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Shell Global Solutions International BV Versus Income Tax Officer, Ward 1 (4) ) , Baroda

2015 (12) TMI 142 - ITAT AHMEDABAD

Taxability of receipts as fees for technical services - Indo Dutch DTAA - whether provisions of the Indo US tax treaty cannot be read into the provisions of Indo Dutch tax treaty?- Held that:- Learned CIT(A) was clearly in error in holding that the provisions of the Indo US tax treaty cannot be read into the provisions of Indo Dutch tax treaty. As clearly stated in the MoU to the Indo US tax treaty, which stands incorporated in the Indo Dutch tax treaty as well by the virtue of MFN clause, “unde .....

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e, which do not involve or transmit the technology, the same cannot be brought to tax as fees for technical services. An example of this type is a service is set out in example no. 7 to the MoU appended to the Indo US tax treaty, which is adopted in respect of Indo Dutch tax treaty as well- as noted earlier in this order

As long as the Assessing Officer can demonstrate, after collecting necessary details from the assessee, that the non taxable consideration component (i.e. considerati .....

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itate this apportionment. We are, however, not inclined to conduct this exercise directly at the stage of second appeal. We, therefore, remit the matter to the file of the Assessing Officer by upholding the plea of the assessee in principle and directing the Assessing Officer to apportion the consideration for basic refinery package on the above lines. - Decided in favour of assessee for statistical purposes. - I.T.A. No.: 1283/Ahd/2010 - Dated:- 10-11-2015 - Pramod Kumar AM and Kul Bharat JM Fo .....

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gar, Ahmedabad [CIT (A)] erred on the following grounds, which are independent, separate/alternative and without prejudice to one another: 1. The learned Commissioner of Income-tax (Appeals), Gandhinagar, Ahmedabad [hereinafter referred to as CIT(A)] erred in holding that the revenues earned by the Appellant for provision of commercial services are in the nature fees for technical services and taxable in India. 2. The learned CIT(A) has erred in rejecting appellant's claim to seek nontaxabil .....

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part is devoid of any basis, logic and is self-contradictory. • The learned CIT(A) erred in holding that the argument of 'make available' either does not apply or cannot be pinpointed by the appellant. • The learned CIT(A) erred in holding that the neither there is any relevance of Memorandum of Understanding ('MOU') to Indo-US DTAA in facts of the case nor can this MOU in that context extendable to Indo-Netherlands DTAA. 3. The learned CIT(A) has erred in rejecting the .....

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U of the India-US DTAA which explains the said term. 5. The learned CIT(A) has erred in rejecting the law laid down by various judicial pronouncement wherein it has been held that in interpreting the language of a treaty, reliance can be placed on other tax treaties where identical language is used, since the Government can be considered to have contemplated the same meaning to be assigned to the same term in the other tax treaties. 6. The learned CIT(A) has erred in rejecting the appellant' .....

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the BRP. 8. The learned CIT(A) has erred in interpreting Clause 1.1 of Article 1 of the Technical Service Agreement to conclude that the total time spent for service rendered in connection with BRP cannot exceed 3,600 manhour i.e 1,200 manhour per contract yea. This is because, the aforesaid limit applied to services rendered by the appellant under the category of 'Help desk services' which were to be rendered within the BRP and not for the various services to be rendered under the BRP. .....

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with section 195 of the Act, interest under Section 234B and Section 234C of the Act should not be charged. 11. Your appellant reserves the right to add, amend , alter or vary all or any of the above grounds of appeal as they or their representative may think fit . 3. The issue in appeal lies in a rather narrow compass of material facts. The assessee before us, i.e. Shell Global Solutions International BV, is a company incorporated in, and tax resident of, the Netherlands. During the course of t .....

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ohren Limited, in addition to fees for commercial services aggregating to ₹ 7,69,29,360 received from Reliance Industries Limited. So far as the reimbursements receipts are concerned, the matter was decided in favour of the assessee, in principle, by the CIT(A) and the matter rests there. We are, therefore, concerned with the second aspect, i.e. receipts for commercial services aggregating to ₹ 7,69,29,360. As far as this receipt is concerned, the Assessing Officer required the asses .....

