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

आदेश / ORDER

PER BEENA PILLAI, JUDICIAL MEMBER:

The present appeal has been filed by the assessee against the order passed by the ACIT, INT. Tax Circle 4(2)(1), Mumbai (hereinafter referred to as “Ld. AO”) u/s 143(3) r.w.s. 143(3) of the Income-tax Act, 1961, dated 17/12/2025 for A.Y. 2023-24 on the following grounds of appeal:-

“1) Ground 1 - General 2) Ground 2 - Final assessment order passed by the learned AO is bad in law 3) Ground 3, 4 and 5- Receipts from General Business Support Services (General BSS) does not constitute income, Receipts from General BSS does not qualify as Fees for Technical Services (FTS) 4) Ground - 6, 7 and 8 - Receipts towards reimbursement of IT costs does not constitute income, Receipts towards reimbursement of IT costs does not qualify as FTS 5) Ground 9 and 10 - Interest under section 234B of the Act 6) Ground 11 - Penalty u/s 270A of the Act”

The assessee is a Shell Group Company incorporated in the U.K. It is in the business of providing consultancy services to various Shell operating companies. It is engaged in provision of business support services and research & development/technical services. Since assessee is a tax resident of the U.K., in view of provisions of section 90(2) of the Act, it is entitled to the beneficial provisions of the India-UK Double Tax Avoidance Agreement (DTAA) which it had availed while filing its return of income. According to the Id. Assessing Officer, during the year under consideration, assessee was in receipt of the following which were not offered for taxation in its return of income:-

Sr. Nature of Receipts Amount in Rs. No. 1 Receipts towards cost allocation for Business 2248611796 Support Services ('BSS') 2 27539541 Receipts towards cost allocation towards reimbursements of IT cost

3.1. Ld. Assessing Officer issued the draft assessment order dated 21/03/2025 by making additions of Rs. 2,24,86,11,796/- on account of receipts towards cost allocation for BSS taxed as fees for technical services (FTS); Rs. 2,75,39,541/- on account of receipts towards cost allocation for IT services taxed as FTS/Royalty and.

Against the draft order, assessee raised its grounds of objections before the DRP.

The DRP dismissed the objections raised by the assessee by following it own directions for assessment years 2019-20 to 2022- 23.

On receipt of the DRP direction, the Ld.AO completed the assessment by passing final assessment order in conformity with the directions of DRP by assessing total income at Rs.2,27,61,51,337/-

Aggrieved by the order of the Ld.AO, the assessee is in appeal before this Tribunal.

Accordingly, Ground no.2 is dismissed as infructuous.

The Ld.AR referred to the following detailed explanation/submissions vide letter dated 28.02.2025:

“… Receipts towards General Business Support Services (BSS) 1.1 SIPC has entered into a Cost Contribution Agreement (‘CCA’) with SIMPL for BSS. A copy of CCA is enclosed as Annexure 3. 1.2 BSS rendered by SIPC under the CCA are primarily in the nature of management support, development and provision of promotional business plans, 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.

1.3 In this regard, SIPC wish to submit the examples of actual BSS rendered as follows:

Explanation in brief on Sr. Function the type of services Objective No. provided Finance related services provided under BSS agreement includes: • To support cost-out Finance Strategy VP • EVP initiatives, eliminate Finance & DS Finance 1 Finance unnecessary process, Controllers • Regional reduce duplicate and Controllers • The DS redundant reporting Management Information (“MI”) Team • Finance in the Business HR related services provided under BSS Completing competence agreement includes: • assessments for all men Human Executive VP • VP Class of 2 staff, Shell People Resources Function • VP HR Policy, Survey, Individual Processes and Systems • Performance Global & Regional HR services & operations IT related services provided under BSS agreement Streamlining of IT efforts includes: • Services are in to enable globalization the nature of providing within the Business IT hardware, creation of user and central IT account, hosting/storage • organization. Also, to scanning etc. • Routine/day enable business by 3 IT to day IT support services • focusing on business IT support to Shell end users outcomes, delivering fit • Technology enabled for business technology business strategies and solutions which empower plans • Information agility and profitable Management Risks • growth. Information Security & Compliance Explanation in brief on Sr. Function the type of services Objective No. provided Contracting and • Contract Management • To contract improvement 4 Procurement Performance Operational management process for (“C&P”) Excellence all Op Cos. Real estate related services provided under BSS Access control, agreement includes: • surveillance, incident Support services in management, etc. 5 Real Estate management of facilities, Defining and monitoring property related services • workplace policies and Facilities Management • standards HSSE & Asset Protection • Transactions & Projects Trading & Supply related services provided under BSS agreement includes: • Operations management (i.e. Enable the cost Trading and product volumes, 6 management of physical Supply distribution, etc.) • Terminal supply chains operations and logistics operations • Maintenance activities • Optimizing delivery operations Customer Operations related services provided under BSS agreement includes: • Order To help deliver the best to delivery process • in market customer Customer 7 Onboarding of new experience and business Operations customers • Change value at an affordable management services • cost. Project Management • Sales support ER related services provided under BSS agreement includes: • Understanding the external landscape and Communications To create business value articulating an appropriate 8 (External by building brand brand strategy to generate Relations (ER)) reputation demand using innovative methods • Support in maintaining strong relationships with media Explanation in brief on Sr. Function the type of services Objective No. provided partners, and JVs • Supporting global initiatives such as media releases, communication materials, sustainability reports, etc. Global Commercial related services provided under BSS agreement includes: • Sales and support through To streamline sales, innovative tools (For e.g. marketing, support Global Salesforce.com) • Global services across key 9 Commercials marketing support to areas, namely: • standard customer Lubricants • Marine • propositions, focal point for Aviation • Bio-Fuels global customers • distribution relationship, etc.) • Supply chain support

