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TMI Blog2012 (7) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter back to the file of the AO for fresh consideration by adopting a reasonable and commercial test for estimation of business attributable to India and net taxable income which could have been said to have accrued to appellant due to bookings from India - in favour of revenue. - I.T.A. No.1306 to 1309/Del/2012 - - - Dated:- 29-6-2012 - SHRI R.P. TOLANI, AND SHRI T.S. KAPOOR, JJ. Appellant by : Shri D.K. Gupta, CIT-DR. Respondent by : Shri Amar Dave, Advocate. ORDER PER TS KAPOOR, AM: These are four appeals filed by the revenue against the order of Ld CIT(A)-XXIV, New Delhi dated 1.12.2011 for assessment years 2003- ITA No1306 to 1309/Del/12 CO 169 to172/Del/12 04, 2004-05, 2005-06 2006-07. The assessee has filed cross objections to these appeals which are listed as C.O. Nos. 169 to 172/Del/2012. These appeals and cross objections were heard together. Therefore, for the sake of convenience, these are disposed off through a single consolidated order. The grounds of appeal for all the four years are common which are reproduced below:- 1. On the facts and in the circumstances of the case, the ld CIT(A) has erred in restricting the attributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has further erred in applying the provisions of Article 5 of the DTAA by holding that the Respondent has a permanent establishment ("PE") in India. 3.2. On the facts and circumstances of the case and in law, the ld. ACIT has erred and the Hon'ble CIT(A) has further erred in holding that the computers of the travel agents in India constitute a fixed place of business under Article 5(1) of the DTAA, of the Respondent in India. 3.3. On the facts and circumstances of the case and in law, the ld. ACIT has erred and the Hon'ble CIT(A) has further erred in holding that Interglobe Enterprises Private Limited through its subsidiary, Galileo India Private Limited ('the distributor company' of the Respondent In India), constitutes a PE of the Respondent in India under Article 5(5)(a) of the DTAA. 3.4. The Id. ACIT has erred in basing his conclusion, and the Hon'ble CIT (A) has further erred in upholding, that the distributor company is a dependent agent of the Respondent by relying, inter alia, upon unsubstantiated allegations, for instance: the Respondent operates in India through M/s Galileo India (P) Ltd; the services of the Respondent are utilised in India by the travel agent; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent, and for any other amounts deductible in computing the Respondent's income. 6. Apportionment of income 6.1. The Id. ACIT and the Hon'ble CIT (A) have erred in the interpretation of the provisions of the Act, inter alia, as they ought to have held that in the absence of any operations in India, the respondent is not liable to tax in India. 6.2. The ld. ACIT and the Hon'ble CIT (A) ought to have held that no part of the Respondent's income is attributable to the Respondent's alleged PE in India. 6.3. Without prejudice to ground 6.2 above, the Id. ACIT erred in arbitrarily imputing 75% of the profits generated from the transactions under consideration as attributable to the Respondent's alleged PE in India. The Hon'ble CIT(A) has further erred in arbitrarily imputing 15% of the profits generated from the transactions under consideration as attributable to the Respondent's alleged PE in India 7. Interpretation of the Act and the relevant agreement 7.1. The Id. ACIT and the Hon'ble CIT (A) have erred in their interpretation and application of the provisions of the Act and the DTAA to the facts of the Respondent's case. 7.2. The ld. ACIT and Hon'ble CIT (A) have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further erred in not adjudicating upon the said penalty proceedings u/s 271 (1)( c). 12. All the above grounds of cross-objection are independent and without prejudice to one another 13. The Respondent craves leave to supplement, to cancel, to amend, to add and/or otherwise to alter/modify any or all the ground(s) of cross objection stated herein above. 14. On the facts and in the circumstances of the case and in law, the order passed by the Id ACIT is bad in law and is liable to be quashed. 3. The brief facts of the case are that M/s Gallileo International Inc. is a U.S. Corporation incorporated in the business of providing electronic distribution services to the travel industry through Computerized Reservation System (CRS). The CRS is an automated system which processes booking data and other data to provide the following functions:- 1. The ability to display flight schedules and seat availability. 2. The ability to display and/or quote airline fare. 3. The ability to make airline seat reservation. 4. The ability to issue airline tickets. 5. The ability to perform any or all of the functions similar to the above functions in respect of hotel, car and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent agent of the appellant within the meaning of article 5 (4) (a) and article 5 (4)( c) of DTAA as it used to conclude contracts on behalf of the appellant and also secured orders wholly for the appellant. On these basis, the Assessing Officer held that a major part of the business activity of the appellant is attributable to its PE in India. Accordingly, he held that 75% of profits generated from Indian operation is attributable to the alleged PE of the appellant in India. While framing assessment order for the assessment year 2003-04 the Assessing Officer took gross booking fees of 34414293 $ and allowed expenses to the extent of 20594360 $ as subscriber fees and vendor cost. Further a deduction of 5% was allowed u/s 44C of the Act and out of the balance 13128936 $ taxable income has been taken at Rs.98,46,702/- (being 75% of Rs.13128936). The same basis was taken for calculation of taxable profits for the years 2004-05, 2005-06 2006-07. 