INTER CONTINENTAL HOTELS GROUP (ASIA PACIFIC) PTE LTD., SINGAPORE V. ACIT, CIRCLE- 2(1)(1), INTERNATIONAL TAXATION, NEW DELHI

ITA 2986/DEL/2019

AI Insights

The case involves Inter Continental Hotels Group (Asia Pacific) Pte Ltd., a non-resident corporate entity from Singapore, appealing against the taxability of fees received from its Indian subsidiary, IHG India, for Management Support Services. The primary legal contention was whether these fees constitute FTS under the India-Singapore DTAA, which would make them taxable in India. The Tribunal examined the nature of the services provided and referenced previous rulings in similar cases involving the same parties, particularly focusing on whether the services 'made available' technical knowledge or were merely 'rendered' without such availability. The Tribunal concluded that the services were not FTS as they did not meet the 'make available' condition specified in the DTAA, thus not making the income taxable in India.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300644 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 04-04-2019
• Other Referred Cases: Sheraton International Inc. vs CIT & Ors., G.V.K. Industries Ltd. v. ITO, CBDT vs. Oberoi Hotels (India) Pvt. Ltd., Dy. CIT vs. Boston Consulting Group Pte Ltd., Raymond Ltd. v. Dy. CIT, Mitsui Engg. & Ship Building Co. Ltd. vs. CIT, Nayveli Lignite Corpn. Ltd. vs. CIT, Klayman Porcelains Ltd. vs. CIT
• Laws Referred To: India-Singapore Double Taxation Avoidance Agreement (DTAA), Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S.K. AGGARWAL; PITYUSH GUPTA
• Keywords: Business income; Double taxation relief
• Section: 143(3); 9(1); 9(1); 9(1); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI BEFORE SHRI G.S. PANNU, PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.2986/Del/2019 Assessment Year: 2014-15 ITA No.4608/Del/2019 Assessment Year: 2013-14 Inter Continental Hotels Group (Asia Pacific) Pte Ltd., 230 Victoria Street, # 13-00, Bugis Junction Towers, Singapore Vs. ACIT, Circle-2(1)(1), International Taxation, New Delhi. PAN :AABCI6407M (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeals by the same assessee arise out of two separate orders of learned Commissioner of Income-Tax (Appeals), New Delhi pertaining to assessment years 2013-14 and 2014-15. Assessee by Shri S.K. Aggarwal & Pityush Gupta, CAs Respondent by Shri Sanjay Kumar, Sr. DR Date of hearing 04.10.2022 Date of pronouncement 11 .01.2023 2 ITA Nos.2986 & 4608/Del/2019 ITA No.4608/Del/20 (Asstt.Year: 2013-14) 2. Grounds raised by the assessee are as under: 1.1 That on the facts and in the circumstances of the case and in law, the order passed by the CIT(A) confirming the addition made by the Ld. A.O under Section 144C(3) r.w.s. 143(3) in relation to Management Support Charge is wrong and bad in law. 1.2 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in treating the amount received by the Appellant from Inter- Continental Hotels Group (India) Pvt. Ltd. (‘IHG India’) towards provision of Management Support Charge to be in the nature of Fee for Technical Services (‘FTS’) under Article 12 of India-Singapore Double Taxation Avoidance Agreement (‘DTAA’/Treaty). 1.3 That on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that merely because the services are managed, technical and consultancy in nature, the same will not ispo- facto result into FTS under Article 12 of India- Singapore DTAA, unless the services results into making available technical 1.4 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in concluding that the Management Support Services ‘make available’ technology, knowledge, skill, experience to the recipient ignoring the explicit language of Article 12(4)(b) of the DTAA which provides that the recipient should be in a position to apply the technology contained in the services. 1.5 That on the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that the support services provided by the Appellant are 3 ITA Nos.2986 & 4608/Del/2019 required by IHG India on an on-going basis and hence the technology, experience etc., cannot be said to be made available by the Appellant to IHG India. 1.6 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in observing that interpreting the term ‘make available’ in reference to other tax treaties, is not permissible. 2. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in levying education cess over the rates provided in Article 11 and 12 of India-Singapore DTAA while computing the taxable income of the Appellant. 3. The above grounds of appeal are independent and without prejudice to one another. 4. That the Appellant reserves its right to add, alter, amend and/or modify any ground of appeal before or at the time of hearing of the appeal.” 3. As could be seen from the grounds raised, the issue in dispute is whether the amount received towards provision of management support services to the Indian subsidiary is in the nature of Fee For Technical Service (FTS) under Article 12(4)(b) of India-Singapore Double Taxation Avoidance Agreement (DTAA). 4. Briefly the facts are, the assessee is a non-resident corporate entity incorporated under the laws of Singapore and a tax resident of Singapore. As stated by the Assessing Officer, the assessee is a part of 4 ITA Nos.2986 & 4608/Del/2019 Inter-Continental Hotels Group (IHG) and primarily engaged in the business of franchise/license operating and manage hotels operating under different hotels of the group in the Asia Pacific Region and headquarter for the Asia Middle East & South Africa Region. The assessee is the economic and beneficial owner of hotel brand news including ‘Inter-continental’ “Holiday Inn” and “Crown Plaza” for Asia Specific Region. For permitting the use of the aforesaid brand names, the assessee enters into agreement/arrangements with various hotels within the Asia Specific Region including India for licensing the hotel brands. The amount received from various hotels towards use of brand name is treated as royalty and offered to tax. Further, the assessee had entered into an agreement with its Indian subsidiary for provision of Management Supports Services. As regards the fee received under such agreement, the assessee claimed it to be not taxable in India as it is not in the nature of FTS. 5. In course of assessment proceedings, the Assessing Officer, to examine assessee’s claim, called for and verified the Management Support Services Agreement and after perusal of the agreement, he found that the support services provided by the assessee are as under: 5 ITA Nos.2986 & 4608/Del/2019 i) Operational Support; ii) Accounting and Legal Support; iii) Sources and Procurement; iv) Information Technology related services; & v) Training Services. 6. After deliberating on the issue, the Assessing Officer ultimately held that not only the services rendered by the assessee are in the nature of consultancy services, but while doing so, assessee had also made available technical knowledge, skill, know-how etc. Therefore, he treated the amount received towards provision of Management Support Services as FTS under Article 12(4)(b) of Indian-Singapore DTAA as well as under Section 9(1)(vii) of the Act. Accordingly, he brought the amount of Rs.6,83,22,262 to tax. While deciding the issue in appeal, learned Commissioner (Appeals) granted partial relief to the assessee by holding that payment received towards information technology services cannot be regarded as FTS, 7. Before us, it is a common point between the parties that the issue is covered by the decision of the co-ordinate Bench in assessee’s own case in assessment year 2012-13. 6 ITA Nos.2986 & 4608/Del/2019 8. Having considered the submissions of the parties, we find, while deciding identical issue in assessee’s own case in assessment year 2012-13, the Tribunal in order dated 24.09.2021 passed in ITA No.4524/Del/2017 has held as under: “24. On analysis of the facts, we find that the assessee started charging management support services from FY2011-12 only. So, it is the first year when the management support services were provided to IHG India, Assessee submitted that the size of hotel management operations o f IHG India were relatively small in prior years. 