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TMI Blog2011 (5) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt in the hands of the assessee - Held that: the marketing and reservation charges are not Royalty or FIS and they are in the nature of business income and since the assessee does not have a PE in India, the same are not taxable in India - Decided in the favour of assessee - IT (Appeal) Nos. 3618 and 3619 (Mum.) of 2008, - - - Dated:- 11-5-2011 - N.V. Vasudevan, B. Ramakotaiah, JJ. Sunil M. Lala and Zeel Jambuwala for the Appellant Malathi R. Sridharan for the Respondent ORDER N.V. Vasudevan, Judicial Member 1. ITA No.3619/M/08 is an appeal by the assessee against the order dated 19-3-2008 of CIT(A) XXXI, Mumbai relating to assessment year 2004-05, while ITA No. 3619/M/08 is also an appeal by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotels in India). According to the Assessee, such funds are solely used to meet out common expenses of marketing and providing centralized reservation facilities to all its franchisee hotels worldwide. These contributions made by hotels for incurring commons expenses are not offered to tax as the same are not in the nature of income. 4. The assessee explained the nature of marketing contribution as a payment made by the franchisee hotels worldwide to assessee under the license agreement as their share towards the common marketing expenditure incurred by assessee for benefit of all the franchisees. The assessee explained that marketing and advertisement expenditure is incurred by the assessee to promote its worldwide chain of hotels ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not make available any technical knowledge, experience, skill, know-how or processes etc. Without prejudice to above, such contributions could be business profits and cannot be subjected to tax in absence of Permanent Establishment of assessee in India. 7. The AO however observed that the assessee must have developed its own secret system to be used by the franchise otherwise it would not have charged such huge amount. It was also observed that there was no evidence of any expenditure being incurred by the assessee. He therefore assessed the amount as Royalty. 8. The CIT(A) confirmed the orders of the AO giving raise to these appeals by the assessee before the Tribunal. 9. We have heard both the parties in the matter. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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