Six continents Hotels, Inc., Gurgaon V. ACIT Circle 3(1)(2) Intl. Taxation, New Delhi

ITA 3339/DEL/2023

• Counselvise Citation: 333920114 RSA 2023
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 12-05-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 23-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY B.VASANTA
• Assessee Lawyers: S.K AGGARWAL
• Keywords: Business income; Double taxation relief; Principle of natural justice; Diversion of income
• Section: 2; 143(3); 195; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘D’: NEW DELHI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER 3339/DEL/2023 [Assessment Year: 2021-22] Six Continents Hotels, INC. C/o BSR & C. LLP, DLF Building,#10, 8 th Floor, Tower-b, DLF Cyber City, Phase II, Gurgaon 122002 Vs The ACIT, International Taxation Circle-3(1)(2), Delhi (Assessee) (Revenue) PAN No. AAHCS785B Assessee by Sh. S.K Aggarwal, CA Sh. Himanshu Aggarwal, CA Revenue by Sh. Vijay B. Vasanta, CIT-DR Date of Hearing 13.05.2024 Date of Pronouncement 13.06.2024 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of the Assessing Officer dated 28.09.2023 passed u/s 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter ‘the Act’) arising out of order of Dispute Resolution Panel dated 04.08.2023 pertaining to Assessment Year 2021-22. 2. The assessee has raised the following grounds: Ground No. 1: “Final Assessment order passed by the ld. AO not in conformity with provisions of section 144C of the Act is bad in law. 2 ITA No.3339/Del/2023 1.1 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not following the directions of the DRP without appreciating the fact that Section 144(10) of the Act mandates every direction issued by the Id. DRP is binding on the AO and hence, the impugned assessment order dated 28 September 2023 passed under section 143(3) r.w.s. 144C(13) is bad in law and thus deserves to be quashed. 1.2 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not following the past years favorable Tribunal decisions in Appellant's own case on taxability of centralized marketing and reservation related receipts, without appreciating the fact that the matter attained finality in said years, as tax department did not challenge the Tribunal's decision before the High Court. Ground No. 2: DRP Directions issued u/s 144C(5) is bad in law due to invalid Document Identification Number (DIN) in view of CBDT Circular No. 19/2019 dated 14.08.2019. 2.1 On the fact and in the circumstances of the case and in law, the Hon'ble DRP erred in not quoting valid computer- generated DIN on the body of the DRP Directions dated 04 August 2023 passed order section 144C(5) of the Act, thus such directions are in contravention to the CBDT Circular No. 19 of 2019 and hence liable to be quashed/ annulled as invalid. 2.2 On the fact and in the circumstances of the case and in law, the hand-written DIN quoted on the body of the DRP Directions has been found to be not in existence and no record has been found for such DIN on the website of Income-tax Department. 2.3 On the fact and in the circumstances of the case and in law, the final assessment order dated 28 September 2023 passed under section 143(3) read with section 144C(13) of the Act pursuant to invalid and non-est 3 ITA No.3339/Del/2023 directions passed by Hon'ble DRP is bad in law, null and void and liable to be quashed. Ground No. 3: Additions made in respect of receipts on account of Marketing, Distribution Marketing, and Frequency Marketing Programme i.e. IHG Rewards) (hereinafter collectively referred to as 'System Fund support fee') and SCHI Facility charges (also referred as Technology Services Fees'), accrued to the Appellant from its group entity (i.e. InterContinental Hotels Group (India) Private Limited, ('THG India')), amounting to INR 6,13,91,631 3.1 That on the facts and in the circumstances of the case and in law, the Ld. AO and the Hon'ble DRP have erred in making the addition to the income of the Appellant in relation to System Fund support fee and Technology Services Fees amounting to INR 6,13,91,631. 