9911796707
TMI Blog2023 (1) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... 13) / 143(3) of the Income tax Act, 1961, ('the Act') on the following grounds, which are without prejudice to each other: 1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in completing the assessment at the total income of INR 1,67,60,05,642 as against 'NIL' income declared. 2. That the Ld. AO and the Dispute Resolution Panel (`Ld. DRP') ought to have held that the Appellant has no income chargeable to tax in India either under the Act or under the provisions of the Double Taxation Avoidance Agreement between India and the United Kingdom ("DTAA"). 3. That the Ld. AO and the Ld. DRP ought to have held that no income had accrued or deemed to accrue or received or deemed to have received by the Appellant in India. 4. That on the facts and circumstances of the case and in law, both the Ld. AO and the Ld. DRP have erred in holding Interglobe Technologies Quotient India Private Limited (`ITQPL') to be legally and economically dependent entity of the Appellant and hence a dependent agent in India based on following allegations: * ITQPL is the sole distributor of Travel port GDS in India i.e. only ITQPL is authorized to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not qualify as a resident for tax purposes in UK and thus India-UK treaty benefits are withdrawn. 5.2 That on the facts and in the circumstances of the case and in law, the Ld. DRP have grossly erred in confirming the draft order of the Ld. AO on the substance of the entity thereby up-holding that the appellant is a conduit in a stepping stone framework, without even considering the detailed submissions and evidences filed by the appellant demonstrating and clearly evidencing its commercial substance, legal structure, tax returns, employee details, and all such documents which are sufficient to demonstrate an entity's legal existence. Thus, the Ld. DRP has erred in not passing a sound order. 5..3 Without prejudice to ground of objection above, on the facts and circumstances of the case and in law, the Ld. AO have erred in not appreciating that India-UK treaty benefits are available by reasons of residence, domicile, place of incorporation as per Article 4 of India- UK tax treaty which are evidently satisfied in the case of the Appellant. 5.4 Without prejudice to the grounds above, on the facts and circumstances of the case and in law, the Ld. DRP has erred in not placing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the Ld. AO and Ld. DRP erred in both facts and in law by not following the binding decisions of Hon'ble Delhi ITAT and Hon'ble Delhi High Court in Appellant's own case/its predecessor's case, wherein the Hon'ble courts have held that even where the appellant is taxable under the domestic law under section 5(2) read with Section 9(1)(i) of the Act, the attribution cannot exceed 15% even under the domestic law, as held by the Hon'ble ITAT 8. That on the facts and in the circumstances of the case and in law, the Ld. AO and Ld. DRP erred in disregarding the financial statements of Appellant and not allowing expenses claimed by it during the course of assessment proceedings as part of India related profitability statement. 8.1 That on the facts and in the circumstances of the case and in law, the Ld. AO and the Ld. DRP erred in disallowing 100% of distribution fees amounting to USD 8,18,57,911 paid to ITQPL. That on facts and in circumstances of the case and in law, the Ld. AO and the Ld. DRP has erred in not appreciating the fact that the payment is made to resident assessee i.e. ITQPL and thus, disallowance for non-ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relating to this issue are, the assessee, a non-resident corporate entity, is incorporated in the United Kingdom (UK) and engaged in the business of providing electronic Global Distribution Services (GDS) in the rest of the world territory, including the Indian region, for the travel industry by utilizing a Computer Reservation System (CRS), which is an automated system set in place for processing booking data. The CRS broadly provides the following functions: 1. The ability to display flight schedule and seat availability. 2. The ability to display and/or quote airlines fare 3. The ability to make airline seat reservation. 