TaxTMI 
TaxTMI 
TaxTMI 
2024 (2) TMI 582
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....on rendered therein shall apply mutatis mutandis to the other appeals in the present batch. ITA No.3362/Mum./2019 Assessee's Appeal - A.Y. 2012-13 3. In this appeal, the assessee has raised the following grounds:- "1.1 That on the facts and in the circumstances of the case and in law, the order passed by the CIT(A) confirming the addition to the income made by the Ld. AO in relation to Marketing Contribution, Priority Club receipts, Reservation Contribution and Holidex (collectively referred to as Marketing and Reservation contribution) amounting to INR 11,53,92,265 is wrong and bad in law. 1.2 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in treating the amount received by the Appellant from Hotels in India towards Marketing and Reservation contribution to be in the nature of Royalty. 1.3 On the facts and in circumstances of the case and in law, the CIT(A) has erred in not appreciating that the Marketing and Reservation contribution received from Indian hotels is neither taxable as Royalty under section 9(1)(vi) of the Act nor under Article 12(3) of the India - USA Double Taxation Avoidance Agreement ('DTAA'). 1.4 On the....
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....market research and for reservation and related activities for the benefit of the said Indian hotels; * Marketing and Reservation contribution received from Indian hotels are not in the nature of an unfettered receipt in the hands of the Appellant; 1.8 On the facts and in circumstances of the case and in law, the CIT(A) has erred in holding that the principle of Mutuality is not applicable in case of the Appellant in relation to receipts and Reservation Contribution received Marketing Contribution, Priority Club receipts and Reservation Contribution received from Indian hotels by stating that; * That the amount is recovered from Indian Hotels as a fixed percentage, therefore the same partakes the character of license fee; * The amount is inseparable and Interlinked to the sales of the India Hotels and expenditure against such receipts, results in increasing in the value of the brand, which in-turn result into increase in revenue of the India Hotels. 1.9 to On the facts and in circumstances of the case, the CIT(A) has erred in not following the binding decision of the jurisdictional Hon'ble Mumbai ITAT in Appellant's own case which has decided the matter in favour ....
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....proceedings, the assessee was asked to show cause as to why the amount received for marketing contribution computer systems should not be treated as its income. In response thereto, the assessee submitted that it maintains a separate fund where the Marketing Contribution and Reservation fees received from various hotels (including contributions from Indian hotels) are credited. It was further submitted that the amount lying in this fund is used for the sole purpose of incurring marketing and advertisement expenditures worldwide and for maintaining the Reservation system. Accordingly, the assessee submitted that the marketing contribution is merely a receipt towards reimbursement of common expenses to be defrayed by the assessee. Similarly, the Reservation fees are also in the nature of reimbursement for the expenditure incurred for maintaining the Reservation system and for providing a free booking facility to the customers of the Holiday Inn chain of hotels worldwide. It was also submitted that the Marketing Contribution and Reservation Fees received by the assessee were received with a corresponding obligation to use it for the agreed purposes. The assessee further submitted that....
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....d that the assessee has merely produced the copies of invoices raised by it without providing any basis for arriving at the figures of such invoice amounts and methods/manner in which the reimbursement amounts were determined. Further, it was held that there is no evidence on record that the market value of services received by the Indian hotels was equivalent to the payments made by the assessee to those third parties outside India as the market value of services received by any hotel may vary from country to country, whereas the assessee has charged hotels on a fixed basis only. Accordingly, the AO treated the entire amount of "Marketing Contribution and Reservation Fees" as Royalty as well as Fees for Included Services taxable in India and added the same to the total income of the assessee. 7. The learned CIT(A), vide impugned order, while dismissing the ground raised by the assessee on this issue held that the payment of marketing-related items to the assessee is tagged with the payment of Royalty offered as income and there is no logic or reason to hold that the receipt is distinct and separate, especially when both are paid as a fixed percentage of turnover. It was further h....
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....reward receipts are utilized for making payments to hotels that provide rooms pursuant to points redemptions, preparation of Priority Club letter, membership packages, maintaining member database, etc., meeting cost of the staff required to manage and promote the program. (c) Reservation Contribution: Reservation Contribution collected by the assessee is utilized to provide a network that assists customers in making room reservations at the hotels and undertake other guest relationship activities. The network consists of reservation/ call centers operated to attend reservation calls from guests, assist them in making the necessary hotel reservation, and attend to guests' queries or complaints. The reservation contribution is utilized to cover expenses in relation to the operation of call center (which comprises payments of employee compensation, equipment costs, and rental for office facilities), costs in relation to maintenance of other reservation channels such as tracking, billing, and payment of travel agents commission, etc. (d) Holidex Fees: Holidex Fee is an amount paid by the hotels to the assessee to facilitate the booking of hotel rooms and reservations for hotel ....
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.... is not taxable in the hands of the assessee in the absence of any PE in India. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- "7. We find that the assessee has produced the financial statements of the Holiday Inn Worldwide Systems Fund and independent auditors report thereon by Deloitte & Touche LLP. These evidences clearly show that the moneys received on account of marketing and reservation where for the agreed purposes and it was not an unfettered receipt in the of the assussee it was a kind of trust money and received capacity. We have also noted, as evident from the significant accounting policies reproduced earlier in this order, that in the past, a part of collections for marketing and reservation fees was refunded to the participating properties on the basis of certain assessments. In the light of these facts the marketing and reservation contributions received by the company cannot be viewed as income of the assessee. These contributions having been made by the participating hotels mandatorily does not affect the determination of the character of receipts. This receipt cannot be termed as a consideration for use of an....
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....s held to be not an unfettered receipt in the hands of the assessee, which fact has also been substantiated by the Independent Auditor in its report as noted above. However, from the perusal of the aforesaid decision, relied upon by the lower authorities, we find that the aforesaid aspects did not arise in the facts of that case. Therefore, we are of the considered view that the conclusion reached by the coordinate bench in the aforesaid decision is based on the peculiar facts of that case. Further, in the present case, it is also undisputed that the orders passed by the coordinate bench in assessee's own case have been accepted by the Revenue and no appeal has been filed against the same before the Hon'ble High Court. Therefore, in view of the above, we find no merits in the reliance placed by the lower authorities on the aforesaid decision in Marriott International Inc (supra). 13. Accordingly, respectfully following the judicial precedence in assessee's own case, the Marketing Contribution and Reservation Fees received by the assessee are not Royalty and therefore, the impugned addition is deleted. Further, since the Revenue is not in an appeal against the findings of the learn....