TaxTMI 
TaxTMI 
2025 (4) TMI 1431
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....e final assessment order is, thus, time-barred and liable to be quashed. 2 The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in assessing the total income of the Appellant at INR 185,49,51,884 by making total amount of impugned additions amounting to INR 147,18,47,338. 3. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recovery of INR 5,90,40,520 received from Shell India Markets Private Limited ('SIMPL"), and Shell Energy India Private Limited ('SEIPL') for CHR Recruitment fees as Fees for Technical Services ('FTS') under Article 12 of India-Netherlands Double Taxation Avoidance Agreement ('DTAA' or 'Tax Treaty'). 4. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recovery of INR 20,99,21,002 received from SIMPL, SEIPL., BG Exploration and Production India Lim....
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....on the facts and in law in treating the aggregate cost recoveries of INR 1,51,58,312 received SIMPL for Brand advertising services as FTS under Article 12 of India-Netherlands DTAA. 12. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 13,28,308 received SIMPL for Media relation services as FTS under Article 12 of India-Netherlands DTAA. 13. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 49,34,988 received SIMPL for Social Performance services as FTS under Article 12 of India-Netherlands DTAA. 14. The learned AO has erred on the facts and in law and learned DRP has further erred in confirming the action of the learned AO on the facts and in law in treating the aggregate cost recoveries of INR 43,39,584 received SIMPL for ER Strategy and Planning services as FTS under Article 12 of India-Netherlands DTAA. 15. The learned AO has erred on the facts and i....
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....ese services are directly covered by the aforesaid orders. 3.1. For the remaining 8 services, although the services are different, however, the legal contention that in the instant facts the services do not qualify as Fee for Technical Services, since the services do not "make available" technology to the recipient of services has been upheld in favour of the assessee in the order passed by ITAT for A.Y. 2009-10 to 2018-19 and the assessee wishes to rely on the observations made by the ITAT qua the "make available" clause in the aforesaid order. Thus the Ld. Counsel filed a Comparative Chart for each grounds of appeal which reads as follows: Shell International B.V. AY 2021-22 Comparitive Chart of Grounds of Appeal for AY 2021-22 Sr. No Grounds of Appeal Outcome of ITAT Order of AY 2009-10 to AY 2018-19 Outcome of ITAT Order of AY 2020-21 Grounds of Appeal for AY 2021-22 Pg. and Para Number of Legal Compilaton Order Quantum of adjustment as per Final Assessment Order 1 barring assessment - Not Pressing - - Ground No. 1 NA NA 2 Time General Ground - - Ground No. 2 - - 3 CHR Recruitment....
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.... - Ground No. 19 - 2,091,385 20 Penalty Ground - - Ground No. 20 - - * The said services were not provided during AY 2009-10 to AY 2018-19, hence the issue did not arise. 4. Ld. CIT DR appearing for the Revenue could not dispute above legal position and admitted that the issues are covered by Coordinate Bench decisions in assesse's own case for the earlier assessment years. 5. Now we deal each Ground raised by the assessee. 5.1. Regarding Ground No. 1 the Ld. Counsel for the assessee submitted that the assessee is not pressing this Ground No.1 vide letter dated 23-12-2024 recording the same Ground No.1 is dismissed as NOT PRESSED. 5.2. Regarding Ground No. 2 is a general ground and does not require any specific adjudication and the same is dismissed. 6. We found that Ground No. 3 (Taxability of CHR Recruitment Fees), Ground No. 7 (Taxability of External Information Services), Ground No.8 (Taxability of Real Estate Corporate Travel Services), Ground No. 9 (Taxability of Health Ecotox Services) and Ground No. 10 (Taxability of IT Services) have been specifically dealt with in the order passed by the Co-ordinate Bench for A.Y. ....
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....ew that the services qualify as fee for technical services since under the CHR recruitment service, the expertise and experience of the global recruitment and attraction team of the assessee is being offered to its affiliates. The nature of work performed by the Shell group companies is highly technical in nature. To attract such highly technical staff, industry experience and expertise is a sine qua non. The global recruitment and attraction team has accumulated such experience and expertise in conducting recruitment of highly technical staff. This team provides consultancy and assists the regional recruitment team of the affiliates in the regular recruitment process apart from the group related activities such as laying path to talent acquisition and presenting the Shell group as an attractive place. The costs incurred by the global recruitment team are shared across various Shell entities which have availed such consultancy services of the recruitment team possessing wide experience in the field. Thus, the critical decision-making function of recruitment has been performed by the affiliates through the assistance/consultancy of the assessee. Hence clearly identifiable and highly....
