2022 (9) TMI 311 - HC - Income Tax

Court Upholds ITAT Decision on PE Revenue Attribution, Emphasizes Factual Analysis

The Commissioner Of Income Tax – International Taxation -2 Versus Travelport L.P. USA

The court upheld the ITAT decision attributing 15% of revenue to the assessee's Permanent Establishment (PE) in India, emphasizing factual analysis and ... Income attributable to the assessee's PE in India - Deployment of assets in India - ITAT holding that only 15% of the revenue is attributable to the assessee's PE in India applying the ratio of Galileo International Inc [2009 (2) TMI 497 - DELHI HIGH COURT] - HELD THAT:- ITAT and CIT(A) have held that out of several activities, the activities of Calleo Distribution Technologies Private Limited in India were only in respect of generating request and receiving end-result of the process. In other words, the computers at the desk of the travel agent in India were merely connected to the extent that they could perform a booking function but were not capable of processing the data of all the airlines together at once place. The ITAT also held that the Assessee has not deployed any assets in India. ITAT in the present case not only relied upon the judgment of this Court in Galileo International (Supra) but also relied on the judgment of its Coordinate Bench in Amadeus Global Travel I Distribution S.A. [2007 (11) TMI 330 - ITAT DELHI-B] ITAT held that the present case was similar to that of Galileo International (Supra) and that the CIT(A) rightly attributed 15% of the revenue to the Respondent’s PE in India. In fact, the Appellant has not brought on record anything which differentiates the facts of this case with that of Galileo International (Supra). No substantial question of law. Issues:1. Challenge to ITAT order regarding attribution of revenue to the assessee's Permanent Establishment (PE) in India.2. Determination of taxable income generated from India.3. Comparison of facts in the current case with legal precedents.4. Assessment of activities conducted in India by the assessee.Analysis:Issue 1: The Appellant challenged the ITAT order, arguing that the Tribunal erred in attributing only 15% of the revenue to the assessee's PE in India. The Appellant contended that the ITAT failed to recognize that substantial business activities were conducted in India, warranting the taxation of the entire booking fees generated from India.Issue 2: The ITAT determined the attribution of income to India based on the absence of specific guidelines, relying on facts and judicial precedents. It was found that the activities of the assessee in India were limited to generating requests and receiving end-results, with no deployment of assets in India for processing data of all airlines collectively.Issue 3: The ITAT referenced the judgment in Galileo International and Amadeus Global Travel Distribution to support its decision, emphasizing the similarity of the present case to Galileo International. The Appellant failed to demonstrate any significant factual differences between the cases to warrant a different outcome.Issue 4: The ITAT concluded that the facts of the current case aligned with Galileo International, leading to the attribution of 15% of revenue to the assessee's PE in India. As no substantial question of law was identified, the appeal was dismissed, with a directive to evaluate subsequent assessment years independently based on their merits.In summary, the judgment upheld the ITAT decision regarding the attribution of revenue to the assessee's PE in India, emphasizing the importance of factual analysis and legal precedents in such determinations. The Court clarified its inability to comment on subsequent assessment years but directed independent evaluations based on individual merits.