TaxTMI 
TaxTMI 
2026 (2) TMI 450
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.... Sr. No. Type of transaction Amount received (in Rs. ) 1. Commission or brokerage 10,39,73,058 2. Payment to NRI 6,10,15,545 3. Interest income 1,02,045 4. Profession/technical fee 19,40,501 5. Payment to contractor 30,36,661 Total 17,00,67,810 2.1 In absence of ITR source of funds and the tax liability of income of Rs. 17,67,810/- could not be ascertained which remained unexplained. The assessee was show caused vide notice u/s 148A(b) of the Act dated 25.03.2022 as to why notice u/s 148 of the Act should not be issued. The assessee did not file any response. Notice u/s 148 of the Act dated 11.04.2022 was issued along with order u/s 148A(d) dated 11.04.2022 of the Act after approval of the competent authority as per Section 149(1)(b) and u/s 151(i) of the Act. The assessee filed return of income for AY: 2018-19 on 18.05.2022 declaring nil income and tax payable nil or nil refund claim. Notice u/s 143(2) of the Act dated 28.06.2023 and notice u/s 142(1) dated 19.01.2023, 28.06.2023, 08.11.2023 and 26.03.2024 along with detailed questionnaire were issued to the assessee. The assessee made compliance electronicall....
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....the "Taxes")) and such other extra's, fees and surcharges which are included in the offered rate at the time of booking of the room by a Guest on the Platforms (such as breakfasts, meals (half-board or full board), bicycle rental, late check outs/early check in fees, extra person charges, resort fees, roll-away beds, theatre tickets, service fees, etc.), (iii) the number of booked rooms by the Guest, and (iv) the relevant Commission percentage set out in the Agreement....." It is also pertinent to point out para 2.4.2 of the contract which puts the onus of withholding taxes and related compliances on the accommodations - "...2.4.2 The Accommodation is responsible for withholding and reporting relevant taxes (i.e. mentioned above in 2.4.1 under d) applicable to the Commission due to Booking.com according to the relevant tax regulations and the practices and requests of the tax authorities. The Accommodation shall bear and be responsible for the payment and remittance of the taxes applicable to the Commission (payments) and the associated late payment interests and penalties imposed by the tax authority for failing to withhold and report any taxes applicable to ....
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....d-party accommodations in India from whom the Appellant earns commission on booking of rooms by the end-users, constitute Permanent Establishment ('PE') of the Appellant in India under Article 5 of the India Netherlands Tax Treaty ('the Tax Treaty'), without any cogent reasons, factual material, or legal basis. 3.2 The Ld. AO and Ld. DRP have grossly erred in not appreciating the facts and erroneously stated in the assessment order that the Appellant has travel agents in India whereas, the Appellant does not have any agent in India, and end-users book the rooms directly using its website/ mobile application and also make payment for the room tariff directly to the third party accommodations. The Appellant receives commission from third party accommodation owners only for bookings made through its website/ mobile application. 3.3 The Ld. AO and Ld. DRP have erred in applying the facts of other taxpayers to the Appellant's case, while wrongly assuming that the Appellant has travel agents in India. This imaginary fact appears to have been copied from the facts of other assessee companies providing CRS services without application of mind and ignor....
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....tion 151 of the Act before initiating reassessment proceedings even after multiple requests from the Assessee. 10. That the Ld. AO erred in initiating penalty proceedings under section 270A of the Act on account of alleged underreporting of income by way of misreporting. 11. That the above grounds of appeal are independent and without prejudice to one another. 12. That the Appellant reserves its right to add, alter, amend and/or modify any ground of appeal before or at the time of hearing of this appeal." 7. Ld. Authorized Representative for appellant assessee submitted that ld. AO ad DRP erred in holding that the assessee's income amounting to Rs. 396,09,81,782/- is chargeable to tax in India. Ld. AO and DRP erred in holding that the assessee constitutes a PE fixed place PE and dependant agent PE without any basis. 8. The Appellant, a Netherlands-based company eligible for benefits under the India-Netherlands DTAA (*the DTAA'), operates a Digital Platform for online Accommodations' reservations. The platform is hosted outside India and enables Accommodations (e.g., hotels, guesthouses) all over the world to list room availability and set pr....
