA. The AO also alternatively held that these receipts are royalty. 8.3. The DRP held that since SAP/GSAP software charges are royalty, maintenance charges for the said software are taxable under article 13(4)(a) of the DTAA as 'ancillary and subsidiary' to providing GSAP software application. Alternatively, the DRP also held that these charges to be akin to BSS and, therefore, and accordingly the receipts fall within purview of ‘make available’ in view of its findings for BSS and is taxable as FTS. Further, the DRP held that since these receipts are taxed as FTS, question of taxing the same receipts as royalty becomes infructuous. 9. The ld AR submitted that Article 13(4)(a) of the DTAA provides that fees for technical services means payment to any person in consideration for rendering of any technical or consultancy services which are ‘ancillary and subsidiary’ to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received. The ld AR further submitted that article 13(4)(a) of the DTAA can only be invoked when there is a payment which is chargeable to tax under article 13(3)(a) as royalty and further payment is made for technical or consultancy services which are ancillary and subsidiary to such royalty. The ld AR accordingly submitted that if there is no payment which is 22 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. chargeable to tax as royalty under article 13 (3)(a) of the DTAA, question of applicability of article 13(4)(a) would not arise. The ld AR argued that in assessee's case it has already been held that the receipt for giving access to software is not in the nature of royalty as defined in Article 13(3) of the DTAA and, therefore, the receipt for providing maintenance services cannot be treated as FTS under article 13(4)(a) of the DTAA. With respect to the alternate contention of the Revenue that receipt for maintenance services are akin to BSS and therefore, chargeable to tax under article 13(4)(c) of the DTAA, it is submitted that it has been held by the Hon’ble High Court and the co-ordinate bench of the Tribunal that BSS is not taxable as FTS as it does not fulfil the criteria of “make available technical knowledge, experience, skill, know how or processes.”. It therefore further submitted that as it is the case of the AO/ DRP that the fact for providing maintenance services is identical to providing BSS, the decision on taxability of BSS would equally apply to this as ground as well. 10. We heard the parties and perused the material on record. Before proceeding further we will once again have a look at Article 13(4) which according to the AO is applicable for receipts towards SUN / GSAP Maintenance charges – “ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. to 2.*** 3. For the purposes of this Article, the term \"royalties\" means: (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematograph films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret 23 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic 4. For the purposes of paragraph (2) of this Article, and subject to paragraph (5), of this Article, the term \"fees for technical services\" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3)(a) of this Article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of this Article is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design.” 11. A combined perusal of the clause (3) and (4) of Article 13 makes it clear that for the purpose of receipt to fall within the purview of FTS, it should be ancillary and subsidiary to the application or enjoyment of the right, property or information which is Royalty within clause (3). In assessee's case the impugned receipts are towards maintenance of the SUN/GSAP applications. We have while considering the issue of SUN / GSAP application charges being treated as Royalty, have already held that the said receipts are not in the nature of Royalty by following the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd.(supra). Accordingly the receipts towards maintenance of the SUN / GSAP application in our considered view will not fall within the purview of clause (4) of Article 13. Therefore the revenue's contention 24 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. that the receipt towards maintenance is FTS in nature is not tenable. Further from the perusal of DRP order we notice that the DRP has observed that the nature of receipts are similar to BSS receipts which we have already held does not fall within FTS since the same does not make available technical knowledge, experience, skill, know-how or processes. Therefore on that count also we are of the view that the revenue's contention is not sustainable. Accordingly we direct the AO to delete the addition made towards SUN / GSAP maintenance charges treating the same as FTS. Ground No.14 to 16 raised by the assessee are allowed and in view of the same Ground No.13 has become academic not warranting any adjudication. Treatment of cost allocations in respect of GTAS product costs as FTS 12. The ld AR submitted that reimbursement received by the assessee is reversed in subsequent year i.e., AY 2017-18 and therefore there cannot be any addition towards said receipts during the year under consideration. The ld AR made an alternate submission that if addition is made in the current year, then a corresponding deduction is to be allowed in AY 2017-18.Therefore, the ld AR submitted that although the assessee has a good case to argue on merits, the assessee does not wish to press the ground. Accordingly the Ground No.18 & 19 are dismissed as not pressed considering the reasons stated herein above. Ground No.17 has become academic and left open. Treatment of cost allocations in respect of GST scoping