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TMI Blog2023 (6) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... een India and the Netherlands ('DTAA'). 3. That the Assessing Officer and the DRP ought to have held that no income had accrued or deemed to accrue or received or deemed to have received by the appellant in India. 4. That on the facts & circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has business connection in India and as such is liable to tax in India as per the provisions of Act. 5. That on the facts and circumstances of the case and in law, both the Assessing Officer and the DRP have erred in holding that the Appellant has: * A fixed place PE in India under Article 5(1) of the DTAA; and * A dependent agent PE in India in the form of Inter globe Technology Quotient Private Limited ('ITQPL') under Article 5(5) of the DTAA. 5.1 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has a PE in India on the basis of the following allegations: * Provision of software by Appellant to the Distributor; * Access to Galileo CRS by the participating carriers from India; * Provision of connectivity by the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section of the Act and Article 12 of the DTAA. 7.3 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in not allowing deduction of royalty, core license fees payment for USDollar4,87,82,910/-, by erroneously holding out that such expenses were not allowed in the orders of his predecessors for the AY 2011-12. 8. The Appellant denies each and every allegation and statement made by the Assessing Officer in the impugned order and orders relied upon by him, unless the same is specifically admitted by the Appellant or is otherwise borne 9. Without prejudice to the generality of the above, the Appellant denies the following amongst other, incorrect allegations of the Assessing Officer that: * The Appellant has a PE in India in the form of fixed place business and agency PE and this finding has been upheld by the Hon'ble Delhi High Court in case of the Appellant itself; * The Appellant has business connection in India and is receiving income from the sources in India; * The payments made by the Appellant to ITQPL are in the nature of commission; * Major part of the activities of the Appellant resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the decision of the Tribunal in assessee's own case by the decisions of the Delhi High Court and the Tribunal for the assessment years 1995-96 to 2006-07 and the Tribunal in its order dated 13.10.2021 which is placed at pages 48 following the order of the Delhi High Court and the Tribunal in assessee's own case held that the attribution rate of the Revenue for the Indian operations of the PE should be 15% of gross booking fees as against 75% attributed by the AO and the DRP. 8. The Ld. DR placed reliance on the orders of the authorities below. 9. We have perused the order of the Tribunal for the assessment years 2007-08 to 2014-15 dated 13.10.2021 which is placed at page 248 of the PB and find that the issue has been decided following the orders of the Hon'ble High Court as well as the Tribunal for the earlier assessment years, wherein it was held that the correct attribution rate to be taken at 15% of gross booking fees. While holding so the Tribunal observed as under: - "15. The issue of attribution in India is covered in favour of company by the decisions of Hon'ble Delhi High Court and Delhi ITAT in Company/it's predecessor's case for AYs 1995-96 to 2006-07. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is also responsible for all other functions like keeping data or the booking made worldwide and also keeping track of all the airlines/hotels worldwide that have entered into PCA. Though no guidelines are available as to how much should be income reasonably attributable to the operations carried out in India, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing minus cancellation. The assessee passed one dollar to Interglobe for each net booking processed through Galileo system by subscriber. Thus, in respect of the activities carried out in India and considering the income accruing in India, remuneration paid to the Indian agents consumes the entire income accruing or arising in India................." "18. .................................While dealing with the question as to what is such part of income as is reasonably attributable to the operations carried out in India, we have held that only 15% of the revenue generated from the bookings made within India is taxable in India. The same proportion has to be adopted here while computing profit attributable to the PE. We have also held that since the payment to the agent in India is more than what is the income attributable to the PE in India, it extinguish the assessment as no further income is taxable in India. It is to be noted that even in the first assessment framed by the Assessing Officer, the entire expenses in the form of remuneration paid to Interglobe was held as allowable deduction and was reduced while computing the income of Appellant. If that be the case, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54(2) of the Act. We, therefore, decline to interfere." 36. The Hon'ble Delhi High Court in case of Galileo International Inc. (GII) (Predecessor of the Appellant) in the first batch of 4 years - AY 1995-96 to 1998-99 upheld the decision of Hon'le Delhi ITAT for these years, vide its order dated 25th Feb. 2009 (ITA No. 851 to 856 of 2008, 859 to 860 of 2008), it was held as under: "The Tribunal thereafter discussed the principle which is to be followed in apportioning the Income-tax accruing in India and the Income accruing outside India. The Tribunal found that only a part of CRS order operates and functions in India. The extent of working in India is only to the extent of channelizing the request and receiving the result of the process in India and the major functioning and collecting the data base of various airlines and hostels which have entered into PCA with the respondent takes place outside the India. The Tribunal also took into consideration the fact that the computer of Denver at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and Appellant's predecessor entity i.e. GII filed an appeal before Hon'ble Supreme Court of India vide SLP No. 6511 to 6518/2010. The Hon'ble Supreme Court vide its order dated 22 November 2019 dismissed (as withdrawn) SLP Nos. 6512 to 6515/2010 and 6517 to 6518/2010 pertaining to AY 1995-96, 1996-97 and AY 1998-99 on account of low tax effect, in consonance with circular No. 17 of 2019, leaving the question of laws open. 38. AY 2017-18, PE attribution at 15% of gross revenue less the expenses (as already allowed by the Ld. AO and Ld. DRP), as per the decision of the Hon'ble Delhi ITAT Benches and Hon'ble Delhi High Court, reduces the taxable income to Nil and thus, no income is taxable in India." 19. Hence, we hereby hold that the correct attribution rate be taken at 15% of the gross booking fee for the years in appeal before us. 20. As per the table (pg 240 PB), Indian related expenses are more than attributed gross booking fees to the PE in India, it would extinguish the assessment of tax as no further income is taxable in India. The AO may check the correctness of the figures before giving effect to this order." 10. Facts being identical. Respectfully following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable profit. The Tribunal, however, direct the Assessing Officer to recomputed the net losses computing the disallowance of other expenses at 30%. The Ld. Counsel for the assessee submits that after applying the attribution rate of Revenue for its PE at 15% and after allowing 100% distribution expenses and also 70% of all other expenses the computation of income attributable to the alleged PE/BC for the AY 2015-16 would result in loss of Rs.299,36,61,069/- as per the table furnished by the assessee in its Synopsis at page 8. 15. Ld. DR placed reliance on the orders of the authorities below. 16. Heard rival submissions, perused the orders of the authorities below and the Tribunal's order dated 13.10.2021 in assssee's own case for the assessment years 2007-08 to 2014-15 which is placed at page 259 of the Paper Book. 17. On perusal of the order of the Tribunal, we observe that the Tribunal restricted the disallowance of other expenses to 30% observing as under: "29. The following table depicts the position of negative profits computed post allowance of booking fee and distribution expenses: Particulars AY 07-08 AY 08-09 AY 09-10 AY 10-11 AY 11-12 AY 12-13 AY 14-15 B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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