TMI Blog2023 (6) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus we direct the AO to adopt the attribution rate of Revenue for the Indian operations of its PE in India at 15% of gross booking fees for the year under consideration also. As assessee submits that during the assessment year under consideration i.e. AY 2015-16 also if the attribution rate to the alleged PE is considered at 15% of gross booking fees since India related expenses are more than the attributed gross booking fees to the PE in India it would extinguish the assessment as no further income would be taxable in India. In view of the above submissions of the Ld. Counsel for the assessee we direct the Assessing Officer to check the correctness of the figures before giving effect to this order. Disallowance of other expenses to 30% - HELD THAT:- We direct the AO to recompute the income/loss of the assessee by restricting the disallowance of other expenses to 30% for the year under consideration also. Grounds raised by the assessee on this issue are partly allowed. - I.T.A No.8234/Del/2018 - - - Dated:- 27-9-2022 - SHRI G.S. PANNU, HON BLE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the Assessee : Shri Ajit Jain, CA For the Revenue : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has erred in attributing 75% of the India related gross booking fee to the alleged activities of the Appellant in India and the DRP has erred in attributing 75% of the net profits before tax i.e. (India related booking fee as reduced by distribution fee) by refusing to take into consideration that the extensive operations and activities are conducted outside India. 6.1 That on the facts and in the circumstances of the case and in law, the DRP has erred in not placing reliance on the order of Hon ble Delhi High Court in assessee s own case for AY 2003-4 to AY 2006-07. The Hon ble Delhi High Court in its order dated 25th August, 2014 addressed the issue of attribution and decided the attribution of 15% of the Revenue as attributable to Indian operations. 6.2 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not placing reliance on the order of the Hon ble DRP in appellant s own case for the AY 2012-13 wherein the aforementioned Delhi High Court Order was relied upon to decide that the attribution of 15% of the revenue is attributable to Indian operation and after allowance of expenses no income is chargeable to tax in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts sales team in India; The Appellant is providing training to its distributors; The Appellant has entered into TIGADA agreement with Travelport LP. 10. That on the facts and in the circumstances of the case and in law, the Ld.AO and the DRP have erred in making factually incorrect allegations with respect to the various expenses and income. 11. That on the facts and in the circumstances of the case and in law, the authorities below have erred in charging interest u/s 234B of the Act. 12. The Appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal. 2. Ground nos. 1, 2, 3 and 12 are general in nature and they need no adjudication. Accordingly, these grounds are disposed off. 3. Ground nos. 4, 5, 5.1 and 5.2 relates to Appellant s Business Connection (BC) and Permanent Establishment (PE) in India. 4. The Ld. Counsel for the assessee at the outset submits that in so far as these grounds i.e. assessee s Business Connection/Permanent Establishment in India is concerned the Tribunal had decided the issue against the assessee by order dated 13.10.2021 for assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution has been held in favour of TIOL by Delhi ITAT vide order dated 27.09.2021 (ITA No. 163/Del/2021) by relying on the decisions of Hon ble Delhi High Court and Delhi ITAT in Company/it s predecessor s case for AY 1995-96 to AY 2006-07. 17. In para 38 of the said order reads as under: 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. 18. The adjudication of this issue taken from ITA No. 163/Del/2021 dated 27.09.2021 in the assessee s own case which is as under: Ground No.6 is covered in favour of the Appellant by virtue of the application of the decisions of Hon ble Delhi ITAT and Hon ble Delhi High Court in case of Appellant and its predecessor entities i.e. GII and TGDSBV. The Hon ble Delhi High Court and Hon ble Delhi ITAT in Appellant s own/predecessor s case i.e. GII and GNBV, have held that attribution rate to the alleged India PE is 15% of gross booking fees and since Indian related expenses are more than attributed gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons performed, assets used and risk shared in two different countries, the income can be attributed. In the present case, we have found that majority of the functions are performed outside India. Even the 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 USA, outside India. However, it is equally important 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% 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) read with section 9(1)(i) of the Act. 10. Next question to be decided as if it is found that the income accruing in India is consumed by the payment made to the agents in India, whether any income still is left to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue authorities thereafter filed. A Miscellaneous Application (MA) before the ITAT to revise the earlier order on the ground that, even after holding that the Appellant s predecessor i.e. GII has a PE in India the Hon ble ITAT erred in holding that no income was attributed to the said PE. The questions posed also included manner of attribution i.e. whether attribution is on sales or the net profits. The revenue authorities contended that the attribution should be on the net profits and not Sales This contention of the revenue authorities was rejected by the Hon ble ITAT vide its MA order dated 21 November 2008 (MA No. 108/Del/2008, 311 to 318/Del/2008 and 220 to 223/Del/2008), in case of GII in the first batch of 4 years- AY 1995-96 to 1998- 99, wherein it was held that for computation of income of an Indian PE, first step is to attribute the revenues to India and then allow deduction of India related expenses from such attributed revenue. The relevant extract of order is re-produced as under: 5. The next contention of applicant is that instead of estimating or apportioning income or profits the Tribunal has attributed the revenue. In our opinion this is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the airlines together at one place. The Tribunal was also influenced by another important fact viz., such functioning requires huge investment and huge capacity which is not available in the computers installed at the desk of the subscriber in India. On this basis, the Tribunal formed the opinion that major part of the work are processed at the host computer in Denver in USA and the activities in India are only minuscule portion. Taking into consideration all these factors the Tribunal was of the opinion that one could reasonably attribute 15% of the revenue accruing to the respondent in respect of bookings made in India as major expenses in that behalf is incurred in activities carried out in US 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% thereof should be attributed to India, keeping in view a very minor portion of the activity being carried out here. After formulating the aforesaid question, the Tribunal answered the same holding that since the revenue attributable in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the above, the Tribunal also observed that the Indian related expenses are more than the attributed gross fees to the PE in India and, therefore, it would extinguish the assessment of tax as no further income is taxable in India. The Ld. Counsel for the assessee submits that during the assessment year under consideration i.e. AY 2015-16 also if the attribution rate to the alleged PE is considered at 15% of gross booking fees since India related expenses are more than the attributed gross booking fees to the PE in India it would extinguish the assessment as no further income would be taxable in India. In view of the above submissions of the Ld. Counsel for the assessee we direct the Assessing Officer to check the correctness of the figures before giving effect to this order. Grounds raised by the assessee on this issue are partly allowed. 12. Ground nos. 7, 7.1, 7.2, 7.3, 8, 9 and 10 relate to allowability of distribution expenses and other expenses. The Ld. Counsel submits that in so far as ground no. 7.1 is concerned i.e. not following the directions of DRP and not allowing the deduction of distribution expenses despite the direction of the DRP by the Assessing Officer Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,511,669 75,676,788 79,826,594 77,519,539 67,339,472 15% of booking fee 8,254,420 10,505,329 9,976,750 11,351,518 11,973,989 11,627,931 10,100,921 Less: Distribution expenses (USD) 37,136,627 47,658,043 45,981,980 51,036,204 58,011,833 56,922,872 49,691,247 Net Loss Position (USD) (28,882,207) (37,152,714) (36,005,230) (39,684,686) (46,037,844) (45,294,941) (39,590,326) 30. The AO disallowed entire amount (100%) claimed by the assessee on account of other expenses such as royalty, vendor cost, license fee owing to non-deduction of withholding tax. From the above table, the position of the profit/loss of the assessee is evident. After deduction of the distribution exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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