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Tax Publishers International hotel/hospitality business - Payment to USA entity for centralized Marketing contribution, Priority club receipts, Reservation contribution, Holidex fees whether royalty? *Facts:* Assessee was a group company of Intercontinental Hotel Group (IHG) whose another group company InterContinental Hotels Group (Asia Pacific) PTE Ltd., Singapore (IHGAP) was owning the brand names "Crowne Plaza" and "Holiday Inn". Royalty was being paid by affiliated Indian hotels to IHGAP separately under a brand royalty agreement which was not the issue in this case. The assessee US entity was incharge of marketing efforts and promotional programmes for the entire group for which they were receiving 4% of the room revenue as Marketing contribution, Priority club receipts, Reservation contribution, Holidex fees from Indian group affiliated hotels. Assessee's stand was that these were not royalty or fee for included services as per the Indo-US DTAA and were not taxable in India besides the fact that this was pooled expenditure where in the actual spends were also met by the recipient assessee based in USA. They also buttressed their stand by producing the independent auditors report by Deloitte Haskins of the assessee company and its activities. The issue of revenue was these payments were also royalty which but cloaked into such expenditure heads and structured through another group company and thus assessee was evading taxes in India. The DRP upheld the reading of the AO. Assessee went in higher appeal to ITAT for all 4 assessment years. Held in favour of the assessee that these were not taxable as royalty or fee for included services. The stand of the revenue was not agreeable to the ITAT. *Applied:* Bass International Holdings NV v. JCIT, in [ITA No. 4341/Mum./2002, dt. 12-5-2006] Six Continents Hotel Inc. v. DCIT, in [ITAs No. 3618 and 3619/Mum./2008, dt. 11-5-2011] : 2011 TaxPub(DT) 1196 (Mum-Trib), for the assessment years 2003-04 and 2004-05. Similarly was held in the assessment year 2005-06 by the coordinate bench of the Tribunal in ITA No. 5914/Mum./2009, vide order dated 30-3-2011. For assessment years 2002-03, 2006-07, 2007-08, 2008-09 to 2011-12, the AO/learned DRP treated the Marketing Contribution and Reservation Fees as not taxable in India. *Dissented:* Marriott International Inc. (ITA No. 1996 & 1997/Mum/2011 / ΙΤΑ No. 1451/Mum/ 2013 / ITA No.1452/Mum/2013 / ITA No.1270/Mum/2013) subsequently recalled and read in favour of the assessee in - Marriott International Inc v DCIT [(IT)/ITA No. 3232/Mum/2018] and other appeals (Assessment Year 2006-07 to AY 2009-10)/Mum ITAT/Favour of the Assessee/29-1-2024 (Flash no. 293) on technical point that the AO passed final order and issued demand notice without issuing draft assessment order. *Ed. Note:* The very verdict of Marriott International case on which revenue based its stand was turned down by ITAT against revenue on 29-1-2024. This was not discussed in this decision. In Marriott international case readers will recollect that the order against the assessee was passed as a part of the remand by the ITAT initially. Then the miscellaneous petition won it in favour of the assessee. *Case:* Six Continents Hotels, Inc. v. Dy. CIT 2024 TaxPub(DT) 865 (Mum-Trib)

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International hotel/hospitality business - Payment to USA entity for centralized Marketing contribution, Priority club receipts, Reservation contribution, Holidex fees whether royalty?

Facts:

Assessee was a group company of Intercontinental Hotel Group (IHG) whose another group company InterContinental Hotels Group (Asia Pacific) PTE Ltd., Singapore (IHGAP) was owning the brand names "Crowne Plaza" and "Holiday Inn". Royalty was being paid by affiliated Indian hotels to IHGAP separately under a brand royalty agreement which was not the issue in this case.

The assessee US entity was incharge of marketing efforts and promotional programmes for the entire group for which they were receiving 4% of the room revenue as Marketing contribution, Priority club receipts, Reservation contribution, Holidex fees from Indian group affiliated hotels. Assessee's stand was that these were not royalty or fee for included services as per the Indo-US DTAA and were not taxable in India besides the fact that this was pooled expenditure where in the actual spends were also met by the recipient assessee based in USA. They also buttressed their stand by producing the independent auditors report by Deloitte Haskins of the assessee company and its activities. The issue of revenue was these payments were also royalty which but cloaked into such expenditure heads and structured through another group company and thus assessee was evading taxes in India. The DRP upheld the reading of the AO. Assessee went in higher appeal to ITAT for all 4 assessment years.

Held in favour of the assessee that these were not taxable as royalty or fee for included services. The stand of the revenue was not agreeable to the ITAT.

Applied:

Bass International Holdings NV v. JCIT, in [ITA No. 4341/Mum./2002, dt. 12-5-2006]

Six Continents Hotel Inc. v. DCIT, in [ITAs No. 3618 and 3619/Mum./2008, dt. 11-5-2011] : 2011 TaxPub(DT) 1196 (Mum-Trib), for the assessment years 2003-04 and 2004-05. Similarly was held in the assessment year 2005-06 by the coordinate bench of the Tribunal in ITA No. 5914/Mum./2009, vide order dated 30-3-2011. For assessment years 2002-03, 2006-07, 2007-08, 2008-09 to 2011-12, the AO/learned DRP treated the Marketing Contribution and Reservation Fees as not taxable in India.

Dissented:

Marriott International Inc. (ITA No. 1996 & 1997/Mum/2011 / ΙΤΑ No. 1451/Mum/ 2013 / ITA No.1452/Mum/2013 / ITA No.1270/Mum/2013) subsequently recalled and read in favour of the assessee in - Marriott International Inc v DCIT [(IT)/ITA No. 3232/Mum/2018] and other appeals (Assessment Year 2006-07 to AY 2009-10)/Mum ITAT/Favour of the Assessee/29-1-2024 (Flash no. 293) on technical point that the AO passed final order and issued demand notice without issuing draft assessment order.

Ed. Note: The very verdict of Marriott International case on which revenue based its stand was turned down by ITAT against revenue on 29-1-2024. This was not discussed in this decision. In Marriott international case readers will recollect that the order against the assessee was passed as a part of the remand by the ITAT initially. Then the miscellaneous petition won it in favour of the assessee.

Case: Six Continents Hotels, Inc. v. Dy. CIT 2024 TaxPub(DT) 865 (Mum-Trib)