Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 4314 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 6 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-10-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2012-2013
Appeal Filed On
29-03-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 4906/DEL/2010 : ASSTT. YEAR : 2007-08 AMADEUS IT GROUP SA, C/O-VAISH ASSOCIATES, ADVOCATE, 10, HAILEY ROAD, DAKSHINESHWAR BUILDING, FLAT NO. 5-7, NEW DELHI-110001 VS A SSTT. DIT, CIRCLE-1(1), INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFCA9629P ITA NO. 5150/DEL/2011 : ASSTT. YEAR : 2008-09 ITA NO. 60/DEL/2013 : ASSTT. YEAR : 2009-10 AMADEUS IT GROUP SA, C/O-VAISH ASSOCIATES, ADVOCATE, 10, HAILEY ROAD, DAKSHINESHWAR BUILDING, FLAT NO. 5-7, NEW DELHI-110001 VS ADDL. DIT, RANGE-1, INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFCA9629P ITA NO. 1824/DEL/2014 : ASSTT. YEAR : 201 0-11 AMADEUS IT GROUP SA, C/O-VAISH ASSOCIATES, ADVOCATE, 1 ST FLOOR, MOHAN DEV BUILDING, 13, TOLSTOY MARG, NEW DELHI-110001 VS DDIT, CIRCLE-1, INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFCA9629P ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 2 ITA NO. 1204/DEL/2015 : ASSTT. YEAR : 2011 -12 ITA NO. 1626/DEL/2016 : ASSTT. YEAR : 2012 -13 AMADEUS IT GROUP SA, C/O-VAISH ASSOCIATES, ADVOCATE, 1 ST FLOOR, MOHAN DEV BUILDING, 13, TOLSTOY MARG, NEW DELHI-110001 VS DCIT, CIRCLE-1(1)(1), INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFCA9629P ASSESSEE BY : SH. AJAY VOHRA, SR. ADV. & SH. ROHIT JAIN, ADV. REVENUE BY : SH. SATPAL GULATI, CIT DR DATE OF HEARING: 28.08.2020 DATE OF PRONOUNCEMENT: 26.10.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDERS PASSED BY THE AO U/S 143(3)/144C (13) OF THE INCOME TAX ACT, 1961 DATED 04.10.2011, 30.10.2012, 29.01.2014, 25.11.2014 AND 13.01.2016. 2. SINCE, THE ISSUES INVOLVED IN ALL THESE APPEALS ARE SIMILAR, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THE COMMON ORDER. 3. IN ITA NO. 4906/DEL/2010, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPUTING THE INCOME OF THE APPELLANT FOR TH E RELEVANT ASSESSMENT YEAR AT RS.381,32,77,751/- AS AGAINST NIL INCOME RETURNED BY THE APPELLANT. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 3 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN PASSING THE IMPUGNED ORDER WITHOUT AFFORDING THE APPELLANT REASONABLE AND ADEQUATE OPPORTUNITY OF BEING HEARD. 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE APPELLANTS REPLIES WERE EVASI VE AND THE APPELLANT PURPOSELY AVOIDED REPLYING TO THE QUERIES RAISED/ DID NOT FURNISH THE SPECIFIC INFORMATION CALLED FOR IN THE ASSESSMENT. RE: CRS INCOME - PERMANENT ESTABLISHMENT 4. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN HOLDING THE APPELLANT TO BE LIABLE TO TAX IN INDIA IN RESPECT OF RECEIPTS FROM AIRLINES, ETC. RE LATING TO SEGMENTS BOOKED FROM INDIA THROUGH THE APPELLANTS COMPUTER RESERVATION SYSTEM, NOT APPRECIATING THAT NO INCOME ACCRUED OR AROSE TO THE APPELLANT IN INDIA. 5. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN HOLDING THAT COMPUTERS, ELECTRONIC HARDWARE, AND THE CONNECTIVITY PROVIDED BY THE APPELLANT TO T HE TRAVEL AGENTS THROUGH SITA NODES LOCATED IN INDIA, COLLECTIVELY, CONSTITUTED PE OF THE APPELLANT IN IN DIA 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 O F THE ALLEGED PE IN INDIA. 6. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN ALLEGING THAT AMADEUS INDIA (P) LTD. (AIPL) CONSTITUTED DEPENDENT AGENT PERMANENT ESTABLISHMENT (PE) OF THE APPELLANT IN INDIA AND TH E INCOME ARISING TO THE APPELLANT FROM THE AIRLINES, ETC., WAS ATTRIBUTABLE TO THE ACTIVITIES OF THE ALLEGED P E IN INDIA. 6.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN ALLEGING THAT THE APPELLANT WAS NOT MAKING A NY ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 4 PAYMENT TO AIPL TOWARDS THE ACTIVITIES OF MARKETING THE APPELLANTS CRS AND PROVIDING THE HARDWARE SUPPORT TO THE TRAVEL AGENT AND THEREFORE THE DISTRIBUTION FEE PAID TO AIPL WAS NOT AT ARMS LENG TH AND CONSEQUENTLY AIPL CONSTITUTED DEPENDENT AGENT PE OF THE APPELLANT. WITHOUT PREJUDICE - RE: ATTRIBUTION OF INCOME 7. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN COMPUTING THE PROFITS ATTRIBUTABLE TO THE ALLEGED PE OF THE APPELLANT IN INDIA AT RS. 108,94,12,818/-. 8. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT EVEN IF IT IS ASSUMED THAT AIPL OR THE COMPUTERS, ELECTRONIC HARDWARE PROVIDED TO THE TRAVEL AGENTS ETC., CONSTITUTED PE OF THE APPELLANT IN INDIA, THE INCOME DERIVED FROM SUCH PE WAS COMPLETELY CONSUMED BY DISTRIBUTION AND OTHER EXPENSES ATTRIBUTABLE THERETO AND THAT NO INCOME SURVIVES FOR TAXATION. 9. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT FOLLOWING THE ORDER OF THE DELHI BENCH O F THE TRIBUNAL IN THE APPELLANTS CASE FOR THE ASSESSMENT YEARS 1996-97 TO 1998-99, WHEREIN THE TRIBUNAL HAD ATTRIBUTED 15% OF THE REVENUES RELATIN G TO THE BOOKINGS MADE FROM INDIA AS ATTRIBUTABLE TO THE APPELLANTS PE IN INDIA AND HELD THAT NO INCOME IS TAXABLE AS THE PAYMENT MADE TO DEPENDENT AGENT WAS MORE THAN THE REVENUES SO ATTRIBUTED, ALLEGING THAT THE FACTS BEFORE THE TRIBUNAL IN THE AFORESAID ASSESSMENT YEARS WERE DIFFERENT THAN THE FACTS OBTAINING IN THE ASSESSMENT YEAR 2007-08. 9.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND L AW IN MISINTERPRETING THE AFORESAID ORDER OF THE TRIBU NAL AND ALLEGING THAT THE TRIBUNAL HAS ATTRIBUTED REVEN UES TO ONLY THE SOFTWARE DEVELOPMENT RELATED SERVICES PROVIDED BY AIPL, NOT APPRECIATING THAT THE TRIBUNA L ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 5 CONSIDERED ALL THE SERVICES REQUIRED TO BE PROVIDED BY AIPL UNDER THE DISTRIBUTION AGREEMENT AND AIPL CONTINUED TO PROVIDE THE SAME SERVICES UNDER THE DISTRIBUTION AGREEMENT DURING THE PREVIOUS YEAR UNDER CONSIDERATION, TOO. 10. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN ALLEGING THAT NO REMUNERATION WAS PAID BY TH E APPELLANT TO AIPL FOR MAIN ACTIVITY OF MARKETING TH E CRS AND PROVIDING THE HARDWARE SUPPORT TO TRAVEL AGENTS AND, THEREFORE, PROFITS FROM SUCH FUNCTIONS WERE REQUIRED TO BE ATTRIBUTED TO THE APPELLANTS DEPENDENT AGENCY PE IN INDIA. 11. WITHOUT PREJUDICE, THAT THE ASSESSING OFFICER E RRED ON FACTS AND IN LAW IN NOT ALLOWING DEDUCTION ON ACCOUNT OF DISTRIBUTION FEE PAID TO AIPL ON THE GRO UND THAT IN THE INVOICES RAISED BY AIPL ON THE APPELLAN T, THE FEE WAS DESCRIBED AS CHARGES FOR EXPORT OF PROCESSED DATA/SOFTWARE AND NOT DISTRIBUTION FEE. 11.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW ALLEGING THAT AIPL WAS REMUNERATED ONLY FOR SOFTWARE DEVELOPMENT SERVICES AND NOT CRS MARKETING SUPPORT SERVICES, ON THE GROUND THAT AIPL HAD CLAIMED DEDUCTION UNDER SECTION 80HHE OF THE AC T IN RESPECT OF THE REMUNERATION RECEIVED BY THE APPELLANT. 12. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN DISALLOWING DEDUCTION OF EURO 6,335,000/- INCURRED BY THE APPELLANT UNDER THE HEAD DEVELOPMENT COST, WHILE COMPUTING THE INCOME ATTRIBUTABLE TO THE ALLEGED PE. 12.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS OF PROVIDING CRS SERVICES AND THE EXPENSES INCURRED IN CONNECTION WITH PRODUC T DEVELOPMENT FUNCTION CARRIED OUT OUTSIDE INDIA WERE ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 6 REQUIRED TO BE EXCLUDED WHILE COMPUTING THE INCOME OF THE ALLEGED PE OF THE APPELLANT IN INDIA. RE: CRS INCOME - ROYALTY 13. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN ALTERNATIVELY HOLDING THAT BOOKING FEE OF EU RO 59,867,000 RECEIVED BY THE APPELLANT WAS TAXABLE IN INDIA AS ROYALTY BOTH UNDER SECTION 9(1)(VI) OF T HE ACT AND ARTICLE 13(3) OF THE TREATY. 14. THAT WITHOUT PREJUDICE, THE 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 T HE TREATY AND WAS NOT LIABLE TO TAX IN INDIA AS ROYAL TY. 14.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN HOLDING THAT SOURCE OF INCOME OF THE ALLEGED ROYALTY INCOME WAS LOCATED IN INDIA ALLEGING THAT T HE MOST OF THE AIRLINES FROM WHOM BOOKING FEES WAS RECEIVED WERE RESIDENT IN INDIA. 14.2 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT BRINGING ANY EVIDENCE ON RECORD TO ESTABLISH THAT THE NON-RESIDENT AIRLINES MAKING PAYMENT TO THE APPELLANT HAD PERMANENT ESTABLISHMENT IN INDIA AND THE BOOKING FEE PAID BY THEM TO THE APPELLANT WAS BORNE BY SUCH PERMANENT ESTABLISHMENTS. 15. WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING TAX @ 20% ON THE AFORESAID ALLEGED ROYALTY INCOME, NOT APPRECIATIN G THAT IN TERMS OF ARTICLE 13 OF THE TREATY READ WITH PARAGRAPH (7) OF THE PROTOCOL THERETO, SUCH INCOME COULD BE TAXED ONLY @ 10%. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 7 RE: ALTEA SYSTEM 16. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN HOLDING THAT PAYMENTS RECEIVED BY THE APPELLANT FROM BRITISH AIRWAYS IN RELATION TO THE ALLEGED USE OF ALTEA SYSTEM AND ARTICLE WAS TAXABLE IN INDIA AS ROYALTY BOTH UNDER SECTION 9(1)(VI) OF T HE ACT 13(3) OF THE TREATY. 17. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN ALLEGING THAT THE APPELLANT FILED THE AGREEM ENT WITH BRITISH AIRWAYS IN RELATION TO USE OF ALTEA SY STEM AT THE FAG END OF THE ASSESSMENT AND THAT THE NATUR E OF ALTEA RESERVATION SYSTEM WAS EXPLAINED FOR THE FIRST TIME AT THE FAG END OF THE ASSESSMENT, VIDE R EPLY DATED 28.12.2009. 18. THAT WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PAYMENTS RECEIVED FROM BRITISH AIRWAYS IN RELATION TO THE ALTEA SYSTEM WERE NOT SOURCED IN INDIA IN TERMS OF ARTICLE 13(6) OF THE TREATY AND WERE LIABLE TO T AX IN INDIA AS ROYALTY. 18.1 THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN NOT BRINGING ANY EVIDENCE ON RECORD TO ESTABLISH BRITISH AIRWAYS HAD PERMANENT ESTABLISHMENT IN INDIA AND THE PAYMENTS MADE FOR TH E USE OF ALTEA SYSTEM WERE BORNE BY SUCH PERMANENT ESTABLISHMENT. 19. FURTHER WITHOUT PREJUDICE, THE ASSESSING OFFICE R ERRED ON FACTS AND IN LAW IN HOLDING ON ADHOC BASIS A SUM OF EURO 6 MILLION AS THE INCOME OF THE APPELLAN T LIABLE TO TAX IN INDIA AS ROYALTY FOR THE ALLEGED USE OF ALTEA SYSTEM BY BRITISH AIRWAYS. 20. WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING TAX @ 20% ON THE AFORESAID ALLEGED ROYALTY INCOME, NOT APPRECIATIN G THAT IN TERMS OF ARTICLE 13 OF THE TREATY READ WITH ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 8 PARAGRAPH (7) OF THE PROTOCOL THERETO, SUCH INCOME COULD BE TAXED ONLY @ 10%. RE: CHARGE OF INTEREST 21. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN LEVYING INTEREST UNDER SECTION 234B OF THE A CT. RE: CREDIT FOR TAX DEDUCTED AT SOURCE 23. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN NOT ALLOWING CREDIT FOR TAX DEDUCTED AT SOUR CE BY VARIOUS AIRLINES MAKING PAYMENT TO THE APPELLANT , AMOUNTING TO RS.5,33,03,605/-. 4. THE ISSUES HAVE BEEN CLUBBED AND ADJUDICATED TOG ETHER FOR ALL THE YEARS. PERMANENT ESTABLISHMENT: 5. THE AO HAS COMPUTED THE INCOME OF ASSESSEE AS PE AT RS.1,45,25,50,424/- IN RELATION TO THE BOOKING FEE RELATABLE TO THE SEGMENTS BOOKED FROM INDIA THROUGH THE CRS DEVE LOPED BY THE ASSESSEE. THEN, THE AO ATTRIBUTED 75% OF THE IN COME AS INCOME OF THE ASSESSEE AS PE IN INDIA. 6. AT THE OUTSET, IT WAS BROUGHT TO OUR NOTICE BY T HE LD. AR THAT THE HONBLE HIGH COURT OF DELHI IN THE ASSESSE ES OWN CASE FOR THE ASSESSMENT YEARS 1996-97 TO 2006-07 HAS HEL D THAT COMPUTERS INSTALLED AT THE PREMISES OF THE SUBSCRIB ERS CONSTITUTE A PE OF THE ASSESSEE IN INDIA IN TERMS O F ARTICLE 5(1) OF INDO-SPAIN TREATY. IT WAS ALSO HELD THAT SINCE T HE AMADEUS INDIA IS FUNCTIONALLY DEPENDENT UPON THE ASSESSEE I T DO ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 9 CONSTITUTE AN AGENCY PE IN INDIA IN TERMS OF ARTICL E 5(IV) OF THE INDO-SPAIN TREATY. 7. SINCE, THE FACTS ARE UNDISPUTED AND SINCE THE HO NBLE JURISDICTIONAL HIGH COURT IN ASSESEES OWN CASE ITA NOS.191, 192, 193/2011 {( BASED ON THE JUDGMENT IN THE CASE OF DIT VS. GALILEO INTERNATIONAL INC. (224 CTR 251)} HAS HELD THAT THE ASSESSEE CONSTITUTES AN AGENCY PE AND AS THE MATTER PENDING BEFORE THE HONBLE SUPREME COURT, THE ISSUE DO NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE. THE ORDER OF THE LD. DR P IS BEING UPHELD ON THIS GROUND. ATTRIBUTION OF PROFIT: 8. GROUND NOS. 7 TO 12.1 PERTAINS TO ATTRIBUTION OF PROFITS. 9. THE AO HELD THAT THE ASSESSEE HAS EARNED A PROFI T OF RS.1,452,550,424/- OR EURO 2,50,90,000 FROM INDIA. THE RATIO OF ATTRIBUTION IS TO BE WORKED OUT, BY CONSIDERING THE IMPORTANCE & RANGE OF FUNCTIONS OF AIPL ESPECIALLY IN THE NEW AG REEMENT DATED 01.10.2004. THE AO HELD THAT AS THE COMPETITI ON IS GROWING IN THE MARKET, THE ROLE OF MARKETING FUNCTI ONS IN EARNING PROFIT INCREASES. FURTHER, IT WAS HELD THAT THE NUMBER OF ASSETS OF THE ASSESSEE IS GROWING IN INDIA AND NEW FACTS RELATING TO PRESENCE OF ASSETS IN INDIA HAVE ALSO BEEN FOUND OUT. HOLDING THUS, THE AO WORKED OUT THE PROFIT ATTRIBUTABLE TO INDIA @ 75% OF THE TOTAL PROFIT. THE AO HELD THAT THE PROFIT AT TRIBUTABLE TO INDIAN PERMANENT ESTABLISHMENTS WAS RS.1,08,94,12,8 18/- ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 10 TAXABLE AT THE RATE OF 40% PLUS SURCHARGE & EDUCATI ON CESS I.E. 41.82%. 10. THE LD. DRP CONFIRMED THE ORDER OF THE ASSESSIN G OFFICER. 11. THIS ISSUE HAS BEEN ADJUDICATED OVER A PERIOD O F TIME FOR VARIOUS YEARS AND THE DECISION OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT. THE CO-OR DINATE BENCH OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 1996-97 TO 1998-99, AFTER CONSIDERING THE EXTENT OF ACTIVITIES IN INDIA AND ABROAD, THE ASSETS EMPLOYED AND RISKS ASSUMED, HELD 15% OF THE REVENUES RELATING TO THE BOOKINGS MADE FROM INDIA A S ATTRIBUTABLE TO THE ASSESSEES PE IN INDIA. 12. THE CO-ORDINATE BENCH OF ITAT, VIDE ORDER DATED 16.11.2016 PASSED FOR ASSESSMENT YEARS 1999-00 AND 2000-01, FOLLOWING THE ORDER FOR THE ASSESSMENT YEARS 1996-9 7 TO 1998- 99, HELD THAT 15% OF THE REVENUES EARNED BY AMADEUS FROM ITS ACTIVITIES IN INDIA SHALL BE ATTRIBUTABLE TO THE PE . IT IS ALSO PERTINENT TO POINT OUT THAT THE ITAT, VIDE ORDER DA TED 24.04.2009, IN MA NOS. 212 TO 213/D/2008, FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 30.11.2007 RELAT ING TO AYS 1997-98 AND 1998-99, CATEGORICALLY HELD THAT REVENU ES OF 15% ATTRIBUTED BY IT TO THE PE WERE IN RELATION TO ACTI VITY OF THE PE AS A WHOLE, I.E., CONSIDERING THE AGENCY AND AS WEL L AS FIXED PLACE OF BUSINESS FUNCTIONS. 13. THE HONBLE DELHI HIGH COURT FOLLOWING ITS DECI SION IN THE CASE OF DIT V. GALILEO INTERNATIONAL 224 CTR 251, H AS AFFIRMED ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 11 THE ORDERS OF THE TRIBUNAL PASSED FOR ASSESSMENT YE ARS 1996-97 TO 2006-07. 14. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSING OFFICER HAD, IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 20 05-06, SOUGHT TO DISTINGUISH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1996-97 TO 1998-99 ON SIMILAR GROUNDS. HOWEVER, THE LD. CIT(A), VIDE ORDER DATED 25.02.2010, ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT NO MORE THAN 15% OF THE REVENUES GENERATED FROM INDIA COULD BE A TTRIBUTED TO THE ALLEGED PE OF THE ASSESSEE IN INDIA. THE AFO RESAID ORDER PASSED BY THE LD. CIT(A) FOR ASSESSMENT YEAR 2005-0 6 HAS BEEN CONFIRMED BY THE ITAT, VIDE ORDER DATED 29.10.2010 AND THE HONBLE HIGH COURT VIDE ORDER DATED 31.05.2011 (REV ENUE APPEAL) AND DATED 13.08.2013 (ASSESSEE APPEAL). 15. SINCE, THE FACTS REMAINED UNALTERED AND SINCE P AYMENT TO THE AGENT IS ALREADY @33%, NO FURTHER ADDITION IS W ARRANTED IN THE CASE OF THE ASSESSE. DISALLOWANCE OF EXPENSES: 16. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF THE DISTRIBUTION EXPENSES. T HE LD. DRP UPHELD THE ADDITION ON THE GROUNDS THAT NO DOCUMENT S HAVE BEEN FILED IN SUPPORT OF THE DISTRIBUTION ACTIVITY. 17. WE HAVE GONE THROUGH THE HISTORY OF SUCH EXPEND ITURE AND FIND THAT THE ADDITION IS BEING MADE OWING TO CONFU SION IN THE ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 12 DESCRIPTION OF THE SERVICES AS EXPORT OF PROCESSED DATA/SOFTWARE OR DISTRIBUTION FEE 18. THIS EXPENDITURE HAS BEEN ALLOWED BY THE CO-ORD INATE BENCH OF THE TRIBUNAL FROM THE ASSESSMENT YEARS 199 6-97 TO 2006-07. SINCE, THE FACTS HAVE NOT BEEN DISPUTED, I N THE ABSENCE OF ANY MATERIAL CHANGE, WE HEREBY ALLOW THE CLAIM OF DISTRIBUTION EXPENSES. CRS INCOME ROYALTY: 19. THE AO HAS HELD THAT THE INCOME RECEIVED BY THE ASSESSEE WITH RESPECT TO BOOKINGS ARISING FROM INDIA IS ALSO TAXABLE AS ROYALTY INCOME. THE AO OBSERVED THAT THE ASSESSEE S UPPLIES/ LICENSES ITS PROPRIETARY PRODUCTS FREE OF CHARGE TO AMADEUS INDIA FOR DISTRIBUTION TO THE SUBSCRIBERS. AS PER T HE DISTRIBUTION AGREEMENT, THE ASSESSEE HAS AUTHORIZED AMADEUS INDI A TO CONCLUDE SUBSCRIBER AGREEMENT WITH THE SUBSCRIBER S WHICH ALLOWS THE TRAVEL AGENTS TO USE THE CRS OWNED BY IT . THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE PAYI NG AIRLINES HAVE OFFICES IN INDIA. THE ASSESSEE HAS GRANTED TO AMADEUS INDIA THE RIGHT TO FURTHER GRANT THE RIGHT TO ACCES S AND RIGHT TO USE ITS PLATFORMS/ SOFTWARE/ PRODUCT OFFERINGS TO S UBSCRIBERS. AMADEUS INDIA HAS THE EXCLUSIVE RIGHTS TO DISTRIBUT E THE CRS IN INDIA. 20. THE AO HAS HELD THAT A SOFTWARE IS ALSO TYPE OF EQUIPMENT IN THE FACTS OF THE CASE. THE SYSTEM COMPRISING OF EQUIPMENTS IS USED BY THE SUBSCRIBERS TO BOOK TICKETS AND THE SAM E IS THE ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 13 SOURCE OF INCOME FOR THE ASSESSEE. THE AO HELD THAT THE INCOME OF THE ASSESSEE IS TAXABLE AS ROYALTY ALSO AS USE OF PROCESS. 21. THE LD. DRP CONFIRMED THE ORDER OF THE ASSESSIN G OFFICER. 22. IN THE ASSESSMENT FRAMED FOR ASSESSMENT YEAR 20 06-07, THE ASSESSING OFFICER HAD SUBSTANTIVELY BROUGHT TO TAX, THE BOOKING FEE AS BUSINESS INCOME AND PROTECTIVELY HEL D 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 ASSESSE E. 23. THE DELHI TRIBUNAL IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2006-07 HAS HELD THAT BOOKING FEE R ECEIVED BY THE ASSESSEE IS TAXABLE AS BUSINESS INCOME AND NOT UNDER THE HEAD ROYALTY. FOR THE SAKE OF READY REFERENCE AND B REVITY, THE RELEVANT PORTION OF THE ORDER OF THE ITAT IN ITA NO . 1494/DEL/2011 IS REPRODUCED BELOW: IN THE PRESENT CASE, TOO, AS SUBMITTED HEREINABOVE , THE APPELLANT USES SOPHISTICATED TECHNOLOGY/SOFTWARE IN THE COURS E OF PROVIDING A SERVICE/FACILITY BUT THE APPELLANT DOES NOT DIVULGE ANY PROCESS INVOLVED IN THE TECHNOLOGY/SOFTWARE TO THE USER OF THE CRS. THE APPELLANT DOES NOT MAKE AVAILABLE TO THE PARTICIPAT ING AIRLINES ANY SECRET FORMULA OR PROCESS. ALSO, NO EQUIPMENT IS PR OVIDED BY THE APPELLANT FOR USE TO THE PARTICIPATING AIRLINES. FU RTHER, NO PAYMENT IS MADE BY THE SUBSCRIBERS, VIZ., THE TRAVEL AGENTS TO THE APPELLANT, UNLIKE THE AFORESAID CASE. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 14 IN THAT VIEW OF THE MATTER, THE BOOKING FEE RECEIVE D BY THE APPELLANT FROM THE PARTICIPATING AIRLINES DOES NOT ANSWER THE DESCRIPTION OF ROYALTY AND, THUS, IS NOT CHARGEABLE TO TAX IN IN DIA. 24. SINCE, THE FACTS HAVE NOT BEEN DISPUTED IN THE ABSENCE OF ANY MATERIAL CHANGES, WE HEREBY HOLD THAT THE BOOKI NG FEE RECEIVED IS IN THE NATURE OF BUSINESS INCOME. ALTEA RESERVATION SYSTEM: 25. THE AO HELD THAT IN RELATION TO THE BOOKINGS AR ISING FROM INDIA, THE PAYMENT FOR ALTEA RESERVATION SYSTEM (AR S) IS MADE BY THE BRITISH AIRWAYS FOR THE USE OF SYSTEM FOR TH E PURPOSE OF BUSINESS IN INDIA AND FOR THE PURPOSE OF EARNING IN COME FROM INDIA. ON THE TRAVEL AGENTS, OFFICES OF BRITISH AIR WAYS USE THIS SYSTEM AS A RIGHT PROVIDED BY THE BRITISH AIRWAYS. THE AO HELD THAT THE ARS HAS BEEN SPECIFICALLY AND EXCLUSIVELY USED BY BRITISH AIRWAYS. HENCE, TAXED THIS AMOUNT UNDER THE HEAD INCOME FROM ROYALTY AND TAX @ 20%. 26. THE LD. DRP HAS UPHELD THE ACTION OF THE ASSESS ING OFFICER ON THE GROUNDS THAT THE FUNCTIONALITY ON THE BUSINE SS MODULE FACTS OF ARS SUGGESTS THAT THE REVENUE CHARGING ON THIS ACCOUNT MAY BE LINKED TO THE NUMBER OF RESERVATIONS/BOOKING S DONE THROUGH THIS SYSTEM. 27. IT WAS CANVASSED BEFORE US, THE ARS SYSTEM IS I NSTALLED AT THE AIRPORTS AND IS ACCESSED ONLY BY THE AIRLINES A ND NOT BY THE AGENTS OF THE ASSESSEE. IT WAS ARGUED THAT THE SYST EM WAS ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 15 AVAILABLE ONLY TO BRITISH AIRWAYS FOR THE PURPOSE O F ACCEPTING PAYMENT AND TRAVELLED DOCUMENTATION ONLY AT THE AIR PORT COUNTERS. IT WAS ARGUED THAT THE PAYMENT MADE BY BR ITISH AIRWAYS TO THE ASSESSEE IN RELATION TO THE ARS IS F OR SERVICES RENDERED BY THE AMADEUS AND NOT FOR USE OF ANY PROC ESS. IT WAS ARGUED THAT SINCE THE INVENTORY HOSTING TAKES PLACE OUTSIDE INDIA AND PAYMENT IS MADE BY NON-RESIDENT AIRLINES TO ANOTHER NON-RESIDENT OUTSIDE INDIA, IN TERMS OF ARTICLE 13( 6) OF THE TREATY, THE PAYMENTS DEEMED TO HAVE BEEN NOT SOURCE D IN INDIA. WE FIND THAT THE REVENUE HAS BROUGHT OUT INFORMATIO N WHICH PROCLAIM THAT THE ASSESSEE WITH BRITISH AIRWAYS DEV ELOPED ALTEA RESERVATION SYSTEM FOR DISTRIBUTION THROUGH BRITISH AIRWAYS SALES OUTLETS, THE PRODUCTS NAMELY ALTEA INVENTORY FOR GLOBAL INVENTORY MANAGEMENT AND ALTEA DEPARTURE CONTROL F OR PASSENGER CHECKING AND FLIGHT DEPARTURE MANAGEMENT. THE BRITISH AIRWAYS USES ARS ON ITS WEBSITE AND FOR REV ENUE MANAGEMENT SYSTEM. WE ALSO HEARD THE ARGUMENT OF TH E ASSESSEE THAT THE ARS HAS NO RELATION TO THE PE OF THE ASSESSEE IN INDIA. THE SOURCE OF REVENUE RECEIVED BY THE ASS ESSEE IN CONNECTION WITH ARS IS NOT SITUATED IN INDIA. WE FI ND THAT ARS IS ESSENTIALLY AN INVENTORY HOSTING AND MANAGEMENT SYS TEM DEVELOPED BY THE ASSESSEE WHICH SOME AIRLINES OUTSO URCED TO AMADEUS, WITH BRITISH AIRWAYS AS A LAUNCH CUSTOMER. THE PAYMENT FOR THE ARS IS MADE BY THE BRITISH AIRWAYS FOR THE USE OF THE SYSTEM FOR THE BUSINESS IN INDIA AT THE INDI AN AIRPORT IS AN UNDISPUTABLE FACT. WHILE THE CONTENTION OF THE A SSESSEE IS THAT THE SOFTWARE WAS NOT AVAILABLE OUTSIDE THE IND IAN AIRPORT OR ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 16 TO ANY OF THE AGENTS OF THE ASSESSEE IN INDIA, THE REVENUE CONTENDED THAT THE ARS ALSO PROVIDES KEY OPERATIONA L SERVICES TO BRITISH AIRWAYS LIKE ACCEPTING PAYMENT AND ISSUA NCE OF TRAVEL DOCUMENTS AND MANAGE CUSTOMER CHECKING. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE ARGUMENTS TAKEN UP WITH REGARD TO CRS ACTIVITY AS ROYALTY MAY ALSO BE CONSI DERED WHILE DEALING WITH ARS ISSUE. 28. THE ARTICLE 7 READS AS UNDER: ARTICLE 7 BUSINESS PROFITS 1. THE PROFITS OF AN ENTERPRISE OF ONE OF THE STATE S SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE ENTERPRISE CARRIES ON BUSINESS IN THE OTHER STATE THROUGH A PERMANENT ESTABLISHMENT SITUA TED THEREIN. IF THE ENTERPRISE CARRIES ON BUSINESS AS AFORESAID, TH E PROFITS OF THE ENTERPRISE MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM AS IS ATTRIBUTABLE TO THAT PERMANENT ESTABLISHMENT. 2. SUBJECT TO THE PROVISIONS OF PARAGRAPH 3, WHERE AN ENTERPRISE OF ONE OF THE STATES CARRIES ON BUSINESS IN THE OTHER STATE THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN, THERE SHA LL IN EACH STATE BE ATTRIBUTED TO THAT PERMANENT ESTABLISHMENT THE P ROFITS WHICH IT MIGHT BE EXPECTED TO MAKE IF IT WERE A DISTINCT AND SEPARATE ENTERPRISE ENGAGED IN THE SAME OR SIMILAR ACTIVITIE S UNDER THE SAME OR SIMILAR CONDITIONS AND DEALING WHOLLY INDEPENDEN TLY WITH THE ENTERPRISE OF WHICH IT IS PERMANENT ESTABLISHMENT. IN ANY CASE WHERE THE CORRECT AMOUNT OF PROFITS ATTRIBUTABLE TO A PER MANENT ESTABLISHMENT IS INCAPABLE OF DETERMINATION OR THE DETERMINATION THEREOF PRESENTS EXCEPTIONAL DIFFICULTIES, THE PROF ITS ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT MAY BE ESTIMATED ON THE BASIS OF AN ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 17 APPORTIONMENT OF THE TOTAL PROFITS OF THE ENTERPRIS E TO ITS VARIOUS PARTS, PROVIDED, HOWEVER, THAT THE RESULT SHALL BE IN ACCORDANCE WITH THE PRINCIPLES CONTAINED IN THIS ARTICLE. 3. (A) IN DETERMINING THE PROFITS OF A PERMANENT ES TABLISHMENT, THERE SHALL BE ALLOWED AS DEDUCTIONS, EXPENSES WHICH ARE INCURRED FOR THE PURPOSES OF THE PERMANENT ESTABLISHMENT, INCLUDING EXECUTIVE AND GENERAL ADMINISTRATIVE EXPENSES SO INCURRED, WHETHE R IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT IS SITUATED OR EL SEWHERE, IN ACCORDANCE WITH THE PROVISIONS OF AND SUBJECT TO TH E LIMITATIONS OF THE TAXATION LAWS OF THAT STATE. PROVIDED THAT WHER E THE LAW OF THE STATE IN WHICH THE PERMANENT ESTABLISHMENT IS SITUA TED IMPOSES A RESTRICTION ON THE AMOUNT OF THE EXECUTIVE AND GENE RAL ADMINISTRATIVE EXPENSES WHICH MAY BE ALLOWED, AND T HAT RESTRICTION IS RELAXED OR OVERRIDDEN BY ANY CONVENTION BETWEEN THAT STATE AND A THIRD STATE WHICH ENTERS INTO FORCE AFTER THE DATE OF ENTRY INTO FORCE OF THIS CONVENTION, THE COMPETENT AUTHORITY OF THAT STATE SHALL NOTIFY THE COMPETENT AUTHORITY OF THE OTHER STATE OF THE T ERMS OF THE CORRESPONDING PARAGRAPH IN THE CONVENTION WITH THAT THIRD STATE IMMEDIATELY AFTER THE ENTRY INTO FORCE OF THAT CONV ENTION AND, IF THE COMPETENT AUTHORITY OF THE OTHER STATE OR REQUESTS, THE PROVISIONS OF THIS SUB-PARAGRAPH SHALL BE AMENDED BY PROTOCOL TO REFLECT SUCH TERMS. (B) HOWEVER, NO SUCH DEDUCTION SHALL BE ALLOWED IN RESPECT OF AMOUNTS, IF ANY, PAID (OTHERWISE THAN TOWARDS REIMB URSEMENT OF ACTUAL EXPENSES) BY THE PERMANENT ESTABLISHMENT TO THE HEAD OFFICE OF THE ENTERPRISE OR ANY OF ITS OTHER OFFICES, BY W AY OF ROYALTIES, FEES OR OTHER SIMILAR PAYMENTS IN RETURN FOR THE USE OF PATENTS OR OTHER RIGHTS, OR BY WAY OF COMMISSION, FOR SPECIFIC SERVI CES PERFORMED OR FOR MANAGEMENT, OR, EXCEPT IN THE CASE OF A BANKING ENTERPRISE, BY ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 18 WAY OF INTEREST ON MONEYS LENT TO THE PERMANENT EST ABLISHMENT. LIKEWISE, NO ACCOUNT SHALL BE TAKEN, IN THE DETERMI NATION OF THE PROFITS OF A PERMANENT ESTABLISHMENT, FOR AMOUNTS C HARGED (OTHERWISE THAN TOWARDS REIMBURSEMENT OF ACTUAL EXP ENSES), BY THE PERMANENT ESTABLISHMENT TO THE HEAD OFFICE OF THE E NTERPRISE OR ANY OF ITS OTHER OFFICES, BY WAY OF ROYALTIES, FEES OR OTHER SIMILAR PAYMENTS IN RETURN FOR THE USE OF PATENTS OR OTHER RIGHTS, OR BY WAY OF COMMISSION FOR SPECIFIC SERVICES PERFORMED OR FO R MANAGEMENT, OR, EXCEPT IN THE CASE OF A BANKING ENTERPRISE, BY WAY OF INTEREST ON MONEYS LENT TO THE HEAD OFFICE OF THE ENTERPRISE, O R ANY OF ITS OTHER OFFICES. 4. NO PROFITS SHALL BE ATTRIBUTED TO A PERMANENT ES TABLISHMENT BY REASON OF THE MERE PURCHASE BY THAT PERMANENT ESTAB LISHMENT OF GOODS OR MERCHANDISE FOR THE ENTERPRISE. 5. FOR THE PURPOSES OF THE PRECEDING PARAGRAPHS, TH E PROFITS TO BE ATTRIBUTED TO THE PERMANENT ESTABLISHMENT SHALL BE DETERMINED BY THE SAME METHOD YEAR BY YEAR UNLESS THERE IS GOOD A ND SUFFICIENT REASON TO THE CONTRARY. 6. WHERE PROFITS INCLUDE ITEMS OF INCOME WHICH ARE DEALT WITH SEPARATELY IN OTHER ARTICLES OF THIS CONVENTION, TH EN THE PROVISIONS OF THOSE ARTICLES SHALL NOT BE AFFECTED BY THE PROVISI ONS OF THIS ARTICLE. 29. ARTICLE 13 READS AS UNDER: ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISIN G IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTI NG STATE MAY BE TAXED IN THAT OTHER STATE. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 19 2. HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNICAL S ERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAW OF THAT STATE, BUT IF THE RECIPIENT IS THE BENE FICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES THE TAX SO CHARGED SHALL NOT EXCEED : ( I ) IN THE CASE OF ROYALTIES RELATING TO THE PAYMENTS F OR THE USE OF, OR THE RIGHT TO USE, INDUSTRIAL, COMMERCIAL OR SCIE NTIFIC EQUIPMENT, 10 PER CENT OF THE GROSS AMOUNT OF THE R OYALTIES; ( II ) IN THE CASE OF FEES FOR TECHNICAL SERVICES AND OTHE R ROYALTIES, 20 PER CENT OF THE GROSS AMOUNT OF FEES FOR TECHNICAL SERVICES OR ROYALTIES. 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHIC FILMS OR FILMS OR TAPES USED FOR RA DIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MOD EL, PLAN, SECRET FORMULA OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMAT ION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 4. THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED I N THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON OTHER THAN PAYME NTS TO AN EMPLOYEE OF THE PERSON MAKING THE PAYMENTS AND TO A NY INDIVIDUAL FOR INDEPENDENT PERSONAL SERVICES MENTIONED IN ARTICLE 15 (INDEPENDENT PERSONAL SERVICES), IN CONSIDERATION FOR THE SERVIC ES OF A TECHNICAL OR CONSULTANCY NATURE, INCLUDING THE PROVISION OF SERV ICES OF TECHNICAL OR OTHER PERSONNEL. 5. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT A PPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES, BEING A RESIDENT OF ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 20 A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTH ER CONTRACTING STATE IN WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES ARISE, THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN, OR PERFOR MS IN THAT OTHER STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BA SE SITUATED THEREIN, AND THE RIGHT, PROPERTY OR CONTRACT IN RESPECT OF W HICH THE ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE PAID IS EFFECTIVELY CONNECTED WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE , THE PROVISIONS OF ARTICLE 7 OR ARTICLE 15, AS THE CASE MAY BE, SHALL APPLY. 6. ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IN THAT STATE IT SELF, A POLITICAL SUB- DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT S TATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES OR FEES FOR TECHNIC AL SERVICES WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT OR FIXED BASE IN CO NNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES OR FEES FOR TECH NICAL SERVICES WAS INCURRED, AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE, THEN SU CH ROYALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED. 7. WHERE, BY REASON OF A SPECIAL RELATIONSHIP BETWE EN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SOME O THER PERSON, THE AMOUNT OF THE ROYALTIES OR FEES FOR TECHNICAL SERVI CES PAID, EXCEEDS THE AMOUNT WHICH WOULD HAVE BEEN PAID IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE SHALL APPLY ONLY TO THE LAST-MENTIONED AMOUNT. IN SUCH CASE, THE EXCESS PART OF THE PAYMEN TS SHALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRACTING S TATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS CONVENTIO N. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 21 30. AFTER GOING THROUGH THE ARTICLE 13 AND ARTICLE 7 AND KEEPING IN VIEW THE FACT THAT THE COMPUTER TERMINAL S ARE AT AIRPORT TERMINALS AND SINCE THE AMOUNTS HAVE BEEN R ECEIVED FOR UTILIZATION OF ARS WHICH IS PREDOMINANTLY A RESERVA TION SYSTEM, THE SAME MAY BE TREATED AS INCOME FROM ROYALTY. W E UPHELD THE ACTION OF THE AO TO THIS EXTENT. 31. DURING THE ARGUMENTS, THE LD. AR RAISED A POINT REGARDING THE TAXABILITY OF ROYALTY INCOME IN THE HANDS OF TH E ASSESSEE AS PER DTAA. HE ARGUED THAT IN THE ABSENCE OF CORRESPO NDING CHANGE IN THE DTAA WITH REGARD TO INTERPRETATION OF ROYALTY IN THE DOMESTIC LAW. HE RELIED ON THE RATIO LAW LAID D OWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DI RECTOR OF INCOME TAX VS NEW SKIES SATELLITE BV VIDE ORDER DAT ED 8 FEBRUARY, 2016. THE LD. DR ARGUED THAT THE PROVISIO NS OF DTAA WOULD HAVE PRIMACY OVER THE DOMESTIC PROVISIONS. 32. THE OPERATIVE PART OF THE SAID JUDGMENT IS AS U NDER: 54. NEITHER CAN AN ACT OF PARLIAMENT SUPPLY OR ALT ER THE BOUNDARIES OF THE DEFINITION UNDER ARTICLE 12 OF TH E DTAAS BY SUPPLYING REDUNDANCY TO ANY PART OF IT. THIS BECOME S ESPECIALLY IMPORTANT IN THE CONTEXT OF EXPLANATION 6, WHICH ST ATES THAT WHETHER THE 'PROCESS' IS SECRET OR NOT IS IMMATERIA L, THE INCOME FROM THE USE OF SUCH PROCESS IS TAXABLE, NONETHELES S. EXPLANATION 6 PRECIPITATED FROM CONFUSION ON THE QU ESTION OF WHETHER IT WAS VITAL THAT THE 'PROCESS' USED MUST B E SECRET OR NOT. THIS CONFUSION WAS BROUGHT ABOUT BY A DIFFEREN CE IN THE ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 22 PUNCTUATION OF THE DEFINITIONS IN THE DTAAS AND THE DOMESTIC DEFINITION. FOR GREATER CLARITY AND TO ILLUSTRATE T HIS DIFFERENCE, WE REPRODUCE THE DEFINITIONS OF ROYALTY ACROSS BOTH DTAAS AND SUB CLAUSE (III) TO EXPLANATION 2 TO 9(1)(VI). ARTICLE 12(3), INDO THAI DOUBLE TAX AVOIDANCE AGREE MENT: 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE ALI ENATION OR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITER ARY, ARTISTIC OR SCIENTIFIC WORK (INCLUDING CINEMATOGRAPH FILMS, PHO NOGRAPHIC RECORDS AND FILMS OR TAPES FOR RADIO OR TELEVISION BROADCASTING), ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMAT ION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE.' (EMPHASIS SUPPLIED) ARTICLE 12(4), INDO NETHERLANDS DOUBLE TAX AVOIDANC E AGREEMENT '4. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC O R SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MA RK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE.' (EMPHASIS SUPPLIED) ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 23 SECTION 9(1)(VI), EXPLANATION 2, INCOME TAX ACT, 19 61 (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y; (EMPHASIS SUPPLIED) 55. THE SLIGHT BUT APPARENTLY VITAL DIFFERENCE BETW EEN THE DEFINITIONS UNDER THE DTAA AND THE DOMESTIC DEFINIT ION IS THE PRESENCE OF A COMMA FOLLOWING THE WORD PROCESS IN T HE FORMER. IN THE INITIAL DETERMINATIONS BEFORE VARIOUS ITATS ACROSS THE COUNTRY, MUCH DISCUSSION TOOK PLACE ON THE IMPLICAT IONS OF THE PRESENCE OR ABSENCE OF THE 'COMMA'. A LOT HAS BEEN SAID ABOUT THE RELEVANCE OR OTHERWISE OF PUNCTUATION IN THE CO NTEXT OF STATUTORY CONSTRUCTION. IN SPOKEN ENGLISH, IT WOULD BE UNWISE TO ARGUE AGAINST THE IMPORTANCE OF PUNCTUATION, WHERE THE PLACEMENT OF COMMAS IS NOTORIOUS FOR DIAMETRICALLY OPPOSITE IMPLICATIONS. HOWEVER IN THE REALM OF STATUTORY INT ERPRETATION, COURTS ARE CIRCUMSPECT IN ALLOWING PUNCTUATION TO D ICTATE THE MEANING OF PROVISIONS. JUDGE CALDWELL ONCE FAMOUSLY SAID 'THE WORDS CONTROL THE PUNCTUATION MARKS, AND NOT THE PU NCTUATION MARKS THE WORDS.' HOLMES V. PHEONIX INSURANCE CO. 47. IT HAS BEEN HELD IN CGT V. BUDUR AND HINDUSTAN CONST V. CIT THAT WHILE PUNCTUATION MAY ASSIST IN ARRIVING A T THE CORRECT CONSTRUCTION, YET IT CANNOT CONTROL THE CLEAR MEANI NG OF A STATUTORY PROVISION. IT IS BUT, A MINOR ELEMENT IN THE CONSTRUCTION OF A STATUTE, HINDUSTAN CONST50. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 24 56. THE COURTS HAVE HOWEVER CREATED AN EXCEPTION TO THE GENERAL RULE THAT PUNCTUATION IS NOT TO BE LOOKED A T TO ASCERTAIN MEANING. THAT EXCEPTION OPERATES WHEREVER A STATUTE IS CAREFULLY PUNCTUATED. ONLY THEN SHOULD WEIGHT UNDOU BTEDLY BE GIVEN TO PUNCTUATION; CIT V. LOYAL TEXTILE51; SAMA ALANA ABDULLA VS. STATE OF GUJARAT52; MOHD SHABBIR VS. ST ATE OF MAHARASHTRA53; LEWIS PUGH EVANS PUGH VS. ASHUTOSH S EN54; ASHWINI KUMAR GHOSE V. ARBINDA BOSE55; POPE ALLIANC E CORPORATION V. SPANISH RIVER PULP AND PAPER MILLS L TD.56. AN ILLUSTRATION OF THE AID DERIVED FROM PUNCTUATION MA Y BE FURNISHED FROM THE CASE OF MOHD. SHABBIR V. STATE O F MAHARASHTRA WHERE SECTION 27 OF THE DRUGS AND COSME TICS ACT, 1940 CAME UP FOR CONSTRUCTION. BY THIS SECTION WHOE VER 'MANUFACTURES FOR SALE, SELLS, STOCKS OR EXHIBITS F OR SALE OR DISTRIBUTES' A DRUG WITHOUT A LICENSE IS LIABLE FOR PUNISHMENT. IN HOLDING THAT MERE STOCKING SHALL NOT AMOUNT TO AN O FFENCE UNDER THE SECTION, THE SUPREME COURT POINTED OUT THE PRES ENCE OF COMMA 98 F 240 (1899) 103 ITR 189 208 ITR 291 SUPRA NOTE 46 231 ITR 573 AIR 1996 SC 569 AIR 1979 SC 564 AIR 192 9 PRIVY COUNCIL 69 AIR 1952 SC 369 AIR 1929 PC 38 AIR 1979 SC 564 AFTER 'MANUFACTURES FOR SALE' AND 'SELLS' AND THE A BSENCE OF ANY COMMA AFTER 'STOCKS' WAS INDICATIVE OF THE FACT 'ST OCKS' WAS TO BE READ ALONG WITH 'FOR SALE' AND NOT IN A MANNER S O AS TO BE DIVORCED FROM IT, AN INTERPRETATION WHICH WOULD HAV E BEEN SOUND HAD THERE BEEN A COMMA AFTER THE WORD 'STOCKS'. IT WAS THEREFORE HELD THAT ONLY STOCKING FOR THE PURPOSE O F SALE WOULD AMOUNT TO AN OFFENCE BUT NOT MERE STOCKING. ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 25 57. HOWEVER, THE QUESTION, WHICH THEN ARISES, IS AS FOLLOWS. HOW IS THE COURT TO DECIDE WHETHER A PROVISION IS CAREF ULLY PUNCTUATED OR NOT? THE TEST- TO DECIDE WHETHER A ST ATUTE IS CAREFULLY (READ CONSCIOUSLY) PUNCTUATED OR NOT- WOU LD BE TO SEE WHAT THE CONSEQUENCE WOULD BE HAD THE SECTION BEEN PUNCTUATED OTHERWISE. WOULD THERE BE ANY SUBSTANTIA L DIFFERENCE IN THE IMPORT OF THE SECTION IF IT WERE NOT PUNCTUA TED THE WAY IT ACTUALLY IS? WHILE THIS MAY NOT BE CONCLUSIVE EVIDE NCE OF A CAREFULLY PUNCTUATED PROVISION, THE REPERCUSSIONS G O A LONG WAY TO SIGNIFY INTENT. IF THE INCLUSION OR LACK OF A CO MMA OR A PERIOD GIVES RISE TO DIAMETRICALLY OPPOSITE CONSEQUENCES O R LARGE VARIATIONS IN TAXING POWERS, AS IS IN THE PRESENT C ASE, THEN THE ASSUMPTION MUST BE THAT IT WAS PUNCTUATED WITH A PA RTICULAR END IN MIND. THE TEST THEREFORE IS NOT TO SEE IF IT MAK ES 'GRAMMATICAL SENSE' BUT TO SEE IF IT TAKES ON ANY ' LEGAL CONSEQUENCES'. 58. NEVERTHELESS, WHETHER OR NOT PUNCTUATION PLAYS AN IMPORTANT PART IN STATUTE INTERPRETATION, THE CONST RUCTION PARLIAMENT GIVES TO SUCH PUNCTUATION, OR IN THIS CA SE, THE IRRELEVANCY THAT IT IMPUTES TO IT, CANNOT BE CARRIE D OVER TO AN INTERNATIONAL INSTRUMENT WHERE SUCH COMMA MAY OR MA Y NOT HAVE BEEN EVIDENCE OF A DELIBERATE INCLUSION TO INF LUENCE THE READING OF THE SECTION. THERE IS SUFFICIENT EVIDENC E FOR US TO CONCLUDE THAT THE PROCESS REFERRED TO IN ARTICLE 12 MUST IN FACT BE A SECRET PROCESS AND WAS ALWAYS MEANT TO BE SUCH . ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 26 IN ANY EVENT, THE PRECINCTS OF INDIAN LAW MAY NOT D ICTATE SUCH CONCLUSION. THAT CONCLUSION MUST BE THE RESULT OF A N INTERPRETATION OF THE WORDS EMPLOYED IN THE LAW AND THE TREATISES, AND DISCUSSIONS THAT ARE APPLICABLE AND SPECIALLY FORMULATED FOR THE PURPOSE OF THAT DEFINITION. THE FOLLOWING EXTRACT FROM ASIA SATELLITE58 TAKES NOTE OF THE OEC D COMMENTARY AND KLAUS VOGEL ON DOUBLE TAX CONVENTION S, TO SHOW THAT THE PROCESS MUST IN FACT BE SECRET AND TH AT SPECIFICALLY, INCOME FROM DATA TRANSMISSION SERVICE S DO NOT PARTAKE OF THE NATURE OF ROYALTY. '74. EVEN WHEN WE LOOK INTO THE MATTER FROM THE STA NDPOINT OF DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), THE CAS E OF THE APPELLANT GETS BOOST. THE ORGANISATION OF ECONOMIC COOPERATION AND DEVELOPMENT (OECD) HAS FRAMED A MODEL OF DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) ENTERED INTO BY INDIA ARE BASED. ARTICLE 12 OF THE SAID MODEL DTAA CONTAINS A DEFINITION OF ROYALTY WHICH IS IN ALL MATERIAL RESPECTS VIRTUALLY THE SAME AS THE DEFINITION OF ROYALTY CONTAINED IN CLAUSE (III) OF EXPLANATION 2 TO SECTION 9(1) (VI) OF THE ACT. THIS FACT IS ALS O NOT IN DISPUTE. THE LEARNED COUNSEL FOR THE APPELLANT HAD RELIED UP ON THE COMMENTARY ISSUED BY THE OECD ON THE AFORESAID MODE L DTAA AND PARTICULARLY, REFERRED TO THE FOLLOWING AMENDME NT PROPOSED BY OECD TO ITS COMMENTARY ON ARTICLE 12, WHICH READ S AS UNDER: '9.1 SATELLITE OPERATORS AND THEIR CUSTOMERS (INCLU DING BROADCASTING AND TELECOMMUNICATION ENTERPRISES) FRE QUENTLY ENTER INTO TRANSPONDER LEASING AGREEMENTS UNDER WHI CH THE SATELLITE OPERATOR ALLOWS THE CUSTOMER TO UTILIZE T HE CAPACITY OF ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 27 A SATELLITE TRANSPONDER TO TRANSMIT OVER LARGE GEOG RAPHICAL AREAS. PAYMENTS MADE BY CUSTOMERS UNDER TYPICAL TRA NSPONDER LEASING AGREEMENTS ARE MADE FOR THE USE OF THE TRAN SPONDER TRANSMITTING CAPACITY AND WILL NOT CONSTITUTE ROYAL TIES UNDER THE DEFINITION OF PARAGRAPH 2; THESE PAYMENTS ARE NOT M ADE IN CONSIDERATION FOR THE USE OF, OR RIGHT TO USE, PROP ERTY, OR FOR INFORMATION, THAT IS REFERRED SUPRA NOTE TO IN THE DEFINITION (THEY CANNOT BE VIEWED, FOR INSTANCE, AS PAYMENTS F OR INFORMATION OR FOR THE USE OF, OR RIGHT TO USE, A S ECRET PROCESS SINCE THE SATELLITE TECHNOLOGY IS NOT TRANSFERRED T O THE CUSTOMER). AS REGARDS TREATIES THAT INCLUDE THE LEA SING OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC (ICS) EQUIPMEN T IN THE DEFINITION OF ROYALTIES, THE CHARACTERIZATION OF TH E PAYMENT WILL DEPEND TO A LARGE EXTENT ON THE RELEVANT CONTRACTUA L ARRANGEMENTS. WHILST THE RELEVANT CONTRACTS OFTEN R EFER TO THE LEASE OF A TRANSPONDER, IN MOST CASES THE CUSTOMER DOES NOT ACQUIRE THE PHYSICAL POSSESSION OF THE TRANSPONDER BUT SIMPLY ITS TRANSMISSION CAPACITY: THE SATELLITE IS OPERATE D BY THE LESSOR AND THE LESSEE HAS NO ACCESS TO THE TRANSPONDER THA T HAS BEEN ASSIGNED TO IT. IN SUCH CASES, THE PAYMENTS MADE BY THE CUSTOMERS WOULD THEREFORE BE IN THE NATURE OF PAYME NTS FOR SERVICES, TO WHICH ARTICLE 7 APPLIES, RATHER THAN P AYMENTS FOR THE USE, OR RIGHT TO USE, ICS EQUIPMENT. A DIFFEREN T, BUT MUCH LESS FREQUENT, TRANSACTION WOULD BE WHERE THE OWNER OF THE SATELLITE LEASES IT TO ANOTHER PARTY SO THAT THE LA TTER MAY OPERATE IT AND EITHER USE IT FOR ITS OWN PURPOSES O R OFFER ITS DATA TRANSMISSION CAPACITY TO THIRD PARTIES. IN SUCH A C ASE, THE ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 28 PAYMENT MADE BY THE SATELLITE OPERATOR TO THE SATEL LITE OWNER COULD WELL BE CONSIDERED AS A PAYMENT FOR THE LEASI NG OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. SIM ILAR CONSIDERATIONS APPLY TO PAYMENTS MADE TO LEASE OR P URCHASE THE CAPACITY OF CABLES FOR THE TRANSMISSION OF ELECTRIC AL POWER OR COMMUNITIES (E.G. THROUGH A CONTRACT GRANTING AN IN DEFEASIBLE RIGHT OF USE OF SUCH CAPACITY) OR PIPELINES (E.G. F OR THE TRANSPORTATION OF GAS OR OIL). 75. MUCH RELIANCE WAS PLACED UPON THE COMMENTARY WR ITTEN BY KLAUS VOGEL ON DOUBLE TAXATION CONVENTIONS (3RD EDI TION)'. IT IS RECORDED THEREIN: 'THE USE OF A SATELLITE IS A SERVICE, NOT A RENTAL (THUS CORRECTLY, RABE, A., 38 RIW 135 (1992), ON GERMANY'S DTC WITH LUXEMBOURG); THIS WOULD NOT BE THE CASE ONLY IN THE EVENT THE ENTIRE DIRECTION AND CONTROL OVER THE SATELLITE, SU CH AS ITS PILOTING OR STEERING, ETC. WERE TRANSFERRED TO THE USER.' 76. KLAUS VOGEL HAS ALSO MADE A DISTINCTION BETWEEN LETTING AN ASSET AND USE OF THE ASSET BY THE OWNER FOR PROVIDI NG SERVICES AS BELOW: 'ON THE OTHER HAND, ANOTHER DISTINCTION TO BE MADE IS LETTING THE PROPRIETARY RIGHT, EXPERIENCE, ETC., ON THE ONE HAN D AND USE OF IT BY THE LICENSOR HIMSELF, E.G., WITHIN THE FRAMEW ORK OF AN ADVISORY ACTIVITY. WITHIN THE RANGE FROM SERVICES', VIZ. OUTRIGHT TRANSFER OF THE ASSET INVOLVED (RIGHT, ETC.) TO THE PAYER OF THE ROYALTY. THE OTHER, JUST AS CLEAR-CUT EXTREME IS TH E EXERCISE BY ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 29 THE PAYEE OF ACTIVITIES IN THE SERVICE OF THE PAYER , ACTIVITIES FOR WHICH THE PAYEE USES HIS OWN PROPRIETARY RIGHTS, KN OW-HOW, ETC., WHILE NOT LETTING OR TRANSFERRING THEM TO THE PAYER.' 77. THE TRIBUNAL HAS DISCARDED THE AFORESAID COMMEN TARY OF OECD AS WELL AS KLAUS VOGEL ONLY ON THE GROUND THAT IT IS NOT SAFE TO RELY UPON THE SAME. HOWEVER, WHAT IS IGNORE D IS THAT WHEN THE TECHNICAL TERMS USED IN THE DTAA ARE THE S AME WHICH APPEAR IN SECTION 9(1)(VI), FOR BETTER UNDERSTANDIN G ALL THESE VERY TERMS, OECD COMMENTARY CAN ALWAYS BE RELIED UP ON. THE APEX COURT HAS EMPHASIZED SO IN NUMBER OF JUDGMENTS CLEARLY HOLDING THAT THE WELL-SETTLED INTERNATIONALLY ACCEP TED MEANING AND INTERPRETATION PLACED ON IDENTICAL OR SIMILAR T ERMS EMPLOYED IN VARIOUS DTAAS SHOULD BE FOLLOWED BY THE COURTS I N INDIA WHEN IT COMES TO CONSTRUING SIMILAR TERMS OCCURRING IN T HE INDIAN INCOME TAX ACT.... ***** ********** ***** 78. THERE ARE JUDGMENTS OF OTHER HIGH COURTS ALSO T O THE SAME EFFECT. (A) COMMISSIONER OF INCOME TAX VS. AHMEDABAD MANUFA CTURING AND CALICO PRINTING CO., [139 ITR 806 (GUJ.)] AT PA GES 820-822. (B) COMMISSIONER OF INCOME TAX VS. VISHAKHAPATNAM P ORT TRUST [(1983) 144 ITR 146 (AP)] AT PAGES 156-157. (C) N.V. PHILIPS VS. COMMISSIONER OF INCOME TAX [17 2 ITR 521] AT PAGES 527 & 538-539.' ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 30 59. ON A FINAL NOTE, INDIA'S CHANGE IN POSITION TO THE OECD COMMENTARY CANNOT BE A FACT THAT INFLUENCES THE INT ERPRETATION OF THE WORDS DEFINING ROYALTY AS THEY STAND TODAY. THE ONLY MANNER IN WHICH SUCH CHANGE IN POSITION CAN BE RELE VANT IS IF SUCH CHANGE IS INCORPORATED INTO THE AGREEMENT ITSE LF AND NOT OTHERWISE. A CHANGE IN EXECUTIVE POSITION CANNOT BR ING ABOUT A UNILATERAL LEGISLATIVE AMENDMENT INTO A TREATY CONC LUDED BETWEEN TWO SOVEREIGN STATES. IT IS FALLACIOUS TO A SSUME THAT ANY CHANGE MADE TO DOMESTIC LAW TO RECTIFY A SITUAT ION OF MISTAKEN INTERPRETATION CAN SPONTANEOUSLY FURTHER T HEIR CASE IN AN INTERNATIONAL TREATY. THEREFORE, MERE AMENDMENT TO SECTION 9(1)(VI) CANNOT RESULT IN A CHANGE. IT IS IMPERATIV E THAT SUCH AMENDMENT IS BROUGHT ABOUT IN THE AGREEMENT AS WELL . ANY ATTEMPT SHORT OF THIS, EVEN IF IT IS EVIDENCE OF TH E STATE'S DISCOMFORT AT LETTING DATA BROADCAST REVENUES SLIP BY, WILL BE INSUFFICIENT TO PERSUADE THIS COURT TO HOLD THAT SU CH AMENDMENTS ARE APPLICABLE TO THE DTAAS. 60. CONSEQUENTLY, SINCE WE HAVE HELD THAT THE FINAN CE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAAS, IT WO ULD FOLLOW THAT THE FIRST DETERMINATIVE INTERPRETATION GIVEN TO THE WORD 'ROYALTY' IN ASIA SATELLITE, WHEN THE DEFINITIONS W ERE IN FACT PARI MATERIA (IN THE ABSENCE OF ANY CONTOURING EXPLANATI ONS), WILL CONTINUE TO HOLD THE FIELD FOR THE PURPOSE OF ASSES SMENT YEARS PRECEDING THE FINANCE ACT, 2012 AND IN ALL CASES WH ICH INVOLVE A DOUBLE TAX AVOIDANCE AGREEMENT, UNLESS THE SAID DTA AS ARE AMENDED JOINTLY BY BOTH PARTIES TO INCORPORATE INCO ME FROM DATA TRANSMISSION SERVICES AS PARTAKING OF THE NATU RE OF ROYALTY, ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 31 OR AMEND THE DEFINITION IN A MANNER SO SUPRA NOTE T HAT SUCH INCOME AUTOMATICALLY BECOMES ROYALTY. IT IS REITERA TED THAT THE COURT HAS NOT RETURNED A FINDING ON WHETHER THE AME NDMENT IS IN FACT RETROSPECTIVE AND APPLICABLE TO CASES PRECE DING THE FINANCE ACT OF 2012 WHERE THERE EXISTS NO DOUBLE TA X AVOIDANCE AGREEMENT. 61. FOR THE ABOVE REASONS, IT IS HELD THAT THE INTE RPRETATION ADVANCED BY THE REVENUE CANNOT BE ACCEPTED. THE QUE STION OF LAW FRAMED IS ACCORDINGLY ANSWERED AGAINST THE REVE NUE. THE APPEALS FAIL AND ARE DISMISSED, WITHOUT ANY ORDER A S TO COSTS. 32. IN VIEW OF THE LAW LAID DOWN, THE REVENUE IS HE REBY DIRECTED NOT TO TAX THE ROYALTY IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE HIGH COURT. 33. REGARDING THE CHARGE OF INTEREST U/S 234B, THE RATIO LAID DOWN BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006-0 7 APPLIES. THE RELEVANT PORTION OF THE CO-ORDINATE BENCH OF IT AT IN ITA NO. 1494/DEL/2011, ORDER DATED 18.07.2019 IS AS UND ER: 19. GROUND NO. 17 IS WITH RESPECT TO THE CHARGE OF THE INTEREST U/S 234B OF THE INCOME TAX ACT. THE CLAIM O THE LERNED AUTHORIZED REPRESENTATIVE IS THAT NO INTERE U/S 234B OF THE INCOME TAX ACT WAS CHARGEABLE SINCE THE ENTIRE PAYMENT RECEIVED BY THE ASSESSEE FROM INDIA WAS SUBJECT TO DEDUCTION OF TAX AT SOURCE ON THE ABOVE PAYMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE PAYMENT OBJECTED TO THE SAME AND SUBMITTED THAT CHA RGE OF INTEREST U/S 234B OF THE ACT IS NOT DEPENDENT ON THE DEDUCTIBILITY OF THE TAX BY THE PAYER. WE HAVE CARE FULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORD ERS OF THE LOWER AUTHORITIES THE ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF DIT VS GE PACKAGED POWER ITA NO. 4906/DEL/2010 ITA NO. 5150/DEL/2011 ITA NO. 60/DEL/2013 ITA NO. 1824/DEL/2014 ITA NO. 1204/DEL/2015 ITA NO. 1626/DEL/2016 AMADEUS IT GROUP SA 32 INCORPORATION 373 ITR 65. THE AMENDMENT BROUGHT INT O THE ACT BY THE FINANCE ACT 2012 IS APPLICABLE WITH EFFECT FROM THE FUND OF 2012 AND IS APPLICABLE FROM ASSESS MENT YEAR 2013-14. IN VIEW OF THIS WE DIRECT THE LEARNED ASSESSING OFFICER TO NOT TO CHARGE INTEREST U/S 234 B OF THE INCOME TAX ACT FOR THE ABOVE REASONS. 34. IN THE ABSENCE OF ANY MATERIAL CHANGE IN THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY CONCUR WITH TH E RATIO OF THE CO-ORDINATE BENCH OF ITAT. TDS CREDIT: 35. THE AO SHALL ALLOW THE TDS CREDIT AS PER THE PR OVISIONS OF I.T. ACT AFTER DUE VERIFICATION 36. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/10/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) VICE PRESIDENT ACCOU NTANT MEMBER DATED: 26/10/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
