Travelport Global Distribution System BV (Earlier known as , Netherland V. DCIT (International Taxation), circle-3(1)(1), New Delhi

ITA 8234/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2437 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 26-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA ANAND
• Keywords: Double taxation relief; Tax effect; Permanent establishment; Question of law
• Section: 154; 143(3); 5(2); 234B; 40(a)(ia); 205; 254(2); 48; 22

Judgement Text

I.T.A.No.8234/Del/2018 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D” NEW DELHI BEFORE SHRI G.S. PANNU, HON’BLE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER आ.अ.स ं /.I.T.A No.8234/Del/2018 /Assessment Year: 2015-16 Travelport Global Distribution System BV, (Earlier known as Netherland) Taurusavenue 33A-2132 LS Hoofddorp., Netherlands, Nederland. ब म Vs. DCIT(International Taxation), Circle 3(1)(1), New Delhi. PAN No. AACCG2258D अ Appellant /Respondent िनधा रतीक ओरसे /Assessee by Shri Ajit Jain, CA राज वक ओरसे /Revenue by Ms. Anupama Anand, CIT DR स ु नवाईक तारीख/ Date of hearing: 02.08.2022 उ ोषणाक तारीख/Pronouncement on 27.09.2022 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the assessee against the order of the Assessing Officer passed u/s 144C(13) read with section 143(3) of the Act dated 31.10.2018 pursuant to the directions of the DRP u/s 144C(5) of the Act dated 07.09.2018. Assessee in its appeal has raised the following grounds of appeal: - 1. “That on the facts and circumstances of the case and in law, the Assessing Officer has erred in completing the assessment at the total income of INR 322,67,85,645 as against ‘NIL’ income declared. 2. That the Assessing Officer and the Dispute Resolution Panel I.T.A.No.8234/Del/2018 2 (‘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 Netherlands (‘DTAA’). 3. That the Assessing Officer and the 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 & circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has business connection in India and as such is liable to tax in India as per the provisions of Act. 5. That on the facts and circumstances of the case and in law, both the Assessing Officer and the DRP have erred in holding that the Appellant has: • A fixed place PE in India under Article 5(1) of the DTAA; and • A dependent agent PE in India in the form of Inter globe Technology Quotient Private Limited (‘ITQPL’) under Article 5(5) of the DTAA. 5.1 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Appellant has a PE in India on the basis of the following allegations: • Provision of software by Appellant to the Distributor; • Access to Galileo CRS by the participating carriers from India; • Provision of connectivity by the Appellant through communication lines. 5.2 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that the Distributor is fully dependent on the Appellant. 6. Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the Assessing Officer has erred in attributing 75% of the India related gross booking fee to the alleged activities of the Appellant in India and the DRP has erred in attributing 75% of the net profits before tax i.e. (India related booking fee as reduced by distribution fee) by refusing to take into consideration that the extensive operations and activities are conducted outside India. I.T.A.No.8234/Del/2018 3 6.1 That on the facts and in the circumstances of the case and in law, the DRP has erred in not placing reliance on the order of Hon’ble Delhi High Court in assessee’s own case for AY 2003-4 to AY 2006-07. The Hon’ble Delhi High Court in its order dated 25 th August, 2014 addressed the issue of attribution and decided the attribution of 15% of the Revenue as attributable to Indian operations. 6.2 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not placing reliance on the order of the Hon’ble DRP in appellant’s own case for the AY 2012-13 wherein the aforementioned Delhi High Court Order was relied upon to decide that the attribution of 15% of the revenue is attributable to Indian operation and after allowance of expenses no income is chargeable to tax in India. 7. Without prejudice to the above grounds, on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP while computing Appellant’s taxable income in India have erred in not allowing deductions for India related expenses. 7.1 That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in not following the directions of the DRP and thus, not allowing deduction of distribution fees paid to the distributors, despite such expenses have been allowed as deduction by the DRP. 7.2 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in holding that payment made by the Appellant to Galileo International LLC, USA (‘GILLC’), Galileo International Technology, LLC (‘GIT’) and Travelport LP (‘TLP’) are chargeable to tax in India as per the provisions of section of the Act and Article 12 of the DTAA. 7.3 That on the facts and in the circumstances of the case and in law, the Assessing Officer and the DRP have erred in not allowing deduction of royalty, core license fees payment for USDollar4,87,82,910/-, by erroneously holding out that such expenses were not allowed in the orders of his predecessors for the AY 2011-12. 