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of <h1>Assessee's Income Not Taxable in India: Tribunal Rules No Permanent Establishment</h1> <h3>Abacus International Pte Ltd. Versus The Asst. Director of Income-tax, Mumbai</h3> Abacus International Pte Ltd. Versus The Asst. Director of Income-tax, Mumbai - TMI Issues Involved:1. Business connection/Permanent Establishment (PE) in India.2. Attribution of income to the PE.3. Reopening of assessments for AY 2001-02 and 2002-03.Summary:1. Business Connection/Permanent Establishment (PE) in India:The primary issue was whether the assessee, a Singapore-incorporated company engaged in airline reservations through a computerized reservation system (CRS), had a business connection or PE in India. The assessee argued that it did not have a PE in India, as the CRS operations were conducted outside India, and only marketing activities were performed by its wholly-owned subsidiary, Abacus Distribution System (India) Ltd. (ADSIL). However, the AO and CIT(A) concluded that the assessee had a business connection and PE in India through ADSIL, which provided computer hardware and software to travel agents and executed contracts on behalf of the assessee.2. Attribution of Income to the PE:The assessee contended that even if it had a PE in India, only a minimal portion of income could be attributed to it. The assessee relied on the case of Galileo International Inc. Vs DCIT, where only 15% of revenue was attributed to operations in India. The Tribunal agreed with the assessee, noting that the functions performed in India were minimal and that the payment to ADSIL (25% of gross receipts) exceeded the 15% threshold. Therefore, no additional income was attributable to the PE in India.3. Reopening of Assessments for AY 2001-02 and 2002-03:The assessee also challenged the reopening of assessments for AY 2001-02 and 2002-03. However, since the appeals were decided in favor of the assessee on merits, the Tribunal did not address the issue of reopening the assessments.Conclusion:The Tribunal held that only 15% of gross receipts could be attributed to operations in India, and since the assessee had already incurred expenditure at 25% of gross receipts on account of payments to ADSIL, there was no income taxable in India. Consequently, the appeals of the assessee were allowed.
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