Income from Centralized Services by Startwood Hotel from Indian Customers not 'FTS': Delhi HC dismisses Dept’s Plea [Read Order]

The Delhi High Court, while upholding an order of the Income Tax Appellate Tribunal (ITAT), has held that payments received by the Assessee, M/s Starwood Hotel and Resorts Worldwide Inc, from its Indian Customers on account of Centralized Services shall not amount to fee for technical services (FTS) under Section 9(l)(vii) of the Income Tax Act, 1961.

The income tax department filed an appeal against the ITAT order holding that the entire payments received by the Assessee from its Indian Customers on account of Centralized Services viz. sales and marketing, loyalty programs, reservation service, technological service, operational services and training programs/human resources do not constitute ‘Fee for Technical Services’ as defined under Section 9(l)(vii) of the Income Tax Act, 1961 or 'Fee for included services’ as defined under Articles 12(4) (a) of the Indo-US DTAA.

While analysing the arguments from both sides, Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “Though the judgment of this Court in Sheraton International Inc. has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras, the present appeal is covered by the judgment passed by the learned predecessor Division Bench in Sheraton International Inc.”

“Accordingly, no substantial question of law arises for consideration in the present appeal and the same is dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the aforesaid Civil Appeal,” the Court said.

To Read the full text of the Order CLICK HERE

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