The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that hotel marketing and reservation-related contributions (MRC) received by a U.S.-based hospitality group from Indian franchisees are not taxable in India as “Fees for Technical Services” (FTS) or royalty under the Income Tax Act, 1961, or the India–U.S. Double Taxation Avoidance Agreement (DTAA).
The bench of Yogesh Kumar U.S. (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that reimbursements towards the Travel Agent Commission Program (TACP) were not taxable as FTS, noting that the payments were made on behalf of Indian hotels and recovered on a cost-to-cost basis without any income component.
The U.S.-based entity, part of a global hotel chain, owns renowned international hospitality brands and licenses them to independent hotel operators in India. It collects marketing and reservation contributions from these hotels to fund global brand promotion, loyalty rewards programs, and centralized booking systems.
The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) had classified such receipts as taxable FTS/FIS (Fees for Included Services), claiming they involved the rendering of technical or managerial services. The assessee argued, however, that the contributions were merely cost-sharing arrangements without any technical or consultancy element, and therefore not taxable in India.
The Tribunal had earlier set aside the assessments due to absence of a Document Identification Number (DIN). On appeal, the Delhi High Court remanded the case to the ITAT for a fresh decision on the substantive tax issue.
After hearing both parties, the ITAT observed that the same issue had repeatedly been decided in favour of the assessee in earlier years by both the Delhi and Mumbai Benches of the Tribunal. The tax department had also accepted the position in multiple prior assessment years.
Referring to its decision in AY 2020–21, the Bench reaffirmed that hotel marketing and reservation-related receipts are not in the nature of managerial, technical, or consultancy services, and therefore cannot be classified as royalty or FTS under Article 12(4)(a) of the India–US DTAA.
Accordingly, the Tribunal deleted the additions made by the Assessing Officer, holding that such receipts are not chargeable to tax in India.
For AY 2018–19, the Tribunal also held that reimbursements towards the Travel Agent Commission Program (TACP)were not taxable as FTS, noting that the payments were made on behalf of Indian hotels and recovered on a cost-to-cost basis without any income component.
Relying on judicial precedents such as Panalfa Autoelektrik Ltd. (Delhi High Court) and Model Exims (Allahabad High Court), the Bench emphasized that pure reimbursements or commission payments to foreign agents cannot be treated as technical services under Section 9(1)(vii) of the Income Tax Act.
On the issue of short credit of TDS — amounting to Rs. 1.14 crore for AY 2017–18 and ₹84.7 lakh for AY 2018–19 — the Tribunal remanded the matter to the Assessing Officer for verification and directed that credit be allowed in accordance with law.
The ITAT partly allowed the appeals for statistical purposes, with major relief granted on the non-taxability of hotel marketing and reservation fees and reimbursement receipts.
Case Details
Case Title: M/s Six Continents Hotels Inc. Versus ACIT
Case No.: ITA No. 373 /Del/2021 (A.Y. 2017-18)
Date: 24/10/2025
Counsel For Appellant: S. K. Agarwal, CA & Sh. Himanshu Agarwal, CA
Counsel For Respondent: Saroj Kumar Dubey, CIT, DR
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, Delhi Bench has held that hotel marketing and reservation-related contributions (MRC) received by a U.S.-based hospitality group from Indian franchisees are not taxable in India as “Fees for Technical Services” (FTS) or royalty under the Income Tax Act, 1961, or the India–U.S. Double Taxation Avoidance Agreement (DTAA).){kind=link}