25. The detailed analysis o f services rendered by the assessee to M/s IHG India to appreciate whether 'make available' condition gets satisfied in delivery of such services by the assessee . As regards the reliance place by the applicant to the meaning of "make available" in the MOU in India-US DTAC, it may be noted that a Convention is a treaty entered into by two sovereign States relating to rights and duties o f subjects or citizens of the respective States in one another's possession. No doubt one can look into the Protocol attached to a treaty between two countries to find the meaning of an expression used in the treaty, but to refer to a treaty to which two countries are not parties, would not be appropriate. It can at the best have persuasive value . The expression "make available" only means that the recipient of the service should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or know-how in future on his own. The list of services rendered by the assessee to M/s IHG India, as ITA No.4524/Del/2017 Inter Continental Hotels Group (Asia Pacific) Pte. Ltd. 13 per schedule 1 of the service agreement between IHG (Asia Pacific) i.e. the assessee company and IHG India, are as under: 1. Operational support • Provide advice to and assist local general CMH. Hotel management in the production of data in line with the AA 7 ITA Nos.2986 & 4608/Del/2019 Region strategic plan and co-ordinate the implementation of such plan; • Provide advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards. • Maintain the highest qualification available with regard to the international hotel business and its management techniques. • Co-ordinate the managerial plan and actions within the AA Region; • Advise local general CMH Hotel management on trends and changes in the hotel business in general. • Provide advice on the production of operating and capital budgets at the level o f the CMH Hotels, which are consistent with the strategic plan; • Provide to local general CMH Hotel management on a periodic basis regional financial reports and statements for operating performance comparisons which allow local management to make business decisions; • Improve finance resources of CMH Hotels which are sub ject to seasonal fluctuation by provision o f treasury assistance; • Provide financial advice on the viability of new projects; • CO-ordinate the implementation of the rules o f operations in CMH Hotels; • Advise CMH Hotels in applying the rules of operations, taking into account the fact that CMH Hotels operate in a number of countries in the AA Region; • Centralize information on the quality performance of CMH Hotels; • Provide advice on technical aspects of site selection for new CMH hotels • Provide advice and support for the maintenance of the existing properties of the AA Region; • Maintain a list of selected contractors available to local management; 8 ITA Nos.2986 & 4608/Del/2019 • Advise on safety, insurance and risk aspects of the properties; • Provide technical services, including engineering, architectural, interior and graphic design advisory services required for new hotel construction and renovation programs and any associated property related services 2. Analytical and Accounting Support • Assist and advise participant in the production o f reports regarding budgets, cash-flow, • capital requirements and annual accounts/quarterly reports;’ • Monitor and ensure consistency in application of accounting standards and policies. • Assist and advise on the implementation and the use o f accounting systems for the AA Region including front and back office systems; • Provide support as necessary from the global and regional finance functions and the business service centre . 3. Legal advice • Provide advice, counsel and opinions on national and international legal problems connected with the business activity in particular with respect to legal aspects of management contracts, lease , real estate , litigation, form of organizations, taxation, employee relations and industrial property rights, trademark and copyright protection in the countries where participant operates, including the legal management of all affiliates; • Provide support, as necessary, from the business reputation and responsibility function. 4. Information Techno logy • Advise on and support the implementation o f hardware and software systems as well as local area networks in the CMH Hotel (s); • Provide IT support, as necessary, to CMH Hotels. 5. Purchasing 9 ITA Nos.2986 & 4608/Del/2019 • Co-ordinate international purchasing o f furniture, equipment and supplies; • Negotiate , execute and implement service agreements and agreed pricing structures with third party suppliers of goods and services. • Perform price and quality comparisons and negotiate with suppliers on volume purchase; 6. Personnel and Training • Provide advice on and co-ordinate the career planning o f all management employees and CMH Hotels; • Provide advice on and co-ordinate compensation and benefit plans including pensions plans for CMH Hotel employees in the AA region; • Provide employees of the Regional Pooling Company or its Affiliates, to participant from time to time on secondment; • Assist and advise on the development of an individual manpower specification and its application to managerial selection; • Assist in recruitment, selection and provision for senior personnel for CMH Hotels; • Provide support as necessary from the Global Human Resources team and the business services centre; • Assist in obtaining necessary visas, work permits and in defining relocation requirements; • Co-ordinate international manpower planning and uniform employment policies; • Monitor and negotiate on labour relation issues. 7. Miscellaneous • Provide ail other relevant areas of advice and support in connection with the owning and-or managing of CMH Hotels. 26. It is not in dispute that IHG India has received the above services from the assessee company in terms of management service agreement. It is obvious that the assessee company provides highly technical services which are used by IHG India for taking managerial decision, budgeting & accounting 10 ITA Nos.2986 & 4608/Del/2019 decision, risk management decision, etc. The knowledge & expertise in the field of hotel operation & management & related areas which was accumulated through study, experience and experimentation with regard to management, budgeting, risk, etc. of the same business is nothing but a technical knowledge. Further, Andhra Pradesh High Court in G.V.K. Industries Ltd. v. ITO [1997] 228 ITR 564/(1998] 96 Taxman 179, held that the advice given by non-resident company in taking a financial decision either to procure loan or to strengthen the finance would be a technical or consultancy services. This shows that the advise given related to managerial including operational and financial aspects would tantamount to delivery of managerial, consultancy or technical services. Furthermore, in the case of CBDT vs. Obreroi Hotels (India) Pvt. Ltd., Hon'ble Supreme Court of India echoed the fact that management support involve great deal of expertise, skill and technical knowledge . The relevant extracts are reproduced as under: “There is no gain saying that running a well equipped modern hotel is no ordinary affair. Once needs a great deal o f expertise skill and technical knowledge for the purpose ...” 27. In view of the above, there is no doubt that the services rendered by the assessee were in the nature of managerial /technical/consultancy services. 28. The rationale o f the Ld. CIT(A)while confirming the order of the Assessing officer is as under: “On the basis o f the input, advice, assistance and service provided by the assessee company , the decision is taken by IHG India to manage the hotels in India and other parts o f South Wes t Asia ("SWA"). I t is also to be remembered that the assessee company is giving services in respect o f Personnel & Training to the IHG India employees in making use o f the inputs, experience, experimentation , assistance and advice rendered by them for taking a better and possible decision in order to achieve the desired objectives/goal. Therefore, in the context o f professional management and decision making process , the advice and service rendered by the assessee 11 ITA Nos.2986 & 4608/Del/2019 company which was made use by IHG India in managerial decision making process is in the nature o f technical services which facilitate IHG India to take correct and suitable decision towards achievement o f the desired objects and business goal . Para 8.1(a) o f the management agreement between Today Hotels Pvt . Ltd . (Hotel Crowne Plaza Gurgaon) and SC Ho tels & Resorts (India) Pte. Ltd . (IHG India) (submitted vide letter dated 28 .02 .2017) states that the Manager (IHG India) shall second the General manager to owner (the Crowne Plaza ho tel) who shall employee that person directly throughout the period of secondment. The process o f engagement of seconded employees from the IHG India to third party owned hotels clearly reflects the trans fer o f knowledge & expertise o f a particular ITA No.4524/Del/2017 Inter Continental Hotels Group (Asia Pacific) Pte. Ltd. 19 institution to other institute. Further, para 3 .3 of a foresaid Management Agreement states that the Manager (IHG India) will have the right to determine all policies and procedures relating to operation o f the hotel including marketing and sales policies , personnel policies etc. IHG India has played the role o f bridge in connecting the assessee company to the third party owners. There fore, it may not be correct to say that the services delivered by the assessee company did no t make available the knowledge, knowhow and skill to IHG India to apply/use the same in its decision making process . The assessee relied on the various case laws to support its claim without appreciating that the facts o f the present case are distinguishable from the facts o f the cited cases. The extracts o f the services rendered by IHG India as per the transfer pricing study report o f IHG India is reproduced as under: "To provide operational assistance to the Family o f Hotel Brands in South West Asia , as IHG AP/SCHI may reasonably request. Such assistance may include, but is no t limited to, technical services, financial management guidance , legal services , human resources , risk management and