Centralized services fees treated as business income, not taxable in India absent a permanent establishment.

Centralized services fees received from Indian hotels were treated as business income rather than fees for technical services or fees for included services, because binding jurisdictional precedents on substantially identical group arrangements held that such receipts do not fall within section 9(1)(vii) or Article 12(4)(a) of the India-US DTAA. In the absence of a permanent establishment in India, the receipts were not taxable under Article 7. The Revenue did not dislodge the applicability of those precedents, so the tax addition on centralized services receipts failed.

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

Analysis: The issue was covered by binding jurisdictional precedents dealing with substantially identical centralized services arrangements of the same group and related entities. Those precedents held that the receipts from centralized services did not constitute fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961 or fees for included services under Article 12(4)(a) of the India-US DTAA. The receipts were treated as business income, and in the absence of a permanent establishment in India, no taxability arose under Article 7 of the treaty. The Revenue did not dislodge the applicability of those decisions.

Conclusion: The centralized services fee was not taxable as fees for technical services or fees for included services and remained business income not chargeable to tax in India in the absence of a permanent establishment.

Final Conclusion: The Revenue's challenge failed and the addition made on account of centralized services receipts was sustained as deleted.

Ratio Decidendi: Where binding jurisdictional precedent holds that centralized services receipts under a group services arrangement are not fees for technical services or fees for included services, such receipts are taxable only as business income and, absent a permanent establishment in India, cannot be brought to tax.

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