2017 (1) TMI 1160 - HC - Income Tax

Income attribution to India - tenability of the order of ITAT to the extent it attributed 15% of the assessee s income to India? - assessee provides online airline booking services. It is a Delaware, USA based limited partnership concern and a tax resident of the USA - Held that - In the present case, the AO had based his conclusions and determined the income based upon figures furnished by the assessee, as is apparent from a plain reading of the order. In the circumstances, the ITAT, in our opinion, ought not to have disturbed that order, without appropriate hearing. In view of the conclusions recorded by us, the present ITA is disposed off with a direction to the ITAT to render specific findings on the questions discussed.

Summary

Issues: Condonation of delay, Permanent Establishment (PE) determination, Attribution of income to India operations

Condonation of Delay:
The judgment addresses applications seeking condonation of delay in re-filing and filing the appeal. The delay of 58 days in re-filing and 20 days in filing the appeal is condoned based on reasons stated in the applications. The appeal is taken on record after condoning the delay.

Permanent Establishment (PE) Determination:
The case involves an assessee providing online airline booking services, a USA-based limited partnership concern and tax resident. The Income Tax Appellate Tribunal (ITAT) held that the assessee had a Permanent Establishment (PE) in India under the Double Taxation Avoidance Agreement (DTAA) between India and the USA. The Tribunal analyzed the income derived by the assessee from its PE, resulting in a net taxable income of US Dollar 73,376, converted to ?13,24,707. The Commissioner of Income Tax (Appeals) rejected the assessee's plea, including an upward revision request under Rule 46A. The ITAT attributed 15% of income to the assessee's India operations in line with a previous court judgment.

Attribution of Income to India Operations:
The Revenue contested the attribution of 15% income to the assessee's India operations, arguing that specific details were available, making the attribution unnecessary. The assessee's counsel defended the ITAT's decision, citing the precedent of Galileo International Inc.'s case. The Court noted the Revenue's challenge to the ITAT's order and emphasized that the ITAT should not have altered the order without proper consideration, especially when the AO based conclusions on information provided by the assessee. The appeal was allowed, directing the ITAT to provide specific findings on the discussed questions.

This detailed analysis encompasses the issues of condonation of delay, PE determination, and attribution of income to India operations, highlighting the key arguments, decisions, and directions provided in the judgment by the Delhi High Court.