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 Halcrow Group Ltd vs. ADIT (ITAT Delhi)
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Principal Commissioner Of Income Tax, Delhi-1 Vs. Amadeus India Pvt. Ltd.
June, 22nd 2017
$~13 & 3
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
+                                 ITA 154/2017
PRINCIPAL COMMISSIONER OF
INCOME TAX, DELHI-1                           ..... Appellant
             Through: Ms. Vibhooti Malhotra, Advocate.

                                  versus

AMADEUS INDIA PVT. LTD.                    ..... Respondent
             Through: Mr. M.S. Syali, Senior Advocate with
                       Mr. Mayank Nagi, Advocate.

                                  WITH

+                                 ITA 330/2017
THE PRINCIPAL COMMISSIONER OF
INCOME TAX-4                                 ..... Appellant
              Through: Mr. Ruchir Bhatia & Mr. Puneet Rai,
                       Advocates.

                                  versus

INTER GLOBE TECHNOLOGY
QUOTIENT PVT. LTD.                           ..... Respondent
              Through: Mr. Aditya Vohra, Advocate.

               CORAM:
                              JUSTICE S.MURALIDHAR
                              JUSTICE VINOD GOEL

                                   ORDER
%                                  22.05.2017

Dr. S. Muralidhar, J.:
1. These are two appeals by the Revenue under Section 260A of the
ITA Nos.154/2017 & 330/2017                             Page 1 of 22
Income Tax Act, 1961 (,,Act) which raise similar issues concerning the
interpretation of Section 10A and Section 10AA of the Act.

2. ITA No.154/2017 is directed against an order dated 21st August,
2016 passed by the Income Tax Appellate Tribunal (,,ITAT) in ITA
No.1804/Del/2014 for the Assessment Year (,,AY) 2009-10. The
Respondent in the appeal is the Assessee, Amadeus India Pvt. Ltd.
(,,AIPL).

3. ITA No. 330/2017 is directed against an order dated 26th July, 2016
passed by the ITAT in ITA No. 6144/Del/2013 for AY 2010-11. The
Respondent in the appeal is the Assessee, Inter Globe Technology
Quotient Pvt. Ltd. (,,Inter Globe).

No ground re: Section 10A in ITA 154 of 2017
4. There were two broad questions raised by the Revenue in its appeal
against AIPL. One concerned the deletion of the transfer pricing
adjustment in the sum of Rs. 75,40,09,515 made by the Assessing
Officer (,,AO). The other concerned the correctness of the impugned
order of the ITAT allowing deduction to AIPL under Section 10A of
the Act in the sum of Rs. 18,43,84,578.

5. By an order dated 26th April, 2017, the Court confined the notice to
the second issue viz., allowing the deduction to AIPL under Section
10A of the Act.

6. It must be noticed at the outset that although in the questions of law,
a specific question has been raised by the Revenue on the issue of
ITA Nos.154/2017 & 330/2017                                     Page 2 of 22
deduction under Section 10A of the Act (Question ,,C) in the grounds
in the memorandum of appeal, there is not a single ground on this
aspect. There is just one general ground i.e., ground ,,E, which reads
"For that the order of ITAT is erroneous since it ignores the settled
position of law."

7. Nevertheless, since Ms. Vibhooti Malhotra, learned counsel for the
Revenue has argued this issue at length, the Court proceeds to examine
it notwithstanding that there is no ground urged in the appeal on the
said issue.

Facts in ITA 154 of 2017
8. The facts relevant to the issue raised are that AIPL was incorporated
on 8th March, 1994 and was granted approval for setting up a 100%
export oriented unit under Software Technology Park Scheme (,,STPS)
by a letter dated 5th July, 1995. This was followed by an agreement
dated 28th September, 1995 between the Government of India and
AIPL. The first undertaking of AIPL was set up at Hansalaya Building,
New Delhi ('Unit I'). AIPL started commercial production under the
Software Technology Park of India (,,STPI) scheme from the financial
year (,,F.Y.) 1994-95. Subsequently, the business activity of the
undertaking was shifted to D-4/4, Vasant Vihar, New Delhi. The
turnover of AIPL was certified by Software Export (Softex) forms
issued by STPI. Till AY 2004-05, AIPL claimed exemption/deduction
under Sections 10A/10B of the Act.