3.2 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP have erred in treating System Fund support fee and Technology Services Fees as Fee for Technical Services ('FTS') under section 9(1)(vii) of the Act and as Fee for Included Services ('FIS') under Article 12 of India - USA DTAA. 3.3 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP have erred in treating the System Fund support fee and Technology Services Fees, received from IHG India taxable as FIS under Article 12(4) of the DTAA without appreciating that: a. The said services are neither technical nor consultancy in nature; b. The said services are not 'ancillary and subsidiary' to the application or enjoyment of the right, property or information for which royalty is received by the Appellant; and c. The said services do not make available any technical knowledge, experience, skill, know-how or processes, etc. 4 ITA No.3339/Del/2023 3.4 On the facts and in the circumstances of the case and in law, the Ld. AO and the Hon'ble DRP have erred in holding that System Fund support fee and Technology Services Fees received from IHG India is taxable as FIS under Article 12(4)(a) of India-USA DTAA. 3.5 On the facts and in circumstances of the case and in law, the id. AO and the Hon'ble DRP while treating System Fund support fee and Technology Services Fees as FIS under Article 12(4)(a) of the India-US DTAA, have failed to appreciate that no Royalty accrues to the Appellant. 3.6 On the facts and in circumstances of the case and in law, the ld. AO and the Hon'ble DRP have erred in holding that System Fund support fee and Technology Services Fees is 'ancillary and subsidiary' to the license fee received by the affiliate group entity, for granting the rights to use the brands to the Indian Hotels. 3.7 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP have erred in concluding that the System Fund support fee and Technology Services Fees is taxable as FIS under Article 12(4)(a) of India-USA DTAA based on following incorrect assertions: a. That the Appellant has artificially bifurcated the royalty and centralized services receipts; and b. That arrangement has been organized in a manner to avoid taxability as FIS under Article 12(4)(a) of India-USA DTAA. 3.8 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP while treating System Fund support fee and Technology Services Fees as FIS under Article 12 of the India-US Treaty, have failed to appreciate that said services do not make available any technical knowledge, experience, skill, know-how, or processes etc. 3.9 On the facts and in circumstances of the case and in law, the Id. AO and the Hon'ble DRP have erred in 5 ITA No.3339/Del/2023 concluding that System Fund support fee received from IHG India are taxable in India without appreciating that: a. The amount is not in the nature of income and cannot be subjected to tax on principles of mutuality; b. The amount is not taxable on the principles of 'Diversion of income by overriding title'; c. The amount is in the nature of unfettered receipts in the hands of the Appellant. 3.10 On the facts and in circumstances of the case and in law, the ld. AO and the Hon’ble DRP have erred in not following the binding decision of Hon’ble Mumbai ITAT in Appellant’s own case which has decided the matter in favour of the Appellant on similar facts. Ground No. 4: Addition made in relation to Travel Agent Commission ('TACP') amounting to Rs.1,23,46,336 from third party Indian hotels 4.1 On the facts and in circumstances of the case and in law, the Id. AO has erred in holding that the TACP amounting to INR 1,23,46,336, recovered from Indian Hotels is taxable in the hands of the Appellant as FTS/ FIS under the Act and under the India-USA DTAA. 4.2 On the facts and in circumstances of the case and in law, the Ld. AO has erred in holding that the receipts amounting to INR 1,23,46,336 is taxable as FIS, without taking cognizance of the detailed factual and legal submissions made by the Appellant with regard to non- taxability of such receipts during the course of the assessment proceedings. 4.3 On the facts and in circumstances of the case and in law, the Id. AO has erred in not complying with the directions of the Hon'ble DRP, for verification of invoices and back-up statements of TACP filed during the assessment proceedings. Thus, making the additions bad in law and liable to be deleted. 6 ITA No.3339/Del/2023 4.4 On the facts and in circumstances of the case and in law, the Ld. AO has erred in holding that TACP amounting to INR 1,23,46,336 received from third party Indian hotels is taxable as FTS/ FIS under the Act and under the India- USA DTAA, without appreciating the fact that the same are reimbursement in nature, and therefore, do not partake the character of Income. 4.5 On the facts and in circumstances of the case and in law, the Id. AO violated the principle of natural justice by not providing any opportunity to furnish the balance invoices and back-up statements of TACP, before making the addition of INR 1,23,46,336 in the final assessment order. 4.6 On the facts and in circumstances of the case and in law, the Id. AO has erred in not following the decision of Hon'ble Commissioner of Income-tax (Appeals) (*CTT(A)) in Appellant's own case in earlier years, wherein taxability of TACP was held in favour of the Appellant on identical facts. 5. That on the facts and in the circumstances of the case and in law, the Id. AO erred in initiating the penalty proceedings under section 270A of the Act on account of underreporting of income by way of misreporting. 6. The above grounds of appeal are independent and without prejudice to one another.” 3. Brief facts of the case: The assessee company, SCHI, is incorporated and a tax resident of USA and beneficial provisions of India-USA DTAA applies. The assessee is part of the InterContinental Hotel Group (‘IHG’), a global hospitality player. 4. With effect from 1 st November 2010, the economic and beneficial ownership of certain IHG brands including ‘Holiday Inn’, ‘Holiday Inn Express’ and ‘Crowne Plaza’ brands were assigned to InterContinental Hotels Group 7 ITA No.3339/Del/2023 (Asia Pacific) Pte. Ltd., Singapore (‘IHGAP Singapore’). IHG also has a group entity in India, InterContinental Hotels Group (India) Private Limited, (‘IHG India’). Effective from 01 April 2019, IHG India has been granted a non- exclusive license by IHG AP Singapore for allowing use of trademark/ brand rights to the third-party Indian hotels. The license fee so received by IHG India is taxable in their hands as business income. 5. SCHI is required to provide Marketing, Distribution Marketing, Frequency Marketing Programme and SCHI facility related support services (i.e. ‘Marketing and Reservation related services’) in respect of hotels using the group brand name and receives the amount for marketing and reservation services from IHG India. 6. Ground No. 1.2 and 3: Additions made in respect of receipts on account of Marketing, Distribution Marketing, Frequency Marketing Programme (i.e. IHG Rewards) (hereinafter collectively referred to as ‘System Fund support fee ’) and SCHI Facility charges (also referred as Technology Service Fees) amounting to Rs.Rs.6,13,91,631/-. Business Model prior to 1 st April 2019: 7. Before 1 st April 2019, a tri-partite agreement [Hotel Management Agreement ('HMA’)] was entered into between IHG India, IHG AP Singapore and third-party hotels owners. As per HMA, IHG AP Singapore granted license to third-party hotels for use of brand name. IHG India was designated as ‘Manager’, obligated to provide Hotel Management, Operation and technical support services to IHG brand Hotels in India. SCHI (as an affiliate of IHG AP 8 ITA No.3339/Del/2023 Singapore), was required to provide certain marketing and reservation related services to such third- party hotel owners for which it received marketing and reservation contribution from each of the IHG brand hotels in India. Business Model with effect from 1 st April 2019: 8. With effect from 1st April 2019, IHG India has been granted a non- exclusive license by IHG AP Singapore for granting use of trademark/ brand rights to the third-party hotels owners and the license fees received is taxable in India in the hands of IHG India as business income. 9. Accordingly, from 1 st April 2019, IHG India has entered into a Hotel Management Agreement (‘HMA’) with third partyIHG brand Hotel in India. Under the HMA, IHG India grants license to the third-party hotel owners for the use of brand name/ trademark, provides hotel management services and provision of system fund services (which is in relation to marketing and reservation related services). 10. As per above referred HMA, IHG India is required to provide/ procure marketing and reservation related services to the Indian Hotels. Such marketing and reservation services were earlier provided by SCHI to the hotel owners in India. For providing marketing and reservation related services, IHG India facilitates provision of marketing and reservation services through its team of employees in India and has also entered into agreements with the Assessee to seek its support for provision of marketing and reservation related services (which IHG India is unable to provide to the Hotels on its own). 