9911796707
TMI Blog2013 (11) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... We, accordingly set aside the impugned order and remit the matter to the file of the AO for considering the facts in the light of Article-7 of the DTAA. X X X X Extracts X X X X X X X X Extracts X X X X ..... ot find any favour from the AO . The AO was of the belief that the marketing and business promotion expenditure is aimed not only for the benefit of the Indian Hotel but also to the Marriot group as a whole. The AO further observed that the assessee has not furnished any documentary evidence such as copies of reimbursement of bills or invoices, all the expenses details and its nature to crystal clear the actual nature of services rendered by the assessee. The AO went on to refer to the relevant clauses of the terms and conditions of the sales and marketing agreement and reproduced the relevant clauses at para-6 of his order. The AO was of the firm belief that the nature of benefits provided by the assessee company to ITC, it is clear that the assessee company makes available ITC to use the brand/brand preference/brand awareness. The AO was also of the belief that the assessee company is having business connection with ITC and ITC is using the confidential information, know-how of changing scenario related to market/industry etc. From the transactions of the assessee company with ITC, it is clear that the payment received by the assessee from ITC clearly falls within the ambit of Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered under clause 3.1, 3.2 and 3.3. of the agreement. It is the say of the Ld. Counsel that payments received under clause 3.1 are receipts over and above reimbursement whereas receipts under clause 3.2 and 3.3 are nothing but reimbursement of the cost of services. At this juncture, the Bench asked the Ld. Counsel to give the break-up of the receipts under these 3 clauses of the agreement. The Ld Counsel for the assessee showed his inability to furnish any break-up of receipts under these three clauses of the agreement. 7.1. Now coming back to the issue before the Tribunal in A.Y. 2004- 05, wherein the break-up was available with the Tribunal and on that note the Tribunal has made the following observations at para-5 on page-5 of its order. "In the first appeal, the ld. CIT(A) noticed that the amount of ₹ 90.06 lacs was on account of payment received under clauses 3.1 to 3.3 of the Agreement. The first part of the amount, being the receipt under clause 3.1 of the Agreement was held to be royalty and the second part of the amount under clauses 3.2 and 3.3 was held to be towards `Reimbursement of expenses' on sales promotions and marketing and hence not chargeable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities, which is in the nature of advertisement and marketing etc. This amount cannot be tagged with any other clause of the Agreement when it has been stated to be for international marketing activities. It is further noticed that the AO also tried to link this amount with "brand Marriott/brand preference/brand awareness". In other words, he canvassed a view that with such payment AHL facilitated in building and strengthening the brand `Marriott'. We have noticed above that the term `royalties' as per Article 12 of the DTAA can always be a consideration for the use or right to use of any defined existing property. It cannot be for the creation of the defined property. Even if we accept that the contribution made by AHL towards the international marketing activities led to the brand building, still it would be a payment for the creation or swelling of the brand and not for the use of such brand, which could qualify to be characterized as `royalties'. Viewed from any angle, it is abundantly clear that the amount in question relatable to clauses 3.2 and 3.3 of the Agreement cannot be held as `royalties' falling within the ambit of Article 12(4) of the DTAA. Thus the AO's action in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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