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February 2026

Non-resident — Income deemed to accrue or arise in India — Amounts paid by Indian affiliates on account of marketing, distribution marketing and frequency marketing programme treated by AO as royalty — American company receiving payments from Indian affiliate for marketing and reservation services in hotel — AO held receipts taxable as royalty under I T Act and under DTAA and alternatively as fees for included services u/s. 9(1)(vii) and article 12(4)(a) and (b) of DTAA between India and US — DRP rejecting assessee’s objections holding that mere changing of business model did not change nature of receipts chargeable to tax — High Court held that the receipts neither taxable as royalty nor fees for technical services — Not taxable under DTAA as fees for included services

By Keshav Bhujle | Ritu Punjabi, Advocates
Reading Time 4 mins

57. CIT(International Taxation) vs. Six Continents Hotels Inc.: (2025) 480 ITR 14 (Del): 2025 SCC OnLine Del 2744

A. Y. 2020-21: Date of order 17/04/2025

Ss. 9(1)(vii), 143(3) and 144C of ITA 1961: Art. 12(4)(a) and (b) of DTAA between India and the USA

Non-resident — Income deemed to accrue or arise in India — Amounts paid by Indian affiliates on account of marketing, distribution marketing and frequency marketing programme treated by AO as royalty — American company receiving payments from Indian affiliate for marketing and reservation services in hotel — AO held receipts taxable as royalty under I T Act and under DTAA and alternatively as fees for included services u/s. 9(1)(vii) and article 12(4)(a) and (b) of DTAA between India and US — DRP rejecting assessee’s objections holding that mere changing of business model did not change nature of receipts chargeable to tax — High Court held that the receipts neither taxable as royalty nor fees for technical services — Not taxable under DTAA as fees for included services.

The assessee was a non-resident, entitled to the beneficial provisions of the DTAA between India and the USA. During the financial year 2019-2020, the assessee had received a sum of ₹28,11,42,298 wh

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Offences and prosecution — Criminal prosecution — Income surrendered during the assessment — Tax paid to buy peace and avoid further litigation — Penalty u/s. 271(1)(c) levied — Concealment of income — Appeal of the assessee allowed by the CIT(A) and ITAT — Department’s appeal before the High Court dismissed — Order of penalty does not exist — Criminal proceedings cannot be allowed to continue in such case.