TaxTMI 
TaxTMI 
TaxTMI 
2009 (2) TMI 497
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....siness, namely the passenger or the traveller, the travel agents, Interglobe, i.e., respondent's agent in India, Sita and other travel agencies, the respondent herein and the airlines. In this behalf, the respondent has entered into an agreement with various participants known as the participating carrier agreement. It has also entered into a separate agreement known as distribution agreement dated April 25, 1995, with Interglobe Enterprises Limited (Interglobe) for the services rendered by Interglobe. Under the said agreement, the respondent is paying Euro 1 for each booking to the said Interglobe from the airlines etc. with whom the respondent has participating carrier agreement, the respondent is paid Euro 3 for each booking. 4. The dispute has arisen about the assessment of its income generated in India. The Income-tax Officer as well as the Commissioner of Income-tax (Appeals) held that a part of the income is generated in India and is there-fore taxable herein. The respondent filed appeals against those orders and the Income-tax Appellate Tribunal has decided these appeals in favour of the respondent, vide the impugned judgment dated November 30, 2007. These appeals a....
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.... to mention that the Tribunal has returned the findings of fact that the respondent has its permanent establishment in India and in this behalf the following findings are returned : "In the present case it is seen that the CRS, which is the source of revenue is partially existent in the machines namely various computers installed at the premises of the subscribers. In some cases, the appellant itself has placed those computers and in all the cases the connectivity in the form of nodes leased from SITA are installed by the appellant through its agent. The computers so connected and configured which can perform the function of reservation and ticketing is a part and parcel of the entire CRS. The computers so installed require further approval from the appellant/Interglobe who allows the use of such computers for reservation and ticketing. With-out the authority of the appellant such computers are not capable of performing the reservation and ticketing part of the CRS system. The computer so installed cannot be shifted from one place to another even within the premises of the subscriber, leave apart the shifting of such computer from one person to another. Thus, the appellant ....
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....he impugned judgment wherein the question is formulated in the following manner : "The next question, therefore, arises is whether having held that there is business connection in India, how much income is chargeable to tax in India." 12. The Tribunal thereafter discussed the principle which is to be followed in apportioning the income accruing in India and the income accruing outside India. The Tribunal found that only a part of CRS order operates and functions in India. The extent of working in India is only to the extent of channelizing the request and receiving the result of the process in India and the major functioning and collecting the data base of various airlines and hotels which have entered into PCA with the respondent takes place out-side India. The Tribunal also took into consideration the fact that the computer of Denver at the USA processes various data like schedule of flights, timings, pricing, the availability, connection, meal preference, special facility, etc. and that too on the basis of neutral display real time on line takes place outside India. In so far as the role played in India is concerned, that is limited to the computers at the desk w....
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....e Tribunal was to first arrive at the figure relating to the revenue generated in India and abroad. It concluded that out of the revenue accrued to the respondent in respect of these bookings 15 per cent. thereof should be attributed to India, keeping in view a very minor portion of the activity being carried out here. 14.Thereafter, the Tribunal, having regard to the provision of the Double Taxation Avoidance Agreement (DTAA) and Circular No. 23, focused its discussion to the relevant consideration namely how much out of the aforesaid would be attributable "profits". The Tribunal was clearly conscious of this which is manifest from the fact that before discussing this aspect it formulated the question as under : "Next question to be decided if it is found that income accruing in India is concerned by payment made to the agent in India, whether any income is still left to be taxed in India." 15. Two things clearly follow from the above : (i) The Tribunal was now addressing itself to the issue of profits. (ii) While giving the finding of fact that 15 per cent. of the revenue can be attributed to the activities in India, the Tribunal had not ta....
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....the assessment of the amount of profits, allowance will be made for the expenses incurred, including the agent's commission, in making the sales. If the agent's commission fully represents the value of the profit attributable to his service ; it should prima facie extinguish the assessment." 21. The emphasis was on condition No. 1 which mentions that "Nonresi-dent principal's business activities in India are wholly channelled through its agent". Learned counsel submitted that the respondent's activities in India were not channelled through its agent and in fact some of the activities were directly carried out by the respondent, as per the finding of the fact arrived at by the Tribunal itself. 22. As pointed out above, the aforesaid sub-paragraph (c) which is titled as "Sales by a non-resident to Indian customer either directly or through agents". It is thus these sales by non-resident i.e. the respondent herein to Indian customer either directly or through agent which are to be taxed in the manner stipulated in the circular. The question that would fall for consideration in these circumstances is as to whether the commission paid to the agent in India is to be deduc....