9. AIPL set up another undertaking at D-1, Local Shopping Centre No.
ITA Nos.154/2017 & 330/2017                                   Page 3 of 22
2, Vasant Vihar, New Delhi ('Unit II'). AIPL was granted approval for
setting up its new 100% export oriented undertaking by a letter dated 8th
June, 2005. Unit II started commercial operations with effect from
April, 2005.

10. Unit II was engaged in the business of export (by transmission
outside India through data communication link) of data processing/IT
Enabled Services (,,ITeS) which were all duly certified by STPI.
During the AY under consideration i.e., AY 2009-10, Unit I had
already exhausted the period of exemption under Section 10A of the
Act. Therefore, the claim for deduction under Section 10A during the
AY 2009-10 was made by the Assessee only with regard to Unit II
located at D-1, Local Shopping Centre No. 2, Vasant Vihar, New Delhi.

11. While filing its return of income for AY 2009-10 the Assessee
claimed a deduction under Section 10A of the Act. It submitted a
certificate from a Chartered Accountant in Form 56F in which it was
certified that during the year under consideration the Assessee had
made a claim for deduction under Section 10A of the Act on data
processing receipts of Rs. 25,36,64,616 being the eligible export
turnover of Unit II. Therefore, out of the total data processing receipts
of Rs. 1,64,98,72,986 credited by the Assessee in its profit and loss
account (,,P&L Account), deduction under Section 10A of the Act was
claimed for an export turnover of Rs. 25,36,64,616 pertaining only to
Unit II. This comprised Rs. 23,37,30,290 on account of 'Data
Processing Receipts', Rs. 27,77,969 on account of 'On Site Support
Services' and Rs. 1,73,56,357 on account of 'Software Development
ITA Nos.154/2017 & 330/2017                                    Page 4 of 22
Services'. Exemption under Section 10A was claimed at Rs.
20,02,81,699.

Order of the TPO
12. The AO made a reference of the Transfer Pricing Officer (,,TPO)
under Section 92CA of the Act in respect of the international
transactions involving AIPL and its Associated Enterprise (,,AE).
Amadeus Spain. The TPO in his report dated 16th January, 2013
recommended an upward transfer pricing adjustment                 of Rs.
75,43,18,168 being the difference the Arms Length Price and the price
charged by AIPL. This has ultimately been ordered to be deleted by the
ITAT in the impugned order on account of AMP adjustment. That
aspect of the matter need not be examined further since in this appeal
notice has been confined only to the question of allowing the deduction
under Section 10A of the Act.

13. However, it requires to be noted that on the basis of the order of the
TPO, the AO passed a draft assessment order under Section 144C of the
Act which was communicated to the Assessee on 28th February, 2013.
The Assessee then went before the Dispute Resolution Panel (DRP).

Proceedings before the DRP
14. During the course of proceedings before the DRP, an enhancement
show cause notice dated 26th November, 2013 was issued. In it, it was
stated that it had been observed that the total revenue received from
business had been credited from the said P&L Account of AIPL by an
amount of Rs. 164.99 crores, which was the distribution fee received
ITA Nos.154/2017 & 330/2017                                     Page 5 of 22
from Amadeus Spain. The distribution fee for the AY under
consideration was 46% of the net turnover. It was stated therein that the
services enlisted in Articles II and XI of the Distribution Agreement
suggested that the main income of the taxpayer was not in conformity
with Section 10A of the Act. The Assessee was also asked to provide
details of various personnel employed in the company, their work
profile, number of Engineers/Software Developers/Data Processors in
each division and the minimum educational qualification for such
employees.

15. The Assessee furnished the requisite details by a letter dated 27th
November, 2013 to the DRP. It also filed its written submissions on 29th
November, 2013. The Assessee relied on the order passed by the ITAT
in its own case for AY 1996-97 reported as Assistant Commissioner of
Income Tax v. Amadeus India (P) Ltd. (2001) 79 ITD 407 [ITAT
(Del)].

