2022 (11) TMI 641 - HC - Income Tax

Income deemed to accrue or arise in India - India - USA 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 do not constitute Fee for Technical Services as defined u/s 9(l)(vii) or 'Fee for included services as defined under Articles 12(4) (a) of the Indo- US DTAA - 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 2022 (11) TMI 631 - DELHI HIGH COURT dismissed the appeals of the Revenue arising out of the same common impugned order. Though the judgment of this Court in Sheraton International Inc. (supra) has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed 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 for consideration in the present appeal and the same is dismissed.

Summary

Issues:
Challenge to ITAT order on classification of payments as 'Fee for Technical Services' under Income Tax Act and Indo-US DTAA.

Analysis:
The High Court judgment pertains to an Income Tax Appeal challenging the ITAT order for Assessment Year 2016-17. The Appellant argued that payments received from Indian Customers for various services do not constitute 'Fee for Technical Services' under Section 9(l)(vii) of the Income Tax Act or 'Fee for included services' under the Indo-US DTAA. The Appellant relied on a previous judgment in Director of Income Tax v. Sheraton International Inc. where a similar issue was decided in favor of the Assessee. The counsel for the Revenue failed to distinguish the facts of the present case from the Sheraton International Inc. case, which was not challenged effectively.

The Court noted that a recent judgment dated 4th November, 2022, dismissed the Revenue's appeals arising from the same impugned order. Despite the challenge to the Sheraton International Inc. judgment pending before the Supreme Court, there was no stay on the decision. Citing precedents like Kunhayammed vs. State of Kerala and Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association, the Court held that the present appeal falls under the purview of the Sheraton International Inc. judgment until the Supreme Court delivers a final decision. Consequently, the Court found no substantial question of law for consideration and dismissed the appeal, clarifying that the orders would be subject to the Supreme Court's final decision in the pending Civil Appeal.

This detailed analysis of the judgment showcases the legal intricacies involved in the classification of payments as 'Fee for Technical Services' under the relevant provisions of the Income Tax Act and the Indo-US DTAA. The reliance on past judgments, the lack of differentiation in the present case, and the application of legal precedents contribute to the comprehensive understanding of the High Court's decision in this matter.