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TMI Blog2021 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of Sec. 254. - M.A No.131/MUM/2021 (Arising out of ITA No. 587/Mum/2016) - - - Dated:- 24-8-2021 - Shri Pramod Kumar (Vice President) And Shri Ravish Sood (Judicial Member) For the Assessee : Shri Porus Kaka, Senior Advocate For the Revenue : Shri Sunil Deshpande, D.R ORDER PER RAVISH SOOD, J.M: The present miscellaneous application filed by the assessee applicant arises from the order passed by the Tribunal in ITA No. 587/Mum/2016, dated 08.01.2021 for A.Y. 2012-13. 2. On a perusal of the application, we find that it is stated by the assessee applicant that the Tribunal while adjudicating the Ground of appeal No. 6 of the abovementioned appeal 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. It is the claim of the assessee applicant that as the Tribunal had disposed off the Ground of appeal No. 6 without considering the main arguments/submissions of the assessee, therefore, the same had rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted by Hon ble DRP and learned AO in case of Appellant's own branch i.e. IATA India branch in AY 2014-15 and A.Y. 2012-13. Further, the RBI has granted a specific approval to IATA India branch for carrying out its operations activities in India, wherein the RBI clearly slates that IATA India Branch is permitted to undertake only the activity of Billing and settlement related ('BSP') services on a non-Commercial and not-for-profit basis. 3. During the course of the hearing and vide submission dated 21 January 2020. it was reiterated that the Hon'ble DRP has accepted IATA India Branch's claim for mutuality in AY 2014-15 and passed detailed directions on the satisfaction of all the 3 tests, i.e. (i) complete identity of contributors and the recipients/participants; (ii) instrumentality of the assessee in carrying out the mandates of its members; and (iii), impossibility of the assessee deriving any profit from contribution or non-involvement of commerciality. The said order was duly followed in A.Y. 2012-13 as well (kindly refer to page nos. 80 to 81 of the submission dated 21 January 2020- re-enclosed as Annexure 2). 4. Accordingly, once the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the Tribunal to adjudicate on the issue of taxability of the aforesaid revenues in the hands of the assessee had rendered its order as suffering from a mistake apparent from record that was rectifiable under sub-section (2) of Sec. 254 of the Act. 4. Per contra, the ld. Departmental Representative (for short D.R ) relied on the order passed by the Tribunal. It was submitted by the ld. D.R that as no mistake was apparent from the record, therefore, the application filed by the assessee applicant did not merit acceptance. 5. We have heard the ld. Authorized Representatives for both the parties and perused the order passed by the Tribunal while disposing off the assessee s appeal in ITA No. 587/Mum/2016, dated 08.01.2021. As is discernible from the records, the assessee appellant vide its Ground No. 6 had assailed the taxing of the membership fees, BSP Link Charges and fees of IATA Clearing House Facility (ICH Facility) as business profits under Article 7 of the India-Canada tax treaty by the A.O, as under: Ground No. 6 - Collection of membership fees, BSP Link charges and fees for IATA Clearing House facility' ('ICH facility') In relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits' under Article 7 of the India - Canada tax treaty. g. Erred in not accepting the contentions of the Appellant that as the ICH facility is provided by the Appellant outside India and the income is also received by the Appellant in a bank account maintained outside India, the revenues pertaining to the said ICH facility cannot be taxed as business profits in India under Article 7 of the India - Canada tax treaty. h. Erred in failing to provide any reason or basis for deeming that the receipts in relation to the ICH facility provided by the Appellant outside India are related to the IATA branch office in India which is specifically involved in providing BSP services as per the approval of the RBI. In relation to attribution of profits i. Erred in estimating 40% of the gross receipts of the Appellant as being the income attributable to the FE (i.e, the Indian branch office) in India, on an arbitrary and ad-hoc basis; and ii. Erred in estimating 90% of the gross receipts attributed to the PE of the Appellant in India, as being the profits attributable to such FE in India, on an arbitrary and ad-hoc basis. As is discernible from the records, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the backdrop of the aforesaid facts, it was submitted before the lower authorities that the assessee viz. IATA, Canada had merely acted as a facilitator/intermediary in relation to the invoices raised and the payments collected from the agents and the airlines in relation to the BSP Link charges. As such, it was the claim of the assessee that in the absence of any income element in the recovery of the BSP charges from the airlines and agents (through IATA India branch), the same could not have been brought to tax in the hands of the assessee. In sum and substance, it was the claim of the assessee before the lower authorities that as the collection of the BSP charges by the assessee viz. IATA, Canada from airlines and agents (through IATA India branch) for onward remittance to Accelya World SLU, Spain, without any mark-up, was in the nature of a reimbursement, thus, in the absence of any income element the same could not have been brought to tax as the business income of the assessee under Article 7 of the India-Canada tax treaty. Apart from that, the assessee had also assailed the assessing of the BSP charges owing to the principle of mutuality . However, the contentions advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O to delete the addition of BSP charges in the hands of the assessee. In the backdrop of our aforesaid observations, we are of the considered view that collection of the BSP charges by the assessee from the airlines and agents for onward remittance to Accelya World SLU, Spain, without any mark-up, cannot be held to be its business income . But then, as the said aspect had not been looked into by the A.O/DRP, we therefore in all fairness restore the matter to the file of the A.O for the limited purpose of