1. These two appeals filed by the Revenue are directed against the respective orders of the Ld. Commissioner of Income Tax (Appeals)-XXII, New Delhi pertaining to assessment years 2005-06 & 2006-07. Since the issues are common in these appeals, hence, heard together and therefore, these are being consolidated and disposed of by this common order for the sake of convenience.

2. The grounds raised in ITA No. 2305/Del/2011 read as under:-

"(i) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in holding that the receipts of the assessee were in nature of Business Profits as against Royalties /FIS.

(ii) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that part of payment received by assessee form Indian customers was towards use of trademark and constitutes Royalty in terms of Article 12 of DTAA.

(iii) On the facts and circumstances of the case, has erred in not appreciating that part of payment received by assessee from Indian customers was making available technical knowhow, skills and managerial practice etc. and therefore constitutes FIS/ Royalty in terms of DTAA.

(iv) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that part of payment received by assessee from Indian customers for use of highly sophisticated CRS systems and towards marketing, publicity, frequent flier program, starwood preferred guest program and reservation fees would constitute FIS/Royalty in term of DTAA.

(v) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal."

3. The grounds raised in ITA No. 2306/Del/2011 read as under:-

"(i) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in holding that the receipts of the assessee were in nature of Business Profits as against Royalties /FIS.

(ii) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that part of payment received by assessee form Indian customers was towards use of trademark and constitutes Royalty in terms of Article 12 of DTAA.

(iii) On the facts and circumstances of the case, has erred in not appreciating that part of payment received by assessee from Indian customers was making available technical knowhow, skills and managerial practice etc. and therefore constitutes FIS/ Royalty in terms of DTAA.

(iv) On the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that part of payment received by assessee from Indian customers for use of highly sophisticated CRS systems and towards marketing, publicity, frequent flier program, starwood preferred guest program and reservation fees would constitute FIS/Royalty in term of DTAA.

(v) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal."

4. The assessee company is engaged in the business of providing various hotel related services to hotels across the world. The assessee had entered into agreements with the ITC Hotels Ltd. chain of hotels, and certain other hotels in India, to provide marketing and advertising services through its system of sales, promotion, public relations and reservations. These services were provided by the assessee outside India, and the income was received in the form of marking fees, and fees for 'Frequent Flier Program' (FFP), and 'Starwood Preferred Guest' (SPG). The assessee stated that it does not have a P.E. in India, and the revenue derived by it is in the nature of business profits as defined in Article 7 of the Double Taxation Avoidance Agreement between India and the USA. The Assessing Officer held, however, that the assessee had received income from royalty and / or fees from technical services. The Assessing Officer, relying on the assessment order of A.Y. 1998-99, held that the revenue earned for the use of trademark, trade name and the stylized 'S' owned by the assessee, was taxable as 'royalty', as defined in Explanation 2(i) of Section 9(1)(vi) of the Income Tax Act, being payment of the use or right to use a trademark, patent or similar property. The payment was also held to be covered by the definition of 'fees for technical services' as per Explanation 2 of section 9(1)(vii), being a consideration for the rendering of technical, managerial and consultancy services. In particular, the payment for the use of the sophisticated CRS systems for making bookings was covered under 'fees for technical services'. The revenues received from rendering services of advertisement, networking, and promotion, was also held to be taxable as royalty and / or fees for technical services. It is seen from the body of the order that it was brought to the notice of the assessing officer that the ITAT, Delhi, had passed an order on 4.10.2006 in the assessee's own case, for the A.Yrs. 1995-96 to 2000-01, holding that the amount received by the assessee from the Indian hotels/ clients could not be treated as royalty or fees for technical or included services. The Assessing Officer observed that appeal had been filed to the High Court by the department against the judgement of the ITAT, and he proceeded to bring to tax the revenues received from the Indian hotels, at 15% as per the provisions of Article 12 of the DTAA between Indian and the USA.

5. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) considered the issue and held as under:-

"I have carefully considered the above submissions, and the contentions of the assessee. I have also perused the assessment order and the orders of the Hon'ble ITAT and the Hon'ble Delhi High Court for the A.Y.rs. 1995-96 to 2000-01 in the assessee's own case. The issue of taxability of the assessee's income from hotel related services provided to hotels in India, as royalty / fees for technical services, stands squarely covered by the judgement of the ITAT, Delhi at ITA Nos. 50 to 55/Del/2006 dated 4.10.2006. It is also observed that the appeals of the Revenue have been dismissed by the Delhi High Court's order dated 30.1.2009, wherein the learned Court held that the Tribunal had rightly concluded that the payments received were in the nature of business income, and not in nature of royalty or fees for technical services. It was accepted that the assessee did not have a permanent establishment in India, and hence the business income could not be brought to tax under Article 7 of the India-USA DTAA. Moreover, no question of law had arisen for their consideration, as these are findings of fact by the tribunal. Therefore, respectfully following the orders of the higher judicial authorities, the bringing to tax of the business receipts of the assessee in India, is deleted."

6. Against the above order the Revenue is in appeal before us.

7. We have heard the rival contentions in light of the material produced and precedents relied upon. Ld. counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of this tribunal dated 4.10.2006 Sheraton International Inc. v. Dy. DIT [2007] 107 ITD 120 /[2006] 10 SOT 542 (Delhi). Revenue appealed against the ITAT order, has been dismissed by the Hon'ble Jurisdictional High Court vide order dated 30.1.2009 in DIT v. Sheraton International Inc. [2009] 313 ITR 267/ 178 Taxman 84 (Delhi).

7.1 Ld. Departmental Representative could not controvert the submissions of the ld. counsel of the assessee.

7.2 Respectfully following the above precedents from the Hon'ble Jurisdictional High Court and the order of the ITAT, we uphold the order of the Ld. Commissioner of Income Tax (Appeals) and decide the issue in favour of the assessee.

8. In the result, both the appeals filed by the Revenue stand dismissed.