TaxTMI 
TaxTMI 
2021 (6) TMI 2
X X X X Extracts X X X X
X X X X Extracts X X X X
....pursuance of the directions issued by Dispute Resolution Panel - I ('Hon'ble DRP'), Mumbai, on the following grounds: On the facts and circumstances of the case and in law, the Learned AO, based on the directions of the Hon'ble DRP has: Ground No. 1 - General ground Erred in determining the total taxable income of the Appellant at Rs. 24,51,25,623/- and computing tax and interest payable thereon at Rs. 7,42,29,180/-. Ground No. 2 - Provision of distance learning courses a. Erred in treating the Authorized Training Centers ('ATCs') to be the dependent agent permanent establishment ('PE') of the Appellant in India under Article 5(4) of the India - Canada tax treaty and accordingly, taxing the revenues of Rs. 12,12,38,736 received by the Appellant on account of sale of distance learning courses as being in the nature of 'business profits' under Article 7 of the India - Canada tax treaty. b. Without prejudice to the above, erred in not appreciating that the income received by the Appellant on account of sale of distance learning courses cannot be said to be attributable to India, considering that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... BSP Link charges and fees for IATA Clearing House facility' ('ICH facility') In relation to collection of membership fees a. Erred in taxing the membership fees as 'business profits' under Article 7 of the India - Canada tax treaty, by treating the Indian office of the Appellant as a PE of the Appellant under Article 5 of the India - Canada tax treaty, without appreciating the fact that the membership fees collected by the Appellant is independent and not related to the BSP activities undertaken by the Indian branch office. b. Erred in fai ling to provide any reason or basis for deeming the contribution/ membership fees received from the members, by which they obtain membership with the Appellant and get access to information pertaining to the various services provided by the Appellant, as being related to IATA branch office which is specifically involved in providing BSP services only as per the approval of the RBI. c. Without prejudice to the above, erred in not appreciating the contention of the Appellant that it qualifies as a mutual association and hence, the membership fees received from the members should not be liable to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in India, as being the profits attributable to such FE in India, on an arbitrary and ad-hoc basis. Ground No. 7 - Short grant of credit for self-assessment taxes paid by IATA Canada Erred in granting short credit of the self-assessment tax of Rs. 1,32,10,040 paid by the Appellant for the subject AY. Ground No. 8 - Non-grant of credit of taxes deducted at source ('TDS') Erred in not granting credit of TDS of Rs. 24,21,636 in respect to the income declared by the Appellant. Ground No. 9 Wrong computation of interest under Section 234A of the Act Erred in wrongly computing the interest under Section 234A of the Act at Rs. 88,10,046, by not granting credit of the TDS to the Appellant. Ground No. 10 - Wrong levy of interest under Section 234B and 234C of the Act a. Erred in levying interest under Section 234B and 2340 of the Act, without appreciating the fact that interest under Section 234B and 234C of the Act is not leviable in case of a foreign company. b. Without prejudice to the above, erred in wrongly computing interest of Rs. 2,20,25,115 and Rs. 2,26,050 under Section 234B and Section 234C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly stated, the assessee is a corporation incorporated under the Special Act of the Parliament of Canada and is a tax resident of Canada. The assessee corporation held a valid Tax Residency Certificate during the year under consideration. Being a non-profit organisation, it is stated to have carried out its activities with an object to promote safe, reliable, secure and economical services for the benefit of the stakeholders of the world commercial aviation industry. Further, the assessee has a branch office in India ,viz. IATA Branch, for setting up of which an approval was obtained from the Reserve Bank of India. 3. On a perusal of the records, we find, that the assessee had filed its return of income for A.Y. 2012-13 on 31.03.2014, declaring a total income of Rs. 4,26,07,201/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. In the course of the assessment proceedings it was observed by the A.O that the assessee had offered its following incomes for tax: Sr. No. Item of Income Amount (USD) Amount(Rs.) 1. Classroom Training 644,436 3,26,79,350 2. Royalty 44,570 22,60,145 3. Annua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ided by IATA Canada outside India 2,43,448 12. Cost recovery Reimbursement of costs, without any mark-up, incurred by IATA Canada on behalf of its customers. 