8. Aggrieved, the assessee filed appeal before the Ld CIT(A) and made the following submissions:- 1. That it does not have any business connection in India and even assuming while denying that it has business connection in India no inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, he submitted that no income is taxable in India based upon the above order of the Hon'ble Tribunal and further confirmed by Hon'ble High Court. The Ld CIT(A) considering the submissions made by the Ld AR deleted the additions made by the Assessing Officer. The relevant portion of Ld CIT(A) s order is reproduced below:- I have carefully considered the appellant s submission. The points raised by the Assessing Officer in the assessment order for the years under consideration, judicial pronouncements relied upon by the appellant and the ITAT Delhi order in the appellant s own case for assessment years 1995-96 to 1998-99. Admittedly the facts of the case for the years under consideration are similar to the facts for the assessment years covered in the Tribunal order. Keeping in view the above facts, that the decision of Hon'ble ITAT Delhi Benches in the appellant s own case has been upheld by the Hon'ble Delhi High Court and which is binding upon the subordinated judicial authorities including the undersigned it is held as under:- The appellant is held to have business connection in India and hence interms of section 9(1)(i) income from booking made from India and income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initely not when it is assured of the losses for all times to come. The ld DR further argued that had there been any loss to the assessee from its India operation it would not have been expanding its business through various travel agents in India. The Ld DR also contended that with increase in globalization international tourism particularly in India has increased manifold and this has necessitated much larger involvement of PE in India which is playing a significant role in revenue generation and therefore he argued that much larger profits are to be attributed to the PE as its performing significant function in India. In support of his claim, the Ld DR put reliance on the Hon'ble ITAT Delhi Bench decision in the case of Amadus Global Travels Distribution in I.T.A. No.,107 108/Del/2008 dated 27.4.2009. The Ld DR argued that on similar facts the Hon'ble ITAT had remitted the matter back to the file of assessee for fresh consideration. The Ld DR brought to our notice that Hon'ble ITAT had not considered the contention of Ld AR that it s case was covered by the case of Gallio Int. which was decided vide order dated 21.11.2008 on which Ld AR had put his reliance during appellate pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the Ld DR relates to the assessment year 2001-02 2002-03 and was decided on 27.4.2009 i.e. after the earlier order of Hon'ble ITAT dated 21st November, 2008. similarly, the Hon'ble Delhi High Court had refused to intervene in both the cases i.e. one filed by the revenue and the other filed by the assessee. In the first case relating to assessee for the assessment years 1995-96 to 1998-99 wherein the ITAT had attributed 15% as attributable to operation in India, the High Court had held as under:- Nothing has been urged before us either on behalf of the assessee appellant or on behalf of the revenue-respondent to assail the finding of the Tribunal in the supplementary statement of case. The question is as to what proportion of the profit of the sale in categories (a), (b) ( c) (d) arose or accrued in British India is essentially one of the fact depending upon the circumstances of the case. In the absence of some statutory or other fixed formula any finding on the question or proportion involves some element of guess work. The endeavour can only be a approximate and there cannot be in the very nature of things be great precision and exactness in the matter. As long as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for years to come without considering the change in facts and circumstances. The estimation of profits attributable to Indian operations should ideally be based upon number of bookings originating from India viz-a-viz total bookings in a particular year and consideration of global accounts. That comparison can easily lead to a fair estimation of percentage of total business attributable to Indian operations. Similarly expenditure attributable to Indian operations can be calculated on some sound commercial basis keeping in view the bookings from India or in the alternative the Assessing Officer can calculate net profits attributable to India operations by calculating proportionate net profits of the company with respect to bookings from India viz-a-viz total bookings. With these directions, we remit the matter back to the file of the Assessing Officer for fresh consideration by adopting a reasonable and commercial test for estimation of business attributable to India and net taxable income which could have been said to have accrued to appellant due to bookings from India. To determine the profits attributable to Indian operations, Assessing Officer may verify the global accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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