Centralized services fees cannot be treated as Fee for Technical Services and hence not taxable

Starwood Asia Pacific Hotels Vs ACIT (ITAT Delhi)

ITAT Delhi held that the centralised services fee received by the assessee cannot be treated as FTS under Article 12 of the India-Singapore tax treaty, hence, not taxable in India.

Facts- The core issue arising for consideration is, whether the amount of Rs.6,00,80,312 received by the assessee towards various centralised services rendered to Indian customers is taxable as Fee for Technical Services (FTS)/royalty under Article 12 of India-Singapore Double Taxation Avoidance Agreement (DTAA).

Conclusion- We find, the issue in dispute has been elaborately dealt with by the Tribunal while deciding a bunch of appeals in respect of other group concerns of the assessee in ITA No.2011/Del/2019 and Ors. Dated 29.04.2022. While deciding the issue of applicability of Article 12(4)(a) of India – USA Tax Treaty, the bench has held that the fee received by the assessee under the Centralized Services Agreement cannot be treated as FIS either under Article 12(4)(a) or 12(4)(b) of the India–US Tax Treaty. As a natural corollary, it can only be treated as business income of the assessee. Hence, in absence of a PE in India, it will not be taxable.

Held that that the centralised services fee received by the assessee cannot be treated as FTS under Article 12 of the tax treaty, hence, not taxable in India. Accordingly, the addition is deleted.

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