The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), while upholding an addition made by the income tax department againstSabre Asia Pacific Pte Ltd observed that a separate addition is not required towards reimbursement of expenses in view of the fact that 10% of the gross income of the reimbursement along with other income attributed to the PE is lower than the sum paid by the assessee to entertain subsidiary and therefore, no further income is required to be attributed.
The assessee is a company incorporated in Singapore, engaged in business of promotion, development, operation, marketing and maintenance of computerised reservation system for making airline booking. The primary business of the assessee is to make airline reservations for and on behalf of the participating airlines by using the computerised reservation system.The assessee licenses the right to market the computerised reservation system to a company in each of the Asia-Pacific countries, which in turn market the system directly to the travel agents. For each of the bookings made through the marketing companies’ subscribers, the assessee pays commission to that marketing company. The assessee has licensed its wholly owned Indian subsidiary company Sabre travel network (India) private limited and pays commission to it. Airlines companies pay a fixed percentage of booking value made through use of computerised reservation system to the assessee. During the year, the income tax department found that all its receipts in India are from this activity from various travel agents.
The department found that the assessee has shown reimbursement of expenditure of Rs. 12,63,651/. The details of the reimbursement were furnished along with documentary evidences. The above sum was reimbursed by Indian entity to the assessee for various activities undertaken by theassessee on behalf of Indian subsidiary. The assessing officer held it to be the business income holding that 10% of such payment received by the assessee from subsidiary should be the income of the assessee. Accordingly, Rs. 1,26,355/- were held to be liable to be taxed in India.
The assessee submitted before the Tribunal that identical issue arose in the case of the assessee, first in assessment year 2004-05 and the co-ordinate bench held that 10% of the gross income of the reimbursement along with other income attributed to the PE is lower than the sum paid by the assessee to entertain subsidiary and therefore, no further income is required to be attributed.
Judicial Member Mr. Pavan Kumar Gadale and Accountant Member Mr. Prasanth Maharishi held that “No change in the facts and circumstances of the case were shown before us. Therefore, respectfully following the decision of the co-ordinate bench in the case of the assessee itself for earlier assessment years, we confirm the action of the learned assessing officer by treating the 10% of the sum as income out of the reimbursement. However, in the present year, as the amount paid by the appellant to its dependent agency PE is higher, no separate addition is required.”
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