The Income Tax Appellate Tribunal ( ITAT ), Delhi bench ruled that income from the hotel related services provided to Indian hotels is not royalty/Fee including service ( FIS ) under Article 12 of the India USA Double Taxation Avoidance Agreements ( DTAA ).
The Appellant Westin Hotel Management L.P.is a firm incorporated in the United States of America and carries on the business of providing various hotel related services in several countries across the world. The Appellant is a tax resident of the USA in terms of the provisions of Double Taxation Avoidance Agreement between India and the USA.
The Appellant has entered into agreements with various Indian hotel owners for providing worldwide marketing and advertising services of the hotels covered by the agreement through its worldwide system of sales, advertising, promotion, public relations and reservations, in the usual course of its business to some hotels owned/managed by the Indian companies. All such services are provided outside India.
While filing the return of income Appellant claimed that revenue received from various hotel owners for providing various Centralized Services from outside India were claimed to be “not taxable” in India under Section 9 of the Income-Tax Act as well as under the provisions of Article 12 of India-USA Double Taxation Avoidance Agreement. Without considering the claim the AO passed an assessment order.
Aggrieved by the order assesee filed an appeal before the CIT(A). The CIT(A) allowed the appeal filed by the assessee . Thereafter the revenue filed an appeal before the tribunal.
During the adjudication Amit Arora, the counsel for assessee relied upon the decision of Delhi High court in DCIT Vs. Sheraton International Inc. argued that the amount received providing services to Indian hotel clients cannot be treated as FIS.
Further with respect to royalty the counsel for assessee argued that assessee is neither the owner of the trademark nor has received any payment as a consideration for the use of, or right to use of the trademark in terms of Article 12(3)(a) of India -USA DTAA.
Vizay B. Vasanta, Department representatives supported the decision of assessing officers.
The tribunal observed that the issue in dispute is squarely covered in favour of the assessee by the decision of the Tribunal and Jurisdictional High Court. Therefore the bench comparising Astha Chandra ( Judicial Member ) and Shamim Yahya, ( Accountant Member ) held that income from the hotel related services provided to Indian hotels are not covered royalty/Fee including service ( FIS ) under Article 12 of the India USA Double Taxation Avoidance Agreements ( DTAA ).
Therefore the bench dismisses the appeal filed by the revenue.
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