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2022 (9) TMI 709 - AT - Income TaxIncome deemed to accrue or arise in India - Permanent establishment - Indo-Spain Treaty - computers installed at the premises of the subscribers constitutes a PE of the taxpayer in India in terms of Article 5(1) of India Spain Tax Treaty - HELD THAT - AR for the taxpayer fairly submitted that this issue has been decided by Hon ble High Court against the taxpayer in its own case for AYs 1996-97 to 2006-07 2007 (11) TMI 330 - ITAT DELHI-B and held that computers installed at the premises of the subscriber constitute a PE of the assessee in India in terms of Article 5 (1) of Indo-Spain Treaty . It is also held that since the Amadeus India is functionally dependent upon the assessee it also constitutes an agency PE in India in terms of Article 5 (iv) of the Indo-Spain Treaty . Aforesaid appeals bearing the identical facts of the taxpayer s case decided in which it is held that the assessee constitutes an agency PE . By following the consistency the additions made by the AO/DRP in the present Appeals are hereby confirmed. Computing the profit attribution to the PE of the assessee in India - By following the orders passed by the coordinate Bench of the Tribunal in earlier years and the Judgment of the jurisdiction High Court 2011 (5) TMI 1114 - DELHI HIGH COURT we are of the considered view that since there is no change in the business model and facts of the cases at hand and the extent nature of the activities of the PE in India and abroad and the assets employed and risk assumed is same as in the earlier years distribution fee paid in those years approximately of the booking fee per segment no further addition can be made during the year under assessment. Disallowance of expenditure under the head of Development fees and under the heads of Central Operating cost while computing the income attributed to the tax payers PE in India - HELD THAT - The very same issue has also been decided in favour of the taxpayer by the Tribunal 2020 (11) TMI 206 - ITAT DELHI for AYs 2007-08 to 2012-13. It is also not in dispute that facts of the present case and business model of the taxpayer and its PE in India are identical to the earlier years. As gone through the history of such expenditure and find that the addition is being made owing to confusion in the description of the services as export of processed data/software or distribution fee - we hereby allow the claim of distribution expenses. Royalty receipts - Booking fee received by the assessee held to be taxable in India as royalty both u/s 9 (1)(vi) of the Act and Article 13(3) of the Treaty - HELD THAT - The Coordinate Bench of the Tribunal in Assessee s own case for AYs 2007- 08 to 2012-13 which was affirmed by the Hon ble Delhi High Court 2011 (5) TMI 1114 - DELHI HIGH COURT held that booking fee received by the taxpayer is taxable as business income and not under the head royalty . Payments received by the assessee from various airlines in relation to the use of Altea System Taxable in India as royalty both u/s 9(1)(vi) of the Act and Article 13(3) of the Treaty - HELD THAT - Following the order passed by the coordinate Bench of the Tribunal in AYs 2007-08 to 2012-13 we are of the considered view that payment received by the taxpayer from British Airways in relation to alleged use of Altea system cannot be characterized as royalty either under the Act or under the Indo- Spain Treaty because Altea system was installed at the airport and was accessed only by the airlines and not by the Amadeus s agents viz. Resbird Amadeus India and that during the year the said system was available to British Airways for the aforesaid purpose and that too only at the airport counter and the said software was not available outside the Indian airport or to any of the agents of the taxpayer since the agents were booking the tickets only through the CRS of the taxpayer. Interest u/s 234A - contention of the assessee that the return was filed well within the due date if that is the fact the question of levying interest u/s 234A does not arise - HELD THAT - We deem it fit to restore the said issue to the file of the A.O to verify the date of return and also the due date for filing the income tax return for the year under consideration and decide the matter afresh in accordance with law. Interest u/s 234B - We are of the considered opinion that since the income has been received by the assessee after deduction of tax at source the proviso is not applicable to the case of the assessee. Non granting of credit of the TDS claimed by the assessee - On hearing both the sides we deem it fit to restore the said issue to the file of the A.O with a direction to grant credit of the TDS in accordance with law after verifying the materials available on record.
Issues Involved:
1. Computation of income. 2. Permanent establishment (PE) and attribution of income. 3. Taxability of CRS income as royalty. 4. Taxability of Altea system payments as royalty. 5. Levying of interest under Section 234A and 234B. 6. Grant of TDS credit. Detailed Analysis: 1. Computation of Income: The assessing officer computed the appellant's income at Rs. 661,28,11,902/- against the 'Nil' income returned by the appellant. The appellant contested the computation, asserting that the assessing officer erred in alleging avoidance of furnishing specific information required for assessment. 2. Permanent Establishment (PE) and Attribution of Income: The Dispute Resolution Panel (DRP) and assessing officer held the appellant liable to tax in India for receipts from airlines related to segments booked through the appellant's computer reservation system (CRS). They determined that the computers, electronic hardware/software, and connectivity provided to travel agents constituted a PE in India under Article 5 of the Indo-Spain DTAA. Additionally, Amadeus India (P.) Ltd. (AIPL) was considered a dependent agent PE of the appellant in India. The DRP/assessing officer attributed Rs. 448,41,17,951/- as profits to the alleged PE in India. The tribunal confirmed that computers installed at subscribers' premises constituted a PE in India, following the High Court's decision in the appellant's case for earlier years. However, it held that only 15% of the revenue relating to bookings made from India should be attributed to the appellant's PE in India, consistent with previous tribunal decisions and the High Court's affirmation. 3. Taxability of CRS Income as Royalty: The DRP/assessing officer alternatively held that the booking fee received by the appellant was taxable as 'royalty' under Section 9(1)(vi) of the Act and Article 13(3) of the Treaty. The tribunal, following the coordinate Bench's decision and the High Court's affirmation, held that the booking fee received by the appellant is taxable as business income and not under the head 'royalty'. 4. Taxability of Altea System Payments as Royalty: The DRP/assessing officer held that payments received by the appellant from airlines for the use of the Altea system were taxable as 'royalty'. The tribunal, referencing the coordinate Bench's decision for earlier years, concluded that the Altea system payments could not be characterized as 'royalty' under the Act or the Treaty, as the system was accessed only by airlines at airport counters and not by the appellant's agents. 5. Levying of Interest Under Section 234A and 234B: The tribunal remanded the issue of levying interest under Section 234A to the assessing officer to verify the filing date of the return and decide accordingly. Regarding interest under Section 234B, the tribunal held that since the appellant's income was received after tax deduction at source, the levy of interest was not warranted, consistent with earlier tribunal decisions. 6. Grant of TDS Credit: The tribunal restored the issue of granting TDS credit to the assessing officer, directing them to verify the materials on record and grant the credit in accordance with the law. Conclusion: The appeals were partly allowed for statistical purposes, with significant reliance on consistency with previous tribunal decisions and High Court affirmations. The tribunal upheld the DRP/assessing officer's findings on the PE and attribution of income but ruled in favor of the appellant regarding the taxability of CRS income and Altea system payments as business income, not royalty. The issues of interest under Section 234A and TDS credit were remanded for further verification.
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