Receipt from hotel owners for providing various centralized services cannot be treated as FIS

ACIT Vs Westin Hotel Management L.P. (ITAT Delhi)

ITAT Delhi held that revenue received from various hotel owners for providing various centralized services cannot be treated as fees for included services (FIS) either under Article 12(4)(a) or 12(4)(b) of the India-US tax treaty. Thus, in absence of PE in India, the same is not taxable.

Facts- Appellant is a firm incorporated in the United States of America and carries on the business of providing various hotel related services in several countries across the world. The Appellant is a tax resident of USA in terms of the provisions of Double Taxation Avoidance Agreement between India and USA.

As per the assessee, revenue received from various hotel owners for providing various Centralized Services from outside India were claimed to be “not taxable” in India under Section 9 of the Income-tax Act, 1961 as well as under the provisions of Article 12 of India-USA Double Taxation Avoidance Agreement. The assessment u/s. 143(3) of the Act has been completed at an income of INR 16,39,00,550/- owing to the additions on account of the centralized services.

CIT(A) decided the issue in favour of the Appellant. Being aggrieved, revenue has preferred the present appeal.

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