TMI Blog2009 (2) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... s court. These appeals are accordingly dismissed in limine - ITA NO 851/08, ITA NO 852/08, ITA NO 853/08, ITA NO 854/08, ITA NO 855/08, ITA NO 856/08, ITA NO 859/08, ITA NO 860/08 - - - Dated:- 25-2-2009 - SIKRI A. K., SURESH KAIT, JJ. Judgment: A. K. Sikri J.- 1. Galileo International Inc. Ltd. (respondent herein) is a company incorporated under the laws of the USA. It is thus a resident of the USA. It carries on the business of maintaining and operating the sys-tem for providing electronic global distribution of services to airlines, hotels, and tour and cab operators by connecting to travel agents utilizing a computerized reservation system (CRS). 2. This CRS, inter alia includes a system which receives, processes, stores and disseminates data about flight schedules, seat/room availability, fare information and provision for booking capabilities etc. The respondent has the same business activities in India as well. 3. As noted by the Income-tax Appellate Tribunal in its impugned judgments, there are six players in the business, namely the passenger or the traveller, the travel agents, Interglobe, i.e., respondent's agent in India, Sita and other travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable to tax in India under section 5(2) of the Income-tax Act as it had business connections in India as per section 9(1)(i) of the said Act. While discussing the extent to which it is taxable, the Tribunal was of the opinion that 15 per cent. of 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. Since the respondent is charg-ing Euro 3 per booking as noted above, 15 per cent. thereof would come to 0.45 Euro. Thereafter, it dealt with the question as to how much income-tax from the above is consumed by payments made to the agents in India. Taking note of the fact that Interglobe is paid one Euro per booking, the Tribunal concluded that after paying the said commission, there is no income or profits which is charged to tax in India. 7. It is not necessary to discuss the findings of the Tribunal in respect of other issues framed by the Tribunal. Suffice is to mention that the Tribunal has returned the findings of fact that the respondent has its permanent establishment in India and in this behalf the following findings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (DTAA) with the USA also enumerates the concept of attribution of "profits" and not revenue. 10. This contention of learned counsel for the appellant may appear to be attractive in the first blush. However, when we go through the findings as recorded by the learned Tribunal, we find that the test which is adopted is that attribution of profits and not the revenue. 11. While deciding the first question namely whether any income of the respondent is chargeable to tax in India and if yes, to what extent, the Tribunal giving its findings that business income of the respondent, though a non-resident is taxable in India as it has business connections in India. The Tribunal discussed the extent of such income which is taxable in India. In that behalf the first exercise which they undertook was to assess the revenue which could be attributed to operations in India and thereafter the Tribunal had gone through the discussion on profits. This would be mani-fest from the reading of paragraph 9 of the impugned judgment wherein the question is formulated in the following manner : "The next question, therefore, arises is whether having held that there is business connection in India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risk shared in two different countries, the income can be attributed. In the present case, we have found that majority of the assets i.e., host computer which is having very large capacity which processes information of all the participants is situated outside India. The CRS as a whole is developed and maintained outside India. The risk in this regard entirely rests with the appellant and that is in the USA, outside India. However, it is equally important to note that but for the presence of the assessee in India and the configuration and the connectivity being provided in India, the income would not have generated. Thus the initial cause of generation of income is in India also. On the basis of the above facts we can reasonably attribute 15 per cent. of the revenue accruing to the assessee in respect of bookings made in India as income accruing or arising in India and charge-able under section 5(2) read with section 9(1)(i) of the Act." 13. Thus, the approach adopted by the Tribunal was to first arrive at the figure relating to the revenue generated in India and abroad. It concluded that out of the revenue accrued to the respondent in respect of these bookings 15 per cent. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution of income. In view of our aforesaid analysis of the judgment of the learned Tribunal, this contention is clearly misconceived. 20. It was next contended by the learned counsel for the appellant that the conditions stipulated in paragraph 6 sub-paragraph (c) of Circular No. 23 were not satisfied and, therefore, no reliance could be placed on the afore-said circular. The said sub-paragraph (c) reads as under : "Where a non-resident's sales to Indian customers are secured through the services of an agent in India, the assessment in India of the income arising out of the transaction will be limited to the amount of profit which is attributable to the agent's services, provided that- (i) the non-resident principal's business activities in India are wholly channelled through his agent, (ii) the contracts to sell are made outside India, and (iii) the sales are made on a principal-to-principal basis. In the assessment of the amount of profits, allowance will be made for the expenses incurred, including the agent's commission, in making the sales. If the agent's commission fully represents the value of the profit attributable to his service ; it should prima faci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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