16. By its order dated 30th November, 2013, the DRP held that AIPL
was an agent of Amadeus Spain carrying on marketing and distribution
functions. It was held that the revenue of Rs. 164.98 crores received
under the Distribution Agreement was not on account of any export of
software or data processing for which deduction could be claimed under
Section 10A. The DRP noted that the ITAT had in Amadeus Global
Travel Distribution SA v. Deputy Commissioner of Income Tax
(2008) 113 TTJ 767 (Del) held that the Assessee was a Dependent
Agency Permanent Establishment (,,DAPE) of Amadeus Spain and
hence "the remuneration derived by it from Amadeus Spain in the form
ITA Nos.154/2017 & 330/2017                                    Page 6 of 22
of distribution fee was for services rendered by it in India as an agent of
the foreign company."

17. However, the DRP found that the IT support services of Rs. 20.59
crores and call centre receipts of Rs 4.58 crore could be in nature of
receipts eligible for deduction under Section 10A. The Assessee was
directed to provide all the details/ certificate(s) in support of its claims
of deduction under Section 10A for only Unit II to the AO. The AO
was further directed to allow deduction under Section 10A on the
profits to the above receipts corresponding to Unit II only, provided that
the basic eligibility criteria of deduction under Section 10A was
satisfied.

18. Based on the order of the DRP, the AO passed the final assessment
order dated 31st January, 2014 restricting the deduction under Section
10-A to Rs. 1,58,97,121. The balance of Rs. 18,43,84,578 was
disallowed and directed to be added back to the income of the Assessee.

Impugned order of the ITAT in the case of AIPL
19. The Assessee then filed an appeal before the ITAT. It was
contended by AIPL before the ITAT that as in the earlier years, even
during the AY in question, the sole activity of AIPL was to provide
software connectivity for providing access of Amadeus CRS to travel
agents for which it received 46% of the revenue earned by Amadeus
Spain. Software connectivity was provided by rendering ITeS data
processing services to Amadeus Spain. AIPL relied extensively on the
order passed in its own case by the ITAT for AY 1996-97 allowing the
ITA Nos.154/2017 & 330/2017                                       Page 7 of 22
deduction claimed for Unit I under Section 80 HHE/10A of the Act and
the fact that this had been accepted by the Revenue. Likewise, in the
claim for AYs 1997-98 and 1998-99, the orders in favour of the
Assessee by the ITAT and the CIT(A) respectively had become final.
Further, Unit II had been set up in AY 2006-07 and for that year the
deduction under Section 10A had been allowed. Thus, the rule of
consistency was also invoked.






20. In the impugned order dated 21st August, 2016, the ITAT noted that
the ITAT had in its earlier order for AY 1996-97 in the Assessee's own
case i.e., Assistant Commissioner of Income Tax v. Amadeus India
(P) Ltd. (supra) undertaken a detailed examination of the activities of
the Assessee. The ITAT had at that stage referred the issue to STP
Noida to clarify whether the information sent by the Assessee to
Amadeus Spain was a "programme" or "data" or "data entry
transaction". Reference was made to the replies received on 26th
February, 1998 from the Assistant Director (Tech.) of STP explaining
the activity performed by AIPL as under:
       "M/s. Amadeus (India) (P.) Ltd. is involved in Data Procession
       activity/Data Entry Jobs. They have a main computer in Delhi
       which is connected to various travel agents in India via Satellite
       Links. Whenever a reservation has to be made the travel agents
       get connected to the Central Reservation System (CRS), at
       Amadeus which processes the data for its correct format. If the
       format is correct the data is sent to Germany for the availability
       of the tickets on a particular flight on a given date and time.
       Amadeus (I) (Pvt.) Ltd. is connected to their German counterpart
       via leased lines. The data is further processed in Germany for the
       correct status of booking. The data are sent in segments. M/s
       Amadeus (I) (Pvt.) Ltd. bills their counterpart on basis of per
ITA Nos.154/2017 & 330/2017                                    Page 8 of 22
       segment basis. A sample copy is enclosed, also enclosed is a
       sample invoice. The nature of activity of M/s. Amadeus (I) (Pvt.)
       Ltd. is as data entry/data processing job. Data entry/Data
       processing is a software development as defined by Customs
       Notification No.10/96 dated 17-2-1997 issued by Ministry of
       Finance, Dept. of Revenue."

