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TMI Blog2023 (10) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... rly the various agreements with the airlines. Re: CRS income-Permanent establishment 3. That the Dispute Resolution Panel (DRP) assessing officer erred on facts and in law in holding the appellant to be liable to tax in India in respect of receipts from airlines, etc. relating to segments booked from India through the appellant's computer reservation system following the orders of earlier years, not appreciating that no income accrued or arose to the appellant in India. 4. That the DRP/ assessing officer erred on facts and in law in holding that computers, electronic hardware/software, and the connectivity provided by the appellant to the travel agents through SITA/ third party nodes located in India, collectively, constituted PE of the appellant in India under Article 5 of the Indo-Spain DTAA ("the Treaty") and the income arising to the appellant from the airlines, etc. was attributable to the activities of the alleged PE in India. 4.1 That the DRP/ assessing officer erred on facts and in law in holding that as the website of the appellant shows that it has various offices in India for performing functions like training, product development, technical support, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 1996-97 to 2005-06 wherein the Supreme Court had attributed 15% of the revenues relating to the bookings made from India as attributable to the appellant's PE in India and held that no income is taxable as the payment made to dependent agent was more than the revenues so attributed, and in following the rate of attribution of 75% adopted in the order for assessment years 2007- 08 to 2019-20. 10. That the DRP/ assessing officer erred on facts and in law in following the order for assessment year 2007-08 to allege that no remuneration was paid by the appellant to AIPL for main activity of marketing the CRS and providing the hardware support to travel agents and, therefore, profits from such functions were required to be attributed to the appellant's dependent agency PE in India. 11. That the DRP/ assessing officer erred on facts and in law in disallowing expenditure of Euro 45,917,375/- incurred by the appellant under the head 'Distribution fee', while computing the income attributable to the alleged PE, following the assessment order for assessment year 2007-08. 11.1 That the DRP/ assessing officer erred on facts and in law in not appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in facts and in law in erroneously computing the income of the alleged PE of the appellant. Re: CRS income- Royalty 15. That the DRP/ assessing officer erred on facts and in law in, alternatively, holding that booking fee of Euro 102,026,836/- received by the appellant was taxable in India as "royalty both under section 9(1)(vi) of the Act and Article 13(3) of the Treaty. 16. That without prejudice, the DRP/ assessing officer erred on facts and in not appreciating that the booking fee received from non-resident airlines was not sourced in India in terms of Article 13(6) of the Treaty and was not liable to tax in India as 'royalty'. 16.1 That the DRP/ assessing officer erred on facts and in law in holding that source of income accruing to the appellant was located in India by alleging that the most of the airlines from which revenues were received were resident in India, which is factually incorrect. 17. Without prejudice, that the DRP/ assessing officer, having held the appellant to have permanent establishment in India, erred on facts and in law in bringing to tax the alleged "royalty' income on gross basis, without appreciating that in terms of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... booking fee for each participant net booking made through the Amadeus system. 3.1 In order to ensure that the customers' needs in each national market/country are met, the assessee has entered into distribution agreements with various National Marketing Companies ("NMCs"), incorporated in the respective national markets/countries for distribution/marketing of the aforesaid CRS. The NMCs are required to seek subscribers (normally travel agents) and enter into agreements with them whereby the NMCs provide the subscribers with appropriate access to the CRS host. The assessee has a distribution agreement with its NMC in India viz., Amadeus India Private Ltd. ('AIPL') and ResBird Technologies Pvt. Ltd. ('ResBird'). The travel agents in India, who intend to use the aforesaid CRS have entered into subscriber's agreement with the AIPL and ResBird. 