TaxTMI 
TaxTMI 
2009 (6) TMI 1021
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....inst the order under section 271(1)(c) For the sake of convenience, they all are disposed of together. 2. The assessee is a US incorporated limited company. It had developed, owns and operates a Computer Reservation System (CRS) known as "SABRE". This and other global distribution systems are the principal means of air travel distribution internationally. Through this system, travel agencies, corporate travel departments and individual consumers can access information regarding and book reservations with airlines and other travel and travel related products and services. The associates which are airlines have entered into an agreement with the assessee concerning booking and reservation, sale of the carrier air services through SABRE and the provisions of related operational services through agreement called as SABRE Participating Carrier Distribution and Service Agreement. The subscribers are provided equipment and connection to the CRS through local National Marketing Companies (NMC) which is generally a locally incorporated company like Air India Limited and Indian Airlines who jointly market SABRE, under the name Sitar, but under contract directly between these two a....
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....also held that the assessee had a permanent establishment in India as it had provided certain services to the travel agent in India under the SABRE Marketing and Data Processing Service Agreement. He also concluded that the assessee had permanent establishment since it has an office at Mumbai which is monitoring all the assessee's business activities and that the airlines under the name SITA constituted vide the said agreement can give rise to a dependant permanent establishment in India of the assessee. The Assessing Officer estimated the total receipts for the two assessment years under consideration at ₹ 70 crores for assessment year 1997-98 and ₹ 90 crores for assessment year 1998-99. As no details of expenses were furnished by the assessee and no claim had been made, he did not allow any expenditure there against. The CIT (Appeals) held that the income accruing or arising to the assessee in India from display of information on the computer of the travel agents; the assessee had permanent establishment but set aside the matter for considering the audited accounts of Indian operations filed by it in appellate proceedings. The assessee carried the matter in appeal....
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....nd 234B is chargeable?" 5. In respect of question no.1, the Tribunal held that income was chargeable to tax under section 5(2) of the Act as the assessee had business connection in India as per section 9(1)(i) of the Act. It however held that 15% of the revenue accrued to the assessee in respect of the bookings made in India that should 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. 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 circ....
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....guidelines are available as to how much should be the 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 undertaken. On the basis 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 that 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 re....