1,45,953 On being confronted, the assessee admitted taxability of the additional income arising from provision of consulting services, and also that arising from provision of e-services i.e Passenger Intelligence Services-PAX-IS as Fees for Technical Services (FTS) and royalty, respectively. As regards its claim of non-taxability of the remaining streams of incomes, the assessee in the course of the assessment proceedings tried to impress upon the A.O that as the same were neither in the nature of royalty, FTS or business profits, they were thus not exigible to tax in India. But then, the A.O after deliberating on the contentions which were advanced by the assessee to drive home its claim of non-taxability of the remaining streams of income, was however, not persuaded to subscribe to the same. As per the draft assessment order passed under Sec. 143(3) r.w.s 144C(1), dated 27.03.2015 the A.O proposed the following additions to the returned income of the assessee: "C Addition of incomes not admitted by the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A.R') for the assessee Shri. Porus Kaka, Senior Advocate, sought liberty for admission of certain documents as 'additional evidence'. The ld. A.R took us through the assessee's letter dated 06.08.2018, as per which the documents filed before us as additional evidence comprised of viz. (i). copies of the extracts of DGR manuals sold by the assessee to its customers; (ii). copies of the extracts of the technical instructions published by the International Civil Aviation Organisation (available in the public domain); (iii). copy of an advertising insertion order and agreement; and (iv). copy of the sample advertisements displayed on the assessee's website. It was submitted by the ld. A.R that as the said documents would have a strong bearing on the adjudication of the Ground of appeal No. 3 and Ground of appeal No. 5, the same may therefore be admitted. On the contrary, the ld. Departmental representative (for short 'D.R') objected to admission of the aforesaid fresh evidence as was sought by the assessee. We have perused the material furnished by the assessee by way of additional evidence (Page 1-13) of the assessee's additional evidence paper book, and being of the considered vie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee. In the backdrop of his aforesaid contentions, it was the claim of the ld. A.R that the A.O/DRP were in error in treating the ATC's as DAPE of the assessee, and resultantly, holding an amount of Rs. 4,84,95,494/- i.e 40% of the revenue generated from sale of distance learning material as the business income attributable to such DAPE, liable to tax in the hands of the assessee in India. 8. Per contra, the ld. Departmental representative (for short 'D.R') relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the ATC's operated as agents of the assessee viz. IATA, Canada, and habitually enrolled students on its behalf and provided training to the students in the courses mandated by the assessee, therefore, the A.O/DRP holding the ATC's as the DAPE of the assessee had rightly attributed the revenue generated from the sale of the distance learning material to them, and brought the same to tax as the 'business income' of the assessee under Article 7 of the India-Canada tax treaty. At the same time the ld. D.R assailed the quantum of income that was attributed by the A.O from provision of distance learning courses pursuant to the directions of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fees for issuance of certificates on successful completion of the courses. In a case where the student would approach the ATC for the distance learning courses of the assessee, the concerned ATC would procure the study material for the said course from the assessee and provide the same to the student who would thereafter make the payment for the same to the ATC. The aforesaid transaction between the ATC's and the students was on an independent basis and the assessee was not a privy to the said arrangement. Also, we find that the ATC would procure the course material as per the number of the students registered with them, and hence, did not maintain a stock of the course material on behalf of the assessee at any time. 10. We have perused the records to which our attention was drawn by the ld. A.R in the course of the hearing of the appeal, and find, that the ATC's were independent third party organisations that provided training of their various self-designed courses, courses designed by other third parties, and also the courses designed by the assessee viz. IATA Canada to its students. In fact, the ld. A.R in order to drive home his claim that the ATC's were not exclusively into....