Rajendra Nayak Ganesh Pai The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Sheraton International inc. vs. DDIT [2007] 293 ITR (AT) 68 examined the taxability of a foreign company engaged in the business of providing various services related to hotels. The taxpayer (US Co), a company incorporated in the US, entered into agreements with an Indian company (I Co) for providing services in the nature of publicity, advertisement, sales and reservation of rooms in the hotels of the I Co. It also permitted the I Co to use its brand name and trade mark as incidental to the main services provided. The I Co made a composite payment to the US Co at a percentage of total room sales and not with reference to any particular service. The issue before the ITAT was the taxability of the fees received by US Co from the provision of such services to the I Co. The US Co was a resident of USA within the meaning of article 4 of the double taxation avoidance agreement between India and USA (the treaty) and was eligible for the treaty benefits.
November 01 2007