CIT Vs Westin Hotel Management LP (Delhi High Court)
Delhi High Court has dismissed an appeal filed by the income tax authorities, affirming that payments received by Westin Hotel Management LP from its Indian customers for a range of centralised services are not taxable as ‘Fee for Technical Services’ under the Income Tax Act, 1961, or ‘Fee for Included Services’ under the Indo-US Double Taxation Avoidance Agreement (DTAA). The court’s decision, delivered on 10 April 2024, largely hinged on its own previous judgment in a similar case involving another international hotel chain, Director of Income-tax vs. Sheraton International Inc.
The appeal, brought by the Commissioner of Income Tax (CIT), challenged an earlier ruling by the Income Tax Appellate Tribunal (ITAT). The central question before the High Court was whether the receipts for services such as sales and marketing, loyalty programs, reservation services, technological services, operational services, and training programs/human resources qualified as taxable technical or included services.
The High Court, in its concise judgment, noted that the issue raised in the appeal was directly addressed and settled by its decision in the case of Director of Income-tax vs. Sheraton International Inc., rendered in 2009.
In the Sheraton International Inc. case, the court had meticulously examined the nature of payments for similar centralised services provided by a non-resident entity to hotels in India. The court in that instance had upheld the Income Tax Appellate Tribunal’s finding that the primary nature of the services was related to advertisement, publicity, and sales promotion, aimed at the mutual benefit of the service provider and the client hotels. The use of trademarks, trade names, and other related services were considered incidental to these main services.
