2024 (5) TMI 687 - AT - Income Tax

Income taxable in India - payments received by the assessee from its India customers on account of Centralized Services - Fee for Technical Services as defined u/s 9(1)(vii) or Fee for included services as defined under Article 12(4)(a) of the Indo-US DTAA - HELD THAT - We find that this Tribunal in assessee s own case 2023 (9) TMI 1470 - ITAT DELHI for Assessment Year 2018-19 and for Assessment Year 2019-20 has decided the issue in favour as finding no reason to interfere with the decision of learned first appellate authority in declaring the receipts from centralized services to be not in the nature of FTS/FIS - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the payments received by the assessee from its Indian customers for Centralized Services constitute Fee for Technical Services (FTS) u/s 9(1)(vii) of the IT Act, 1961 or "Fee for included services" under Article 12(4)(a) of the Indo-US DTAA.

Summary:

Issue 1: Payments as Fee for Technical Services (FTS) u/s 9(1)(vii) or Fee for Included Services under Article 12(4)(a) of the Indo-US DTAA

The Revenue's appeal challenges the Ld. CIT(A)'s decision that payments received by the assessee, a US-based firm providing hotel-related services, from Indian customers did not constitute Fee for Technical Services (FTS) u/s 9(1)(vii) of the IT Act, 1961 or "Fee for included services" under Article 12(4)(a) of the Indo-US DTAA. The assessee argued that the revenue from various hotel owners for providing Centralized Services from outside India was "not taxable" in India under Section 9 of the Income-tax Act, 1961 and Article 12 of the Indo-US DTAA. The Ld. CIT(A) found the issue covered in favor of the assessee by the Tribunal and Hon'ble High Court's decisions in the assessee's own case, concluding that the payments were in the nature of business income and not Royalty or FTS. The Tribunal upheld this view, noting that the services provided by the assessee, such as sales, marketing, loyalty programs, reservation services, and training, were not technical services making available technical knowledge, experience, skill, know-how, or processes. It was also noted that the assessee did not have a permanent establishment in India, thus the business income could not be taxed under Article 7 of the Indo-US DTAA. The Tribunal cited previous decisions, including the Hon'ble Delhi High Court's judgment affirming that the payments were business income, not FTS. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order.