2022 (10) TMI 108

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition to income amounting to Rs. 20,13,09,505 made by Ld. Assessing Officer (hereinafter referred to as 'Ld. AO'), towards Centralized Services fees received by the Appellant primarily in the nature of Sales & Marketing charges, Reservation charges, Loyalty programs and fees for other centralized services rendered outside India. 3. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the fees of Rs. 20,13,09,505 received for rendering various Centralized Services as ancillary and subsidiary to the license fee. a. That the Ld. CIT(A) has violated the principles of natural justice while holding that the income arising to the Appellant is through a business connection in India under Section 9(1)(i) of the Act without granting opportunity to Appellant/ Assessee to present its case regarding non-applicability of such provision/ reason. b. That the Ld. ClT(A) has erred in arbitrarily applying considering a very high profit percentage of 50% in terms of Rule 10 of the Income Tax Rules, 1962. c. That the....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tated that this matter is pending before the Hon'ble Supreme Court. 6. Ld. DR for the Revenue did not dispute this proposition. 7. We have heard both the parties and perused the record. We are of the considered opinion that following the judicial discipline, we have to follow the Hon'ble High Court's decision as well as ITAT decision in assessee's own case. Hence, ld. CIT (A) has erred in distinguishing these decisions, which is not in accordance with the principles of judicial discipline. We may briefly refer to the ITAT order for AY 2012-13 vide order dated 17.10.2019 wherein ITAT has referred to Hon'ble High Court's order in assessee's own case and held as under:- "(i) the main purpose of the agreement entered into between the assessee and its clients-hotels was to promote business keeping in mind their mutual interests, through worldwide publicity, marketing and advertisement. All other services rendered by the assessee as encapsulated in various articles of the agreement were incidental and/or ancillary to its main object. The permission to use the trade mark, brand name, as well as the stylized " S" given by the assessee to its clients-hotels was examined by th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ngement between the assessee-company and the Indian hotels/clients as evident from the relevant agreements as well as the nature of the assessee` s own business, the said amount clearly represented its ` business profit` which was not liable to tax in terms of article 7 of the Indo-American DTAA. We, therefore, allow the relevant grounds raised in the assessee` s appeals on this issue and dismiss the additional grounds raised by the Revenue in its appeals." (v) it found that article 12(4)(b) had no applicability and for this purpose it relied upon the memorandum of understanding dated May 15, 1989, and the examples set out therein. After perusing the examples given therein, it came to the conclusion that it had no applicability to the hotel industry. It held that article 12(4)(b) applied to those services which related to areas where technology was made available, whereas what the assessee in the present case was extending was services to the hotel industry in relation to advertisement, publicity and sales promotion, which were not in the nature of technical or consultancy service involving " making of any technology available" . The finding to this effect is given in para....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... the Indian hotels/clients. What is transferred to the Indian company through the service contract is commercial information and the mere fact that technical skills were required by the performer of the service in order to perform the commercial information services does not make the service a technical service within the meaning of paragraph (4)(b) of article 12. Since the facts of the present case are almost similar to the facts of this case given in example 7 of the memorandum of understanding, it leaves no doubt that the payment in question received by the assessee-company from the Indian hotels/clients or any part thereof could not be treated as ` fees for included services` within the meaning of paragraph (4)(b) of article 12." 12.2 As regards the agreement being a colourable device the Tribunal noted that nothing was brought on record by the revenue authorities to show that the intention of the said arrangement or even the action of the parties, as reflected in the agreement, was at variance with the terms of the agreement. It noted that since both the assessee and its clients were operating at arm` s length, no collusion could be attributed to the parties ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....not have a permanent establishment under article 7 of the DTAA " business income" received by the assessee cannot be brought to tax in India. The findings of the Tribunal on this account cannot be faulted. The Tribunal pointedly observed that there was no evidence brought on record by the Revenue to enable them to hold that the agreement was a colourable device, in particular, that the payments received were for use of trade mark, brand name and stylized mark " S" . We agree with reasoning adopted by the Tribunal. Moreover, these are findings of fact which could be gone into only if a question was proposed impugning the findings of the Tribunal as perverse. We find that no such question has been proposed in the appeal. The observations of the Supreme Court in the case of K. Ravindranathan Nair v. CIT [2001] 247 ITR 178 being relevant are extracted below (page 181) : "The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact-finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense tha....