TaxTMI 
TaxTMI 
2004 (11) TMI 290
X X X X Extracts X X X X
X X X X Extracts X X X X
....as stated in writing that AXESS was on Japan Airlines. (ii) the agreement for providing CRS facility has been entered into between Japan Airlines and other Airlines inIndia. (iii) the payment for the CRS booking fees is received by Japan Airlines through IATA Clearance House." 2. The assessee is a non-resident company operating airline services world-wide. On21st Dec., 1998, a notice was issued to the company asking it to submit the name of the reservation system used by it with the name of the company owning it. It was also asked that in case the assessee-company did not own the system, (to clarify regarding) the total amount paid by the head office to the CRS company yearwise for the last five years. In response to this notice, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The software was meant for the purpose of ticket booking by the various airlines and the travel agents. The AO then referred to certain clauses of the agreement. As per the agreement, the assessee was to maintain and operate the AXESS system and provide standard functionalities specified in the schedule to the agreement. The assessee was also to provide neutral flight availability display to all AXESS subscribers. 3. The AO referred to cl. 12.2 of the agreement to take note of the fact that the title and full and complete ownership rights to all software utilised by AXESS system was to remand with the assessee. The participant's licence was non-exclusive, non-transferable and was limited to the right to use such software during the terms....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to its subsidiaries AXESS International Net Ink w.e.f. 1st April, 1994. The CIT(A) took note of the declarations made by the Director (Accounting), that the assessee never received any revenues from bookings made on CRS through terminals inIndiaand also took note of the communication sent out by the assessee to various airlines informing them that w.e.f.1st April, 1994, the AXESS Airlines Participation agreement was assigned to AXESS. From these facts, CIT(A) came to the conclusion that the CRS did not belong to the assessee w.e.f.1st April, 1994. It was also observed that the assignment of CRS to AXESS by the assessee was not found to be sham or that it was done to avoid or evade payment of tax inIndia. It was further held that the payment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was stated that it was one of the several systems used by various airlines for air ticket booking through computers by using a specific software. AXESS was stated to be one such software like the others being Amadeus, Abacus, Galileo, Sabre etc. It was submitted that the assessee uses AXESS system only. Upto 31st March, 1994, this system was owned by the assessee itself. However, w.e.f.1st April, 1994, the system was assigned over by the assessee to its subsidiary company known as AXESS International Network Inc. which is also incorporated inJapan. With this assignment, all the existing agreements also stood assigned to the said subsidiary. Therefore, it was contended that if at all there was any accrual of income, it was to the subsidiary ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has entered into any contract with any of the companies owning reservation systems other than AXESS. Now, as mentioned earlier, the assessee itself was earlier owning the AXESS system. Presently, it was owned by its own subsidiary AXESS International Network Inc. The system was installed in the offices of the assessee. On account of these factors, though the assessee did not own the AXESS system, it did have a sense of belonging, particularly when viewed vis-a-vis other systems. It was in this background that the assessee replied to the above communication of the AO stating that it had not entered into any contracts with Amadeus, Abacus etc. but was using its own system AXESS. While replying in this manner, the assessee did not realis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ices to the assessee, the AO was not aware of the assignment and in the initial correspondence, the assessee could not categorically convey the changed situation to the AO on account of misunderstanding as mentioned earlier. Nonetheless, fact remains that the AXESS system is not owned by the assessee since1st April, 1994and hence any income arising from the use of the said system cannot accrue to it. A question, however, may arise as to why is the system installed in the office of JAL and why payment is made through JAL by the user of the system. Well, the reply is quite simple. As mentioned earlier, prior to1st April, 1994, the system was owned by JAL and obviously the system was installed in its office. Subsequent to the assignment w.e.f.....