Facts of the Case

  • The respondent/assessee, Sheraton International LLC, earned “centralized fees” from Indian entities.
  • These fees related to services such as:
    • Sales and marketing
    • Loyalty programs
    • Reservation systems
    • Technological and operational services
    • Training and human resource programs
  • The ITAT held that such income was not taxable in India.
  • The Revenue filed an appeal before the Delhi High Court challenging the ITAT order.

Issues Involved

  1. Whether centralized service fees earned by a foreign entity are taxable in India.
  2. Whether the issue is already covered by earlier judicial precedents.
  3. Whether any substantial question of law arises for consideration under Section 260A.

 Petitioner’s (Revenue’s) Arguments

  • The Revenue challenged the ITAT order dated 23.09.2022.
  • It contended that the centralized fees earned by the assessee should be subject to taxation in India.
  • The Revenue attempted to distinguish or challenge earlier rulings on similar issues.

Respondent’s (Assessee’s) Arguments

  • The assessee relied on earlier decisions, particularly:
    • Director of Income Tax vs Sheraton International Inc. (2009) 178 Taxman 84 (Del)
  • It was argued that:
    • The issue is already settled by binding precedent.
    • Similar treatment has been consistently followed in assessee’s own cases for other assessment years.
  • Hence, no fresh question of law arises.

 Court’s Findings / Order

  • The Delhi High Court held that:
    • The issue is squarely covered by earlier judgment in Sheraton International Inc.
    • The Tribunal correctly followed binding precedent.
    • No substantial question of law arises for consideration.
  • Accordingly, the appeal filed by the Revenue was dismissed/closed.

 Important Clarification by Court

  • The Court clarified that:
    • Since the Revenue has challenged the earlier judgment before the Supreme Court,
    • The parties will be governed by the final outcome of the Supreme Court decision in that matter.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS11052023ITA2712023_180859.pdf

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