INTERNATINAL AIR TRANSPORT ASSOCIATION (CANADA), MUMBAI V. DCIT (IT) 2(2)(1), MUMBAI

MA 131/MUM/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7898 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PORUS KAKA SENIOR SHRI SUNI
• Keywords: Business income; Double taxation relief; Opportunity of being heard; Set aside
• Section: 143(3); 13

Judgement Text

M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI PRAMOD KUMAR (VICE PRESIDENT) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) M.A NO.131/MUM/2021 (ARISING OUT OF ITA NO. 587/MUM/2016) (ASSESSMENT YEAR: 2012 - 13) INTERNATIONAL AIR TRANSPORT ASSOCIATION (CANADA) 14 TH FLOOR, THE RUBY 29 SENAPATI BAPAT MARG, DADAR (W), MUMBAI - 400 028 VS. DCIT (IT) 2(2)(1) R. NO. 136, 1 ST FLOOR, SCINDIA HOUSE, BALLARD PIER, MUMBAI 400 038 PAN NO. AACCI4659N ( ASSESSEE ) ( REVENUE ) ASSESSEE BY : SHRI PORUS KAKA , SENIOR ADVOCATE REVENUE BY : SHRI SUNIL DESHPANDE , D.R DATE OF HEARING : 06/08/2021 D ATE OF PRONOUNCEMENT : 24 /08/2021 ORDER PER RAVISH SOOD, J.M: THE PRESENT MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE APPLICANT ARISES FROM THE ORDER PASSED BY THE TRIBUNAL IN ITA NO. 587/MUM/2016, DATED 08.01.2021 FOR A.Y. 2012 - 13. 2. ON A PERUSAL OF THE APPLICATION, WE FIND THAT IT IS STATED BY THE ASSESSEE APPLICANT THAT THE TRIBUNAL WHILE ADJUDICATING THE GROUND OF APPEAL NO. 6 OF THE ABOVEMENTIONED APPEAL HAD FAILED TO CONSIDER THE MAIN ARGUMENT S /SUBMISSIONS OF THE ASSESSEE ON THE BASIS OF WHICH IT HAD ASSAILED THE TAXABILITY OF CERTAIN M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 2 REVENUES IN ITS HANDS, VIZ. (I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES. I T IS THE CLAIM OF THE ASSESSEE APPLICANT THAT AS THE TRIBUNAL HAD DISPOSED OFF THE G ROUND OF APPEAL NO. 6 WITHOUT CONSIDERING THE MAIN ARGUMENT S / SUBMISSIONS OF THE ASSESSEE , THEREFORE, THE SAME HAD RENDERED THE ORDER PASSED BY IT AS SUFFERING FROM A MISTAKE APPARENT FROM RECORD MAKING IT AMENABLE FOR RECT IFICATION UNDER SUB - SECTION (2) OF SEC. 254 OF THE ACT. IT IS STATED BY THE ASSESSEE APPLICANT THAT THE TRIBUNAL DISPENSING WITH THE ADJUDICATION O F THE ISSUE OF TAXABILITY OF THE REVENUE IN QUESTION, VIZ. (I). MEMBERSHIP FEES; AND (II). FEES FOR IATA CLEA RING HOUSE FACILITY (ICH FACILITY) HAD RATHER DRAW N SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES CO. LTD. VS. DIT (2007) 288 ITR 408 (SC) AND CONFINED ITS ADJUDICATION TO THE ATTRIBUTION OF THE INCOME QUA T HE SAID RESPECTIVE REVENUES TO IATA INDIA BRANCH DEPENDING ON THE ROLE THAT WAS PLAYED BY THE PE IN THE RESPECTIVE TRANSACTION S IN QUESTION. IT IS FURTHER STATED BY THE ASSESSEE APPLICANT THAT THE TRIBUNAL HAD ALSO FAILED TO ADDRESS ITS SPECIFIC CLAIM THAT THE BSP LINK CHARGES COULD NOT HAVE BEEN BROUGHT TO TAX IN ITS HANDS, AND HAD RESTRICT ED ITS ADJUDICATION TO THE ALTERNATIVE CONTENTION OF THE ASSESSEE AND D IRECTED THE A.O TO VERIFY AS TO WHETHER THE PAYMENTS MADE FOR BSP CHARGES WERE COLLECTED BY THE AS SESSEE WITHOUT ANY MARK - UP. ALSO, IT IS STATED BY THE ASSESSEE THAT ITS SPECIFIC CLAIM THAT THE AFORESAID REVENUES, VIZ. (I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES COULD NOT BE BROUGHT TO TAX OWING TO THE PRINCIPLE OF MUTUALITY HAD ALSO REMAINED UNADJUDICATED BY THE TRIBUNAL. AS STATED BY THE ASSESSEE APPLICANT, THOUGH THE TRIBUNAL HAD TAKE N NOTE OF THE CONTENTIONS QUA THE AFOREMENTIONED ISSUE S IN ITS ORDER , BUT HAD FAILED TO ADDRESS AND THEREIN ADJUDICATE THE SAME. IT IS STATED BY THE ASSESSEE IN ITS APPLICATION THAT ITS FOLLOWING CONTENTIONS WHICH WERE THOUGH RAISED IN THE COURSE OF HEARIN G OF THE APPEAL HAD HOWEVER NOT BEEN ADJUDICATED UPON BY THE TRIBUNAL : M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 3 1. THE HON'BLE TRIBUNAL HAS NOTED THAT THE LEARNED AO/ HON'B LE DRP REJECTED ITS CLAIM OF MUTUALITY ON THE BASIS THAT THE ASSESSES CORPORATION FAILED TO CUMULATIVELY SATISFY THE REQUIS ITE CONDITIONS TO INV OKE THE PRINCIPLE OF MUTUALITY. 2. IN THIS REGARD, IT WAS RESPECT FULLY SUBMITTED BEFORE THE HON'B LE TRIBUNAL THAT THE COLLECTION OF MEMBERSHIP FEES, FEES PERTAINING TO ICH FACILITY AND BSP LINK CHARGES CANNOT BE TAXED IN THE HANDS OF IATA I NDIA BRANCH OWING TO THE PRINCIPLE OF MUTUALITY, WHICH HAS BEEN DULY ACCENTED BY HON BLE DRP AND LEARNED AO I N CASE OF APPELLANT'S OWN BRANCH I.E. IATA I NDIA BRANCH IN AY 2014 - 15 AND A.Y. 2012 - 13 . FURTHER, THE R BI HAS GRANTE D A SPECIFIC APPROVAL TO IATA INDIA BRANCH FOR CARRYING OUT ITS OPERATIONS ACTIVITIES IN INDIA, WHEREIN THE RBI CLEARLY SLATES THAT IATA INDIA BRANC H IS PERMITTED TO UNDERTAKE ONLY THE ACTIVITY OF B ILLING AND SETTLEMENT RELATED ('BSP') SERVIC ES ON A NON - CO MMERCIAL AND NOT - F OR - PROFIT BASIS. 