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2021 (9) TMI 123 - AT - Income TaxRectification of mistake - Income deemed to accrue or arise in India - determination of income attributable to India - as argued Tribunal while adjudicating the Ground of appeal No. 6 had failed to consider the main arguments /submissions of the assessee on the basis of which it had assailed the taxability of certain revenues in its hands, viz. (i). membership fees; (ii). fees for IATA Clearing House Facility (ICH facility); and (iii). BSP Link charges - HELD THAT - As the Tribunal had failed to address and therein adjudicate the specific contentions that were raised by the assessee in the course of the hearing of the appeal in furtherance of its claim that the aforesaid revenues, viz. (i). membership fees; (ii). fees for IATA Clearing House Facility (ICH facility); and (iii). BSP Link charges were not taxable in India, therefore, to the said extent the order passed by it while disposing off the assessee s appeal 2021 (6) TMI 2 - ITAT MUMBAI suffers from a mistake which being apparent from record renders the order amenable for rectification under sub-section (2) of Sec. 254.
Issues Involved:
1. Taxability of membership fees. 2. Taxability of fees for IATA Clearing House Facility (ICH facility). 3. Taxability of BSP Link charges. 4. Principle of mutuality. 5. Attribution of income to Permanent Establishment (PE). Detailed Analysis: 1. Taxability of Membership Fees: The assessee contended that membership fees collected by IATA Canada should not be taxed in India as they are independent of the BSP activities undertaken by the Indian branch. The Tribunal observed that the assessee failed to demonstrate that the activities related to the collection of membership dues were conducted outside India. The Tribunal directed the Assessing Officer (A.O) to verify if the collection of membership dues was carried out directly outside India. If verified, the addition made by the A.O would be vacated. The Tribunal's decision was based on the principle that only the portion of profits attributable to the PE in India is taxable in India. 2. Taxability of Fees for IATA Clearing House Facility (ICH Facility): The assessee argued that the ICH facility fees should not be taxed in India as the services were provided and fees received outside India. The Tribunal noted that the A.O/Dispute Resolution Panel (DRP) did not accept this claim due to a lack of evidence. The Tribunal, referring to the Supreme Court judgment in Ishikawajima Harima Heavy Industries Co. Ltd. Vs. DIT, held that only profits attributable to the PE’s role in India are taxable. The Tribunal restored the matter to the A.O for verification of the assessee's claim that ICH services were provided directly outside India. 3. Taxability of BSP Link Charges: The assessee claimed that BSP Link charges collected for onward payment to Accelya World SLU, Spain, without any markup, should not be taxed as they are reimbursements. The Tribunal agreed that if the charges were collected without any markup, they should not be taxed as business income. The Tribunal directed the A.O to verify this claim and delete the addition if found correct. 4. Principle of Mutuality: The assessee argued that the revenues from membership fees, ICH facility fees, and BSP Link charges should not be taxed based on the principle of mutuality. The Tribunal noted that the A.O/DRP rejected the mutuality claim as the assessee did not satisfy the requisite conditions. The Tribunal did not specifically adjudicate on this principle but focused on the attribution of income to the PE. 5. Attribution of Income to Permanent Establishment (PE): The Tribunal emphasized that the income attributable to a PE in India should be based on the extent of the role played by the PE in generating that income. The Tribunal referred to the Supreme Court's judgment in Ishikawajima Harima Heavy Industries Co. Ltd. Vs. DIT, which limits the tax on business profits to those arising from the operations of the PE. The Tribunal restored the matters to the A.O for verification of the claims regarding the role of the PE in the respective transactions. Conclusion: The Tribunal found that its previous order failed to address the specific contentions raised by the assessee regarding the taxability of membership fees, ICH facility fees, and BSP Link charges. The order was recalled for fresh adjudication on these issues, and the matter was restored to the A.O for verification of the claims. The application filed by the assessee was allowed, and the case was scheduled for a hearing on 30.09.2021.
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