TMI Blog2010 (8) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... on system. For this purpose the assessee maintained a computerized reservation system call Abacus computerized reservation system (CRS). The participating airlines provide the necessary information which was displayed to the travel agents throughout the world so that they could guide the customers who made necessary requests through CRS. The assessee had licensed the marketing right in the CRS to a marketing company in each of the Asia Pacific countries known as National Marketing Co. (NMC). The NMC of the assessee in India was Abacus Distribution System (India) Ltd. (ADSIL) which was a wholly owned subsidiary of the assessee in India. The travel agents used the equipments owned and provided by ADSIL. The messages were transmitted through the MTNL phone lines to the Societe International Telecommunications Aeronautiques (SITA) networks in all cities except in Mumbai and Delhi where the messages were transmitted through the Abacus Travel Telecommunication Transport Network (ATN) owned by ADSIL during February 1998 to December 2000. From January 2001, all cities in India were connected through SITA. 2.1 The assessee was charging fees from airlines whose tickets were booked throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia the assessee had wholly owned subsidiary i.e. ADSIL, who had no doubt entered into agreements with various travel agents in India and provided them a dedicated computer along with printers and internet lease lines. The travel agents were debarred from using these computers for any other business purpose. The revenue generated by the assessee through computerized reservation was being shared by ADSIL @ 25%. There was therefore a business connection in India. Further ADSIL was executing contracts on behalf of the assessee for providing computer hardware and software to travel agents so as to carry out the business of booking of tickets. Thus ADSIL was habitually exercising authority of appointing travel agents in India on behalf of the assessee. Therefore ADSIL was a wholly depending agent of the assessee which constituted a PE within the meaning of article 5(8) of the Tax Avoidance Treaty between India and Singapore. As regards the attribution of income to the PE, CIT(A) observed that the assessee had not produced its global profit and loss account. It was therefore not known as to what was the profitability globally from the operation of CRS. It was also observed by him that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra) was broadly identical pointed out that there were some factual differences which needed to be taken into account in attribution of income. It was submitted that Galileo International Inc. had its own CRS which was owned by it but in the present case, the assessee did not own CRS and had to make payments to SITA and Sabre Inc which was clear from the details of expenditure given at page 156 of the paper book. The assessee has thus to pay to Sabre Inc and other concerns in addition to the payment made to Indian subsidiary. It was also pointed out that the agent in India in case of the assessee was the own wholly owned subsidiary and payment to it could not be considered at arm s length price. It was argued that all these factors should be taken into account while making attribution of income. 6. In reply the Learned counsel for the assessee stated that it was not correct to say that the assessee had no CRS of its own. He referred to the assessment order as well as order of CIT(A) in which both the authorities had clearly mentioned that assessee had set up its own computer in USA to facilitate the booking of tickets. As regards the payments to SITA it was submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case, tribunal held that only 15% of receipts could be attributed to accrue/ arise in India and since the payment made by the assessee to ADSIL in India was more than 15%, there was no income attributable to PE which could be taxable in India. 7.1 We have carefully perused the order of the tribunal in the case of Galileo International Inc (supra) and we agree that the case is identical to that of the assessee. Galileo International Inc was also in the business of computerized reservation and had maintained the host computer in USA. It was also marketing the reservation work in India through agents to whom payments were being made and the nature of functions performed in India were identical to that in case of the assessee. As in case of the assessee, Galileo International Inc was also sharing the network of SITA in India. Though the agent in India in case of the assessee was its own wholly owned subsidiary we agree with the submission of the Learned counsel of the assessee that there was no reason for the assessee to inflate the payment to the subsidiary as the same was taxable in India. No material has also been on record to show that payment to the ADSIL was not at arm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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