TaxTMI 
TaxTMI 
2010 (10) TMI 1178
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....ss profits and thereafter subsequently reducing it with deduction of expenses paid to the agent. This attribution of revenue @ 15% of business connection/permanent establishment, then allowing the deduction of expenses of 33% of revenue as payment to agent, will lead to artificial computation of loss on perpetual basis, which is against the actual facts, wherein, assessee had itself computed profit. 3. On the facts and in the circumstances of the case, the ld.CIT(A) has grossly erred in law and on facts in not appreciating the facts correctly by stating that there was no dispute regarding the allowability of payment to interglobe as expenses while computing income of the appellant. The ld.CIT(A) had not appreciated the facts correctly that the Assessing Officer has allowed deduction of payment made to agent as expenses out of the total receipts from booking made in India. Whereas, ld.CIT(A) allowed deduction for payments to agent against the 15% of the revenue. This resulted into mismatch of receipts and expense. 4. On the facts and in the circumstances of the case, the ld.CIT(A) has grossly erred in law and on facts in not attributing any income to the fixed place permanent es....
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....ned AR that the decision of CIT(A) is based on the earlier decision of ITAT in the case of assessee in respect of earlier assessment years and thus, it was pleaded that all the issues raised by the department and the assessee in their respective appeals and cross-objections are covered by the earlier decision of the ITAT in assessee's own case. It was pointed out that the said decision of the Tribunal is since under the name of Amadeus Global Travel Distribution S.A. v. Dy. CIT [2008] 113 TTJ (Delhi) 767. 4. It was pointed out that the Revenue has raised only one issue which is regarding attribution of income arising to assessee as per provisions of Section 9(1)(i) of the Act and Article 7 of Indo-Spain DTAA. Grievance of the Revenue in the present appeal is that CIT(A) has wrongly attributed only 15% of revenue as income arising in India and for holding so, he has wrongly appreciated the provisions of Circular 23 of 1969 and has wrongly appreciated the decision of Hon'ble Supreme Court in the case of DIT, International Taxation v. Morgan Stanley & Co. [2007] 292 ITR 416/162 Taxman 165. 5. It was pointed out by the learned AR that the ITAT while rendering the decision reg....
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....d that too on the basis of neutral display real time on-line takes place outside India. The computers at the desk of travel agent in India are merely connected or configured to the extent that they can perform a booking function but are not capable of processing the data of all the airlines together at one place. Such function requires huge investment and huge capacity, which is not available to the computers installed at the desk of subscriber in India. The major part of the work or to say a lion's share of such activity is processed at the host computer in Erding in Germany. The activities in India are only minuscule portion. The appellant's computer in Germany is also responsible for all other functions like keeping data of the booking made worldwide and also keeping track of all the airlines/hotels worldwide who have entered into PCA. Though no guidelines are available as to how much should be income reasonably attributable to the operations carried out in India, the same has to be determined on the factual situation prevailing in each case. However, broadly to determine such attribution one has to look into the factors like functions performed, assets used and risk und....
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....only if the income is arising directly or indirectly through or from any business connection in India, can be taxed in India. The expression 'business connection' was earlier not defined in the Act. The Finance Act, 2003 w.e.f. 1st April, 2004 i.e. as applicable to asst. yr. 2004-05 and onwards has inserted two new Explanations to cl.(i) of s. 9(1) clarifying that expression 'business connection' will include a person acting on behalf of non resident and who carried on certain activities. However, for the purpose of our present discussion, the amended provisions have no relevance as the same are w.e.f. asst. yr. 2004-05 onwards. Since these appeals are for the years prior thereto, we shall discuss only the unamended provisions. The expression 'business connection' has a wide though uncertain meaning. It admits of no precise definition and the solution to the question must depend upon the particular facts of each case. Even the amended definition will not determine as to what constitutes business connection as the same is not an exhaustive definition but is a definition which also includes some of the activities to be termed as business connection. We shall, ....
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....39;ble Bombay High Court in the case of Blue Star Engineering Co. (Bombay) (P.) Ltd. v. CIT(1969) 73 ITR 283 (Bom) at p. 291, after referring to the decision of R.D. Aggarwal & Co. (supra) held as under: "It would thus be seen that in order to constitute a 'business connection' as contemplated by s.42, there must be an activity of the non-resident and contributing to the earning of profits by the non-resident in his business. The business connection must undoubtedly be a commercial connection but all commercial connections will not necessarily constitute business connection within the meaning of the concept unless the commercial connection is really and intimately connected with the business activity of the non-resident in the taxable territories and is contributory to the earning of profits in the said trading activity." 17.2 In the light of the above provisions of the IT Act and the judicial pronouncements, we may appreciate the facts and deal within the issue. The appellant has developed a fully automatic reservation and distribution system known as Amadeus system with ability to perform comprehensive information, communication, reservation, ticketing distribution an....