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Tax Publishers
Issue of alleged masking of royalty income as
International Sales and Marketing Arrangement fees (ISMA) with no identity of
the original owner of the Marriott brand/trademark - case remanded to AO -
miscellaneous application alleging order was passed with demand notice with no
draft assessment order as per Section 144C.
Facts:
This was a Miscellaneous application for the said assessment
years on the same case. The original case goes thus. The original
brand/trademark owner of Marriott/Renaissance was not known and the assessee
was a group company in the USA. They had collected ISMA fees and other
reimbursements for promotional of the said sales/marketing support offered
internationally - in this case the collections were from Indian hotel
establishments who decided to use the Marriott brand and leverage their sales.
The royalty was paid separately by these entities. It was alleged by the
revenue that these ISMA etc. were all masked royalty rolled into such
descriptions to evade taxes and vide Indo-US DTAA the same was taxable in India
and the assessee was held to be a representative assessee (in the absence of
the actual brand/trademark owner's name) thus liable to pay tax on the entire
sums. The lifting of corporate veil was required to be done in this case thus
held the ITAT and remanded the case to the AO in the original ITAT orders. The
AO made a draft order and then passed a demand notice as well alongside the
same which was what under question in the original ITAT appeal. The question
here in the MA petition was that since assessee was a non-resident revenue
ought to have passed a draft assessment order and then the adjudication process
as per Section 144C should have followed by the revenue. Since this was not
done and instead order with the demand notice was directly issued on assessee
the orders deserved dismissal. Thus pleaded the assessee -
Held in favour of the assessee that since the process as
per Section 144C was not followed and this was not curable under section 292B
as well the orders stood dismissed.
Ed. Note: The
original order is worth noting/reading and is enclosed here. The MA is only a
fall out of this.
Case: Marriott
International Inc v Dy CIT 2022 TaxPub(DT) 3422 (Mum-Trib)
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