The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that receipts from airlines relating to segments booked from India through the non-resident computed reservation system was taxable in India as per the India-Spain Double Taxation Avoidance Agreement (DTAA).
Assessee, Amadeus IT Group SA was a tax resident of Spain. The assessee along with its affiliated companies had developed a fully automated computer information system, which enabled display and dissemination of information supplied by various airlines, which in turn facilitates, inter alia, reservations, communications, ticketing and related functions on a worldwide basis (hereinafter referred to as ‘CRS’) for the travel industry. The CRS is for the facility of both travel agencies and airline offices worldwide.
The assessee had entered into agreements with various airlines (‘Participating Carrier Agreement’) by providing interconnectivity between the host computer of the individual airline and the Amadeus CRS created by the assessee at Erding, Germany. Amadeus also provides connectivity to its CRS to the travel agents.
In order to ensure that the customers’ needs in each national market/country are met, the assessee had 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.
For AY 2020-21, the assessee filed its return of income on 10.01.2021 declaring ‘nil’ income and claiming refund -. The assessee’s case was selected for scrutiny. The AO following the orders passed in the earlier years held that the computers provided to the travel agents through which sales were conducted constituted fixed place PE of the assessee in India under Article 5(1) of the India-Spain DTAA. Further, the AO held that AIPL constitutes a dependent agency PE in terms of Article 5(4) of the India-Spain DTAA. The DRP following the orders passed by it for AYs 2007-08 to 2019-20 upheld the order passed by the AO.
Neeraj Jain, on behalf of the assessee submitted that when the matter travelled to the Delhi Tribunal in earlier annual years, 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 Delhi High Court by the assessee for the AYs 1996-97 to 2016-17, the Delhi High Court had upheld the order(s) of the Delhi Tribunal.
He further submitted that recently the Supreme Court vide order dated 19.04.2023 had decided the issue of attribution of profit to the alleged PE of the assessee in India upholding the order of the Delhi High Court confirming that 15% of the revenue earned by the assessee is taxable in India. Since the issue on attribution had attained finality, the ground of existence of PE of the assessee in India had become academic in nature.
Vizay B. Vasanta, appeared on behalf of the revenue.
The two-member Bench of G.S. Pannu, (President) and Astha Chandra, (Judicial Member) observed that the impugned issue was squarely covered in favour of the Revenue by series of Tribunal’s order from AYs 1996-97 to 2019-20 in assessee’s own case which had been affirmed by the Delhi High Court. The Bench dismissed this ground of appeal.
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