INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and Singapore - Fees for technical services undr article 12(4)(b) - Consideration received towards management support services

Assessee based at Singapore was a part of Inter-Continental Hotels Group (IHG) and primarily engaged in the business of franchise/license operating and manage hotels operating under different hotels of the group in the Asia Pacific Region and headquarter for the Asia Middle East & South Africa Region. Assessee was the economic and beneficial owner of hotel brand news including 'Inter-continental' 'Holiday Inn' and 'Crown Plaza' for Asia Specific Region. For permitting the use of the aforesaid brand names, assessee entered into agreement/arrangements with various hotels within the Asia Specific Region, including India, for licensing the hotel brands. The amount received from various hotels towards use of brand name was treated as royalty and offered to tax. Further, assessee entered into an agreement with its Indian subsidiary for provision of Management Supports Services. AO held that amount received towards provision of management support services to the Indian subsidiary was in the nature of Fees for Technical Service (FTS) under article 12(4)(b) of India-Singapore DTAA. Held: Operational support such as Providing advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards, maintaining the qualification available with regard to the international hotel business and its management techniques and Co-ordinating the managerial plan and actions, advising local general CMH Hotel management on trends and changes in the hotel business general and providing advice on the production of operating and capital budgets at the level of the CMH Hotels, which were consistent with the strategic plan could, at best, be the managerial consultancy service but not the services made available so that the recipient could use or replicate the such services received from assessee. Further, accounting support given was in relation to the preparation of balance sheet and modalities and to advice production of reports regarding the budgets from time to time and the services were rendered repeatatively based on the requirements of the clients and hence it could not be treated as a service which was 'made available' to be applied independently and in times to come. Similarly, in relation to services rendered in connection with traininga nd recruitment and manpower specification, there was neither technology transfer, knowledge transfer nor transfer of any skill or know-how. Hence, amount received by assessee cannot be regarded as FTS under article 12(4)(b) of DTAA.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 90 Artiicle 12(4)(a)

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