TaxTMI 
TaxTMI 
2024 (6) TMI 817
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....0) of the Act mandates every direction issued by the Id. DRP is binding on the AO and hence, the impugned assessment order dated 28 September 2023 passed under section 143(3) r.w.s. 144C(13) is bad in law and thus deserves to be quashed. 1.2 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not following the past years favorable Tribunal decisions in Appellant's own case on taxability of centralized marketing and reservation related receipts, without appreciating the fact that the matter attained finality in said years, as tax department did not challenge the Tribunal's decision before the High Court. Ground No. 2: DRP Directions issued u/s 144C(5) is bad in law due to invalid Document Identification Number (DIN) in view of CBDT Circular No. 19/2019 dated 14.08.2019. 2.1 On the fact and in the circumstances of the case and in law, the Hon'ble DRP erred in not quoting valid computer-generated DIN on the body of the DRP Directions dated 04 August 2023 passed order section 144C(5) of the Act, thus such directions are in contravention to the CBDT Circular No. 19 of 2019 and hence liable to be quash....
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.... 3.4 On the facts and in the circumstances of the case and in law, the Ld. AO and the Hon'ble DRP have erred in holding that System Fund support fee and Technology Services Fees received from IHG India is taxable as FIS under Article 12(4)(a) of India-USA DTAA. 3.5 On the facts and in circumstances of the case and in law, the id. AO and the Hon'ble DRP while treating System Fund support fee and Technology Services Fees as FIS under Article 12(4)(a) of the India-US DTAA, have failed to appreciate that no Royalty accrues to the Appellant. 3.6 On the facts and in circumstances of the case and in law, the ld. AO and the Hon'ble DRP have erred in holding that System Fund support fee and Technology Services Fees is 'ancillary and subsidiary' to the license fee received by the affiliate group entity, for granting the rights to use the brands to the Indian Hotels. 3.7 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP have erred in concluding that the System Fund support fee and Technology Services Fees is taxable as FIS under Article 12(4)(a) of India-USA DTAA based on following incorrect assertions: ....
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....d back-up statements of TACP filed during the assessment proceedings. Thus, making the additions bad in law and liable to be deleted. 4.4 On the facts and in circumstances of the case and in law, the Ld. AO has erred in holding that TACP amounting to INR 1,23,46,336 received from third party Indian hotels is taxable as FTS/ FIS under the Act and under the India- USA DTAA, without appreciating the fact that the same are reimbursement in nature, and therefore, do not partake the character of Income. 4.5 On the facts and in circumstances of the case and in law, the Id. AO violated the principle of natural justice by not providing any opportunity to furnish the balance invoices and back-up statements of TACP, before making the addition of INR 1,23,46,336 in the final assessment order. 4.6 On the facts and in circumstances of the case and in law, the Id. AO has erred in not following the decision of Hon'ble Commissioner of Income-tax (Appeals) (*CTT(A)) in Appellant's own case in earlier years, wherein taxability of TACP was held in favour of the Appellant on identical facts. 5. That on the facts and in the circumstances of the case and in law....
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....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^st April 2019: 8. With effect from 1st April 2019, IHG India has been granted a nonexclusive license by IHG AP Singapore for granting use of trademark/ brand rights to the third-party hotels owners and the license fees received is taxable in India in the hands of IHG India as business income. 9. Accordingly, from 1^st April 2019, IHG India has entered into a Hotel Management Agreement ('HMA') with third party IHG brand Hotel in India. Under the HMA, IHG India grants license to the third-party hotel owners for the use of brand name/ trademark, provides hotel management services and provision of system fund services (which is in relation to marketing and reservation related services). 10. As per above referred HMA, IHG India is required to provide/ procure marketing and reservation related services to the Indian Hotels. Such marketing and reservation services were earlier provided by SCHI to the hotel owners in India. For providing marketing and reservation related services, IHG India facilitates provision of marketi....
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....s given on this issue for AY 2020-21 and rejected the assessee's objections on this ground. However, it stated that the assessee has mentioned that there are favourable judgments from the ITAT Mumbai in assessee's own case and directed the AO to verify as to whether the Department has filed or in the process of filing the appeal against the above orders and give effect to the ITAT's directions if the matter has attained finality in judicial proceedings. The relevant directions of the DRP in para 4.3 of this order is reproduced as under:- "Since the legal and factual matrix remains unchanged, the DRP reiterates its directions given on this issue for the assessment year 2020-21 and rejects the assessee's objections on this ground. However, assessee has mentioned that there is favourable judgments from the ITAT Mumbai, in assessee's case. The AO is directed to verify the above fact from the available record and ascertain whether the department has filed or in the process of filing appeal against the above order and give effect to the ITAT's directions if the matter has attained finality in judicial proceedings." 15. Thus, the ld. DRP following the orders of earlier years h....
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.... (vii) For AY 2020-21, the Delhi ITAT vide order dated 09.05.2024 in ITA No.2355/Del/2023 following the earlier decisions of the ITAT in assessee's own case held that the marketing and reservation related receipts is not taxable as 'Royalty'/ 'Fees for Technical Services' under India-USA DTAA and deleted the additions made in the assessment order. 19. The above decisions of the ITAT has held that the Marketing, Distribution and Marketing and Frequency Marketing program and SCHI Facility Service charges is not Royalty/FTS and hence not taxable in India. Therefore, the matter is squarely covered by the above decisions and hence, the appeal of the assessee on this ground is allowed. The addition of Rs. 6,13,91,631/- is hereby deleted. Ground no.1.2 and 3 are allowed. 20. Ground No.2 is regarding challenging the order due to invalid Document Identification Number (DIN) in view of CBDT Circular No.19/2019 dated 14.08.2019. During the course of hearing, the ld. AR did not press this ground and hence, this ground is dismissed as not pressed. 21. Ground No.4 : Additions in relation to Travel Agent Commission ('TACP') amounting to Rs. 1,23,46,336/- received from third-party Indi....
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....41 of its reply, it submitted as under:- "141. Without prejudice to the above(i.e. receipts on account of TACP is neither taxable as FTS under the Income-tax Act nor under India- US DTAA), it is submitted that the receipts on account of TACP do not partake the character of income and are merely in the nature of recovery of expenses incurred in facilitating the distribution channels to the hotels on account of bookings made through them, which are ultimately borne by the beneficiary hotel. This is evident from the invoices raised by the assessee on hotels (refer to Annexure 12) and corresponding back-up statement received with respect to such commissions/fees (refer to Annexure 13)." 25. Further, it is seen that the assessee has also placed copy of invoices in relation to TACP on page no.346 to 348 of the paper book and also copy of back-up statements of TACP on page no.349 to 448 of the paper book. Further, it is also certified by the assessee that these documents are already on the records of the AO/DRP or in the public domain. Therefore, it is seen that the AO is not correct in observing that the necessary details/invoices were not submitted during the assessment proc....
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....our of the assessee in previous years. 21. On perusal of definition of FTS defined under the Act, there are broadly three components i.e. managerial, technical and consultancy services. 22. It was submitted that the expression 'managerial, technical and consultancy services' have not been defined either under the Act or under the General Clauses Act, 1897. Therefore, the said terms have to be read together with the word 'services' to understand and appreciate their purport and meaning. 23. In this respect the Delhi Tribunal, while interpreting the meaning of FTS as per Explanation 2 of section 9(1)(vii) of the Income tax Act, 1961 held as under: "...... ..A look at the above Explanation shows that it contains a definition of FTS and says that FTS means any consideration for the rendering o f any managerial , technical or consultancy services including the provision of services of technical or other personnel , but does not include consideration for any construction , assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries The content o....