insurance, 12 ITA Nos.2986 & 4608/Del/2019 tax , treasury, marketing advice , and other general corporate services . With respect to management services, pre-commencement services and technical services , these services are provided to third-party hotel owners. The agreement for the provision o f these services is between IHG India and third party hotel owner. For the pre-commencement services, IHG India has this separate design and engineering team o f personnel to work with third party hotel owners on design and engineering aspects o f the hotels . The team works with the owners of hotels to manage the construction or refurbishment of the hotels, putting in place the pre-commencement processes for the hotels to ensure that the hotels can open on time and on brand. The team provides reviews the design concept, de tailed schematic and activities; related to construction , review and approve the design and drawings, monitor the progress of the projects, conduct ore-opening reviews and inspections, assist In the selection of vendors and materials , and provide necessary guidance and support to other external consultants hired by the owner (viz . architects, interior designers , engineers etc .) . The team may also provide recommendation to the hotel owner on which external consultants may be hired for the project . The guidance provided by the team relate to aspects such as brand standard, engineering , fire safety etc. Some o f the key objectives for the design and engineering team are to ensure that the constructed hotel meets the brand standards and the same adheres to the relevant safety norms and local regulations so as to bring out the brand proposition which the owner wishes to operate the hotel as. For the hotel management services, IHG India is responsible for managing the hotels on behalf of third party owners. The services typically comprise of support in the areas related to hotel operations, commercial support (sales and marketing), and other business support functions ( finance, human resources , IT etc .). IHG India works closely with hotel owners to develop and monitor business plans, capital expenditure budgets , 13 ITA Nos.2986 & 4608/Del/2019 operational strategies, communicating and providing guidance to the hotels in rolling out various initiatives , conduct annual review and operational audits o f the hotels etc. Guidance are provided to the General Managers ("GM") o f the hotels in analyzing information and diagnosing operational issues and develop action plans to improve the performance o f the hotels including coordination between various corporate functions and the hotels . The respective functional teams in the areas o f human resource, IT and new hotel openings support the related needs for the third party hotel management business .” 29. In this background, the only issue remains to be adjudicated is whether the meaning of ‘make available’ is applicable to the services mentioned under sub-clause (b) of Article 12(4) o f the treaty or not. The ld. CIT (A) gave the reasons the services of operation support, analytical and accounting support, legal advice, purchasing, personal training should be treated as the services which have been covered under ‘make available’. The arguments of the assessee are that the services were not made available but only rendered to the clients. 30. We have gone through the agreement and the TP study report of the IHG India with regard to the services provided. We find that the operational support such as Providing advice , information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards, maintaining the qualification available with regard to the international hotel business and its management techniques and Coordinating the managerial plan and actions, advising local general CMH Hotel management on trends and changes in the hotel business in general and provide advice on the production of operating and capital budgets at the level o f the CMH Hotels, which are consistent with the strategic plan can at best be the managerial consultancy service but not the services made available so that the recipient can use or replicate the such services received from the assessee. ITA No.4524/Del/2017 Inter Continental Hotels Group (Asia Pacific) Pte. Ltd. 22 14 ITA Nos.2986 & 4608/Del/2019 31. With regard to accounting support the Bench has posed a pertinent question as to why not the accounting support given be treated as the technical knowledge ‘made available’. It was answered that the accounting support given was in relation to the preparation of balance sheet and modalities and to advice production of reports regarding the budgets from time to time and the services are rendered repeatatively based on the requirements o f the clients and hence it cannot be treated as a service which was ‘made available’ to be applied independently and in times to come . We, after going through the type of services rendered, hereby concur with the explanation given by the ld. AR. 32. Similarly, the services rendered in connection with training & recruitment and manpower specification, we find that there is neither technology transfer , knowledge transfer nor transfer of any skill or know-how. 33. Hence , we hold that the provisions o f the Article 12(4) could not be applied to the services rendered by the assessee in the strict sense of the provisions of DTAA. Hence , we hold that the decision of the ld. CIT (A) cannot be supported.” 9. Facts being identical, respectfully following the decision of the co-ordinate Bench in assessee’s own case, as referred above, we hold that the amount received by the assessee cannot be regarded as FTS under Article 122(4)(b) of the Act. Accordingly, addition made is deleted. Grounds are allowed 10. In the result, the appeals is allowed. ITA No.2986/Del/2019 : 11. Grounds raised in this appeal are as under: 15 ITA Nos.2986 & 4608/Del/2019 1.1 That on the facts and in the circumstances of the case and in law, the order passed by the CIT(A) confirming the addition made by the Ld. A.O under Section 144C(3) r.w.s. 143(3) in relation to Management Support Charge amounting to INR 8,67,34,734 is wrong and bad in law. 1.2 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in treating the amount received by the Appellant from Inter- Continental Hotels Group (India) Pvt. Ltd. (‘IHG India’) towards provision of Management Support Charge to be in the nature of Fee for Technical Services (‘FTS’) under Article 12 of India-Singapore Double Taxation Avoidance Agreement (‘DTAA’/Treaty). 1.3 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that the consideration against Management Support Services received from IHG India is taxable as FTS under Article 12(4) of India-Singapore Treaty. 1.4 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that the consideration against Management Support Service received by the Appellant from IHG India is taxable as FTS under Article 12(4) of India-Singapore Treaty. 1.5 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that the consideration received by the Appellant from IHG India against rendition of Management Support Service is ‘ancillary and subsidiary’ to the license fee received by it from the India Hotels for granting them right to use the brands, which were beneficially held by the Appellant. 1.6 That on the facts and in the circumstances of the case and in law, the CIT(A) while treating Management 16 ITA Nos.2986 & 4608/Del/2019 Support Service taxable as FTS under Article 12(4)(a) of the India Singapore Treaty, has failed to appreciate that the consideration against rendition of Management Support Service is received from IHG India, whereas consideration against right to use the Hotel brand name (i.e. license fee) is received from India Hotels, under different contracts. 1.7 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that Management Support Agreement and Hotel Management Agreement are interrelated. 1.8 That on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that merely because the services are managerial, technical and consultancy in nature, the same will not ipso- facto result into FTS under Article 12 of India- Singapore DTAA, unless the services results into making available technical knowledge, experience, skill, know-how or processes, which enables the service recipient to apply the technology contained therein. 1.9 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the observation of the Ld. AO that the Management Support Service s ‘make available’ technology, knowledge, skill, experience to the recipient, ignoring the explicit language of Article 12(4)(b) of the DTAA which provides that the recipient should be in a position to apply the technology contained in the services. 1.10 That on the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that the support services provided by the Appellant are required by IHG India on an on-going basis and hence the technology, experience etc., cannot be said to be made available by the Appellant to IHG India. 17 ITA Nos.2986 & 4608/Del/2019 1.11 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the observations of the Ld. A.O that interpreting the term ‘make available’ in reference to other tax treaty, is not permissible. 2. The above grounds of appeal are independent and without prejudice to one another. 3. That the Appellant reserves its right to add, alter, amend and/or modify any ground of appeal before or at the time of hearing of the appeal.” 12, As could be seen from the grounds raised, the issue in dispute is more or less identical to ITA No.4068/Del/2019 decided by us in the earlier part of this order. However, there is slight difference in the factual position in the sense that learned Commissioner (Appeals) has attempted to provide a different dimension to the issue. Like assessment year 2013-14, in the impugned assessment year, the assessee had received fee for provision of Management Support Services amounting to Rs.8,67,34,734. The nature and character of services provided under the agreement are identical to assessment year 2013-14. While completing the assessment, Assessing Officer adopted the same approach as in assessment year 2013-14 and held that the amount received is in the nature of FTS, both under Section 9(1)(vii) 18 ITA Nos.2986 & 4608/Del/2019 as well as under Article 12(4)(b) of the India-Singapore DTAA. However, while deciding the issue in appeal, learned Commissioner (Appeals) held that since the services provided under the Management Support Services Agreement are ancillary and incidental to the license agreement entered by the assessee to permit use of brand name, the consideration received from which is in the nature of royalty, the Management Support Service Charges received are in the nature of FTS under Article 12(4)(a) read with section 9(1)(vii) of the Act. 13. We have considered elaborate submissions made by the learned counsel appearing for the assessee and learned Departmental Representative. At the outset, we must observe, the facts relating to the issue in dispute are identical to the preceding assessment years, as, the same agreements, both, relating to license to use brand name and provision of management services are continuing from earlier years. In fact, as stated by us earlier, the approach adopted by the Assessing Officer in bringing to tax Management Support Service Charges as FTS under Article 12(4)(b) of the treaty is similar to assessment year 2013-14. 19 ITA Nos.2986 & 4608/Del/2019 14. However, while deciding the issue in appeal, learned Commissioner (Appeals) had concluded that the amount received by the assessee towards the provisions of Management Support Services are in the nature of the FTS under Article 12(4)(a) as it is ancillary and subsidiary to the royalty income received from license to use brand names by various hotels in India. 15. Thus, we have to examine whether the services rendered by the assessee under Management Support Service Agreement are ancillary and subsidiary to the license granted for user of brand name, charges received from which are in the nature of royalty. For this purpose, first, we have to see Article 12(4)(a) of the treaty, which reads as under: (a) “are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received.” 16. Having given a thoughtful consideration to the submissions of the parties in the context of the aforesaid finding of learned Commissioner (Appeals), we find, the license granted by the assessee to various hotels in India for user of brand name from earlier times 20 ITA Nos.2986 & 4608/Del/2019 and the assessee had been offering such income as royalty. Whereas, the assessee had entered into Management Support Services agreement at a later point of time. These facts show that the agreements for user of brand name and for Management Support Services are independent of each other, hence, not connected or dependent upon each other. It is also relevant to observe, while the license agreements for user of brand name are with various third party hotels in India, the agreement for provision of Management Support Services is with the Indian subsidiary. Therefore, it cannot be said that the amount received from provision of Management Support Services is ancillary and subsidiary to the license agreement. It is further relevant to observe, in the year under consideration, the assessee had received more income from provision of Management Support Services than royalty. In that sense also, Management Support Services cannot be considered to be ancillary and subsidiary to the license agreement. These aspects could have been clarified by the assessee, had learned Commissioner (Appeals) given an inkling that he intends to apply Article 12(4)(a) of the treaty to bring to tax the Management Support Services fee. 21 ITA Nos.2986 & 4608/Del/2019 17. Be that as it may, the nature and character of Management Support Services fee received by the assessee in the impugned assessment year is no different from similar fee received in assessment year 2013-14. After threadbare analysis of Management Support Services Agreement and the fee received under various heads in pursuance to such agreement, the Co-ordinate Bench in assessee’s own case in assessment year 2012-13(supra) has given a categorical finding that it does not come under Article 12(4) of India-Singapore DTAA. The decision of the Co-ordinate Bench as aforesaid, will also apply mutatis-mutandis to this appeal. However, for the sake of completeness, we must observe, in course of hearing learned counsel for the assessee has brought to our notice a decision of the Co-ordinate Bench in case of Starwood Hotels & Resorts Worldwide Inc. vs CIT & Ors. In ITA No.2011/Del/2019 order dated 29.04.2022 in the context of the applicability of Article 12(4)(a) of the DTAA. 18. Having carefully perused the aforesaid decision, we find, while dealing with an identical issue, the Bench has held as under: “12. Therefore, the only issue which arises for our consideration is, whether the amount received by the assessee for various services, commonly known as centralized services, will fall 22 ITA Nos.2986 & 4608/Del/2019 within the ambit of FIS under Article 12(4)(a) of the Treaty. For holding the payment received by the assessee to be in the nature of FIS under Article 12(4)(a), learned Commissioner (Appeals) has attempted to link the Centralized Services Agreement entered into by the assessee with License Agreement entered into by the Indian Hotels with group affiliates for grant of right to use trade name. It is a fact on record, under License Agreement for grant of right to use trade name, the Indian hotels have paid license fee to the affiliates. The affiliates have also offered such license fee as royalty income. There is no dispute that the license fee paid to the affiliates have been taxed in India. It is the reasoning of learned Commissioner (Appeals) that since the services rendered by the assessee under Centralized Services Agreement is ancillary and subsidiary to the License Agreement for grant of right to use trade name, the amount received by the assessee in pursuance to Centralized Services Agreement has to be treated as FIS under Article 12(4)(a) of the Tax Treaty. 13. It is relevant to observe, identical issue relating to taxability of centralized service fee as FIS under Article 12(4) came up for consideration before the Coordinate Bench in case of Sheraton International Inc. (supra) in assessment years 1995-96, 1996-97, 1999-2000 and 2000-01. After analyzing the terms of Centralized Services Agreement, which is more or less identical to the agreement entered into by the present assessee, the Tribunal observed that the assessee is basically providing the Indian hotels services for publicity, marketing and reservation. The main purpose/intention of the association between the assessee and the Indian hotels was to promote the hotel business in their mutual business interest through worldwide publicity, marketing and advertisement. The various facilities as well as services provided were merely the means to attain this main objective. The Tribunal observed, the main job undertaken by the assessee is promoting hotel business by worldwide publicity, marketing and advertisement and any other services provided are in the nature of ancillary and auxiliary to the main job. The Tribunal observed that the rationale behind providing the use of 23 ITA Nos.2986 & 4608/Del/2019 trade mark/trade name was not only going to help and assist the assessee in rendering its services relating to publicity, advertisement and business promotion of the Indian hotels, but such use was also going to help the assessee in advertising its other hotels worldwide and to promote their business as the Indian Hotels, in terms with the agreement, will take steps to recommend and promote Sheraton Inn/Hotels worldwide and to make every reasonable effort to encourage the use of same by all of its customers and guest. Thus, the intention behind entering into agreement was to benefit from mutual promotional effort undertaking by each of the entity. 14. It is quite evident, the basis for learned Commissioner (Appeals) to conclude that the fee received by the assessee for centralized services is in the nature of FIS under Article 12(4)(a) of the Treaty is because of the following reasons: (i) Centralized Services Agreement is actually a subsidiary and ancillary agreement of the license agreement. (ii) Primary agreement which enables and sets off of the business of the franchisee is the License Agreement for which license fee is paid and such license fee is taxable as royalty advance of the affiliates which receives the license fee. (iii) There is no need for satisfying ‘the make available’ clause under Article 12(4)(a) of the Treaty. In case of Sheraton International Inc. neither the Tribunal nor the Hon’ble Jurisdictional High Court to examine the implication and applicability of Article 12(4)(a) of the Tax Treaty. 