Tribunal directs Assessing Officer to verify international income for tax determination

The Tribunal directed the Assessing Officer to verify the collection of membership dues outside India to determine taxability. The Tribunal also instructed verification of the claim that ICH services were provided outside India for taxability of ICH facility fees. Regarding BSP Link charges, if collected without markup, they should not be taxed. The Tribunal emphasized attributing income to the Permanent Establishment based on its role in generating income. The order was recalled for fresh adjudication on taxability issues, and the case was scheduled for a hearing on 30.09.2021.

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Issues Involved:
1. Taxability of membership fees.
2. Taxability of fees for IATA Clearing House Facility (ICH facility).
3. Taxability of BSP Link charges.
4. Principle of mutuality.
5. Attribution of income to Permanent Establishment (PE).

Detailed Analysis:

1. Taxability of Membership Fees:
The assessee contended that membership fees collected by IATA Canada should not be taxed in India as they are independent of the BSP activities undertaken by the Indian branch. The Tribunal observed that the assessee failed to demonstrate that the activities related to the collection of membership dues were conducted outside India. The Tribunal directed the Assessing Officer (A.O) to verify if the collection of membership dues was carried out directly outside India. If verified, the addition made by the A.O would be vacated. The Tribunal's decision was based on the principle that only the portion of profits attributable to the PE in India is taxable in India.

2. Taxability of Fees for IATA Clearing House Facility (ICH Facility):
The assessee argued that the ICH facility fees should not be taxed in India as the services were provided and fees received outside India. The Tribunal noted that the A.O/Dispute Resolution Panel (DRP) did not accept this claim due to a lack of evidence. The Tribunal, referring to the Supreme Court judgment in Ishikawajima Harima Heavy Industries Co. Ltd. Vs. DIT, held that only profits attributable to the PE’s role in India are taxable. The Tribunal restored the matter to the A.O for verification of the assessee's claim that ICH services were provided directly outside India.

3. Taxability of BSP Link Charges:
The assessee claimed that BSP Link charges collected for onward payment to Accelya World SLU, Spain, without any markup, should not be taxed as they are reimbursements. The Tribunal agreed that if the charges were collected without any markup, they should not be taxed as business income. The Tribunal directed the A.O to verify this claim and delete the addition if found correct.

4. Principle of Mutuality:
The assessee argued that the revenues from membership fees, ICH facility fees, and BSP Link charges should not be taxed based on the principle of mutuality. The Tribunal noted that the A.O/DRP rejected the mutuality claim as the assessee did not satisfy the requisite conditions. The Tribunal did not specifically adjudicate on this principle but focused on the attribution of income to the PE.

5. Attribution of Income to Permanent Establishment (PE):
The Tribunal emphasized that the income attributable to a PE in India should be based on the extent of the role played by the PE in generating that income. The Tribunal referred to the Supreme Court's judgment in Ishikawajima Harima Heavy Industries Co. Ltd. Vs. DIT, which limits the tax on business profits to those arising from the operations of the PE. The Tribunal restored the matters to the A.O for verification of the claims regarding the role of the PE in the respective transactions.

Conclusion:
The Tribunal found that its previous order failed to address the specific contentions raised by the assessee regarding the taxability of membership fees, ICH facility fees, and BSP Link charges. The order was recalled for fresh adjudication on these issues, and the matter was restored to the A.O for verification of the claims. The application filed by the assessee was allowed, and the case was scheduled for a hearing on 30.09.2021.

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