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2015 (6) TMI 380 - AT - Income TaxRoyalty income from franchisee hotels - use of registered trade mark of `Holiday Inn’ and `Crowne Plaza’ in hotel business - whether the royalty income should be taxed at the rate of 11.33% or at the rate of 15%, as per the DTAA? - DTAA with USA - Held that:- From the perusal of the said agreement, it is seen that the agreement is between SC Hotels & Resorts (India) Pte. Ltd., which has been referred to as `manager’; Inter Continental Hotels Group (Asia Pacific) Pte. Ltd., which has been referred as `guarantor’; and Today Hotels Private Limited, Indian Company, which has been referred as the `owner’. The title of the said agreement is for management of the hotels and the terms and conditions under which the manager on behalf of owner will manage the hotel. Here, neither the owner nor the manager has any reference to the assessee. Even clause 9.5, it is seen that the same only provides that the owner will pay to SC Hotels & Resorts (India) Pte. Ltd. the license fees. Here again, there is no reference of the assessee. Further nothing has been brought on record that there was any kind of correspondence or a letter between the assessee and Today Hotels Private Limited, setting out the terms and conditions for the payment of royalty. Under these facts, it cannot be held that the payment of royalty has been made “in pursuance of an agreement”. Once there is a clear cut provision under the statute, which mandates certain terms and conditions for applying a beneficial rate, then the same has to be applied in a letter and spirit. Thus, we hold that the finding of the CIT(A) that, there is no agreement in terms of which the assessee was paid royalty is legally and factually correct, and therefore, the beneficial rate of tax will not apply. The A.O. has rightly charged the tax rate of 15% as given in the DTAA. - Decided against assessee.
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