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TMI Blog2024 (4) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in law, the CIT(A) has erred in treating the amount received by the Appellant from Hotels in India towards Marketing and Reservation contribution to be in the nature of Royalty under Article 12(3) of India - USA Double Taxation Avoidance Agreement ('DTAA'), following the CIT(A) order for AY 2012-13. 1.3 On the facts and in circumstances of the case and in law, the CIT(A) has erred in not appreciating that the Marketing and Reservation contribution received from Indian hotels is neither taxable as Royalty under section 9(1)(vi) of the Act nor under Article 12(3) of the India-USA DTAA. 1.4 On the facts and in circumstances of the case and in law, the CIT(A) has erred in not appreciating that the action of Id. AO invoking Article 3(2) of the DTAA to draw the meaning of royalty from the provisions of the Act is incorrect, when DTAA specifically provides the meaning of Royalty. 1.5 On the facts and circumstances of the case, the CIT(A) has erred in not quashing the assessment order, wherein the Id. AO concluded that the Marketing and Reservation contribution is taxable as Royalty under the Act and DTAA based on incorrect assertions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from Indian hotels are not in the nature of an unfettered receipts in the hands of the Appellant; 1.12 On the facts and in circumstances of the case and in law, the CIT(A) has erred in holding that the principles of Mutuality are not applicable in case of the Appellant in relation to Marketing Contribution, Priority Club receipts and Reservation Contribution received from Indian hotels by stating that: That the amount is recovered from Indian Hotels as a fixed percentage, therefore the same partakes the character of license fee; The amount is inseparable and interlinked to the sales of the India Hotels and expenditure against such receipts results in increasing in the value of the brand, which in-turn result into increase in revenue of the India Hotels. 1.13 On the facts and in circumstances of the case, the CIT(A) has erred in not following the binding decision of the jurisdictional Hon'ble Mumbai ITAT in Appellant's own case which has decided the matter in favour of the Appellant on identical facts. The CIT(A) has further erred in arriving at his conclusion in his order by relying on the decision of Hon'ble Mumbai ITAT in case of Marriott International Inc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l justification for collection of this money and its application thereof. The assessee has relied upon the 'Principle of Mutuality' in order to contend that the said receipts are not chargeable to tax. (v) The assessee has also contended that the receipts on account of marketing contribution IHG reward club receipts, reservation contribution and Holidex fees is not in the nature of FIS as per Article 12(4) and 12(4)(b) of the India-USA DTAA. The assessee has mainly contended that the services which are obtained by Indian Hotels form it are on a year on year basis as a result of which it should be inferred that such services do not make available any knowledge, experience, skill, know how or process etc. (vi) The assessee has also contended that the receipts on account of marketing contribution IHG reward club receipts, reservation contribution and Holidex fees is not in the nature of FTS u/s 9(1)(vii) of the Income Tax Act, 1961. (vii) The assessee has also contended that the receipts on account of marketing contribution IHG reward club receipts, reservation contribution and Holidex fees is not in the nature of FIS under Article 12(3) of the India-USA DTAA. (viii) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Mumbai Tribunal in order dated 09.02.2024 for AY 2012-13 to AY 2015-16 again held that the said receipts is not taxable as Royalty/FIS under India-USA DTAA and deleted the additions made in the orders of assessment. A copy thereof was submitted. The Ld. AR placed reliance on the decision of Hon'ble Delhi High Court in CIT vs. Starwood Hotel and Resorts Worldwide Inc. in ITA No. 456/2022 rendered on 16.11.2022 a copy of which is placed on record wherein decision in DIT v. Sheraton International Inc. (2009) 178 Taxman 84 (Del) has been relied upon. 6. The Ld. CIT-DR conceded that it is a covered matter and that the facts are identical to those pertaining to earlier AYs. 7. We have considered the submission of the parties and perused the records. It is revealed from the decision of Mumbai Tribunal in the assessee's own case in ITA No. 3662/Mum/2019; ITA Nos. 6655, 6656 and 6657/Mum/2019 dated 08.02.2024 for AY 2012-13 to 2015-16 that the Tribunal took up the appeal for AY 2012-13 as the lead case and noticed the nature of various receipts under the head "Marketing Contribution and Reservation Fees" and thereafter recorded the observation and findings in para 9-13 which we produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of marketing and reservation where for the agreed purposes and it was not an unfettered receipt in the of the assussee it was a kind of trust money and received capacity. We have also noted, as evident from the significant accounting policies reproduced earlier in this order, that in the past, a part of collections for marketing and reservation fees was refunded to the participating properties on the basis of certain assessments. In the light of these facts the marketing and reservation contributions received by the company cannot be viewed as income of the assessee. These contributions having been made by the participating hotels mandatorily does not affect the determination of the character of receipts. This receipt cannot be termed as a consideration for use of any of the intellectual property asset of the company or for the fees for technical services even though this receipt may have been incidental to the same. Unless it is a consideration of such a nature it cannot in our understanding be taxed as royalty or fees for technical services. Since the assessee company does not have any PE in India, there is no question of business profits under Article 7 either in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench in the aforesaid decision is based on the peculiar facts of that case. Further, in the present case, it is also undisputed that the orders passed by the coordinate bench in assessee's own case have been accepted by the Revenue and no appeal has been filed against the same before the Hon'ble High Court. Therefore, in view of the above, we find no merits in the reliance placed by the lower authorities on the aforesaid decision in Marriott International Inc (supra). 13. Accordingly, respectfully following the judicial precedence in assessee's own case, the Marketing Contribution and Reservation Fees received by the assessee are not Royalty and therefore, the impugned addition is deleted. Further, since the Revenue is not in an appeal against the findings of the learned CIT(A) that the issue of taxation as Fees for Included Services or nontaxation as reimbursement of expenses does not arise, therefore we are not expressing any opinion on the same. As a result, grounds no.1.1 to 1.9 raised in assessee's appeal are allowed." 7.1 The decision (supra) of Mumbai Tribunal for AY 2012-13 applied mutatis mutandis to the appeals for AY 2013-14, 2014-15 and 2015-16. 7.2 Respectfully f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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