charges as FTS 13. During the year under consideration, the assessee incurred expenses towards customisation existing systems to comply with the GST regulations implemented in India. The assessee recharged the said costs to its Indian AE and the same was 25 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. reimbursed. The AO treated the said customisation receipts as FTS. The DRP held that these receipts are not independent service and very much part of BSS, thereby, holding that these services being akin to / part of BSS fall within purview of make available and is taxable as FTS. 14. The ld AR submitted that the GST scoping / customisation receipts are akin to the Go-Live charges of GSAP applications received during the earlier AYs and that the coordinate bench has held the said payments as not taxable in India. The ld AR therefore argued that the GST scoping / customisation receipts cannot be treated as FTS to be taxed in India. The ld AR further submitted that the DRP has held the impugned receipts as similar to BSS receipts which are held as not taxable in India by the coordinate bench. The ld AR accordingly argued that the impugned receipts are not taxable on both counts. 15. The ld DR relied on the order of the lower authorities. 16. We heard the parties and perused the materials on record. We have already held that the BSS charges are not in the nature of FTS by following the earlier orders in assessee's own case. We notice that the DRP has given a categorical finding that the GST scoping / customisation receipts are similar to BSS charges. Therefore we hold that the GST charges cannot be treated as FTS. Further GST scoping / customisation receipts are incurred towards modifying the existing systems especially the billing module to comply with GST regulations and the said services are carried out by third party service providers. The assessee has made payments towards the same which is allocated to the Indian AE who paid the same to the assessee. In our view the impugned receipts are not towards any services rendered by the assessee which makes available any technical knowledge or skill and cannot be treated as FTS. We have while considering the issue of receipts 26 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. towards SUN/GSAP application have held the same as not in the nature of Royalty. The GST scoping / customisation receipts are incurred as an enhancement to the existing systems the same do not fall with Clause (4) of Article 13 since the receipts towards the application is held to be not royalty. It is also relevant to consider the following observations of coordinate bench with respect to treatment of GSAP Go-live charges as royalty in the AY 2012-13 – 9. During the year under consideration the assessee received payments towards cost allocation for GSAP Go-Live application. The AO held that the receipt is a Royalty both under the DTAA and under section 9(1) of the Act. The ld. AR submitted that the assessee has entered into an agreement with IBM for procurement of licence of GSAP Software and the same is customized the requirements of the assessee. The ld. AR further submitted that the cost incurred towards the licence and for Go-Live are allocated to the Shell group companies on a cost to cost basis based on the number of users. The ld. AR drew our attention to the findings given by the DRP in para- 12.3.1 of the directions wherein the DRP has held that GSAP maintenance charges are similar to SUN Maintenance Charges to submit that the nature of software being accepted as identical the decision on the issue of SUN software is applicable to GSAP Software also. The ld. AR argued that the licence cost and the Go-live cost are incurred towards obtaining the right to use the GSAP Software and therefore, the decision of the Hon'ble Supreme Court in the case of Engineering Analysis (supra) is applicable for the impugned issue also. 10. We heard the parties and perused the record. The assessee during the year under consideration has migrated to GSAP Software and has incurred expenses towards procurement of licence to use the Software also expenses towards customization of the Software for Go-live. These expenses have been allocated across the group on a cost to cost basis based on the number of users. The contention of the AO is that the amount received by the assessee is in the nature of Royalty as per explanation-4 to section 9(1)(vi) of the Act. The argument of the assessee is that the amendment to section 9(1)(vi) cannot be read into the DTAA and thus the provisions as per DTAA which is more beneficial to the assessee should only be applied in assessee's case as per section 90(2) of the Act. In this regard it is relevant to consider the following observations of the Hon'ble Supreme Court in the case of Engineering Analysis (supra) – 100. Also, any ruling on the more expansive language contained in the explanations to section of the Income-tax Act would have to be ignored if it is wider and less beneficial to the assessee than the definition contained in the 27 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. DTAA, as per section 90(2) of the Income-tax Act read with explanation 4 thereof, and Article 3(2) of the DTAA. Further, the expression \"copyright\" has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems Asia Pacific Pty Ltd. (supra) does not state the law correctly and is the aside. 11. From the perusal of above finding, it is clear that the if the definition of Royalty as contained in the DTAA is more beneficial to the assessee then the same should only be applied as per section 90(2) of the Act. The term \"Royalty\" as per Article 13(3) of the DTAA between India and UK reads as under – 3. For the purposes of this Article, the term \"royalties\" means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. 