2023 (10) TMI 771 - AT - Income Tax

Shell Global Appeals Win: Tribunal Favors Assessee on Royalty, FTS, and Interest Levy; TP Adjustment Remanded.

Shell Global Solutions Internat ional BV, C/o. BSR Associates & LLP Versus Deputy Commissioner of Income Tax, International Taxation-I, Ahmedabad

Shell Global Solutions Internat ional BV, C/o. BSR Associates & LLP Versus Deputy Commissioner of Income Tax, International Taxation-I, Ahmedabad - TMI Issues Involved:1. Transfer Pricing Adjustment2. Software Royalty3. Fees for Technical Services (FTS) from HLPL, HPPL, and HPCL4. Taxability of Revenues from Larsen & Toubro (L&T)5. Levy of Interest under Sections 234A, 234B, 234C, and 234DSummary of Judgment:1. Transfer Pricing Adjustment:The Tribunal noted that the assessee, M/s. Shell Global Solutions International B.V., had provided services to its Associated Enterprises (AEs) at rates significantly lower than those charged to third parties. The Transfer Pricing Officer (TPO) made upward adjustments for the discrepancies. The assessee argued that no adjustments should be made as the transactions were at Arm's Length Price (ALP) in the hands of the Indian AEs. The Tribunal referred to the case of Filtrex Technologies Pvt. Ltd. and concluded that ALP has to be determined in the hands of the assessee irrespective of acceptance in the hands of AEs. The matter was remanded to the TPO for fresh consideration.2. Software Royalty:The assessee received revenues from Indian entities for software licenses. The Assessing Officer (AO) treated these revenues as royalty under Section 9(1)(vi) of the Act and Article 12 of the India-Netherlands DTAA. The Tribunal referred to the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd., which held that payments for software do not constitute royalty. The Tribunal ruled in favor of the assessee and allowed the appeal.3. Fees for Technical Services (FTS) from HLPL, HPPL, and HPCL:The AO treated revenues from services provided to HLPL, HPPL, and HPCL as FTS under Section 9(1)(vii) of the Act and Article 12 of the India-Netherlands Tax Treaty. The Tribunal noted that the services did not 'make available' technology to the recipients, a requirement under the DTAA for classification as FTS. Citing the Karnataka High Court's decision in CIT vs. De Beers Indian Minerals Pvt. Ltd., the Tribunal ruled that the services did not qualify as FTS and allowed the appeal.4. Taxability of Revenues from Larsen & Toubro (L&T):The AO taxed revenues from L&T for services related to overseas projects under Section 9(1)(vii) of the Act. The Tribunal observed that the services were rendered outside India and payments were received outside India. Referring to the Gujarat High Court's decision in Motif India Infotech Pvt. Ltd., the Tribunal concluded that the source of income was outside India and allowed the appeal.5. Levy of Interest under Sections 234A, 234B, 234C, and 234D:The assessee contested the levy of interest, arguing that for years prior to FY 2012-13, Section 209(1)(d) allowed reduction of tax deductible at source while computing advance tax. The Tribunal referred to the Supreme Court decision in Mitsubishi Corporation, which held that the proviso to Section 209(1) applies prospectively from AY 2012-13. The Tribunal ruled in favor of the assessee and allowed the appeal.Conclusion:The Tribunal allowed the appeals of the assessee for statistical purposes, remanding the transfer pricing issue to the TPO for fresh consideration and ruling in favor of the assessee on other issues.