3.2 The Airlines provide the information which they would like to be displayed in a neutral form on the CRS host terminal from where the information is disseminated worldwide to the travel agents who ask for being connected to the CRS host terminal. The business of the Airlines is promoted if the travel agent is facilitated to obtain the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blishment 7. Let us first deal with the primary issue of existence of PE of the assessee in India. The Ld. AO following the orders passed in the earlier years (i.e. AY 1996-97 to 1998-99, 2001-2002 to 2005-06, 2007-08 to 2017-18) held that the computers provided to the travel agents through which sales are conducted constituted fixed place PE of the assessee in India under Article 5(1) of the India-Spain DTAA. Further, the Ld. AO held that AIPL constitute a dependent agency PE in terms of Article 5(4) of the India-Spain DTAA. The Ld. DRP following the orders passed by it for AYs 2007-08 to 2019-20 upheld the order passed by the Ld. AO. 8. The Ld. AR submitted that when the matter travelled to the Delhi Tribunal in earlier AYs, the Tribunal decided the impugned issue in favour of the Revenue in series of its orders starting from AY 1996-97 to 2019-20. On further appeal to the Hon'ble Delhi High Court by the assessee for the AYs 1996-97 to 2016-17, the Hon'ble Delhi High Court has upheld the order(s) of the Delhi Tribunal. The Ld. AR further submitted that recently the Hon'ble Supreme Court vide order dated 19.04.2023 has decided the issue of attribution of profit to the alleged P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de its order dated 19.04.2023 in Civil Appeal Nos. 6511-6518/2010 has dismissed the appeal(s) of the Revenue on impugned issue of attribution of profit to the PE of the assessee in India for the AYs 1996-97 to 2005-06. Accordingly, 'nil' return filed by the assessee has duly been accepted by the Hon'ble Supreme Court and thus the impugned issue has attained finality. The Ld. DR had no objection to the submission of the Ld. AR. 13. We have considered the submissions of the parties and perused the records. 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 (supra) dated 19.04.2023 (copy placed at pages 346 to 345 of the Paper Book-I) 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. The relevant observations and findings of the Hon'ble Supreme Court in its decision (supra) are reproduced below: 6. There is no dispute on fact that the respondents earn an amount of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bookings in India which can be attributed to activities carried out in India, on the basis of FAR analysis (Functions performed, assets used and risks undertaken). The Commission paid to the distribution agents by the respondents was more than amount of attribution and this has already been taxed. Therefore, the Tribunal rightly concluded that the same extinguished the assessment. 16. The question as to what proportion of profits arose or accrued in India is essentially one of facts. Therefore, we do not think that the concurrent orders of the Tribunal and the High Court call for any interference. 17. Explanation 1(a) under clause (1) of Sub-Section (1) of Section 9 of the Income Tax Act, reads as follows: 9. Income deemed to accrue or arise in India. (1) The following incomes shall be deemed to accrue or arise in India: (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. Explanation 1-For the purposes of this clause- (a) in the case of a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Ground No. 11 to 14: Disallowance of expenses 15. The next issue raised by the assessee in Ground No. 11 to 14 relates to disallowance of certain expenses incurred by the assessee while computing the income attributable to the PE. The Ld. 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. The said disallowance has been made on the ground that as per the invoices raised by AIPL, the description of services is "Export of Processed Data/ software" and not 'Distribution fee'. Further, the Ld. AO also disallowed "development fee" amounting to Euro 17,757,948/- and "marketing cost/ Central Operating Cost" amounting to Euro 13,459,711/- incurred for earning revenue from bookings made from India. The Ld. DRP upheld the order of the Ld. AO. Aggrieved, the assessee is in appeal before the Tribunal challenging the aforesaid disallowance of expenses by the Ld. AO/ DRP. 16. The Ld. AR submitted that similar expenditure has been allowed since inception i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion fee" 18. This expenditure has been allowed by the Co-ordinate Bench of the Tribunal from the assessment years 1996-97 to 2006-07. Since, the facts have not been disputed, in the absence of any material change, we hereby allow the claim of distribution expenses." 21. By following the principle of consistency, we follow the order passed by the coordinate Bench of the Tribunal in Assessee's own case vide order (supra), The Grounds No. 11, 12, 13 & 14 of I.T.A. No. 2/DEL/2021(A.Y 2017-18), I.T.A. No. 1465/DEL/2022 A.Y 2018-19) and I.T.A. No. 1466/DEL/2022 (A.Y 2019-20) respectively are allowed. " 18. In view of the above facts and circumstances of the case and following the decision (supra) of the Coordinate Bench of the Delhi Tribunal, we hereby allow ground No. 11 to 14 of the assessee. Ground No. 15 to 17: CRS income- Royalty 19. Ground No. 15, 16 and 17 relates to taxability in India of booking fee amounting to Euro 102,026,836/- received by the assessee as 'royalty' both under section 9(i)(vi) of the Act as well as under Article 13(3) of the India- Spain DTAA. The Ld. AO, on an alternate basis, held that booking fee received by the assessee is taxable as royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the appeals filed by the Revenue by recording its common finding for all the AYs involved as under: "7. Mr Ruchir Bhatia, learned senior standing counsel, who appears on behalf of the appellant/revenue, says that the following questions have been, broadly, proposed in support of the above-captioned appeals: (a) ... (b) Whether in the facts and in circumstances of the case, the Tribunal erred in law in holding that booking fee received by the appellant/assessee is taxable as business income, and not as royalty? (c) ... 8.2 Insofar as the proposed question (b) is concerned, once again, Mr Bhatia confirms that the said question raised by the appellant/revenue is covered by a decision rendered by a coordinate bench on 08.02.2016, in ITA No.473/2012, titled Director of Income Tax vs. New Skies Satellite BV & Ors. Accordingly, this question also does not arise for our consideration, as it also stands covered by the aforesaid decision of the court. 10. Given this position, we are of the view that none of the questions of law, as proposed, arise for our consideration." 22. Respectfully following the decision(s) of the Hon'ble Delhi High Court (supra), we hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the airlines for the use of Altea system cannot be characterized as "royalty" either under the Act or under the India-Spain DTAA. It was also brought to our notice that the Hon'ble Delhi High Court has not framed any question of law on the impugned issue in the appeal filed by the Revenue and hence this issue has attained finality. The Ld. DR has not brought on record any material to controvert the submissions of the Ld. AR. 25. We have heard the Ld. Representative of the parties and perused the records. The facts are not in dispute and remain same as that of earlier AYs. We find that the impugned issue is covered by various decisions of the Delhi Tribunal in assessee's own case in its favour which have not been challenged by the Revenue before the Hon'ble Delhi High Court. This is evident from the decisions placed before us. We may refer to the recent decision of the Coordinate Bench of the Delhi Tribunal in ITA No.2/Del/2021 for AY 2017-18, ITA No. 1465/Del/2022 for AY 2018-19 and ITA No. 1466/ Del/2022 for AY 2019-20 wherein the Tribunal following the order(s) of the Coordinate Bench for earlier AYs held as under: "31. Following the order passed by the coordinate bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for the relevant Assessment Year was filed within the prescribed period. But the Ld. A.O has committed an error by levying interest u/s 234A of the Act. Therefore, submitted that, the Ground No. 21 deserves to be allowed. 33. The contention of the assessee Ld. Counsel for the assessee is 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. Therefore, 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. Accordingly, we remand the issue involved in Ground No. 21 in ITA No. 1466/Del/2022 and 1465/Del/2022 to the file of the A.O for fresh consideration in accordance with law. Thus, we allow the Assessee's Ground No. 21 in ITA No. 1466/Del/2022 and 1465/Del/2022 are allowed for statistical purpose." 29. Following the decision (supra) of the Coordinate Bench of Delhi Tribunal, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) is concerned, Mr Bhatia says that although on account of the amendment introduced via Finance Act, 2021, (with effect from 01.04.2012), the decision of the Supreme Court rendered in Director of Income Tax, New Delhi v. Mitsubishi Corporation, (2021) 130 Taxman.com 276 SC may not apply, but on facts, since the additions have not been sustained, the addition qua interest under Section 234B of the Act may not survive. 9. It cannot but be accepted by Mr. Bhatia that the following observations returned by the Tribunal would lead to the conclusion that addition vis-a-vis interest under Section 234B of the Act, could not have been made: "33. Ld. AR for the tax payer contended that in the absence of any liability for payment of advance tax since tax is deductible at source of the income of the taxpayer held liable to tax in India, the levy of interest u/s 234B is not warranted. 34. Provisions contained below section 209(1)(d) of the Act introduced by Finance Act, 2012 wef 01.04.2012 would apply only in a situation where persons responsible for tax has paid or credited such income without deduction of tax. In the instant case, since the income has been received by the taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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