15. Learned Commissioner (Appeals) has observed that the five determinative factors for classification of the consideration received as FIS under of paragraph 12(4)(a) of the treaty, as, explained in the Memorandum of Understanding (MoU) to India– US Treaty are clearly satisfied, as, the predominant factor in relation to the clients is the grant of license to use the name, which gave rise to royalty and all other payments and agreements flow from the License Agreement. 24 ITA Nos.2986 & 4608/Del/2019 17. For better appreciation, it is necessary to look into the provisions contained under Article 12(4)(a), which in turn, refers to Article 12(3) of the Tax Treaty. Article 12(3) of the Tax Treaty reads as under: “USA ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. .............. 2. ............... 3. The term "royalties" as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof ; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8.” 18. As could be seen from the opening sentence of the Article, it defines the term ‘Royalty”. It is quite obvious that the payment made by the Indian hotels to one of the group affiliates towards use of trademark has been treated as royalty and there is no dispute to the aforesaid factual position as the concerned group affiliates have offered the amount to tax as royalty. Article 12(4) of the Tax Treaty defines FIS as under: “USA 25 ITA Nos.2986 & 4608/Del/2019 ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. .............. 2. ............... 3. .............. 4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design.” 19. As discussed earlier, even learned Commissioner (Appeals) does not dispute the fact that Article 12(4)(b) would not apply to the centralized fee received by the assessee as the ‘make available’ condition is not satisfied. Therefore, to overcome this deficiency, learned Commissioner (Appeal) has made an attempt to invoke the provision of Article 12(4)(a) of the Treaty. A reading of Article 12(4)(a) would make it clear that the payment received for rendering any technical or consultancy services would come within the ambit of FIS, if such services are ancillary and subsidiary to the application and enjoyment of the right, property or information for which the payment described in Article 12(3) is received. So, the conditions to be satisfied to be regarded as FIS under Article 12(4)(a) are, services for which the payment was received must be ancillary and subsidiary to the application or enjoyment of the right, property or information for which the payment in the nature of royalty under Article 12(3) is received. 26 ITA Nos.2986 & 4608/Del/2019 20. In the facts of the present appeal, undisputedly, the 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 trademark in terms of Article 12(3)(a). The payment was received by the group affiliates under a distinct and separate license agreement. Whereas, the assessee provided centralized services relating to marketing, advertisement, promotion etc. under a distinct and separate agreement. So, when the assessee is not the owner of the property, there is no question of allowing a third party to use or right to use of the property. That being the case, the services for which payments are received cannot be considered to be ancillary and subsidiary to the application or enjoyment of the right of property or information for which royalty has been paid. Further, the MoU to India – USA Tax Treaty while explaining the import of Article 12(4)(a) has laid down the following parameters: “Paragraph 4(a) Paragraph 4(a) of Article 12 refers to technical or consultancy services that are ancillary and subsidiary to the application or enjoyment of any right, property, or information for which a payment described in paragraph 3(a) or (b) is received. Thus, paragraph 4(a) includes a technical and consultancy services that are ancillary and subsidiary to the application or enjoyment of an intangible for which a royalty is received under a licence or sale as described in paragraph 3(a), as well as those ancillary and subsidiary to the application or enjoyment of industrial, commercial, or scientific equipment for which a royalty is received under a lease as described in paragraph 3(b). It is understood that, in order for a service fee to be considered "ancillary and subsidiary" to the application or enjoyment of some right, property, or information for which a payment described in paragraph 3(a) or (b) is received, the service must be related to the application or enjoyment of the right, property, or information. In addition, the clearly predominant purpose of the 27 ITA Nos.2986 & 4608/Del/2019 arrangement under which the payment of the service fee and such other payments are made must be the application or enjoyment of the right, property, or information described in paragraph 3. The question of whether the service is related to the application or enjoyment of right, property, or information described in paragraph 3 and whether the clearly predominant purpose of the arrangement is such application or Payment must be determined by reference to the facts and circumstances of each case. Facts which may be relevant to such determination (although not necessarily controlling) include : 1. The extent to ‘which the services in question facilitate the effective application or enjoyment of the right, property, or information described in paragraph 3 ; 2. The extent to which such services are customarily provided in the ordinary course of business arrangements involving royalties described in paragraph 3 ; 3. Whether the amount paid for the services (or which would be paid by parties operating at arm's length) is an insubstantial portion of the combined payments for the services and the right, property, or information described in paragraph 3 ; 4. Whether the payment made for the services and the royalty described in paragraph 3 are made under a single contract (or a set of related contracts); and 5. Whether the person performing the services is the same person as, or a related person to, the person receiving the royalties described in paragraph 3 [for this purpose, persons are considered related if their relationship is described in Article 9 (Associated Enterprises) or if the person providing the service is doing so in connection with an overall arrangement which includes the payer and recipient of the royalties]. To the extent that services are not considered ancillary and subsidiary to the application or enjoyment of some right, property, or information for which a royalty payment under paragraph 3 is made, such 28 ITA Nos.2986 & 4608/Del/2019 services shall be considered "included services" only to the extent that they are described in paragraph 4(b).” 21. If one critically examines the determinative factors/parameters to qualify as FIS under Article 12(4)(a), it can be seen, most of the determinative factors/parameters do not apply to the centralized service fee received by the assessee. This is so, because, the services rendered by the assessee do not facilitate the use of trade name/trademark. Rather, as has been held by the Coordinate Bench in case of Sheraton International Inc. (supra) and affirmed by the Hon’ble Jurisdictional High Court, the predominant object is advertisement, marketing and promotion of the hotels. The assessee does not provide such services in ordinary course of business arrangement involving royalty as described under Article 12(4)(a). The amount received by the assessee towards centralized services cannot be considered to be insubstantial and certainly not part of combined payment of services rendered and license fee. The payments for centralized services and royalty are not under a single contract and cannot be said to be related contracts. Thus, many of the determinative factors mentioned in the MoU to India-USA treaty are absent to constitute the centralized service fee as FIS under Article 12(4)(a). In this regard, the following example given in the MOU to India– US Tax Treaty would be of much relevance: Example. 2 Facts: An Indian manufacturing company produces a product that must be manufactured under sterile conditions using machinery that must be kept completely free of bacterial or other harmful deposits. A U.S. company has developed a special cleaning process for removing such deposits from that type of machinery. The U.S. company enters in to a contract with the Indian company under which the former will clean the latter's machinery on a regular basis. As part of the arrangement, the U.S. company 29 ITA Nos.2986 & 4608/Del/2019 leases the Indian company a piece of equipment which allows the Indian company to measure the level of bacterial deposits on its machinery in order for it to known when cleaning is required. Are the payments for the services fees for included services? Analysis : In this example, the provision of cleaning services by the U.S. company and the rental of the monitoring equipment are related to each other. However, the clearly predominant purpose of the arrangement is the provision of cleaning services. Thus, although the cleaning services might be considered technical services, they are not "ancillary and subsidiary" to the rental of the monitoring equipment. Accordingly, the cleaning services are not "included services" within the meaning of paragraph 4(a). 