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Informative

ITAT Delhi on Taxability of Marketing and Reservation Contribution under India-USA DTAA

Update / Judgement Date

24 Oct 2025

Source

WCP News Bulletin

Author

Sakshi Bhardwaj — WCP Legal Desk

Reading Time

2 min read

Consumer Protection ActFinancial Management
ITAT Delhi on Taxability of Marketing and Reservation Contribution under India-USA DTAA
WCP News Bulletin

Headnote

The ITAT Delhi held that Marketing and Reservation Contributions (MRC), including Travel Agent Commission Program (TACP) reimbursements, received by Six Continents Hotels Inc. from Indian hotels, are not taxable as Fees for Technical Services (FTS) or Royalty under the Income Tax Act, 1961 or India-USA DTAA. The Tribunal also directed the AO to examine and grant the assessee’s TDS credit claims in both assessment years. The appeals were partly allowed for statistical purposes.


Background

  1. Assessee, a US tax resident and part of Inter-Continental Hotel Group, earned MRC and reimbursement receipts from Indian hotels during AY 2017-18 and AY 2018-19.
  2. MRC included Marketing Contribution, Priority Club Reward receipts, Reservation Contribution, and Holidex Fees. Reimbursements included TACP receipts.
  3. AO treated MRC and reimbursements as taxable FTS/FIS under the Act and DTAA and made additions accordingly.
  4. Earlier ITAT orders were quashed due to DRP non-compliance (DIN missing), and Delhi High Court remanded the appeals for merit consideration.


Court’s Observations

  1. MRC receipts are not taxable as Royalty/FTS, as these are payments for services rendered to Indian hotels through third-party agents, not by the assessee directly.
  2. TACP reimbursements are not FTS, as the assessee only acted as an intermediary, passing payments from Indian hotels to travel agents on a cost-to-cost basis.
  3. Previous ITAT rulings consistently supported the assessee on this issue across multiple assessment years.
  4. TDS credit claims were not granted properly; AO was directed to examine and allow TDS credit claims in accordance with law.


Decision

  1. Ground 1 (MRC taxability): Allowed.
  2. Ground 2 (TACP reimbursements, AY 2018-19): Allowed.
  3. Ground 3 (TDS credit issues): Remanded to AO for proper consideration.
  4. Appeals were partly allowed for statistical purposes.


Legal Provisions Discussed

  1. Section 9(1)(vii), Income Tax Act, 1961 – Fees for Technical Services (FTS) definition and taxability.
  2. Rule 37BA(2), Income-tax Rules, 1962 – TDS credit provisions.
  3. India-USA Double Taxation Avoidance Agreement (DTAA) – Tax exemption on certain receipts.