DCIT, New Delhi V. M/s. Sheraton Overseas Management Corporation, New Delhi

ITA 5142/DEL/2016

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 6191 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 29-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH DNEW DLEHI BEFORE SHRI G.S. PANNU, HONBLE VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A.NO.5142/DEL/2016 ASSESSMENT YEAR: 2013-14 DCIT, CIRCLE 3(1)(2), VS M/S SHERATON OVERSEAS MAN AGEMENT NEW DELHI. CORPORATION, C/O M/S NANGIA& CO., SUITE 4A, PLAZA M6, JASOLA, NEW DELHI. PAN : AALCS8306H (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIJAY KUMAR KATARIA, SR . DR RESPONDENT BY: SHRI AMIT ARORA, CA DATE OF HEARING: 06/11/2019 DATE OF ORDER : 18/11/2019 ORDER PER K. NARSIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 26/7/2016 IN APPEAL NO. 46/2016-17 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-43, NEW DELHI, REVENUE PREFERRED THIS APPEAL ON THE FOLLOWI NG GROUNDS:- (I) WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CENTRALISED SE RVICES FEE RECEIVED BY THE APPELLANT FROM RENDERING VARIOUS SE RVICES SUCH AS SALES AND MARKETING, LOYALTY PROGRAMS, RESERVATI ON SERVICE, TECHNOLOGICAL SERVICES, OPERATIONAL SERVICES AND TR AINING PROGRAMS ETC TO CUSTOMERS IN INDIA, WERE NOT TAXABL E AS FEE FOR TECHNICAL SERVICES (FTS) IN TERMS OF SECTION 9 OF THE INCOME 2 TAX ACT, 1961 AS WELL AS ARTICLE 12 OF THE INDIA-US DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). (II) THE APPELLANT THE PLACE FOR YOU TO ADD, AMEND, MODI FY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OF OUR BEFORE THE HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING HOTEL RELATED SERVICES IN SEVERAL COUNTRIES AROUND THE WORLD AND IN INDIA IT HAS ENTERED INTO A GREEMENTS WITH VARIOUS INDIAN HOTELS FOR PROVISION OF HOTEL RELATE D SERVICES WHICH INCLUDES THE WORLDWIDE PUBLICITY, MARKETING AND ADV ERTISING SERVICES THROUGH ITS SYSTEM OF SALES, ADVERTISING, PROMOTION , PUBLIC RELATIONS AND RESERVATIONS. PURSUANT TO SUCH AGREEMENTS IT HAS RE NDERED THE SERVICES. FOR THE ASSESSMENT YEAR 2013-14 IT HAS FILED ITS RE TURN OF INCOME ON 30/9/2013 DECLARING NIL INCOME AND ALSO CLAIMING A REFUND OF RS. 56,25,320/-. 3. DURING THE COURSE OF ASSESSMENT LEARNED ASSESSIN G OFFICER FOUND THAT THE ASSESSEE RECEIVED A SUM OF RS. 5,51,05,219 /- FROM CERTAIN HOTEL OWNERS FOR RENDERING CENTRALISED SERVICES AND IT TR EATED THE SAME AS FEE FOR TECHNICAL SERVICES (FTS) AND BROUGHT THE SAME T O TAX. IN APPEAL, LD. CIT(A) WHILE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, REACHED A CONCLUSION THAT THE PAYMENTS RECEIVED BY THE ASSESSEE WHERE IN THE NATURE OF BUS INESS INCOME, AND NOT IN THE NATURE OF ROYALTY OR FEE FOR TECHNICAL SERVI CES (FTS) AND THEREFORE, IN THE ABSENCE OF ANY PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE IN INDIA, SUCH RECEIPTS CANNOT BE BROUGHT TO TAX. AGGR IEVED BY THE SAID FINDINGS OF THE LD. CIT(A), REVENUE PREFERRED THIS APPEAL. 3 4. AT THE OUTSET, LD. AR SUBMITTED THAT THE ISSUE I NVOLVED IN THIS MATTER IS NO LONGER RES INTEGRA AND IN THE CASE OF ASSESSEE REPORTED IN DIRECTOR OF INCOME TAX VS. SHERATON INTERNATIONAL I NC (2009) 313 ITR 267 (DELHI), THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THE PAYMENTS FOR ADVERTISING, PUBLICITY AND THE SALES PROMOTION SERV ICES RENDERED BY THE ASSESSEE, A COMPANY INCORPORATED AND TAX RESIDENT I N USATO INDIAN COMPANY, WAS ADVISEMENT, PUBLICITY AND SALES PROMOT ION KEEPING IN MIND THE MUTUAL INTERESTS AND IN THAT CONTEXT, THE USE O F TRADEMARK, TRADE NAME ETC. AND OTHER ENUMERATED SERVICES REFERRED TO IN THE AGREEMENT WITH THE ASSESSEE