TaxTMI 
TaxTMI 
2023 (6) TMI 378
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....sions of the Double Taxation Avoidance Agreement between India and the Netherlands ('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 Inter globe 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 on the basis of the following allegations: * Provision of software by Appellant to the Distributor; * Access to....
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....ternational LLC, USA ('GILLC'), Galileo International Technology, LLC ('GIT') and Travelport LP ('TLP') are chargeable to tax in India as per the provisions of section of the Act and Article 12 of the DTAA. 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 deduction of royalty, core license fees payment for USDollar4,87,82,910/-, by erroneously holding out that such expenses were not allowed in the orders of his predecessors for the AY 2011-12. 8. The Appellant denies each and every allegation and statement made by the Assessing Officer in the impugned order and orders relied upon by him, unless the same is specifically admitted by the Appellant or is otherwise borne 9. Without prejudice to the generality of the above, the Appellant denies the following amongst other, incorrect allegations of the Assessing Officer that: * The Appellant has a PE in India in the form of fixed place business and agency PE and this finding has been upheld by the Hon'ble Delhi High Court in case of the Appellant itself; * The Appellant has business connection in India and is rec....
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....essee in respect of BC/PE are decided against the assessee. 6. Ground nos. 6, 6.1 and 6.2 relates to excess attribution of Revenue to India operations in respect of PE in India. 7. The Ld. Counsel for the assessee submits that this issue is also covered by the decision of the Tribunal in assessee's own case by the decisions of the Delhi High Court and the Tribunal for the assessment years 1995-96 to 2006-07 and the Tribunal in its order dated 13.10.2021 which is placed at pages 48 following the order of the Delhi High Court and the Tribunal in assessee's own case held that the attribution rate of the Revenue for the Indian operations of the PE should be 15% of gross booking fees as against 75% attributed by the AO and the DRP. 8. The Ld. DR placed reliance on the orders of the authorities below. 9. We have perused the order of the Tribunal for the assessment years 2007-08 to 2014-15 dated 13.10.2021 which is placed at page 248 of the PB and find that the issue has been decided following the orders of the Hon'ble High Court as well as the Tribunal for the earlier assessment years, wherein it was held that the correct attribution rate to be taken at 15% of gross booking f....
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....resent 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 processing the data of all the airlines together at one place. Such function requires huge investment and huge capacity, which is not available to the computers installed at the desk of subscriber in India. The major part of the work or to say a lion's share of such activity, 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 a....
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....ng 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................." "18. .................................While dealing with the question as to what is such part of income as is reasonably attributable to the operations carried out in India, we have held that only 15% of the revenue generated from the bookings made within India is taxable in India. The same proportion has to be adopted here while computing profit attributable to the PE. We have also held that since the payment to the agent in India is more than what is the income attributable to the PE in India, it extinguish the asse....
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....nd 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'le Delhi ITAT for these years, vide its order dated 25th Feb. 2009 (ITA No. 851 to 856 of 2008, 859 to 860 of 2008), it was held as under: "The Tribunal thereafter discussed the principle which is to be followed in apportioning the Income-tax accruing in India and the Income accruing outside India. The Tribunal found that only a part of CRS order operates and functions in India. The extent of working in India is only to the extent of channelizing the request and receiving the result of the process in India and the major functioning and collecting the data base of various airlines and h....
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....e judgment of the Supreme Court in Morgan Stanley & Co. Inc.'s case (supra)". 'We, therefore, are of the opinion that no question of law arises in these matters which needs any further determination by this Court. These appeals are accordingly dismissed in limine." 37. 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 the question of laws open. 38. AY 2017-18, PE attribution at 15% of gross revenue less the expenses (as already allowed by the Ld. AO and Ld. DRP), as per the decision of the Hon'ble Delhi ITAT Benches and Hon'ble Delhi High Court, reduces the taxable income to Nil and thus, no income is taxable in India." 19. Hence, we hereby hold that the correct attribution rate be taken at 15% of the ....
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....7.1 of grounds of appeal is dismissed as not pressed. 14. Coming to other grounds other than 7.1 the Ld. Counsel submits that the Tribunal decided this issue partly in favour of the assessee in its order dated 13.10.2021 for the assessment years 2007-08 to 2014-15. The Ld. Counsel submits that the Tribunal held that after deduction of the distribution expenses and 15% booking fees the assessee is left with no taxable profit. The Tribunal, however, direct the Assessing Officer to recomputed the net losses computing the disallowance of other expenses at 30%. The Ld. Counsel for the assessee submits that after applying the attribution rate of Revenue for its PE at 15% and after allowing 100% distribution expenses and also 70% of all other expenses the computation of income attributable to the alleged PE/BC for the AY 2015-16 would result in loss of Rs.299,36,61,069/- as per the table furnished by the assessee in its Synopsis at page 8. 15. Ld. DR placed reliance on the orders of the authorities below. 16. Heard rival submissions, perused the orders of the authorities below and the Tribunal's order dated 13.10.2021 in assssee's own case for the assessment years 2007-08 to 2014....