TaxTMI 
TaxTMI 
2026 (9) TMI 2028
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....ons are erroneous and bad in law. 2. On the facts and circumstances of the case and in law, the Final Order and DRP Directions are barred by limitation provided u/s 153 of the Act and deserves to be held as void-ab-initio. bad in law and time-barred. 3. On the facts and circumstances of the case & in law, the Ld. AO/Hon. DRP erred in determining the income of Appellant at INR 44,44,098 as against the nil returned income declared by Appellant. 4. On the facts and in the circumstances of the case and in law, the Hon. DRP has grossly erred by failing to independently verify the additional evidences filed by Appellant and by not issuing speaking directions with respect to such additional evidences filed. This is a gross violation of section 144C(6) of the Act and the Final Order is bad in law. 5. On the facts and circumstances of the case and in law, the Ld. AO/Hon. DRP erred in holding Expedia Online Travel Services India Private Limited ("EXP-IN") to be a Dependent Agent Permanent Establishment ["DAPE") of the Appellant in India under Article 5(5) of the Double Taxation Avoidance Agreement between India and Switzerland (IN-CH DTAA']. In doing s....
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....erland. Its holding company is incorporated in Luxembourg. Its ultimate parent company is incorporated in US. The Assessee is engaged in business of providing strategic lodging services to its group company situated in India and earns commission for it. In Expedia Group compensation is earned under agency model (Hotel collects) or merchant model (Expedia collects). Assessee is involved in hotel collect model in which travelers pay lodging supplier at stay and subsequently assessee receives a commission from lodging suppliers. 4. Assessee has claimed that it works via two Indian AEs to receive support services: (i) Hotel.com India Pvt Ltd (HCOM-IN) collects credit card related hotel commission paid by Indian lodging suppliers whereas other commission are received by it directly from Indian lodging suppliers. These commission payments are received in Indian account and repatriated subsequently in foreign account. Assessee claims that it has paid HCOM-IN at arm's length price for these services. Assessee has claimed that it is its business income which is not chargeable to tax in India. It has paid equalisation levy on it. (ii) Expedia Online Travel Services I....
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.... role is limited to low level designing, coding, testing, and maintenance. With respect to the other support services provided by EXP-IN (including AM supply support), the Ld. AO leveraged responses submitted by certain indian lodging suppliers (ie.. Indian (The) Hotels Company Limited d/b/a Taj Hotels and Hotel Vellara) (collectively, the "Lodging Suppliers"), as well as materials available in public domain (I.e., Linkedin), to allege that the employees of EXP-IN are engaged in contract negotiation and conclusion on behalf of Appellant. 3. The allegations of the Ld. AO/Hon, DRP are based on wrongly interpreting the factual elements gathered during the audit proceedings, particularly with respect to the functions performed by the employees of EXP-IN. The responses from the Lodging Suppliers must be read in the right context. Moreover, the Ld. AO /Hon. DRP did not consider numerous factors that clearly undermine their conclusion, including (e., in the Final Order) only some isolated responses that could not be considered adequate to ground their claim and support their PE theory. In this regard, Appellant wishes to submit the below: 4. It should be considered that ....
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....t): communicating preapproved terms to HEP partners and helping with administrative items related to the contracting process (e.g.. preparing decks, routing contracts for signature, emailing informed stakeholders, etc.) all such services rendered at the direction of Appellant and being considered as "Implementing the strategies devised by ELPS." At no point was Ms. Joshi (or any other local AM) able to conclude any commercial aspect of a deal, explicitly lacking authority to deviate from pre-approved conditions. With regard to the detailed steps involved in HEP contract renewal and approval matrix for any non-standard terms, please refer to details at p.18-21 of the submission dated 11 Nov 2024 filed before the Hon. DRP (refer to Paperbook p.416-419). 8. The Ld. AO/Hon. DRP is misguided and misconstrued communications / liaison activities as pricing negotiations. Additionally, the Ld. AO/ Hon. DRP has not given due appreciation to internal communications among ELPS and EXP-IN leadership, as well as with regional HEP leadership in Singapore. and Ms. Joshi, whereby all commercial terms were approved outside India and contract negotiations were even handled by the ELPS Presid....
