A Microsoft file hosting and synchronization service.
Dear saweera iftikhar,
Good day! Thank you for posting to Microsoft Community. We are happy to help you.
We are sorry to hear that you’re having trouble with shared folder which appears as internet shortcut when they should be a file folder. I deeply understand the inconvenience caused and apologize for it.
After investigations from our end and according to the official article shared, Microsoft's product team is aware of the issue and is working to resolve it. The Internet .url shortcuts will automatically be converted to a folder when the issue is resolved.
We recommend that you have access to the contents of the shared folder on the OneDrive website in your browser as a workaround.
For your reference: Add and sync shared folders to OneDrive for home - Microsoft Support
For more information and detailed analysis of the issue, I sincerely recommend that you create a support ticket with Microsoft Support directly by following the steps provided in this link: Get support - Microsoft 365 admin | Microsoft Learn
If you are not an admin, you can contact your admin to contact Microsoft support. You can look for the way to find your admin through this link: How do I find my Microsoft 365 admin? - Microsoft Support
Please accept my sincere apologies for not being able to resolve the problem and for redirecting you to the relevant support team. I regret any inconvenience this may cause. The direct support team can further escalate this, and provide more details from the development team, hence, I suggest you raise a support ticket from the Office 365 admin center, where the appropriate team will assist you.
Once again, I apologize for the inconvenience this has caused. We appreciate your patience and understanding and thank you for your time and cooperation.
Sincerely,
Ralph Chawatama | Microsoft Community Moderator