8. The Appellant denies each and every allegation and statement made by the Assessing Officer in the impugned order and orders relied upon by him, unless the same is specifically admitted by the Appellant or is otherwise borne out by the record. I.T.A.No.8234/Del/2018 4 9. Without prejudice to the generality of the above, the Appellant denies the following amongst other, incorrect allegations of the Assessing Officer that: • The Appellant has a PE in India in the form of fixed place business and agency PE and this finding has been upheld by the Hon’ble Delhi High Court in case of the Appellant itself; • The Appellant has business connection in India and is receiving income from the sources in India; • The payments made by the Appellant to ITQPL are in the nature of commission; • Major part of the activities of the Appellant resulting to the income are attributable to its activities in India; • Only activities carried on by the Appellant outside India correspond to the services provided by IBM; • The tickets are being booked in India; • The Appellant is having assets in India; • The Appellant is having its sales team in India; • The Appellant is providing training to its distributors; • The Appellant has entered into TIGADA agreement with Travelport LP. 10. That on the facts and in the circumstances of the case and in law, the Ld.AO and the DRP have erred in making factually incorrect allegations with respect to the various expenses and income. 11. That on the facts and in the circumstances of the case and in law, the authorities below have erred in charging interest u/s 234B of the Act. 12. The Appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal.” I.T.A.No.8234/Del/2018 5 2. Ground nos. 1, 2, 3 and 12 are general in nature and they need no adjudication. Accordingly, these grounds are disposed off. 3. Ground nos. 4, 5, 5.1 and 5.2 relates to Appellant’s Business Connection (BC) and Permanent Establishment (PE) in India. 4. The Ld. Counsel for the assessee at the outset submits that in so far as these grounds i.e. assessee’s Business Connection/Permanent Establishment in India is concerned the Tribunal had decided the issue against the assessee by order dated 13.10.2021 for assessment years 2007-08 to 2014-15 which is placed at pages 234 to 285 of the Paper Book. 5. We have perused the order of the Tribunal and find that the issue relating to Business Connection and Permanent Establishment in India is decided against the assessee by the Tribunal in its order dated 13.10.2021 vide para nos. 22 to 32, wherein the Tribunal followed the decision of the Hon’ble Delhi High Court in assessee’s own case and the assessees predecessor’s case in deciding the issue of as to whether the assessee was BC/PE in India. Respectfully following the said decision, we hold that assessee has Business Connection and Permanent Establishment in India. The grounds raised by the assessee in respect of BC/PE are decided against the assessee. 6. Ground nos. 6, 6.1 and 6.2 relates to excess attribution of Revenue to India operations in respect of PE in India. I.T.A.No.8234/Del/2018 6 7. The Ld. Counsel for the assessee submits that this issue is also covered by the decision of the Tribunal in assessee’s own case by the decisions of the Delhi High Court and the Tribunal for the assessment years 1995-96 to 2006-07 and the Tribunal in its order dated 13.10.2021 which is placed at pages 48 following the order of the Delhi High Court and the Tribunal in assesse’s own case held that the attribution rate of the Revenue for the Indian operations of the PE should be 15% of gross booking fees as against 75% attributed by the AO and the DRP. 8. The Ld. DR placed reliance on the orders of the authorities below. 9. We have perused the order of the Tribunal for the assessment years 2007-08 to 2014-15 dated 13.10.2021 which is placed at page 248 of the PB and find that the issue has been decided following the orders of the Hon’ble High Court as well as the Tribunal for the earlier assessment years, wherein it was held that the correct attribution rate to be taken at 15% of gross booking fees. While holding so the Tribunal observed as under: - “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 27.09.2021 (ITA No. 163/Del/2021) by relying on the decisions of Hon’ble Delhi I.T.A.No.8234/Del/2018 7 High Court and Delhi ITAT in Company/it’s predecessor’s case for AY 1995-96 to AY 2006-07. 17. In para 38 of the said order reads as under: “38. AY 2017-18, PE attribution at 15% of gross revenue less the expenses (as already allowed by the Ld.AO and Ld.DRP), as per the decision of the Hon’ble Delhi ITAT Benches and Hon’ble Delhi High Court, reduces the taxable income to Nil and thus, no income is taxable in India.” 