22. As could be seen from the aforesaid illustration, though, both the services are interlinked, however, the predominant purpose of the arrangement is provision of cleaning services, hence, will not be ancillary or subsidiary to the rental of monitoring machine. Hence, the cleaning services are not to be regarded as FIS under Article 12(4)(a) of the Tax Treaty. 23. The factual position, in a way, is quite similar in the present case. The aforesaid illustration to some extent can be made applicable to the facts of the present appeal. Even if one agrees with learned Commissioner (Appeals) that the License Agreement and Centralized Services Agreement are related to each other and the Centralized Services Agreement actually flows out of the License Agreement but still the issue which requires examination is, whether the Centralized Services Agreement is ancillary or subsidiary to the License Agreement. In our view, the answer to the aforesaid question would be in the negative. Clearly, predominant purpose of the Centralized Service Agreement and the overall arrangement between the parties is to provide advertisement, marketing and 30 ITA Nos.2986 & 4608/Del/2019 promotion of the hotel business. Even, the quantum of fees received under both the agreements would demonstrate the aforesaid fact. 24. As could be seen from the materials placed on record, as against the license fee of Rs.6,05,43,227/- received by the affiliates, the assessee has received centralized services fee of Rs.6,93,56,315/-. Therefore, the quantum of fee received by the assessee in no way makes it ancillary and subsidiary to the licence fee received by the group affiliates. Further, the observations of learned Commissioner (Appeals) that in case of Sheraton International Inc. (supra) neither the Tribunal nor the Hon’ble Jurisdictional High Court have examined the taxability of centralized services fee in the context of Article 12(4)(a) of the Tax Treaty, is totally incorrect and misleading statement. If one reads the decision of the Tribunal in case of Sheraton International Inc. (supra), it would be very much clear that before the Tribunal an additional ground was raised by the Revenue regarding applicability of Article 12(4)(a) of India–US Tax Treaty to the centralized service fee received. However, after in depth examination of the issue, the Tribunal has held as under: 72. It appears from the orders of the authorities below passed in the present case that while treating the amount in question received by the assessee from Indian hotels/clients as ‘royalty’ and/or ‘fees for included services’ the Assessing Officer relied on Article 12(3) and 12(4){b) of the lndo-American DTAA besides the provisions of section 9(l)(v«) of the Income-tax Act, 1961 whereas the learned CIT(A) applied Article 12(3)(a). At the time of hearing before us, the learned Special Counsel for the Revenue Shri Y.K. Kapur has sought to rely, by way of raising the additional grounds in the appeals filed by the Revenue, Article 12(4)(a) to support the Revenue’s case that the amount in question being in the nature 31 ITA Nos.2986 & 4608/Del/2019 of ‘fees for included services' was liable to tax in India also. The learned counsel for the assessee has raised a strong objection for admission of these additional grounds stating that neither the Assessing Officer nor the learned CIT(A) having applied Article 12(4)(a) of the DTAA in their orders passed in the assessee’s case, the Revenue cannot rely on the said Articles to support its case at this stage during the course of appellate proceedings before the Tribunal. Keeping in view that the issues sought to be raised by the Revenue in these additional grounds are purely legal and all the facts relevant to consider and adjudicate the same are on record, we. however, find no merits in the objection raised by the learned, counsel for the assessee and admitting the additional grounds raised by the Revenue, we now proceed to consider and decide the issues raised in these additional grounds also on merits. In support of the Revenue’s case that the impugned amount received by the assessee from the Indian hotels/clients was in the nature of ‘royalty’ or ‘fees for included services’ as per the DTAA between India and America, reliance thus has been placed by it mainly on the provisions of Articles 12(3)(a) as well as 12(4)(r/) and 12(4)( b). Article 12(3){b) being specifically applicable only to payments received for the use of or the right to use of any equipment of industrial, commercial or scientific nature, in any case, is not applicable to the facts of the present case. It is, therefore, relevant to consider as to whether the payment received by the assessee from the Indian hotels/clients was in the nature of "royalties" or "fees for included services" within the meaning given in Article 12(3)(a), 12(4)(a) or 12(4){b) of the DTAA between India and USA or "fees for technical services" within the meaning given in Explanation 2 to section 9(1){vii). 32 ITA Nos.2986 & 4608/Del/2019 73. In order to decide this issue relating to the applicability of Article 12(3)(a), 12(4)( a) or 12(4)(b) of the DTAA or the provisions of section 9(1)(vii) read with Explanation 2 to the payment received or receivable by the assessee from the Indian hotels/clients in pursuance of the agreements entered into with them, it is necessary to appreciate the exact nature of services rendered by the assessee as is evident from the said agreements. In this regard, it is necessary to read the said agreements as a whole as held in the various judicial pronouncements discussed above so as to ascertain the exact nature of services as well as the relationship between the two parties. We have already done this exercise in the context of issue relating to applicability of section 9(1)(vi) read with Explanation 2 and after examining and analyzing all the relevant clauses and articles of the said agreements in detail, we have come to a conclusion that the arrangement between the assessee company and the Indian hotels/clients was in the nature of integrated business arrangement predominantly for rendering the services in connection with publicity, advertising and sales including reservations of the Indian hotels worldwide. The main intention/purpose of the said arrangement was to promote the hotel business worldwide in the mutual interest of both the sides and the other services enumerated in the various Articles of the agreements to be rendered by the assessee- company were merely ancillary or auxiliary to this main objective/intention. This precisely was the sum and substance of the agreement if the same is read as a whole and thus, it was a case in which the assessee- company had undertaken to provide services in connection with advertising, publicity and sales promotion including reservations for the Indian 33 ITA Nos.2986 & 4608/Del/2019 hotels/clients. Even the payment was entirely made as expressly stipulated in the agreement for these services and this is the way in which the entire arrangement was not only made but was also understood by both the sides. Even the use of trademark, trade names etc. of the assessee-company by the Indian hotel /clients was an integral part of this arrangement and such use was allowed at no cost as expressly provided in the relevant agreements. Moreover the rationale behind providing such use at no cost has been explained on behalf of the assessee which is found to be satisfactory by us for the detailed reasons given in the foregoing portion of this order. Having regard to all these aspects, we have come to a conclusion that the various services rendered by the assessee to enable it to complete efficiently and effectively the job undertaken by it as an integrated business arrangement to provide the services relating to advertising, publicity and sales promotion including reservations of the Indian hotels worldwide in mutual interest cannot be relied upon by picking and choosing the same in isolation so as to say that part of the consideration received by the assessee, as attributable to the said services, was in the nature of ‘royalties’ or ‘fees for included services’. Such an approach adopted by the Revenue authorities, in our opinion, was neither permissible in law nor practicable in the facts of the case and the conclusion drawn by them on the basis of such approach to cover the said services taken individually or in isolation divorced from the main intention within the meaning of ‘royalties’ or ‘technical services’ as defined in Explanation 2 to section 9( 1)(v/) or to section 9(l)(v») and/or that of "royalties" or "fees for included services" as defined in Article 12(3) and 34 ITA Nos.2986 & 4608/Del/2019 12(4) of the DTAA between India and USA was neither well-founded nor justified. 