TMI Blog2011 (12) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 - - - Dated:- 21-12-2011 - Justice P.K. Balasubramanyan, V.K. Shridhar, JJ. RULING 1. The applicant is a company incorporated in India and is a tax resident of India. Its associated enterprises are Shell Global Solutions International BV (SGSI BV) and Shell International Exploration and production BV (SIEP BV). The applicant mainly renders technical services to overseas Shell group companies using desktop based IT applications and claims to be eligible for tax holiday under section 10B of the Income-tax Act in respect of income generated from export of services to the overseas Shell group entities. Shell had set up as part of its global finance functional plan, Shell Shared services (Asia) BV(SSSABV). That company incorporated in Netherlands is supporting the global finance functions of Shell by carrying out common activities across the countries in one sector by bringing them all into one export specialist area. It is designed with the aim of standardization of processes within a strong control framework. It is also aimed at cost effective deployment of standard system and processes while maintaining control to a high standard with clear accountabilities. SSSABV in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to claim the application of the Double Taxation Avoidance Convention (DTAC) between India and Netherlands, its contract being with a company incorporated in Netherlands and which is controlled from Netherlands. It was therefore entitled to rely on paragraph 5 of Article 12 of the India-Netherlands treaty read with the protocol thereto, relating to the most favoured nation clause, to contend that the services received by it from SSSABV do not fall within the purview of Article 12.5(a) of the India-Netherlands Convention. What the applicant was receiving was not technical or consultancy services in terms of the Convention. Moreover, the services were not being made available to the applicant within the meaning of the said paragraph of Article 12. Therefore, the business support services provided to it by SSSABV, is not technical services and the remuneration paid by it for receiving such services was not fees for technical services under Article 12 of the Convention. Since SSSABV did not have a permanent establishment in India in terms of Article 5 of the convention, the payment made by the applicant to SSSABV being the business income of SSSABV, is not taxable in India. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployee of the applicant was being trained by SSSABV for availing the services. It is financial accounting related work that has been out sourced to SSSABV. If it all there was any training required, that would be given to the personnel of SSSABV to understand the process of the applicant and vice - versa. Once a particular process has been out sourced to SSSABV, then it would be the responsibility of the SSSABV to carry out the activities of that process and then report the same to the applicant. No training in hardware, software, accountancy etc. is required to be given to the personnel of the applicant. The applicant has also relied upon some decisions and Rulings in support of its stand. 5. In its submission submitted after the arguments were completed, based on a doubt raised whether it was India-Netherlands Convention that applied or the India- Philippines Convention that applied, the services being rendered by SSSABV Philippines branch, the applicant submitted that it was India-Netherlands Convention that applied because SSSABV was incorporated in Netherlands, was the tax resident of Netherlands and was controlled and managed from Netherlands. The Philippines branch was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion, training and advisory. Imparting of knowledge is involved. The contract is for 3 years. After three years, obviously the applicant itself can do it. That obviously means that the service is being made available to the applicant. In any event, an apportionment has to be made. A portion is related to technical services and another portion to management and consultancy services. In its reply on behalf of the applicant, the stand of the Revenue is controverted and its original submissions reiterated. 7. It is argued on behalf of the applicant that what is involved is the nature of the payment made by the applicant to SSSABV for providing financial services relating to accounts, billings etc. to the applicant. These services are financial services and they are not technical services. Therefore, going by paragraph 5 of Article 12 of the Double Taxation Avoidance Convention (DTAC) between India and Netherlands, the payment is not taxable in India in the absence of SSSABV having a permanent establishment in India and consequently, the applicant has no obligation to withhold tax on the said payment in terms of section 195 of the Act. The essential contention on behalf of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Philippines. It appears to us that this aspect may not matter, as the software is used by the Philippines branch of SSSABV for rendering the services to the applicant and not by the applicant itself, on the facts as now disclosed. Similarly, whether SSSABV Netherlands, has intellectual property rights on the software used, also does not appear to be material. As we see it, the Netherlands company is providing through its branch, output to the applicant through the services included in the agreement. From a look at the distribution of responsibilities amongst the two companies shown in the annexure, it is seen that SSSABV provides services to the applicant without any involvement of the applicant. In that context, it cannot be said that anything is made available to the applicant in terms of the agreement. It is also seen that the customer care centre is handled by SSSABV Netherlands through its branch in Philippines and a timing is fixed for contact. In one sense, it appears to be service through back office, rather than a support service. Since the services are rendered by SSSABV Netherlands though through its branch in Philippines, we see no occasion for taking the view, on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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