9 ITA No.3339/Del/2023 11. With the above background, to be able to provide services to third party hotel owners, IHG India has entered into following inter-company agreements with the Assessee: • System Fund Support Services Agreement (‘SFS Agreement’) between the SCHI and IHG India: Under this agreement, SCHI is required to provide Marketing, Distribution Marketing and Frequency Marketing Programme related support services to IHG India (to the extent such services cannot be per formed locally by IHG India)for it to fulfill its obligations under the agreements with third party owned hotels in India . • Reservation System Facility Agreement (‘RSF Agreement’) between SCHI and IHG India: Under this agreement, SCHI is required to provide support services related to the reservationsystemmaintained by it in USA (hereinafter referred to a s Reservation System Support Services) to IHG India . 12. For the System fund support services provided by SCHI, IHG India shall pay to SCHI a fee equal to amount payable by Indian third-party hotel owners to IHG India in respect of such services less all the expenses incurred by IHG India with respect to such services. Further, in consideration for reservation system support services, IHG India pays to SCHI, a fee equal to 95% of the total fees payable by third- party Indian hotels to IHG India. Assessment Order and ld. DRP directions for A.Y. 2021-22 13. The AO passed the draft assessment order for A.Y. 2021-22 u/s144C(1) of the Act dated 22.12.2022 on the same line as in A.Y. 2012-13 onwards, alleging that marketing and reservation related receipts are ancillary and subsidiary to Royalty received by the group entity for the use of brand name and taxable as Fees for Included Services (‘FIS’) under Article 12(4)(a) of India- US DTAA (internal page no.18, (para no.13) of the final assessment order at 10 ITA No.3339/Del/2023 page 28 of the appeal set). In making the above allegation in the draft order, the AO referred the agreement with Duet Hotels. 14. The ld. DRP in its order dated 11.07.2023 stated that the legal and factual matrix remaining unchanged, reiterated its directions given on this issue for AY 2020-21 and rejected the assessee’s objections on this ground. However, it stated that the assessee has mentioned that there are favourable judgments from the ITAT Mumbai in assessee’s own case and directed the AO to verify as to whether the Department has filed or in the process of filing the appeal against the above orders and give effect to the ITAT’s directions if the matter has attained finality in judicial proceedings. The relevant directions of the DRP in para 4.3 of this order is reproduced as under:- “Since the legal and factual matrix remains unchanged, the DRP reiterates its directions given on this issue for the assessment year 2020-21 and rejects the assessee’s objections on this ground. However, assessee has mentioned that there isfavourable judgments from the ITAT Mumbai, in assessee’s case. The AO is directed to verify the above fact from the available record and ascertain whether the department has filed or in the process of filing appeal against the above order and give effect to the ITAT’s directions if the matter has attained finality in judicial proceedings.” 15. Thus, the ld. DRP following the orders of earlier years held that marketing and reservation related receipts are ancillary and subsidiary to Royalty received by the group entity for the use of brand name and taxable as FIS under Article 12(4)(a) of India-USA DTAA subject to the verification of the favorable order of the ITAT by the AO . 16. However, on perusal of the assessment order dated 28.09.2023 passed u/s 143(3) r.w.s. 144C(13) of the Act, it is seen that the AO did not follow the 11 ITA No.3339/Del/2023 above direction of the DRP to verify the orders of the ITAT and its acceptance by the Department or otherwisebut simply reproduced the draft order dated 22.12.2022 and made the addition of Rs.6,13,91,631/-. 17. With respect to the directions of the DRP, it was submitted by the ld. AR that the ld. DRP has relied on its past years orders which have been decided in favour of the assessee by the ITAT . 18. It was further submitted by the Ld. AR that the issue of taxability of Marketing and reservation related receipts has been subjected to scrutiny in the past years and the same has been consistently held in favour of the Assessee by (i) The ITAT in Assessee’s own case for A.Y. 1997-98, A.Y.2003-04, A.Y.2004-05, AY 2005- 06. These orders of the ITAT were accepted by the tax department and no appeal was filed before Hon’ble High Court. (ii) The AO/DRP in the Assessment order(s) for A.Y . 