SHELL INDIA MARKETS PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(4), MUMBAI

ITA 4828/MUM/2024Status: DisposedITAT Mumbai19 November 2025AY 2020-21Bench: SHRI AMIT SHUKLA, JUDICIAL MEMBER\n&\nMS. PADMAVATHY S (Accountant Member)100 pages
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What did the Tribunal hold?

The Tribunal decided the issues as follows: Regarding the Provision of SBO IT services (Bengaluru) and Provision of SBO services (Chennai), the judgment indicates that these were part of the substantial transfer pricing adjustments made by the TPO and upheld by the DRP. The assessee's grounds of appeal extensively challenged the TPO's selection of comparables, functional and risk analysis, and the rejection of its own analysis and adjustments for working capital and risk. The Tribunal's detailed findings and reasoning on these specific issues are not fully captured in the provided excerpt, but the appeal is directed against the TPO/DRP's confirmation of these adjustments. The judgment notes that the assessee's arguments regarding the nature of services and comparables were detailed. Regarding the Provision of Technical Services under the P&T division, E&P segment, the Tribunal acknowledged the assessee's argument that these services are rendered 'at-cost' under PSCs and global policy, supported by an expert opinion. The opinion highlighted that charging cost only is not conflicting with the arm's length principle under specific conditions, including identical charges to related/non-related members, absence of entrepreneurial risk for service companies, government contracts stipulating cost-only charges, and flexibility under OECD Guidelines. The Tribunal noted the DRP's reliance on previous year's directions and the need for consistency with the revenue's stand. The provided excerpt does not contain the final decision or reasoning of the Tribunal on this specific issue, only the arguments presented and the DRP's observations.

What were the facts?

Shell India Markets Private Limited (the assessee) is an Indian subsidiary engaged in downstream oil operations. For Assessment Year 2020-21, it declared a total income of Rs. 215,80,20,615. The case was selected for scrutiny, and the Transfer Pricing Officer (TPO) proposed aggregate transfer pricing adjustments of Rs. 536,75,63,935 across various services, including SBO IT services, SBO services, technical services, cost allocation, and mark-up on recoveries. The Assessing Officer (AO) incorporated these adjustments and also made a corporate tax disallowance of Rs. 8,82,155 under section 40(a)(ia). The Dispute Resolution Panel (DRP) substantially upheld the TPO's actions. The final assessment order was passed by the AO on 31 July 2024, confirming the adjustments and disallowance. The assessee is in appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the upward adjustment of INR 109,94,08,144 in respect of Provision of SBO IT services (Bengaluru) by the Appellant to Associated Enterprises (AEs) is at arm's length under Chapter X of the Income-tax Act, 1961. The assessee argued that the TPO erred by not appreciating its business model, functional, asset & risk analysis, and economic analysis, and by rejecting its comparable companies without cogent reasons, while accepting non-contemporaneous comparables with different profiles. The assessee also contended that its services are basic IT/ITeS and not high-end, and it should receive benefits for working capital and risk adjustments. The revenue's arguments are not explicitly recorded on this specific point, beyond the TPO's initial proposal and the DRP's upholding of it. 2. Whether the upward adjustment of INR 102,56,73,395 in respect of Provision of SBO services (Chennai) by the Appellant to AEs is at arm's length under Chapter X of the Act. Similar to the IT services, the assessee argued that the TPO failed to appreciate its analysis and erred in selecting comparables. The revenue's arguments are not explicitly recorded beyond the TPO's proposal and DRP's confirmation. 3. Whether the upward adjustment of INR 48,62,63,073 for provision of Technical Services under the Project & Technology (P&T) division, E&P segment, is at arm's length. The assessee contended that these services are core technical functions under Production Sharing Contracts (PSCs) and are rendered strictly on an 'at cost' basis, with no mark-up, as per global Shell group policy and industry practice. It argued that this 'at-cost' model is a quasi-external CUP and satisfies the arm's length principle, supported by expert opinion. The revenue, through the TPO and DRP, proposed applying a mark-up based on comparables used for ITES, which the assessee disputed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA,Section 40(a)(ia),Section 234B,Section 234D,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘H’ BENCH

Before: SHRI AMIT SHUKLA & MS. PADMAVATHY S

For Appellant: Shri Ajit Jain a/w. Siddesh
For Respondent: Shri Ajay Chandra, CIT DR
Hearing: 21/08/2025Pronounced: 19/11/2025

PER AMIT SHUKLA (J.M): This appeal by the assessee is directed against the final assessment order dated 31 July 2024 passed under section 143(3) read with section 144C(13) and section 144B of the Income-tax Act, 1961, in pursuance of the directions issued by the Dispute Resolution Panel, Mumbai, under section 144C(5) for the assessment year 2020–21. The controversy before us straddles substantial transfer pricing adjustments across multiple business segments of the assessee, together with certain corporate tax disallowances and consequential iss

The order continues below.

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