TaxTMI 
TaxTMI 
2022 (7) TMI 674
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....ated 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 the facts and circumstances of the case and in law, the CIT(A) has erred in not co....
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....s 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 outside India in the form of advertising, marketing promotion, sales programme and special services and other pr....
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....tels; 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 certain India hotel owners. The difference cited is that there is no provision for Centralized Reservation System in regard to services and for Marketing fee regarding income (paragrapli B-1 of written Submissio....
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....herefore, 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 agreement between Appellant and owner of brand, the authority under which the program operates is not explained. If the role is executed as a subsidiary, then it is to be so stated. 24. The written submission filed on 12112018 and 27.03.2018 highlights certain case decisio....
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.... 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 distinct character different from main character. For the hotels in India, all the three payments viz (a) Royalty, (b) Marketing fee and (c) Reimbursement of expenses are in an integrated manner needed to successfully use Marriot Brand which in turn increases their business. 29. Value of Marriot Brand soars when t....
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....cipal 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 above and views of appellant reproduced in paragraph 12 of this order, I find that the decision of AAR subsist in the case even though the parties concerned is different since broad character of transactions remain same. Independently also test of mutuality fails and Hon. ITAT has held the income of similar nature to be Royalty. Accordingly grounds B to F stands dismissed. 34. I had raised ....
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....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. Ltd. and Chalet Hotels Limited and we are also conscious of the fact that sum is received by the assessee and provision of section 163 of the act also needs to be examined. However, there is a substantive provision for that. 014. In view of these facts, we set aside all these four appeals back to the file of the learned Assessing Officer with a direction to consider the certificate of registration on trademark dat....