2006-07 to A .Y. 2011-12 held that Marketing and reservation related receipts is not taxable as ‘Royalty’/ ‘Fees for Technical Services’ , following the aforesaid orders of the ITAT . (iii) The Mumbai ITAT in their combined order dated 08 February 2024 for A.Y. 2012-13 to A.Y. 2015-16 again held that Marketing and reservation related receipts is not taxable as ‘Royalty’/ ‘Fees for Technical Services’ under India-USA DTAA and deleted the additions made in the assessment order(s). (iv) The Delhi ITAT in the order dated 10 April 2024 for A.Y . 2016- 17 again held that Marketing and reservation related receipts is not 12 ITA No.3339/Del/2023 taxable as ‘Fees for Technical Services’ under Article 12(4)(a) of India USA DTAA and deleted the additions made in the assessment order. (v) For A.Y. 2017-18 and A.Y. 2018-19, the Delhi ITAT quashed the assessment orders on non-compliance of the DIN requirement. (vi) For A.Y. 2019-20, the matter was not picked up for scrutiny assessment and there was no assessment order. (vii) For AY 2020-21, the Delhi ITAT vide order dated 09.05.2024 in ITA No.2355/Del/2023 following the earlier decisions of the ITAT in assessee’s own case held that the marketing and reservation related receipts is not taxable as ‘Royalty’/ ‘Fees for Technical Services’ under India-USA DTAA and deleted the additions made in the assessment order. 19. The above decisions of the ITAT has held that the Marketing, Distribution and Marketing and Frequency Marketing program and SCHI Facility Service charges is not Royalty/FTS and hence not taxable in India. Therefore, the matter is squarely covered by the above decisions and hence, the appeal of the assessee on this ground is allowed. The addition of Rs.6,13,91,631/- is hereby deleted. Ground no.1.2 and 3 are allowed. 20. Ground No.2 is regarding challenging the order due to invalid Document Identification Number (DIN) in view of CBDT Circular No.19/2019 dated 14.08.2019. During the course of hearing, the ld. AR did not press this ground and hence, this ground is dismissed as not pressed. 21. Ground No.4 : Additions in relation to Travel Agent Commission (‘TACP’) amounting to Rs.1,23,46,336/- received from third-party Indian hotels. 13 ITA No.3339/Del/2023 22. In the draft assessment order as well as in the final assessment order, the AO disallowed this amount by observing as under:- “15. In respect of the reimbursement of the Travel Agent expenses amounting to Rs.1,23,46,336/-, the assessee did not provide the break-up of such reimbursement and also did not provide the copy of bank statement highlighting these entries. Therefore, in absence of any such submission and relevant contract/agreement in respect of these reimbursements, the amount of Rs.1,23,46,336/- is taxable as FIS/FTS under the provisions of Income-tax Act and also under relevant provisions of India-USADTAA.” 23. Regarding the above finding by the AO, the ld. AR in its written submission in para no.73 and 74 on page-33 submittedthat it had furnished the details as well as invoices in its submissions dated 17.12.2022 before the AO during the assessment proceedings as under:- “73. The Id. AO in the assessment order has incorrectly observed that the Appellant did not provide the break-up of such reimbursements and did not provide documents to justify that the receipts are reimbursement in nature. The Id. AO made the addition of the reimbursements in the absence of above details. In this regard, it is submitted that the Appellant vide its submission dated 17 December 2022 (refer page 195 to 455 of the paper-book) provided all the requisite details in relation to TACP during the assessment proceedings. 74. It is further submitted that the Appellant duly provided the copy of TACP invoices (refer page 346 to348 of paper-book) and back up statements (refer page 349 to 448 of paper-book) during the assessment proceedings for AY 2021-22. Similar documents were submitted in earlier years as well (from AY2013-14 to AY 2017-18) wherein the Id. CIT(A)/ ld. AO had accepted the position of the Appellant that the TACP receipts are reimbursements and not taxable as FTS under Article 12 of India-US DTAA.” 24. The above submissions of the assessee were verified from the paper book and it is seen that the assessee in para nos.124 to 152 (page no.238 to 255 of the paper book) of its submissions dated 17.12.2022 before the AO furnished its explanation as to why the receipts in relation to TACP amounting to 14 ITA No.3339/Del/2023 Rs.1,23,46,336/- was not taxable in Indiaalongwith invoices on pages 247 to 248 of the paper book. In para 141 of its reply, it submitted as under:- “141. Without prejudice to the above(i.e. receipts on account of TACP is neither taxable as FTS under the Income-tax Act nor under India- US DTAA), it is submitted that the receipts on account of TACP do not partake the character of income and are merely in the nature of recovery of expenses incurred in facilitating the distribution channels to the hotels on account of bookings made through them, which are ultimately borne by the beneficiary hotel. This is evident from the invoices raised by the assessee on hotels (refer to Annexure 12) and corresponding back-up statement received with respect to such commissions/fees (refer to Annexure 13).” 