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.... provided directly to hotel partners via EPC automation, allowing them to self-serve based on robust data analytics performed by the AEs, without any necessary AM involvement. In fact, the majority of EG's interactions with hotel partners takes place on EPC without any AM involvement. Ultimately, the functions performed by local AM are only limited and auxiliary to the hotel's self-serve engagement with EPC. 12. The limited involvement of EXP-IN becomes clear when one considers the role of overseas EG's technology and online tools. As explained above, the role of EXP-IN is limited primarily to providing support and guidance to hotel partners. In short, the long-term hotel partner relationship is driven by the data analytics. not the periodic touches local AM have with hotel partners, as that interaction is standard and only a small part of the interaction a hotel partner regularly has with EG. Furthermore, the interaction any one individual AM has with a single hotel partner is short-lived given high employee tumover as well as the lifetime that any single hotel partner is within an individual's portfolio. 13. It is respectfully submitted that the ....
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....l and devoid of legal merit. The settled position, based on verified facts and authoritative review, cannot be displaced by speculative assertions and is liable to rejected. Conclusion: EXP-IN's AM functions do not create a Permanent Establishment 17. The primary function of the AMs is account management (i.e., supporting certain hotel partner relationships with EG through the supplementary communication of information the results of data analytics performed by ELPS and EXP-US) concerning the competitiveness of a given hotel partner relative to its peers in the market. In this case, the activities of EXP-IN'S AMs must be considered as mere support activities and not activities in connection with the negotiation and conclusion of contracts for several reasons: a. Simply communicating supplementary information cannot be considered an essential, revenue-generating activity. The quality of the information, its relevancy to specific hotel partners, its scope. and its feasibility (i.e., whether hotel partners can put actions/recommendations into practice) is paramount in this context. This is only achieved by substantial financial investment in innovati....
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....an HMP contract does not involve local personnel in India. It is clear from the email evidence showcased in the Final Order that local AM (specifically, Ms. Khuntia) merely contacted the partner and pointed them to the EG online portal to register and list their respective properties. Simple communication does not involve any contract negotiation, nor conclusion. Conclusion 20. Indeed, based on the analysis of domestic and treaty tax rules, it is hereby concluded that: a. EXP-IN does not qualify as an agent of ELPS as it is working on a principal-to- principal basis under a contracting arrangement: b. EXP-IN does not qualify as a dependent agent of ELPS; and c. the activities carried out by EXP-IN should be considered as support activities for which EXP-IN is already remunerated on an arm's length basis. 21. There should be no doubt that the id. AO'S/Hon. DRP's assertion of the existence of a DAPE of ELPS in India is unfounded. The activities performed by EXP-IN very clearly align with the description of activities that do not create a PE. Furthermore, it is submitted that, for a DAPE to be constituted one of the act....
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....d approach in international tax jurisprudence, supported by guidelines provided by the Organisation for Economic Co-operation and Development. 26. Furthermore, in this regard, Appellant humbly submits that such a thorough examination of all activities of EXP-IN was undertaken during BAPA proceedings recently signed between EXP-IN and CBDT vide agreement dated 16 Apr 2025. Therefore, no question arises on any further attribution of profits to the alleged DAPE in the present case (refer to Case law Paperbook p. 163-189) 27. The key points of the BAPA are summarized below: a. The Subject Year is a covered year under the BAPA and both the CSD and non-CSD support services provided by EXP-IN are covered transactions. The AM support services that the Ld. AO/Hon. DRP wrongfully concluded to have risen to the level of contract negotiation and conclusion are included in the non CSD support services covered transaction: b. The service recipient AEs with respect to the non-CSD support services provided by EXP-a ore, infer alla, Expedia Inc. and Expedia Group international Holdings I. LLC (EGIHO) Supply side functions carried on by Appellant were transferred ....
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.... the agreed mark-up in respect of these non-CSD services by filling of its modified return of income. 29. In view of the above, it is submitted that where the remuneration/arm's length mark-up has already been determined/agreed in the BAPA and offered to tax, no question arises for any further attribution. Hence, the Final Order should not be sustained. 30. Given the above facts, it is respectfully submitted that assuming, without admitting, EXP-IN constitutes a DAPE of Appellant in india-no further profit can be attributed to Appellant as EXP-IN has already been compensated for all functions performed, assets deployed and risks assumed on an arm's length basis by its AEs. 31. Accordingly, further attribution of income made by the Ld. AO is baseless and not in accordance with the law." Therefore, such adjustment should be deleted, Ground No. 7: On the facts and circumstances of the case and in law, Ld. AO grossly erred by incorrectly computing interest u/s 234B of the Act. 32. The levy of interest u/s 234B of the Act is consequential to the determination of assessed tax liability, which inter alia is dependent on the decision in ....
