AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 697
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....the case and in law, the Ld. AO and the Hon'ble DRP have erred in making the addition to the income of the Appellant in relation to System Fund support fee and Technology Services Fees amounting to INR 28,11,42,298. 1.2 On the facts and in circumstances of the case and in law, the ld. AO and the Hon'ble DRP have erred in treating System Fund support fee and Technology Services Fees as Fee for Technical Services ('FTS') under section 9(1)(vii) of the Act and as Fee for Included Services ('FIS') under Article 12 of India - USA DTAA. 1.3 On the facts and in circumstances of the case and in law, the ld. AO and the Hon'ble DRP have erred in treating the System Fund support fee and Technology Services Fees, received from IHG India taxable as FIS under Article 12(4) of the DTAA without appreciating that: a. The said services are neither technical nor consultancy in nature; b. The said services are not 'ancillary and subsidiary' to the application or enjoyment of the right, property or information for which royalty is received by the Appellant; and c. The said services do not make available any technical knowledge, experience, skill, know-how, or processes, etc. 1.4 On the ....
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.... Hon'ble Mumbai ITAT in Appellant's own case which has decided the matter in favour of the Appellant on similar facts. Ground No. 2: Addition made in relation to Travel Agent Commission ('TACP') amounting to INR 10,02,93,045 from third party Indian hotels 2.1 On the facts and in circumstances of the case and in law, the Id. AO has erred in holding that the TACP amounting to INR 10,02,93,045, recovered from Indian Hotels is taxable in the hands of the Appellant as FTS/ FIS under the Act and under the India-USA DTAA. 2.2 On the facts and in circumstances of the case and in law, the Ld. AO has erred in holding that the receipts amounting to INR 10,02,93,045 is taxable as FIS, without taking cognizance of the detailed factual and legal submissions made by the Appellant with regard to nontaxability, of such receipts during the course of the assessment proceedings. 2.3 On the facts and in circumstances of the case and in law, the Id. AO has erred in not complying with the directions of the Hon'ble DRP, for verification of invoices and back-up statements of TACP filed during the assessment proceedings. Thus, making the additions bad in law and liable to be deleted. 2.4 On the....
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.... brand name and receives the amount for marketing and reservation services from IHG India. Ground No. 1 Additions made in respect of receipts on account of Marketing, Distribution Marketing, Frequency Marketing Programme (i.e. IHG Rewards) (hereinafter collectively referred to as 'System Fund support fee ') and SCHI Facility charges (also referred as Technology Service Fees) amounting to INR 28,11,42,298: Business Model prior to 1 April 2019: 6. Before 1 April 2019, a tri-partite agreement [Hotel Management Agreement ('FIMA ')] was entered into between IHG India, IHG AP Singapore and third-party hotels owners. As per HMA, IHG AP Singapore granted license to third-party hotels for use of brand name. IHG India was designated as 'Manager', obligated to provide Hotel Management, Operation and technical support services to IHG brand Hotels in India. SCHI (as an affiliate of IHG AP Singapore), was required to provide certain marketing and reservation related services to such third- party hotel owners for which it received marketing and reservation contribution from each of the IHG brand hotels in India. Business Model with effect from 1 April 2019: 7. With effect from 1st A....
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....ices. Further, in consideration for reservation system support services, IHG India pays to SCHI, a fee equal to 95% of the total fees payable by third- party Indian hotels to IHG India. Assessment Order and ld. DRP directions for A.Y. 2020-21 12. The AO passed the draft assessment order for A.Y. 202021 on the same line as in A.Y. 2012-13 onwards, alleging that marketing and reservation related receipts are ancillary and subsidiary to Royalty received by the group entity for the use of brand name and taxable as Fees for Included Services ('FIS') under Article 12(4)(a) of India-US DTAA (internal page 16 of the final assessment order at page 25 of the appeal set). In making the above allegation in the draft order, the AO referred the agreement with Duet Hotels. 13. The Id. DRP in its directions dated 12 May 2023 stated that the issue of taxability of marketing and reservation related services is covered from A.Ys. 2012-13 to 2018-19 and taxable under Article 12 of India-USA DTAA (internal page 4 to 7 of the DRP directions) and held as under: "5.3 Mere tweaking of business model doesn't change the nature of the receipts chargeable to tax. However, the AO may discuss the new busin....
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....tted that the Id. CIT (A) in Assessee's own case in A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 has held that the amount of TACP received by SCHI is not in the nature of FTS. The Id. CIT(A) in passing the above appellate order noted that the AO in the assessment order for A.Y. 2016-17 has held that TACP receipts are not taxable as FTS under the India-USA DTAA. 19. Further, the tax department has accepted the above order of Id. CIT(A) for A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 and has not filed an appeal before the ITAT. Accordingly, the taxability of TACP receipts have already been settled in favour of the assessee in previous years and the same are not taxable in view of 'Rule of consistency'. Further, no addition in relation to TACP was made by the Id. AO in A.Y. 2016-17 and A.Y. 201718. The AO deviated from the settled position and taxed the amount of TACP in A.Y. 2020-21 without taking cognizance of the earlier position and documents filed by the Assessee during the assessment proceedings. 20. The ld. CIT (A) in Assessee's own case in A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 has held that the amount of TACP received by SCHI is not in the nature of FTS basis the observ....