Cost allocation - hence no element of income and thus, not taxable

1.4 During FY 2022-23, SIPC has received a sum of Rs. 2,24,86,11,796/- by way of cost recharge for BSS to SIMPL.

1.5 As per the provisions of Section 9 of the Act, for any payment to a non- resident to be chargeable under the Act, it has to be received, accrued, arise, or deemed to receive, accrue or arise in India. These payments may be in the nature of, inter alia, interest, royalty, fees for technical services or where the source of income is in India; such income would be treated as income deemed to accrue in India. However, every receipt by a non- resident may not be income and hence not chargeable to tax under the provisions of the Act.

1.6 It is submitted that the receipts towards BSS are not liable to be taxed in India, as the same are in nature of cost recharge pursuant to the CCA and does not constitute income of SIPC under section 2(24) of the Act.

1.7 SIPC works on a cost-only arrangement i.e. the common costs incurred by SIPC for the various support services are charged to cost sharers including SIMPL, which avails such services on a cost basis. The costs are allocated to the entities availing the services on the basis of allocation keys depending upon the nature of cost. Further, the costs are not marked up and are charged to the cost sharers on the basis of actual costs incurred by SIPC.

1.8 The TP study report provides the details of cost allocation keys in respect of costs incurred in relation to each of the services. The allocation keys used for apportioning the costs amongst the service recipients have been determined by categorizing the service provided in different baskets. The same has been elaborated below:

Functional services cost – Functional services cost refer to the costs of globally provided common functional services such as finance, information technology, human resources, contracting and procurement, etc. Costs for such services are allocated based on the full-time employee equivalent, personal computer count and / or capital expenditure or operating expenditure for the function.

Regional charges – Regional charges refer to costs pertaining to services that are not rendered globally to all cost sharers carrying out a particular activity but only to cost sharers which benefit from such activity. Cost allocated are directly proportional to the ratio of the sales proceeds / volumes of the service recipients compared with total sales proceeds / volumes of all companies in the region.

Activity cost – The share of costs offer than functional service costs incurred by SIPC with respect to particular activity are determined by reference to charging methodology which reflects the business or Activity model. The activities pertain to business, commercial fuels lubricants, retail etc.

1.9 In view of the above context, attention of your goodself is also invited to Clause 6 of the CCA (copy of CCA is enclosed as Annexure 2). Cost Sharing for BSS provides as follows:

In consideration of General Business Support Services rendered to it, Company (“SIMPL”) shall pay to Shell (“SIPC”) the amounts which represent Company’s share in the Cost to Shell of the General Business Support Services (i) provided globally and (ii) rendered to a regional group to which Company belongs, for the year concerned as covered in the field of Company’s Activities. Further details are set forth in Appendix 4.

Company’s share for any Activity shall be determined using the Cost allocation keys for such Activity as set out in Appendix 4.

Shell undertakes that the Cost share calculation applicable to Company for any Activity shall be the same calculation as applicable to other Cost Sharers with cost contribution agreements similar to this Agreement for the same Activity.

In addition to this payment Company shall reimburse Shell, and Shell shall include Company in the relevant detailed costs incurred by Shell in connection with performing General Business Support Services under this Agreement, including but not limited to travelling and hotel expenses and reasonably living allowances of Shell’s and / or any Service Provider’s personnel rendering the General Business Support Services.”