3. DURING THE COURSE OF THE HEARING AND VIDE SUBMISSION DATED 21 JANUARY 2020. IT WAS RE ITERATED THAT THE HON'BLE DRP HAS ACCEPTED IAT A INDIA BRANCH'S CLAIM FOR MUTUALITY IN AY 2014 - 15 AND PASSED DETAILED DIRECTIONS ON THE SATISFACTIO N OF ALL THE 3 TESTS, I.E. (I) COMPLETE IDENTITY OF CONTRIBUTORS AND THE RECIPIENTS/PARTICIPANTS; (I I) INSTRUMENTALITY OF THE ASSESSEE IN CARRYING OUT THE MANDATES OF ITS MEMBERS; AND (III), IMPOSSIBILITY OF THE ASSE SSEE DERIVING ANY PROFIT FROM CONTRIBUTION OR NON - INVOLVEMENT OF COMMERCIALI TY. THE SAID ORDER WAS DULY FOLLOWED IN A.Y. 2012 - 13 AS W ELL (KINDLY REFER TO PAGE NOS. 80 TO 81 OF THE SUBMISSION DATED 21 JANUARY 2020 - RE - ENCLOSED AS ANNEXURE 2). 4. ACCORDING LY, ONCE THE HON'BLE DRP/LEARNED AO HAD ACCEPTED THE AFORESAID CLAIM IN IATA INDIA BRAN CH'S OWN EASE AFTER DUE VERIFI CATION OF FACTS, A CONTRARY POSITION CANNOT BE ADOPTED. 5. FURTHER, IN ADDITION TO THE ORDER OF THE HON'BLE DRP IN THE CASE O F IATA INDIA BRANCH, RELIANCE WAS ALSO PLACED ON THE FOLL OWING JUDICIAL PRECEDENTS IN THIS REGARD: CI T VS. BANKIPUR CLUB LIMITED (226 ITR 97) (SC) CHELMSFORD CLUB V S. CIT (243 ITR 89) (SC) VENKATESH PREMISES CO - OPERATIVE SOCI ETY LTD. (91 TAXMANN. COM 137) (SC) KPMG(I64 LTD421)(MUMBAI - TRIB ) SOCIETE INTERNATIONAL DE TELECOMMUNICATIONS AERONAUTIQUES (ITA NO. 6651/MUM/2011) INTERNATIONAL ZINE ASSOCIATION (94 TAXMANN.COM 27) (AAR) . 6. IN ADDITION TO THE ARGUMENTS WITH RESPECT TO BSP LINK CHARGES BEING PURE COST REIMBURSEMENTS, RELIANCE WAS ALSO PLACED ON THE HONBLE TRIBUNALS M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 4 DECISION I N IATA INDIA BRANCHS OWN CASE (WHICH WERE ALSO FILED VIDE LEGAL PAPER BOOK FILED ON 16 JANUARY 2020) , WHEREIN IT HAS BEEN HELD THAT THE BSP LINK SERVICES CANNOT BE CHARGEABLE TO TAX IN INDIA AND SHOULD ACCORDINGLY NOT BE SUBJECT TO WITHHOLDING TAX IN INDIA. I N THE BACKDROP OF ITS AFORESAID CLAIM, IT IS STATED BY THE ASSESSEE THAT AS THE TRIBUNAL HAD FAILED TO ADJUDICATE ON THE MAIN ARGUMENT S/SUBMISSIONS THAT WERE PUT FORTH BY IT QUA THE TAX ABILITY OF THE AFORESAID AMOUNTS, VIZ. ((I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES , THEREFORE, TH E ORDER PASSED BY IT WHILE DISPOSING OFF THE CAPTIONED APPEAL SUFFERS FROM A MISTAKE WHICH BEING GLARING, PATENT, APPARENT AND OBVIOUS FROM RECORD, THEREIN RENDERS IT AMENABLE FOR RECTIFICATION UNDER SUB - SECTION (2) OF SEC. 254 OF THE ACT. 3. THE LD. AUTHO RIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SHRI PORUS F. KAKA, SENIOR ADVOCATE TOOK US THROUGH THE ORDER THAT WAS PASSED BY THE TRIBUNA L WHILE DISPOSING OFF THE ASSESS EES APPEAL IN ITA NO. 587/MUM/2016, DATED 08.01.2021. IT WAS SUBMITTED BY T HE LD. A.R THAT THOUGH THE TRIBUNAL HAD TAKEN NOTE OF THE CONTENTIONS WHICH WERE RAISED QUA THE TAXABILITY OF THE AFORESAID AMOUNTS, VIZ. (I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES, HOWEVER , IT HAD INADVERTENTLY ERRED IN NOT ADDRESSING AND THEREIN ADJUDICATING THE SAME. IT WAS SUBMITTED BY THE LD. A.R THAT THE AFORESAID FAILURE ON THE PART OF THE TRIBUNAL TO ADJUDICATE ON THE ISSUE O F TAXABILITY OF THE AFORESAID REVENUES IN THE HANDS OF THE ASSESSEE HAD RENDERED ITS ORDER AS SUFFERING FROM A MISTAKE APPARENT FROM RECORD THAT WAS RECTIFIABLE UNDER SUB - SECTION (2) OF SEC. 254 OF THE ACT. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER PASSED BY THE TRIBU NAL. IT WAS SUBMITTED BY THE LD. D.R THAT AS NO MISTAKE WAS APPARENT FROM THE RECORD, THEREFORE, THE APPLICATION FILED BY THE ASSESSE E APPLICANT DID NOT MERIT ACCEPTANCE. M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 5 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES AND PERUSED THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE ASSESSEES APPEAL IN ITA NO. 587/MUM/2016 , DATED 08.01.2021 . AS IS DISCERNIBLE FROM THE RECORDS, THE ASSESSEE APPELLANT VIDE ITS GROUND NO. 6 HAD ASSAILED THE TAXING OF THE MEMBERSHIP FEES, BSP LINK CHARGES AND FEES OF IATA CLEARING HOUSE FACILITY (ICH FACILITY) AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY BY THE A.O, AS UNDER: GROUND NO. 6 - COLLECTION OF MEMBERSHIP FEES, BSP LINK CHARGES AND FEES FOR IATA CLEARING HOUS E FACILITY' ('ICH FACILITY') IN RELATION TO COLLECTION OF MEMBERSHIP FEES A. ERRED IN TAXING THE MEMBERSHIP FEES AS BUSINESS PROFITS' UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY, BY TREATING THE INDIAN OFFICE OF THE APPELLANT AS A PE OF THE APPELLANT UNDER ARTICLE 5 OF THE INDIA - CANADA TAX TREATY, WITHOUT APPRECIATING THE FACT THAT THE MEMBERSHIP FEES COLLECTED BY THE APPELLANT IS INDEPENDENT AND NOT RELATED TO THE BSP ACTIVITIES UNDERTAKEN BY THE INDIAN BRANCH OFFICE. B. ERRED IN FAILING TO PROVIDE ANY REASON OR BASIS FOR DEEMING THE CONTRIBUTION/ MEMBERSHIP FEES RECEIVED FROM THE MEMBERS, BY WHICH THEY OBTAIN MEMBERSHIP WITH THE APPELLANT AND GET ACCESS TO INFORMATION PERTAINING TO THE VARIOUS SERVICES PROVIDED BY THE APPELLANT, AS BEING REL ATED TO IATA BRANCH OFFICE WHICH IS SPECIFICALLY INVOLVED IN PROVIDING BSP SERVICES ONLY AS PER THE APPROVAL OF THE RBI. C. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN NOT APPRECIATING THE CONTENTION OF THE APPELLANT THAT IT QUALIFIES AS A MUTUAL ASSOCIATION AN D HENCE, THE MEMBERSHIP FEES RECEIVED FROM THE MEMBERS SHOULD NOT BE LIABLE TO TAX HAVING REGARD TO THE PRINCIPLE OF MUTUALITY UNDER THE ACT. IN RELATION TO BSP LINK CHARGES FROM AIRLINES AND IATA BRANCH FOR ONWARD REMITTANCES TO ACCELYA WORLD SLU, SPAIN ('ACCELYA SPAIN) (CATEGORIZED AS 'PROVISION OF E - SERVICES) D. ERRED IN CONSIDERING THE INCORRECT AMOUNT OF RS.2,81,04,800 AS BEING THE BSP LINK CHARGES COLLECTED BY THE APPELLANT FOR ONWARD PAYMENT TO ACCELYA SPAIN, INSTEAD OF THE CORRECT AMOUNT OF RS.2,29,29,020. E. ERRED IN NOT ACCEPTING THE CONTENTIONS OF THE APPELLANT THAT THE BSF LINK CHARGES COLLECTED BY THE APPELLANT FOR ONWARD PAYMENT TO ACCELYA SPAIN ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES/ COST, WITHOUT ANY MARK UP, AND HENCE, IN THE ABSENCE OF ANY INCOME ELEMENT IN RESPECT OF SUCH CHARGES, THE SAME CANNOT BE TAXED AS 'BUSINESS PROFITS' UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. IN RELATION TO FEES FOR ICH FACILITY F. ERRED IN TREATING THE INDIAN BRANCH OFFICE OF THE APPELLANT AS BEING THE P E OF THE APPELLANT IN INDIA AS PER ARTICLE 5 OF THE INDIA - CANADA TAX TREATY, WITHOUT APPRECIATING THE FACT THAT THE ACTIVITY OF PROVISION OF I CH FACILITY IS COMPLETELY INDEPENDENT AND SEPARATE FROM THE BSP SERVICES PROVIDED BY THE INDIAN BRANCH OFFICE AND ACCORDINGLY, TAXING THE SAID RECEIPTS AS 'BUSINESS PROFITS' UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 6 G. ERRED IN NOT ACCEPTING THE CONT ENTIONS OF THE APPELLANT THAT AS THE ICH FACILITY IS PROVIDED BY THE APPELLANT OUTSIDE INDIA AND THE INCOME IS ALSO RECEIVED BY THE APPELLANT IN A BANK ACCOUNT MAINTAINED OUTSIDE INDIA, THE REVENUES PERTAINING TO THE SAID ICH FACILITY CANNOT BE TAXED AS BUSINESS PROFITS IN INDIA UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. H. ERRED IN FAILING TO PROVIDE ANY REASON OR BASIS FOR DEEMING THAT THE RECEIPTS IN RELATION TO THE ICH FACILITY PROVIDED BY THE APPELLANT OUTSIDE INDIA ARE RELATED TO THE IATA BRANC H OFFICE IN INDIA WHICH IS SPECIFICALLY INVOLVED IN PROVIDING BSP SERVICES AS PER THE APPROVAL OF THE RBI. IN RELATION TO ATTRIBUTION OF PROFITS I. ERRED IN ESTIMATING 40% OF THE GROSS RECEIPTS OF THE APPELLANT AS BEING THE INCOME ATTRIBUTABLE TO THE FE (I. E, THE INDIAN BRANCH OFFICE) IN INDIA, ON AN ARBITRARY AND AD - HOC BASIS; AND II. ERRED IN ESTIMATING 90% OF THE GROSS RECEIPTS ATTRIBUTED TO THE PE OF THE APPELLANT IN INDIA, AS BEING THE PROFITS ATTRIBUTABLE TO SUCH FE IN INDIA, ON AN ARBITRARY AND AD - HO C BASIS. AS IS DISCERNIBLE FROM THE RECORDS, WE FIND THAT THOUGH THE ASSESSEE HAD ASSAILED THE TAXABILITY OF THE AFORESAID REVENUES IN ITS HANDS , VIZ. (I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES BY RAISING THE AFORE MENTIONED SPECIFIC CONTENTIONS (AS STATED IN PARA 2 HEREINABOVE), HOWEVER, THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL HAD INADVERTENTLY CONFINED ITS ADJUDICA TION QUA THE SAID ISSUES , VIZ. (I). THE TRIBUNAL HAD OBSERVED THAT THE REVENUE FROM MEMBERSHIP FEES AND FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY) BE ATTRIBUTED TO IATA INDIA BRANCH DEPENDING ON THE ROLE THAT WAS PLAYED BY THE PE IN THE RESPECTIV E TRANSACTIONS IN QUESTION; AND (II). THE TRIBUNAL HAD DIRECTED THE A.O TO VERIFY AS TO WHETHER THE PAYMENTS MADE FOR BSP LINK CHARGES WERE COLLECTED BY THE ASSESSEE WITHOUT ANY MARK - UP. FOR THE SAKE CLARITY, THE OBSERVATION S RECORDED BY THE TRIBUNAL WHILE DISPOSING THE G ROUND OF APPEAL NO. 6 ARE REPRODUCED AS UNDER : 20. WE SHALL NOW TAKE UP THE GRIEVANCE OF THE ASSESSEE THAT THE A.O/DRP HAD ERRED IN TAXING CERTAIN RECEIPTS VIZ. (I) COLLECTION OF MEMBERSHIP FEES; (II). BSP LINK CHARGES; AND (III). FEES FOR CLEARING HOUSE FACILITY (ICH FACILITY) AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. AFTER HEARING THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES AT LENGTH IN CONTEXT OF THE AFORESAID ISSUES, PERUSING THE ORDERS OF THE LO WER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM, OUR OBSERVATIONS AS REGARDS THE SAME ARE AS UNDER: (A). BSP LINK CHARGES : M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 7 (I). DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE VIZ. IATA, CANADA HAD AN AGREEMENT WITH ACCELYA WORLD SLU, A COMPANY REGISTERED IN SPAIN, FOR PROVIDING BILLING SETTLEMENT PLAN (BSP) LINK SERVICES TO THE AIRLINES ACROSS THE WORLD INCLUDING INDIA. THE BSP L INK ENABLED THE AGENTS AND THE AIRLINES TO AVAIL BILLING AND SETTLEMENT FACILITY/SERVICES IN RELATION TO THE AIR TICKETS SOLD BY THE AGENTS. FOR PROVISION OF THE BSP LINK SERVICES, ACCELYA WORLD SLU, SPAIN, RAISED INVOICES ON THE ASSESSEE VIZ. IATA, CANADA , FOR RECOVERY OF THE BSP LINK CHARGES CHARGES FROM THE AIRLINES AND THE AGENTS. IN TURN, THE ASSESSEE VIZ. IATA, CANADA RAISED INVOICES DIRECTLY ON THE AIRLINES AND IATA INDIA BRANCH, WHEREIN THEY IN TURN RAISED INVOICES ON THE AGENTS WITHOUT ANY MARK UP. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE VIZ. IATA, CANADA HAD MERELY ACTED AS A FACILITATOR/INTERMEDIARY IN RELATION TO THE INVOICES RAISED AND THE PAYMENTS COLLECTED FROM THE AGENTS AND THE AIRLINES IN RELATION TO THE BSP LINK CHARGES. AS SUCH, IT WAS THE CLAIM OF THE ASSESSEE THAT IN THE ABSENCE OF ANY INCOME ELEMENT IN THE RECOVERY OF THE BSP CHARGES FROM THE AIRLINES AND AGENTS (THROUGH IATA INDIA BRANCH), THE SAME COULD NOT HAVE BEEN BROU GHT TO TAX IN THE HANDS OF THE ASSESSEE. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT AS THE COLLECTION OF THE BSP CHARGES BY THE ASSESSEE VIZ. IATA, CANADA FROM AIRLINES AND AGENTS (THROUGH IATA INDIA BRANCH) FO R ONWARD REMITTANCE TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP, WAS IN THE NATURE OF A REIMBURSEMENT, THUS, IN THE ABSENCE OF ANY INCOME ELEMENT THE SAME COULD NOT HAVE BEEN BROUGHT TO TAX AS THE BUSINESS INCOME OF THE ASSESSEE UNDER ARTICLE 7 OF T HE INDIA - CANADA TAX TREATY. APART FROM THAT, THE ASSESSEE HAD ALSO ASSAILED THE ASSESSING OF THE BSP CHARGES OWING TO THE PRINCIPLE OF MUTUALITY. HOWEVER, THE CONTENTIONS ADVANCED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O. ALTHOUGH, THE A.O VIDE H IS DRAFT ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 144C(1), DATED 27.03.2015 OBSERVED, THAT REIMBURSEMENTS RECEIVED ON ACTUAL BASIS AT COST CANNOT BE TAXED AS THEY DO NOT CARRY ANY ELEMENT OF PROFIT, BUT THEN, INSOFAR THE BSP CHARGES WERE CONCERNED, HE AFTE R ALLOWING 10% OF THE GROSS BSP CHARGES AS DEDUCTION FOR RELATABLE EXPENSES, THEREIN SUBJECTED THE BALANCE AMOUNT OF BSP CHARGES (90% OF GROSS RECEIPTS) TO TAX IN THE HANDS OF THE ASSESSEE. AFTER REJECTING THE CONTENTIONS OF THE ASSESSEE THE DRP PRINCIPALL Y UPHELD THE VIEW TAKEN BY THE A.O THAT THE BSP CHARGES WERE LIABLE TO BE ASSESSED AS THE BUSINESS INCOME OF THE ASSESSEE. BUT THEN, THE DRP DIRECTED THE A.O TO RESTRICT THE INCOME ON ACCOUNT OF BSP CHARGES TO 40% OF THE GROSS RECEIPTS. (II). AGGRIEVED WITH THE ORDER OF THE A.O/DRP THE ASSESSEE HAS ASSAILED THE ASSESSING OF THE BSP CHARGES AS ITS BUSINESS INCOME UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. ON THE OTHER HAND, THE REVENUE IS AGGRIEVED WITH THE SCALING DOWN OF THE QUANTUM OF INCOME FR OM BSP CHARGES FROM 90% OF GROSS RECEIPTS AS WAS PROPOSED BY THE A.O VIDE HIS DRAFT ASSESSMENT ORDER, TO 40% OF GROSS RECEIPTS PURSUANT TO THE DIRECTIONS OF THE DRP. WE FIND THAT THE ASSESSEE HAD INTER ALIA SUBMITTED BEFORE THE LOWER AUTHORITIES THAT IT HA D MERELY ACTED AS A FACILITATOR/INTERMEDIARY IN RECOVERING BSP LINK CHARGES FROM THE AIRLINES AND AGENTS (THROUGH IATA INDIA BRANCH), AND HAD REMITTED THE SAME TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP. IN FACT, THE SAID CONTENTION WAS RAISED BY THE ASSESSEE BOTH BEFORE THE A.O AND THE DRP. ADMITTEDLY, IN CASE THE ASSESSEE HAD ONLY FACILITATED THE RECOVERING OF THE BSP CHARGES FROM THE AIRLINES AND AGENTS (THROUGH IATA INDIA BRANCH), AND REMITTED THE SAME TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP, THEN THE SAME IN THE ABSENCE OF ANY INCOME ELEMENT COULD NOT HAVE BEEN BROUGHT TO TAX IN ITS HANDS. IN FACT, WE FIND THAT THE DRP IN THE ASSESSEES OWN CASE FOR A.Y 2016 - 17, VIDE ITS ORDER PASSED U/S 144(5), DATED 03.07.2019, HAD ACCEPTED THE OBJECTIO N OF THE ASSESSEE, AND OBSERVED, THAT AS THE BSP LINK CHARGES M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 8 WERE COLLECTED BY THE ASSESSEE FOR ONWARD REMITTANCE TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP, THE SAME WOULD THUS NOT CONSTITUTE INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE DR P HAD DIRECTED THE A.O TO DELETE THE ADDITION OF BSP CHARGES IN THE HANDS OF THE ASSESSEE. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE ARE OF THE CONSIDERED VIEW THAT COLLECTION OF THE BSP CHARGES BY THE ASSESSEE FROM THE AIRLINES AND AGENTS FOR ONWA RD REMITTANCE TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP, CANNOT BE HELD TO BE ITS BUSINESS INCOME. BUT THEN, AS THE SAID ASPECT HAD NOT BEEN LOOKED INTO BY THE A.O/DRP, WE THEREFORE IN ALL FAIRNESS RESTORE THE MATTER TO THE FILE OF THE A.O FOR THE LIMITED PURPOSE OF VERIFYING THE SAME. IN CASE THE CLAIM OF THE ASSESSEE THAT THE BSP LINK CHARGES WERE COLLECTED BY IT FOR ONWARD REMITTANCE TO ACCELYA WORLD SLU, SPAIN, WITHOUT ANY MARK - UP, IS FOUND TO BE IN ORDER, THEN THE ADDITION MADE BY THE A.O TO T HE SAID EXTENT SHALL STAND DELETED. THE GROUNDS OF APPEAL NO.6(D & E) RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. (B). IATA CLEARING HOUSE FACILITY (ICH FACILITY) : (I). THE ASSESSEE VIZ. IATA, CANADA, PROVIDED THE ICH FA CILITY TO THE AIR TRANSPORT INDUSTRY ACROSS THE GLOBE. THROUGH THE ICH FACILITY THE ASSESSEE VIZ. IATA, CANADA ENABLED THE WORLD AIRLINES AND INDUSTRY SUPPLIERS TO SETTLE THEIR PASSENGER, CARGO AND MISCELLANEOUS/NON - TRANSPORTATION BILLINGS. THE ICH FACILIT Y PROVIDED BY THE ASSESSEE, VIZ. IATA, CANADA FACILITATED RAISING OF THE INVOICES, NETTING OFF OF PAYABLES AND RECEIVABLES, PROVIDING TRANSACTION DETAILS REPORT TO THE AIRLINES/STRATEGIC PARTNERS. IN ORDER TO EXPLAIN THE CONCEPT OF ICH FACILITY THE ASSESSE E HAD DRAWN SUPPORT FROM AN EXAMPLE BEFORE THE LOWER AUTHORITIES. SAY, A PASSENGER BOOKED A TICKET THROUGH AIR INDIA FOR A JOURNEY FROM INDIA TO GENEVA, WITH A LAY - OVER AT AMSTERDAM. ON THE BASIS OF AN INTERLINING AGREEMENT AMONG THE WORLDS AIRLINES, THE AIR INDIA AIRCRAFT WOULD CARRY THE PASSENGER FROM INDIA TO AMSTERDAM, AND THEREAFTER A SWISS AIRLINES AIRCRAFT WOULD CARRY THE PASSENGER FROM AMSTERDAM TO GENEVA. IN THIS SITUATION, AIR INDIA WOULD COLLECT THE ENTIRE FARE FROM THE PASSENGER AND WOULD BE RE QUIRED TO PAY THE SWISS AIRLINES FOR THE JOURNEY BETWEEN AMSTERDAM TO GENEVA. NOW, IT IS BY AVAILING THE ICH FACILITY THAT AIR INDIA WOULD SETTLE ITS DUES WITH THE SWISS AIRLINES. AS SUCH, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ICH FACILITY ENABLED THE AIRLINES TO SETTLE THEIR BILLINGS/DUES SECURELY AND EFFICIENTLY, THEREBY REDUCING THEIR EXPOSURE ARISING ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. IT WAS THE CLAIM OF THE ASSESSEE, VIZ. IATA, CANADA, BEFORE THE LOWER AUTHORIT IES THAT AS THE ICH SERVICES WERE PROVIDED BY IT DIRECTLY OUTSIDE INDIA, AND THE FEES IN RESPECT OF THE SAID SERVICES WAS ALSO RECEIVED IN ITS BANK ACCOUNT MAINTAINED OUTSIDE INDIA, THEREFORE, THE REVENUE PERTAINING TO THE SAID ICH SERVICES COULD NOT HAVE BEEN BROUGHT TO TAX AS THE BUSINESS INCOME OF THE ASSESSEE UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THOUGH IATA INDIA BRANCH CONSTITUTED A PE OF THE ASSESSEE IN INDIA AS PER ARTICLE 5(2)(B) OF THE INDI A - CANADA TAX TREATY, BUT THEN, AS THE FEES PERTAINING TO ICH FACILITY WAS RECEIVED DIRECTLY OUTSIDE INDIA, AND IATA INDIA AS PER THE APPROVAL OF THE RBI WAS NOT PERMITTED TO UNDERTAKE ANY ACTIVITY APART FROM THE BSP SERVICES, THEREFORE, THE FEES RECEIVED B Y THE ASSESSEE FROM ICH FACILITY COULD NOT BE ATTRIBUTED TO THE IATA INDIA BRANCH. ACCORDINGLY, IT WAS THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE FEES PERTAINING TO ICH FACILITY COULD NOT BE ASSESSED AS BUSINESS INCOME OF THE ASSESSE E UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE ASSESSEE THAT AS ITS INDIAN PE VIZ. IATA INDIA BRANCH WHICH AS PER THE APPROVAL OF RBI WAS NOT PERMITTED TO UNDERTAKE ANY ACTIVITY APART FROM THE BSP SERVICES H AD NO ROLE IN PROVIDING OF THE ICH SERVICES WHICH WERE PROVIDED OUTSIDE INDIA, THEREFORE, THE FEES THEREIN M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 9 RECEIVED BY THE ASSESSEE COULD NOT BE ATTRIBUTED TO THE SAID PE. HOWEVER, THE A.O/DRP DID NOT FIND FAVOUR WITH THE AFORESAID CLAIM OF THE ASSESSEE. O BSERVING, THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE ACTIVITIES PERTAINING TO ICH FACILITY WERE BEING CONDUCTED BY THE ASSESSEE, VIZ. IATA, CANADA DIRECTLY FROM OUTSIDE INDIA, THE DRP CONCURRED WITH THE VIEW TAKEN BY THE A.O THAT THE FEES PERTAINING T O ICH FACILITY WAS LIABLE TO BE ASSESSED AS THE BUSINESS INCOME OF THE ASSESSEE UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. (II). WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS ADVANCED BY THE AUTHORISED REPRESENTATIVES FOR BOTH THE PART IES IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION, AND HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENTS THAT HAVE BEEN PRESSED INTO SERVICE BY THEM. AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSESSEE WAS GIVEN PERMISSION BY THE RBI TO OPEN A BRANCH OFFICE IN INDIA, VIDE ITS ORDER DATED 25.11.1995, UNDER SEC. 29 OF THE FOREIGN EXCHANGE REGULATION ACT, 1973, FOR CONDUCTING NON - COMMERCIAL ACTIVITIES ON NO PROFIT BASIS. WE FIND THAT THOUGH IT WAS THE CLAIM OF THE ASSESSEE THAT AS PER THE APPROVAL OF THE RBI THE IATA - INDIA BRANCH WAS NOT PERMITTED TO UNDERTAKE ANY ACTIVITY APART FROM THE BSP SERVICES, BUT THE DRP TAKING COGNIZANCE OF THE FINANCIAL STATEMENTS OF THE IATA - INDIA BRANCH, AND ALSO OBSERVING THAT RBI HAD NEVER CONDUCTED ANY ENQUIRY INTO THE AFFAIRS OF THE ASSESSEE, DECLINED TO ACCEPT THE SAID CLAIM OF THE ASSESSEE. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THOUGH IATA - INDIA BRANCH CONSTITUTED A PE OF THE ASSESSEE IN INDIA AS PER ARTICLE 5(2)(B) OF THE INDIA - CANADA TAX TREATY, BUT THEN, AS THE ICH SERVICES WERE PROVIDED DIRECTLY OUTSIDE INDIA, AND THE FEES IN RESPECT OF THE SAID SERVICES WAS ALSO RECEIVED BY THE ASSESSEE IN ITS BANK ACCOUNT MAINTAINE D OUTSIDE INDIA, THEREFORE, THE REVENUE PERTAINING TO THE SAID ICH SERVICES COULD NOT HAVE BEEN ATTRIBUTED TO THE IATA - INDIA BRANCH, THE SAME WE FIND WAS REJECTED BY THE DRP, FOR THE REASON, THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE ICH SERVICES WERE BEING PROVIDED BY THE ASSESSEE, VIZ. IATA, CANADA, DIRECTLY FROM OUTSIDE INDIA. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND ARE IN AGREEMENT WITH THE CLAIM OF THE ASSESSEE, THAT THE AMOUNT OF PROFIT THAT WOULD BE ATTRIBUTABLE TO A PE WOULD BE ON THE BASI S OF THE EXTENT APPROPRIATE TO THE ROLE PLAYED BY THE PE IN THOSE TRANSACTIONS. IN A CASE WHERE THE TRANSACTIONS HAD TAKEN PLACE OUTSIDE INDIA, THE SAME CANNOT BE ATTRIBUTED TO THE PE, BECAUSE THE PE HAD NO ROLE TO PLAY IN SUCH TRANSACTIONS. AS SUCH, ONLY THE PORTION OF PROFITS WHICH ARE ATTRIBUTABLE TO THE PE IN INDIA ARE TAXABLE IN INDIA, AND THE REVENUES FROM FUNCTIONS/ACTIVITIES CARRIED OUTSIDE INDIA CANNOT BE TAXED IN INDIA. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT I N THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES CO. LTD. VS. DIT (2007) 288 ITR 408 (SC) . IN THE SAID CASE THE HONBLE APEX COURT HAD OBSERVED, THAT AS THE PE OF THE ASSESSEE COMPANY HAD NOTHING TO DO WITH THE OFFSHORE SERVICES RENDERED BY THE ASSESSEE COMPANY, A RESIDENT OF JAPAN, IN CONNECTION WITH A TURNKEY PROJECT EXECUTED IN INDIA, THEREFORE, CONSIDERATION RECEIVED BY THE ASSESSEE COMPANY FOR RENDITION OF SUCH SERVICES COULD NOT BE BROUGHT TO TAX IN INDIA. REFERRING TO ARTICLE 7 OF THE DTAA, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT THE SAME LIMITS THE TAX ON BUSINESS PROFITS TO THAT ARISING FROM THE OPERATIONS OF THE PE. IT WAS OBSERVED BY THE HONBLE COURT, THAT AS IN THE CASE BEFORE THEM THE ENTIRE SERVICES WERE RENDERED OUTSIDE INDIA, AND H AD NOTHING TO DO WITH THE PE, THEREFORE, NOTHING COULD BE ATTRIBUTED TO THE PE AND THUS BROUGHT TO TAX IN INDIA. APART FROM THAT, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT IN CASE OF COMPOSITE TRANSACTIONS WHICH HAVE SOME OPERATIONS IN ONE TERRITORY A ND SOME IN OTHERS, THE PRINCIPLE OF APPORTIONMENT HAS TO BE ESSENTIALLY APPLIED IN ORDER TO DETERMINE THE TAXABILITY OF VARIOUS OPERATIONS. IN THE BACKDROP OF THE AFORESAID SETTLED POSITION OF LAW, M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 10 THE AMOUNT OF PROFIT THAT WOULD BE ATTRIBUTABLE TO A PE WO ULD BE ON THE BASIS OF THE EXTENT APPROPRIATE TO THE ROLE PLAYED BY THE PE IN THE TRANSACTION FROM WHICH REVENUE HAS BEEN GENERATED. WE ARE UNABLE TO SUBSCRIBE TO THE MANNER IN WHICH THE A.O/DRP HAD SUMMARILY REJECTED THE CLAIM OF THE ASSESSEE THAT AS THE ICH SERVICES WERE PROVIDED BY THE ASSESSEE, VIZ. IATA, CANADA DIRECTLY OUTSIDE INDIA, AND THE FEES IN RESPECT OF THE SAID SERVICES WAS ALSO RECEIVED BY THE ASSESSEE IN ITS BANK ACCOUNT MAINTAINED OUTSIDE INDIA, THEREFORE, THE REVENUE PERTAINING TO THE SAID ICH SERVICES COULD NOT HAVE BEEN ATTRIBUTED TO THE IATA - INDIA BRANCH. IN OUR CONSIDERED VIEW, THE MATTER IN ALL FAIRNESS REQUIRES TO BE RESTORED TO THE FILE OF THE A.O. THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS VERIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THE ICH SERVICES WERE PROVIDED BY THE ASSESSEE, VIZ. IATA, CANADA DIRECTLY OUTSIDE INDIA. IN CASE, THE CLAIM OF THE ASSESSEE IS FOUND TO BE IN ORDER, THEN THE ADDITION OF FEES RECEIVED FROM PROVIDING ICH SERVICES MADE IN ITS HAND S WOULD STAND VACATED. NEEDLESS TO SAY, THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD DURING THE COURSE OF THE SET ASIDE PROCEEDINGS AND SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS AFORESAID CLAIM ON THE BASIS OF FRESH DOCUMENT ARY EVIDENCE. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O FOR FRESH ADJUDICATION IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUNDS OF APPEAL NOS. 6(F) TO 6(H) ARE ALLOWED FOR STATISTICAL PURPOSES. (C). COLLECTION OF MEMBERSHIP FEE S : (I). AS OBSERVED BY US HEREINABOVE, THE ASSESSEE IS A CORPORATION INCORPORATED UNDER THE SPECIAL ACT OF THE PARLIAMENT OF CANADA, PAGE 1 OF THE APB. THE ASSESSEE IS STATED TO BE A NON - PROFIT ORGANISATION WHOSE PURPOSE, OBJECTS AND AIMS ARE TO PROM OTE SAFE, RELIABLE, SECURE AND ECONOMICAL SERVICES TO ALL THE STAKEHOLDERS OF THE WORLDS COMMERCIAL AVIATION INDUSTRY. ANOTHER PRIMARY FUNCTION OF THE ASSESSEE IS TO PROVIDE MEANS FOR COLLABORATION AMONG THE AIR TRANSPORT ENTERPRISES ENGAGED DIRECTLY OR I NDIRECTLY IN INTERNATIONAL AIR TRANSPORT SERVICES. ALSO, THE ASSESSEE CORPORATION COOPERATES WITH THE INTERNATIONAL CIVIL AVIATION ORGANIZATION AND OTHER SUCH INTERNATIONAL ORGANIZATIONS. THE ASSESSEE HAS 240 MEMBERS AND ASSOCIATE MEMBERS FROM 115 COUNTRIE S AROUND THE WORLD. IN ORDER TO BECOME A MEMBER OF THE ASSESSEE CORPORATION, VIZ. IATA, CANADA, THE AIRLINES PAY THE NECESSARY JOINING FEES AND SUBSEQUENT ANNUAL MEMBERSHIP FEES. ALSO, THE ASSESSEE RECEIVES JOINING AND ANNUAL MEMBERSHIP FEES FROM ITS VARIO US STRATEGIC PARTNERS. THAT PURSUANT TO OBTAINING THE MEMBERSHIP OF THE ASSESSE CORPORATION, VIZ. IATA, CANADA, THE MEMBERS OBTAIN CERTAIN BENEFITS, VIZ. IATA OPERATIONAL SAFETY AUDIT; SECURITY AND FACILITATION; PRODUCT DISTRIBUTION; PHYSICAL PUBLICATIONS; TRAINING ACTIVITIES; ATTENDING ANNUAL GENERAL MEETINGS AND WORLD AIR TRANSPORT SUMMIT ETC. HOWEVER, A MEMBER IN ORDER TO AVAIL ANY OF THE AFORESAID SERVICES HAS TO PAY A SEPARATE FEES FOR THE SAME. APART FROM THAT, UPON PAYMENT OF THE MEMBERSHIP FEES TO T HE ASSESSEE, VIZ. IATA, CANADA, THE MEMBER AIRLINES AND THE STRATEGIC PARTNERS GET INFORMATION ABOUT THE VARIOUS SERVICES PROVIDED BY THE ASSESSEE CORPORATION. (II). IN THE BACKDROP OF ITS CLAIM THAT THE ASSESSEE CORPORATION WAS REGULATED BY THE PRINCI PLE OF MUTUALITY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE AFORESAID RECEIPTS WERE NOT EXIGIBLE TO TAX. HOWEVER, THE A.O/DRP BEING OF THE VIEW THAT THE ASSESSEE CORPORATION FAILED TO CUMULATIVELY SATISFY THE REQUISITE CONDITIONS TO INVOKE THE PRINCIPLE OF MUTUALITY, VIZ. (I). COMPLETE IDENTITY OF CONTRIBUTORS AND THE RECIPIENTS/PARTICIPANTS; (II). INSTRUMENTALITY OF THE ASSESSEE IN CARRYING OUT THE MANDATES OF ITS MEMBERS; AND (III). IMPOSSIBILITY OF THE ASSESSEE DERIVING ANY PROFIT FROM CONTRIBUTION OR NO N - INVOLVEMENT OF COMMERCIALITY, THEREIN REJECTED ITS CLAIM OF MUTUALITY. ALTERNATIVELY, IT WAS SUBMITTED BY M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 11 THE ASSESSEE THAT AS ITS INDIAN PE VIZ. IATA INDIA BRANCH WHICH AS PER THE APPROVAL OF RBI WAS NOT PERMITTED TO UNDERTAKE ANY ACTIVITY APART FROM TH E BSP SERVICES HAD NO ROLE IN COLLECTION OF MEMBERSHIP DUES WHICH WAS CARRIED OUT OUTSIDE INDIA, THEREFORE, THE SAID ACTIVITY COULD NOT BE ATTRIBUTED TO THE SAID PE. HOWEVER, THE A.O DID NOT FIND FAVOUR WITH THE AFORESAID CLAIM OF THE ASSESSEE, AND VIDE HI S DRAFT ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 144C(1), DATED 27.03.2015 AFTER ALLOWING DEDUCTION OF 10% OF THE GROSS COLLECTION OF MEMBERSHIP DUES AS DEDUCTION FOR RELATABLE EXPENSES, THEREIN SUBJECTED THE BALANCE AMOUNT (90% OF GROSS RECEIPTS) TO TAX I N THE HANDS OF THE ASSESSEE. OBSERVING, THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE ACTIVITIES PERTAINING TO THE COLLECTION OF MEMBERSHIP DUES WERE BEING CONDUCTED BY THE ASSESSEE, VIZ. IATA, CANADA DIRECTLY FROM OUTSIDE INDIA, THE DRP CONCURRED WITH T HE VIEW TAKEN BY THE A.O THAT THE SAME WAS LIABLE TO BE ASSESSED AS THE BUSINESS INCOME OF THE ASSESSEE UNDER ARTICLE 7 OF THE INDIA - CANADA TAX TREATY. BUT THEN, THE DRP DIRECTED THE A.O TO RESTRICT THE ADDITION TO 40% OF THE GROSS COLLECTION OF MEMBERSHIP DUES. (III). WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS ADVANCED BY THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS THE JUDICIAL PRONOUNCEMENTS THAT HAVE BEEN PRESSED INTO SERVICE BY THE M. AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSESSEE WAS GIVEN PERMISSION BY THE RBI TO OPEN A BRANCH OFFICE IN INDIA, VIDE ITS ORDER DATED 25.11.1995 UNDER SEC. 29 OF THE FOREIGN EXCHANGE REGULATION ACT, 1973, FOR CONDUCTING NON - COM MERCIAL ACTIVITIES ON NO PROFIT BASIS. WE FIND THAT THOUGH IT WAS THE CLAIM OF THE ASSESSEE THAT AS PER THE APPROVAL OF THE RBI THE IATA - INDIA BRANCH WAS NOT PERMITTED TO UNDERTAKE ANY ACTIVITY APART FROM THE BSP SERVICES, BUT THE DRP TAKING COGNIZANCE OF THE FINANCIAL STATEMENTS OF THE IATA - INDIA BRANCH, AND ALSO THE FACT THAT RBI HAD NEVER CONDUCTED ANY ENQUIRY INTO THE AFFAIRS OF THE ASSESSEE, DECLINED TO ACCEPT THE SAID CLAIM OF THE ASSESSEE. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THOUGH IATA - INDIA B RANCH CONSTITUTED A PE OF THE ASSESSEE IN INDIA AS PER ARTICLE 5(2)(B) OF THE INDIA - CANADA TAX TREATY, BUT THEN, AS THE COLLECTION OF THE MEMBERSHIP DUES BY THE ASSESSEE, VIZ. IATA, CANADA WAS CARRIED OUT DIRECTLY OUTSIDE INDIA, THEREFORE, THE SAME COULD N OT HAVE BEEN ATTRIBUTED TO THE IATA - INDIA BRANCH, WE FIND WAS REJECTED BY THE DRP, FOR THE REASON, THAT THE ASSESSEE HAD NOT DEMONSTRATED THAT THE ACTIVITIES PERTAINING TO COLLECTION OF THE MEMBERSHIP DUES WERE BEING CARRIED OUT BY THE ASSESSEE, VIZ. IATA, CANADA, OUTSIDE INDIA. WE ARE IN AGREEMENT WITH THE CLAIM OF THE ASSESSEE THAT AMOUNT OF PROFIT THAT WOULD BE ATTRIBUTABLE TO A PE WOULD BE ON THE BASIS OF THE EXTENT APPROPRIATE TO THE ROLE PLAYED BY THE PE IN THOSE TRANSACTIONS. IN A CASE WHERE THE TRAN SACTIONS HAD TAKEN PLACE OUTSIDE INDIA, THE SAME CANNOT BE ATTRIBUTED TO THE PE, BECAUSE THE PE HAD NO ROLE TO PLAY IN SUCH TRANSACTIONS. AS SUCH, ONLY THE PORTION OF PROFITS WHICH ARE ATTRIBUTABLE TO THE PE IN INDIA ARE TAXABLE IN INDIA, AND THE REVENUE F ROM FUNCTIONS/ACTIVITIES CARRIED OUTSIDE INDIA CANNOT BE TAXED IN INDIA. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES CO. LTD. VS. DIT (2007) 288 ITR 408 (SC) . IN THE SAID CASE, THE HONBLE APEX COURT HAD OBSERVED THAT AS THE PE OF THE ASSESSEE COMPANY HAD NOTHING TO DO WITH THE OFFSHORE SERVICES RENDERED BY THE ASSESSEE COMPANY, A RESIDENT OF JAPAN, IN CONNECTION WITH A TURNKEY PROJECT EXECUTED IN INDIA, THEREFORE, CONSIDE RATION RECEIVED BY THE ASSESSEE COMPANY FOR RENDITION OF SUCH SERVICES COULD NOT BE BROUGHT TO TAX IN INDIA. REFERRING TO ARTICLE 7 OF THE DTAA, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT THE SAME LIMITS THE TAX ON BUSINESS PROFITS TO THAT ARISING FROM THE OPERATIONS OF THE PE. IT WAS OBSERVED BY THE HONBLE COURT, THAT AS IN THE CASE BEFORE THEM THE M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 12 ENTIRE SERVICES WERE RENDERED OUTSIDE INDIA AND HAD NOTHING TO DO WITH THE PE, THEREFORE, NOTHING COULD BE ATTRIBUTED TO THE PE AND THUS BROUGHT TO TAX IN INDIA. APART FROM THAT, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT IN CASE OF COMPOSITE TRANSACTIONS WHICH HAVE SOME OPERATIONS IN ONE TERRITORY AND SOME IN OTHERS, THE PRINCIPLE OF APPORTIONMENT HAS TO BE ESSENTIALLY APPLIED IN ORDER TO DETERMINE THE TAXABILITY OF ITS VARIOUS OPERATIONS. IN THE BACKDROP OF THE AFORESAID SETTLED POSITION OF LAW, THE AMOUNT OF PROFIT THAT WOULD BE ATTRIBUTABLE TO A PE WOULD BE ON THE BASIS OF THE EXTENT APPROPRIATE TO THE ROLE PLAYED BY THE PE IN THE TRANSACTION FROM WHI CH REVENUE HAS BEEN GENERATED. WE ARE UNABLE TO SUBSCRIBE TO THE MANNER IN WHICH THE A.O/DRP HAD SUMMARILY REJECTED THE CLAIM OF THE ASSESSEE THAT AS THE ACTIVITIES PERTAINING TO COLLECTION OF MEMBERSHIP DUES WERE BEING CARRIED OUT BY THE ASSESSEE, VIZ. IA TA, CANADA DIRECTLY OUTSIDE INDIA, THEREFORE, THE SAME COULD NOT HAVE BEEN ATTRIBUTED TO THE IATA - INDIA BRANCH. IN OUR CONSIDERED VIEW, THE MATTER IN ALL FAIRNESS REQUIRES TO BE REVISITED BY THE A.O. THE A.O SHALL IN THE COURSE OF THE SET ASIDE PROCEEDIN GS VERIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THE COLLECTION OF MEMBERSHIP DUES WAS CARRIED OUT BY IT DIRECTLY OUTSIDE INDIA. IN CASE THE CLAIM OF THE ASSESSEE IS FOUND TO BE IN ORDER, THEN, THE ADDITION MADE BY THE A.O ON THE SAID COUNT WOULD S TAND VACATED. NEEDLESS TO SAY, THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD DURING THE COURSE OF THE SET ASIDE PROCEEDINGS AND SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE ITS AFORESAID CLAIM ON THE BASIS OF FRESH DOCUMENTARY EVIDE NCE. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O FOR FRESH ADJUDICATION IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUND OF APPEAL NO. 6(A) TO 6(C) ARE ALLOWED FOR STATISTICAL PURPOSES. A S STATED BY THE LD. A.R, AND RIGHTLY SO, AS THE TRIBUNAL HAD FAILED TO ADDRESS AND THEREIN ADJUDICATE THE SPECIFIC CONTENTIONS THAT WERE RAISED BY THE ASSESSEE IN THE COURSE OF THE HEARING OF THE APPEAL IN FURTHERANCE OF ITS CLAIM THAT THE AFORESAID REVENUES, VIZ. (I). MEMBERSHIP FEES; (II). FEES FO R IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHARGES WERE NOT TAXABLE IN INDIA, THEREFORE, TO THE SAID EXTENT THE ORDER PASSED BY IT WHILE DISPOSING OFF THE ASSESSEES APPEAL IN ITA NO. 587/MUM/2016, DATED 08.01.2021 SUFFERS FROM A MI STAKE WHICH BEING APPARENT FROM RECORD RENDERS THE ORDER AMENABLE FOR RECTIFICATION UNDER SUB - SECTION (2) OF SEC. 254 OF THE ACT. WE, THUS, IN THE TOTALITY OF THE AFORESAID FACTS RECALL THE ORDER PASSED BY THE TRIBUNAL IN ITA NO. 587/MUM/2016, DATED 08.01. 2021 FOR THE LIMITED PURPOSE OF AFRESH ADJUDICATI ON OF THE GROUND OF APPEAL NO. 6 WHEREIN THE ASSESSEE HAD CLAIMED THAT THE AFORESAID REVENUES, VIZ. (I). MEMBERSHIP FEES; (II). FEES FOR IATA CLEARING HOUSE FACILITY (ICH FACILITY); AND (III). BSP LINK CHA RGES ARE NOT TAXABLE IN INDIA. ACCORDINGLY, THE ORDER PASSED BY THE TR IBUNAL IN ITA NO. 587/MUM/2016, DATED M.A. NO.131/MUM/2021 A.Y.2012 - 13 (ARISING OUT OF ITA NO.587/MUM/2016) INTERNATIONAL AIR TRANSPORT ASSOCIATION VS. DCIT (IT) - 2(2)(1) 13 08.01.2021 IS RECALLED FOR THE AFORESAID LIMITED PURPOSE. THE REGISTRY IS DIRECTED TO FIX THE MATTER FOR HEARING ON 30.09.2021. NOTICE OF THE AFORESAID DATE OF HEARING BE INTIMATED TO THE PARTIES CONCERNED. 6 . THE APPLICATION FILED BY THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PR ONOUNCED IN THE OPEN COURT ON 24 .08.2021 SD/ - SD/ - ( PRAMOD KUMAR ) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED: 24 .08 .2021 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. THE APP LICANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI