TaxTMI 
TaxTMI 
2022 (7) TMI 674
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....the Commissioner of Income-tax (Appeals) 35 CIT(A) dated February 28, 2019 under section 250 of the Act on the following grounds, which are independent and without prejudice to each other 1. On the facts and circumstances of the case and in law, the CIT(A) erred in determining the total income of the Appellant at Rs 9,63,05,200. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in holding that the marketing contribution and reimbursement of expenses ('IMPPA receipts') received by the Appellant from the Indian hotel owners pursuant to the International Marketing Program Participation Agreement (IMPPA) are taxable as 'royalty'. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred in holding that the IMPPA receipts are taxable as fees for technical services". 4. On the facts and circumstances of the case and in law, the CIT(A) has erred in not considering that the marketing contribution and reimbursement of expenses pursuant to the IMPPA are in the nature of pure cost reimbursements without any profit element embedded therein and therefore, not liable to tax in India. 5. On ....
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....ing media, advertising slots on radio, television, and other electronic media. Further, the marketing and business promotion expenditure is intended not only for the benefit of Indian Hotel, but for the Marriott group as a whole. The assessee is in the business of promoting enterprises and is conducting international advertising, marketing and sales programme for Marriott chain of hotels to promote them in foreign markets. Further, the Assessing Officer noted that in the advertisements, the main emphasis is on the brand, i.e. Renaissance Hotels, JW Marriott. Moreover, all these advertisements carry a copyright of Marriott International, Inc. or by the assessee itself. The Assessing Officer further held that the expenditure incurred by the assessee in international advertising is for building up of the brand "Marriott" and accordingly payment has been made by the owner towards Royalty for the use of international brand and therefore the entire consideration received by the assessee from the Indian Hotel Owner under the IMPPA is taxable in India as Royalty under section 9(1)(vi) of the Act. Further, the assessing officer held that the services provided by the assessee both within and....
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....a fair and reasonable basis. • Receipts from hotel owners: Contribution for undertaking international marketing activities as a percentage of gross revenue of the respective hotels; and Reimbursement of cost in relation to other services on a fair and reasonable basis. 4. Place of rendering services The international marketing activities are undertaken outside India as evidenced in clause 3.2 of the marketing agreement. The international marketing activities are undertaken outside India 5. Operating construct A centralized marketing fund is mentioned and administered for the purpose of undertaking advertising, marketing, promotion and sales activities on behalf of hotel owners who have been licensed to use 'Marriott' brands. A centralized marketing fund is mentioned and administered for the purpose of undertaking advertising, marketing, promotion and sales activities on behalf of hotel owners who have been licensed to 'Marriott' brands. use 6. Royalty agreement entered into with the hotel owners MILC has entered into royalty agreement with certain Indian hotel owners. IHLC has also entered into royalty agreement with ....
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....the posers were made in response, the reply was "1. Produce a copy of the agreement, if any, between Marriott International Inc. (MII) and IHLC has not entered into any agreement with MII in connection with the impugned transaction under consideration and therefore, the above details are not applicable. This brings to fore the fact that nothing is payable to brand owner and the income aspect of the receipt is to be absorbed by appellant itself. 23. There is a missing link in the argument above. Para C of IMPPA read as under: C. As of the late of this Agreement, IHLC is a wholly-owned, indirect subsidiary of Marriott International, Inc. IHLC and its Affiliates have expertise and experience in providing international advertising, marketing, promotion and sales services to Courtyard System hotels. Owner desires to participate in such program conducted by IHLC outside India and IHLC desires to accept Owner into such program upon He terms and conditions set forth in this Agreement. It is not explained as to how the appellant can exist in isolation and still do activity independent of owner of brand. This is a point that needs explanation. Irrespective of any a....
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....t is that IMPPA is non-profit making exercise. According to Appellant, the expense in for specified purpose matches income is in pre determined manner and there is no surplus to be taxed. This argument is valid if attempt is to the same as business profit, which is never the focus of this discussion. It also is to be noted that in this appellate order at various stages, it is held that IMPPA cannot exist in isolation of payment of Royalty for Marriot Brand. 28. Let us consider this receipt of Royalty income in accordance with provisions of double Taxation Avoidance Agreement. Under Double Taxation Avoidance Agreement, income is not determined, but tax is determined as a fixed per cent of gross RECEIPT. The perspective whether there is profit or loss and whatever be its extent, tax is determined at a fixed rate. This is the manner in which Royalty suffers tax in hands of brand owner and extent of expenses does not count. The same principle applies in regard to royalty under section 115A also. A receipt tagged to recipient of Royalty (Payment by hotels in India is for overall benefit of use of Marriot Brand, though made to Appellant who is not the brand owner) cannot have a ....
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..... Section 245S of Income Tax Act 1961 reads as under: Applicability of advance ruling. 245S. (I) The advance ruling pronounced by the Authority under section 245R shall be binding only- (a) on the applicant who had sought it; (b) in respect of the transaction in relation to which the ruling had been sought; and (c) on the Principal Commissioner or Commissioner, and the income-lax authorities subordinate to him, in respect of the applicant and the said transaction. (2) The advance ruling referred to in sub-section (1) shall he binding as aforesaid unless there is a change in law or facts on the basis ol which the advance ruling has been pronounced. Since there is no change in facts, the IMPPA remaining same, the decision of AAR has applicability in case of appellant. Coming to sub-section (2) of section 245S, there is (judicial decision on character of income and (b) no decision on aspect of mutuality. On (b) Hon. ITAT has merely reverted matter to Assessing Officer and no firm decision is available to follow. The additional ground on mutuality is dismissed by me in paragraph. 33. Overall, after considering abov....
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....nc. (supra), observed as under: '013. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this appeal is that income of royalty arising out of the above trademark of ' brand ' Marriott' is taxable in the hands of the assessee or not. Now, assessee has given a registration certificate dated 21st august, 2006 and covers above assessment years. No doubt, as held by the Hon'ble Delhi High Court in the case of CUB Pty Limited vs. [2016] 71 taxmann.com 315 (Delhi) that since the brand owner not located in India, the situs of the brand would also be outside India and naturally, the income arising there from would be chargeable to tax in the hands of the owner of the brand. In fact, Marriott International Inc. (assessee) in these appeals is not the owners of the brand as per certificate of ownership produce before us. Therefore, it is chargeable to tax in the hands of the person who owns the brand. Nevertheless, it is not the contention of the assessee that no tax should have been deducted under section 195 of the Act on the payments made by, Juhu Beach Resorts Limited, V.M. Salgaonkar and Brothers Pvt. ....