Facts of the Case

The present appeal was filed by the Revenue before the Delhi High Court against the order dated 27.09.2022 passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2015–16.

The core dispute revolved around the attribution of profits to the Permanent Establishment (PE) of the assessee in India. The Dispute Resolution Panel (DRP) had attributed 75% of gross profits earned from Indian operations to the assessee.

However, the ITAT, relying on its earlier decisions for Assessment Years 2007–08 to 2014–15, directed the Assessing Officer to restrict attribution to 15% of gross booking fees.

The Revenue challenged this finding before the High Court.

Issues Involved

  1. Whether the attribution of 15% of gross booking fees to the Permanent Establishment (PE) was justified.
  2. Whether the Tribunal was correct in following its earlier decisions for prior assessment years.
  3. Whether any substantial question of law arose for consideration by the High Court.

Petitioner’s Arguments (Revenue)

  • The Revenue sought to challenge the Tribunal’s reduction of attribution from 75% to 15%.
  • It argued that the DRP’s higher attribution was justified considering the extent of Indian operations.
  • The appeal was filed to reconsider the correctness of the Tribunal’s reliance on earlier rulings.

Respondent’s Arguments (Assessee)

  • Although no appearance was recorded, the position of the assessee was supported by binding judicial precedents.
  • The assessee relied on earlier Tribunal rulings and decisions upheld by higher courts in similar matters involving group entities.
  • It was contended that the issue was already settled by the Supreme Court in related cases.

Court’s Findings / Order

  • The High Court noted that the issue on merits was already covered by the decision of the Supreme Court in:
    • Commissioner of Income Tax (International Taxation) v. Travelport L.P. USA (2023)
    • DIT v. Travelport Inc. (2023)
  • The Supreme Court had affirmed the High Court’s earlier rulings, thereby settling the issue against the Revenue.
  • The High Court observed that:
    • The Tribunal’s approach of attributing 15% of gross booking fees was consistent with earlier judicial precedents.
    • No new or substantial question of law arose for consideration.
  • Accordingly, the appeal filed by the Revenue was dismissed.

Important Clarification

  • Once an issue is conclusively settled by the Supreme Court, lower courts are bound to follow the same.
  • Re-litigation of identical issues without any distinguishing facts will not give rise to a substantial question of law.
  • Profit attribution to a Permanent Establishment must follow judicial consistency across assessment years unless facts materially differ.

 

Sections Involved

  • Section 260A of the Income Tax Act, 1961 (Appeal to High Court)
  • Provisions relating to Permanent Establishment (PE) and profit attribution under international taxation

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/60812122023ITA7482023_010728.pdf

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