25. Further, it is seen that the assessee has also placed copy of invoices in relation to TACP on page no.346 to 348 of the paper book and also copy of back-up statements of TACP on page no.349 to 448 of the paper book. Further, it is also certified by the assessee that these documents are already on the records of the AO/DRP or in the public domain. Therefore, it is seen that the AO is not correct in observing that the necessary details/invoices were not submitted during the assessment proceedings. Further, the AO also did not follow the directions of the DRP, which had directed the AO to verify from the available record as to whether the receipt on account of recovery of travel agent commission (TACP), is reimbursement or not, and directed the AO to delete the above addition, in case, it was found to be reimbursement in nature. 26. In this regard, the ld. AR further relied upon a decision of the Co- ordinate Bench in assessee’s own case in ITA No.2355/Del/2023, for AY 2020- 21, which allowed the appeal of the assessee and submitted that the facts being similar, the addition made by the AO for this year may also be deleted. 15 ITA No.3339/Del/2023 27. On the other hand, the Ld. CIT-DR relied upon the orders of the authorities below. 28. We have considered the rival submissions and perused the material available on record. On perusal, it is seen that on similar facts, the Co-ordinate Bench had allowed the assessee’s appeal. The relevant extract of the order is reproduced as below:- “18. At the outset, it was submitted that the Id. CIT (A) in Assessee’s own case in A.Y . 2013-14, A.Y. 2014-15 and A.Y . 2015-16 has held that the amount of TACP received by SCHI is not in the nature of FTS. The Id. CIT(A) in passing the above appellate order noted that the AO in the assessment order for A.Y. 2016-17 has held that TACP receipts are not taxable as FTS under the India-USA DTAA. 19. Further, the tax department has accepted the above order of Id. CIT(A) for A.Y. 2013-14 , A.Y. 2014-15 and A.Y . 2015-16 and has not filed an appeal before the ITAT. Accordingly , the taxability of TACP receipts have already been settled in favour of the assessee in previous years and the same are not taxable in view of ‘Rule of consistency’ . Further, no addition in relation to TACP was made by the Id. AO in A.Y. 2016-17 and A.Y. 2017- 18. The AO deviated from the settled position and taxed the amount of TACP in A.Y. 2020-21 without taking cognizance of the earlier position and documents filed by the Assessee during the assessment proceedings. 20. The ld. CIT (A) in Assessee’s own case in A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2015-16 has held that the amount of TACP received by SCHI is not in the nature of FTS basis the observation of the then AO made in the assessment order of AY 2016-17. Accordingly, the taxability of TACP receipts havealready been settled in favour of the assessee in previous years. 21. On perusal of definition of FTS defined under the Act, there are broadly three components i.e. managerial, technical and consultancy services. 22. It was submitted that the expression 'managerial, technical and consultancy services' have not been defined either under the Act or under the General Clauses Act, 1897. Therefore, the said terms have to be read together with the word 'services' to understand and appreciate their purport and meaning. 