TMI Blog2021 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. These contentions are coming for the first time and are not emerging from the actual assessment order which is contested before this forum. Services in the nature of FTS whether constitutes FTS or not and whether the assessee has PE in India or not, was very well settled and was undisputed as per the submissions and records before the Assessing Officer as well as before the CIT(A). The Revenue is projecting a new case which was not part of assessment order as well as order of the CIT(A). Therefore, the written submissions made by the Ld. AR are just afterthought and cannot be taken into account as the same are not plausible. The issue involved is squarely covered by the Tribunal s decision in Assessment Year 2013-14 in case of Westin Hotel [ 2020 (1) TMI 1484 - ITAT DELHI] as well as by the decision of the Hon ble Delhi High Court in case of Sheraton [ 2009 (1) TMI 27 - DELHI HIGH COURT ] and hence both the appeals of the Revenue are dismissed. The appeals of the Revenue are dismissed. - I.T.A. No. 5191/DEL/2017 I.T.A. No. 5336/DEL/2017 - - - Dated:- 30-7-2021 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Appellant by : Sh. Sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified as under:- Sales Marketing Loyalty Programs Reservations Service Technological Services Operational Services Training Programs/Human Resource The above services, according to the assessee company, were provided by the assessee company outside India and the income was received in the form of marketing fees, and fees for 'Frequent Flier Program (FTP), and 'Starwood Preferred Guest' (SPG). The assessee company does not have a P.E. in India. The said fact has not been disputed by the Assessing officer. As per the contentions of the assessee company before the Assessing 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 Taxation Avoidance Agreement between India and the USA. The Assessing Officer held that the assessee company had received income from fees from technical services as per provision of both DTAA and section 115A of the Income Tax Act, 1961. The Assessing Officer relying on the assessment order of group concern i.e. M/s Sheraton International Inc. wherein the similar payments were also held to be covered by the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court are distinguishable as the assessee in the cited case was not having any Royalty Income from the clients in India. The relevant facts of the cited case are reproduced as under for ready reference- The assessee, a non-resident company incorporated in the USA, was engaged in providing services to hotels in various parts of the world. Towards that end, it entered into agreements with ITC Hotels Ltd. (ITC) for providing services to some of its hotels. The scope of services envisaged in the agreements was publicity; advertisement and sales promotion including reservation services. In consideration of the services which the assessee was required to render, ITC agreed to pay a fee at the rate of 3 per cent of the room sales to the assessee. The assessee claimed that the fee received by it was business income and same was not taxable in India, as it had no permanent establishment in India. The Assessing Officer held that what the assessee was making available to the ITC were technical and consultancy services; provision of training to its employees; and the use of its trademark; technical know-how, documentation and manuals and the reservation network and, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority may like to call for examination of license/royalty agreement and services agreement with Indian Clients which will throw light in this regard. 10. It may be noted that Hon'ble Delhi High Court in the case of M/S JANSAMPARK ADVERTISING AND MARKETING (P) LTD. ITA 525/2014 categorically held at para 38 of the order that Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact-finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority Accordingly, Hon'ble Tribunal may like to ensure that clear cut facts of the case are on record as per the Royalty agreement and Services agreement and the decision may be taken on the basis of the same. 11. It is submitted that Hon'ble Tribunal may duly consider the aforesaid written submission and it is also prayed that this submission may be made part of the order. 7. The Ld. AR submitted that the issue of Article 12 has been decided by the Hon ble Delhi High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International, Inc. have been reproduced hereunder: 85. As such, considering all the facts of the case, the relevant provisions of the Income-tax Act, 1961 as well as that of DTAA between India and USA and keeping in view the legal position emanating from various judicial pronouncements discussed above, we are of the opinion that the amount received by the assessee from the Indian hotels/clients for the services rendered under the relevant agreements was not in the nature of 'royalties' within the meaning given in section 9(l)(vi) read with Explanation 2 thereto of the Income-tax Act, 1961 or as given in Article 12(3) of Indo-American DTAA. The same was also not 'fees for technical services' or 'fees for included services' as defined in section 9(l)(vii) read with Explanation 2 thereto of the Income-tax Act, 1961 or Article 12(4) of the Indo-American DTAA respectively. Having regard to the integrated business arrangement between the assessee company and the Indian hotels/clients as evident from the relevant agreements as well as the nature of assessee's own business, the said amount clearly represented its 'business profit' which was not l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight, property or information for which a Royalty payment described in Paragraph 3 of article 12 is received, the same would be in the nature of Fee for technical services. In response to the above, it is respectfully submitted that this specific aspect has already been duly considered and decided in Assessee's favour by Hon'ble Delhi Tribunal at Para 81 and confirmed by Hon'ble Delhi High Court at Para 12 and Para 13 in case of Sheraton International, Inc. (supra), facts of which are identical to those of Respondent-Assessee, as admitted by Ld. AO and Ld. CIT(A) as well. Hon'ble ITAT in case of Sheraton International, Inc. (supra) has taken a view that Article 12(4)(a) of the India-USA DTAA cannot be applied to any of the services rendered by the Assessee to the respective Indian Hotels/ clients. The Jurisdictional ITAT has taken a view that the activities of advertisement, publicity and sales promotion are the main activities of the business and the use of trademark and tradename are incidental to the said main service. Article 12(4)(a) is specifically applicable to those cases where the main service falls within the ambit of Article 12(3), i.e. Royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is pertinent to note that the Assessing Officer has simplicitor made addition in respect of FTS under Article 12 but no limb of Article 12 was given by the Assessing Officer and there is no specification which comes out from the assessment order as contemplated by the Ld. DR during the hearing. The main contentions of the Ld. DR which are totally new in the present assessment year and not presented before either of the Revenue Authorities in Assessment Year 2013-14 as well as 2014-15. These contentions are coming for the first time and are not emerging from the actual assessment order which is contested before this forum. Services in the nature of FTS whether constitutes FTS or not and whether the assessee has PE in India or not, was very well settled and was undisputed as per the submissions and records before the Assessing Officer as well as before the CIT(A). The Revenue is projecting a new case which was not part of assessment order as well as order of the CIT(A). Therefore, the written submissions made by the Ld. AR are just afterthought and cannot be taken into account as the same are not plausible. The issue involved is squarely covered by the Tribunal s decision in Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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