DCIT, International Taxation, Circle-3(1)(2), New Delhi V. M/s. Sheraton Overseas Management Corporation, Noida

ITA 5190/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9462 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 10-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Double taxation relief
• Section: 143(3)

Judgement Text

1 ITA NO. 5190/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 5190/DEL/2017 (A.Y 2014-15) (THROUGH VIDEO CONFER ENCING) DCIT INTERNATIONAL TAXATION, CIRCLE- 3(1)(2), ROOM NO. 418, E-2, DR. SPM CIVIC CENTRES, NEW DELHI (APPELLANT) VS M/S SHERATON OVERSEAS MANAGEMENT CORPORATION, C/O. M/S NANGIA & CO. A- 109, SESCTDOR-136, NOIDA, UTTAR PRADESH PAN:AALCS8306H (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST ORDER D ATED 06/06/2017 PASSED BY CIT(A)-43, NEW DELHI FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN HOLDING THAT THE RECEIPTS OF THE ASSES SEE FROM VARIOUS ACTIVITIES OF HOTEL MANAGEMENT RANGING INTERALIA FR OM TICKETING, RESERVATION, MARKETING, ADVERTISING, OPERATION, ADM INISTRATION, CATERING, NETWORK SUPPORT SERVICES, STARWOOD PORTAL SERVICES, IMPARTING OF SKILL SETS THROUGH TRAININGS ETC. WERE NOT TAXABLE AS 'FEE FOR TECHNICAL SERVICES' (FTS) WITHIN THE MEANING AN D SCOPE OF SECTION APPELLANT BY SH. SATPAL GULATI, CIT DR RESPONDENT BY SH. AMIT ARORA, CA DATE OF HEARING 20.07.2021 DATE OF PRONOUNCEMENT 30.07.2021 2 ITA NO. 5190/DEL/2017 9 OF THE INCOME TAX ACT, 1961 AS WELL AS ARTICLE 12 OF THE INDIA-US DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 3. SHERATON OVERSEAS MANAGEMENT CORPORATION IS A C OMPANY INCORPORATED IN UNITED STATES OF AMERICA USA AND CARRIES ON THE BUSINESS OF PROVIDING VARIOUS HOTEL RELATED SERVICES IN SEVERAL COUNTRIES ACROSS THE WORLD. THE ASSESSEE COMPANY IS A TAX RESIDENT OF USA IN TERMS OF THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND USA ('INDIA-USA DTAA'). THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, ON SEPTEMBER 30, 2014 DEC LARING NIL INCOME. IN THE RETURN OF INCOME, IT WAS CLAIMED THAT ASSESSEE COMP ANYS INCOME FROM INDIAN PAYERS DOES NOT CONSTITUTE 'FEES FOR INCLUDED SERVI CES' UNDER PROVISIONS OF INDIA-USA DTAA. THE ASSESSEE COMPANY'S CASE WAS SEL ECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143(2)/142(1) OF THE INCOME T AX ACT, 1961 ('ACT') WERE ISSUED TO THE APPELLANT SEEKING CERTAIN INFORMATION AND CLARIFICATIONS. IN RESPONSE TO SAID NOTICES, VARIOUS SUBMISSIONS WERE FILED BY THE ASSESSEE COMPANY FURNISHING INFORMATION AND DOCUMENTS AS REQ UESTED BY THE ASSESSING OFFICER. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 144C(3)(B)OF THE ACT AT AN ASSESSED INCOME OF RS.126,124,353 VID E ORDER DATED JANUARY 30, 2017 WHEREIN THE ASSESSING OFFICER HELD THAT PAYMEN T RECEIVED BY THE ASSESSEE COMPANY FOR CENTRALIZED SERVICES RENDERED TO VARIOU S INDIAN CUSTOMER WAS TAXABLE AS 'FEE FOR TECHNICAL SERVICES' ('FTS') IN INDIA UNDER THE PROVISIONS OF THE ACT AND ALSO TAXABLE AS 'FTS/FIS' UNDER INDIA-U SA DTA. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. AT THE TIME OF HEARING, THE LD. AR SUBMITTED THA T FOR IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2013-14, THE ID ENTICAL ISSUE OF FTS WHICH WAS CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL W AS DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 18/11/2019 (ITA NO. 5 142/DEL/2016) WHICH WAS BASED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF DCIT VS. SHERATON INTERNATIONAL INC. (2009) 313 ITR 267. TH E LD. AR FURTHER SUBMITTED 3 ITA NO. 5190/DEL/2017 THAT THE IDENTICAL FACTS IN CASE OF STARWOOD WHICH IS A GROUP COMPANY WAS DECIDED BY THE HON'BLE HIGH COURT FOR ASSESSMENT Y EAR 2010-11 AND 2011-12 IN ITA NO. 467/2018 FOR ASSESSMENT YEAR 2010-11 AND ITA NO. 713/2019 ORDER DATED 2/8/2019 FOR ASSESSMENT YEAR 2011-12. 6. THE LD. DR SUBMITTED THAT THERE ARE NO DISTINGUI SHING FACTS IN THE PRESENT ASSESSMENT YEAR FROM THE DECISION OF THE HO NBLE DELHI HIGH COURT AND THE TRIBUNALS DECISION IN ASSESSEES CASE. THE LD . DR RELIED UPON THE ASSESSMENT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT REVENUE DOES NOT DISPUTE THE FACTS OF THE PRESENT ASSESSMENT YEAR IS DIFFERENT THAT THE FACTS DISCUSSED IN ASSESSEES OWN CASE BY THE HON'BLE HIGH COURT AS WELL AS BY THE TR IBUNAL IN A.Y. 2013-14 (ITA NO. 5142/DEL/2016 ORDER DATED 18.11.2019). THE TRIB UNAL HELD AS UNDER:- 5. REVENUE DOES NOT DISPUTE THE FACT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE REPORTED IN DIRECTOR O F 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. 4 ITA NO. 5190/DEL/2017 6. FURTHER, ON IDENTICAL SET OF FACTS, IN THE CASE OF STARWOOD (SUPRA),TRIBUNAL TOOK A CONSISTENT VIEW FOLLOWING T HE ABOVE DECISION OF THE HON'BLE HIGH COURT FOR THE AY 2010-11 AND 2011-12, AND SUCH VIEW WAS UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO. 467/2018 BY ORDER DATED 18/4/2018 FOR ASSESSMENT YEAR 2010-11, 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 DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW FROM THE VIEW T AKEN BY THE TRIBUNAL AND THE HON'BLE HIGH COURT FOR THE IMMEDIATELY PREC EDING YEARS. ACCORDINGLY, WE DO NOT FIND ANY MERITS IN THE GROUN DS OF APPEAL OF THE REVENUE AND CONSEQUENTLY DISMISS THE SAME. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . SINCE, THE LD. DR DID NOT DISTINGUISH THE FACTS OF THE CASE FOR THE PRESENT ASSESSMENT YEAR FROM THAT OF THE EARLIER ASSESSMENT YEAR, THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THE APPE AL OF THE REVENUE IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY, 2021. SD/- SD/- (ANIL CHATURVEDI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 30/07/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 5 ITA NO. 5190/DEL/2017 ASSISTANT REGISTRAR ITAT NEW DELHI