1.10 Further, the “Cost” is defined in the CCA as under:

“Cost in relation to an activity undertaken by Shell (“SIPC”) other Service Provider means the total cost of such Activity namely (i) those cost referable to it which can be allocated directly, and (ii) an allocation of direct salary and labour burden costs determined by time writing or estimation of time and effort and (iii) indirect costs attributable to the direct labour costs but shall not include any element of profit.”

(Emphasis supplied)

1.11 In view of the above, it is submitted that since the payment received by SIPC is in the nature of various Shell entities towards sharing of expenses in relation to services utilized by the group companies, the payments received by SIPC towards the cost under such an arrangement are in the nature of cost allocations and hence, does not constitute income chargeable to tax in India.

In view of the above, we wish to draw your attention to following judicial precedents:

DIT vs. A.P. Moller Maersk 2016 (SC) (392 ITR 186)

It is clearly held that no technical services are provided by the agreement to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as fee for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share to the parent expenses incurred on these said systems and for maintaining those systems. It is re-emphasized that neither the AO nor the CIT (A) has stated there was any profit element embedded in the payments received by the assessee from its agents in India. Record shows that the assessee had given the calculations of the total costs and not only division thereof among the agents for reimbursement. We reiterate that the assessee have also even submitted before the Transfer Pricing Officer that these payments were reimbursement in the hands of the assessee and the reimbursement was accepted as such at arm’s length. Once the character of the payment is found to be in the nature of reimbursement of the expenses, it cannot be income chargeable to tax.(A copy of the judgement is enclosed as Annexure 3)

CIT v. Siemens Aktiongesellschaft (310 ITR 320) (Bombay HC)

The Bombay High Court held that “the amount received by the assessee by way of reimbursement could not be regarded as the revenue receipt particularly where the Tribunal had found that the assessee had received no sums in excess of the expenses incurred. Therefore, the impugned amount was not liable to tax in the hands of the assessee.

“We may gainfully refer to the judgment of a Division Bench of the Delhi High Court in Industrial Engineering Projects (P.) Ltd.’s case (supra). The Division Bench of the Delhi High Court was pleased to hold that reimbursement of expenses for actual costs and circumstances, be regarded as a revenue receipt and in the present case the Tribunal had found that the assessee received no sums in excess of expenses incurred. A similar issue had also come up for consideration before the Division Bench of the Calcutta High Court in Dunlop Rubber Co. Ltd.’s case (supra). The Division Bench was answering the following question:

Whether, on the facts and in the circumstances of the case, the amounts received by the assessee (English company) from M/s. Dunlop Rubber Co. (India) Ltd. (Indian company) as per agreement dt. 29-1-1957 constituted income assessable to tax?

On considering the issue, the Bench noted that the Tribunal was of the view that what was recouped by the Scottish company was part of the expenses incurred by it. The Court upheld the said finding. The Bench was pleased to hold that sharing of expenses of the research utilized by the subsidiaries as well as the head office organization would not be income which would be assessable to tax. A similar view was taken in Stewarts & Lloyds of India Ltd.’s case (supra). We are in respectful agreement with the view expressed by the Delhi and Calcutta High Courts.”(A copy of the judgement is enclosed as Annexure 4)

ABB Limited [2010] (322 ITR 564)

The Authority for Advanced Ruling (AAR) while holding that reimbursement of R&D cost cannot be taxable income has held as follows:

“… the cost contribution formula is evolved so as to ensure the distribution of the burden of actual cost amongst the participating entities. The fact that R and D Information can be accessed by the parties to CCA and the further fact that the licensed income derived by the limited commercial exploitation of IPR as per cl.7.5 would go to reduce the amount which the participants would have to contribute are clear pointers that an internal arrangement has been evolved by the participating group entities through a joint endeavor to reap the benefits of research conducted by an organized set up of R and D Board consisting inter alia of the representatives of those entities. It is clear, as stated by the applicant that ABB Zurich meets all the costs incurred by the for the purpose of recouping the costs that are contributed by the various participants and acts as a medium for organizing and providing the CRCs with the funds for the research that is carried out. … The manner in which the corporate funding will be arranged by the R and D Board and ABB Zurich based on budgeted cost and revised cost would indicate that the parties to CCA have arrived at methodology to reimburse the actual cost. We are therefore of the view that the payments made by the applicant to ABB Zurich cannot be treated as payments in the nature of royalties liable to be taxed in India.” (A copy of the judgement is enclosed as Annexure 5)

The Company wishes to respectfully submit that the facts of the BBS case would squarely apply to its own case. SIMPL and SIPC has also entered into a CCA for the provision of BSS. Though the nature of services in the case of ABB Ltd and the Company’s case are different, the underlying principle would remain the same. The payments made by SIMPL to SIPC are mere cost allocations which are allocated based on an agreed cost allocation key.

