TaxTMI 
TaxTMI 
2012 (7) TMI 277
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....to the PE in India to 15% only and not appreciating the finding of the Assessing Officer that major part of the business activity of the assessee leading to generation of profits is attributable to the assessee's PE in India thereby attributing 75% of the profits to the PE of the assessee in India. 2. The appellant craves to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal. 2. The assessee has taken 14 grounds of cross objections. The grounds of cross objections filed are more or so same in each year. For the sake of convenience, the cross objections taken for the assessment year 2003-04 are reproduced below. Invalid Assessment: 1.1. At the outset, the Respondent prays that the assumption of jurisdiction by the Assistant Commissioner of Income-tax, (International Taxation) - Circle 19(1), Bangalore ('the ld. ACIT'), under section 148 the Act, was illegal, invalid, null and void, as the jurisdictional conditions precedent for a valid assumption of jurisdiction under section 148 were not fulfilled, and the Hon'ble CIT (A) has erred in holding the said order to be valid. 1.2. The Respondent prays that the Id. ACIT has err....
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.... the Respondent in India has habitually exercised and is authorised to conclude contracts on behalf of the Respondent; and the distributor company of the Respondent in India habitually secures orders wholly for the Respondent. The ld. ACIT and the Hon'ble CIT (A) ought to have held that the distributor company in India is not an agent of the Respondent. In view of the above, the ld. ACIT and the Hon'ble CIT(A) ought to have held that the Respondent did not have a PE in India, and hence was not subject to tax in India. 3.5. On the facts and in the circumstances of the case and in law, the Id. ACIT has erred and the Hon'ble CIT(A) has further erred in holding that the Respondent's income is chargeable to tax in India under the provisions of DTAA. 3.6. The Hon'ble CIT(A) has erred in holding that the Respondent has a PE in India for the reasons stated in the order of the Hon' ble ITAT in the case of Galileo International Inc ("GlI") for A Y 1995-96 to 1998-99, and the assessment order passed in case of the Respondent for previous assessment years. 4. Taxable income I Attribution of income 4.1. Without prejudice to grounds of cross - objections in point nos. 1, 2 and 3 a....
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....rred in their interpretation of the agreement between the Respondent and the distributor company. 8. Denial of allegations 8.1. The Respondent denies each and every allegation and statement made by the Id. ACIT, in the order passed under section 143(3), read with section 148, of the Act and upheld by Hon'ble CIT(A) in order passed under section 250 of the Act, unless the same is specifically admitted by the Respondent or is otherwise borne out by the record. 8.2. Without prejudice to the generality of the above, the Respondent denies the following, amongst other, incorrect allegations of the Id. ACIT and/or the Hon'ble CIT(A): that the Respondent has a branch in India; that the Respondent's operations, in India, are carried out from a large computer facility located at Denver, Colorado, USA; that the computer of the travel agents becomes an extension of the Respondent's main-frame computer; that the Respondent had undertaken to provide all computer hardware and software to the travel agents; that the contract between the passenger and the Airline is entered into in India; that the issue of allowability of expenses has been examined at length In the Respon....
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....ove functions in respect of hotel, car and other travel related services apart from air services. 4. For this purpose, the appellant maintained a large computer facility at Denver Colorado in the USA. The data regarding availability of airline seat, hotel rooms and cars and the fares/tariffs thereof is fed in to this computer. Travel Agents and other persons who wish to make airline/hotel/car bookings communicate their requirements on line to the appellant's above computer system which on the basis of data contained therein provides them with information regarding possible itineraries, availability of seats, rooms, fares etc. and ultimately enables a person to make a booking. The appellant has an exclusive distributor in India; M/s Galileo India Pvt. Ltd. (Galileo India) negotiates and enter into contracts with various India Travel Agents who wish to be connected to the appellant's computer reservation system (CRS) and provides them connectivity with the same. The appellant pays fees to Galileo India for acting as an distributor. For each completed booking, the appellant receives Euro 3 and it pays to the distributor Euro 1. 5. For assessment years 2003-04 to 2006-07, the ass....
