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2023 (6) TMI 344 - AT - Income TaxIncome deemed to accrue or arise in India - taxability or otherwise of the fee received from Indian franchise hotels towards centralized services as fees for technical services (FTS)/fees for included services (FIS) under Article 12(4)(a) of India-USA DTAA - Assessee is a non-resident corporate entities incorporated in USA in the business of operating, managing and franchising hotels and resorts in countries across the globe - HELD THAT:- Revenue Authorities have treated the fees received from provision of centralised services as FTS/FIS under Article 12(4)(a) of India-USA treaty on the reasoning that the services rendered are ancillary and incidental to license to use brand name/trademark, resulting in royalty income. If we examine the relevant facts, it will be demonstrable that the income earned from centralised services far exceeds the royalty income. The centralised services income, by a reasonable measure, outstrips the royalty income. Thus, rather than centralised service income being ancillary and incidental to royalty income, in reality, it is a reverse situation. In such a scenario, it cannot be said that centralised service income, being ancillary and incidental to royalty income, would fall under Article 12(4)(a) of the Tax Treaty. We hold that the receipts from centralised service income are not taxable as FTS/FIS under Article 12(4)(a) of India-USA DTAA. Accordingly, we direct the AO to delete the additions.Appeal of assessee allowed.
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