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Under Graduate Courses, viz. Certificate Course in Domestic Tour Management; (ii). Post Graduate Courses, viz. MBA Tourism (Pondichery University), Travel Professional Program - A Post Graduation Diploma in Travel & Tourism Management with MBA- Tourism (Pondichery University), Travel Professional Program - A Post Graduate Diploma in Travel & Tourism Management, Certificate Course in World Tour Management, PGDM in International Tourism Business-equivalent to MBA (IITTM); and (iii). IATA Courses, viz. IATA Foundation Course, IATA Consultant Course, Corporate Training, and Tourism Board Training. Accordingly, in the backdrop of our aforesaid observations it can safely be concluded that the aforesaid ATC's could not be held to be exclusively into providing of courses designed by the assessee, but were also providing a host of other self-designed/third party courses. On being confronted with the aforesaid factual matrix the ld. D.R failed to dislodge the claim of the counsel for the assessee that the ATC's were independent third party organisations providing training of their various selfdesigned courses, courses designed by other third parties, and also the courses designed by the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties of the ATC's were devoted wholly or almost wholly on behalf of the assessee viz. IATA, Canada. Rather, the facts brought to our notice as regards the multiple educational programs offered by the ATC's viz. Srinivassa Sinai Dempo College of Commerce and Economics, Kuoni Academy and Thomas Cook, gives a clear picture that the said ATC's were not exclusively into providing of courses designed by the assessee, but were providing a host of other self-designed/third party courses. Further, the factum as regards the miniscule revenue generated by the aforesaid ATC viz. Thomas Cook India Pvt. Ltd. from conducting training programs, as in comparison to its other streams of revenue generation clearly militates against the observation of the DRP that the distance learning courses of the assessee constituted the backbone of the overall operations of the ATC's. 11. It is in the backdrop of our aforesaid observations that we shall now deliberate on the aspect as to whether or not the ATC's could be held to be the DAPE of the assessee viz. IATA, Canada. At the outset, we may herein observe that in order to treat the ATC's as a DAPE of the assessee the provisions of Article 5(5) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be considered an agent of an independent status within the meaning of Article 5(5) of the India-Canada tax treaty. Now, in the case before us, as observed at length hereinabove, the activities of the ATC's in India cannot be held to be devoted wholly or almost wholly on behalf of the assessee viz. IATA, Canada. Independent of that, it is not even the case of the revenue that the transactions between the assessee viz. IATA, Canada and ATC's are not made under arm's length conditions. As observed by us hereinabove, as per Article 5(5) of the India-Canada tax treaty an enterprise carrying on business in the other contracting state through a broker, general commission agent or any other agent of an independent status, or merely maintaining in that other State a stock of goods with an agent of an independent status from which deliveries are made by that agent, shall not be deemed to have a PE in the other Contracting state, subject to the condition that such agent of an independent status is acting in the ordinary course of its business. As regards the rider therein provided in Article 5(5) of the India-Canada tax treaty, the same as observed by us hereinabove would require cumulative ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibunal on the basis of a conjoint reading of Article 5(5) and Article 5(6) of India-France tax treaty, had observed as under: " 9. Let us now deal with the scope of dependent agent permanent establishment (DAPE) as set out in Article 5(5) and Article 5(6) of the Indo French DTAA. Article 5(5) provides the situations in which business being carried on through a dependent agent results in creation of PE in the source state. The provisions of Article 5(6) are, however, slightly at variance with standard tax treaty provisions, and need to be analysed in some detail. The significant feature of Article 5(6) of Indo French DTAA, which is somewhat unique in the sense that this provision is in clear deviation from the standard UN and OECD Model conventions, is that even when an agent is wholly or almost wholly dependent on the foreign enterprise, he will still be treated as an independent agent unless additional condition of the transactions being not an arm's length conditions is fulfilled. It is so for the reason that Article 5(6) provides that even when an agent is wholly or almost wholly dependent on the principal, i.e. foreign enterprise, "he will not be considered an agent of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a settled position of law, as noted by the Special Bench of this Tribunal in the case of Motorola Inc. , that the onus is on the Revenue to demonstrate that a PE of the foreign enterprise exists in India". In the present case, i.e. in the case of DAPE in accordance with provisions of Indo French DTAA, the onus is even greater inasmuch the very foundation of DAPE rests on a negative finding with respect to the wholly dependent or almost wholly dependent agent i.e. "if it is shown that the transactions between the agent and the enterprise were not made under at arm's length conditions". Unless this negative finding is on record, it cannot be inferred that the agent is not of an independent status. No such finding was given by the Assessing Officer, or even by the Dispute Resolution Panel. Even in the proceedings before us, no material has been brought on record which at least prima facie demonstrates, or even indicates, that the transactions between the principal and agent are not under arm's length conditions. Once this onus is not discharged by the revenue authorities at any of these stages, and in accordance with the law laid down by Special Bench decision in the case of Motorol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts, as has been made by the DRP, is not decisive test either because even when agent has the authority to conclude contracts, it is still to be established that the agent is not an independent agent. That exercise is not even conducted in this case. The Assessing Officer's reliance on OECD Commentary, therefore, is of no avail either. In view of these discussions, as also bearing in mind entirety of the case, we set aside and vacate the Assessing Officer's findings with regard to existence of assessee's PE in India. We may, at the cost of repetition, clarify that these conclusions are arrived at in the light of the factual position that there are no findings by the Assessing Officer, or the Dispute Resolution Panel, to the effect that the transactions between the agent and the assessee are not at an arm's length price, and that, in view of the provisions of Article 5(6) of Indo French DTAA, such a finding by the revenue is a sine qua non for existence of DAPE. To this extent, our decision is confined to the facts of this case for the particular assessment year before us". 10. In the absence of any distinguishing feature brought on record by the Revenue, we respectfully fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed an agent of an independent status within the meaning of this paragraph if it is shown that the transactions between the agent and the enterprise were not made under at arm's length conditions. 10) In the present case, what was essentially brought to the notice of the Tribunal was that this is an important aspect relating to the transactions, but they have not been examined in the manner indicated by us above by the Assessing Officer, therefore the matter should be restored to file of the Assessing Officer for specific adjudication of the transactions between the Assessee and the agent. The Tribunal did not accept this. Not because of any broad legal principle, but there being no finding of this nature on record at all. If the Assessing Officer or the DRP failed to render the finding and which would indicate the applicability of the Article and as pressed by the departmental representative, then, to our mind, the Tribunal was under no obligation to remand the matter back to the Assessing Officer. The Tribunal has rightly observed that even during the course of the proceedings before it, no material was placed on record, which would prima facie demonstrate or even ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot have any PE in India. We may herein observe, that the Tribunal taking cognizance of the fact that there was nothing on record to even remotely suggest a prima facie case that the transactions between the foreign enterprise and the agent were not at arm's length, had thus, declined to remand the matter and allow a fresh inning to the A.O for making roving and fishing enquiries on the aspect of transactions not having been done in arm's length conditions. On further appeal, the Hon'ble High Court approved the view taken by the Tribunal. In the case before us also neither the lower authorities had established that the transactions between the assessee viz. IATA, Canada and the ATC's were not done under arm's length condition, nor any material was placed on our record by the ld. D.R to demonstrate any such fact. Accordingly, in the absence of any finding by the lower authorities that the transactions between the assessee and the ATC's were not at arm's length, we thus on a similar footing conclude that as per a conjoint reading of Article 5(4) and Article 5(5) of the India-Canada tax treaty, the ATC's being an independent agent within the meaning of Article 5(5) of the India-Canada ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the definition of royalty as contemplated in Article 12(3) of the India-Canada tax treaty, which reads as under: "12(3). The term "royalties" as used in this Article means: (a) payment of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film paper or other means or reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 or Article 8 from activities described in paragraph 3(c) or 4 of Article 8." As observed by us hereinabove, the assessee pursuant to the request from the student's/ATC's despatches the course m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is purely a case of apportioning of fees attributable to eCornell as per the Affiliate Agreement being remitted to eCornell and the portion of the fees collected for providing enrollment infrastructure in order to access the study material by the students is retained by the assessee as its share. As such on facts the present case does not partake the nature of royalty as contemplated under Clause 3(a) of Article 12 of the Indo-US DTAA." Accordingly, not finding favour with the alternative observation of the DRP that the consideration received by the assessee for providing course material to the students/ATC's was liable to be assessed as royalty, we vacate the same. The Ground of appeal No. 2 raised by the assessee is allowed in terms of our aforesaid observations. As we have held that the ATC's are not the DAPE of the assesse, therefore, the Ground of appeal No. 1 raised by the revenue, wherein it had challenged the scaling down of the quantum of revenue attributed by the A.O pursuant to the directions of the DRP is dismissed as having been rendered as infructuous. 15. We shall now deal with the claim of the assessee that the A.O/DRP had erred in taxing the income from sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oped by ICAO. The DGR manuals were purchased by the customers by placing orders on the website of the assessee. The assessee after receiving the orders would despatch the manual directly to the customers. At this stage, we may herein observe that the assessee had also inadvertently classified the application fees received by it for DGR manuals/publications, as "Collection of royalties from Accredited Training Schools", and had offered the same to tax as royalty. However, on learning about its said mistake, the assessee had in the course of the assessment proceedings sought refund of the taxes paid on the aforesaid amount which was wrongly projected by it as royalty. In order to buttress his aforesaid claim the ld. A.R in the course of hearing of the appeal had drawn our attention to a reconciliation statement that was filed by the assessee in respect of the amounts which were wrongly treated by it as royalty received from the ATC's, Page 82- 84 of 'APB'. Being of the view that the DGR manual was a proprietary material sold by the assessee viz. IATA, Canada, which falls in the category of "Information concerning industrial, commercial or scientific experience" the A.O/DRP held the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to use' any copyright in relation to the publication was granted to the customer; • The customers did not get vested with any right to reproduce/sell the content of the publication in any form or media; • The customers also did not get any right to use the patent, trademark, design or model, plan, secret formula or process of IATA Canada on supply of such physical publications; • The information provided in the publications was merely a user-friendly and comprehensive compilation of data available in the public domain and hence, the same cannot tantamount to imparting of any information concerning the technical, industrial, commercial or scientific experience; • The assessee by compiling the instructions for safe transport of dangerous goods as laid down by ICAO did not share its experience, techniques or methodology employed in developing the publication with the subscribers nor did it impart any information relating to the formation of the publication; • The information or data transmitted through the publication was already available in the public domain and it was not something which was exclusively available with....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Delhi in the case of DIT Vs. Infrasoft Ltd. (2014) 220 Taxman 273 (Del). In the backdrop of our aforesaid observations we vacate the view taken by the lower authorities that the consideration received by the assessee from sale of DGR manuals was to be treated as 'royalty' and brought to tax in its hands. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations. 17. We shall now advert to the claim of the ld. A.R that the A.O/DRP had erred in treating the application fees received by the assessee for DGR manuals/publications that was wrongly offered to tax as "Collection of royalties from ATS", as royalty income under Article 12 of the India-Canada tax treaty. It is the claim of the assessee that the amounts which were received by it as application fees for DGR manuals/publications were inadvertently offered by it in its return of income as royalty income. In order to buttress its aforesaid claim, the assessee had filed before us a reconciliation statement in respect of the amounts which were wrongly treated by it as royalty received from the ATC's, Page 82-84 of 'APB'. As observed by us hereinabove, the consideration received by the assessee on sale of DG....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terial available on record, as well as the judicial pronouncements relied upon by them to drive home their respective contentions. In our considered view, the providing of advertising space by the assessee to its customers, either on its website or publications/manuals, did not result to vesting of any right to use, display, exploit or modification of the assessee's brand or logo, in any manner. As such, the consideration received by the assessee from provision of advertisement space in its publications /manuals or website would not fall within the realm of the definition of 'royalty' as provided in Article 12(3) of the India-Canada tax treaty. In sum and substance, as no 'use' or 'right to use' any copyright, patent, trademark, design or model, plan was granted to the customers by the assessee in the course of providing of advertising space to them in its publications/manuals or website, the consideration received in lieu thereof cannot be brought within the meaning of the definition of the term 'royalty' as provided in Article 12(3) of the India-Canada tax treaty. Viewed from another angle, as the customers by obtaining an advertising space in the website or publications/manuals ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of any PE of Yahoo Holdings (Hong Kong) Ltd. in India, it was not chargeable to tax in India." As observed by us hereinabove, in the case of the present assessee before us also the consideration received by the assessee from the customers was for providing advertisement space in its publications/manuals or websites, without vesting of any right to use, display, exploit or modify the assessee's brand or logo in any manner. As such, we are of the considered view that the consideration received by the assessee for a simplicitor providing of advertisement space to the customers in its publications/manuals or website cannot be held as 'royalty'. Our aforesaid view is supported by the order of the ITAT, Kolkata in the case of ITO Vs. Right Florists Pvt. Ltd. (2013) 143 ITD 445 (Kol). In the said case, it was observed by the Tribunal that payment made by assessee for online advertisement to Yahoo and Google was not in the nature of 'royalty'. A similar view had also been arrived at by the ITAT, Mumbai in the case of Pinstorm Technologies Pvt. Ltd. Vs. ITO (2013) 154 TTJ 0173 (Mum). In the said case, it was observed by the tribunal that the amount paid by the assessee to M/s. Google Ir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments collected from the agents and the airlines in relation to the BSP Link charges. As such, it was the claim of the assessee that in the absence of any income element in the recovery of the BSP charges from the airlines and agents (through IATA India branch), the same could not have been brought to tax in the hands of the assessee. In sum and substance, it was the claim of the assessee before the lower authorities that as the collection of the BSP charges by the assessee viz. IATA, Canada from airlines and agents (through IATA India branch) for onward remittance to Accelya World SLU, Spain, without any mark-up, was in the nature of a reimbursement, thus, in the absence of any income element the same could not have been brought to tax as the 'business income' of the assessee under Article 7 of the India-Canada tax treaty. Apart from that, the assessee had also assailed the assessing of the BSP charges owing to the 'principle of mutuality'. However, the contentions advanced by the assessee did not find favour with the A.O. Although, the A.O vide his draft assessment order passed u/s 143(3) r.w.s 144C(1), dated 27.03.2015 observed, that reimbursements received on actual basis at co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lines and agents for onward remittance to Accelya World SLU, Spain, without any mark-up, cannot be held to be its 'business income'. But then, as the said aspect had not been looked into by the A.O/DRP, we therefore in all fairness restore the matter to the file of the A.O for the limited purpose of verifying the same. In case the claim of the assessee that the BSP Link charges were collected by it for onward remittance to Accelya World SLU, Spain, without any mark-up, is found to be in order, then the addition made by the A.O to the said extent shall stand deleted. The Grounds of appeal No.6(d & e) raised by the assessee are allowed for statistical purposes. (B). IATA CLEARING HOUSE FACILITY (ICH FACILITY) : (i). The assessee viz. IATA, Canada, provided the ICH facility to the air transport industry across the globe. Through the ICH facility the assessee viz. IATA, Canada enabled the world airlines and industry suppliers to settle their passenger, cargo and miscellaneous/non-transportation billings. The ICH facility provided by the assessee, viz. IATA, Canada facilitated raising of the invoices, netting off of payables and receivables, providing transaction details report to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad no role in providing of the ICH services which were provided outside India, therefore, the fees therein received by the assessee could not be attributed to the said PE. However, the A.O/DRP did not find favour with the aforesaid claim of the assessee. Observing, that the assessee had not demonstrated that the activities pertaining to ICH facility were being conducted by the assessee, viz. IATA, Canada directly from outside India, the DRP concurred with the view taken by the A.O that the fees pertaining to ICH facility was liable to be assessed as the business income of the assessee under Article 7 of the India-Canada tax treaty. (ii). We have given a thoughtful consideration to the contentions advanced by the authorised representatives for both the parties in context of the aforesaid issue under consideration, and have perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements that have been pressed into service by them. As is discernible from the orders of the lower authorities, the assessee was given permission by the RBI to open a branch office in India, vide its order dated 25.11.1995, under Sec. 29 of the Fore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Hon'ble Apex Court that the same limits the tax on business profits to that arising from the operations of the PE. It was observed by the Hon'ble Court, that as in the case before them the entire services were rendered outside India, and had nothing to do with the PE, therefore, nothing could be attributed to the PE and thus brought to tax in India. Apart from that, it was observed by the Hon'ble Apex Court that in case of composite transactions which have some operations in one territory and some in others, the principle of apportionment has to be essentially applied in order to determine the taxability of various operations. In the backdrop of the aforesaid settled position of law, the amount of profit that would be attributable to a PE would be on the basis of the extent appropriate to the role played by the PE in the transaction from which revenue has been generated. We are unable to subscribe to the manner in which the A.O/DRP had summarily rejected the claim of the assessee that as the ICH services were provided by the assessee, viz. IATA, Canada directly outside India, and the fees in respect of the said services was also received by the assessee in its bank account main....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnual general meetings and world air transport summit etc. However, a member in order to avail any of the aforesaid services has to pay a separate fees for the same. Apart from that, upon payment of the membership fees to the assessee, viz. IATA, Canada, the member airlines and the strategic partners get information about the various services provided by the assessee corporation. (ii). In the backdrop of its claim that the assessee corporation was regulated by the principle of mutuality, it was submitted by the assessee that the aforesaid receipts were not exigible to tax. However, the A.O/DRP being of the view that the assessee corporation failed to cumulatively satisfy the requisite conditions to invoke the principle of mutuality, viz. (i). complete identity of contributors and the recipients/participants; (ii). instrumentality of the assessee in carrying out the mandates of its members; and (iii). impossibility of the assessee deriving any profit from contribution or non-involvement of commerciality, therein rejected its claim of mutuality. Alternatively, it was submitted by the assessee that as its Indian PE viz. IATA India branch which as per the approval of RBI was n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied out directly outside India, therefore, the same could not have been attributed to the IATA-India branch, we find was rejected by the DRP, for the reason, that the assessee had not demonstrated that the activities pertaining to collection of the membership dues were being carried out by the assessee, viz. IATA, Canada, outside India. We are in agreement with the claim of the assessee that amount of profit that would be attributable to a PE would be on the basis of the extent appropriate to the role played by the PE in those transactions. In a case where the transactions had taken place outside India, the same cannot be attributed to the PE, because the PE had no role to play in such transactions. As such, only the portion of profits which are attributable to the PE in India are taxable in India, and the revenue from functions/activities carried outside India cannot be taxed in India. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Co. Ltd. Vs. DIT (2007) 288 ITR 408 (SC). In the said case, the Hon'ble Apex Court had observed that as the PE of the assessee company had nothing to do with the offsho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 21. As we have restored the issues as regards assessing of the aforesaid receipts, viz. (i). BSP link charges; (ii). fess for ICH facility; and (iii). collection of membership dues to the file of the A.O for fresh adjudication in terms of our aforesaid observations, therefore, the scaling down of the revenue attributable to the PE, viz. IATA-India branch that was proposed vide the draft assessment order by the A.O at 90%(of the gross receipts), to 40% (of gross receipts) pursuant to the directions of the DRP, are also resultantly restored to the file of the A.O. The Ground of appeal No. 2 of the revenue is allowed for statistical purposes. 22. We shall now advert to the claim of the assessee that the A.O had erred in allowing short credit for self-assessment taxes of Rs. 1,32,10,040/- paid by the assessee. As the said issue would require verification of records, we therefore restore the matter to the file of the A.O. The A.O is directed to verify the factual position, and in case the claim of the assessee is found to be in order, then the credit for the amount deposited by it by way of self-assessment tax be allowed to it. Needless to say, the A.O in the course of the 'set asid....