2020 (1) TMI 1484 - AT - Income Tax

Income accrued in India - Centralized services fee received by the appellant for rendering various services such as sales and marketing, Loyalty Programs, Reservation Service, Technological Service, Operational Services and Training Program etc. to customers in India - whether taxable as Fees for Technical Services (FTS) in terms of Section 9 of the Income Tax Act, 1961 as well as Article 12 of the India US Double Taxation Avoidance Agreement (DTAA) - HELD THAT - The issue in respect of taxability of marketing fee and amounts received under Frequent Flier and Starwood Preferred Guest (FFP/SPG) programs is already decided in assessee s favour by the Hon ble Delhi High Court in its group concerns M/s Sheraton International LLC 2009 (1) TMI 27 - DELHI HIGH COURT - Therefore, following the decision of the Hon ble Delhi High Court, despite the fact that the SLP is pending before the Hon ble Supreme Court, we are dismissing this appeal of Revenue.

Summary

Issues:
Taxability of centralized services fee under the Income Tax Act, 1961 and India US Double Taxation Avoidance Agreement (DTAA).

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax [Appeals]-43, New Delhi for Assessment Year 2013-14. The main issue raised was whether the centralized services fee received by the appellant for providing various services to customers in India were taxable as "Fees for Technical Services" (FTS) under Section 9 of the Income Tax Act, 1961 and Article 12 of the India US DTAA. The assessee, a firm incorporated in the USA, provided hotel-related services globally and had agreements with Indian companies for marketing and advertising services. The Assessing Officer held that the amounts received by the assessee were taxable as FTS under the DTAA and the Income Tax Act, resulting in an assessment of income at a higher amount.

Upon appeal, the CIT(A) allowed the appeal of the assessee. During the hearing, the Ld. AR cited previous Tribunal decisions in favor of the assessee in similar cases. The Ld. AR also highlighted that the issue was pending before the Hon’ble Supreme Court based on Special Leave Petitions. The Revenue relied on the Assessing Officer's order, while the Tribunal considered the taxability of the marketing fee and amounts received under Frequent Flier and Starwood Preferred Guest programs. The Tribunal noted that the issue had been decided in favor of the assessee by the Hon’ble Delhi High Court in similar cases, despite the pending SLP before the Supreme Court. Consequently, the Tribunal dismissed the Revenue's appeal based on the decision of the Delhi High Court.

In conclusion, the Tribunal upheld the decision of the CIT(A) and the Hon’ble Delhi High Court, dismissing the Revenue's appeal regarding the taxability of the centralized services fee under the Income Tax Act, 1961 and the India US DTAA.