16 ITA No.3339/Del/2023 23. In this respect the Delhi Tribunal, while interpreting the meaning of FTS as per Explanation 2 of section 9(1)(vii) of the Income tax Act, 1961 held as under: “...... ..A look at the above Explanation shows that it contains a definition of FTS and says that FTS means any consideration for the rendering o f any managerial , technical or consultancy services including the provision of services of technical or other personnel , but does not include consideration for any construction , assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries The content of the Explanation unmistakably is that the payment must be made as quid pro quo for such services rendered as have been enumerated therein. It postulates that the remitter of the amount has received the benefit of the technical services and that the technical services have been rendered by the recipient of the amount ......... .” (emphasis supplied) 24. Thus, • The services were rendered by the travel agents to the Indian Hotels i.e. the Assessee did not render any service to the Indian hotels, as envisaged under section 9(1)(vii) of the Act; • The Assessee made payments to travel agents on behalf o f the Indian hotels; and • Subsequently, the Assessee recovered such payments made to distribution channels from Indian hotels on cost-to-cost basis without any element of income . 25. Thus, it can be found that the Assessee has rendered services in relation to booking of hotel rooms to the Indian Hotels in consideration o f commission, it cannot be treated as FTS under the Act. 26. The following judicial precedents held that commission charged by commission agents outside India is not taxable in India:  DIT (International Taxation) vs. PanalfaAutoelektrikLtd . [2014] 49 taxmann.com (Delhi High Court)  Group Ism (P.) Ltd. 57 taxmann.com 450 (Delhi High Court)  CIT (Central) vs. Model Exims [2014] 42 taxmann.com 446 (Allahabad High Court)  Le Passage to India Tours and Travel (P.) Ltd. 54 taxmann.com 138 (Delhi ITAT) 17 ITA No.3339/Del/2023  Dy. CIT vs. Troikaa Pharmaceuticals Ltd. [IT Appeal No . 2028/Ahd./13 and CO No 13/Ahd./14]  DCIT vs. Welspun Corporation L td. [2017] 77 taxmann.com 165 (Ahmadabad ITAT)  Armayesh Global vs. ACIT 45 SOT 69 (ITAT Mumbai)  DCIT , Chennai vs. Mainetti (India) (P.) Ltd. [2011] 12 taxmann.com (ITAT Chennai)  CLSA Ltd. vs . ITO, (International Taxation) [2013] 31 taxmann.com 5 (ITAT Mumbai)  PahilajraiJaikishin (66 taxmann.com 30) (ITAT Mumbai) 27. In view of the principles emerging from the above judicial precedents, it can be concluded that the amount charged by the Assessee as TACP for booking hotel rooms for third-party Indian Hotels cannot be said to be in the nature o f managerial, technical or consultancy in nature for treating the same as FTS under the provisions of section 9(1)(vii) of the Act. 28. The appeal of the assessee on this ground is allowed.” 29. The facts being similar, relying upon the above decision of the Co- ordinate Bench, in principle, the reimbursement of expenses in relation to TACP is not taxable. However,the AO has not verified the documents submitted by the assessee in support of its claim that it was reimbursement of expenses, which were already on his record as submitted by the assessee in the foregoing paragraphs. It may be mentioned that in ground no.4.5, the assessee submits that the ld. AO violated the principle of natural justice by not providing any opportunity to furnish the balance invoices and back-up statements of TACP, before making the addition of Rs.1,23,46,336 in the final assessment order.As seen from the discussion in the foregoing paragraphs, the AO did not examine the explanation/documents submitted by the assessee during the course of 18 ITA No.3339/Del/2023 assessment proceedings and therefore, there is a merit in this ground of the assessee. Further, the AO also did not follow the directions of the DRP, which had directed the AO to verify from the available record as to whether the receipt on account of recovery of travel agent commission (TACP), is reimbursement or not, and directed the AO to delete the above addition, in case, it was found to be reimbursement in nature. Therefore, the AO is directed to verify the above claim/documents of the assessee and to decide the matter keeping in view the directions of the ITAT that the same was an allowable expense, if it was in the nature of reimbursement as decided by the Co-ordinate Bench vide its order dated 09.05.2024 in ITA No.2355/Del/2023 in assessee’s own case.Further, the assessee is allowed to submit any details/explanations/documents in support of its claim.The AO may also call for any further details to satisfy himself in deciding the matter keeping in view the above directions that the amount of Rs.1,23,46,336/- will not be taxable, if the assessee establishes that the same is reimbursement of expenses as claimed by it. Ground no.3 of the appeal is disposed as above. 30. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 13 th June, 2024. Sd/- Sd/- [SAKTIJIT DEY] [BRAJESH KUMAR SINGH] VICE PRESIDENT ACCOUNTANT MEMBER Dated 13.06.2024. ff^ ff^ff^ ff^? ?? ? 19 ITA No.3339/Del/2023 Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi