TaxTMI 
TaxTMI 
2013 (8) TMI 138
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....imary business is to make airline reservations for and on behalf of the participating airlines. For this purpose, it uses the CRS. Participating airlines provide necessary information which is displayed to the travel agents throughout the world so that they can guide their customers who make the necessary requests through the CRS. The assessee licensed a right to market the CRS to a company in each of the Asia Pacific countries, known as National Marketing Company (NMC). Each NMC, in turn, markets the CRS directly to the travel agents in the country of its incorporation. For each booking made, the NMC is paid certain commission by the assessee. Abacus Distribution Systems (India) Ltd (ADSIL) is a company incorporated in India and is the NMC of the assessee in India. ADSIL is wholly owned subsidiary of the assessee. The assessee filed its return declaring total income of Rs.88,660. During the course of the assessment proceedings, it was noticed that the assessee received total payment of Rs.27.49 crores from its activity of providing airline reservations in India, which was not offered for taxation. On being called upon to explain the reasons for this, the assessee stated that it di....
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....hould be attributed as income accruing or arising in India and since 25% of the receipts were paid to ADSIL in India as marketing fees, there was no income chargeable to tax. In reaching this conclusion, the Tribunal relied on an order passed by the Delhi Bench of the Tribunal in the case of Galileo International Inc. v. DCIT, 116 ITD 1. It is noticed that the said order passed by the Delhi Bench of the Tribunal came up for consideration before the Hon'ble Delhi High Court in DIT v. Galileo International Corporation 2009 TIOL-161-HC(Del)-IT. The Hon'ble Delhi High Court dismissed the appeal filed by the Revenue by holding that no question of law arose from the order, thereby affirming the view of the Tribunal. The facts and circumstances for the year under consideration are admittedly similar to those of the preceding years already decided by the tribunal. There is nothing on record to indicate that this order of the tribunal has been overruled or modified in any manner by the Hon'ble Bombay High Court. Respectfully following the precedent, we hold that 15% of the gross revenue should be taken as income accruing or arising to the assessee in India, subject to deduction of marketing....
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.... on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution (including an insurance company); (b) 15 per cent. of the gross amount of the interest in all other cases. (3)** ** ** 11. The assessee is a resident of Singapore. A bare perusal of this article from that perspective divulges that the interest arising in India and paid to a resident of Singapore may be taxed in Singapore. However, such interest may also be taxed in India. It is not the case of the assessee that it falls under clause (a) of Para 2 of Article-11 of the DTAA. Clause (b) provides for the rate of tax at 15% of the gross amount. 12. It would be befitting to consider the mandate of Article 24 of the DTAA, which has been invoked by the AO for denying the benefit of a lower rate of tax as per Article 11. The relevant part of Article-24 of the DTAA is as under: "Article 24 Limitation of relief &n....
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.... a pertinent query, the ld AR could not lead any direct evidence to show that such amount was received in Singapore. 14. We are not persuaded to accept the assessee's contention of drawing an inference in favour of the assessee. It is palpable that the basic condition for availing the benefit extended by Article-11 of the DTAA is that the income must have been remitted to or received in Singapore. Unless it is positively shown that the income was received in Singapore, the benefit of Article-11 cannot be made available. The effect of acceptance of the submission of the ld AR would lead to making the Article 24 redundant and putting an unending burden on the Revenue to prove the negative, the positive of which is otherwise required to be established by the assessee. The requirement of Article 24, in the present context, is that the assessee must have received the interest income in Singapore. The relevant facts for proving this lie in the domain of the assessee alone. Simply not having a bank account in India does not mean that the amount was received in Singapore. The requirement of Article 24 is to receive the amount of interest in Singapore, which can't be established by provi....
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....(A) admitted such additional evidence on receipt of remand report from the AO. Thereafter, he proceeded to examine the nature of the amount. He noticed that the line charges and installation charges were expenses incurred for connectivity provided by the SITA, a third party, to the assessee. He therefore, held that such amount could not be considered as "fees for technical services" as per Article-12 of the DTAA as no technical knowledge, experienced skills etc., was made available by the assessee to ADSIL. It was seen that line charges of Rs.1.18 crores and installation of Rs.16.29 lakhs were supported by the debit notes raised by the assessee on ADSIL which were backed by the third party vouchers of SITA to whom the assessee had made such payments. As regards the service charges of Rs.25.88 lakhs and other expenses of Rs.12.45 lakhs, the ld CIT (A) noted that these were the amounts not supported by any evidence in the form of third party vouchers except the debit notes sent by the assessee to the ADSIL. From the vouchers of other expenses, it was found that these were in respect of "Marketing fees" and "Advertisement". These debit notes did not show that the actual expenditure wa....
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....ndia on account of the appellant having a PE in India". Following the view taken by him qua the estimation of income @ 10% of total receipts attributable to all the Indian operations amounting to Rs.27.49 crores, the ld CIT (A) held that the : "AO is directed to tax the said receipts of the appellant (which are called reimbursement) by the appellant as business income by applying the same rate as applied by the AO for all other receipts of the appellant". The assessee is aggrieved against the view convessed by the CIT (A) on this issue. 18. We have heard the rival contentions and perused the relevant material on record. At the very outset, we want to make it clear that the Revenue has not preferred any appeal against the impugned order. Thus, the view point of the AO for taxing the said amount as 'Fees for technical services' covered u/s 9(1)(vii) of the Act does not require any further evaluation. We need to examine as to whether the amount so received from ADSIL is in the nature of 'Business income' liable to tax or 'reimbursement of expenses' not needing any inclusion in the total income. 19. It has been elaborately discussed in the impugned order that the ADSIL was simply....
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....estion as to whether it is 'Reimbursement of expenses' or 'Business income'. As we have held supra that the amount is not in the nature of reimbursement of expenses, we are refraining ourselves from rendering any positive conclusion on the nature of amount except for holding that it is 'Business income' arising from operations in India. 21. Now let us evaluate the consequence of our decision jettisoning the point of view of the assessee that the amount should be taken as reimbursement of expenses. In this situation, the decision of the ld. CIT(A) shall become final directing the AO to tax the said receipts of the appellant as business income by applying the same rate as applied by the AO for all other receipts of the appellant. 22. Explanation 1 to section 9(1) clarifies that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. While following the view adopted by the tribunal in earlier years, we have held in relation to the first issue in this appeal that 15% ....