2024 (11) TMI 1448 - HC - Income Tax

Marketing Contributions Spark Tax Dispute: Revenue Challenges ITAT Order on Royalty Classification Under Section 260A

HC hearing Revenue's appeal under Section 260A of Income Tax Act challenging ITAT order regarding taxation of marketing and reservation contributions. Key ... Income deemed to accrue or arise in India - marketing and reservation contribution received is taxable as Royalty under India-US DTAA or not? - Assessee submits that the issue involved in the present appeal is covered by several decisions of this Court, as well as the decision of the ITAT in Assessee’s own case, which has been accepted by the Revenue - HELD THAT:- Assessee drawn the attention of this Court to the finding of the learned ITAT in the impugned order to the effect that a similar view, in the Assessee’s own case in respect of earlier assessment years (AYs), has been accepted and not appealed by the Revenue. He has also handed over a tabular statement showing that no appeal was preferred in respect of the decision of the learned ITAT in respect of AYs 1997-98, 2002-03 to 2005-06 as well as AYs 2012-13 to 2015-2016. In addition, it is stated that the Assessing Officer had for the AYs 2002-03 and 2006-07 to 2011-12 accepted the Assessee’s contention. Revenue seeks time to examine the decisions in the Assessee’s own case in respect of previous AYs. Respondent is also at liberty to file his written submissions along with the authorities relied upon with an advance copy to the learned counsel appearing for the appellant. List on 12.12.2024. The Delhi High Court is hearing an appeal filed by the Revenue under Section 260A of the Income Tax Act, 1963, challenging the ITAT order dated 10.04.2024 in ITA No. 923/Del/2020. The key legal question pressed by the Revenue is whether the ITAT erred in holding that marketing and reservation contributions received by the Assessee do not constitute taxable 'Royalty' under the India-US DTAA. The Revenue contends that these contributions are 'fees for included services' ancillary to the right to operate a hotel brand, involving no technical knowledge or know-how transfer.The Assessee relies on prior decisions of the ITAT and this Court, noting that similar issues in earlier assessment years were accepted by the Revenue without appeal, and that the Assessing Officer had accepted the Assessee's position in multiple years. The Court has allowed the Revenue time to review these precedents and permitted the Respondent to file written submissions. The matter is adjourned for further hearing on 12.12.2024.