4. The ability to issue airline tickets, etc. 6. Basically, these services are provided to airlines for helping them in facilitation of booking of tickets. For each completed booking using assessee's CRS/GDS, airlines pay booking fee to it. It is noteworthy, CRS was earlier owned and managed by Gallilio International Inc. (GII), a USA based entity, which operated worldwide. In the year 2002, the territory operation was split into two parts, where under, territory (1) covered USA and Canada, whereas, territory (2) covered rest of the world. The res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and Sh. Gangadhar Panda, learned CIT (DR). It is a common point between the parties that the issue of existence of PE has been consistently decided against the assessee, both by the Tribunal as well as the Hon'ble Jurisdictional High Court in past assessment years upto immediately preceding assessment year 2017-18. 10. Having considered rival submissions, we find, while deciding assessee's appeal for assessment year 2017-18 in ITA No. 163/Del/2021, the Tribunal vide order dated 27.09.2021 considered identical issue and held as under: "23. In the first batch of 4 years i.e. from AY 1995-96 to 1998-99 in case of GII, the Hon'ble Delhi ITAT vide its dated 30 Nov. 2007 (19 SOT 257 (DELHI) held that GII has a fixed place PE and Agency PE in form of the Interglobe in India. (Page 194 to 251 of Paperbook Part 1.) The relevant extracts from this order are re-produced as under: "17.1 In the present case it is seen that the CRS, which is the source of revenue is partially existent in the machines namely various computers installed at the premises of the subscribers. In some cases, the appellant itself has placed those computers and in all the cases the connectivity in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the subscribers under an authority granted to it, are contracts relating to operations which constitute business proper and not merely in the nature of internal operations. Such contracts are habitually exercised and there is nothing on record to suggest that such authority was cancelled at any point of time. We, therefore, hold that Interglobe is dependent agent of the appellant who has habitually exercised the authority to conclude contracts on behalf of the appellant. To that extent the appellant has a PE in India. Since we have held that ITA No.6661/Del/2019 Aspect Software Inc. 14 Interglobe is a dependent agent of appellant in India, we need not discuss para (5) of Article 5 of the treaty regarding independent agent form of PE." 24. The Hon'ble Delhi High Court vide its order dated 25 Feb 2009 (ITA No. 1048 to 1055/2008 and ITA Nos. 17408/2008, 17437/2008, 17409/2008, 17438/2008, 17473-74/2008, 17469-70/2008, 17410/2008, 17439/2008 and 17471/2008 ) in case of GII for such first batch of 4 years from AY 1995-96 to AY 1998-99 held the issue of PE/BC as academic as overall taxability of GII was held to be Nil. The relevant extracts from this order are re-produced as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's appeal, it was held by the Hon'ble Delhi High Court that in view of the dismissal of appeals of the revenue, the question raised by assessee in these appeals have become academic and are therefore dismissed. It is submitted that this judgment of Hon'ble High Court of Delhi in respect of assessee's appeal is also dated 25.02.2009 in ITA Nos 17408, 17409, 17437, 17438, 17473-74, 17469-70, 17410, 17439 and 17471- 72/2008. He submitted a copy of both these judgements of Hon'ble Delhi High Court rendered in the assessee's appeals as well as revenue's appeals. Ld. DR also agreed that these issues are covered as per these judgements." 27. Hon'ble Delhi High Court in its order dated 25th September 2012 (ITA No. 1148 to 1151/2011 and ITA No. 466 to 472/2012) in case of GII for such second batch of 4 years from AY 1999-00 to AY 2002- 03 relied on the decisions of Hon'ble Delhi ITAT and Hon'ble Delhi High Court in case of GII for first batch of 4 years and held that since factual matrix is same, the earlier decision of Hon'ble Delhi High Court in case of 25.02.2009 is squarely applicable i.e. issue of PE/BC is academic. 28. Against the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt and Hon'ble Delhi ITAT in Appellant's predecessor's case." 11. Following the consistent view of the Hon'ble High Court and the Tribunal on the issue, the Tribunal in the latest order passed in assessee's case in assessment year 2016-17 vide ITA No. 9711/Del/2019, dated 21.02.2022 has held as under: "11. Ground No. 4 and 5 relate to the presence of BC/ PE of the assessee in India. The Hon'ble Delhi ITAT vide its order dated 27.9.2021 in assessee's own case pertaining to the AY 2017-18 held that the assessee has a BC/ PE in India. In arriving at this conclusion, the coordinate bench followed the decisions of Hon'ble Delhi High Court and Hon'ble Delhi ITAT in case of assessee's predecessor entities i.e. TGDSBV and Galileo International Inc. ("GII"). The relevant para of the Hon'ble Delhi ITAT's order dated 27.09.2021 is reproduced below:- "32. Thus, the issue of Appellant's PE/BC in India is covered against it by the above decisions of Hon'ble Delhi High Court and Hon'ble Delhi ITAT in Appellant's predecessor's case." Similarly, for AY 2007-08 to 2012-13 and AY 2014-15 in the case of TGDSBV (assessee's predecessor), the coordinate bench of ITAT vide its order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further income is taxable in India. 