Royalty classification of loyalty, reservation and marketing fees rejected under the India-Singapore DTAA, with addition deleted.

Receipts from the loyalty programme, reservation fee and marketing fee were held not to constitute royalty under the Act or Article 12 of the India-Singapore DTAA. The Tribunal followed its co-ordinate Bench's decision in the assessee's own prior year on identical facts and applied the same legal and factual pattern to delete the addition. The related interest issue was left to be recomputed in accordance with law as a consequence of the revised tax position, and the penalty issue was treated as academic after deletion of the addition.

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Issues: Whether receipts from loyalty programme, reservation fee and marketing fee were taxable as royalty under the Act and Article 12 of the India-Singapore Double Taxation Avoidance Agreement.

Analysis: The addition was made by following the position taken in an earlier year. The Tribunal noted that, on identical facts in the assessee's own case for a prior assessment year, the co-ordinate Bench had held that the disputed receipts could not be characterised as royalty and had directed deletion of the addition. Following that binding factual and legal pattern, the Tribunal accepted the assessee's claim and deleted the entire addition. The related interest grounds were only consequential to the main addition, and the penalty ground became academic after deletion of the addition.

Conclusion: The receipts were not taxable as royalty, and the addition was deleted in favour of the assessee. The consequential interest issue was to be recomputed in accordance with law, while the penalty issue was not adjudicated as academic.

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