74. On the other hand, the predominant object/purpose of the integrated business arrangement/between the assessee-company and its Indian clients/hotels as reflected in the relevant agreements so also as understood by both the sides was that of providing the services in relation to marketing, publicity and sales promotion and even the payments in question were entirely made by the Indian hotels/clients to the assessee-company for such services as expressly provided in the relevant agreements. 75. In the case of Dy. CAT v. Boston Consulting Group Pte Ltd. [2005] 94 ITD 3 1 (Mum.) the assessee was a foreign company receiving income by providing strategy consultancy services such as marketing and sales strategy, business strategy and portfolio strategy to its clients in India and the said income was sought to be held as in the nature of ‘fees for technical services’ within the meaning given in relevant Articles of the DTAA between India and Singapore and after comparing the scope of Article 12(4)(/?) of IndiaUS Treaty with that of the same Article of the India-Singapore Tax Treaty, it was held by the Tribunal that the services rendered by the assessee-company being non-technical services could not be covered by the scope of Article 12(4)(6) of the Indo-American DTAA as well as that of India- Singapore DTAA. It was held by the Tribunal that the nature of services being rendered by the assessee company such as business strategy, marketing and sales strategy etc. were materially different and they were not of technical in nature which would enable the person acquiring the services to apply the 35 ITA Nos.2986 & 4608/Del/2019 technology contained therein. Explaining further, it was also observed by the Tribunal that so far as the provisions of India-Singapore DTAA as well as the provisions of Indo-American DTAA are concerned, payments for services which are non-technical in nature or, in other words, payment for services not containing any technology, are required to be treated as outside the scope of ‘fees for technical services’. It was further held by the Tribunal that the scope of ‘fees for technical services’ under Article 12(4)(b ) does not cover consultancy services unless these services are technical in nature. 76. In the case of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791. Mumbai Bench of ITAT held that the normal, plain and grammatical meaning of the language employed using the expressions ‘making available’ and ‘making use of’ is that the mere rendering of services is not roped in unless the person utilizing the services is able to make use of the technical knowledge etc. by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill etc. must remain with the person utilizing the services even after the rendering of the services has come to an end. The fruits of the services should remain available to the person utilizing the services in some concrete shape such as technical knowledge, experience, skill etc. 77. As already observed, a close reading of the relevant agreements especially the payment clause, the predominant nature of the services rendered, the integrated arrangement between assessee company and Indian hotels/clients as well as the nature of relationship between them as reflected in the relevant agreements so also as understood by both the sides 36 ITA Nos.2986 & 4608/Del/2019 leaves no doubt that the entire consideration was paid by the Indian hotels/clients to the assessee company for the services rendered in relation to advertisement, publicity and sales promotion of the hotel business worldwide and this being so as well as considering all the facts of the case including especially the fact that other services to be rendered by the assessee as enumerated in the various Articles of the relevant agreements were merely ancillary or auxiliary in nature being incidental to the integral job undertaken by the assessee to provide the services in relation to advertisement, publicity and sales promotion of the hotel business worldwide, it is very difficult to accept the stand of the Revenue that the amount so paid by the India hotels/clients to the assessee-company or any part thereof was paid for the use of a patent, invention, model, design, secret I formula or process or trademark or similar property or for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as envisaged in Article 12(3)(a), 12(4)(a) or 12(4)(b) of the DTAA or in section 9(1)(vii) read with Explanation 2. 78. The supply of drawings, design, documents, information etc. such as fire safety system, computer reservation system etc. as mentioned in the relevant Articles of the agreements on which much emphasis has been laid by the learned Special Counsel for the Revenue was made by the assessee to enable it to execute the job undertaken by it to render services in relation to advertisement, marketing and sales promotion of hotel business worldwide and such supply was merely incidental to the performance of integrated business arrangement which included mainly rendering services in relation to advertisement, publicity and sales promotion of hotel 37 ITA Nos.2986 & 4608/Del/2019 business. The payment made by the Indian hotels/clients to the assessee-company on account of such job or any part thereof, therefore, cannot be attributed to the use of a patent, invention, model, design, secret formula or process or trademark or similar property or for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. The decision of Hon’ble Madras High Court in the case of Nayveli Lignite Corpn. Ltd. (supra) and that of Hon’ble Andhra Pradesh High Court in the case of Klayman Porcelains Ltd. (supra) fully support this view. Even the decision of Authority for Advance Ruling in the case of Rotem Co. In re |2005| 279 1TR 165 ^ (AAR - New Delhi) is to the similar effect wherein after discussing the various judicial pronouncements, it was held that the principle which emerges from the various decisions is that in a contract for manufacture, installation, sale or supply of goods, the element of services will always be present and where such services are inextricably linked with manufacture, installation, sale or supply, they cannot be evaluated for the purpose of FTS. It is only where services are separable and independent that the FTS will be assessable. In the present case, the services sought to be treated as ‘fees for technical services’ or ‘fees for included services’ were of ancillary or auxiliary in nature and being integral part of the job undertaken by the assessee-company, the same were neither independent of nor separable from the said job undertaken by the assessee in relation to publicity, advertisement and sales promotion of the hotel business worldwide. 79. Before us, the learned Special Counsel for the Revenue has referred to some of the Articles of the agreements between the assessee and the Indian 38 ITA Nos.2986 & 4608/Del/2019 hotels/clients to submit that the drawings, designs, documents, systems and other facilities agreed to be provided by the assessee to the Indian hotels/clients in terms of the said Articles are the components which have been provided/supplied in the process of rendering of the services in relation to advertisement, marketing and sales promotion. He has contended that since the same come within the purview of one or the other clauses contained in Explanation 2 to section 9(1 )(vi) and (vii) as well as Article 12(3) and 12(4) of the DTAA between India and USA, the payment/consideration attributable to the same should be apportioned so as to bring the same to tax in India. In this regard, it is observed that a similar contention was raised before the Hon’ble Delhi High Court on behalf of the Revenue in the case of Mitsui Engg. & Ship Building Co. Ltd. (supra). The same, however, was rejected by the Hon’ble Jurisdictional High Court holding that it was not possible to apportion the consideration for design on the one part and engineering, manufacturing, shop testing etc. on the other since the price paid by the assessee to the supplier was a total contract price which covered all the stages involved in the supply of machinery from the stage of design to the stage of commissioning. ln the present case also, the entire price was paid by the Indian hotels/clients to the assessee-company in pursuance of the relevant agreements expressly for rendering the services in relation to advertisement, publicity and sales promotion and it was neither possible nor practicable nor permissible to apportion the said consideration as sought to be done by the Revenue authorities. 80. As regards the applicability of Article 12(3)(a) of the DTAA, we have already held that its trademark, trade name etc. were made available by the assessee- 39 ITA Nos.2986 & 4608/Del/2019 company to the Indian hotels/clients as an integral part of the business arrangement between them and the same, therefore, was merely incidental to carry out the job of advertisement, publicity and sales promotion undertaken by the assessee-company. Moreover, the said use was allowed for mutual benefit and the exact benefits derived by the assessee- company from such use have already been discussed by us. As expressly provided in the relevant agreements, it was agreed that no cost is to be paid by the Indian hotels/clients to the assessee-company for such use and the entire payment/consideration was on account of the services rendered in relation to advertisement, publicity etc. This was the arrangement between the parties as is evident from the relevant terms and conditions of the agreements and this is the way in which both the sides had apparently understood and acted upon such arrangement. It was thus neither desirable nor possible to apportion any portion of the consideration received by the assessee company from the Indian hotels/clients towards use of trademark, trade name etc. by the Indian hotels/clients. Having regard to all these facts and circumstances of the case borne out from the record including especially the relevant agreements between the parties, we find it difficult to accept the stand taken by the Revenue that the payments received by the assessee-company from the Indian hotels/clients in pursuance of the said agreements or any part was in the nature of royalties within the meaning of Article 12(3)(a). 