TMI Blog2010 (10) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... rtant to note that but for the presence of the assessee in India and the configuration and 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 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 chargeable u/s. 5(2) r/w s.9(1)(i). Therefore, we found that the appeals of the department are covered by the aforementioned observations of the Tribunal. Respectfully following the same, we found no merit in departmental appeals and they are dismissed. CIT(A) has correctly held that assessee has PE in India and his findings in this regard are in accordance with the aforementioned order - We dismiss the cross-objections filed by the assessee. - Mr. G. E. Veerabhadrappa, VICE-PRESIDENT AND Mr. I.P BANSAL, JUDICIAL MEMBER For the Appellant : Mrs. Pratima Kaushik, Sr. DR and Ashok Pandey, CIT-DR For the Respondent : Ajay Vohra, Roopesh Jain and Sachit Jolly, Advs. ORDER I.P. Bansal, Judicial Member All these appeals are filed by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. 22.10.2009. Grounds raised by the assessee :- 1. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in holding the appellant liable to tax in India in respect of receipts from airlines and other service providers, relating to segments booked from India through the appellant's Computer Reservation System ('CRS'). 2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in holding that the appellant had a 'permanent establishment' ('PE') in India, in terms of the Double Taxation Avoidance Agreement ('DTAA') entered into between India and Spain. 2.1 That the CIT(A) erred on facts and in law in holding that computers provided to the travel agents, through which the bookings were made using the appellant's CRS constituted fixed place of business and, therefore, a PE of the appellant in India, in terms of paragraph (1) of Article 5 of the DTAA between India and Spain. 2.2 That the CIT(A) erred on facts and in law in not appreciating that the activities of the appellant in India were of auxiliary and preparatory character and, therefore, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said issue against the assessee and to keep the matter alive, the assessee is pressing through the cross-objections regarding the decision of the Tribunal vide which it has been held that assessee has PE in India. 7. We have heard both the parties on this issue. So as it relates to the attribution of income arising to assessee in India, the issue is covered by para 18 of the aforementioned order of the Tribunal dated 30.11.2007. The said para is reproduced below:- 18. The next question therefore, arises is whether having held that there is business connection in India, how much income is chargeable to tax in India. As per s.9(1)(i) of the Act, income accruing or arising whether directly or indirectly through or from any business connection in India shall be deemed to accrue or arise in India. As per cl.(a) of Expln. 1 to s. 9(1)(i) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Thus in a given case if all the operations are not carried out in India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the presence of the assessee in India and the configuration and 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 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 chargeable under s. 5(2) r/w s.9(1)(i) of the Act. 8. Therefore, after hearing both the parties, we found that the appeals of the department are covered by the aforementioned observations of the Tribunal. Respectfully following the same, we found no merit in departmental appeals and they are dismissed. 9. So as it relates to cross-objections filed by the assessee, the issue is covered by the following observations of the Tribunal in the aforementioned order dated 30.11.2007:- '17.1 The first question before us is whether there is any business connection in India within the meaning of s. 9(1)(i) of the Act. The scope of total income is described in s.5 of the IT Act. As per s. 5(2), the total income of a person, who is a non-resident to the extent which is received or deemed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of the non-resident and the activity in the taxable territories, a stray or isolated transaction is normally not to be regarded as a business connection. Business connection may take several forms. It may include carrying on a part of the main business or activity incidental to the main business of the non-resident through an agent or it may merely be a relation between the business of the non-resident and the activity in the taxable territories, which facilitates or assists the carrying on of that business. In each case, the question whether there is a business connection from or through which income, profits or gains arise or accrue to a non-resident must be determined upon the facts and circumstances of the case. A relation to be a business connection must be real and intimate, and through or from which income must accrue or arise whether directly or indirectly to the non-resident. But it must in all cases be remembered that by s.42, income, profit or gain which accrues or arises to a non resident outside the taxable territories is sought to be brought within the net of the IT law, and not income, profit or gain which accrues or arises or is deemed to accrue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all cases is configured and connected to such an extent that such computers can initiate or generate a request for reservation and also receive the information in this regard so as to enable the subscriber to book the airlines seat or hotel room. The request which originated from the subscriber's computer ended at the subscriber's computer and on the basis of information made available to the subscriber, reservations were also possible. It is to be noted that all the subscribers in respect of which income is held taxable are situated in India. The equipment i.e. computer in some cases and the connectivity as well as configuration of the computer in all the cases are provided by the appellant. The booking takes place in India on the basis of the presence of such seamless CRS system. On the basis of booking made by the travel agent in India, the income generates to the appellant. But for the booking no income accrues to the appellant. Time and again it is contended that the whole of the processing work is carried out at host computer situated at Erding in Germany and only the display of information is in India for the proposition that there is no business connection in In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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