…………………………

1.14 Therefore, the position that cost allocations / reimbursement of costs cannot constitute income is well settled in law, as is evident from the principles emanating from various judicial precedents.

1.15 In light of the above submissions, it is respectfully prayed before your goodself that BSS receipts from cost allocations being reimbursement of costs do not constitute income in the hands of the Company and thus, are not liable for tax under the provisions of the Act.

Without prejudice to the above contention, it is submitted that the payment towards BSS do not constitute FTS under Article 13 of India-UK Tax Treaty. In this regard, our submissions are as under:

Provisions of the Act

1.16 Explanation 2 to Section 9(1)(vii) of the Act defines, ‘fees for technical services’ as “consideration for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include…”

Taxability under India-UK Tax Treaty

1.17 Section 90(2) of the Act gives an option to the Company to apply the provisions of the Act or the provisions of the applicable tax treaty, whichever is more beneficial. This view is supported by the Andhra Pradesh High Court in the CIT v Visakhapatnam Port Trust [144 ITR 146 (AP)] and also by Circular No. 333 dated 2 April 1982 (A copy of the judgement and circular is enclosed as Annexure 6 as a copy).

SIPC is a tax resident of UK and accordingly, SIPC is entitled to the beneficial provisions of the India-UK Tax Treaty.

1.18 Further, Article 13(4) of the India-UK Tax Treaty defines ‘fees for technical services’ as “payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provision 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.”

1.19 Based on the above-mentioned definitions, it is submitted that there is a fundamental difference in the manner in which ‘FTS’ is defined under the Act vis-à-vis the India-UK Tax Treaty in as much as the requirement of paragraph 4(c) of the Article 13 of the India-UK Tax Treaty is absent in Section 9 of the Act.

Whereas under Section 9 of the Act mere rendering of technical services is enough for the services to be taxable as ‘FTS’, Article 13 of the India- UK Tax Treaty requires that technical knowledge, experience, etc. should be made available to the recipient.

Since, the definition of FTS is narrower under the India-UK Tax Treaty than under the Act, the provisions of the India-UK Tax Treaty are more beneficial than the provisions of the Act and the Company has resorted to the provisions of the India-UK Tax Treaty.

1.20 Further, we submit to your goodself that no receipts are in the nature of fees received by SIPC for granting enjoyment of any rights, property, information, or equipment as described in Paragraph 3(a) and 3(b) to the aforesaid Article 13 of the India-UK Tax Treaty. Accordingly, it is submitted that the BSS would not fall within the purview of Article 13(4)(a) and 13(4)(b) of the India-UK Tax Treaty.

1.21 Under the India-UK Tax Treaty services will fall within the category of technical services, if all of the following conditions are satisfied:

The services are technical or consultancy services;

The services “make available” technical knowledge, skill, experience, etc. or consist of the development and transfer of a technical plan or design; and

Such knowledge, skill, experience, etc. is technical.

Given the above, under the India-UK Tax Treaty the services would be taxable as “fees for technical services” only if the services make available technical knowledge, experience, etc.

SIMPL.

1.22 It is submitted that a mere rendering of services does not qualify as FTS unless further / an additional condition is satisfied, i.e. the services make available technical knowledge, experience, skill etc. Also, from jurisprudence it is reasonable to conclude this further/additional condition is intended to apply to cases where the person utilizing 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, etc. must remain with the person utilizing the services even after rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills, etc. from the person rendering the services to the person utilizing the same is contemplated by the Article to qualify as FTS.

1.23 Meaning of the term ‘Make Available’

The meaning of the term ‘make available’ has not been defined under the India-UK Tax Treaty. However, an inference can be drawn from the India- USA Tax Treaty which has an identical definition in the paragraph 4(b) of Article 12 defining ‘fees for included services’. The Memorandum of Understanding to the India-USA Tax Treaty (‘MOU’) explains the term ‘fees for included services’ and related terms such as make available, which can be used for the purpose of analysis of the definition of term for technical services under the treaty.

The term ‘make available’ has been defined in the MOU to mean that technology can be said to have been ‘made available’ when the person acquiring the service is enabled to apply the technology embedded in the services provided to him, independently. The technical knowledge or skills of the provider would be imparted to and absorbed by the recipient so that the receiver can deploy similar technology or techniques in future without depending on the provider. The mere fact that provision of the service may require technical input by the person providing the service would not per-se mean that technology has been made available.

1.24 Applicability of explanation in the MOU of India-USA Tax Treaty to India-UK Tax Treaty

In this context SIPC wishes to submit that the India-USA Tax Treaty was signed on 20 December 1990 (i.e. prior to the India-UK Tax Treaty which was signed on 17 February 1993). Since India being the common participating to the USA and UK Tax Treaties, we humbly submit that Government of India should have intended to give same interpretation to identical defined term ‘fees for technical services’. Therefore, we submit that since the definition of the term ‘fees for technical services’ under the India-UK Tax Treaty is identically worded as that of the definition in the India-USA Tax Treaty, reference to the MOU to the India-USA Tax Treaty should be made to understand the provisions of Article 13(4)(c) of the India-UK Tax Treaty.

1.25 Further, the business support services mentioned above, it is apparent that the said services do not involve any technical know-how or skill etc. which force the services to fall under the ambit of FTS.

Also, we wish to reiterate that the term ‘make available’ is akin to the concept of transfer and involves the transfer of technical knowledge, experience, skill, knowhow, or processes to the recipient by the service provider so that the recipient can apply the same on his own. From the description, it is apparent that the BSS provided by SIPC are mainly for standardization and to support day to day business operations and that it does not provide any technical knowledge or skill through the BSS to SIMPL.

1.26 In view of the above, payments received by SIPC for providing BSS cannot be construed as FTS under the Act and since the services are not technical or consultancy in nature and rendering of such services does not make available any technical knowledge, skill, experience, etc. to the service recipient (i.e. SIMPL), the same cannot be termed as FTS under Article 13(4)(c) of the India – UK Tax Treaty.

1.26 In view of the above, we wish to draw your attention to following judicial precedents:

Mumbai ITAT in the case of Raymond Limited vs DCIT (86 ITD 791) [2003] (Mum ITAT) held that the MOU contained in the India – US Tax Treaty can be used as a guide in interpreting the definition of FTS in other treaties as well, which use similar language as the definition contained in the India-US Tax Treaty. It was upheld the principle that unskilled services are rendered which would enable the recipient to apply the technology it would not constitute ‘fees for included services’ under the Tax Treaty. It has laid down the following criteria to determine whether a service would satisfy ‘make available’ condition to be classified as FTS under the Tax Treaty:

Mere rendering of services is not roped into FTS 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, etc. must remain with the person utilizing the services, even after the rendering of the services has come to end.

A transmission of the technical knowledge, experience, skill, etc., from the person rendering the services to the person utilizing the same is contemplated by the Articles.

Some sort of durability or permanency of the result of the ‘rendering of services’ is envisaged which will remain at the disposal of the person utilising the services.

The fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skill, etc. A copy of the said judicial precedent is enclosed as Annexure 8.

1.27 Further, the Delhi High Court (WP 1502/2012) has remitted back the AAR ruling in case of Perfetti Van Melle Holding B.V. (AAR no 869 of 2010) to determine the taxability of payments under India-Netherlands Tax Treaty after considering the Memorandum of Understanding attached to India-USA Tax Treaty. (Copy of ruling is enclosed as Annexure 9)

Based on the above-mentioned jurisprudence, the Company wishes to submit that reference to the MOU to the India USA Tax Treaty can be made while interpreting similar provisions of the India-UK Tax Treaty.

………………………………..

CIT vs De Beers India Minerals Pvt. Ltd. (2012) (208 Taxman 406) (Kar HC) (A copy of the judgement is enclosed as Annexure 12)

Shell Global Solutions International BV vs. ITO [2016] 157 ITD 24 (Ahmedabad - ITAT) (A copy of the judgement is enclosed as Annexure 13)

Sandvik Australia Pty. Ltd. vs. DDIT, IT [2013] 141 ITD 598 (Pune - ITAT) (A copy of the judgement is enclosed as Annexure 14)

Ernst and Young Private Limited (323 ITR 184) (AAR)

Bharati AXA General Insurance Co Ltd (326 ITR 477)

R.R Donnelley India Outsource Private Limited (AAR No. 883 of 2010)

M/s Invensys Systems Inc. v. DIT (2009) 317 ITR 438 (AAR)