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....ardware system, the assessee has recharged the cost incurred. 25. The Ld. Assessing Officer was of the view that under the Shell inter-com charges, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of expat services work performed by the Shell group companies is highly technical in nature. This team provides consultancy and assists the regional team of the affiliates in providing services in the nature of tax administration. The costs incurred by the assessee company are shared across various Shell entities which have availed such facilities. Thus, Shell intercom function has been performed by the affiliates through the assistance/consultancy of the assessee. Hence it is established that clearly identifiable and highly specialized services, requiring expertise and experience have been provided by the assessee. 26. Further, the Ld. Assessing Officer was of the view that in all the above three services, that providing of such services would invariably lead to imparting of suitable skill sets / knowledge in the hands of the affiliates in the area in which the services are rendered with consequent im....
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....t made to Swiss company for rendering such consultancy services amounted to 'fee for technical service' liable to tax in India. The Hon'ble SC observed that as the factual matrix in the case at hand would exposit, NRC had acted as a consultant. It had the skill, acumen and knowledge in the specialized field i.e. preparation of a scheme for required finances and to tieup required loans. The nature of service rendered by the NRC, can be said with certainty would come within the ambit and sweep of the term 'consultancy service' and, therefore, it has been rightly held that the tax at source should have been deducted as the amount paid as fee could be taxable under the head 'fee for technical service. Accordingly, the Assessing Officer relied upon the aforesaid decision to come to the conclusion that the instant services were in the nature of consultancy services, and hence in the view of the aforesaid decision rendered in the context of India-Swiss tax treaty, the services qualified as fee for technical services. 28. The assessee is in appeal before us against the aforesaid services being taxed as fee for technical services under the Act, read with Ind....
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....the aforesaid services. Further, the argument of the Counsel for the assessee that the services qualify as managerial services is also flawed, since looking into the nature of services these are primarily technical/consultancy services and fall squarely within the definition of fee for technical services under the India-Netherlands tax treaty. Further, so far as the argument of services been rendered on a cost to cost basis is concerned, the assessee has not been able to establish that there is no profit element/income element during the course of rendering the services, even if the argument were to be accepted that in absence of any income element, the services are not taxable in India. The profit and loss account presented by the assessee is a self serving documents and nothing concrete has been placed on record to show that services have been rendered on cost to cost basis. Further, in absence of valid agreement in place for the period under consideration, the nature of services is also not clear to decide to what extent protection of "make available" clause is available to the assessee. 30. We have heard the rival contentions and perused the material on record. ....
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....espective associated enterprises, which have been incurred by the assessee in rendering the services. In the instant case, though the assessee submitted/contended that while charging for the services rendered, the assessee has only recovered the cost incurred in rendering the aforesaid services and nothing over and above the cost which has been incurred for rendering the various services, has been recovered from it's associated Enterprises. However, from the facts placed on record, the assessee, in our view (and as also noted by the Department for some of the Assessment Years under consideration) has not been able to establish that only the cost which has been incurred for rendering the services through its various employees etc alone has been recovered from its group companies. It is not a case where the assessee has incurred certain costs in purchasing certain third party software or obtained these services from a third party etc, which have been reimbursed/recovered on cost to cost basis from its associated Enterprises India. In this case, we observe that the employees of the assessee are engaged in providing certain services, and the assertion of the assessee is that the precis....
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....pertaining to, involving, or characteristic of a particular art, science, profession, or occupation, or the applied arts and sciences generally. In CBDT v. Oberoi Hotels India (P.) Ltd. [1998] 97 Taxman 453, the Supreme Court reiterated the view that the term 'technical services' included professional services. In the case of Dean, Goa Medical College v. Dr. Sudhir Kumar Solanki [2001] 7 SCC 645, the question was whether the expression technical institutions' takes within its fold the medical colleges. The Supreme Court observed that "the dictionary meaning of the word "technical" is also "professional" and is used in contradistinction with pure sciences to prepare the professionals in applied sciences". However, we would like to observe that it is not any or every professional service that amounts to technical service. Professionalism and an element of expertise should be at the back of such services. There is a decision of Andhra Pradesh High Court in which the ambit of expression 'technical service' was considered. In G.V.K. Industries Ltd. v. ITO [1997] 228 ITR 564 (AP), SSM Quadri, J. speaking for the Division Bench rejected the argument of the ass....
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....ical design." 36. The scope of the term "make available" was discussed at length in the case of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791, in the following words: "Whereas Section 9(1)(vii ) stops with the 'rendering' of technical services, the DTA goes further and qualifies such rendering of services with words to the effect that the services should also make available technical knowledge, experience, skills, etc., to the person utilizing the services. The making available in DTA refers to the stage subsequent to the 'making use of stage. The qualifying word is 'which'- the use of this relative pronoun as a conjunction is to denote some additional function the 'rendering of services' must fulfil. And that is that it should also 'make available' technical knowledge, experience, skill, etc. Thus, the normal, plain and grammatical meaning of the language employed, is that a mere rendering of services is not roped in unless the person utilising the services is able to make use of the technical knowledge, etc., by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill, ....
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....nce, hence, payment was taxable in India as FTS. The Tribunal allowed assessee's appeal holding that payments made could not be considered as royalty or FTS and hence, no TDS was required to be deducted. It was found that US Company did not have any permanent establishment in India. Further Tribunal in its order had noted that scope of work was to generate customer leads using/subscribing customer data base, market research, analysis, and online research data and that service provider had not made available any technical knowledge, experience, know-how, process to develop and transfer technical plan or technical design. The High Court by impugned order held that in view of admitted fact that services were utilized in USA, findings returned by Tribunal did not call for any interference. The Hon'ble Supreme Court dismissed the SLP filed by revenue against said impugned order of High Court. 39. Further, in our considered view, the decision of GVK industries supra is also not relevant to the instant facts, since in such case, the issue for consideration before the Hon'ble Supreme Court was whether the services relating to obtaining loan qualifies as managerial serv....
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....sessee provides consultancy and assists the regional team of the affiliates in managing real estate transactions and leveraging of global relationships and contract management with key suppliers and real estate information technology tool. The critical decision-making function of real estate consultancy has been performed by the affiliates through the assistance/consultancy of the assessee. As per the Ld. Assessing Officer, identifiable and highly specialized services requiring expertise and industrial experience of the global support team of the assessee have been provided by the assessee and the nature of work performed by the Shell group companies is highly technical in nature The AO thus concluded that the assessee, through its personnel, provided 'technical services' to assessee, especially since the DTAA definition of FTS expressly includes the provision of the services of personnel. The AO further concluded that the services performed by the assessee would invariably lead to imparting of suitable skill sets / knowledge in the hands of the affiliates with consequent improvement in experience and skill set of the local employees of the affiliates. The Ld. Assessing Off....
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....tity, which inter alia, includes certain services in relation to the Physical Access Control System ('PACS') being implemented at each location. This requires experience and expertise of highly technical and trained staff. Thus, in such a scenario it cannot be said that technical knowledge, experience, skill etc has not been made available to the Indian entity. It is seen that the advice and assistance rendered by the assessee to the Indian entity are not transient in nature and are capable of being used by the Indian entity on its own. Health Ecotox services: 83. During the year under consideration, the assessee rendered Health Ecotox services to SIMPL which pertains to "One Health IT System". The One Health IT system is for keeping and maintaining confidential medical information of Shell employees. The system is managed by Shell Health. The cost incurred for these services has been allocated between group companies using these services based on the actual number of full time employee per entity. As per the assessee, the fee is in relation to keeping and maintaining confidential medical information of Shell employees and therefore represents commercial / managem....
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....the amounts received are taxable as per the DTAA. The services are enduring and they help in promoting the business of the affiliates. The employees of the affiliates are in a position to, actually they are expected to use the knowledge gained, in the business of the affiliates. Thus, knowledge and knowhow are made available to the affiliates. Hence, on an understanding of the overall effect of the services, it has to be held that the technical knowledge, experience, and skill are made available to the affiliates. 86. The assessee is in appeal before us against the aforesaid order passed by Assessing Officer holding the services as fees for technical services under the Act read with the Tax Treaty. Before us, the arguments of the Counsel for the assessee remain the same as discussed in earlier paragraphs while dealing with other services which were held to be FTS for Assessment Year 2011-12. 87. In our considered view, in view of our observations made in the preceding paragraphs, we are of the considered view that in respect of the aforesaid services, the condition of "make available" is not satisfied and the Department has not brought anything on record to demons....