21. The ITAT had in the earlier occasion for AY 1996-97 made a
separate reference to the Export Promotion Council (,,ESC). In its
opinion, the ESC had stated:
       "It is to confirm and clarify that data processing job is well
       covered within the scope of the definition of Computer Software.
       To substantiate this we enclose herewith a copy of Customs
       Notification No.7/98 and Customs Notification dated 11-2-1998.
       Further customs Notification No.10/96 dated 17-2-1997 also
       clarifies that data entry are well covered within the scope of
       computer software. Since Ministry of Finance has given detailed
       definition of Computer Software (for Customs Act) it would be
       appropriate that benefit under section 80HHE be extended to
       M/s. Amadeus. In case of any doubt the matter be referred to
       Department of Electronics before any decision is taken."

22. A reference was also made to the National Informatics Centre
(,,NIC). By a letter dated 9th February, 1998, the NIC intimated the AO
as under:
       "According to the details given by you, M/s. Amadeus India Pvt.
       Ltd. is merely collating information (data) from customers and
       doing bit of processing (collating) and forwarding the collated
       information (not any software programme) to its German
       counterpart."

23. However, before the ITAT, the Assessee had pointed out that the
AO had not put the correct facts before the NIC and that in that event
the opinion was bound to be incorrect. In para 31 of its order for AY

ITA Nos.154/2017 & 330/2017                                    Page 9 of 22
1996-97, the ITAT observed as under:
       "31. From the objections raised by the assessee as mentioned
       above it appears that the Assessing Officer has not supplied the
       complete information about the activities of the assessee to NIC.
       The opinion based on incomplete information cannot be relied
       upon. Moreover, when opinion from NIC was received by the
       Assessing Officer, the assessee was asked as to why the claim of
       the assesse for deduction under section 80HHE may not be
       disallowed, the assessee made a reference to ESC also. ESC vide
       their letter dated 10-3-1998 addressed to Assessing Officer
       opined as under:-
              "If you go by the definition of section 80HHE of the
              Income Tax Act, that also clearly says that section 80HHE
              is applicable to a person who is engaged in the business of
              export out of India of Computer Software.... Since,
              Ministry of Finance at various occasions have given
              elaborate definition of computer software after detailed
              consultations with the technical authority like Department
              of Electronics, it would be appropriate that benefit under
              section 80HHE are extended to M/s Amadeus India Pvt.
              Ltd. against their export of Computer Software to which
              they are entitled. In case of any doubt it is requested that
              matter may kindly be referred to the Department of
              Electronics before any decision is taken in this regard."

24. It was further observed by the ITAT in paras 34 & 35 as under:
       "34. Even if undue importance is to be attached to the use of the
       word "programme" under the Act and to the need for the
       presence of a "computer programme" stricto sensu (in contrast to
       the wider compass of the language used in the Customs
       notifications) as essential for claiming an exemption, under the
       Act. We are of the opinion that the assessee qualifies tor
       exemption under the quoted sections. In the computer industry, a
       distinction no doubt exists among three different processes: (i)
       preparing a programme (ii) compiling a data base on the basis of
       the programme and (iii) processing for purpose of adding to, or
       altering the documents on the data base. In the present case, a one
       end, we have the Amadeus group of companies with a mega
ITA Nos.154/2017 & 330/2017                                    Page 10 of 22
       computer at Erding into which they have fed various programmes
       and built up a huge data base of various kinds of information
       relating to several airlines and service providers. At the other end
       we have the travel agent with a computer who merely accesses or
       utilises relevant information which appears on the data base of
       the computer. In a sense, he also adds to and alters the database
       available on the computer when he books a ticket for a client by
       typing in the data regarding his customer such as airline, fare,
       ticket, nature of services etc. for such entries will be added to the
       data base and become available for other operators on computers
       working on the system all over the world. A view may perhaps
       be taken that what the travel agent does is not "programming" as
       he merely makes use of adds to or alters the information on the
       data base but does not touch the process by which such
       information is brought on to the host computer.

       35. The assessee which occupies a position midway between the
       two fulfils, it will be clear from the facts as stated above, the
       functions of a programme exporter, it does not add mere entries
       to a database as done by the travel agent. In fact it has no direct
       interest in adding to, or drawing extracts from the data base built
       into the computer like the several operators all the world over.
       What it does actually is to supplement the functions of the
       Amadeus Group by preparing and transmitting programmes to
       the latter for incorporation into portions or "partitions" in its
       mega-computer at Erding in Germany, so as to enable the travel
       agents in its marketing region draw on the available information
       for their benefit. Its activities are to issue instructions to the
       master computer to recognise the operators, identify them and
       provide them access to specific portions of the data base. There
       can be no doubt whatever, for the reasons discussed above, that
       the assessee manufactures, produces and exports software within
       the meaning of the three specified sections of the Act. It is open
       to it to claim exemption under any one of these sections and as is
       well established by pertaining to interpretation of taxing statutes
       is entitled to choose that one which is most favourable to it in any
       particular assessment year."


