TaxTMI 
TaxTMI 
2021 (3) TMI 208
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....he assessee is engaged in the business of providing information, reservations, transaction processing and related services for airlines, travel agencies and other travelrelated entities. It owns and operates a Global Distribution System located outside India, referred to as Computerized Reservation System (CRS) and provides subscribers with access to and use of this CRS. The assessee earns its revenue through participating in carrier agreements with airlines for which the bookings are made through the CRS. 4. The assessee entered into an agreement with Travelport Services Limited (TSL,) a limited company existing under the laws of England and which is a 100% subsidiary of the assessee to market the CRS and other services of TLP in the United Kingdom, Europe, the Middle East, Africa, and parts of Asia. 5. During the years under appeal, the UK based company was marketing and distributing the CRS of the assessee through its nonexclusive representative, Calleo Distribution Technologies Pvt. Ltd. which is an independent third-party company registered in New Delhi, India. As per the distribution agreement, it was specifically provided that Calleo Distribution Technologies Pvt. Ltd.....
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.... 260A of the Act. 12. The Hon'ble High Court of Delhi, vided order dated 09.11.2016 for Assessment Years 2006-07, 2007-08 & 2008-09 and order vide dated 01.03.2017 for Assessment Years 2009-10 & 2010-11, dismissed the appeals of the assessee. However, on the challenge of the revenue relating to attribution of 15% revenue, the Hon'ble High Court remanded back the matter to the Tribunal vide order dated 19.12.2016 for Assessment Years 2007-08 order dated 20.12.2016 for Assessment Years 2006-07 & 2008-09 and order dated 26.04.2017 for Assessment Years 2009-10 & 2010-11. 13. The relevant findings of the Hon'ble High Court of Delhi read as under: "10. It is apparent from the above discussion that the specific and limited challenge by the Revenue in this appeal is to the ITAT's order, rather mechanical adherence to the Galileo International Inc's case (supra) attribution, principally to the extent it followed the 15% ratio. In the present case, the AO had based his conclusions and determined the income based upon figures furnished by the assessee, as is apparent from a plain reading of the order. In the circumstances, the ITAT, in our opinion, ought not to have....
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....tion of the ld. counsel for the assessee. Following findings from the judgment of the Hon'ble High Court would justify the claim of the assessee: "We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of Rule 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. In taking this view, we are conscious about the observations of the Madras High Court and the Calcutta High Court made in the decisions relied upon by learned counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to entertain a ground beyond those in corporated in the memorandum of appeal though the party urging ....
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....on between a mere procedural provision which could be waived and such jurisdictional provision or a mandatory provision enacted in public interest which could not be waived, because by consent no jurisdiction could be conferred on the authority unless the conditions precedent were first fulfilled. In DasaMuni Reddy v. Appa Rao, AIR 1974 SC 2089, 2092, such a question of waiver was examined also in the context of the bar of estoppel or of res judicata. At page 2091, it was us exercise of jurisdiction. If there is want of jurisdiction the whole proceeding is coram non judice. The absence of a condition necessary to found the jurisdiction to make an order to give a decision deprives the order or decision of any conclusive effect. (See Halsbury's Laws of England, 3rd edition, volume 15, paragraph 384). Further proceeding at page 2092, it was pointed out that just as the courts normally did not permit contracting out of the Acts so there could be no contracting in. A status of control of premises under the Rent Control Acts could not be acquired either by estoppel or by res judicata. Their Lordships in terms held that the principle was that neither estoppel nor res judicata could gi....
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....on had held at the earlier stage that the dispute in question was an industrial dispute and, therefore, the reference being a competent reference, the writ petition was dismissed. The order of the High Court was a final judgment which terminated the independent writ proceeding. It was held at page 1186 that order having not been appealed before the Supreme Court, it had become final and it was no longer open to the parties to raise a plea of jurisdiction in appeal against the subsequent award given by the Industrial Tribunal after exercising jurisdiction which the Tribunal was permitted to exercise by the order of the High Court. These were competent proceedings and the independent writ proceeding was also finally terminated and, therefore, this final order precluded the parties from reagitating the same question before the Industrial Tribunal. Their Lordships distinguished the earlier decision in Satyadhyan Ghosal v. Smt. DeorajinDebi, AIR 1960 SC 941, where the question had arisen about the applicability of section 28 of the CalcuttaThika Tenancy Act, 1949, and the plea having been rejected by the munsif trying a suit, revision, the High Court had held that oper....
