Case Law Details
Radisson Hotels International Incorporated Vs ACIT (ITAT Delhi)
ITAT Delhi held that the receipts from centralised service income are not taxable as Fees for Technical Services (FTS)/ Fees for included Services (FIS) under Article 12(4)(a) of India-USA DTAA.
Facts- The assessees in appeals are nonresident corporate entities incorporated in United States of America (USA) and tax residents of USA. As stated by the Assessing Officer, the assessees are in the business of operating, managing and franchising hotels and resorts in countries across the globe. In pursuance to such activities, the assessees have entered into license agreements with Indian hotel owners to operate the hotels under the brand name ‘Radisson’ and ‘Country Inns and Suites’, as the case may be. Being tax residents of USA, the assessees have claimed benefit under India-USA DTAA.
The only issue, arising in these appeals, relates to taxability or otherwise of the fee received from Indian franchise hotels towards centralized services as fees for technical services (FTS)/fees for included services (FIS) under Article 12(4)(a) of India-USA Double Taxation Avoidance Agreement (DTAA).
Conclusion- Held that the centralised services income, by a reasonable measure, outstrips the royalty income. Thus, rather than centralised service income being ancillary and incidental to royalty income, in reality, it is a reverse situation. In such a scenario, it cannot be said that centralised service income, being ancillary and incidental to royalty income, would fall under Article 12(4)(a) of the Tax Treaty.
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