Facts of the Case

The present appeals were filed by the Revenue against a common order dated 29.01.2021 passed by the Income Tax Appellate Tribunal concerning Assessment Years 2013-14, 2014-15, 2015-16, and 2016-17.

The respondent/assessee, Amadeus IT Group SA, is a non-resident entity engaged in providing global distribution systems for travel-related services. The dispute revolved around the taxability of booking fees, attribution of profits to the Permanent Establishment (PE) in India, and levy of interest under Section 234B of the Income Tax Act, 1961.

Additionally, there was a delay of 300 days in refiling the appeals, which was condoned by the High Court 

Issues Involved

  1. Whether profit attribution to the Permanent Establishment (PE) at 15% was legally sustainable.
  2. Whether booking fees received by the assessee are taxable as business income or as royalty.
  3. Whether interest under Section 234B is leviable when tax is deductible at source under Section 195.

Petitioner’s Arguments (Revenue)

  • The Tribunal erred in adopting a fixed profit attribution rate of 15% to the PE in India.
  • The booking fee received by the assessee should be treated as royalty income, not business income.
  • Interest under Section 234B should be levied even where tax is subject to withholding under Section 195.

Respondent’s Arguments (Assessee)

  • The issues raised by the Revenue are already settled by binding judicial precedents.
  • Booking fee is in the nature of business income and not royalty.
  • Where tax is deductible at source, there is no liability to pay advance tax, and therefore, interest under Section 234B is not applicable.

Court’s Findings / Order

The Delhi High Court held that no substantial question of law arises and dismissed the appeals.

  1. Profit Attribution to PE (15%)
    • Covered by Supreme Court judgment in Director of Income Tax vs Travelport Inc.
    • Hence, no question of law survives.
  2. Booking Fee – Business Income vs Royalty
    • Already settled in Director of Income Tax vs New Skies Satellite BV & Ors.
    • Held as business income, not royalty.
  3. Interest under Section 234B
    • Where income is subject to TDS under Section 195, no advance tax liability arises.
    • Consequently, interest under Section 234B is not leviable.
    • Also supported by Tribunal findings and factual position that additions did not survive.

Final Order:

  • Appeals dismissed.
  • No question of law arises for consideration. 

Important Clarifications

  • Where tax is deductible at source, liability for advance tax does not arise.
  • Consequently, Section 234B interest cannot be levied.
  • Booking fees in similar cross-border digital service models may be treated as business income instead of royalty, depending on precedents.
  • Profit attribution to PE may follow settled judicial benchmarks where already adjudicated 

Sections Involved

  • Section 9 (Income deemed to accrue or arise in India)
  • Section 195 (TDS on payments to non-residents)
  • Section 234B (Interest for default in payment of advance tax)
  • Section 209(1)(d) (Computation of advance tax)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS04052023ITA2582023_115448.pdf

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