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....ind, the Tribunal's view was clearly erroneous that the matter became final when the Tribunal passed the earlier remand order so that this point of jurisdiction got finally settled, which could not be agitated unless the assessee had come in the reference to this court at that stage. The Tribunal's view was also incorrect that in restoring the case to the file of the Income-tax Officer by the earlier order, the only point left open was in respect of addition of Rs. 19,421 on merits and that the legal or jurisdictional aspect whether the reassessment proceedings were legally initiated was not kept open. Even on the third question the Tribunal's view was erroneous that even though this point went to the root of the jurisdiction and was a pure question of law, merely because the point was initially raised and not pressed when the matter was taken up before the Appellate Assistant Commissioner, it could be waived and it could not be reagitated. Therefore, in view of the settled legal position our answers on questions Nos. 1 and 2 are in the negative, while our answer on question No. 3 is in the affirmative, that is to say, all the questions are answered against the revenue ....
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....reads as under :- `Respondent may support order on grounds decided against him. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.' 14.3. The effect of this rule is that a respondent has been entitled to support the order on the ground which has been decided against him. The underlying idea and the spirit of Rule 27 is to arm a respondent, in an appeal filed by the plaintiff, with an option to contest unfavourable decision of the CIT(A) on the aspect(s) of an issue, the final decision on which issue has been delivered in his favour. Take an instance of first appellate authority deciding the legal issue of reopening of an assessment against the assessee but deleting the addition on merits in favour of the assessee. When the Revenue files appeal against this order before the tribunal, it will naturally assail the finding of the CIT(A) qua the deletion of addition on merits. Notwithstanding the fact that the respondent assessee did not file any appeal against the order passed by the CIT(A), shall still be entitled under Rule 27 of the ITAT Rules, 1963, to support the conclusi....
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....aspect, which is otherwise germane to the overall issue decided in favour of the respondent, can the respondent espouse such aspect under rule 27 in an appeal filed by the plaintiff ? If we go by the literal interpretation of the Rule, then the answer is in negative that unless the ground is not `decided against' the respondent, he cannot take recourse to this provision. However, it is of paramount importance to keep in mind the fundamental object of enshrining rule 27, being giving an opportunity to the respondent to support the impugned order in an appeal filed by the plaintiff. A pragmatic approach on consideration of the object of such Rule, in our considered opinion, necessitates the adoption of liberal interpretation that when a particular issue is decided in favour of the respondent and the plaintiff has come up in appeal against such decision on the issue, then all the relevant aspects having bearing on the overall issue, even though not specifically decided against the plaintiff, should be open for challenge by the respondent under the rule. If the respondent is debarred from raising that aspect of the issue, which was not taken up before the first appellate a....
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....t particulars with respect to the assessee's operations in respect of India were available and therefore attribution of 15% was not warranted. The learned counsel for the assessee resisted the appeal and submitted that the ITA T was correct in following the decision of Galileo International lnc's case (supra) in the circumstances. 11. It is apparent from the above discussion that the specific and limited challenge by the Revenue in this appeal is to the ITA T's order, rather mechanical adherence to the Galileo International Inc's case (supra) attribution, principally to the extend it followed 15% rule. In the present case, the AO had based his conclusions and determined the income based upon figures furnished by the assessee, as is apparent from a plain reading of the order. In the circumstances, the ITA T, in our opinion, ought not to have disturbed that order, without appropriate hearing." 3. It flows from the above findings of the Hon"ble High Court that the case has attained finality except for the directions of remand back to Hon'ble Tribunal on specific point of reasonability of attribution of income which is the ground of appeal filed by....
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....he plain language of Rule 11. 6. As regards application under Rule 27, the rule says that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. However, it is not a case where the ground has been decided against the assessee. In this regard, the appellant relied on the decision of ITAT, Delhi in the case of where V the facts of the case are that the penalty was deleted by Ld. CIT(A) and ITAT upheld the penalty on part of the additions made in this case. At this stage, the respondent, challenged the penalty ground on jurisdictional/legal ground of appeal. Hon'ble tribunal accepted the application under Rule 27 in this case. However, it is important to note that the cited case was very mush pending before Hon'ble tribunal on all scores and it was not a case of remanded back case as against the present case which has been remanded back to ITAT on specific point/issue as per the order of Hon'ble Delhi High Court. Therefore, the reliance placed by the assessee on the cited case is clearly distinguishable. 7. It is noteworthy that all case laws relied upon by the assessee were open ....
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....red to decide on this point at this stage where the case has been remanded by Hon'ble High Court on a particular aspect. 9. It may also be interesting to take note of the decision of landmark judgement of Delhi HC in Sanjay Sawhney case ITA 834/2019 Dated 18.05.2020which considered a no. of watershed renderings viz., CIT vs. Edward Keventor Successive Pvt. Ltd., CIT vs. Divine Infra Pvt. Ltd, Commissioner of Income Tax, Madras vs. Sundaram & Co. Pvt. Ltd.(1964) 52 ITR 763 (Madras) etc. Para 20 of the decision reads as under:- "If we refer to Rule 27 of ITAT Rules, 1963, a bare reading thereof manifest that a Respondent has a right to support the impugned order, without having filed any cross appeal or cross objection. This understanding emerges from the language of the said provision which begins with the words "The Respondent, though he may not have appealed, ". This means that the provision is to enable a Respondent to effectively defend the order appealed before the Appellate forum. The expression "though he may not have appealed" also indicates that the provision is to be resorted to in a situation where a Respondent may otherwise have a right to file an a....