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ld still not qualify as FTS as they do not make available any technical knowledge, experience, skill, know-how, or process, or consist of the transfer of technical plan or technical design as per the definition under the tax treaty . Reliance was placed on the decisions of this Tribunal in the cases of Raymonds Limited Vs DCIT [(2003) 86 ITD 791 (Mum)] and CESC Limited Vs DCCIT [(2003) 86 ITD TM 653 (Kol)]. None of these submissions, however, impressed the Assessing Officer. The Assessing Office .....

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s also held that these services are in the nature of technical or consultancy services and, therefore, taxable @ 10% as per (Indo Dutch) DTAA . As for the judicial precedents cited by the assessee in respect of connotations of make available , the Assessing Officer brushed aside the same. He was of the view that this expression is not defined in the Income Tax Act or the DTAAs signed by India with various countries , and, therefore, one has to look forward for its meaning in the general dictiona .....

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text . The Assessing Officer then referred to some more google searches justifying the meaning as making accessible . He then proceeded to summarize his findings, at page 12 of the assessment order, as follows: This clearly suggests that the words make available which were used in treaty in that context, and the treaty too suggests that these services in the nature of technical knowledge, skill etc were offered or made accessible to the other party, and it never meant that that the other party s .....

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n proceeded to deal with memorandum to the India United States Double Taxation Avoidance Agreement [(1991) 187 ITR (Statute) 102; Indo US tax treaty, in short] which provides that in the case of technical training , technology will be deemed to have been made available . On the basis of this analysis, the Assessing Officer finally treated the entire amount as taxable @ 10% on gross basis under Article 12 of the Indo Dutch tax treaty by, inter alia, observing as follows: In view of the above disc .....

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services provided to RIL is not only technical in nature but is also making available technical knowledge, experience, skill, know-how which RIL is to benefit from such expertise. RIL has utilised these expertise for furthering its own business interest and therefore the remuneration paid would fall within the ambit of FTS of Indian Netherlands tax treaty. Hence it is clearly established that services are covered by definition of FTS under Indian Netherlands tax treaty and shall be taxed @ 10% a .....

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te basis, relatable to the commercial services rendered by the assessee. The other 50% of the consideration for basic refinery package services as also entire consideration for certain optional services has been considered, by the assessee himself, as taxable and the due taxes, as applicable under Article 12 of the Indo Dutch treaty, were paid thereon. As to the nature of commercial services rendered by the assessee, the assessee submitted as follows: The scope of services to be rendered by Appe .....

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in commercial as well as technical matters relating to designing, engineering, installation, operation, maintenance and trouble shooting in refineries round the world and the same form a part of the existing library of Appellant. None of the deliverables have been specifically prepared for RIL and the same are also being provided to other members of the Royal Dutch Shell club. 2.2 RIL employee s who would be engaged in the day-to-day operations of the refinery would be referring to the above ma .....

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short periods. The agreement envisages that the above services to be provided by the personnel of Appellant would be in respect of various commercial as well as technical aspect of day to day operation of our refinery. 2.3 The various commercial aspects in respect of which services will be provided by the personnel of Appellant under the Basic Refinery Package are as under: (i) RIL would be included in the mailing list of Appellant and accordingly, RIL would receive regular updates in the form o .....

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end these conferences to enhance RIL s vision of improving profitability and efficiency which can then be implemented in their refinery. (iii) Appellant would benchmark RIL s refinery every year with reference to other refineries and give their findings as to where RIL s refinery stands and shall identify the areas for improvement. Since Appellant has an excellent record of operating the maintaining oil refineries all over the world, the benchmarking exercise would make a comparison of RIL s ref .....

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under the above agreement which can be used in our procurement activities for better negotiations, selection of better products (alternative products), alternative sources of suppliers/manufacturers around the world with objective to minimise cost of input materials and thus improve profitability of RIL s refinery. (v) The hydrocarbon management procedure contained in the abovementioned manual/guidelines can be used by RIL for analysing fuel and loss figures obtained in RIL s refinery during ope .....

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iverable and services to be provided by Appellant under the BRP, Appellant would also provide to RIL consultancy services and assistance in the various commercial and technical aspect of the day-to-day operations of our refinery which are not covered under the scope of BRP, as and when specifically requested by RIL from time to time. The services to be rendered by Appellant under the optional services would include review/audit of any part of the plant from the stand point of design, operability .....

