The Income Tax Appellate Tribunal (ITAT), Delhi bench, while allowing relief to Starwood (M) Intenrtinal Inc., held that the Company cannot be taxed for “Fee for Technical Services” for the marketing and advertising services provided to various Indian hotels.
The assessee Company is incorporated in USA and carries on the business of providing various centralized services to the hotels in several countries across the world. During the year under consideration, the appellant had provided worldwide marketing and advertising services of the hotels through Starwood’s 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 from outside India. The assessee company has agreed to provide the following services to various hotels operating in India. The Assessing Officer held that the receipts from such services are taxable as “Fee for Technical Services” (FTS) within the meaning and scope of section 9 of the Income Tax Act, 1961 as well as Article 12 of the India-US Double Taxation Avoidance Agreement (DTAA).
The assesseecontended that the above services, were provided by the assessee company outside India and the income was received in the form of marketing fees, and fees for ‘Frequent Flier Program (FTP), and ‘Starwood Preferred Guest’ (SPG). It was also submitted that the assessee company does not have a P.E. in India and therefore, no tax can be charged.
The bench comprising Judiacial Member Suchitra Kambleand Accountant Member Anil Chaturvedi observed that the Assessing Officer has simplicitor made addition in respect of FTS under Article 12 but no limb of Article 12 was given by the Assessing Officer and there is no specification which comes out from the assessment order.
Allowing the contentions of the assessee, the Tribunal held that “the main contentions of the Ld. DR which are totally new in the present assessment year and not presented before either of the Revenue Authorities in Assessment Year 2013-14 as well as 2014-15. These contentions are coming for the first time and are not emerging from the actual assessment order which is contested before this forum. Services in the nature of FTS whether constitutes FTS or not and whether the assessee has PE in India or not, was very well settled and was undisputed as per the submissions and records before the Assessing Officer as well as before the CIT(A). The Revenue is projecting a new case which was not part of assessment order as well as order of the CIT(A). Therefore, the written submissions made by the Ld. AR are just afterthought and cannot be taken into account as the same are not plausible.”
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