Taxability of centralized services fee under the India-USA DTAA failed where no permanent establishment existed in India.

Centralized services fee received from Indian hotels was held not to fall within Article 12(4)(a) or Article 12(4)(b) of the India-USA DTAA and not to constitute fees for technical services under the Act. The Tribunal followed its earlier decision in the assessee's own case, which itself had applied binding jurisdictional precedent in the group concern's matter. The receipt was treated as business income, and because the assessee had no permanent establishment in India, the income was not taxable in India. The addition was therefore deleted in favour of the assessee.

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Issues: Whether the centralized services fee received by the assessee from Indian hotels was taxable as fees for technical services or fees for included services, or was to be treated as business income not chargeable to tax in India in the absence of a permanent establishment.

Analysis: The issue stood covered by the Tribunal's earlier decision in the assessee's own case for the preceding assessment year, which had followed binding jurisdictional precedent in the group concern's matter. The Tribunal held that the centralized services fee could not be brought within Article 12(4)(a) or Article 12(4)(b) of the India-USA DTAA and could not be assessed as fees for technical services under the Act. The receipt was held to be business income, and in the absence of a permanent establishment in India, it was not taxable.

Conclusion: The addition was deleted and the issue was decided in favour of the assessee.

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