Fee for technical services test rejected for centralized hotel support receipts under the India-US DTAA.

Centralized sales, marketing, reservation, loyalty and related hotel support services rendered under an integrated business arrangement were held not to constitute fee for technical services under section 9(1)(vii) or fees for included services under Article 12(4)(a) or 12(4)(b) of the India-US DTAA. The receipts were not consideration for use of any trademark, right, property or information, were not ancillary or subsidiary to any royalty-bearing arrangement, and the make-available condition was not satisfied. Following binding decisions in the assessee's own and connected cases, the receipts were treated as business income; in the absence of a permanent establishment in India, they were not chargeable to tax in India.

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Issues: Whether receipts from centralized services provided to Indian hotel customers constituted fee for technical services under section 9(1)(vii) of the Income-tax Act, 1961 or fees for included services under Article 12(4)(a) or Article 12(4)(b) of the India-US DTAA.

Analysis: The services were found to be principally sales, marketing, reservation, loyalty and related hotel support services rendered under an integrated business arrangement. The receipts were held not to be consideration for use of any trade mark, right, property or information, and the services were not ancillary or subsidiary to any royalty-bearing arrangement. The make available condition was also not satisfied, and the earlier binding decisions in the assessee's own case and the connected case were followed.

Conclusion: The receipts from centralized services were not taxable as FTS/FIS and were to be treated as business income; in the absence of a permanent establishment in India, they were not chargeable to tax in India.

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