Amount received from Indian Hotels for Services under terms of agreements is Business Income: Delhi HC dismisses Income Tax Appeal pending SC decision [Read Order]

The Delhi High Court dismissed income tax appeal pending the Supreme Court (SC) decision in the ruling of the Delhi High Court that the amount received from Indian hotels for services under terms of agreements is business income.

Via the instant appeal, the appellant/revenue sought to assail the order passed by the Income Tax Appellate Tribunal [“Tribunal”]. The counsel for the appellant did not dispute the fact that the issue raised in the instant appeal stands covered by the judgment of the coordinate bench rendered in Director of Income Tax v. Sheraton International Inc.

In Director of Income Tax v. Sheraton International Inc it was observed that “In view of the aforesaid findings of the Tribunal that the main service rendered by the assessee to its client-hotels was advertisement, publicity and sales promotion keeping in mind their mutual interest and, in that context, the use of trademark, trade name or the stylized "S" or other enumerated services referred to in the agreement with the assessee were incidental to the said main service, it rightly concluded, in our view, that the payments received were neither in the nature of royalty under Section 9(1)(vi) read with explanation 2 or in the nature of fee for technical services under Section 9(1)(vii) read with explanation 2 or taxable under Article 12 of the DTAA.”

A Division Bench comprising Justices Rajiv Shakdher and Girish Kathpalia observed that “In view of the fact that the appellant/revenue has preferred an appeal qua the judgment rendered by the court in Sheraton International Inc, it is made clear that if the appellant/revenue were to succeed in the said matter, parties will abide by the final decision rendered by the Supreme Court.”

To Read the full text of the Order CLICK HERE

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