81. As regards Article 12(3)(b) covering the payments received as consideration for the use of or the right to use any industrial, commercial or scientific equipment, we have already noted that neither the Revenue has invoked the provisions of this 40 ITA Nos.2986 & 4608/Del/2019 Article in the assessee’s case nor the same otherwise also is applicable to the facts of the present case since there was no such use or the right to use any industrial, commercial or scientific equipment. This takes us to Article 12(4)(a) of the DTAA which covers only the "payments made for rendering of any technical or consultancy services which are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received. As clarified and explained in the Memorandum of Understanding dated 1 5thi May, 1989, paragraph 4(a) of Article 12 thus includes technical and consultancy services that are ancillary and subsidiary to the application or enjoyment of an intangible for which a royalty is received under a license or sale as described in paragraph 3(a) as well as those ancillary and subsidiary to the application or enjoyment of industrial, commercial or scientific equipment for which a royalty is received under a lease as described in paragraph 3(b). In this regard, we have already held that the payments received by the assessee in the present case from the Indian hotels/clients were not in the nature of royalties within the meaning given In paragraph 3(a) or 3(b) of Article 12. It, therefore, follows that paragraph 4(a) of Article 12 also cannot be applied to cover any of the services rendered by the assessee company to the Indian hotels/clients in the present case.” 24. Thus, on a reading of the aforesaid observations of the Coordinate Bench, it becomes very much clear that not only the Tribunal has examined the applicability of Article 12(4)(a) of the Treaty qua the payment received but has categorically held that it cannot be treated as FIS under Article 12(4)(a) of the Treaty. Undisputedly, the aforesaid observations of the Coordinate Bench have been upheld by 41 ITA Nos.2986 & 4608/Del/2019 the Hon’ble Jurisdictional High Court in case of DIT Vs. Sheraton International Inc (supra). In view of the aforesaid, the observations of learned Commissioner (Appeals) that the applicability of Article 12(4)(a) was never examined has to be rejected at the threshold. In fact, we are constrained to observe, learned Commissioner (Appeals), being conscious of the fact that the centralized service fee received by the assessee cannot be treated as FIS under Article 12(4)(b) due to failure of ‘make available’ condition, has made an unsuccessful attempt to bring it within the ambit of Article 12(4)(a) of the Treaty and in the processes has misrepresented certain facts.” 25. Be that as it may, the fact on record reveal that the taxability of centralized services fee as FIS is a recurring issue between the assessee and the Revenue from the past years. It is relevant to observe, while deciding the issue in assessment year 2010-11, the Tribunal in ITA No.202/Del./2016, dated 28.09.2017, has held as under: “5. We have heard the ld. Authorized Representative of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 6. Ld. DR for the revenue relied upon the order of the AO. However, the ld. AR for the assessee relied upon the order passed by the ld. CIT (A). 7. For the sake of ready reference, the findings returned by the ld. CIT(A) allowing the appeal is reproduced as under “8. I have carefully considered the above submissions, and the contentions of the appellant. I have also perused the assessment order and the orders of the Hon'ble ITAT and the Hon'ble Delhi High Court for the A Vs. 1995-96 to 2000-2001 in the case of Sheraton International Inc (group concern). The issue of taxability of the appellant's income from hotel related services provided to hotels in India, as royalty fees for technical services, stands squarely covered by f the judgment of the ITAT, Delhi in the 42 ITA Nos.2986 & 4608/Del/2019 case of Sheraton International Inc. at ITA Nos. 50 to 55/Del/2006 dated | 04.10.2006, It is also observed that the appeals of the Revenue have been dismissed by the Delhi High Court vide order dated 30.01.2009, therein the Hon'ble High Court held that the Tribunal had rightly concluded that the payments received were in the nature of business income, and not in nature of royal or fees for technical services. It was accepted by the Ld. Assessing Officer that the appellant did not have a permanent establishment in India, and hence the business income could not be brought to tax under Article 7 of the India- USA DTAA, Moreover, no question of taw had arisen for their consideration, as these are findings of fact by the Tribunal. Therefore, respectfully following the orders of the higher judicial authorities, the bringing to tax of the business receipts of the appellant in India, is deleted. Thus, the appellant succeeds in grounds 1 to 4. 8. The issue in controversy has also been set at rest by the Hon'ble Delhi High Court in case cited as Director of Income-tax vs. Sheraton International Inc. - (2009) 313 ITR 267 (Del.) as under: “Double taxation relief-Agreement between India and USA Payment for advertising, publicity and sales promotion services-Tribunal found as a final fact finding authority that main services rendered by assessee, a company incorporated and tax resident in USA, to Indian company, was advertisement, publicity and sales promotion keeping in mind their mutual interests and in that context, the use of trademark, trade name etc, and other enumerated services referred to in the agreement with the assessee were incidental to main service- Tribunal thus rightly concluded that the payments received were neither in the nature of royalty under s. 9(l)(vi), Expln. 2 not in the nature of fee for technical services under s. 9(1) (vii), Expln. 2, but business income and assessee not having any 43 ITA Nos.2986 & 4608/Del/2019 PE in India such business income was not taxable in India- j There was nothing on record to show that the agreement was a colourable device- Such findings of fact having not been challenged as perverse, no substantial question of law arose out of the order of the Tribunal” 9. So, following the decision rendered by Hon’ble Delhi High Court in case of Director of Income-tax vs. Sheraton International Inc. (supra), we are of the considered view that the revenue received by the assessee for providing centralized services is not in the nature of Fee for Technical Services (FTS) u/s 9( I )(vi) Explanation 2, but it is a business income. Since the assessee is not having any PE in India, its business income earned is not taxable in India. under:- 10. So, in view of what has been discussed above, we find no illegality or perversity in the impugned order passed by the Id. CIT (A), hence present appeal filed by the Revenue is hereby dismissed.” 26. The aforesaid decision was upheld by the Hon’ble Jurisdictional High Court while dismissing Revenue’s Appeal. The same view was reiterated by the Tribunal while deciding assessee’s appeal in assessment year 2011-12 in ITA No. 203/Del/2016, dated 18.12.2018. It is relevant to observe, the aforesaid decisions of the Coordinate Bench have been upheld by the Hon’ble Jurisdictional High Court while dismissing Revenue’s appeals. Identical is the factual position in assessment year 2013- 14, wherein, the Tribunal decided the issue in favour of the assessee in ITA No. 5144/Del/2016, dated 18.11.2019 and the Hon’ble Jurisdictional High Court has upheld the decision of the Tribunal. 27. Thus, keeping in view our detailed reasoning, hereinabove, and the ratio laid down in the binding judicial precedents rendered in assessee’s own case as well as in case of group 44 ITA Nos.2986 & 4608/Del/2019 company, viz, Sheraton International Inc., cited before us, we have no hesitation in holding that the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India–US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable.” 19. In our view, the ratio laid down in the aforesaid decision of the co-ordinate Bench squarely applies to the facts of the present appeal. Hence, we delete the addition made. 20. In the result, the appeal is allowed. 21. To sum up, both the appeals are allowed, as indicated above. Order pronounced in the open court on 11 th January 2023. Sd/- Sd/- (G.S. PANNU ) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: January, 2023. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi