Centralised hotel services fee treated as business income, not royalty or technical services, and not taxable in India without PE.

Centralised services fee received for hotel-related support services was treated as business income rather than royalty or fee for technical services under the Income-tax Act and the India-US DTAA. The services, including advertising, publicity, sales promotion and allied support functions, were regarded as incidental to the commercial arrangement and not as services giving rise to royalty or technical fee character. In the absence of a permanent establishment in India, the receipts were not taxable in India. The analysis followed the jurisdictional High Court ruling in the assessee's own case and the consistent view taken for earlier years.

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Issues: Whether the centralised services fee received for hotel-related services was taxable as fee for technical services or royalty under the Income-tax Act and the India-US Double Taxation Avoidance Agreement, or constituted business income not taxable in India in the absence of a permanent establishment.

Analysis: The receipt was examined in the light of the jurisdictional High Court's earlier ruling in the assessee's own case and the consistent view taken in connected matters for earlier assessment years. The services rendered, including advertising, publicity, sales promotion and allied support services, were held to be incidental to the main commercial arrangement and did not assume the character of royalty or fee for technical services. The assessee had no permanent establishment in India, and on that basis the business receipts were not liable to tax in India.

Conclusion: The receipt was held to be business income and not taxable in India; the Revenue's challenge failed.

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