DIRECTOR OF INCOME TAX Vs. GALILEO INTERNATIONAL INC.

JUDGEMENT

(1.) GALILEO International Inc. Ltd. ('respondent herein') is a company incorporated under the laws of US. It is thus a resident of USA. It carries on the business of maintaining and operating the system for providing electronic global distribution of services to airlines, hotels, and tour and cab operators by connecting to travel agents utilizing a Computerized Reservation System (CRS). This CRS, inter alia includes a system which receives, processes, stores and disseminates data about flight schedules, seat/room availability, fare information and provision for booking capabilities etc. The respondent has same business activities in India as well.

(2.) AS noted by the Income Tax Appellate Tribunal in its impugned judgments, there are six players in the business, namely the passenger or the traveller, the travel agents, Interglobe i.e., respondent's agent in India, Sita and other travel agencies, the respondent herein and the airlines. In this behalf, the respondent has entered into an agreement with various participants known as the Participating Carrier Agreement. It has also entered into a separate agreement known as Distribution Agreement dated 25 -4 -1995 with Interglobe Enterprises Limited (Interglobe) for the services rendered by Interglobe under the said agreement. The respondent is paying Euro 1 for each booking to the said Interglobe from the airlines etc. with whom respondent has Participating Carrier Agreement, the respondent is paid Euro -3 for each booking.

(3.) THE Tribunal thereafter took up for consideration those questions and discussed them in detail. In respect of question No. 1 the Tribunal opined that respondent's income was chargeable to tax in India under Section 5(2) of the Income Tax Act as it had business connections in India as per Section 9(1)(i) of the said Act. While discussing the extent to which it is taxable, the Tribunal was of the opinion that 15 per cent of the revenue accruing to the respondent in respect of bookings made in India should be treated as Income accruing or assessed in India and chargeable under Section 5(2) read with Section 9(1)(i) of the Act. Since the respondent is charging Euro -3 per booking as noted above, 15 per cent thereof would come to 0.45 Euro. Thereafter, it dealt with the question as to how much Income Tax from the above is consumed by payments made to the agents in India. Taking note of the fact Interglobe is paid one Euro per booking, the Tribunal concluded that after paying the said commission, there is no income or profits which is charged to tax in India.