2025 (6) TMI 1812 - AT - Service Tax

Taxability - reverse charge mechanism - online information and database access or retrieval OIDAR services - services provided by Computer Reservation System CRS Companies to M/s. Air India Ltd. - what is that information or data which was contractually agreed to be provided by the CRS Companies? - HELD THAT - What transpires from the agreement is that entire data base of the CRS Companies has been created by accessing information from the appellant and other various airlines. The appellant only intended to use the infrastructure set up by the CRS Companies to facilitate a better booking mechanism for travel agents. The CRS Companies were only obliged to ensure that the information of the appellant could reach the travel agents on real time basis. Thus the transaction between the appellant and the CRS Companies cannot be treated as provision of OIDAR service by the CRS Companies to the appellant. The appellant had not associated with the CRS Companies for receiving such data/information for the purpose of the agreement was to promote and increase the number of bookings by providing seamless interface by the travel agents and the consideration is dependent on the number of bookings. Consideration is not payable for the provision of data. It also needs to be noted that data pertaining to other airlines is not provided to the appellant - the expression providing data/information in the context of OIDAR service would mean to supply such data/information which was previously not available to the service recipient. Thus what is of paramount is the ownership of such data/information intended to be provided. It cannot therefore be urged that foreign CRS Companies provided any data/information to the appellant. Conclusion - The services provided by CRS Companies to the appellant would not be taxable under the category of OIDAR services. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal on merits.

Summary

The core legal question considered by the Tribunal was whether the services provided by Computer Reservation System (CRS) Companies to the appellant airline would be taxable under the category of "online information and database access or retrieval" (OIDAR) services on a reverse charge basis under the Finance Act, 1994. This issue arose due to conflicting precedents regarding the taxability of such services when the data involved belongs to the service recipient rather than the service provider.

At the heart of the dispute was whether CRS Companies, which provide infrastructure and software enabling travel agents to book airline tickets, were rendering OIDAR services to the appellant airline, thereby attracting service tax liability under reverse charge provisions. The appellant contended that the CRS Companies did not provide any data or information to it, as the data belonged to the appellant itself and was merely processed or displayed by CRS. The Department argued that the CRS Companies did provide OIDAR services and the appellant was liable to pay service tax accordingly.

The Tribunal identified the following key issues for detailed analysis:

• Whether the services rendered by CRS Companies fall within the definition of OIDAR services under the Finance Act;
• Whether the ownership of data or information is a determinative factor in establishing the taxability of OIDAR services;
• The interpretation and application of relevant statutory provisions and precedents on OIDAR services;
• The nature and substance of the contractual arrangements between the appellant and CRS Companies;
• The applicability and correctness of conflicting Tribunal decisions on the issue.

Issue-wise Detailed Analysis:

1. Definition and Taxability of OIDAR Services

The Tribunal examined section 65(75) and section 65(105)(zh) of the Finance Act, which define and make taxable the category of OIDAR services. OIDAR services are defined as "providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network." The Information Technology Act definitions of "data," "information," "electronic form," and "computer network" were also considered to understand the scope of OIDAR services.

The Court emphasized that for a service to qualify as OIDAR, it must involve the provision of data or information that is accessible or retrievable by the recipient electronically.

2. Ownership of Data and Its Relevance

A central point of contention was whether the ownership of data affects the taxability of OIDAR services. The appellant relied heavily on the decision in United Telecom Limited, where the Tribunal held that since the data was generated and owned by the Andhra Pradesh Government, the service provider did not "provide" data to the recipient, and thus OIDAR service tax was not leviable. Similarly, decisions in State Bank of India and PVR Ltd. reiterated that if the data belongs to the service recipient, the service provider cannot be said to have provided OIDAR services.

The Tribunal analyzed the meaning of "providing" data or information, referring to dictionary definitions which uniformly describe "providing" as giving or supplying something previously unavailable to the recipient. It concluded that "providing data/information" in the OIDAR context means supplying data that the recipient did not already possess. Hence, if the data belongs to the service recipient, the service provider cannot be deemed to have provided such data under OIDAR.

3. Nature of Services Rendered by CRS Companies

The Tribunal examined the working of CRS Companies and the contractual arrangements, particularly the agreement with Abacus Distribution Systems Pte Limited. The CRS Companies provide a computerized reservation system infrastructure that aggregates data from multiple airlines, including the appellant, and enables travel agents to access schedules, fares, and availability on a single platform for seamless booking.

The appellant provides its flight data to CRS Companies, which is converted and displayed to travel agents. The CRS Companies facilitate booking by travel agents and provide reports to the appellant. The appellant pays fees based on successful bookings, not merely for data access.

The Tribunal observed that the CRS Companies act as facilitators or intermediaries, providing infrastructure and software enabling ticket bookings, rather than supplying data to the appellant. The primary purpose of the contract was to enhance the appellant's outreach and increase bookings, not to provide data or information to the appellant. The consideration was linked to bookings, not mere data provision.

4. Analysis of Conflicting Tribunal Decisions

The Tribunal noted conflicting precedents: United Telecom held that ownership of data is relevant and no OIDAR service tax applies if data belongs to the recipient; British Airways and Jet Airways held that services by CRS Companies are taxable under OIDAR, without considering data ownership; and State Bank of India and PVR supported United Telecom's view.

The Tribunal critically examined British Airways and Jet Airways decisions, finding that they did not engage with the ownership issue or the rationale in United Telecom. The distinction drawn in British Airways between forward charge and reverse charge levy was found to be unsustainable as a basis for ignoring United Telecom's principle.

Consequently, the Tribunal held that United Telecom lays down the correct legal position, namely that OIDAR services cannot be said to be rendered when the data belongs to the service recipient.

5. Application of Law to Facts and Treatment of Competing Arguments

The Tribunal applied the statutory definitions and contractual terms to the facts, concluding that the CRS Companies do not provide data or information to the appellant but merely provide access to the appellant's own data to travel agents via their infrastructure. The appellant is not dependent on CRS Companies to receive data about bookings, as the data is updated internally in real time.

The Tribunal rejected the Department's argument that CRS Companies provide OIDAR services by virtue of enabling access to data, emphasizing that the data must be owned by the service provider to constitute OIDAR services. The ancillary provision of data or reports to the appellant was considered incidental and insufficient to change the nature of the transaction.

The Tribunal also underscored the primacy of the contract's terms in determining the nature of the service and tax liability, relying on authoritative precedents that contractual intention governs the classification of services.

Significant Holdings:

"The expression 'providing data/information' in the context of OIDAR service would mean to supply such data/information which was previously not available to the service recipient. Thus, what is of paramount is the ownership of such data/information intended to be provided."

"The services provided by CRS Companies to the appellant would not be taxable under the category of OIDAR services and the decision of the Tribunal in United Telecom lays down the correct position of law."

"The primary purpose of the agreement was to achieve greater outreach and thereby increase the number of bookings of the appellant. If the intention of the parties was the provision and receipt of data, then service itself would have ended once data/information were shared by the CRS Companies and it would not be material whether the travel agents were successful in booking tickets."

"It cannot, therefore, be urged that foreign CRS Companies provided any data/information to the appellant."

"The ancillary or incidental activities undertaken in the course of achieving the ultimate objective of the contract would not determine the nature of the transaction."

In conclusion, the Tribunal answered the reference by holding that the services provided by CRS Companies to the appellant airline do not constitute taxable OIDAR services under the Finance Act, as the data involved belongs to the appellant and the CRS Companies merely provide infrastructure and facilitation services. The decision in United Telecom is authoritative and correctly states the law on this issue.