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....ng that it has business connection in India no income accrues or arose through or from the business connection alleged by the Assessing Officer. 2. That no part of the operation of the business of the appellant is carried out in India and therefore no part of income is taxable in India under the provisions of the Act. 3. That it did not have a fixed place in India under DTAA as it did not satisfy three tests vis-a-vis place of business test; right to use and business activity test) required for a fixed place PE. 4. That it did not have any agency PE within India within the meaning of article 5(1) of DTAA as the distributor did not carry out any of the activities specified in clauses (a), (c) of article 5(4) of DTAA on behalf of the appellant. 5. That distributor carried on its own business in India and was not dependent on the appellant for its business in India. 6. That activities of the alleged PE if any were only of a prepatory character and the appellant did not carry on any business in India whether through the alleged PE or otherwise. 7. That appellant merely provided information for facilitating transactions of booking tickets at the request of passengers t....
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....tion 9(1)(i) income from booking made from India and income from such operation have deemed to accrue or arise to the appellant in India. Keeping in view the facts of the appellant's case for the years under consideration and the FAR analysis carried out in its study by Hon'ble ITAT for assessment years 1995-96 to 1998-99, 15% of the revenue accruing or arisen to it in India is held as a reasonable attribution as income accruing or arisen to the appellant in India and chargeable u/s 5(2) read with section 9(1)(i) of the Act. Hon'ble ITAT while holding that remuneration paid by the appellant to Galileo India for the functions performed in India being more than the income attributable to the appellant extinguished its liability to tax in India. The computers their configuration and connectivity provided by the appellant to subscribers in India either directly or through its agents amount to operating part of its CRS system and constitute the appellant's fixed placed PE within the meaning of apart from it of article 5 of DTAA. M/s Galileo India is a dependent agent of appellant who has habitually exercise the authority to conclude contracts on behalf of the appellant and t....
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....ted 21.11.2008 on which Ld AR had put his reliance during appellate proceedings. Ld DR further brought to our notice that on the assessee's appeal against this order of Tribunal, the Hon'ble Delhi High Court vide judgment in I.T.A. No.1040 of 2009 dated 24.1.2011 did not interfere, therefore, order of Hon'ble Tribunal became final. He argued that since this order and further confirmation by Hon'ble High Court had come after the Hon'ble High Court judgment in assessee's case (which was on 25.2.2009) the latter should be considered. 14. The ld AR, on the other hand, argued that the matter stands settled as Hon'ble Delhi High Court had not intervened in the ITAT order relating to assessment years 1995-96 to 1998-99 relating to assessee's own case and the subject matter for the assessment years 2003-04 to 2006-07 are similar to the facts of assessment year 1995- 96 to 1998-99. Regarding contention of Ld DR that this methodology of allocating revenue to PE in India would incur guaranteed losses, the Ld AR argued that this point has already been clarified vide misc. petition No,108/Del/2008 filed by the Income Tax Department in the earlier years i.e. assessment years 1995-96 to 1998-9....
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....ure of things be great precision and exactness in the matter. As long as the proportion fixed by the Tribunal is based upon the relevant material it should not be disturbed." We, therefore, are of opinion that no question of law arises in these matters which needs any further determination by this court. 17. In the other case of Amadius IT Group similar controversy has arisen and Ld AR had relied upon the ITAT order in the case of M/s Galileo International (the assessee in the present case) in I.T.A. No.,108/Del/ dated 21.11.2008. However, the Hon'ble Tribunal had rejected the claim of the assessee and had referred back the matter to the file of Assessing Officer for fresh adjudication. The relevant paragraph of Hon'ble Tribunal is reproduced below:- "Apropos the other issue i.e. estimate about the expenditure of profits of PE in India we are unable to accept the contentions of ld counsels that the issue is covered in its favour inasmuch as, the Tribunal gave above decision on the peculiar facts of that year. Looking at globalization the share of Indian travellers in terms of booking has increased considerably. Besides the extent of assessee's expenses is not known which h....