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2023 (3) TMI 198 - AT - Income TaxIncome deemed to accrue or arise in India - Fee For Technical Services (FTS) under Article 12 of the India-Singapore Double Taxation Avoidance Agreement (DTAA) and section 9(1)(vii) of the Act - addition of marketing receipts, frequent guest program receipts, general advertising, coordination fund contribution and reservation fees etc. - assessee is a non-resident corporate entity incorporated under the Laws of Singapore and a tax resident of Singapore - HELD THAT:- From the nature of activities carried on by the assessee, it is found to be in the nature of centralized marketing and reservation related activities to have a wide geographical coverage and to improve the visibility amongst prospective customers. The centralized reservation allows a customer or a third party travel intermediary anywhere in the world to access the availability status, the room rates to make booking easily. Thus, as could be seen, the marketing and reservation activities performed by the assessee are not only distinct and different from the license fee but they are done under two distinct and separate agreements. Therefore, in our view, the marketing and reservation receipts cannot be treated to be ancillary and subsidiary to the license fee. Hence, such fee will not fall under Article 12(4)(a) of the treaty. Similarly, the nature of services rendered does not demonstrate that they are in the nature of managerial, technical or consultancy services. Even if, to some extent they may involve consultancy services, however, there is nothing on record to demonstrate that while rendering the services, the assessee had made available technical knowledge, experience, skill, know-how or processing etc. to bring it within the ambit of FTS under Article 12(4)(b) of the treaty. See Starwood Hotels and Resorts case [2022 (7) TMI 781 - ITAT DELHI], thus we direct the Assessing Officer to delete the additions in both the assessment years. Taxability of reimbursement of expenses as FTS both under the provisions of the Act as well as India-Singapore DTAA - As alleging that the assessee did not provide the break up of reimbursement and copy of bank statement the Assessing Officer treated the reimbursement of expenses as FTS - HELD THAT:- As could be seen from the nature of services, these are routine services without involving any technical or strategic expertise or involvement of any advisory services. Further, these services are neither ancillary and subsidiary to royalty nor there is anything on record to demonstrate that while rendering such services, the assessee had made available any technical knowledge, know-how, skill etc. to the third party Indian hotels. It is further observed that the recipients are receiving such services on a continuous basis from year to year, which shows that the recipients are not capable of independently performing such services without the aid and assistance of the assessee. Thus, in our considered opinion, the reimbursement of cost received by the assessee, cannot be treated as FTS under Article 12(4) of the India-Singapore DTAA, at least, based on the facts involved in the impugned assessment years. Therefore, we direct the Assessing Officer to delete the additions. Short grant of TDS - HELD THAT:- Having considered the submissions of the parties, we direct the Assessing Officer to factually verify assessee’s claim and allow credit of TDS in accordance with law.
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