12. A plain reading of the above article makes it clear that only when the payment is made towards the right to use the copy right the same would fall within the definition of Royalty under the DTAA. In assessee's case the amount received towards cost allocation of expenses incurred towards acquiring the licence to access GSAP Software and the cost incurred towards modification for Go-live does not result any right to use the copy right, but only the right to use the copy righted software of GSAP. Therefore in our considered view, the amount paid cannot be treated as Royalty under Article 13 of the DTAA between India and UK. Further the amount received by the assessee is on a cost to cost basis without any income element in it and on that count also, the amount received cannot be treated as taxable in India. In view of this discussion and, respectfully following the above decision of the Hon'ble Supreme Court, we hold that the receipt towards cost allocation of GSAP licence and Go-live of GSAP application cannot be treated as Royalty and the addition made by the AO in this regard is not tenable. Ground No. 28 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 11, 12, 14 & 15 are allowed. Ground No. 10 & 13 are left open in view of our decision in Ground No. 11, 12, 14 & 15. 17. In view of these discussions, we hold that the treatment of GST scoping / customisation receipts as FTS is not correct and the addition made in this regard is liable to be deleted. Ground No.21 to 23 are allowed and Ground No.20 has become academic. Treatment cost allocations in respect of IT service and local project costs as FTS 18. During the year under consideration, there was a need for the assessee to relocate warehouses / depots from existing locations to new locations, since the existing contracts with supplier expired. Accordingly, this relocation triggered the need for IT infrastructure / eRouter setup at new locations to ensure business continuity and the cost incurred towards the same are allocated. In furtherance of the same, the assessee received cost allocation charges towards IT service and local project costs. The AO though held that the same is in the nature of BSS treated the same FTS and alternatively as royalty. The DRP held that these receipts are not independent service and very much part of BSS. Thereby the DRP held that these services being akin to / part of BSS fall within purview of make available and is taxable as FTS. Subsequently, following the DRP directions, the AO in the final assessment order recorded that the said receipts are similar to BSS (i.e., taxable as FTS) and question of taxing the same receipts as royalty becomes infructuous. 19. We heard the parties and perused the material on record. From the perusal of the orders of the lower authorities we notice that the revenue has held the impugned services to be similar to BSS and accordingly held the same to FTS. We 29 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. have already held that the receipt towards BSS services are not in the nature of FTS. Further our findings with respect to GST scoping / customisation charges with regard to actual services being rendered by third party and that by rendering of IT services the assessee does not make available any technical knowledge or skill is also to relevant. Accordingly we hold that the treatment of IT services is not in the nature of FTS and cannot be taxed in India. Ground No.25 to 27 are allowed and Ground No.24 has become academic. 20. Ground No. 28 pertaining to interest under section 234B of the Act is consequential not warranting any separate adjudication. 21. In result, the appeal for AY 2016-17 is partly allowed. 22. From the perusal of the issues contended by the assessee through various grounds for AY 2017-18 to AY 2020-21 as tabulated in the earlier part of this order, it is clear that the issues are identical to the issues contended in AY 2016- 17. Therefore in our considered view, our decision with regard to the issues contended in AY 2016-17 are mutatis mutandis applicable to AYs 2017-18 to AY 2020-21 also. The ld AR during the course of hearing brought to our attention that for AY 2017-18, the SUN / GSAP maintenance charges are held by DRP as FTS only but the AO while passing the final assessment order, held the same as Royalty. In this regard we notice that the coordinate bench in assessee's own case while considering the issue of SUN / GSAP maintenance being treated as royalty has held that the same is not in the nature of royalty in Para 6 to 8 of the said order. Therefore, in our view our decisions pertaining to the impugned payments not being in the nature of Royalty and not liable to be taxed in India for AY 2012-13 are mutatis mutandis applicable to AY 2017-18 also. 30 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. 23. In result, the appeals for AY 2016-17 to AY 2020-21 are partly allowed. Order pronounced in the open court on 21-04-2025. Sd/- Sd/- (RAJ KUMAR CHAUHAN) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai 31 ITA No.7499/M/19, 1244/M/ 21, 995 & 2307/M/ 22 & 3317/M/ 23 M/s Shell International Petroleum Co. Ltd. Sr. No. Details Date Initial Designation 1 Draft dictated on PC 09.04.2025 Sr.PS/PS 2 Draft Placed before author 11.04.2025 Sr.PS/PS 3 Draft proposed & placed before the Second Member Sr.PS/PS 4 Draft discussed/approved by Second Member JM/AM 5 Approved Draft comes to the Sr.PS/PS JM/AM 6 Order pronouncement on Sr.PS/PS 7 File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk Sr.PS/PS 9 Date on which file goes to the AR 10 Date of Dispatch of order "