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....al basis; there is no element of agency involved. Even if, Principal- Agent relationship is to be assumed between the Accommodation and the Appellant, considering the flow of funds by the Accommodations to the Appellant (for payment of commission), the Appellant could, at the highest, be constituted to be agency of the Accommodations and not the other way round. 17. The assessing officer has miserably failed to discharge the onus of establishing that the Appellant has fixed place PE in India and to attribute the earning of commission income to such (alleged) fixed place PE (in India). 18. Recognizing the need to tax the digital/ new age economy for which the existing tax framework was considered inadequate, the Government of India introduced the provisions of Significant Economic Presence ('SEP') from the subject AY. As per the provisions of Explanation 2A to section 9(1)(i) of Income-tax Act, 1961 ('the Act'), the significant economic presence of a non-resident in India is deemed to constitute "business connection" in India. SEP was defined to mean transaction in respect of any goods, services or property carried out by a non-resident with any person in India....
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.... taxes withheld by the Accommodations) and the inference drawn that income chargeable to tax has escaped assessment. 24. In the case of Progress Rail Locomotive Inc. v. DCIT [2024] 466 ITR 76 (Delhi), the Hon'ble Delhi High Court quashed the reassessment proceedings. 25. Ld. Departmental Representative submitted that it is to state that the above two decisions still hold good and issue of PE and attribution of 15% of income to such PE has been upheld by higher courts in case of Galileo and Amadeus. Therefore, the ratio of the above cases is applicable to case of MAPL and similarly placed cases; however, attribution of income is a fact based exercise wherein functions performed, assets deployed and risk assumed determine the quantum of income attribution. 26. Conclusion: In view of above, the assessee-company's protected software or portal offers facility to the clients to login, to furnish some data and then access reports generated after the data is analyzed. Further, the assessee which allows its travel agents/clients to have access to the main Booking Interface System/Processor owned/at the disposal of the group entity, in order to execute/process the requests o....
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....ideration is nothing other than Royalty and this has been further elaborated later in this order. 4.5.1 The assessee also submitted that the consideration for services rendered does not fall in the ambit of fee for technical services as provided in section 9(1)(vii) of the Income-tax Act. Though royalty being a more specific clause, and as the services being rendered by the assessee, as discussed above clearly fall in the ambit of Royalty, there is no requirement to separately deal with this argument. However, the reasoning given by the assessee is nevertheless controverted hereunder. 4.5.2 The assessee bas stated that FTS means any consideration including any lump sum consideration)for the rendering of any managerial, technical or consultancy services including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient chargeable under the bead Salaries. The assessee has picked up the definition of Consultancy Services from Black's law dictionary as "The act of asking the advice or opinion of someone (such as lawyer)" or Webs....
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.... c) Tribunals and AARs have repeatedly held that where the receipts from India of a non-resident are not chargeable to tax in India, such a non-resident is not liable to file Rol in India. Reliance in this regard may be placed on the following rulings: 30. The Ld. AR placed reliance on the following judgments: (page 7 to 10) i. ACIT, Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 161 Taxman 316 (SC) ii. ACIT, International Taxation, Vs. Sabre Decision Technologies International LLC [2023] 152 taxmann.com 51 (Delhi- ITAT) iii. Master Card Asia Pacific Ltd. Vs. [2018] 94 taxmann.com 195 (AAR- New Delhi) 31. From examination of record, in light of aforesaid rival contention it is crystal clear that assessee is a Netherland based company eligible for benefit under India-Netherland DTAA operates digital platform for online accommodations reservations outside India and enables accommodation for example hostel guest houses all over the world to list room availability and set prices independently using a self-service tool. The assessee acts as a intermediary/aggregator between bookers and accommodations. Reservations are concluded directly between....