18. The adjudication of this issue taken from ITA No. 163/Del/2021 dated 27.09.2021 in the assessee’s own case which is as under: “Ground No.6 is covered in favour of the Appellant by virtue of the application of the decisions of Hon’ble Delhi ITAT and Hon’ble Delhi High Court in case of Appellant and its predecessor entities i.e. GII and TGDSBV. The Hon’ble Delhi High Court and Hon’ble Delhi ITAT in Appellant’s own/predecessor’s case i.e. GII and GNBV, have held that attribution rate to the alleged India PE is 15% of gross booking fees and since Indian related expenses are more than attributed gross booking fees to the PE in India, it would extinguish the assessment as no 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 – AYAY 1995-96 to 1998-99 vide its order dated 30 th 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 I.T.A.No.8234/Del/2018 8 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 of travel agent in India are merely connected or configured to the extent that it can perform a booking function but are not capable of processing the data of all the airlines together at one place. Such function requires huge investment and huge capacity, which is not available to the computers installed at the desk of subscriber in India. The major part of the work or to say a lion’s share of such activity, are processed at the host computer in Denver in USA. The activities in India are only minuscule portion. The appellant’s computer in Germany is also responsible for all other functions like keeping data or the booking made worldwide and also keeping track of all the airlines/hotels worldwide that have entered into PCA. Though no guidelines are available as to how much should be income reasonably attributable to the operations carried out in India, the same has to be determined on the factual situation prevailing in each case. However, broadly to determine such attribution one has to look into the factors like functions performed, assets used and risk undertaken. On the basis of such analysis of functions performed, assets used and risk shared in two different countries, the income can be attributed. In the present case, we have found that majority of the functions are performed outside India. Even the majority of the assets, i.e., host computer which is having very large capacity which processes information of all the participants is situated outside India. The CRS as a whole is developed and maintained outside India. The risk in this regard entirely rests with the appellant and that is in USA, outside India. I.T.A.No.8234/Del/2018 9 However, it is equally important to note that but for the presence of the assessee in India and the configuration and connectivity being provided in India, the income would not have generated. Thus, the initial cause of generation of income is in India also. On the basis of above facts we can reasonably attribute 15% of the revenue accruing to the assessee in respect of bookings made in India as income accruing or arising in India and chargeable u/s 5(2) read with section 9(1)(i) of the Act.” “10. Next question to be decided as if it is found that the income accruing in India is consumed by the payment made to the agents in India, whether 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 considering the income accruing in India, remuneration paid to the Indian agents I.T.A.No.8234/Del/2018 10 consumes the entire income accruing or arising in India.................” “18. .................................While dealing with the question as to what is such part of income as is reasonably attributable to the operations carried out in India, we have held that only 15% of the revenue generated from the bookings made within India is taxable in India. The same proportion has to be adopted here while computing profit attributable to the PE. We have also held that since the payment to the agent in India is more than what is the income attributable to the PE in India, it extinguish the assessment as no further income is taxable in India. It is to be noted that even in the first assessment framed by the Assessing Officer, the entire expenses in the form of remuneration paid to Interglobe was held as allowable deduction and was reduced while computing the income of Appellant. If that be the case, the income attributable to PE in India being less than the remuneration paid to the dependent agent, it extinguishes the assessment and requires no further exercise for computation of income. We accordingly hold so and in view of the same the income of the Appellant will be NIL.” 35. The revenue authorities thereafter filed. A Miscellaneous Application (MA) before the ITAT to revise the earlier order on the ground that, even after holding that the Appellant’s predecessor i.e. GII has a PE in India the Hon’ble ITAT erred in holding that no income was attributed to the said PE. The questions posed also included manner of attribution i.e. whether attribution is on sales or the net profits. The revenue authorities