Anapharm Inc., In re (2008) 305 ITR 394 (AAR)

DCIT vs Boston Consulting Group Private Limited (2005) 280 ITR 1 (Mum)

DIT vs Guy Carpenter & Co [2012] [207 Taxman 121] (Del ITAT)

Endemol India P. Ltd (340 ITR 361)(AAR)

DDIT(IT) vs IATA BSP India (64 SOT 290) (Mum ITAT)

CIT (International Taxation) - 1, DELHI vs. Bio-Rad Laboratories (Singapore) Pte Ltd [2023] 155 taxmann.com 646 (Delhi - HC)

US Technology Resources (P.) Ltd vs. CIT, Thiruvananthapuram [2018] 97 taxmann.com 642 (Kerela)

1.32 Based on the above, it is submitted that the term ‘make available’ is akin to the concept of transfer and involves the transfer of technical knowledge, experience, skill, know-how, or processes to the recipient by the service provider so that the recipient can apply the same on his own. The BSS services provided by SIPC are services to support its business operations and related issues and that it does not provide any technical knowledge or skill through the BSS to SIMPL.

In view of the above, SIPC submits that the BSS provided will not be construed to be in nature of fees for technical services under Article 13(4) of the India-UK Tax Treaty. Further, as SIPC does not have business connection / PE in India, branch in India receipt towards BSS is not taxable in India by virtue of the provisions in Article 7 of the India-UK Tax Treaty.

Order of the Hon’ble High Court in case of SIMPL, setting aside the AAR ruling (AAR no. 833/2009)

1.33 To learned AO while passing the assessment order for earlier years, majorly relied upon the AAR ruling in SIMPL (342 ITR 2012) while considering the receipts from BSS as taxable in India.

SIMPL had challenged the said AAR ruling in Hon’ble Bombay High Court on its bonafide belief that tax is not required to be deducted at source as the BSS is not chargeable to tax in India. In this regard, Hon’ble Bombay High Court held that receipts by SIPC towards BSS do not make available technical knowledge, experience etc. and does not amount to fees for technical service. A copy of the judgement is enclosed as Annexure 15.

Further, relying on the aforesaid order Hon’ble High Court, the Hon’ble Mumbai ITAT, for AY 2009-10 and AY 2011-12, has held that the payments received by SIPC for providing General BSS would not amount to ‘fees for technical services’. Accordingly, directions has been given to assessing officer to delete the addition made towards BSS in hands of SIPC. Copy of the orders are enclosed as Annexure 16.

Your goodself may appreciate that the legal precedents in assessee’s own case, on the facts of the case and submission discussed in the earlier points that these services do not “make available” any technology. SIPC humbly submits to your goodself that receipt of Rs. 2,42,07,82,544 from provision of BSS are not taxable in India even though SIMPL has deducted tax at source.

1.34 Without prejudice to the above submission, the Company submits that FTS as per Article 12(5) of the tax treaty does not specifically include managerial services within its ambit. Therefore, BSS being managerial nature, are not taxable as per Article 12(5) of the tax treaty.

The Company also wishes to place reliance on the following rulings wherein it is held that the similar services are not taxable in India as they are managerial services in nature and not technical.

Steria (India) Ltd v. CIT [2016] 72 taxmann.com 1 (Delhi High Court)

DCIT v. Hyva Holding B.V. [2019] 106 taxmann.com 24 (Mumbai ITAT) Everest Global Inc. vs DDIT [2023] 156 taxmann.com 404 (Delhi ITAT)” 6.1. It is submitted that the facts in the present year are identical with the facts considered by this Tribunal in assessees own case for assessment year 2022-23 in ITA No. 1751/Mum/2025, vide order dated 11/02/2026. The Ld. AR submitted that identical issues relating to validity of assessment proceedings, taxability of receipts from General Business Support Services (BSS), reimbursement of IT costs, characterization of such receipts as Fees for Technical Services (FTS), were decided in favour of the assessee.

6.2. The Ld. DR fairly conceded that the issues raised in the present appeal are covered by the aforesaid order of the Coordinate Bench and that the facts for the year under consideration are identical.

We have perused the submissions advanced by both sides in light of records placed before us.

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 DAA 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 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.

7.1. Further, this Tribunal in assessees own case for assessment year 2022-23 in ITA No. 1751/Mum/2025, vide order dated 11/02/2026 observed as under:-

“4.1. Based on the above sample data, assessee contended that said services do not involve any technical know-how or skill, etc. These are provided mainly for standardization and to support the day-to-day business operations. On this assessee contended that whereas under Explanation 2 to section 9(1)(vii) of the Act, mere rendering of technical services is enough for the services to be taxable as FTS, however, Article 13 of the India-UK DTAA requires that technical knowledge, experience, etc. should be made available' to the recipient. Assessee thus, availed the treaty benefit as its BSS would not fall under Article 13(4)(a)/(b) of the said treaty. 4.2. Assessee strongly asserted before the ld. DRP that it has received a favourable order from the Hon'ble jurisdictional High Court of Bombay in the case of a group concern Shell India Markets Pvt Ltd in WP No. 10788 Of 2012 against the ld. AAR order wherein it was held that the receipts towards BSS do not ‘make available’ technical knowledge, experience etc and do not amount to fees for technical services as per Article 13 of India- UK DTAA. Thus, not taxable in India. Hon'ble Court held that technical services and consultancy services can be taxed in India only if the same are ‘made available’ as per Article 13 of the India-UK DTAA. According the Hon'ble High Court, services in question relate to managerial services not involving anything of a technical nature. It thus held that even if it is fees for technical or consultancy services, it can be brought to tax only where fees are paid in consideration for ‘making available’ technical knowledge or consist of development or transfer of a technical plan or technical design. 4.3. Ld. DRP while dealing with the objections of the assessee stated that identical objections had come up for its directions in AYs 2021-22, 2020- 21, 2019-20 and earlier years, in assessee’s own case. It referred to its directions on this issue given in its order for AY 2014-15 and reproduced it in the impugned order. 4.3. Taking note of the factual position as stated above, we are of the considered view that the material facts and circumstances in the present year are same as the earlier years. The issue under consideration is squarely covered favourably for the assessee by the order from the Hon'ble jurisdictional High Court of Bombay in the case of its group concern Shell India Markets Pvt Ltd (supra) wherein it was held that the receipts towards BSS do not 'make available' technical knowledge, experience etc, and do not amount to fees for technical services as per Article 13 of India-UK DTAA. Thus, not taxable in India. For this judgment, Id. DRP stated that Revenue is in the process of filing SLP before the Hon'ble Supreme Court. According to it, it is essential to maintain the issue legally alive in order to protect the interest of the revenue and thus, affirmed the approach of the Assessing Officer by not accepting the grounds of objections raised by the assessee.

4.4. We also note that this is a legacy issue and dealt by the Co-ordinate Bench in assessee's own case for past several assessment years including Assessment Year 2009-10, 2011-12, 2012-13 to 2021-22, consistently holding in favour of the assessee. For the first time, this came up in Assessment Year 2009-10 in ITA no. 1253/Mum/2014 vide order dated 10.09.2024 and has been subsequently followed in all the other years. There being no material change in the factual matrix and the position of law, respectfully following the decision of the Hon'ble jurisdictional High Court of Bombay in Shell India Markets Pvt Ltd (supra) as well as decisions of the Coordinate Bench in assessee's own case for past several years, ground no. 3 and 4 raised by the assessee are allowed. Ground no. 2 mentions about 'cost recharge' for general BSS. The same is rendered academic and left open in view of our finding arrived at for ground nos. 3 and 4.

5.1. Arguments of the assessee for not offering these receipts for taxation are two-fold - a) Both the receipts were received as cost allocation and are in the nature of reimbursements. There being no element of income and thus, not taxable;

b) Receipts towards IT services provision and software license do not qualify as 'Royalty/FTS' under India-UK DTAA and also in view of decision of Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT [2023] 432 ITR 471 (SC).

5.2. This issue is also a recurring one and stands covered in assessee's favour in its own case by the decisions of the co-ordinate benches from AY 2011-12 to AY 2020-21. Further, the issue involved is covered by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Put. Ltd. V. CIT(A) [2023] 432 ITR 147, wherein it held that consideration for use of computer software is not payment of royalty for use of copyright. Also, reliance placed by Id. DRP on the directions issued in the case of SITI BV for AY 2020-21 and 2017-18 is partially misplaced. Coordinate bench of ITAT vide order dated 04.04.2024 in ITA No. 3339 of 2023 and another order dated 11.05.2022 in ITA No. 1245 of 2021, while dealing with SITI BV's case, has left the issue of reimbursement/income open. Furthermore, it decided the issue in respect of IT services alleged to be FTS, in favour of SITI BV. In view of the above discussion and factual matrix remaining the same, respectfully following the decision of the Hon'ble Apex Court as well as of the Co-ordinate Bench in assessee's own case for past several years, ground no. 6 is allowed. Ground no. 5 mentions about 'reimbursement' for the concerned receipts. The same is rendered academic and left open in view of our finding arrived at for ground no. 6.

