2009 (7) TMI 1341

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....ully. We find that the grounds of appeals taken by the assessee as well as revenue in all the assessment years of their respective appeals are verbatim same. For the facility of reference, we are taking cognizance of the assessee's grounds of appeal in ITA No.2311/Del/08 in assessment year 1999-00 which read as under: "1. That on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in holding that the appellant exposes 'Business Connection' in India under sec. 9(1)(i) of the Income-tax Act, 1961. 2. That on the facts and in the circumstances of the case and internationally accepted tax principles, the learned CIT(Appeals) has erred in holding that the appellant exposes Permanent Establishment ("PE") in India under Article 5 of the India-US Double Tax Avoidance Agreement ("DTAA"). 2.1 That on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has grossly erred in holding that the appellant has fixed place PE in India in terms of computer, software, printer, network and telecommunication equipment installed at the premises of subscribers in India. 2.2 That on the ....

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....ct. 7. The appellant craves leave to alter, amend, modify, amplify or withdraw any or all the above grounds of appeal, or add any farther grounds, before or at the time of hearing". 4. Similarly, we take cognizance of the grounds of appeals raised by the revenue in ITA No.2493/Del/08 in assessment year 1999-00 winch read as under: "1. The learned Deputy Director of Income-tax ("the DDIT") erred in concluding that the appellant constituted a Permanent Establishment in India. It is respectfully submitted that considering the facts and under the circumstances, the appellant does not constitute PE in India under the provisions of Article 5(1) of the Agreement for Avoidance of Double Taxation between India and USA; 2. The learned DDIT erred in considering the entire income related to the bookings originating in India as chargeable to tax in India; 3. The learned DDIT erred in rejecting the audited statements with regard to bookings fee received from Jet Airways by assuming the same to be 60% of the total global booking fees paid by Jet Airways to the appellant. 4. The DDIT further erred in estimating that 60% of the total global booking fe....

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....uld be treated as income accrued or assessed in India and since the assessee is charging Euro-3 per booking, 15% thereof would be 0.45 Euro against which Interglobe was paid one Euro per booking. The Tribunal therefore held that there was no income or profits which is charged to tax in India. It however held that the assessee had a permanent establishment based on the Circular No 23 of 1969 of 23.7.1969 and judgment of the Supreme Court in the case of DIT (International Taxation) v. Morgan Stanley & Co, [2007] 292 ITR 416/162 Taxman 165. The matter was carried in appeal to High Court by the revenue and it was contended that the Tribunal has committed a serious error in attributing revenue while arriving at the findings that 15% of the said revenue to be attributed to the assessee in respect of booking made, whereas the criteria as laid down in the aforesaid circular as well as Double Tax Avoidance Agreement with USA enumerates the concept of attribution of "profits" and not "revenue". This contention of the department was not accepted by the High Court as the test which is adopted is that attribution of profits and not the revenue. Quoting paragraph 9 of the Tribunal order stating,....

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....s of such analysis of functions performed, assets used and risk shared in two different countries, the income can be attributed. In the present case, we have found that majority of the assets i.e., host computer which is having very large capacity which processes information of all the participants is situated outside India. The CRS as a whole is developed and maintained outside India. The risk in this regard entirely rests with the appellant and mat is in USA, outside India. However, it is equally important to note that but for the presence of the assessee in India and the configuration and connectivity being provided in India, the income would not have generated. Thus the initial cause of generation of income is in India also. On the basis of above facts we can reasonably attribute 15% of the revenue accruing to the assessee in respect of bookings made in India as income accruing or arising in India and chargeable under Section 5(2) read with Section 9(1)(i) of the Act" 6. High Court upheld the approach adopted by the Tribunal to first arrive at the figure relating to the revenue generated in India and abroad and concluding that out of the revenue accrued to the assessee....