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Tax Publishers Attribution of income of a PE - whether a question of law? *Facts:* Assessee was providing airline computerized reservation systems. A place and agency PE was read by the tax authorities. The assessee was getting paid USD 3/EUR 3 per booking and they were remunerating the agents almost USD 1/EUR 1 or more in certain cases. On facts, the tax authorities upheld a 15% attribution of the income at USD 0.45/per reservation based on Functional, risk analysis (FAR). The case of the assessee was once the agent/PE was remunerated beyond the Arm's length computed by tax authorities at USD 0.45/reservation, no further attribution of income is possible in India. This was upheld by the ITAT and on appeal the high court dismissed the plea of the revenue that the attribution was done erroneously. Aggrieved by this high court order revenue went in higher appeal to SC - Held against the revenue, the issue of existence of a PE is a fact and the arm's length pricing and the remuneration to the agents @ 15% was also a fact. No question of law arises on this. The order of High court and ITAT was upheld. *Ed. Note:* This case of computerized reservation first in the case of Gallelio and then by Travelport for many years was a vexed issue. Now this verdict has set right that what is fact cannot be going in appeal as question of law to high court or to Apex court. Parallel to this verdict recently the SC also has upheld that the computation of arm's length price can be appealed as a question of law especially if the ground rules of computation are not adequately followed. Refer Flash No. 142/2023/Sap Labs India Private Limited v ITO/Civil Appeal No. 8463 of 2022 (Arising from S.L.P.(Civil) No.28652/2018)/SC/19.04.2023 : 2023 TaxPub(DT) 2471 (SC) *Case:* DIT v. Travelport Inc. 2023 TaxPub(DT) 2563 (SC)

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Attribution of income of a PE - whether a question of law?

Facts:

Assessee was providing airline computerized reservation systems. A place and agency PE was read by the tax authorities. The assessee was getting paid USD 3/EUR 3 per booking and they were remunerating the agents almost USD 1/EUR 1 or more in certain cases. On facts, the tax authorities upheld a 15% attribution of the income at USD 0.45/per reservation based on Functional, risk analysis (FAR). The case of the assessee was once the agent/PE was remunerated beyond the Arm's length computed by tax authorities at USD 0.45/reservation, no further attribution of income is possible in India. This was upheld by the ITAT and on appeal the high court dismissed the plea of the revenue that the attribution was done erroneously. Aggrieved by this high court order revenue went in higher appeal to SC -

Held against the revenue, the issue of existence of a PE is a fact and the arm's length pricing and the remuneration to the agents @ 15% was also a fact. No question of law arises on this. The order of High court and ITAT was upheld.

Ed. Note: This case of computerized reservation first in the case of Gallelio and then by Travelport for many years was a vexed issue. Now this verdict has set right that what is fact cannot be going in appeal as question of law to high court or to Apex court.

Parallel to this verdict recently the SC also has upheld that the computation of arm's length price can be appealed as a question of law especially if the ground rules of computation are not adequately followed. Refer Flash No. 142/2023/Sap Labs India Private Limited v ITO/Civil Appeal No. 8463 of 2022 (Arising from S.L.P.(Civil) No.28652/2018)/SC/19.04.2023 : 2023 TaxPub(DT) 2471 (SC)

Case: DIT v. Travelport Inc. 2023 TaxPub(DT) 2563 (SC)