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2022 (3) TMI 1475 - AT - Income TaxTDS u/s 195 - royalty / Fees for Technical Service (“FTS”) taxable under section 9(1)(vi)/(vii) - payments proposed to be made to Hyatt Chain Services Ltd., Hongkong (“HCSL”) for provision of centralised services i.e. advertisement, sales promotion and computerised reservation to the assessee amongst others - assessee is running a hotel under the name and style of Hyatt Regency as a franchise of Hyatt International Asia Pacific Limited known as Hyatt - whether the chain marketing services provided by HCSL to assessee falls within the scope of Explanation 2 to section 9(1)(vi) of the Act? - HELD THAT:- As per SOA the remittance to HCSL is made by the assessee in relation to centralised services provided by HCSL outside India for advisement, sales promotion and computer reservation. In our view, payments to HCSL are not made for consideration for any of the items (i) to (vi) enumerated in Explanation 2 to section 9(1)(vi). There are numerous decisions wherein the issue relating to the nature of provision of centralised marketing services by way of advertising and computer reservation etc. rendered by one of the group of company particularly in the field of hospitality industry outside India has been considered. In the case of Director of Income Tax vs. Sheraton International Inc. [2009 (1) TMI 27 - DELHI HIGH COURT] wherein such type of service was under consideration, the Hon’ble Delhi High Court held that such services are neither royalty nor FTS as per the provisions of section 9 of the Act and accordingly not liable to tax in India. Thus we hold that the payments made to the HSCL by the assessee are not in the nature of royalty under the provisions of section 9(1)(vi) of the Act and thus not chargeable to tax and not requiring the assesee to withhold any tax on such payments. It is a settled position of law that under section 195 of the Act, tax is not required to be withheld on remittance made by the assessee in respect of the income of the payee which is not chargeable to tax under the provisions of the Act. In support, reliance is placed on the judgements of the Hon’ble Supreme Court in Transmission Corporation of A.P. Ltd. & Anr. [1999 (8) TMI 2 - SUPREME COURT] and GE India Technology Cen. (P) Ltd. [2010 (9) TMI 7 - SUPREME COURT] Alternate argument that the payment for chain marketing services has been made to HSCL as reimbursement of the proportionate expenses incurred by HSCL on cost to cost basis and there was no element of income at all - We find force in the argument of the Ld. AR. The Hon’ble Delhi High Court in CIT vs. Expeditors International (India) (P.) Ltd. [2011 (12) TMI 104 - DELHI HIGH COURT] held that the assessee was not liable to withhold tax in respect of the reimbursement of global management expenses, communication uplink charges and other expenses made to its parent company located outside India. Thus in our view, no income can be said to accrue or arise to HCSL in India making the assessee liable to withhold tax under section 195 of the Act. We accordingly uphold the order of the Ld. CIT(A) and reject the appeal of the Revenue.
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