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ngement with the Indian client, the assessee had also supplied certain goods in the form of deliverables under the basic refinery package. Since the consideration for basic refinery package included consideration for outright purchase of these deliverables, in the form of manuals etc, it is not taxable as fees for technical services. These deliverables, as also the explanation justifying that major portion of the services rendered under the BRP is commercial in nature, are as follows: Sr List of .....

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an made Vitreous Fibers(HSE) Benchmarking training seminar Fitness to work (HSE) Repetitive strain injury in office environment Group HSE Management System (Feb-2002) TA Management Best Practice M-122 Manufacturing Business Economics Profits and principles - does there have to be a choice ? Performance and Efficiency Conference Year 2002 Impact services and technology to improve margins Reliance Laboratory Efficiency - February 2003 Fuels Product Quality - June 2004 Help Desk Query Consolidated .....

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is intended as a source of informal information on all matters in the field of planning and scheduling of interest to staff active in the area. Each of the news letter issue covers various topics in the field of planning and scheduling. 3. Guidelines for Business travel and Office working These guidelines are for the benefit and protection of the staff that are engaged in any type of business activity away from their primary work location. 4. Business Continuity and Contingency Planning Action .....

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idance for process owners who will be leading the management of their business processes - Provide background information to management and senior staff involved in the continuous improvement of business process Accordingly this guideline covers the following commercial aspect of refineries in detail, namely - How to select the critical business process - How to analyse business process - How to identify potential improvements and put in place measurement and controls so that the process owner c .....

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ineries to identify performance Gaps between their current position and the best performers in the industry. The main focus is to provide a basis of the improvement of Operational Performance. The information provided in the said document can be used for further analysis and benchmarking, a reference document and as guide for target setting. 9. Roads Transportation of goods, Equipment and Product (HSE) This guide sets outs the Group s requirements for effective safety management in Road Transpor .....

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verse outcomes (near misses). It sets out rules for the reporting of incident by Shell companies and joint ventures. 11. Man Made Vitreous Fibers ( MMVF )(HSE) MMVF include products containing refractory ceramic fibers, Fiberglass and mineral wool. This guideline establishes requirements for managing and working with MMVF because available toxicity information and recommendations from manufacturers support controlling exposures to these materials. 12. Benchmarking training seminar This is the ma .....

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uter use is a medical condition affecting the neck, upper back, shoulders, wrist or hand. RSI are the most commonly reported work related health problem. This document, one of the Shell Group HSE Advisor Panel s Yellow Guide (YG) series provides management tools and examples of best practices to address this issue. 15. Group HSE Management System (Feb-2002) The Group HSE Management System is a reference document that defined in one place the various HSE policies, standards and procedures that ei .....

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finery optimisation - medium/long term for options evaluations - a methodology to tackle economic evaluations and present results to assist business decisions 18. Profits and principles - does there have to be a choice ? This is a report about values. It provides evidence of how the Statement of General Business Principles is put into practice, Shell s views on significant global issues affecting the society and the environment and Shell s contribution to the Society. 19. Performance and Efficie .....

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rspirit, refining and oil marketing and upstream. 21. Reliance Laboratory Efficiency - February 2003 As a part of the process of continuous improvement, RIL wished to compare their laboratory with Shell facilities in terms of manpower efficiency and numbers of samples/tests. This document records the finding of Shell, based on the questionnaire which was developed to identify and gain insight into the factors that influence laboratory efficiency. 22. Fuels Product Quality Refinery News ( FPORN ) .....

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el and other personnel during the functioning of refinery. 1. Oil Movement Newsletter The Oil Movement News letter contains general information/articles on Oil and Gas industry, which are contributed by refineries from all over the world. Further this newsletter aims to maximise the synergy by bringing together the full range of specialism involved in Oil Movements. 2. Hydrocarbon Logistics Newsletter The hydrocarbon logistics newsletter is intended as a source of informal information on all mat .....

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tinuity review and development of a Crisis Management Process. 5. Planning and scheduling (Decision support) This is short PPT presentation on integrated planning and scheduling and on processes, tools and organisation. 6. Business Process Management guideline This guideline - Provide guidance for Quality Management Advisors, who will be involved with training for any facilitation in business processes selection and analysis - Provide guidance for process owners who will be leading the managemen .....

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uct Quality The commercial services under this category are aimed at providing integrated solutions to best meet both the challenges faced by refineries i.e. to reduce the cost and improve the product quality. 8. Shell Bench Making 2001 Volume-1 and 2 Benchmarking is one of the modules in the Shell Global Pacesetting programme. It is only the start to Operation Performance improvement. The objective to benchmarking is to allow client refineries to identify performance Gaps between their current .....

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ervisory staff in developing safe driving policies and procedures for their Rod Transport operations and inclusions with HSSE case document. 10. Incident classification, investigation and reporting (HSE) This document provides guidance on the classification, investigation and reporting of incidents which results in injury or illness and in damage to assets, the environment or company reputation. It also addresses incidents that had no adverse outcomes (near misses). It sets out rules for the rep .....

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ar conducted at their training centre Leeuwenhorst , Netherlands. 13. Fitness to work (HSE) The purpose of this document is to ensure that a lack of Fitness to Work (FTW) does not result in significant injury or illness, risks o the business or risk to the community or company reputation and to comply with the Group Minimum Health Management Standard. 14. Repetitive Strain Injury ( RSI ) in office environment (HSE) RSI from personal computer use is a medical condition affecting the neck, upper b .....

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roup. 16. TA Management Best Practice This document provides a PPT presentation of the better practices in Turnaround Management 17. M-122 Manufacturing Business Economics The aforesaid training course is intended to provide participant with - a global perception of the refinery as a business segment with Oil products - a working knowledge of the basic tools and techniques used for economics evaluations in refineries: - short term for refinery optimisation - medium/long term for options evaluati .....

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ce and Efficiency Conference held at Jamnagar Manufacturing Complex in India on 11 to 15th March 2002 . 20. Impact services and technology to improve margins This editorial provides an extensive portfolio of technical and business solutions that actively improve the operations and bottom line cost of companies in the following industries: additives, chemicals, gas and liquefied natural gas, hydrocarbon logistics, industrial markets, motorspirit, refining and oil marketing and upstream. 21. Relia .....

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times a year and present tropical information in brief, easily accessible articles on fuel issues affecting refinery customers. I also provide information on developments in fields of automotive fuels (including non-traditional fuels like bio-fuels), aviation fuels, industrial gas oil and residual fuel oil. 23. Help Desk Query Consolidated List This document the consolidated list of closed query which were faced by the operating personnel and other personnel during the functioning of refinery. .....

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onsulting Group Pte Ltd [(2005) 94 ITD 31 (Mum)], would be equally applicable for similarly worded treaties with make available clause. Reliance was also placed on the MOU entered into by India and US in the context of the Indo US tax treaty, as also on decisions of the coordinate benches in the cases of Raymond Limited (supra), CESC Limited (supra), DCIT Vs Boston Consulting Group Pte Ltd (supra) and a host of other decisions. It was also submitted that while there cannot be any hard and fast f .....

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fees for commercial services which are not taxable in nature. 8. None of these submissions impressed the learned CIT(A). He rejected the grievances of the assessee, and thus upheld the stand of the AO, by justifying this action as follows: 5.10 We are concerned with payment covered under clause 2.1.2. Therefore, in context of above two Articles, the issue is whether we can split the payments for the Basic Refinery Package into two components, Technical and Commercial as the appellant has done or .....

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sidered singly, I am afraid I do not agree to that. This is becauseI. i) The various services are being offered as a package for which a single consideration is being charged. ii) RPL or RIL has the option to use various services and hence imputing value to each of the service is not possible at the time of contract. iii) Each service itself contains four or five components and clearly it will depend on the situation in real-time as to what component is utilized by RIL and to what extent, making .....

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asis on the newsletters, conference etc. if one were to look at the Annexure A, listing the services, it can be seen that each service has four or five components and providing newsletters or CDs are only a part of the dissemination of the information in the context, e.g. Primary distillation, Hydrotreating Sulphur Recovery, Cat craching are some of major and core process of an oil refinery where crude oil is refined into different components like petrol, diesel, kerosene etc. There is nothing c .....

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t action of it has been to a large extent based on that order. Needless to say, order u/s.195 was a summary order and the taxability or otherwise of a receipt has to be seen afresh at the time of assessment. Therefore, any finding contained therein or decision based thereupon is not material to the context. 5.14 Nevertheless, during the course of appellate proceedings, the Authorised Representative was asked to justify as how it claims 50% of the basic refinery package being commercial in nature .....

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the same is that not a single service has been put as 100% technical in nature. The same is not acceptable. Hence the reason the chart is not acceptable is - i) It splits up a service into further technical or non-technical part; not only this is conceptually incongruent with the scheme of Act, it is also in conflict with the contract under security. ii) Total manhour listed for three years for the purpose are 52690. This amount of time spent is not possible for Basic Refinery Package which was .....

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chnical component. This split up would completely fail any logical test. If improvement and development of systems is treated as passing on the experience or skill or processes it has to be 100% technical. If because of any reason, it is thought otherwise, it has to be 100% non-technical or commercial. There can not be a middle ground. Similarly, service management is part of consultancy services, which forms 13.7% of time spent has been split into 10% technical and 90% non-technical on a basis .....

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he appellant has failed to even identify the services which have been taken out of F.T.S. fold, the test of make available cannot be applied to such specified services. On the other hand, if we were to go by the appellant s chart in Annexure B, it is contradiction in terms of the same service being treated partly as having the test of make available while it fails partly. As already stated, it would still be the most irrational conclusion if we were to estimate even the percentage of makeavailab .....

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ugh the Memorandum of Understanding of the later DTAA. 5.19. With due respect to the decision of some benches of Tribunal and keeping in view that no High Court has given any ruling on the issue, much less the jurisdictional High Court; l think any two DTAA s can not be compared. This is because - i) DTAA s arc negotiated instruments. These are not pieces of legislation. The quotation attributed to Lord Denning in Buhmer Ltd. Vs. S.A. Bollinger (1972) and the other decision cited by the Bench in .....

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ng meaning on the basis of language being paramateria when one of the treaty has a supplementary MOU and other not, is comparing uncomparable. ii) MOU has been signed, in context of lndo-U.S. Treaty. Having not signed such a memorandum with U.K. Government for an instrument which is signed later, in fact shows the true intention of the parties, namely that the parties to this agreement did not want to restrict the meaning of word fee for technical services . iii) Even if the two DTAAs can be com .....

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to cover the included services while the Holland Treaty was much wider; The presence of MOU in one case and absence in the other could thereby be explained in the context. 5.20. Therefore, in my view, the Indo-Netherland Treaty has to be applied as such and interpreted in itself, without any extraneous help. 5.21. Hence, considering all the facts and the legal angles, 1 think the appellant s claim to seek non-taxability of 50% of its receipts from the sale of Basic Refinery Package as exempt fro .....

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randum of Understanding to Indo- US DTAA in facts of the case nor can this Memorandum of Understanding in that context extendable to Indo-Holland Treaty. 9. The assessee is not satisfied by the stand so taken by the CIT(A) and is in further appeal before us. 10. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 11. The fundamental question that comes up for our consideration is the scope of fee .....

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e available clause pattern. While on this aspect of the matter, it is important to bear in mind the fact that protocol to the Indo Dutch tax treaty, which was signed on the same day when the said treaty was signed i.e. on 13th July 1988. It is in this backdrop that we need to take a look at the original Article 12 and the protocol to the Indo Dutch tax treaty. ARTICLE 12 Royalties, fees for technical services and payments for the use of equipment 5. The term "fees for technical services&quo .....

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e signature of this Convention under any Convention or Agreement between India and a third State which is a member of the OECD, India should give relief from such levy, directly, by reducing the rate or the scope of the levy, either in full or in part, or, indirectly, by reducing the rate or the scope of the Indian tax allowed under the Convention or Agreement in question on payments as meant in Article 12 of this Convention with the levy, either in full or in part, then, as from the date on whi .....

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and read as follows: ARTICLE 12 Royalties and fees for included services 4. For purposes of this Article, fees for included services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 .....

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to the rental of ships, aircraft, containers or other equipment used in international traffic; (c) for teaching in or by educational institutions; (d) for services for the personal use of the individual or individuals making the payment; or (e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent personal services). 14. Explaining the scope of this definition, an MoU of .....

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services and those intended to be excluded, either because they do not satisfy the tests of paragraph 4, or because, notwithstanding the fact that they meet the tests of paragraph 4, they are dealt with under paragraph 5. The examples in either case are not intended as an exhaustive list but rather as illustrating a few typical cases. For ease of understanding, the examples in this memorandum describe U.S. person providing services to Indian persons, but the rules of Article 12 are reciprocal i .....

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in a technology is required to perform it. Under paragraph 4, technical consultancy services are considered included services only to the following extent : (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which a royalty payment is made; or (2) as described in paragraph 4(b), if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and trans .....

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ary and subsidiary to the application or enjoyment of an intangible for which a royalty is received under a license or sale as described in paragraph 3(a), as well as those ancillary and subsidiary to the application or enjoyment of industrial, commercial, or scientific equipment for which a royalty is received under a lease as described in paragraph 3(b). It is understood that, in order for a service fee to be considered "ancillary and subsidiary" to the application or enjoyment of so .....

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lication or enjoyment of the right, property, or information described in paragraph 3 and whether the clearly predominant purpose of the arrangement is such application or enjoyment must be determined by reference to the facts and circumstances of each case. Factors which may be relevant to such determination (although not necessarily controlling) include : 1. the extent to which the services in question facilitate the effective application or enjoyment of the right, property, or information des .....

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aragraph 3 are made under a single contract (or a set of related contracts); and 5. whether the person performing the services is the same person as, or a related person to, the person receiving the royalties described in paragraph 3 [for this purpose, persons are considered related if their relationship is described in Article 9 (Associated enterprises) or if the person providing the service is doing so in connection with an overall arrangement which includes the payer or and recipient of the r .....

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ge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person.) This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be consi .....

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categories of services that generally involve either the development and transfer of technical plans or technical designs, or making technology available as described in paragraph 4(b), include : 1. engineering services (including the sub-categories of bio engineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial engineering); 2. architectural services; and 3. computer software development. Under paragraph 4(b), technical and con .....

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at the MFN clause set out in the Indo Dutch tax treaty is a clause which does not need anything other than a greater relief, vis-àvis the scope and rate of fees for technical services in the Indo Dutch tax treaty, being given in any other tax treaty with another OECD country. Any such relief being extended automatically incorporates such beneficial arrangement being read into the Indo Dutch tax treaty as well. This MFN clauses clearly stipulates that in the event of India extending any be .....

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ies, such as with Philippines and Switzerland, wherein where similar provisions, for incorporation of favourable provisions contained in other tax treaties, are existent, but with the exception that in order to make the incorporation effective, the Governments of two countries should first mutually decide of such incorporation in the form of amendment of tax treaty. That s not the case in Indo Dutch treaty. Therefore, whatever benefit is extended under Indo US tax treaty is, by the virtue of MFN .....

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s that not only the provisions of Article 12 will stand amended accordingly, in the light of the Indo US tax treaty and other similarly worded subsequent treaties, but also The Memorandum of Understanding and the Confirmation of Understanding, dated 12th September, 1989, with reference to paragraph 4 of Article 12 of the Indo-USA Double Taxation Avoidance Convention (DTAC), will apply mutatis mutandis for the purpose of paragraphs III, IV, V and VI above . In any event, as held by a coordinate b .....

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igh Court in the case of CIT Vs De Beers India Pvt Ltd [(2012) 346 ITR 467 (Kar)] in favour of the assessee, and there is no contrary decision by Hon'ble jurisdictional High Court or by Hon'ble Supreme Court. In De Beers case (supra), Their Lordships posed the question, as to what is meaning of make available , to themselves, and proceeded to deal with it as follows: ……… The technical or consultancy service rendered should be of such a nature that it "makes avai .....

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he particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered "made available" when .....

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included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. 18. Learned CIT(A) was thus clearly in error in holding that the provisions of the Indo US tax treaty cannot be read into the provisions of Indo Dutch tax treaty. As clearly stated in the MoU to the Indo US tax treaty, which stands incorporated in the Indo Dutch tax treaty as well by the virtue of MFN clause, under paragraph 4(b), consultancy services which .....

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ng strategy consulting services, such as business strategy, marketing and sales strategy, portfolio strategy carried on by the assessee the nature of these services is materially similar . All these services were held to be outside the scope of fees for technical services taxable under the Indo US tax treaty. In the case of Bharat Petroleum Corporation Ltd vs JDIT [(2007) 14 SOT 307 (Mum)], another coordinate bench of this Tribunal, inter alia, held that market study covering study of supply and .....

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rovision before us) unlike many other treaties . We are in considered agreement with the views so expressed by the Authority for Advance Ruling. On the same lines are various decisions of this Tribunal in the cases of ICICI Bank Limited Vs DCIT [(2008) 20 SOT 453 (Mum)] and McKinsey & Co Inc Vs ADIT [(2006) 99 ITD 549 (Mum)]. What essentially follows, therefore, is that as long as the services rendered by the assessee are managerial or consultancy services in nature, which do not involve or .....

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eting consulting firm to do a computer simulation of the world market for such oil and to advise it on marketing strategies. Are the fees paid to U.S. company for included services? Analysis: The fees would not be for included services. The American company is providing a consultancy service which involves the use of substantial technical skill and expertise. It is not, however, making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a te .....

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ages 1 to 57 of the compilation of papers, set out below: Activities and deliverables In the earlier mentioned three main areas that require specific managerial attention of the Service Manger the following activities and deliverables are identified: Service provision • Stay closely abreast of customer needs. Categorise and evaluate customer need and document. Value the customer needs in terms of contribution and required service levels. • Determine by walking around and staying in dir .....

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e plan. Document important decisions taken. • Allocate and align service requirements in Shell Global Solutions home bases and facilitate delivery. • Make sure that service deliveries are of a quality as promised. • Handle customer complaints. • Resolve conflicts (commercial, technical, staff matters, safety). • Administer the service accounts (status of delivered services versus plan, outstanding services etc.). • Set up and take part in a regular and joint review .....

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l process. Communications and relations • Familiarise with the Site, its organisation and policies. Stay abreast of economic and other drivers of the decision making process of Reliance Petroleum Limited • Ensure rapid familiarisation of Reliance Staff with Shell Global Solutions organisation,- people, and - information sources. • Ensure full participation by Reliance Staff in Shell Global Solutions workshops, seminars, conferences etc. • Put in place a communication and repo .....

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end monthly progress reports to Shell Global Solutions and keep the business groups in Shell Global Solutions fully informed on developments in their respective areas. • Pay regular visits to Shell Global Solutions to ensure that the business unit stay fully clear about required service levels. Personnel matters • Promote and assist in maintaining goal-oriented direction of advisory and seconded staff of Shell Global Solutions. Hence, ensure that: Shell Global Solutions staff are and s .....

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efficient reporting system and efficient templates are in place for Shell Global Solutions staff so as to maintain maximum time available for their core-activities. Sty in active contact with Shell Global Solutions staff, structurally allocate time for sound-boarding and stay easily accessible o them. Organise quarterly staff review and appraisal sessions with Reliance and Shell Global Solutions. Ensure fair performance rating Shell Global Solutions staff receives regular (at least quarterly or .....

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agement, HSE management, engineering management (i.e. maintenance, electrical, instrumentation, projects), training management, and technical and laboratory management. This review is always done for a Shell-owned facility and experience shows that it allows the refinery to eliminate a significant number of problems and achieve a smoother start up (yielding in effect the equivalent of a minimum of two weeks additional profitable processing time). DELIVERABLES The review team, consisting of profe .....

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ties (including the marine terminal, outside plot and inside plot). SIOP will report the finding of the review to Reliance and will seek an understanding on the action items with Reliance prior to departure of the review team. 2. The review will be carried out and will encompass an examination of any Operations Implementation Plan which has already been developed by Reliance. Areas to be covered will include organisation, management system, decisionmaking, communications channels, training plans .....

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start-up HSE review is to ensure that all possible operating conditions, including start-up, shutdown, as well as maintenance, can be handled in a safe healthy and reliable manner, with minimum environmental impact. Shell experience shows that this review will minimise production loss by at least week s operation in the life time of the plant DELIVEABLES The review team, consisting of professionals with extensive refining experience, will deliver a report which includes a prioritised list of rec .....

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cess Safeguarding Memoranda (including Safeguarding Flow Schemes). His review focuses on the main technical safety and operability features to ensure that the plants will handle all foreseeable operating conditions, including start-up, shutdown (both normal and emergency), in a safe and reliable manner, with minimum environmental impact. • Identify deviations from current SIOP design practices, guideline and recommendations on technical IISE, fire safety and operability issues and analyse t .....

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tegrity of the design is reflected in the as-built facilities. • Review by inspection operability aspects, safe exists and accessibility, with reference to process engineering flow schemes or design drawings when required. • Review general safety equipment and safety facilities (e.g. safety showers, gas detectors and alarms). Note: The site inspection does not replace the final and detailed P&I check. 3. A check will be carried out on the availability and status of start-up/shutdow .....

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le level of safety and general technical HSE features on a short-term basis. Implementation should be at first opportunity but not later than during the first planned shutdown. 5. A formal report of the findings and recommendations of the review will be prepared. While at the draft stage, the report is discussed and agreed with the relevant site management representatives (preferably immediately at the end of the review visit). The report will include a record of the discussions and consensus on .....

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deliverables cannot be brought to tax as fees for technical services either. The fact that these services or physical deliverables are interlinked with certain technical services, in our considered view, does not alter the basic character of these services and physical deliverables. 21. As a matter of fact, learned CIT(A) has not even seriously disputed the above position. His primary objection, however, is that these services cannot be segregated as these services are given as a package and are .....

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ated or not, we find guidance from Hon ble Supreme Court s judgment in the case of Continental Services Limited Vs CIT [(1992) 195 ITR 81 (SC)]. Speaking through Hon ble Justice Ranganathan, one of the most distinguished former Presidents of this Tribunal adorning the office of Hon ble Supreme Court judges at the relevant point of time, Hon ble Supreme Court had observed as follows: An assessee cannot claim deduction under s. 80-O in respect of certain receipts merely on the basis that they are .....

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possible or worthwhile for the parties to dissect the consideration and apportion it to the various ingredients or elements comprised in the contract. The cases referred to by the Tribunal and Sri Ahuja as to the indivisibility of a contract arose in an entirely different context. For purposes of income-tax, a principle of apportionment has always been applied in different contexts. Consolidated receipts and expenses have always been considered apportionable in the contexts: (a) of the capital .....

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edition). We are, therefore, of the opinion that, if, as we have held, the contracts in the present case oblige the assessee to make available information and render services to the foreign Government of the nature outlined in s. 80-O, it is the duty of the Revenue and the right of the assessee to see that the consideration paid under the contract legitimately attributable to such information and services is apportioned and the assessee given the benefit of the deduction available under the sect .....

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deliverables and several commercial services which cannot be brought to tax as fees for technical services. It is, to borrow the words of Hon ble Supreme Court, duty of the revenue, and right of the assessee to see that the consideration paid for the package attributable to such services and deliverables is apportioned and the assessee is given the benefit of non taxability in respect of the same. 23. We have noted that the Assessing Officer, at the time of issuing order under section 195(2) in .....

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He has observed that the underlying purpose of the package is operationalising the refinery and obviously in such a scenario the various services are interdependent and complimentary and cannot be segregated . We are, for the detailed reasons set out above, unable to see any merits in this approach. We have also noted that the learned CIT(A) was in error in rejecting the apportionment by observing that total man-hours listed for three years for the purpose are 52690, and that this amount of tim .....

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e category of 'Help desk services' which were to be rendered within the BRP and not for the various services to be rendered under the BRP. The action of the CIT(A) cannot, therefore, be sustained in law. We have also noted that there is no specific discussion about the values to be assigned to the consultancy services which are non technical in nature and to the physical deliverables. We have also noted that in the 195(2) order, the Assessing Officer has categorically observed that only .....

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