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TMI BlogUnraveling the Royalty Conundrum and DTAA: ITAT's Stance on Marketing and Reservation FeesX X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 and the India-US Double Taxation Avoidance Agreement (DTAA). Arguments Presented Assessee's Contentions The assessee, a US-based company, contended that the amounts received towards Marketing Contribution, Priority Club receipts, Reservation Contribution, and Holidex Fees were not taxable in India for the following reasons: The amounts were received with a corresponding obligation to use them for agreed purposes and were not unfettered receipts in the hands of the assessee. The receipts could not be termed as consideration for the use of any intellectual property asset or fees for technical services, even though they might have been incidental to the same. The amounts were reimbursements of common expenses and were not taxable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected from hotels for the cost of points issued to members based on their stays, utilized for making payments to hotels for room redemptions, maintaining member databases, and promoting the program. Reservation Contribution: Utilized to provide a network for assisting customers in making room reservations, attending to queries, and maintaining reservation channels. Holidex Fees: Paid by hotels to facilitate booking of hotel rooms through the assessee's Central Reservation System (Holidex). Reliance on Precedents The ITAT noted that the coordinate bench had previously decided in the assessee's favor on identical facts in earlier years, holding that the receipts were not taxable as royalty or fees for technical services in the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by treating the Marketing Contribution and Reservation Fees as royalty or fees for included services. Doctrine or Legal Principle Discussed The judgment primarily discussed the principles governing the taxability of receipts as royalty or fees for technical services under the Income Tax Act, 1961 and the India-US DTAA . It also touched upon the principle of mutuality, which exempts certain receipts from taxation when received in a fiduciary capacity. Comprehensive Summary The ITAT, in a well-reasoned judgment, held that the Marketing Contribution, Priority Club receipts, Reservation Contribution, and Holidex Fees received by the US-based company from Indian hotels were not taxable in India as royalty or fees for technical services. The ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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