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Facts
The assessee, a tax resident of Spain, received booking fees from India. The Assessing Officer treated these fees as royalty, making an addition. The assessee contended that the income was business income and not royalty.
Held
The Tribunal held that the income was taxable as business income, not royalty, following previous decisions of the Tribunal and the Delhi High Court. The Tribunal also allowed the assessee's ground regarding interest under section 234B.
Key Issues
Whether booking fees received by the assessee are taxable as royalty or business income, and whether interest under Section 234B is leviable.
Sections Cited
143(3), 144C, 143(2), 9(1)(vi), 44DA, 13(6), 5(1), 5(4), 234B, 209(1)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order dated 22.01.2025 u/s 143(3)/144C of the Income-tax Act, 1961 [the Act, for short] pertaining to A.Y 2022-23.
Ground Nos. 1 and 2 are general in nature. in brief, are that assessee is tax resident of Spain and has developed a fully automated Computer Information System (hereinafter referred to as CRS) which enables 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 for the travel industry. The aforesaid system is for facility of both travel agencies and airline offices worldwide.
M/s Amadeus I.T. Group S.A. filed its return of income for the Assessment Year (‘AY’) 2022-23 on 29.12.2022 declaring NIL income and claiming refund of Rs. 44,68,11,192/-. The case was selected for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961 ("the Act”) was issued to the assessee on 31.05.2023.
The assessee, during the year under consideration, received a gross booking revenue/fees arising from India of Rs. 4,46,01,71,932/-.
The Assessing Officer held that the booking fee received by the assessee was taxable as royalty both u/s 9(1)(vi) of the Act and Article 13 of the Indo-Spain Treaty on the ground that the booking fees received by the assessee from various airlines is payment for use of process and scientific
Page 2 of 13 4,46,01,71,932/- as gross booking revenue arising from India and taxed it at the rate of tax applicable to royalty at 10% as per the DTAA which worked out to Rs. 44,60,17,193/- with which the DRP agreed.
Aggrieved , the assessee is before us.
At the very outset, the ld. counsel for the assessee submitted that this issue is squarely covered in favour of the assessee and against the Revenue by the decision of the coordinate bench in assessee’s own case for A.Ys 2006-07 to 2021-22 which was affirmed by the Hon'ble Delhi High Court.
It is the say of the ld. counsel for the assessee that in terms of section 44DA of the Act and Article 13(5) of the Treaty, payment in the nature of royalty which is effectively connected with the PE of the non- resident is required to be taxed as business income. Such income is required to be computed on net basis and the said income cannot be brought to tax in India on gross basis. For this proposition, the ld. counsel for the assessee relied on the decision in the case of Rio Tinto Technical Services 340 ITR 507. The ld. counsel for the assessee also Page 3 of 13 Engineering Analysis Centre of Excellence [P] Ltd 432 ITR 471.
The ld AR submitted that in the assessment framed for assessment year 2006-07, the assessing officer had substantively brought to tax the booking fee as business income and protectively held the same to ‘royalty’ since in that year the tax worked out in treating the income as royalty was less than the tax worked out after attributing income to the alleged PE of the appellant. The ld AR further stated that the Delhi Tribunal in appellant's own case for the assessment years 2006-07 to 2021-22 (further affirmed by the Delhi High Court) has held that booking fee received by the appellant is taxable as business income and not under the head royalty. Recently, the Hon'ble High Court of Delhi vide order dated 04.05.2023, 25.05.2023, 30.05.2023, 31.08.2023, 18.09.2023 and 23.04.2025 has dismissed the appeals filed by the department against the aforesaid finding of the Delhi Tribunal for assessment years 2007-08 till 2021-22. ( refer page no. 364-376, 544-550 and 580-583 of the CLPB).
10. Per contra, the ld. DR raised no serious objection and fairly conceded to the same.
Page 4 of 13 material on record. We find that this issue is squarely covered in favour of the assessee and against the Revenue by decision of the co-ordinate bench [supra]. The co-ordinate bench in assessee’s own case in ITA No.
1742/DEL/2023 for AY 2020-21 vide order dated 16.10.2023 has held as under:
“21. We have heard the Ld. Representative of the parties and perused the records. We find that the impugned issue is squarely covered by the decision of the Hon'ble Delhi High Court in assessee's favour wherein it has been held that the booking fee received by the assessee is taxable as 'business income' and not as 'royalty'. The Hon'ble Delhi High Court vide its order dated 04.05.2023 for AY 2013-14 to 2016-17, order dated 23.05.2023 for AY 2009-10 and order dated 30.05.2023 for AY 2012-13 (placed at pages 364 to 376 of the Paper Book-II) has 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,
Page 5 of 13 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.
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 allow ground No. 15 to 17 of the assessee.”
We also find that the Hon'ble Jurisdictional High Court of Delhi has dismissed the appeals filed by the department against the findings of the Tribunal in A.Ys 2007-08 to 2021-22. We, therefore, respectfully following the orders of the Hon'ble High Court [supra], allow this ground No. 3 of the assessee. Accordingly, Ground No. 3 is allowed.
Ground No. 4 pertains to Altea System.
Facts in brief relating to this issue are that the Assessing Officer, brought to tax payments received of Rs. 364,03,75,700/- in relation to the Altea System (an inventory management and hosting system developed by the assessee) as 'royalty', for the same reasons as given hereinabove in relation to the booking fee received in respect of the CRS activity. The assessing officer observed that Altea system is not merely Page 6 of 13 operational services to various airlines like accepting payment and issuance of travel documents, performing credit card validation, maintaining data security, manage customer check ins, etc. Accordingly, the Assessing Officer came to the conclusion that the payments received in relation to the Altea System were sourced in India in terms of Article 13(6) of the Treaty.
Before us, the ld. counsel for the assessee vehemently stated that, the Assessing Officer failed to appreciate that the Altea system is installed at the airports and is accessed only by the airlines and not by any of Amadeus's agents viz, Resbird, Amadeus India and that during the year the said system was only available to British Airways for the aforesaid purpose and that, too, only at the airport counter. The said software was not available outside the Indian airport or to any of the agents of the assessee in India since the agents were booking the tickets only through the CRS of the assessee.
The ld. counsel for the assessee continued by saying that payment made by British Airways to the assessee in relation to the Altea system is for services rendered by Amadeus and not for use of any process, or Page 7 of 13 transferred by Amadeus to British Airways. Further, the inventory hosting takes place outside India and payment is made by non-resident airlines to another non-resident outside India. The various services like accepting payments, credit card validation, etc. are incidental to reservation, which services had not been subscribed to by British Airways during the relevant previous year.
The ld. counsel for the assessee sought to reiterate and rely upon the submissions, case law and legal analysis made while dealing with the issue of taxation of income from CRS activity as 'royalty'. The ld AR pointed out that the co-ordinate bench in assessee’s own case for the A.Ys 2007-08 to 2021-22 under similar circumstances held that payment received by the assessee from the airlines for the Altea system cannot be characterized as "royalty" either under the Act or under the Treaty and that the question of taxability of Altea Payments was not admitted by the Hon'ble High Court and hence the order of the Tribunal attained finality.
Per contra, the ld. DR relied upon the orders of the authorities below.
Page 8 of 13 material on record. We find that the co-ordinate bench in assessee’s own case for the A.Ys 2007-08 to 2021-22 under similar circumstances has held that payment received by the assessee from the airlines for the Altea system cannot be characterized as "royalty" either under the Act or under the Indo-Spain Treaty. We also find that the Revenue’s appeal with respect to question of taxability of Altea Payments was not admitted by the Hon'ble High Court and hence the order of the Tribunal attained finality. Accordingly, we hold that payment received by the assessee from the airlines for the Altea System is not ‘royalty’ either under the Act or the Treaty. Accordingly, ground 4 is allowed.
Ground No. 5 pertains to Permanent Establishment of Amadeus.
The Assessing Officer, following the orders passed in the earlier years 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 Tax Treaty. Further, the Assessing Officer also held the assessee to be dependent agency PE in terms of paragraph 5(4) of the India Spain Tax Treaty. The DRP as well
Page 9 of 13 the order passed by the Assessing Officer.
We have heard the rival submissions and have perused the relevant material on record. We find that the Delhi High Court in assessee’s own case for the A.Ys 1996-97 to 2019-20 has upheld the orders of the Tribunal that the PE of the assessee exists in India. The issue of PE is no longer res-integra as the Hon'ble Supreme Court has decided this issue in favour of Revenue vide its order in Civil Appeal 8057/2011 dated 20.07.2023 and considered it as academic in nature. Further, the Hon'ble Supreme Court vide order dated 19.04.2023 has decided the issue of profit accruing/arising to the assessee attributable to the Permanent Establishment in India wherein it has upheld the order of the High Court on the aspect that 15% of the revenue earned by the assessee being 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. We therefore are of the considered view that the issue of attribution has attained finality. Ground No. 5 is accordingly dismissed.
Ground No. 6 pertains to interest u/s 234B of the Act.
Page 10 of 13 in the absence of any liability for payment of advance tax since tax is deductible at source on the income of the assessee held liable to tax in India, the levy of interest under section 234B of the Act is not warranted.
The ld. counsel for the assessee continued by saying that the aforesaid proviso would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax. In the present case since the income has been received by the assessee after deduction of tax at source, therefore, the aforesaid proviso is not applicable.
We have heard the rival submissions and have perused the relevant material on record. We find that the co-ordinate bench in assessee’s own case allowed the ground of the assessee and the Hon'ble High Court of Delhi dismissed the appeals filed by the department against the findings of the Tribunal for AYs 2009-10, 2012-13 and 2013-14 to 2016-
17. The relevant extract of the Hon'ble Delhi High Court's decision (supra) dated 04.05.2023 in for AY 2013-14 to 2016-17 is reproduced below:
“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: Page 11 of 13 "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.
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 after deduction of tax at source, the proviso is not applicable as has been held by the coordinate Bench of the Tribunal in BG International Ltd. vs DCIT in order dated 31.12.2020, Even otherwise, when no addition sustains section 234B would not apply. So, ground no.21 of 3494/Del/2018 7970/Del/2018 & 7047/Del/2019 for Assessment Years 2013-14, AY 2014-15, AY 2015-16 & AY 2016-17 respectively is determined in favour of the taxpayer”.
Respectfully following the same, we allow Ground No. 6 and direct the Assessing Officer to delete the interest so levied u/s 234B of the Act.