Tribunal's Decision Upheld: 15% Revenue Attributed to India

DIRECTOR OF INCOME TAX, NEW DELHI Versus TRAVELPORT INC.

DIRECTOR OF INCOME TAX, NEW DELHI Versus TRAVELPORT INC. - [2023] 454 ITR 289 (SC) Issues involved:
The judgment deals with the issues of taxation of income earned by a business providing electronic global distribution services through a Computerized Reservation System (CRS) in India, attribution of income accruing in India, and the existence of a Permanent Establishment (PE) in India.

Taxation of Income:
The appeals by the Revenue were against orders dismissing appeals filed against Income Tax Appellate Tribunal orders. The respondents provide CRS services and earn USD 3/EURO 3 per booking in India, paying a portion to Indian entities. The Assessing Officers concluded the entire income earned abroad is taxable. The Tribunal found the respondents had a PE in India and attributed 15% of the revenue to India, which was already paid to Indian entities, thus no further income was taxable.

Attribution of Income:
The Tribunal's attribution of 15% of revenue to India based on Functions performed, assets used, and risks undertaken (FAR) was deemed fair and reasonable. The Commission paid to distribution agents exceeded the attributed income, thus no further income was taxable in India. The Tribunal and High Court's concurrent findings on the attribution of income were upheld.

Permanent Establishment (PE):
The Revenue argued for a fixed place PE in India due to hardware installed at travel agents' premises. However, the Tribunal and High Court's approach on attribution was considered reasonable. The judgment did not delve into the PE issue as the attribution of income was found to be fair and no interference was warranted.

Conclusion:
The High Court's orders were upheld as reasonable, and the Revenue's appeals were dismissed. The judgment clarified that only income attributable to operations in India is taxable under Section 9(1) of the Income Tax Act, rather than the entire income earned abroad. The judgment did not address the PE issue further, as the attribution of income was found to be appropriate.