Consultancy services which are not of a technical nature cannot be treated as technical services

Brief of the Case

ITAT Ahmedabad held In the case of Shell Global Solutions International BV vs. ITO that 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, consultancy services which are not of a technical nature cannot be treated as technical services.

Also it is clear that as long as the services rendered by the assessee are managerial or consultancy services in nature, which do not involve or transmit the technology, the same cannot be brought to tax as fees for technical services. In the given case, the overall consideration is for a package as a whole which consists of several physical deliverables and several commercial services which cannot be brought to tax as fees for technical services. Accordingly, matter remanded back to the AO for segregation of such services.

Facts of the Case

The Shell Global Solutions International BV, is a company incorporated in, and tax resident of, the Netherlands. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that while the assessee has duly accepted taxability of its receipts aggregating to Rs 65,21,62,165 as fees for technical services, the assessee has claimed receipts aggregating to Euros 16,75,781, i.e. Rs 17,26,50,194, as non taxable in nature. The non taxable receipts included reimbursement of expenses, aggregating to Rs 1,78,40,156, received from Hazira Port Pvt Ltd, Hazira LNG Pvt Ltd and Welspun Gujarat Stahl Rohren Limited, in addition to fees for commercial services aggregating to Rs 7,69,29,360 received from Reliance Industries Limited.

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