Facts of the Case

The present appeals were filed by the Revenue challenging a common order dated 13.10.2021 passed by the Income Tax Appellate Tribunal concerning multiple assessment years ranging from AY 2007–08 to AY 2014–15.

The central issue arose from attribution of profits to the Indian operations of the respondent assessee, a foreign entity engaged in global distribution systems.

The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) [CIT(A)], concluding that 15% of the profits from Indian operations were attributable to the assessee in India.

Issues Involved

  1. Whether the attribution of 15% of profits to Indian operations of the assessee was legally sustainable.
  2. Whether any substantial question of law arose for consideration under Section 260A of the Income Tax Act.
  3. Whether prior judicial precedents, including Supreme Court rulings in related group entities, were binding on the present case.

Petitioner’s Arguments (Revenue)

  • The Revenue sought to challenge the Tribunal’s order affirming the CIT(A)’s approach on profit attribution.
  • It was contended that the Tribunal erred in accepting the 15% attribution formula.
  • However, during arguments, the Revenue fairly conceded that the issue on merits was already covered by a binding Supreme Court decision in the case of the assessee’s group entity.

Respondent’s Arguments (Assessee)

  • The assessee relied on binding precedents, particularly decisions of the Supreme Court in related matters involving the same group.
  • It was contended that the issue of profit attribution had already attained finality and could not be reopened.

Court’s Findings / Order

  • The Court noted that the issue was squarely covered by the Supreme Court decision in Commissioner of Income Tax (International Taxation) v. Travelport L.P. USA.
  • The Supreme Court had already dismissed the Revenue’s challenge and affirmed the High Court’s earlier ruling in favor of the assessee.
  • The Delhi High Court observed:
    • The same issue had been considered in earlier years (AY 2006–07).
    • The coordinate bench had held that no substantial question of law arises.
    • The Supreme Court affirmed that position by dismissing the SLP.
  • Accordingly, the Court held:
    • No substantial question of law arises for consideration.
    • The appeals filed by the Revenue were dismissed/closed.

Important Clarification

  • The Court reaffirmed the principle that once an issue is settled by the Supreme Court in a group entity’s case, it becomes binding for subsequent years and related entities.
  • The judgment strengthens the doctrine of judicial consistency and finality in tax matters.
  • Profit attribution once judicially determined (15% in this case) cannot be arbitrarily altered without fresh legal grounds.

Sections Involved

  • Section 9 – Income deemed to accrue or arise in India
  • Section 260A – Appeals to High Court
  • Principles relating to Permanent Establishment (PE) and profit attribution under international taxation

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS08122023ITA7182023_153642.pdf

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