DCIT (International Taxation),Circle-3(1)(2), New Delhi v. M/s. Starwood Hotels & Resorts Worldwide Inc.,, Noida

ITA 5189/DEL/2017 | 2014-2015
Pronouncement Date: 31-08-2021 | Result: Dismissed

Appeal Details

RSA Number 518920114 RSA 2017
Bench Delhi
Appeal Number ITA 5189/DEL/2017
Duration Of Justice 4 year(s) 21 day(s)
Appellant DCIT (International Taxation),Circle-3(1)(2), New Delhi
Respondent M/s. Starwood Hotels & Resorts Worldwide Inc.,, Noida
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 31-08-2021
Last Hearing Date 11-08-2021
First Hearing Date 11-08-2021
Assessment Year 2014-2015
Appeal Filed On 10-08-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE JUDI CIAL MEMBER I.T.A. NO. 5189/DEL/2017 (A.Y 2014-15) (THROUGH VIDEO CONFER ENCING) DCIT (INTERNATIONAL TAXATION) CIRCLE-3(1)(2) ROOM NO. 418 E-2 DR. SPM CIVIC CENTRE JLN MARG NEW DELHI (APPELLANT) VS M/S STARWOOD HOTELS & RESORTS WORLDWIDE INC. C/O. M/S NANGIA & CO. A- 109 SECTOR-136 NOIDA UTTAR PRADESH (RESPONDENT) ORDER PER SUCHITRA KAMBLE JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 06/06/2017 PASSED BY CIT(A)-02 NEW DELHI FOR ASSESSMENT YEAR 2014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT(A) HAS ERRED IN HOLDING THAT THE RECEIPTS OF THE ASSESSEE FROM VARIOUS ACTIVITIES OF HOTEL MANAGEMENT RANGING INTERALIA FROM TICKETING RESERVATION MARKETING ADVERTISING OPERATION ADMINISTRATION CATERING N ETWORK SUPPORT SERVICES STARWOOD PORTAL SERVICES IMPARTING OF SKILL SETS T HROUGH TRAININGS ETC. WERE NOT TAXABLE AS 'FEE FOR TECHNICAL SERVICES' (FTS) W ITHIN THE MEANING AND SCOPE OF SECTION 9 OF THE INCOME TAX ACT 1961 AS W ELL AS ARTICLE 12 OF THE INDIA-US DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) . 3. M/S STARWOOD HOTELS AND RESORTS WORLDWIDE INC. I .E. THE ASSESSEE APPELLANT BY SH. PRABHA KANT SR. DR RESPONDENT BY SH. AMIT ARORA CA DATE OF HEARING 11.08.2021 DATE OF PRONOUNCEMENT 31.08.2021 COMPANY IS INCORPORATED IN USA AND CARRIES ON THE B USINESS OF PROVIDING VARIOUS CENTRALIZED SERVICES TO THE HOTELS IN SEVER AL COUNTRIES ACROSS THE WORLD. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAD PROVIDED WORLDWIDE MARKETING AND ADVERTISING SERVICES OF THE HOTELS TH ROUGH STARWOODS WORLDWIDE SYSTEM OF SALES ADVERTISING PROMOTION PUBLIC RELATIONS AND RESER VATIONS IN THE USUAL COURSE OF ITS BUSINESS TO SOME HOTELS OWNED/M ANAGED BY THE INDIAN COMPANIES ALL SUCH SERVICES ARE PROVIDED FROM OUTS IDE INDIA. THE ASSESSEE COMPANY HAS AGREED TO PROVIDE THE FOLLOWING SERVICE S TO VARIOUS HOTELS OPERATING IN INDIA. THE RANGE OF THESE SERVICES HA VE BEEN BROADLY CLASSIFIED AS UNDER:- SALES & MARKETING LOYALTY PROGRAMS RESERVATIONS SERVICE TECHNOLOGICAL SERVICES OPERATIONAL SERVICES TRAINING PROGRAMS/HUMAN RESOURCE THE ABOVE SERVICES ACCORDING TO THE ASSESSEE COMPA NY WERE PROVIDED BY THE ASSESSEE COMPANY OUTSIDE INDIA AND THE INCOME WAS R ECEIVED IN THE FORM OF MARKETING FEES AND FEES FOR 'FREQUENT FLIER PROGRA M (FTP) AND 'STARWOOD PREFERRED GUEST' (SPG). THE ASSESSEE COMPANY DOES N OT HAVE A P.E. IN INDIA. THE SAID FACT HAS NOT BEEN DISPUTED BY THE ASSESSIN G OFFICER. AS PER THE CONTENTIONS OF THE ASSESSEE COMPANY BEFORE THE ASSE SSING OFFICER THE ASSESSEE COMPANY SUBMITTED THAT THE REVENUE DERIVED BY IT IS IN THE NATURE OF BUSINESS PROFITS AS DEFINED IN ARTICLE 7 OF THE DOUBLE TAXAT ION AVOIDANCE AGREEMENT BETWEEN INDIA AND THE USA. THE ASSESSING OFFICER HE LD THAT THE ASSESSEE COMPANY HAD RECEIVED INCOME FROM FEES FROM TECHNICA L SERVICES AS PER PROVISION OF BOTH DTAA AND SECTION 115A OF THE INCO ME TAX ACT 1961. THE ASSESSING OFFICER RELYING ON THE ASSESSMENT ORDER O F GROUP CONCERN I.E. M/S SHERATON INTERNATIONAL INC. WHEREIN THE SIMILAR PAY MENTS WERE ALSO HELD TO BE COVERED BY THE DEFINITION OF 'FEES FOR TECHNICAL SE RVICES' AS DTAA AND AS PER EXPLANATION 2 OF SECTION 9(L)(VII)OF THE ACT BEING A CONSIDERATION FOR THE RENDERING OF TECHNICAL MANAGERIAL AND CONSULTANCY SERVICES. THE REVENUES RECEIVED FROM RENDERING SERVICES OF ADVERTISEMENT NETWORKING AND PROMOTION WAS ALSO HELD TO BE TAXABLE AS FEES FOR TECHNICAL S ERVICES. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE A SSESSEE. 5. AT THE TIME OF HEARING THE LD. AR SUBMITTED THA T FOR IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2013-14 THE ID ENTICAL ISSUE OF FTS WHICH WAS CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL W AS DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 18/11/2019 (ITA NO. 5 142/DEL/2016) WHICH WAS BASED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF DCIT VS. SHERATON INTERNATIONAL INC. (2009) 313 ITR 267. TH E LD. AR FURTHER SUBMITTED THAT THE IDENTICAL FACTS IN CASE OF STARWOOD WHICH IS A GROUP COMPANY WAS DECIDED BY THE HON'BLE HIGH COURT FOR ASSESSMENT Y EAR 2010-11 AND 2011-12 IN ITA NO. 467/2018 FOR ASSESSMENT YEAR 2010-11 AND ITA NO. 713/2019 ORDER DATED 2/8/2019 FOR ASSESSMENT YEAR 2011-12. 6. THE LD. DR SUBMITTED THAT THERE ARE NO DISTINGUI SHING FACTS IN THE PRESENT ASSESSMENT YEAR FROM THE DECISION OF THE HO NBLE DELHI HIGH COURT AND THE TRIBUNALS DECISION IN ASSESSEES CASE. THE LD . DR RELIED UPON THE ASSESSMENT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT REVENUE DOES NOT DISPUTE THE FACTS OF THE PRESENT ASSESSMENT YEAR IS DIFFERENT THAT THE FACTS DISCUSSED IN ASSESSEES OWN CASE BY THE HON'BLE HIGH COURT AS WELL AS BY THE TR IBUNAL IN A.Y. 2013-14 (ITA NO. 5142/DEL/2016 ORDER DATED 18.11.2019). THE TRIB UNAL HELD AS UNDER:- 5. REVENUE DOES NOT DISPUTE THE FACT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE REPORTED IN DIRECTOR O F INCOME TAX VS. SHERATON INTERNATIONAL INC (2009) 313 ITR 267 (DELH I) TOOK THE VIEW THAT THE PAYMENTS FOR ADVERTISING PUBLICITY AND THE SAL ES PROMOTION SERVICES RENDERED BY THE ASSESSEE A COMPANY INCORPORATED AN D TAX RESIDENT IN USA TO INDIAN COMPANY WAS ADVISEMENT PUBLICITY AN D SALES PROMOTION KEEPING IN MIND THE MUTUAL INTERESTS AND IN THE CON TEXT THE USE OF TRADEMARK TRADE NAME ETC. AND OTHER ENUMERATED SER VICES REFERRED TO IN THE AGREEMENT WITH THE ASSESSEE WERE INCIDENTAL TO MAIN SERVICES AND THEREFORE THE PAYMENTS RECEIVED WERE NEITHER IN TH E NATURE OF ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT EXPLANATION 2 N OR IN THE NATURE OF 'FEE FOR TECHNICAL SERVICES' (FTS) UNDER SECTION 9(1)(VI I) OF THE ACT EXPLANATION 2 BUT BUSINESS INCOME AND ASSESSEE NOT HAVING ANY PE IN INDIA SUCH BUSINESS INCOME WAS NOT TAXABLE IN INDIA. 6. FURTHER ON IDENTICAL SET OF FACTS IN THE CASE OF STARWOOD (SUPRA) TRIBUNAL TOOK A CONSISTENT VIEW FOLLOWING T HE ABOVE DECISION OF THE HON'BLE HIGH COURT FOR THE AY 2010-11 AND 2011-12 AND SUCH VIEW WAS UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO. 467/2018 BY ORDER DATED 18/4/2018 FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 713 OF 2019 BY ORDER DATED 02/08/2019 FOR ASSESSMENT YEAR 2011-12. SINCE THE FACTS ARE IDENTICAL AND THE ISSUE IS NO LONGER RES INTEGRA WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW FROM THE VIEW T AKEN BY THE TRIBUNAL AND THE HON'BLE HIGH COURT FOR THE IMMEDIATELY PREC EDING YEARS. ACCORDINGLY WE DO NOT FIND ANY MERITS IN THE GROUN DS OF APPEAL OF THE REVENUE AND CONSEQUENTLY DISMISS THE SAME. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . SINCE THE LD. DR DID NOT DISTINGUISH THE FACTS OF THE CASE FOR THE PRESENT ASSESSMENT YEAR FROM THAT OF THE EARLIER ASSESSMENT YEAR THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THE APPE AL OF THE REVENUE IS DISMISSED. 8. IN RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31ST DA Y OF AUGUST 2021. SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 31/08/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI