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2024 (6) TMI 697 - AT - Income TaxIssues Involved: 1. Taxability of System Fund support fee and Technology Services Fees. 2. Taxability of Travel Agent Commission (TACP). 3. Charging of interest u/s 234A and 234B. 4. Initiation of penalty proceedings u/s 270A. Summary: Issue 1: Taxability of System Fund support fee and Technology Services Fees The assessee contested the addition of INR 28,11,42,298 made by the AO, treating System Fund support fee and Technology Services Fees as Fee for Technical Services (FTS) u/s 9(1)(vii) and as Fee for Included Services (FIS) under Article 12 of India-USA DTAA. The assessee argued that these services are neither technical nor consultancy in nature and do not make available any technical knowledge, experience, skill, know-how, or processes. The DRP upheld the AO's decision, but the ITAT noted that similar issues in previous years were consistently decided in favor of the assessee by various ITAT orders. Consequently, the appeal on this ground was allowed. Issue 2: Taxability of Travel Agent Commission (TACP) The assessee challenged the addition of INR 10,02,93,045, arguing that TACP is not taxable as FTS/FIS under the Act and India-USA DTAA. The CIT(A) in earlier years had held that TACP is not in the nature of FTS, and the tax department had accepted these decisions. The ITAT observed that the services were rendered by travel agents to Indian hotels, and the assessee merely recovered these payments on a cost-to-cost basis without any income element. Citing various judicial precedents, the ITAT concluded that TACP cannot be treated as FTS and allowed the appeal on this ground. Issue 3: Charging of interest u/s 234A and 234B The assessee contended that the AO erred in charging interest u/s 234A and 234B. However, the judgment does not provide specific details or a ruling on this issue. Issue 4: Initiation of penalty proceedings u/s 270A The assessee argued that the AO erred in initiating penalty proceedings u/s 270A for underreporting of income by way of misreporting. The judgment does not provide specific details or a ruling on this issue. Conclusion: The ITAT allowed the appeal of the assessee on the grounds of taxability of System Fund support fee, Technology Services Fees, and TACP, following consistent decisions in favor of the assessee in previous years. The judgment was pronounced in the open court on 09/05/2024.
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