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....d accordingly, the same never formed the subject matter of appeal before the Hon'ble High Court and hence the doctrine of Merger will not be applicable in the case in hand. Therefore, in our view, the distinction sought by the ld. DR in the decision of the Hon'ble High Court of Gujarat in the case of P.V. Doshi [supra] does not hold any water. 31. The ld. DR has heavily relied upon the decision of the Hon'ble High Court of Delhi in the case of Sanjay Sawhney [supra]. 32. We have carefully gone through the decision of the Hon'ble High Court of Delhi. We find that in the very beginning of Para 20, the Hon'ble High Court has observed as under: " If we refer to Rule 27 of ITAT Rules, 1963, a bare reading thereof manifest that a Respondent has a right to support the impugned order, without having filed any cross appeal or cross objection. This understanding emerges from the language of the said provision which begins with the words "The Respondent, though he may not have appealed,". This means that the provision is to enable a Respondent to effectively defend the order appealed before the Appellate forum. The expression "though he may not have appea....
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....he 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee." 38. The aforesaid section 144C of the Act can only apply prospectively i.e. from A.Y. 2011-12 and is not applicable to the captioned assessment years.The Hon'ble High Court of Madras in the case of M/s Vedanta Limited vs. ACIT Writ Petition No.1729 of 2011 has categorically held that the provisions of Section 144C of the Act can be held to be applicable prospectively, from AY 2011-12 only. The relevant findings read as under: "26. Thus, where there is a change in the form of assessment itself, such change is not a mere deviation in procedure but a substantive shift in the manner of framing an assessment. A substantive right has enured to the parties by virtue of the introduction of Section 144C, that, bearing in mind the settled position that the law applicable on the first day of assessment year be reckoned as the applicable law for assessment for that year, leads one to the inescapable conclusion that the provisions of Section 144C can be held to be applicable only prospectively, from AY 2011-12 only." 39. In all the A.Ys under challenge....
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....ection etc. * The aforesaid data is processed on the basis of neutral display real time on line. All of this takes place outside India. * Travelport USA is responsible for the design and product development by which it decides which market segments to pursue, the software characteristics that are needed to meet the market demand etc. The key personnel of Travelport would undertake the conceptualization and coding of software. Further, it also makes constant updates to the software whenever it is required. These activities are carried outside of India. * The invoicing is done outside of India and the payment too is received outside of India * Travelport USA is responsible for the development and enhancement of products, obtaining legal protection for the developed intangibles. These activities again are carried outside of India. 42. Out of the aforesaid several activities, the activities of Calleo Distribution Technologies Pvt. Ltd. are only in respect of generating request and receiving end-result of the process carried out in India. In other words, bookings, execution and receiving of the tickets are in India. In other words, the computers at....
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...., are processed at the host computer in Denver in USA. 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 that 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 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 functions are performed outside India. Even the 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 an....
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....part of the income as is reasonably attributable to the operations carried out in India. Thus in a given case if all the operations are not carried out in India, the income has to be apportioned between the income accruing in India and income accruing outside India. In instant case, it was found that only part of CRS system operated or functioned in India. The extent of work in India was only to the extent of generating request and receiving end result of the process in India. The major functions like collecting the database of various airlines and hotels, which had entered into PCA with the assessee took place outside India. The computer at Erding in Germany processed various data like schedule of flights, timings, pricing, the availability, connection, meal preference, special facility, etc. and that too on the basis of neutral display real time on line took place outside India. The computers at the desk of travel Page 21 of 26 agent in India were merely connected or configured to the extent that it could perform a booking function but were not capable of processing the data of all the airlines together at one place. Such function required huge investment and huge capacity, which....
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....ken by the Hon'ble High Court of Delhi in the case of Galileo Nederland BV v. DCIT [2014] 51 taxmann.com 419 Delhi) wherein the assessee was a providing travel industry services of Computerized Reservation System and its Indian distributor merely gave connection to Indian travel agents for booking and major functioning of collecting and data analysis/development took place in, USA. 51. The Hon'ble High Court held as under: "The major functioning, i.e., collecting data bases with various airlines, hotels etc. and entering or feeding them into the computer took place outside India. It was in the computer in Denver, USA that various processed data with regard to schedule of flights timing, pricing, availability, meal preference, special facilities etc. was stored and process undertaken. The role performed by the computers in India or the Indian agents was to merely get connected or be configured so that the travel agents could perform the booking function. The computers in India were not capable of processing data, which was processed abroad. Further, the functions required huge investment and capacity, which was not installed and available in the computers at the desk....