Travel agent’s booking function is not substantial business activity and not taxable

The Delhi High Court in the case CIT Versus Travelport L.P. USA observed and has held that the travel agents in India were merely connected to the extent that they could perform a booking function but were not capable of processing the data of all the airlines together in one place.

The division bench comprising of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed and has held that a booking function is not covered under substantial business activity and, therefore, the same is not taxable.

It was held by ITAT and CIT(A) that out of several activities, the activities of Calleo Distribution Technologies Private Limited in India were only in respect of generating requests and receiving end results of the process. Thus, the computers at the desk of the travel agent in India were merely connected to the extent that they could perform a booking function but were not capable of processing the data at once of all the airlines together. It was also held by ITAT that the assessee has not deployed any assets in India.

The order passed by ITAT has been challenged by the appellant/department.

However, it has been stated by the department that the ITAT has erred in holding that only 15% of the revenue is attributable to the assessee’s PE in India without appreciating the facts of the case.

Further, the appellant contended that the ITAT had failed to note that the substantial activities relating to the business of the assessee were carried out in India and, accordingly, the entire booking revenue/fees generated from India would be taxable in India.

Accordingly, the court dismissed the appeal of the department.