International Taxation Dispute: Travelport International Operations Limited vs. ACIT, Circle-3(1)(1), New Delhi

The case of Travelport International Operations Limited versus ACIT, Circle-3(1)(1), International Taxation-3, New Delhi, marked by case number ITA 1566/DEL/2022, stands as a noteworthy examination of international taxation issues, cross-border income attribution, and the implications of the Double Taxation Avoidance Agreement (DTAA) between India and the United Kingdom. Held before the Income Tax Appellate Tribunal Delhi Bench ‘D’, under the adjudication of Hon’ble President Shri G.S. Pannu and Judicial Member Shri Saktijit Dey, this case scrutinizes the appeals filed against the final assessment orders under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 for the assessment year 2018-19.

Travelport International Operations Ltd., headquartered in Langey, Berkshire, United Kingdom, contested the determination of its income in India, asserting a nil liability claim against the income assessed by the tax authorities. The core of the dispute lay in the interpretation of business connection and the establishment of a permanent establishment (PE) in India, potentially subjecting the foreign entity to Indian taxation laws despite its non-resident status.

The appellant’s contentions included challenging the assessment made by the Assistant Commissioner of Income-tax at the total income of INR 1,67,60,05,642 as against ‘NIL’ income declared, arguing against the jurisdiction’s right to tax under the ACT or under the provisions of the DTAA between India and the UK. The case further delved into the distribution agreement with Inter-globe Technologies Quotient India Private Limited (ITQPL), examining whether ITQPL operated as a dependent agent PE in India, thereby attributing income to the appellant under Indian tax laws.

Another significant area of dispute was whether Travelport operated as a conduit entity under the stepping-stone conduit framework, affecting its eligibility for India-UK tax treaty benefits. The allegations rested on not providing a corporate structure of the group during assessment proceedings, making the entity a vehicle for treaty shopping and profit shifting, devoid of substantial commercial substance within the UK.

The Tribunal’s detailed examination of these issues culminated in a decision that partly allowed the appeal, setting a precedent on the nuances of international taxation laws, the role of factual and legal analysis in the determination of a PE, and the criteria for eligibility under the DTAA. The clear articulation of the business model, distribution arrangements, and substantial economic presence led to this nuanced verdict. This analysis not only underscores the complexity of the tax obligations of multinational companies in India but also illuminates the intricate relationship between domestic tax provisions and international tax treaties.

This case serves as a vital reference for legal professionals, companies with cross-border operations, and tax authorities, facilitating a deeper understanding of the evolving landscape of international taxation and its enforcement within Indian jurisdiction. The verdict reinforces the imperative for multinational corporations to meticulously structure their operations and contractual relationships in adherence to both the letter and spirit of international tax agreements and domestic tax laws.

International Taxation Dispute: Travelport International Operations Limited vs. ACIT, Circle-3(1)(1), New Delhi