CIT Vs Starwood Hotel And Resorts Worldwide Inc. (Delhi High Court)
Delhi High Court has dismissed an appeal filed by the Income Tax Department against a tribunal ruling that payments received by Starwood Hotel And Resorts Worldwide Inc. from its Indian customers for centralized services did not constitute ‘Fee for Technical Services’ (FTS) under the Income Tax Act or ‘Fee for included services’ under the Indo-US Double Taxation Avoidance Agreement (DTAA). The court’s decision was primarily based on its own binding precedent on the matter, which, despite being under challenge before the Supreme Court, remains in effect.
The appeal, filed by the Principal Commissioner of Income Tax (CIT), contested an order dated April 29, 2022, passed by the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 2015-16.
The central issue in the case revolved around the taxability of payments received by Starwood Hotel And Resorts Worldwide Inc., a foreign entity, from its customers in India. These payments were for various centralized services provided by Starwood, including sales and marketing, loyalty programs, reservation services, technological support, operational services, and training programs/human resources. The Revenue contended that these payments qualified as FTS under Section 9(1)(vii) of the Income Tax Act, 1961, or as ‘Fee for included services’ as defined in Article 12(4)(a) of the Indo-US DTAA, and were therefore taxable in India.