a. Improvement to Customer Relationship Management system to integrate data in order to enable having a single view of the customer

b. Transitioning of a real estate system to enable better customization and integration with Shell ecosystem

c. Establishment of Fuel Stock management system to enhance monitoring d. Enabling liaison interface for logistic service provider

e. Vendor loyalty system

f. Providing latest update patches into a particular system

6.1. We note the observation of Id. DRP whereby it is mentioned that this issue had come up for its directions in AY 20201-22 and earlier years. Ld. DRP in AY 2016-17 considered the issue and gave its directions to bring it to tax. Ld. AO has allegedly relied on the clause of service agreement which in fact was furnished for BSS, and treated the impugned services to be akin to BSS while holding that they are in the nature of FTS, taxable under the Act and under Article 13(4)(c) of the India-UK DTAA. On the alternative treatment as Royalty, Id. DRP followed its own directions for AY 2020-21 and earlier AYs, especially AY 2016-17 wherein it was held that question of taxing the same receipts as royalty becomes infructuous in the light of judgment of Engineering Analysis (supra).

6.2. From the discussion made and perusal of material on record, it is noted that cost allocation charges towards IT costs is treated akin to BSS by the Ld.AO/DRP. Issue with respect to treatment of BSS charges as FTS stands covered in favour of the assessee in ground nos. 3 and 4 of the present appeal before us wherein the following has already been considered -

(i) Shell India Markets Pvt Ltd vs. UOI (supra)

(ii) AY 2016-17 to 2020-21 vide ITAT Mumbai order dt. 21.07.2025 (supra)

6.3. We are of the considered view that the material facts and circumstances as well as the applicable law have not undergone any change when compared to the earlier years Considering the discussion made in the above paragraphs, since BSS charges have already been held not to be FTS, ground nos. 8 and 9 are allowed. Ground no. 7 mentions about 'reimbursement' for the concerned receipts. The same is rendered academic and left open in view of our finding arrived at for ground no. 8 and 9.

7 Ground nos. 10 for grant of TDS credit, ground nos. 11 and 12 for levy of interest u/s. 234B and ground no. 13 for incorrect amount of refund issued to the assessee needs verification of records by the ld. Assessing Officer. Assessee has already moved an application u/s. 154 for rectification which is pending for disposal by the ld. Assessing Officer. Accordingly, for these stated grounds, ld. Assessing Officer is directed to verify the records and dispose the pending application, giving correct effect to the same. 8. Ground no 14 for imposition of penalty u/s. 271(1)(c) is premature and consequential which does not need separate adjudication 9. In the result, appeal of the assessee is allowed.” 7.2. 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 Id. A.O. who in fact has relied on the Hon'ble AAR's ruling to decide the issue in hand. We, therefore, deem it fit to allow the grounds of appeal raised by the assessee.

Accordingly, Grounds 3-5 raised by the assessee stands allowed.

8.1. It is noted that these are consequential to the issue raised in ground 3-5 hereinabove. As we have considered allowed Grounds 3-5 have been allowed in favour of assessee these becomes academic and infructuous.

Accordingly Grounds 6-8 is dismissed as infructuous.

The Ld.AR submitted that the interest payable under section 234B needs to be recomputed. Accordingly, Ld.AO is directed to re- compute the interest under section 234B having regard to the findings herein on merits.

Accordingly Grounds 10 raised by the assessee stands allowed for statistical purposes.

In the result appeal filed by the assessee stands partly allowed.

Order pronounced in the open court on 14/05/2026.

Sd/- Sd/- ARUN KHODPIA BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 14/05/2026 SC, Sr. P.S.

Copy to:

SHELL INTERNATIONAL PETROLEUM COMPANY LIMITED, C/O DELOITTE HASKINS & SELLS CHARTERED ACCOUNTANTS LLP, ONE 1 INTERNATIONAL CENTER, TOWER 3, 27TH - 32ND FLOOR, SENAPATI BAPAT MARG, ELPHINSTONE ROAD (WEST), MUMBAI-400013, MAHARASHTRA DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) - 4(2)(1), MUMBAI, DEPUTY COMMISSIONER OF INCOME TAX 2 (INTERNATIONAL TAXATION)- 4(2)(1), KAUTILYA BHAVAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE