2022 (11) TMI 1492 - HC - Income Tax

Classification of payments as 'Fee for Technical Services' under u/s 9(1)(vii) OR 'Fee for included services' under Indo-US DTAA - payments received by the Assessee from its Indian Customers on account of Centralized Services viz. sales and marketing, loyalty programs, reservation service, technological service, operational services and training programs/human resources - HELD THAT - Admittedly, this Court in Sheraton International Inc. 2009 (1) TMI 27 - DELHI HIGH COURT has decided the issue involved in the present appeal in favour of the Assessee. The counsel for the Revenue has not brought anything on record to distinguish the facts of present case from the facts of Sheraton International Inc. (supra) case. Also, this Court in WESTIN HOTEL MANAGEMENT LP, SHERATON OVERSEAS MANAGEMENT CORPORATION 2022 (11) TMI 631 - DELHI HIGH COURT dismissed the appeals of the Revenue arising out of the same common impugned order. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another 2000 (7) TMI 67 - SUPREME COURT and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras 1992 (4) TMI 183 - SUPREME COURT the present appeal is covered by the judgment passed by the learned predecessor Division Bench in Sheraton International Inc. (supra). No substantial question of law arises.

Summary

Issues involved: Challenge to ITAT order on classification of payments as 'Fee for Technical Services' under u/s 9(l)(vii) of Income Tax Act and 'Fee for included services' under Indo-US DTAA.

The High Court of Delhi heard an Income Tax Appeal challenging the ITAT order regarding payments received by the Assessee from Indian Customers for various services. The Appellant argued that the ITAT erred in not classifying these payments as 'Fee for Technical Services' u/s 9(l)(vii) of the Income Tax Act or 'Fee for included services' under the Indo-US DTAA. The Appellant referred to a previous judgment in Director of Income Tax v. Sheraton International Inc. where a similar issue was decided in favor of the Assessee. The Revenue had appealed against this decision, which is pending before the Supreme Court. The Court noted that the facts of the present case were not distinguished from the Sheraton International Inc. case, where the issue was decided in favor of the Assessee.

The Court also mentioned a recent judgment where the appeals of the Revenue based on the same impugned order were dismissed. Despite the challenge to the Sheraton International Inc. judgment pending before the Supreme Court, there was no stay on the decision. Citing precedents, the Court held that the present appeal falls under the judgment of Sheraton International Inc. until the Supreme Court's final decision. Consequently, the Court found no substantial question of law for consideration and dismissed the appeal, clarifying that the order would abide by the Supreme Court's final decision in the pending Civil Appeal.