Six Continents Hotels Inc. Vs ACIT (ITAT Delhi)
Marketing & Reservation Fees Not Taxable as FTS under India-US DTAA- ITAT Delhi Rules in Favour of Six Continents Hotels
Delhi Tribunal allowed the appeals partly, holding that Marketing & Reservation Contributions (MRC) received from Indian hotels by the US-based IHG group entity were not taxable as “Royalty” or “Fees for Technical Services (FTS)” under the Act or India-USA DTAA.
Assessee, owner of hotel brands like Holiday Inn, Holiday Inn Express & Crowne Plaza, received MRC & other reimbursements from Indian franchisees. AO & DRP treated such receipts as taxable FTS/FIS. However, Tribunal noted that the same issue had been consistently decided in favour of Assessee in earlier years (AYs 1997-98 to 2020-21) by both Delhi & Mumbai Benches, & those orders were accepted by Department. Hence, following judicial consistency, Tribunal reiterated that MRC receipts were not consideration for any managerial, technical or consultancy services, & therefore not taxable in India
For AY 2018-19, Tribunal also deleted addition of ₹8.10 crore relating to Travel Agent Commission Program (TACP) reimbursements, holding that these were pure cost recoveries without income element, not FTS either under section 9(1)(vii) or Article 12 of the DTAA.
On the issue of short TDS credit, Tribunal restored the matter to AO for verification & due allowance.