ITA Nos.154/2017 & 330/2017                                      Page 11 of 22
25. In the impugned order dated 21st August, 2016 for AY 2009-10, the
ITAT further noted that the registration granted by the STPI authorities
to Unit II was exclusively for manufacture of 'computer software/IT
enabled services'. The ITAT held that the DRP could not have possibly
taken a contrary view. With there being no change in the modus
operandi since 1996-97, the ITAT found no reason not to follow the
earlier decision for that AY.

26. A further factor that was adverted to before the ITAT by the
Revenue was the view taken by the DRP that Amadeus Spain has a
Permanent Establishment (,,PE) in the form of AIPL. The ITAT found
that "this fact is totally irrelevant in adjudication of the Appellant's
(AIPL's) claim for deduction under Section 10A." It was held that a
foreign companys DAPE and DA are two separate taxable entities as
per law. The ITAT noted: "DAPE is a creation of Article 5 of the
relevant DTAA, wherein the object is to tax profits of foreign company
in the source state." In this context it referred to the decision of the
Mumbai Bench of the ITAT in Deputy DIT International Taxation v.
Set Satellite (Singapore) Pte. Ltd. (2008) 307 ITR (AT) 181 (Mum).

27. The ITAT also took note of its order dated 26th July, 2016 in ITA
Nos. 1463/Del/2013 etc. (Deputy CIT v. Inter Globe Technology
Quotient P. Ltd.) for AYs 2007-2008 to 2010-2011. (This order is
incidentally under appeal in the companion appeal here i.e., ITA 330 of
2017 for AY 2010-11). The ITAT noted that although Inter Globe was
a competitor for AIPL, "both the Assesses have similar business model
and are rendering data processing activity."
ITA Nos.154/2017 & 330/2017                                   Page 12 of 22
Contentions of the Revenue
28. It was urged by Ms. Vibhooti Malhotra, learned counsel for the
Revenue, that a parallel could not be drawn between the decisions in
the Assessees own case for AY 1996-97 and the AY under
consideration because the deduction that was claimed for AY 1996-97
deduction was under Section 80HHE whereas here it is under Section
10A of the Act.

29. There is no merit in the above contention for the simple reason that
the Revenue has not been able to show that the activity of the Assessee,
which was examined then and the activity now is any different. The
essence of both Section 80 HHE and Section 10A in terms of the
conditions of eligibility are not very different.

30. It was then submitted by Ms. Malhotra that the beneficiaries of the
Assessees activities are all located in India and, therefore, there was no
real export of services. The extracted portions of the order of the ITAT
for 1996-97 reveal that the very same activity of the Assessee was
examined not only by STPI but also by ESC. It was also noticed that
the NIC had been furnished wrong information about the activity of the
Assessee by the Revenue. The categorical finding of the ITAT, on the
basis of the reports of the STPI and ESC was that the Assessee
"manufactures, produces and exports software" and that it could claim
exemption under any of the three provisions viz., Section 80HHE or
Sections 10A or 10B of the Act. The said order for AY 1996-97 and
followed in the subsequent two AYs has been accepted by the Revenue.
ITA Nos.154/2017 & 330/2017                                    Page 13 of 22
31. Ms. Malhotra raised a doubt whether the Assessee could be said to
be exporting computer software. The Court finds that this doubt has
been comprehensively negated by the ITAT in its order in the
Assessee's own case for AY 1996-97. It observed in this regard:
       "32. ... the Government of India has identified computer software
       as an area of extreme focus. In order to give impetus to the
       software export industry in a concrete manner and for providing
       conducive environment to the industry to conduct business at a
       pace commensurate with international practices, Government has
       conceived the STP Scheme, one of the significant features of
       which is to provide single point contact services. In this context,
       'computer software' (used in contrast with 'computer hardware")
       will include all services where 'computer hardware' viz.,
       computers are used as professional tools for processing
       intellectual inputs to be used in automatic data processing
       machines. The setting up of STP's and their monitoring by the
       DOE, the stipulation of an export obligation, the grant of customs
       concessions and exemptions for imports (if any), sales tax
       concessions, grant of the exchange clearances for the export of
       the products after verification and certification by the DOE,
       restriction on external commercial borrowings, the amendment of
       the Copyright Act as well as the grant of exemption for Income-
       tax purposes under section 10A, 10B and 80HHE all form part of
       an integrated policy for development and export of software.
       The expression 'software' should, therefore, be understood in the
       same sense in relation to each of the legislations pertaining to this
       industry. If the assessee is registered as a unit for manufacture
       and export of software and is such a one for all the other aspects
       referred to above, it would be not only anomalous but unjust to
       say that it is not an exporter of software for purposes only of
       Income-tax merely because the various departments of
       Government have not kept abreast of each other in the issue of
       their clarificatory notifications and instructions."



ITA Nos.154/2017 & 330/2017                                      Page 14 of 22
Conclusion in ITA 154 of 2017 (AIPL)
32. The Court finds that the impugned order of the ITAT in the case of
AIPL for AY 2009-10 on the issue of allowing of deduction under
Section 10A of the Act suffers from no legal infirmity either in its
analysis of the legal provisions or in its conclusions. The Court is not
inclined to frame any question of law on the issue concerning a Section
10A deduction in the appeal of the Revenue against AIPL for AY 2009-
10.

Facts in ITA 330 of 2017 (Inter Globe)
33. Turning now to the Revenue's appeal in the case of Inter Globe for
AY 2010-11, it is seen that there are concurrent findings of CIT(A) as
well as ITAT regarding the eligibility of the Assessee to deduction
under Section 10AA of the Act.

34. The facts were that the Assessee/Inter Globe was engaged in the
business     of software development     and providing information
technology services, namely, ,,data processing. It exported the services
from the Special Economic Zone (,,SEZ) Unit located at Noida.

AO's order
35. The basis for the AO to deny the deduction under Section 10AA of
the Act for AY 2010-11 was that a majority of the invoices were
addressed to the Assessee at the addresses in Mumbai, Gurgaon etc.
Very few of those invoices bore the Noida SEZ address. The AO
observed that the source of the data processing export had to be unit
established at SEZ area. However, there were only 38 employees there.
ITA Nos.154/2017 & 330/2017                                   Page 15 of 22
The value of the computers at the Noida SEZ address was only
Rs.31.63 lakhs.

36. The AO in the assessment order dated 1st March, 2013 concluded
that the Assessee was nothing but a distributor of Galileo, which was
the owner of the computer reservation system (,,CRS) through which
the airline and hotel reservations were done worldwide. As per the
Agreement the Assessee installed computer hardware and software at
the office of various travel agents throughout India. The agents made
bookings on the software and were entitled to commission. The AO
disbelieved that the Assessee was required to provide any ITeS to
Galileo, namely, export of data processing or that the said services were
rendered on Galileo USA from the unit located in Noida and not at the
desk of the travel agents.

Order of CIT (A)
37. The CIT(A), however, disagreed. In the order 6th September, 2013
allowing the Assessee's appeal, the CIT (A) followed the decision of the
ITAT in the case of AIPL for AY 1996-97. The CIT(A) found as a
matter of fact that "data that is being processed and transmitted by the
appellant is gathered in the appellant's Unit at SEZ from across the
country from the offices of various travel agents or from the customers,
who make booking through CRS system of Galileo. However, in order
to transmit the same to Galileo, it has to be processed through
appellant's system located at SEZ Unit NOIDA. Therefore, in the
absence of the CRS system at appellant's SEZ Unit NOIDA, the data
collected from the travel agents, cannot be transmitted further and
ITA Nos.154/2017 & 330/2017                                   Page 16 of 22
moreover in the absence of CRS, of which the appellant is sale
distributor, the data is of no use for the desired objectives. Therefore, I
hold that the service by appellant data for processing transmission from
its SEZ Unit NOIDA, is the only service which has been exported for
the purpose of making booking through CRS to Galileo, therefore, in
view of the same, the observation whether the appellant had more
number of computers/manpower outside SEZ, and that the data is
collected by travel agents (outside SEZ) is of no relevance in
determining the nature of services exported by the appellant."

38. Further, in the Assessees own case for AY 2007-08, followed by
the CIT(A) for AYs 2008-09 and 2009-10, the deduction under Section
10AA of the Act had been allowed by holding that the profits earned
from rendering services to Galileo were covered thereunder.             The
material facts remained the same for AY 2010-11. The CIT(A)
accordingly allowed the appeal and allowed the deduction claimed by
the Assessee/Inter Globe under Section 10AA of the Act.






Impugned order of the ITAT in case of Inter Globe
39. The Revenue then went in appeal to the ITAT. The ITAT noted that
the Agreement entered into between the Assessee and Galileo
envisaged the following technical services being provided: access
levels, communication links, scripts, problem ticketing and help desk
operations, voice inbound call centre 24X7, Network Monitoring
Operations, Ticket Stock Control Operations, Vendor Support
Operations, Fares Support Operations. Further, constant update network
was done by the Assessee from time to time. The Software Export
ITA Nos.154/2017 & 330/2017                                      Page 17 of 22
Declaration (SOFTEX) form showing the work of the Assessee of data
entry and conversion of software data processing was also referred to.
The Auditors report certified that the Assessee had been engaged in the
development of computer software and information technology enabled
products and services. This had been certified by the Office of the
Development Commissioner, Noida SEZ.

40. Before the ITAT as it was contended by the Revenue it was urged
that the activity involving AIPL was very different from the activities
being performed by Inter Globe and, therefore, there could be no
comparison between the two cases. In rebutting this contention, the
ITAT referred to the fact that the claim under Section 10AA of the Act
was supported by a certificate of a Chartered Accountant in Form 56F.
It was noticed that Article 9 read with Schedule-I of the Distribution
Agreement between the Assessee (Inter Globe) and Galileo showed that
Galileo was entitled to a fee based on the number of segments
completed by the Assessee. ,,Segment was defined under Article 2 to
mean a booking, either of a direct flight or consisting of various legs of
journeys, which is concluded and not cancelled at any stage. The more
the number of segments booked by travel agent, the higher would be
the revenues of the Assessee. Therefore, it was critical for the Assessee
to ensure that the bookings were converted into segments. In terms of
Article 8 of the Agreement, the Assessee was required to provide any
kind of technical help, support or assistance as may be required by the
subscribers in connection with use of Galileo GDS server located in
Denver, USA.          Revenue generated on creation of segment and

ITA Nos.154/2017 & 330/2017                                    Page 18 of 22
finalisation of PNRs required the Assessee to undertake the said data
processing services from its units located in Noida SEZ.

41. The case of the Assessee which was accepted by the ITAT was that
"the aforesaid data processing services were rendered on the Galileos
GDS in USA from the unit located in Noida SEZ and not at the desk of
the travel agent." The ITAT concurred with the findings of the CIT(A)
in this regard including the part of the order where reliance was placed
on the decision of the ITAT in the case of AIPL.

42. The ITAT also discussed the case of Acquire Service Private
Limited v. Commissioner of Service Tax [2015] 78 VST 292
(CESTAT-New Delhi), which was a part of the group of companies
using the CRS of Amadeus or Galileo. The modus operandi was
described as under:
       "7.6. ... These groups had evolved and were maintaining a
       computer reservation system (CRS), the requisite software and a
       huge database comprising a variety of information relating to
       several airlines and other travel services provides, for providing
       international travel related facilities. The core computer
       system/server were established at overseas locations at US,
       Germany or Spain as the case may be. The travel agent, with a
       computer, merely accesses or utilizes travel information drawn
       from the data base of the computers. The travel agent also adds
       to, and alters the data available on the computer when he books a
       ticket (or other travel facilities like cab services, accommodation
       at hotels/resorts etc.) for a customer by feeding in the data
       regarding the customer such as airlines, hotel, local travel fare,
       tickets, the several intermediary and eventual destination; and the
       nature of services to be provided etc. This data enters the
       composite data based stream and becomes available to other
       operators via computers operating on Amadeus or Galileo
ITA Nos.154/2017 & 330/2017                                    Page 19 of 22
       system, all over the world, whenever a fulfilling transactions
       occurs at the travel agents end. The Assessee's role like the
       present Assessee before us, was occupying the position of
       hyphen between the overseas Amadeus and Galileo which have
       conceived evolved, maintained and operates the CRS (Computer
       Reservation System) facility on the one hand; and travel agent on
       the other. What the Assessee does is to supplement functions, of
       the overseas entities (Amadeus or Galileo) by preparing and
       transmitting the locally generated travel related data to them for
       incorporation and synthesis into the core data base, maintained in
       the mega computers overseas, so as to enable travel agents
       (operating within the Assessee's marketing region) to draw on the
       available and updated information, for their benefit. The
       Assessees issued instructions to the respective master computer
       (of Amadeus or Galileo) to enable recognition that identification
       of tour operator and facilitate access to them of specific portion
       (segment) of the composite data basis. CRS is a system
       connected with a data base carrying various kinds of information
       pertaining to several airlines and other travel services provides is
       used for booking airlines tickets, cabs, hotels and like travel
       facilities across the globe. Airlines hotels, cabs agencies and
       other services providers pay fee to the overseas entities
       (Amadeus or Galileo) for bookings made by employing the CRS.
       The Assessee process the data generated by their accredited
       travel agent in India, at their respective STP unit and align and
       interface such information as per protocols of the CRS systems of
       the overseas entitles-Amadeus or Galileo. On successful booking
       of a ticket or others travels related facilities by accredited travel
       agents, the relevant data is processed by the Assessees and fed
       into the data overseas, employing internet facilities and activities
       amounting to computer data processing. For providing this
       service, Assessees received data processing fees from the
       overseas entities in convertible foreign exchange, assesses,
       however receive no fee/consideration from either the airlines, the
       travel agents or from hotels etc. the CESTAT has thus come to
       the conclusion that Assessees promote/market CRS services
       provide by the Overseas entities (Amadeus/Galileo) but do so
       through computers data processing, amounting to information
       technology services."
ITA Nos.154/2017 & 330/2017                                      Page 20 of 22
43. It was noticed that the functions of AIPL had also been discussed in
the case of Galileo. The ITAT noted that its decision in the case of
Galileo was upheld by this Court in its decision in Director of Income
Tax v. Galileo International Inc. (2011) 336 ITR 264 (Del.).
Reference was also made to the decision of this Court in CIT v. M.L.
Outsourcing Services (P) Ltd. (2014) 271 CTR 553 (Del.) where a
reference was made to the CBDT notification dated 26th September,
2000 in relation to deduction under Section 10A of the Act.

Contentions of the Revenue
44. Mr. Ruchir Bhatia, learned counsel for the Revenue submitted that
the decision of this Court in Director of Income Tax v. Galileo
(supra)which interpreted the same agreement between the Assessee and
Galileo held that it did not provide for rendering of export services.

45. The Court is unable to agree with the above submission. This Court
in Director of Income Tax v. Galileo (supra) was not examining
whether the Assessee was entitled to deduction under Section 10AA for
the services provided by it. The focus there was on whether Galileo
could be said to have a PE in India. As noted by the CIT(A) and the
ITAT even in that case, the ITAT discussed the functions of the
Assessee. The said decision of the ITAT, which was affirmed by this
Court, was not inconsistent with what the ITAT held in its impugned
order in the present case as far as the Assessee's functions are
concerned.


ITA Nos.154/2017 & 330/2017                                     Page 21 of 22
46. The concurrent factual findings of both the CIT (A) and the ITAT
as regards the Assessee/Inter Globe fulfilling the conditions of
eligibility for deduction under Section 10AA of the Act have not been
shown to be perverse.

Conclusion in ITA No. 330 of 2017 (Inter Globe)
47. Consequently, the Court is not persuaded that any substantial
question of law arises from the order dated 26th July, 2016 of the ITAT
in the case of Inter Globe for AY 2010-2011.

48. Both appeals are dismissed but, in the circumstances, with no orders
as to costs.

CM No. 16642/2017 (Exemption) in ITA No. 330/2017
49. Allowed, subject to just exceptions.

CM No. 16643/2017 in ITA No. 330/2017 (for condonation of 38
days' delay in re-filing)

50. For the reasons stated in the application, the delay in re-filing the
appeal is condoned. The application is allowed.



                                                  S.MURALIDHAR, J



                                                      VINOD GOEL, J
MAY 22, 2017/b'nesh



ITA Nos.154/2017 & 330/2017                                   Page 22 of 22

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