contended that the attribution should be on the net profits and not Sales – This contention of the revenue authorities was rejected by the Hon’ble ITAT vide its MA order dated 21 November 2008 (MA No. 108/Del/2008, 311 to 318/Del/2008 and 220 to 223/Del/2008), in case of GII in the first batch of 4 years- AY 1995-96 to 1998- I.T.A.No.8234/Del/2018 11 99, wherein it was held that for computation of income of an Indian PE, first step is to attribute the revenues to India and then allow deduction of India related expenses from such attributed revenue. The relevant extract of order is re-produced as under: “5. The next contention 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. (GII) (Predecessor of the Appellant) in the first batch of 4 years – AY 1995-96 to 1998-99 upheld the decision of Hon’le Delhi ITAT for these years, vide its order dated 25 th Feb. 2009 (ITA No. 851 to 856 of 2008, 859 to 860 of 2008), it was held as under: “The Tribunal thereafter discussed the principle which is to be followed in apportioning the Income-tax accruing in India and the Income accruing outside India. The I.T.A.No.8234/Del/2018 12 Tribunal found that only a part of CRS order operates and functions in India. The extent of working in India is only to the extent of channelizing the request and receiving the result of the process in India and the major functioning and collecting the data base of various airlines and hostels which have entered into PCA with the respondent takes place outside the India. The Tribunal also took into consideration the fact that the computer of Denver at 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. Insofar as the role played in India is concerned, that is limited to the computers at the desk which are merely connected or configured to the extent that it can perform a booking function but are not capable of processing the data of all the airlines together at one place. The Tribunal was also influenced by another important fact viz., such functioning requires huge investment and huge capacity which is not available in the computers installed at the desk of the subscriber in India. On this basis, the Tribunal formed the opinion that major part of the work are processed at the host computer in Denver in USA and the activities in India are only minuscule portion. Taking into consideration all these factors the Tribunal was of the opinion that one could reasonably attribute 15% of the “revenue” accruing to the respondent in respect of bookings made in India as major expenses in that behalf is incurred in activities carried out in US...............” “Thus, the approach adopted by the Tribunal was to first arrive at the figure relating to the revenue generated in India and abroad. It concluded that out of the revenue accrued to the respondent in respect of these bookings 15% thereof should be attributed to India, I.T.A.No.8234/Del/2018 13 keeping in view a very minor portion of the activity being carried out here.” “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 23.07.1969 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)”. ‘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 1995-96 to AY 1998-99, both the Income-tax department and Appellant’s predecessor entity i.e. GII filed an appeal before Hon’ble Supreme Court of India vide SLP No. 6511 to 6518/2010. The Hon’ble Supreme Court vide its order dated 22 November 2019 dismissed (as withdrawn) SLP Nos. 6512 to 6515/2010 and 6517 to 6518/2010 pertaining to AY 1995-96, 1996-97 and AY 1998-99 on account of low tax effect, in consonance with circular No. 17 of 2019, leaving the question of laws open. 38. AY 2017-18, PE attribution at 15% of gross revenue less the expenses (as already allowed by the Ld. AO and Ld. DRP), as per the decision of the Hon’ble Delhi ITAT Benches and Hon’ble Delhi High Court, reduces the taxable income to Nil and thus, no income is taxable in India.” I.T.A.No.8234/Del/2018 14 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. 20. As per the table (pg 240 PB), Indian related expenses are more than attributed gross booking fees to the PE in India, it would extinguish the assessment of tax as no further income is taxable in India. The AO may check the correctness of the figures before giving effect to this order.” 10. Facts being identical. Respectfully following the decision in assessee’s own case, we direct the Assessing Officer to adopt the attribution rate of Revenue for the Indian operations of its PE in India at 15% of gross booking fees for the year under consideration also. 11. Further as could be observed from the above, the Tribunal also observed that the Indian related expenses are more than the attributed gross fees to the PE in India and, therefore, it would extinguish the assessment of tax as no further income is taxable in India. The Ld. Counsel for the assessee submits that during the assessment year under consideration i.e. AY 2015-16 also if the attribution rate to the alleged PE is considered at 15% of gross booking fees since India related expenses are more than the attributed gross booking fees to the PE in India it would extinguish the assessment as no further income would be taxable in India. In view of the above submissions of the Ld. Counsel for the assessee we direct the Assessing Officer to check the correctness of the figures before giving effect to this order. Grounds raised by the assessee on this issue are partly allowed. I.T.A.No.8234/Del/2018 15 12. Ground nos. 7, 7.1, 7.2, 7.3, 8, 9 and 10 relate to allowability of distribution expenses and other expenses. The Ld. Counsel submits that in so far as ground no. 7.1 is concerned i.e. not following the directions of DRP and not allowing the deduction of distribution expenses despite the direction of the DRP by the Assessing Officer Ld. Counsel submits that on petition for rectification filed by the assessee to rectify the mistake in not allowing distribution expenses the Assessing Officer passed rectification order dated 02.07.2019 u/s 154 of the Act read with section 143(3) allowing distribution expenses. Therefore, the Ld. Counsel submits that since the Assessing Officer rectified the assessment order by allowing distribution expenses this ground of appeal is not pressed. 13. In view of the above submissions of the Ld. Counsel for the assessee ground no. 7.1 of grounds of appeal is dismissed as not pressed. 14. Coming to other grounds other than 7.1 the Ld. Counsel submits that the Tribunal decided this issue partly in favour of the assessee in its order dated 13.10.2021 for the assessment years 2007-08 to 2014-15. The Ld. Counsel submits that the Tribunal held that after deduction of the distribution expenses and 15% booking fees the assessee is left with no taxable profit. The Tribunal, however, direct the Assessing Officer to recomputed the net losses computing the disallowance of other expenses at 30%. The Ld. Counsel for the assessee submits that after applying the attribution rate of Revenue for its PE at 15% and after allowing 100% I.T.A.No.8234/Del/2018 16 distribution expenses and also 70% of all other expenses the computation of income attributable to the alleged PE/BC for the AY 2015-16 would result in loss of Rs.299,36,61,069/- as per the table furnished by the assessee in its Synopsis at page 8. 15. Ld. DR placed reliance on the orders of the authorities below. 16. Heard rival submissions, perused the orders of the authorities below and the Tribunal’s order dated 13.10.2021 in assssee’s own case for the assessment years 2007-08 to 2014-15 which is placed at page 259 of the Paper Book. 17. On perusal of the order of the Tribunal, we observe that the Tribunal restricted the disallowance of other expenses to 30% observing as under: “29. The following table depicts the position of negative profits computed post allowance of booking fee and distribution expenses: Particulars AY 07-08 AY 08-09 AY 09-10 AY 10-11 AY 11-12 AY 12-13 AY 14-15 Booking fee (USD) 55,029,465 70,035,529 66,511,669 75,676,788 79,826,594 77,519,539 67,339,472 15% of booking fee 8,254,420 10,505,329 9,976,750 11,351,518 11,973,989 11,627,931 10,100,921 Less: Distribution expenses (USD) 37,136,627 47,658,043 45,981,980 51,036,204 58,011,833 56,922,872 49,691,247 Net Loss Position (USD) (28,882,207) (37,152,714) (36,005,230) (39,684,686) (46,037,844) (45,294,941) (39,590,326) 30. The AO disallowed entire amount (100%) claimed by the assessee on account of other expenses such as royalty, I.T.A.No.8234/Del/2018 17 vendor cost, license fee owing to non-deduction of withholding tax. From the above table, the position of the profit/loss of the assessee is evident. After deduction of the distribution expenses and 15% booking fee, the assessee is left with no taxable profit. Considering the disallowance @30% u/s 40(a)(a) in accordance with the law laid down by the Hon’ble Delhi High Court in case of CIT Vs. Herbalife International India (P) Ltd. 69 taxman.com 205 wherein the High Court struck down discriminating treatment of disallowance u/s 40(a)(ia) and Section 40(a)(ia) of the Act by relying on Article 26(3) of the DTAA between India and US, we hereby direct the AO to re-compute the net losses computing the disallowance on other expenses @30%.” 18. Following the order of the Tribunal, we direct the AO to re- compute the income/loss of the assessee by restricting the disallowance of other expenses to 30% for the year under consideration also. Grounds raised by the assessee on this issue are partly allowed. 19. Ground no. 11 of the grounds of appeal is relating to charging of interest u/s 234B of the Act which is consequential in nature and the same is restored to the Assessing Officer for applying the provisions in accordance with law. I.T.A.No.8234/Del/2018 18 20. In the result, the appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 27/09/2022 Sd/- Sd/- (G.S. PANNU) (C.N. PRASAD) PRESIDENT JUDICIAL MEMBER Dated: 27.09.2022 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi