TaxTMI 
TaxTMI 
2021 (10) TMI 1023
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....ted Kingdom ("DTAA"). 3. That the Assessing Officer and the DRP ought to have held that no income had accrued or deemed to accrue or received or deemed to have received by the Appellant in India. 4. That on the facts & circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has business connection in India and as such is liable to tax in India as per the provisions of Act. 5. That on the facts and circumstances of the case and in law, both the Assessing Officer and the DRP have erred in holding that the Appellant has: * A fixed place PE in India under Article 5(1) of the DTAA; and * A dependent agent PE in India in the form of Interglobe Technology Quotient Private Limited ('ITQPL') under Article 5(5) of the DTAA. 5.1. That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has a PE in India based on inter- alia following allegations: * authority has been delegated to ITQPL to conclude contracts on Appellant's behalf * ITQPL is wholly dependent on Appellant f....
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....tribution fees is in nature of commission; and - Since taxes are not deducted on such payments, expenses should be disallowed under Section 40a(ia) of the Act 7.2. That on the facts and in the circumstances of the case and in law, the Ld. AO and the DRP has erred is not allowing the deduction of Apportionment of Technology service fees for US$ 8,460,978 and Vendor cost for US$ 164,832 merely by following the DRP directions for AY 2016-17 not providing any cogent reason for disallowing such expenses. 7.3. That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in not allowing the deduction of amortization on all Intangible assets amounting to USS 12,293,433, on the basis of the DRP directions for AY 2016-17 (passed pursuant to Rule 13), wherein following reasoning was accorded by DRP for not allowing complete claim of depreciation. a) No amortization/depreciation on Goodwill and Trademark/tradename has been claimed in the UK corporate tax return of Appellant. b) No amount is debited as depreciation on Goodwill and Trademark/tradename in the global accounts therefore there is no base ....
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....services provided by IBM; * The tickets are being booked in India; * The Appellant is having assets in India; * The Appellant is having its sales team in India; * The Appellant is providing training to its distributors 11. That on the facts and in the circumstances of the case and in law, the Ld. AO and the DRP have erred in making factually incorrect allegations with respect to the various expenses and income. 12. That on the facts and in the circumstances of the case and in law, the authorities below have erred in charging interest under section 234B of the Act." 3. The Appellant is a company incorporated in The United Kingdom. The Appellant provides electronic global distribution services in the 'rest of the world' territory (including the Indian region) for the travel industry, by utilizing a Computer Reservation System ('CRS'), which is an automated system which processes booking data. The CRS is an automated system, which process booking data and other data to provide the following functions: a) The ability to display flight schedule and seat availability b) The ability to display and/o....
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....T-1 (USA and Canada) and T-2 (Rest of the world). The responsibility of carrying out business in T-2 territory was given to the TGDSBV. TGDSBV was a Netherland based entity and carried on such CRS business till 31 December 2015. 10. With effect from 01 January 2016, the CRS business of TGDSBV was assumed by the Appellant and accordingly was assessed in India for the first time as a new entity in AY 2016-17. 11. Basic structure of the business, risks, functionalities and assets remain unchanged after the above territorial reorganization and such fact has even been admitted, relied and emphasized by the assessing officer (Ld. AO) and Dispute resolution panel ('DRP') in their orders/ directions. 12. For AY 2017-18, the Appellant filed its original income tax return dated 26 October 2017, declaring Nil taxable income, and claiming a refund of INR 40,22,89,995 on account of excess TDS deducted and appearing in Form 26AS. Thereafter a revised income tax return was filed on 28 March 2019, wherein the claim of TDS and refund was revised to INR 40,55,24,740. 13. The case was selected for scrutiny assessment and subsequently during the course of assessment proceedings, th....
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....tax Act as it had business connection in India as per Section 9(1)(i) of the said Act and a PE in India and that the revenue accruing to the respondent in respect of bookings made in India should be treated as income accruing or assessed in India and chargeable under Section 5(2) read with Section 9(1)(i) of the Act. This finding has also been upheld by the Hon'ble Delhi High Court in case of assessee's predecessor entities for earlier assessment years." "9.1 Here is it again emphasized that the Hon'ble Delhi High Court has categorically held that the assessee has a PE in India. It is a settled law that the determination of a PE is a mixed question of fact and law. Accordingly, the Hon'ble Delhi High Court has settled the issue against the predecessor entities of the assessee and in favour of revenue authorities. Largely, the present set of facts and circumstances are similar in nature. Hence, respectfully, following the decision of Hon'ble Delhi High Court it is held by the undersigned that assessee has a PE in India as a Fixed Place PE and an Agency PE." 18. However, on the issues covered in favour of the appellant by the Delhi High Court decisions....
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....present case it is seen that the CRS, which is the source of revenue is partially existent in the machines namely various computers installed at the premises of the subscribers. In some cases, the appellant itself has placed those computers and in all the cases the connectivity in the form of nodes leased from SITA are installed by the appellant through its agent. The computers so connected and configured which can perform the function of reservation and ticketing is a part and parcel of the entire CRS. The computers so installed require further approval from appellant/Interglobe who allows the use of such computers for reservation and ticketing. Without the authority of appellant such computers are not capable of performing the reservation and ticketing part of the CRS system. The computer so installed cannot be shifted from one place to another even within the premises of the subscriber, leave apart the shifting of such computer from one person to another. Thus, the appellant exercises complete control over the computers installed at the premises of the subscribers. In view of our discussion in the immediately preceding paragraph, this amounts to a fixed place of business for car....
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....39/2008 and 17471/2008 ) in case of GII for such first batch of 4 years from AY 1995-96 to AY 1998-99 held the issue of PE/BC as academic as overall taxability of GII was held to be Nil. The relevant extracts from this order are re-produced as under: "These appeals were listed along with the appeals filed by Revenue against the same judgment. The appeals filed by Revenue have been dismissed by us vide our orders passed in today's date in WP(C) No. 851/2008. In view of this dismissal of those appeals of the Revenue, learned counsel for appellant submits that the question raised in these appeals have become academic and are therefore, dismissed." 25. Against the Hon'ble Delhi High Court order for AY 1995-96 to AY 1998-99, both the Income-tax department and Appellant's predecessor entity i.e. GII filed an appeal before Hon'ble Supreme Court of India vide SLP No. 6511 to 6518/2010. The Hon'ble Supreme Court vide its order dated 22 November 2019 dismissed (as withdrawn) SLP Nos. 6512 to 6515/2010 and 6517 to 6518/2010 pertaining to AY 1995-96, 1996-97 and AY 1998-99 on account of low tax effect, in consonance with circular No. 17 of 2019, leaving....
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....n'ble Delhi High Court in case of GII for first batch of 4 years and held that since factual matrix is same, the earlier decision of Hon'ble Delhi High Court in case of 25.02.2009 is squarely applicable i.e. issue of PE/BC is academic. 28. Against the Hon'ble Delhi High Court order for AY 1999-00 to 2002- 03, both the Income-tax department and Appellant's predecessor entity i.e. GII filed an appeal before Hon'ble Supreme Court of India vide SLP Nos. 2956 of 2014, 2242 of 2013, 7222 of 2013, 2241 of 2013. These SLPs are pending adjudication by Hon'ble Supreme Court. 29. In the third batch of 4 years i.e. from AY 2003-04 to AY 2006-07 in case Galileo Netherland BV (GNBV) (now known as Travelport Global Distribution System BV) (TGDSBV) (Predecessor of the Appellant and Successor of GII), the Delhi ITAT vide its order dated 29th June 2012 (ITA No. 1306 to 1309/Del/2012), dismissed the cross objections raised by GNBV on PE/BC ground. It was held that: "21. Now coming to the cross objections filed by the assessee in all these years four years. The Ld. AR did not argue the cross objections and therefore these cross objections are treated as not press....
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....h of 4 years- AY 1995-96 to 1998-99 vide its order dated 30 Nov. 2007 (19 SOT 257 (DELHI) on the basis a Function, assets and risk (FAR) analysis, held that only 15% of the revenue could be attributed to India which got completely exhausted by the commission paid to the Indian distributor/ ITQPL, resulting in no income remaining to be taxed in India. It was held as under: "9. .......................In the present case, we find that only part of CRS system operates or functions in India. The extent of work in India is 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 have entered into PCA with the appellant takes place outside India. The computer at Denver in USA processes 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 takes place outside India. The computers at the desk of travel agent in India are merely connected or configured to the extent that it can perform a booking function but are not capable of pro....
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....d. (Interglobe). Interglobe is responsible for monitoring the activities of the subscribers enrolled in India. The request originated from the computers at the desk of travel agent is once again routed through the facility of processing such information at Interglobe. If Interglobe finds that the subscriber accessing the CRS is authorized to do so, the request is further forwarded. Interglobe is also responsible for establishing connectivity of the computers of the subscribers and maintaining them. Interglobe is also responsible for training of the subscribers in respect of use of CRS. For all these services rendered by Interglobe to the appellant, it is being paid remuneration in terms of distribution agreement. Broadly the assessee receives three 'Euros' as fees per 'net booking', i.e., gross booking minus cancellation. The assessee passed one dollar to Interglobe for each net booking processed through Galileo system by subscriber. Thus, in respect of the activities carried out in India and considering the income accruing in India, remuneration paid to the Indian agents consumes the entire income accruing or arising in India..................." (Para 18 o....
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.... opinion this is not a mistake apparent from record. For computation of any income, the first point is to apportion the revenue from the operations carried out in India. Unless the revenues are attributed, the income which is a second step cannot be attributed. However, after apportioning revenue, since it was found that out of the apportioned revenue, the remuneration payable to the agent in India exceeds such apportioned revenue, no further income is taxable in India........." "............9. We find that all issues arising in the appeal have beenanswered. Neither any argument nor any ground is left out. In view of overall situation if the tribunal has consciously come to the conclusion that no income accrues in India and in respect of which elaborate reasons are given, if the applicant do not agree with the reasoning, it cannot be said that any mistake has crept in the order of the Tribunal which is rectifiable under section 254(2) of the Act. We therefore decline to interfere". 36. The Hon'ble Delhi High Court in case of Galileo International Inc (GII) (Predecessor of the Appellant) in the first batch of 4 years- AY 1995- 96 to 1998-99 upheld the decision of Hon....