34. The ITAT in the case of Galileo International Inc (GII) (Predecessor of the Appellant) in the first batch of 4 years- AY 1995-96 to 1998-99 vide its order dated 30 Nov. 2007 (19 SOT 257 (DELHI) on the basis a Function, assets and risk (FAR) analysis, held that only 15% of the revenue could be attributed to India which got completely exhausted by the commission paid to the Indian distributor/ ITQPL, resulting in no income remaining to be taxed in India. It was held as under: "9. .......................In the present case, we find that only part of CRS system operates or functions in India. The extent of work in India is only to the extent of generating request and receiving end-result of the process in India. The major functions like collecting the database of various airlines and hotels, which have entered into PCA with the appellant takes place outside India. The computer at Denver in USA processes various data like schedule of flights, timings, pricing, the availability, connection, meal preference, special facility, etc. and that too on the basis of neutral display real time on line takes place outside India. The computers at the desk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther any income still is left to be taxed in India. The activities of the appellant in India are entirely routed through the efforts of NMC namely Interglobe India (P.) Ltd. (Interglobe). Interglobe is responsible for monitoring the activities of the subscribers enrolled in India. The request originated from the computers at the desk of travel agent is once again routed through the facility of processing such information at Interglobe. If Interglobe finds that the subscriber accessing the CRS is authorized to do so, the request is further forwarded. Interglobe is also responsible for establishing connectivity of the computers of the subscribers and maintaining them. Interglobe is also responsible for training of the subscribers in respect of use of CRS. For all these services rendered by Interglobe to the appellant, it is being paid remuneration in terms of distribution agreement. Broadly the assessee receives three 'Euros' as fees per 'net booking', i.e., gross booking minus cancellation. The assessee passed one dollar to Interglobe for each net booking processed through Galileo system by subscriber. Thus, in respect of the activities carried out in India and consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of applicant is that instead of estimating or apportioning income or profits the Tribunal has attributed the revenue. In our opinion this is not a mistake apparent from record. For computation of any income, the first point is to apportion the revenue from the operations carried out in India. Unless the revenues are attributed, the income which is a second step cannot be attributed. However, after apportioning revenue, since it was found that out of the apportioned revenue, the remuneration payable to the agent in India exceeds such apportioned revenue, no further income is taxable in India........." "............9. We find that all issues arising in the appeal have been answered. Neither any argument nor any ground is left out. In view of overall situation if the tribunal has consciously come to the conclusion that no income accrues in India and in respect of which elaborate reasons are given, if the applicant do not agree with the reasoning, it cannot be said that any mistake has crept in the order of the Tribunal which is rectifiable under section 254(2) of the Act. We therefore decline to interfere". 36. The Hon'ble Delhi High Court in case of Galileo International Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, keeping in view a very minor portion of the activity being carried out here" (Please refer Para on Page 273 of Paperbook Part 1) "After formulating the aforesaid question, the Tribunal answered the same holding that since the revenue attributable in respect of the booking made in India is only 0.45 Euro (15 per cent of Euro 3) and commission paid to Interglobe was Euro 1, there was no income which was taxable in India." "The Tribunal in this behalf has noted that the entire payment made by the respondent to the Interglobe has been allowed as expenses while computing total Income of the respondent. After arriving at these findings of facts, the Tribunal referred to Circular No. 23 of 23-7-1969 which prescribes that no income can be further charged to tax in India. To same effect is the judgment of the Supreme Court in Morgan Stanley & Co. Inc.'s case (supra)" (Please refer last Para on Page 276 of Paperbook Part 1) "We, therefore, are of the opinion that no question of law arises in these matters which needs any further determination by this Court. These appeals are accordingly dismissed in limine." 37. Against the Hon'ble Delhi High Court order for AY 1995- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil and thus, no income is taxable in India." Similar view was taken by the coordinate bench of ITAT in its order dated 13.10.2021 for AY 2007-08 to 2012-13 and AY 2014-15 in case of TGDSBV (assessee's predecessor). The relevant paras of the Hon'ble Delhi ITAT's order is reproduced below: "15. The issue of attribution in India is covered in favour of Company by the decisions of Hon'ble Delhi High Court and Delhi ITAT in Company/it's predecessor's case for AYs. 1995-96 to 2006-07. The Hon'ble Delhi High Court and the Delhi ITAT in Company's own / predecessor's case, has held that attribution rate to the alleged India PE is 15% of gross booking fees. 16. For AY 2017-18 in case of Company's successor entity i.e., TIOL, this issue on attribution has been held in favour of TIOL by Delhi ITAT vide order dated 27th September, 2021 (ITA No. 163/Del/2021) by relying on the decisions of Hon'ble Delhi High Court and Delhi ITAT in Company/it's predecessor's case for AY 1995-96 to AY 2006-07. 19. Hence, we hereby hold that the correct attribution rate be taken at 15% of the gross booking fee for the years in appeal before us." Accordingly, following the decisions (supra), we decide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any for AY 1995-96 to AY 2006-07... 24. For AY 2015-16, the Id. DRP in its direction in Company's own case accepted that distribution expenses are integral expenses for CRS companies like Company and therefore a deduction should be allowed of such expenses... 25. Thus, it was duly accepted by the revenue authorities that the distribution expenses incurred by the assessee is for maintaining their network of subscribers/ travel agents and thus, an inseparable part of the business and thus it cannot be denied that the expenses have been incurred for the purpose of the business. 26. It is also an accepted fact that there is only one business of the Company i.e., the CRS business. Therefore, all expenses incurred by Company including distribution expenses can only be related to such business. Thus, the AO's argument that distribution fees is not related to its business since its nomenclature in invoices is specified as 'data processing charges' instead of distribution fees lacks basic fallacy. The similar issue has come up before the Delhi ITAT in case of another CRS entity i.e., Amadeus IT Group SA for AY 2007-08 to AY 2012-13 dated 26 October 2020 (ITA No. 4906/D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rival submissions, we find, while deciding identical issue in assessee's own case in assessment year 2016- 17 (supra) the Tribunal has held as under: "15. Ground No. 8 relates to allowability of head office expenses under section 44C of the Act. The assessee submitted that as per section 44C of the Act, a non resident assessee shall be allowed claim of head office expenditure incurred, notwithstanding the provisions of section 28 to section 44C of the Act. It is further submitted that the Ld. AO and the Hon'ble DRP have suo moto allowed the deduction of head office expenditure in AY 2016-17, however the amount of such expenditure is computed incorrectly. Therefore, the Ld. AO may be directed to provide correct allowance of head office expenditure. In view of the above submissions of the assessee, we remit this issue to the file of the Ld. AO for allowing the correct claim of the head office expenditure to the assessee in the light of the details/information/ documents already on record and which he may require the assessee to furnish before him. We order accordingly." 24. Facts being identical, we dispose of the ground with similar direction to the Assessing Officer. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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