Today's cases
Income tax - Indo-USA tax treaty - non-resident signs service contract with ITC hotels - receives payments for advertising, publicity and sales promotion worldwide - such payments are neither royalty nor fee for included services - to be treated as business income but not taxable in India as assessee has no PE under Article 7 of DTAA : Delhi HC
THE assessee in this case is a prominent US-based hotel brand name. It gets into commercial service agreement with ITC hotels and others to undertake advertising, publicity and sales promotion to promote mutual interest. In return, it was paid three per cent of the room sales. Tribunal held that payments made to the non-resident for providing such services or use of trademark which is only incidental to the main objectives cannot be bracketed as either royalty under Section 9(1 )( vi) read with explanation 2 or in the nature of fee for technical services under Section 9(1)(vii) read with explanation 2 or taxable under Article 12 of the DTAA . It further held that such payment can only be treated as business income but since the assessee has no PE under Article 7 of the DTAA, it cannot be taxed in India. And the High Court finds no fault with such a finding of the Tribunal.
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