The Delhi Income-tax Appellate Tribunal (the Tribunal) in the case of Sabre Inc. v. DCIT (2009-TIOL- 488-ITAT-DEL) ruled on the taxability of the income earned through Computer Reservation System (CRS) in India. The Tribunal after following the decision of the Delhi High Court in the case of Galileo International Inc. v. DCIT  180 Taxman 357 (Del) held that since the income attributable to the Permanent Establishment (PE) in India was less than the remuneration paid to the distributor in India by the taxpayer no income was taxable in hands of Sabre Inc.
Facts of the case
Issue before the Tribunal:-Whether the taxpayer formed PE under the provisions of the tax treaty?
Taxpayer’s contentions:-The taxpayer after relying on the decision of the Galileo International Inc. contended that profits were not attributable to India since it was paying 60 percent to the distributor in India.
Tribunal’s Ruling :-The Tribunal after relying on the decision of the Delhi High Court in the case of Galileo International Inc. held that since remuneration paid (60 percent) to the distributor in India by the taxpayer was more than the income attributable to the PE in India (15 percent) no income was taxable in hands of the taxpayer in India.
Our Comments :-The Tribunal has followed the decision of the Delhi High Court in the case of Galileo International Inc where Galileo had developed a CRS for reservation, ticketing, distribution and related functions. The High Court had held that no further income was required to be apportioned since the commission paid to the Indian agent was more than the revenue attributed i.e. adequately compensated at an arms length.
The above decision is in line with the decision given by the Supreme Court in the case of DIT v. Morgan Stanley and Co. Inc.  292 ITR 416 (SC) and Bombay High Court in the case of Set Satellite (Singapore) Pte.Ltd v. DDIT  218 CTR 452 (Bombay).