Cross-border centralized services fees not taxable as FTS where binding precedent places them outside domestic law and treaty scope.

Centralized services fees for marketing, reservation, technological, operational and allied services rendered from outside India were not taxable as fees for technical services under section 9(1)(vii) of the Income-tax Act or Article 12 of the India-US DTAA. The ITAT followed binding precedent in the assessee's own case and in the group concern's case, both affirmed by the High Court, and held that the same receipts fell outside the domestic and treaty scope of FTS. The revenue's challenge failed and the addition treating the fee as taxable FTS was not sustained.

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Issues: Whether the centralized services fee received for marketing, reservation, technological, operational and allied services rendered from outside India was taxable in India as Fees for Technical Services under section 9(1)(vii) of the Income-tax Act, 1961 and Article 12 of the India-US Double Taxation Avoidance Agreement.

Analysis: The issue was treated as covered by earlier decisions in the assessee's own case and in the group concern's case, which had been affirmed by the High Court. Following those binding precedents, the fee received for the services rendered outside India was held not to fall within the taxable scope of Fees for Technical Services under the domestic provision or the treaty article.

Conclusion: The receipt was not taxable in India as Fees for Technical Services under section 9(1)(vii) of the Income-tax Act, 1961 or under Article 12 of the India-US Double Taxation Avoidance Agreement, and the issue was decided in favour of the assessee.

Final Conclusion: The revenue's challenge failed and the addition treating the services fee as taxable FTS was not sustained.

Ratio Decidendi: Where the same services fee has already been held, on binding precedent, to be outside the ambit of taxable Fees for Technical Services under the domestic law and the applicable treaty, the receipt is not taxable in India.

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