verifying the same. In case the claim of the assessee that the BSP Link charges were collected by it for onward remittance to Accelya World SLU, Spain, without any mark-up, is found to be in order, then the addition made by the A.O to the said extent shall stand deleted. The Grounds of appeal No.6(d e) raised by the assessee are allowed for statistical purposes. (B). IATA CLEARING HOUSE FACILITY (ICH FACILITY) : (i). The assessee viz. IATA, Canada, provided the ICH facility to the air transport industry across the globe. Through the ICH facility the assessee viz. IATA, Canada enabled the world airlines and industry suppliers to settle their passenger, cargo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ada tax treaty. In sum and substance, it was the claim of the assessee that as its Indian PE viz. IATA India branch which as per the approval of RBI was not permitted to undertake any activity apart from the BSP services had no role in providing of the ICH services which were provided outside India, therefore, the fees therein received by the assessee could not be attributed to the said PE. However, the A.O/DRP did not find favour with the aforesaid claim of the assessee. Observing, that the assessee had not demonstrated that the activities pertaining to ICH facility were being conducted by the assessee, viz. IATA, Canada directly from outside India, the DRP concurred with the view taken by the A.O that the fees pertaining to ICH facility was liable to be assessed as the business income of the assessee under Article 7 of the India-Canada tax treaty. (ii). We have given a thoughtful consideration to the contentions advanced by the authorised representatives for both the parties in context of the aforesaid issue under consideration, and have perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements that have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a turnkey project executed in India, therefore, consideration received by the assessee company for rendition of such services could not be brought to tax in India. Referring to Article 7 of the DTAA, it was observed by the Hon ble Apex Court that the same limits the tax on business profits to that arising from the operations of the PE. It was observed by the Hon ble Court, that as in the case before them the entire services were rendered outside India, and had nothing to do with the PE, therefore, nothing could be attributed to the PE and thus brought to tax in India. Apart from that, it was observed by the Hon ble Apex Court that in case of composite transactions which have some operations in one territory and some in others, the principle of apportionment has to be essentially applied in order to determine the taxability of various operations. In the backdrop of the aforesaid settled position of law, the amount of profit that would be attributable to a PE would be on the basis of the extent appropriate to the role played by the PE in the transaction from which revenue has been generated. We are unable to subscribe to the manner in which the A.O/DRP had summarily rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership of the assesse corporation, viz. IATA, Canada, the members obtain certain benefits, viz. IATA operational safety audit; security and facilitation; product distribution; physical publications; training activities; attending annual general meetings and world air transport summit etc. However, a member in order to avail any of the aforesaid services has to pay a separate fees for the same. Apart from that, upon payment of the membership fees to the assessee, viz. IATA, Canada, the member airlines and the strategic partners get information about the various services provided by the assessee corporation. (ii). In the backdrop of its claim that the assessee corporation was regulated by the principle of mutuality, it was submitted by the assessee that the aforesaid receipts were not exigible to tax. However, the A.O/DRP being of the view that the assessee corporation failed to cumulatively satisfy the requisite conditions to invoke the principle of mutuality, viz. (i). complete identity of contributors and the recipients/participants; (ii). instrumentality of the assessee in carrying out the mandates of its members; and (iii). impossibility of the assessee deriving any profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee that though IATA-India branch constituted a PE of the assessee in India as per Article 5(2)(b) of the India-Canada tax treaty, but then, as the collection of the membership dues by the assessee, viz. IATA, Canada was carried out directly outside India, therefore, the same could not have been attributed to the IATA-India branch, we find was rejected by the DRP, for the reason, that the assessee had not demonstrated that the activities pertaining to collection of the membership dues were being carried out by the assessee, viz. IATA, Canada, outside India. We are in agreement with the claim of the assessee that amount of profit that would be attributable to a PE would be on the basis of the extent appropriate to the role played by the PE in those transactions. In a case where the transactions had taken place outside India, the same cannot be attributed to the PE, because the PE had no role to play in such transactions. As such, only the portion of profits which are attributable to the PE in India are taxable in India, and the revenue from functions/activities carried outside India cannot be taxed in India. Our aforesaid view is fortified by the judgment of the Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h documentary evidence. Accordingly, the matter is restored to the file of the A.O for fresh adjudication in terms of our aforesaid observations. The Ground of appeal No. 6(a) to 6(c) are allowed for statistical purposes. As stated by the ld. A.R, and rightly so, 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 in ITA No. 587/Mum/2016, dated 08.01.2021 suffers from a mistake which being apparent from record renders the order amenable for rectification under sub-section (2) of Sec. 254 of the Act. We, thus, in the totality of the aforesaid facts recall the order passed by the Tribunal in ITA No. 587/Mum/2016, dated 08.01.2021 for the limited purpose of afresh adjudication of the Ground of appeal No. 6 wherein the assessee had claimed that the aforesaid revenues, viz. (i). me ..... 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