TaxTMI 
TaxTMI 
2021 (8) TMI 69
X X X X Extracts X X X X
X X X X Extracts X X X X
....ices" (FTS) within the meaning and scope of section 9 of the Income Tax Act, 1961 as well as Article 12 of the India-US Double Taxation Avoidance Agreement (DTAA). I.T.A. No. 5336/DEL/2017 (A.Y 2014-15) "Whether on the facts and in the circumstances of the case, the CIT(A) has erred in holding that the receipts of the assessee from various activities of hotel management ranging interalia from ticketing, reservation, marketing, advertising, operation, administration, catering, network support services, Starwood Portal Services, imparting of skill sets through trainings etc. were not taxable as "Fee for Technical Services" (FTS) within the meaning and scope of section 9 of the Income Tax Act 1961 as well as Article 12 of the India - US Double Taxation Avoidance Agreement ("DTAA"). 3. We are firstly taking facts of M/s Starwood (M) Intentional Inc. for Assessment Year 2014-15 as the facts are identical as well in case of Westin Hotel Management which is a group company. The assessee Company is incorporated in USA and carries on the business of providing various centralized services to the hotels in several countries across the world. During the year under consideration,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....covers the issue contested in both these appeals and also relied upon the decisions of the Hon'ble Delhi High Court in case of DCIT vs. Sheraton International Inc. (2009) 313 ITR 267. 6. The DR submitted that the decision in case of Westin Hotel Management is not applicable in the present case in relation to the following written submissions:- Issue Involved- 1. The issue involved in aforesaid cases are similar in nature. The assessee has offered Royalty Income in return of income (refer para 1 of the AO order in case of Westin, para 3.2 of the AO order in case of Starwood). The assessee has earned service income which has not been offered to tax on two grounds- a) the services do not constitute FTS as per article 12(4)(b) of DTAA and b) the assessee does not have PE in India. 2. However, the AO considered it to be FTS as per I.T. Act as well as article 12(4)(b) of DTAA as the services do make available the skill set to the recipient. 3. It is claimed that the Hon'ble Tribunal has already decided the issue in favour of the assessee on this issue wherein it is held that the services are not in the nature of make available.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in Paragraph 3 is received, or (b) make available technical knowledge, experience, skill, knowhow or processes, which enables the person acquiring the services to apply the technology contained therein." or (c) consist of the development and transfer of technical plan or design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. 8. Perusal of article 12(4)(a) shows that in a case where the services are ancillary and subsidiary to the enjoyment of the right, property or information for which a Royalty payment described in Paragraph 3 of article 12 is received, the same would be in the nature of Fee for technical services. 9. It is prayed that the cases in hand do ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cle 12 of India-.USA DTAA? B. Our Submissions: At the outset, it is respectfully submitted that the taxability of Centralized Services fees (namely sales & marketing services, reservations, loyalty programs etc.) is duly covered by decision of this Hon'ble Tribunal Assessee's own case for AY 2013-14 in ITA No. 5146/DEL/2016 in identical facts. Copy of decision of Hon'ble Tribunal is enclosed herewith as Annexure-1 for your kind reference and records. It is further submitted that in the present case, both Ld. AO and Ld. CIT(A) have held the nature' of services to be same as those rendered by the Assessee in the earlier years and also same as nature of services rendered by a group entity, namely Sheraton International Inc, which has been examined in detailed and found to be 'not taxable' in hands of the Assessee by this Hon'ble Tribunal in Sheraton International Inc. vs DDIT [(2007) 106 TTJ 620 (Delhi Tribunal)] - copy enclosed as Annexure-2 and confirmed by Hon'ble Delhi High Court in case of DIT vs Sheraton International Inc. [(2009) 313 ITR 267 (Delhi HC)] - copy enclosed as Annexure-3. Specific reference....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oyalty under section 9(l)(vi) read with Explanation 2 or article 12(3) of the DTAA nor fee for technical services or fee for included services under section 9(l)(vii) read with Explanation 2 or article 12(4) of the DTAA. See observations in paragraph 85 of the impugned judgment. The relevant portion of the finding is extracted below .................................................................... 13. In view of the aforesaid findings of the Tribunal that the main service rendered by the assessee to its clients-hotels was advertisement, publicity and sales promotion keeping in mind their mutual interest and, in that context, the use of trademark, trade name or the stylized 'S' or other enumerated services referred to in the agreement with the assessee were incidental to the said main service, it rightly concluded, in our view, that the payments received were neither in the nature of royalty under section 9(l)(vi) read with Explanation 2 or in the nature of fee for technical services under section 9(l)(vii) read with Explanation 2 or taxable under article 12 of the DTAA. The payments received were thus, rightly held by the Tribunal, to be in the nature o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e's case nor the same otherwise also is applicable to the facts of the present case since there was no such use or the right to use any industrial, commercial or scientific equipment. This takes us to Article 12(4)(a) of the DTAA which covers only the payments made for rendering of any technical or consultancy services which are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received. As clarified and explained in the Memorandum of Understanding dated 15th May, 1989, paragraph 4(a) of Article 12 thus includes technical and consultancy services that are ancillary and subsidiary to the application or enjoyment of an intangible for which a royalty is received under a license or sale as described in paragraph 3(a) as well as those ancillary and subsidiary to the application or enjoyment of industrial, commercial or scientific equipment for which a royalty is received under a lease as described in paragraph 3(b). In this regard, we have already held that the payments received by the assessee in the present case from the Indian hotels/clients were not in the nature of royalties within the ....