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....s on behalf of the assessee. v) A plain reading of all the e-mails, emanating from draft order and filed by assessee as additional evidence before DRP, reveal that Ms. Kanupriya Joshi, who is employee of Expedia India, is actively and purposefully involved in the on-going negotiations with Taj, as has been brought out by the AO in the order. The mails are internal communications of Expedia group and of Expedia India with Taj group. Taj group is addressing emails directly to Expedia India employee, Ms Kanupriya and are marking copy of mails to other employees of Expedia Group. Had the main negotiators been the employees of assessee, the e-mails would have been addressed to them and not to Ms Kanupriya, who is employee of Expedia, India. In fact, in such a case there would not have been a need of even marking email copy to Ms Knaupriya, and she would have been only a silent spectator to the negotiations. The conversations reveal that claim of assessee regarding the supply services being in the nature of account management services etc. is a completely misguiding submission and is contrary to information available in the aforesaid mails and information obtained through 133(6)....
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....necessarily all the elements, can be said to exercise the authority to conclude contracts. 'Skaar' a well-known author, proposes to apply business activity test in such situations: where the intermediary also performs activities like locating customers, explaining the conditions of the contract and finally concluding the contract on behalf of the foreign enterprise, it appears obvious that the main parts of the business were conducted by the intermediary and the constitution of an Agency PE seems to be justified. Therefore, for discussion as made above, Indian AE is acting as DAPE of assessee." vii) The other e-mails submitted by the assessee reveal that the mails have been written primarily by Kanupriya to other employees of Expedia Group and the conversation revolves around her discussions with Taj group w.r.t. the contract. She initiates discussion points within the group related to the contract with Taj group, which are further deliberated upon by the other employees of Expedia Group. Such services provided by Expedia India, by no stretch of imagination, can be considered as account management type services claimed by the assessee. viii) The assessee i....
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....ved and hence give a more unbiased view. xiii) Before DRP assessee has contended that it has 10,500 hotel partners in India whereas AO has obtained evidence from only 3 partners. The point here to notice is that all the 3 parties from whom enquires u/s 133(6) were done, submitted evidences that go against the assessee. It may also be noted that assessee has provided a handful of mails, from thousands of mails to prove its case. Therefore, on either side there are only a handful of evidences to prove its case. Since Income Tax law is a civil proceeding, what is required to be proven here is a preponderance of the evidence or balance of probabilities. It is not criminal law where a case has to be proven beyond a reasonable doubt. Moreover, the e-mails which have been submitted by the assessee itself, is evidence against the assessee and corroborates 3rd party information obtained by the AO. xiv) In order to prove its case assessee has taken recourse to its Hotel Market Partnerships which include independent properties managed through standard automated contracts and in which Expedia India employees have no role. This claim of assessee is incorrect, in view of eviden....
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.... formation of a DAPE while considering India's position on the negotiation of contracts from OECD commentary and the reservations expressed by India on the issue of conclusion of contracts. (Para 63-70). xviii) On the issue of FAR for determination of attribution of profit to PE, the ld DR submitted that FAR methodology has no legal basis in India. It is not an accepted principal or rule under Income Tax Act of DTAA. FAR methodology was introduced through revised Article 7 in OECD Model Tax Convention of year 2010. India has reserved the right to use the pre-2010 version of Article 7 in its tax treaties, completely rejecting the authorized OECD approach. It disagrees with treating a PE as a separate and independent enterprise and refuses to recognize notional intra-entity dealings or deduct executive and general administrative expenses under domestic law mechanisms. The specific, official quote of India's reservation to the revised Article 7 (Business Profits) in the OECD Model Tax Convention reads as follows: "India reserves the right to use the previous version of Article 7, i.e., the version that was included in the Model Tax Convention immediately befo....
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....ment which is not publicly available iv) In para 21 of the agreement, it is specifically mentioned that it will not have any impact on tax assessment of AEs of the assessee v) For Assessee to be covered under APA it has to make a separate application vi) The services covered under head non CDS services do not include contract negotiation services of Expedia India In view of the above, it is humbly submitted that BAPA of Expedia India does not have bearing in case of the assessee. The ld DR concluded that : 1. Expedia India has been determined as DAPE of the assessee u/A 5(5) of India- Swiss DTAA 2. Rule 10 applied instead of FAR for attribution of profits. 3. Profits attributed despite transaction being at Arm-length and without brining on record any services other than support services being provided by Expedia India to assessee. 9. We have heard the rival submissions and have perused the materials on record. Certain admitted facts, in the instant case, are the assessee, Expedia Lodging Partner Services Sarl (ELPS), is a foreign entity, incorporated in Switzerland and earns revenue in the nature of commissi....
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....or merchandise belonging to the enterprise, provided that this provision shall apply only in relation to the goods or merchandise so manufactured or processed. ^3[6.] An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it, he would not be considered an agent of an independent status within the meaning of this paragraph. ^3[7.] ******* The India-Switzerland DTAA in Article 5(5)(i), uses the formulation that a person acting for an enterprise is deemed to constitute a Agency PE where he "has and habitually exercises ... an authority to negotiate and enter into contracts" for or on behalf of the enterprise. We therefore have to determine the question whether Ms Kanupriya....
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.... formal/confirmatory. The Revenue holds that similar conduct occurred repeatedly with other Indian hotels. It is the case of the Revenue that the emails submitted by the assessee, before the DRP, clearly depict that the employees of Indian AE are negotiating and concluding contracts and are the main point of contact for the Indian Hotels. Further, the employees of Indian AE propose the final negotiating value which is discussed by the assessee and Indian AE employees, and final decision is taken based on consensus. Hence, clearly the Indian AE is functioning as the Dependent Agent PE of the assessee. 14. On the other hand, the assessee argues that the said correspondence demonstrates that Ms Kanupriya had no authority to deviate from pre-approved terms; she could neither accept nor reject commercial proposals; every counter-proposal was escalated to overseas leadership; overseas personnel negotiated the material terms; Ms Kanupriya merely communicated the final decision. The assessee further contends that HMP contracts were generated automatically through the portal and HEP negotiations were substantively undertaken by US/Swiss/Singapore leadership. The assessee stand is that Ms....
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....onstandard terms. This is evident from the correspondence during the renewal process with Taj Hotels during FY 2021 where Cyril Ranque (ELPS President) engaged in direct conversations/negotiations with the CEO of Taj Hotels. Even after this discussion, Mr. Ranque continued to be actively involved with determining commercial terms (e.g.. approving and re-approving marketing commitments) relating to Taj Hotels. We further find that the employees of EXP-IN communicated pre-approved deal terms to an HEP partner, using language and processes approved by functional leadership outside India. The rejection of any proposal or renewal term was summarized and reverted to AE Leadership for guidance and next steps, without any further discussions by local AM with the partner. Non-approved terms could not be discussed by local AM. For example, sample emails from Ms. Kanupriya Joshi (ie.. during FY 2022) to AM leadership in Singapore (ie.. Sarah Montgomery, Senior Director), Switzerland (i.e., Mr. Ranque) and the United States (ie.. Zuhairah Washington, Senior Vice President) requested their reviews and, ultimately, approvals on marketing commitments for Taj Hotels. Following the receipt of such ....
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.... had considered India's position on the OECD Commentary and accepted the proposition that, in appropriate circumstances, participation in negotiations and authority over essential elements can constitute the requisite contractual authority. The Court also considered the argument that employees in India merely participated in negotiations without formal authority to conclude contracts. The Court ultimately regarded the Indian activities as extending beyond merely preparatory negotiations where the Indian personnel were involved in core contractual matters such as price, technical specifications and other material terms. Applying the ratio of GE Energy Parts Inc, the Revenue would have a substantial case notwithstanding formal signature/approval outside India, if the evidence establishes that Ms Kanupriya had authority to negotiate the essential commercial elements, and her negotiations were routinely adopted in the final contract. The decisive distinction therefore, is whether Ms Kanupriya had the decision-making authority over negotiation of essential commercial terms, in terms of express condition enumerated in Article 5(5)(i) of the India-Swiss treaty i.e., authority to "nego....