WERE INCIDENTAL TO MAIN SERVICES AND, THEREFORE, THE PAYMENTS RECEIVED WERE NEITHER IN THE NATURE OF ROY ALTY UNDER SECTION 9(1)(VI) OF THE ACT, EXPLANATION 2, NOR IN THE NATU RE OF FEE FOR TECHNICAL SERVICES (FTS) UNDER SECTION 9(1)(VII) OF THE ACT, EXPLANATION 2, BUT BUSINESS INCOME AND ASSESSEE NOT HAVING ANY PE IN I NDIA SUCH BUSINESS INCOME WAS NOT TAXABLE IN INDIA. HE SUBMITTED THAT IN THE CASE OF A GROUP CONCERN, NAMELY, STARWOOD HOTELS FOR THE ASSESSMENT YEAR 2010-11, A COORDINATE BENCH OF THIS TRIBUNAL, BY ORDER DATED 2 8/9/2017 WHILE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT IN SHERATON (SUPRA) HELD THAT SINCE THE ASSESSEE IS NOT HAVING ANY PE IN INDIA, ITS BUSINESS INCOME EARNED IS NOT TAXABLE IN INDIA AND SUCH A FINDING IS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA 467/2018 BY ORDER DATED 18/04/2018. HE FURTHER SUBMITTED THAT A SIMIL AR VIEW WAS TAKEN IN STARWOOD HOTELS (SUPRA) CASE FOR ASSESSMENT YEAR 20 11-12 BY A COORDINATE BENCH OF THIS TRIBUNAL BY ORDER DATED 18 /12/2018 IN ITA NO. 203/DEL/2016 WHILE REFERRING TO THE ORDER OF THE TR IBUNAL FOR THE ASSESSMENT YEAR 2010-11. LASTLY, HE BROUGHT TO OUR NOTICE, THE ORDER DATED 2/9/2019 FOR ASSESSMENT YEAR 2012-13 FOR A SI MILAR RESULT. 4 HE,THEREFORE, PRAYED THAT THE CONSISTENT VIEW TAKE N BY THE TRIBUNAL AND THE HONBLE HIGH COURT MAY BE CONTINUED SINCE THE F ACTS ARE IDENTICAL FOR ALL THESE YEARS. 5. REVENUE DOES NOT DISPUTE THE FACT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE REPORTED IN DIREC TOR OF INCOME TAX VS. SHERATON INTERNATIONAL INC (2009) 313 ITR 267 (DELH I) TOOK THE VIEW THAT THE PAYMENTS FOR ADVERTISING, PUBLICITY AND THE SAL ES PROMOTION SERVICES RENDERED BY THE ASSESSEE, A COMPANY INCORPORATED AN D TAX RESIDENT IN USA TO INDIAN COMPANY, WAS ADVISEMENT, PUBLICITY AN D SALES PROMOTION KEEPING IN MIND THE MUTUAL INTERESTS AND IN THE CON TEXT, THE USE OF TRADEMARK, TRADE NAME ETC. AND OTHER ENUMERATED SER VICES REFERRED TO IN THE AGREEMENT WITH THE ASSESSEE WERE INCIDENTAL TO MAIN SERVICES AND, THEREFORE, THE PAYMENTS RECEIVED WERE NEITHER IN TH E NATURE OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT, EXPLANATION 2, N OR IN THE NATURE OF FEE FOR TECHNICAL SERVICES (FTS) UNDER SECTION 9(1)(VI I) OF THE ACT, EXPLANATION 2, BUT BUSINESS INCOME AND ASSESSEE NOT HAVING ANY PE IN INDIA SUCH BUSINESS INCOME WAS NOT TAXABLE IN INDIA. 6. FURTHER, ON IDENTICAL SET OF FACTS, IN THE CASE OF STARWOOD (SUPRA),TRIBUNALTOOK A CONSISTENT VIEW FOLLOWING TH E ABOVE DECISION OF THE HONBLE HIGH COURT FOR THE AY 2010-11 AND 2011- 12, AND SUCH VIEW WASUPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 467/2018 BY ORDER DATED 18/4/2018 FOR ASSESSMENT YEAR 2010-1 1, IN ITA NO. 713 OF 2019 BY ORDER DATED 02/08/2019 FOR ASSESSMENT YEAR 2011-12. SINCE THE FACTS ARE IDENTICAL AND THE ISSUE IS NO LONGER RES INTEGRA,WE DONOT FINDANY REASON TO TAKE A DIFFERENT VIEW FROM THE VIEW TAKEN BY THE TRIBUNAL AND THE HONBLE HIGH COURT FOR THE IMMEDIATELY PRECEDIN G YEARS. ACCORDINGLY, 5 WE DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL OF THE REVENUE AND CONSEQUENTLY DISMISS THE SAME. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . PRONOUNCED IN OPEN COURT ON 18 TH NOVEMBER, 2019. SD/- SD/- (G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 18 TH NOVEMBER, 2019. VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED 6.11.2019 DRAFT PLACED BEFORE AUTHOR 8.11.2019 APPROVED DRAFT COMES TO THE SR.PS/PS 18.11.2019 ORDER SIGNED AND PRONOUNCED ON 18.11.2019 FILE SENT TO THE BENCH CLERK 18.11.2019 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. DATE OF UPLOADING ON THE WEBSITE