Centralized hotel support receipts held as business income, not fees for technical services or included services, and not taxable without a permanent establishment.

Receipts from centralized hotel-related support services were held to be business income arising from an integrated marketing and sales-promotion arrangement, not fees for technical services, fees for included services, or royalty. The services were provided from outside India and were directed to publicity, reservation, loyalty and related support functions, without any use of trademark, property or technical know-how. The treaty conditions for fees for included services were not met because the services were neither ancillary to a royalty-bearing right nor did they make available technical knowledge. In the absence of a permanent establishment in India, the receipts were not taxable in India.

---

---

Issues: Whether the receipts from centralized hotel-related services were taxable as fees for technical services or fees for included services under the Income-tax Act, 1961 and the India-USA Double Taxation Avoidance Agreement, or were only business income not taxable in India in the absence of a permanent establishment.

Analysis: The receipts arose from a separate centralized services arrangement under which the assessee provided marketing, advertising, promotion, reservation, loyalty and related hotel support services from outside India. The receipts were held to be part of an integrated business arrangement whose predominant object was publicity, marketing and sales promotion, and not the use of any trademark, property or technical know-how. The conditions for characterization as fees for included services were not satisfied because the services were not ancillary and subsidiary to any royalty-bearing right, and the make available requirement under the relevant treaty provision was also not met. The earlier decisions in the assessee's own case and the connected group case were followed.

Conclusion: The centralized services receipts were not taxable as fees for technical services, fees for included services, or royalty, but constituted business income. In the absence of a permanent establishment in India, the amount was not taxable in India, and the Revenue's appeal failed.

---