Case Number: ITA 698/DEL/2021
Appellant: INTER CONTINENTAL HOTELS GROUP (ASIA PACIFIC) PTE LTD., SINGAPORE
Respondent: ACIT, CIRCLE- 2(1)(1), INTERNATIONAL TAXATION, NEW DELHI
Assessment Year: 2017-18
Case Filed On: 2021-06-11
Order Type: Final Tribunal Order
Date of Order: 2023-04-05
Pronounced On: 2023-04-05
The case ITA 698/DEL/2021 was filed by Inter Continental Hotels Group (Asia Pacific) Pte Ltd., Singapore (the appellant), against the ACIT, Circle-2(1)(1), International Taxation, New Delhi (the respondent), pertaining to the assessment year 2017-18. The dispute centers around the taxability of Management Support Service fees under the India-Singapore Double Taxation Avoidance Agreement (DTAA).
The primary issue in this appeal was whether the Management Support Service fees received by the appellant from its Indian subsidiary, InterContinental Hotels Group (India) Pvt. Ltd. (IHG India), should be classified as Fee for Technical Services (FTS) under Article 12 of the India-Singapore DTAA.
The appellant raised several arguments against the classification of the Management Support Service fees as FTS:
The respondent, ACIT, argued that the Management Support Service fees should be classified as FTS under Article 12 of the DTAA because:
The Income Tax Appellate Tribunal (ITAT) analyzed the agreements and previous rulings related to similar issues. Key points of consideration included:
The Tribunal concluded that the Management Support Service fees did not constitute FTS under Article 12 of the India-Singapore DTAA. The services provided were managerial and did not make available technical knowledge or skills to IHG India. The fees were also not ancillary and subsidiary to the license fee for the use of brand names.
The ITAT ruled in favor of the appellant, Inter Continental Hotels Group (Asia Pacific) Pte Ltd., Singapore, allowing the appeal. The addition made by the Assessing Officer (AO) treating the Management Support Service fees as FTS was deleted, and the fees were not considered taxable under the India-Singapore DTAA.
Order Pronounced in the Open Court on 05/04/2023 by Dr. B. R. R. Kumar, Accountant Member, and Sh. Yogesh Kumar US, Judicial Member.
This ruling provides clarity on the treatment of Management Support Service fees under the India-Singapore DTAA, reinforcing the distinction between managerial consultancy services and technical services that make technology available. It also underscores the importance of analyzing the nature and independence of agreements in determining tax liability under international treaties.
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