Centralized hotel services not treated as technical or included services where marketing and sales promotion remained the dominant character.

Payments for centralized hotel services were held not to be fee for technical services under section 9(1)(vii) or fee for included services under Article 12(4)(a) of the Indo-US DTAA where the dominant character of the arrangement was marketing, publicity and sales promotion, and the remaining services were merely incidental. The analysis followed an earlier binding decision on similar hotel-related services and accepted the factual findings as not shown to be perverse. On that basis, no substantial question of law was found to arise, and the payments retained their non-FTS character.

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Issues: Whether the payments received by the assessee for centralized services such as sales and marketing, loyalty programmes, reservation services, technology services, operational services and training or human resources constituted fee for technical services under section 9(1)(vii) of the Income-tax Act, 1961 or fee for included services under Article 12(4)(a) of the Indo-US DTAA.

Analysis: The question was answered by applying the earlier binding decision dealing with the same nature of hotel-related centralized services. The governing principle applied was that where the dominant character of the services is marketing, publicity and sales promotion, and the other services are merely incidental, the receipts do not assume the character of royalty or fee for technical services. The decision also proceeded on the basis that the relevant factual findings had not been shown to be perverse and that no substantial question of law arose.

Conclusion: The payments did not constitute fee for technical services or fee for included services, and the appeal was dismissed.

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