TMI Blog2014 (8) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... on taken after due application of mind should be followed consistently as this lead to certainty, unless there are valid and good reasons for deviating and not accepting the earlier decision. The role performed by the computers in India or the Indian agents was to merely get connected or be configured so that the travel agents could perform the booking function - The computers in India were not capable of processing data, which was processed abroad - the functions required huge investment and capacity, which was not installed and available in the computers at the desk of the travel agents in India but were available in the host computer in the USA - it was looking at the nature and the character of the functions undertaken in India viz., the functions and assets outside India, 15% was attributed to India - This worked out to Euro 0.45 and this was less than the commission of Euro 1, which was paid by the appellant-assessee to the distributor in India - The Tribunal has wrongly observed that earlier appellant-assessee was in losses - There is no such finding in the earlier orders - assessee was maintaining globalised accounts and India specific attribution of profits/losses was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers as attributable to the assessee s income arising in India, is inapplicable to the assessment years in question for the reasons mentioned in its impugned order? 2. Did the Tribunal fall into error in departing from its reasoning in the case of the assessee s predecessor for the period 1995-96 to 2000-2003 [sic, 2002-2003] through different orders? 3. Whether the Tribunal fell into error in applying the ratio of Amadeus in disregard of the order of this Court in the concerned appeals? 4. Whether on the facts and in the circumstances of the case and in law the ITAT ought to have held that even if any income of the appellant could be attributed to India, the same stood exhausted by the expense incurred by the appellant in India, resulting in the appellant having no tax liability in India? 4. The appellant, a company incorporated in Netherlands at the relevant time was engaged in the business of providing electronic distribution services to travel industry through Computerised Reservation System (CRS). CRS is an automated system which processes booking data and other data and provides the following functions:- 1. Display flight schedules and seat availability. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ookings made in India. The appellant-assessee received these payments outside India. The appellant-assessee did not receive any payment from the travel agents in India. The appellant-assessee had received Euro 3 for each completed booking from the airline etc. The appellant-assessee had paid Euro 1 for each completed booking to their distributor in India. 8. As noticed above, the sole question and dispute in the present appeals relate to computation or assessment of the profits/income attributable to Indian operations, i.e. income earned by the appellant-assessee through and from their PE in India. Other aspects and issues need not be examined in these appeals. 9. The Assessing Officer held that as per Explanation to Section 9(1)(i) of Income Tax Act, 1961 (Act, in short) where all business operations were not carried out in India, the income of business deemed as taxable in India shall only be such part of income as was reasonably attributable to the operations carried out in India. Article 7(2) of the Indo-Netherlands Tax Treaty states that only profits attributable to the PE were taxable in the State where the PE existed. He held that major part of business activity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of attributable income to the Indian operations, he observed that Functions, Assets and Risk (FAR) Analysis was undertaken by the Tribunal for the Assessment Years 1995-96 to 1998-99 and the facts for the year under consideration being identical, 15% of the revenue accruing or arising in India was reasonable attribution towards income accruing or arising to the appellant-assessee in India and chargeable under Section 5(2) read with Section 9(1)(i) of the Act. He further observed that Tribunal had in earlier years held that the payment made to the Indian distributor (i.e. Euro 1) was more than the income attributable to India (15% of Euro 3 or Euro 0.45), thus, extinguishing the appellant-assessee s liability to pay tax. With regard to Circular No. 23 relied on by the Tribunal in the said case it was observed that the withdrawal would be effective from 22nd October, 2009, i.e., prospectively and not retrospectively. Thus, the remuneration paid by the appellant-assessee to Galileo India Limited, the distributor for the functions carried out in India, being more than the income attributable to the appellant assessee s earning from India, extinguished their tax liability. This meant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Tribunal is reproduced below:- Apropos the other issue i.e. estimate about the expenditure of profits of PE in India we are unable to accept the contentions of ld. counsels that the issue is covered in its favour inasmuch as, the Tribunal gave above decision on the peculiar facts of that year. Looking at globalization the share of Indian travellers in terms of booking has increased considerably. Besides the extent of assessee's expenses is not known which has been informed that such expenditure cannot be apportioned. In view thereof we are inclined to set aside the issue about the estimate of taxability of India PE back to the file of Assessing Officer to consider our observations and above ITAT and High Court judgment to decide the same afresh in accordance with law and above observations after giving the assessee an opportunity of being heard. 18. On assessee's appeal to High Court, the High Court had refused to interfere in the order of ITAT. 19. From the facts of the case and from two citations of Hon'ble High Court and Hon'ble Tribunal's order in assessee's own case and in the case of Amadeous Travels (supra), we are of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the decision of the Tribunal in the case of Amadeus Global Travel Distribution, who was engaged in the identical business and were competitors of the appellant-assessee. Appeal filed by Amadeus Global Travel Distribution for the Assessment Years 2001-02 and 2002-03 came up for hearing before the Tribunal and was decided by order dated 27th April, 2009. The Tribunal observed that the High Court had already decided and held that 15% of the operations were attributable to India but nothing would be taxable as the expenses incurred were more. In the result, the taxable income of Indian PE was nil as there were no taxable profits. However, in spite of the aforementioned observations, agreeing with the submissions made by the Departmental Representatives, Tribunal in order dated 27th April, 2009 held:- 4. Learned DR, on the other hand, contends that it is not the ratio of the Tribunal that for all years to come there will be no income, inasmuch as the number of travellers in India have hugely increased resulting in an increase in the percentage of share of Indian revenue and profits. Therefore, the ITAT judgment apropos estimation cannot be held as applicable to all the subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at the finding of fact that the assessee is having permanent establishment in India. However, limited grievance of the learned counsel for the appellant is that even when the Income Tax Appellate Tribunal has accepted that the income chargeable to tax shall be 15% of the income earned in India, in Para 6 of the impugned order, the ITAT has sent the matter back to the Assessing Officer to consider the question of apportionment of the expenses. Para 6 reads as under: 6. Apropos the other issue i.e. estimate about the expenditure of profits of PE in India we are unable to accept the contentions of ld. counsels that the issue is covered in its favour inasmuch as, the Tribunal gave above decision on the peculiar facts of that year. Looking at globalization the share of Indian travellers in terms of booking has increased considerably. Besides the extent of assessee's expenses is not known it has been informed that such expenditure cannot be apportioned. In view thereof we are inclined to set aside the issue about the estimate of taxability of India PE back to the file of Assessing Officer to consider our observations and above ITAT and High Court judgment to decide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. The appeals filed by the Revenue on the said aspect have been dismissed. One such appeal relates to Assessment Year 2005-06. 18. The aforesaid decisions by Coordinate Division Benches are binding on us and we do not think it will be appropriate to disregard and not follow the said orders. Appropriately appeals by the Revenue are pending before the Supreme Court and the issues and questions can be decided there. Division Benches of the Delhi High Court have specifically rejected the plea and submission that globalisation by itself mandates and requires change in 15% formula for attribution profits to Indian PE. 19. We are aware that each assessment year is separate and distinct and principle of res judicata does not apply to proceedings for subsequent or other years. However, decision on an issue or question though not binding should be followed and not ignored unless there are good and sufficient reasons to take a different view. Thus, it was/is possible for the Assessing Officer to depart from the finding or a decision in one year as it is final and conclusive only in relation to a particular year for which it is made but as observed in Radhasoami Satsang versus Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (sic USA) is also responsible for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CRS operations and functions were performed in India. These were limited to the extent of generating the request and receiving the result in India. The major functioning, i.e., collecting data bases with various airlines, hotels etc. and entering or feeding them into the computer took place outside India. It was in the computer in Denver, USA that various processed data with regard to schedule of flights timing, pricing, availability, meal preference, special facilities etc. was stored and process undertaken. The role performed by the computers in India or the Indian agents was to merely get connected or be configured so that the travel agents could perform the booking function. The computers in India were not capable of processing data, which was processed abroad. Further, the functions required huge investment and capacity, which was not installed and available in the computers at the desk of the travel agents in India but were available in the host computer in the USA. Thus, it was looking at the nature and the character of the functions undertaken in India viz., the functions and assets outside India, 15% was attributed to India. (Aspect of risk has not been discussed but it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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