Case Law Details
RELEVANT PARAGRAPH
4. We have carefully considered the arguments on both the sides. We have also perused the order sought to be rectified. The Tribunal while deciding the appeal formulated the questions arising in the appeal. These are No.l to 5 as recorded in para 17 of the order. As regards first question the Tribunal held that the assessee has business connection in India. However, after considering clause (a) of Explanation 1 to section 9(1 )(i) of the Act, it was held that since in the case of a business of which all the operations are not carried out in India, the income of the business is to be attributed to the operations carried out in India. Therefore, unless the apportioned income from the operations carried out in India is computed, the net income could not have been computed. Therefore first job as statutorily required under section 5(2) read with Explanation 1 to section 9(1 X0 of the Act was to identify the operations carried out in India and thereafter attribute the income from the operations carried out in India. While attributing revenue from the operations carried out in India, the Tribunal made FAR analysis i.e. Functions performed, Assets employed and Risk undertaken. The Tribunal also explained as to why only 15% of the revenue can be attributed to the Indian operations. The Tribunal noted that out of the bookings generated in India, for the services rendered by AIPL in India, the remuneration is payable to it. Since this remuneration exceeded the revenue attributable to the operations in India, in view of Circular No.23 of 23rd July 1969, it was held that no income is chargeable to tax in India. Though it is not specifically mentioned that Rule 10 is applied, the effect of estimating the revenue from operations in India is only to estimate the revenue which is considered reasonable. Rule 10 by itself does not prescribe as to how much revenue is attributable. Therefore, the observance that 6<No guidelines are available as to how much should be income reasonably attributable to the operations carried out in India” in Para 18 of the order do not amount to a mistake apparent on record. In estimating revenue from operations in India, the Tribunal indirectly considers Rule 10 of Income-tax Rules also 5. The next contention of applicant is that instead of estimating or apportioning income or profit the Tribunal has attributed the revenue. In our opinion this is not a mistake apparent on record. For computation of any income the first point is to apportion the revenue from the operations carried out in India. Unless the revenues are attributed, the income which is a second step cannot be attributed. However, after apportioning revenue, since it was found that out of apportioned revenue, the remuneration payable to the agent in India exceeds such apportioned revenue, no income is further taxable in India. Therefore, there is no mistake apparent on record. For holding so Circular No.23 has been considered and hence cannot be considered as mistake apparent on record.
6. The next contention is that the working given by the independent auditor and the assessee himself before the CIT(A) has been ignored. The assessee gave the working before the learned CIT(A) in an appeal against assessment framed giving effect to the appellate order and not in the original appeal. The working was only with respect to allowability of various expenses and not in respect of revenue generated from operations carried out in India. The working was given without prejudice to the claim that no income is chargeable to tax in India. Therefore, the working given by the assessee or independent auditor cannot be the basis to apportion the revenue from operations carried out in India. To this extent, it cannot be held to be a mistake apparent on record.
7. The contention that 15% of the income should have been apportioned and no expenses could have been allowed. In our opinion the argument has basic fallacy. While computing income, the gross revenue cannot partake the character of income itself. After apportioning revenue various expenses incurred for earning such revenue are to be considered and the income can be computed only thereafter. What is chargeable to tax in India is the income and not revenue.
8. As regards contention that the operations in India will result into perennial loss is fallacious. The income of the assessee accrues due to worldwide operation and not because of the operations carried out only in India. However, in respect of taxability in India only such profit can be taxed which accrues or arise in India. Even if the assessee do not earn strictly out of operations carried out in India, yet on global basis due to operations in India, the assessee earns income. At any rate how the business should be conducted should be left to the wisdom of the assessee. This does not amount to a mistake apparent on record.
9. We find that all the issues arising in the appeal have been answered Neither any argument nor any ground is left out. In view of overall situation if the Tribunal has consciously come to the conclusion that no income accrues in India and in respect of which elaborate reasons are given, if theapplicant does not agree with the reasoning, it cannot be said that any mistake has crept in the order of the Tribunal which is rectifiable under section 254(2) of the Act. We also find that the facts of the present assessee are identical to the facts in the case of Galileo International Inc. who is also operating CRS system and in the said case also the approval for attributed 15% of the gross revenue as accruing in India but since the remuneration payable to the Indian agent was more than the income attributable to Indian operation, no further income was held taxable. This decision of the Tribunal has been approved by the Hon’ble Delhi High Court by order dated 25 February 2009. We, therefore, decline to interfere.
