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2023 (10) TMI 1138 - AT - Income TaxTaxability of receipts from airlines in India - PE in India - profits attributable to the PE - Whether the booking fee received by the assessee from CRS is in the nature of royalty income taxable in India? - Whether the receipts from Altea Reservation System are in the nature of royalty/FTS taxable in India? - HELD THAT - We find that the impugned issue is squarely covered in favour of the Revenue by series of Tribunal s order from AYs 1996-97 to 2019-20 in assessee s own case which has been affirmed by the Hon ble Delhi High Court 2022 (9) TMI 709 - ITAT DELHI confirming that 15% of the revenue earned by the assessee is taxable in India. Attribution of profit to the PE, the Ld. AO computed income from bookings made in India after adding back development costs, distribution fees and attributed 75% to the alleged PE - It is undisputed that the facts of the AY under consideration (i.e. AY 2020-21) and that of the earlier years are same. We find that the Hon ble Supreme Court in its decision 2023 (5) TMI 227 - SUPREME COURT has upheld the order(s) of the Hon ble Delhi High Court that 15% of the revenue earned by the assessee is taxable in India and that since the assessee pays 33% of the booking fees to the distributors, no income is attributable to tax in India. Accordingly, we deem it fit to remit this issue to the file of the Ld. AO to decide it afresh in light of the decision (supra) of the Hon ble Supreme Court. Disallowance of expenses incurred by the assessee while computing the income attributable to the PE - AO disallowed the expenditure of Euro 45,917,375/- claimed by the assessee under the head Distribution fee following the assessment order for AY 2007-08 - HELD THAT - It is not in dispute that facts of the present case and business model of the assessee and its PE in India are identical to the earlier years. We find that Tribunal has consistently decided the impugned issue in favour of the assessee in series of its orders for AYs 2007-08 to 2019-20 against which Revenue has not preferred any appeal before the Higher Forum. It can very well be inferred that the Revenue has accepted the said decision of the Delhi Tribunal which is evident from the fact that the Revenue has not challenged the impugned issue before the Delhi High Court in its appeals for earlier AYs 2007-08 till 2016-17 - we hereby allow ground of the assessee. Nature of receipts - CRS income - Royalty - taxability in India of booking fee received by the assessee as royalty both u/s 9(i)(vi) of the Act as well as under Article 13(3) of the India- Spain DTAA - AO, on an alternate basis, held that the 'booking fee' received by the assessee from various airlines is payment for use of process and scientific equipment - AR argued that in terms of section 44DA of the Act and Article 13(5) of the India-Spain DTAA payment in the nature of royalty which is effectively connected with the PE of the non-resident is required to be taxed as business income - HELD THAT - We find that the impugned issue is squarely covered by the decision of the Hon ble Delhi High Court in assessee s favour wherein it has been held that the booking fee received by the assessee is taxable as business income and not as royalty . See order dated 04.05.2023 for AY 2013-14 to 2016-17 2023 (5) TMI 1249 - DELHI HIGH COURT , order for AY 2009-10 and for AY 2012-13 - Decided in favour of assessee. Addition of payments received from various airlines in relation to the use of Altea System as royalty both u/s 9(1)(vi) and Article 13(3) of the India-Spain DTAA on the ground that the payment received by the assessee is for use of process and scientific equipment - HELD THAT - Following the order passed by the coordinate bench of the Tribunal in AYS 2007-08 to 2012-13 2021 (2) TMI 358 - ITAT DELHI 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. Levy of interest u/s 234A and 234B - HELD THAT - As regards levy of interest under section 234A of the Act, we observe that the Tribunal in its decision 2022 (9) TMI 709 - ITAT DELHI for AY 2017-18 to 2019-20 remitted the matter back to the file of Ld. AO for verification and decide the matter afresh in accordance with law. Thus we deem it fit and proper to restore this issue to the file of Ld. AO for verification as to the filing date of return viz-a viz the due date of filing of return for the year under consideration in the light of the CBDT Circular dated 30.12.2020. Levy of interest under section 234B - As in the absence of any liability for payment of advance tax since tax is deductible at source on the income of the assessee held liable to tax in India, the levy of interest under section 234B of the Act is not warranted. Further, in the present case the income has been received by the assessee after deduction of tax at source. Thus levy of interest under section 234B of the Act is not called for.
Issues Involved:
1. Existence of Permanent Establishment (PE) in India. 2. Attribution of income to the PE. 3. Taxability of booking fee as royalty income. 4. Taxability of receipts from Altea Reservation System as royalty/FTS. 5. Disallowance of expenses. 6. Levy of interest under sections 234A and 234B. Summary: 1. Existence of Permanent Establishment (PE) in India: The Tribunal upheld the findings of the AO and DRP that the assessee has a PE in India. The computers provided to travel agents and the activities of Amadeus India Pvt. Ltd. (AIPL) constituted a fixed place and dependent agent PE respectively under Article 5 of the Indo-Spain DTAA. The Tribunal dismissed the assessee's grounds on this issue, noting that the Supreme Court had upheld the attribution of 15% of the revenue earned by the assessee as taxable in India, rendering the PE existence issue academic. 2. Attribution of Income to the PE: The AO attributed 75% of the revenue to the PE, which was upheld by the DRP. However, the Tribunal remitted the issue back to the AO to decide afresh in light of the Supreme Court's decision, which confirmed that 15% of the revenue earned by the assessee is taxable in India and that the distribution fee paid by the assessee extinguished any further taxable income. 3. Taxability of Booking Fee as Royalty Income: The AO's alternative finding that the booking fee is taxable as royalty under section 9(1)(vi) of the Act and Article 13(3) of the Indo-Spain DTAA was contested. The Tribunal, following the Delhi High Court's decision, held that the booking fee is taxable as business income and not as royalty, thus allowing the assessee's grounds on this issue. 4. Taxability of Receipts from Altea Reservation System as Royalty/FTS: The AO's finding that payments received for the Altea system were taxable as royalty was challenged. The Tribunal, following earlier decisions, held that such payments are not royalty under the Act or the DTAA, as the system was accessed only by airlines at airport counters and not by the assessee's agents. The Tribunal allowed the assessee's grounds on this issue. 5. Disallowance of Expenses: The AO disallowed expenses under various heads, which was upheld by the DRP. The Tribunal, following the principle of consistency and earlier decisions, allowed the assessee's grounds, noting that similar expenses had been allowed in previous years and the Revenue had not challenged those decisions. 6. Levy of Interest under Sections 234A and 234B: For interest under section 234A, the Tribunal remitted the matter back to the AO to verify the filing date of the return vis-à-vis the due date. For interest under section 234B, the Tribunal, following earlier decisions and the Delhi High Court's affirmation, held that since the income was received after deduction of tax at source, the levy of interest was not warranted. The Tribunal partly allowed the assessee's grounds on this issue for statistical purposes. Conclusion: The Tribunal's decision was a mix of upholding and remitting issues back to the AO for fresh consideration, with significant reliance on past decisions and higher court rulings. The appeal was partly allowed for statistical purposes.
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