Travelport LP Challenges Void Assessment Order in ITA No. 6503/DEL/2019

Travelport LP vs. DCIT: Challenging the Void Assessment Order for AY 2011-12

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Delhi ‘G’ Bench, addressed the appeal of Travelport LP against an assessment order by the Deputy Commissioner of Income Tax, International Taxation Circle-3(1)(1), New Delhi. The case, identified as ITA No. 6503/DEL/2019, pertains to the assessment year 2011-12, with the tribunal’s decision pronounced on February 9, 2023.

Background of the Case

Travelport LP, a limited partnership based in Georgia, USA, was subjected to an assessment order claiming a substantial tax liability in India despite declaring nil income for the relevant assessment year. The order was based on a disputed permanent establishment status and transactions reported under Form 26AS, which the appellant contested were not attributable to them but to a subsidiary.

The appeal was lodged against the backdrop of an order dated June 21, 2019, framed under Sections 144C(13), 147, and 143(3) of the Income-tax Act, 1961 (‘The Act’). The primary grievances highlighted by Travelport LP included the erroneous classification as an ‘eligible assessee’ under Section 144C(15)(b) of the Act, inappropriate initiation of proceedings under section 148 without any substantial new material, and incorrect attribution of a permanent establishment in India.

Arguments and Tribunal’s Analysis

The appellant’s legal representatives argued that the draft assessment order dated December 3, 2018, and the subsequent final order were void ab initio, asserting that Travelport was not an ‘eligible assessee’ as defined under the applicable tax provisions. They contended that the assessment was based on flawed legal grounds and procedural lapses, including a failure to recognize that the company had discontinued its operations related to the alleged permanent establishment in India post the assessment year 2010-11.

The tribunal critically examined the procedural aspects and the substantive issues raised by the assessee. It was found that the assessing officer had incorrectly applied the provisions of Section 144C, intended for ‘eligible assessees,’ which did not pertain to Travelport LP as it was not a foreign company under the specific definitions of the Act.

Judicial Precedents and Decision

Referencing various judicial precedents, the tribunal noted similar cases where the application of Section 144C was scrutinized and found inapplicable. The decisions highlighted included notable judgments from the Madras High Court and other ITAT benches, which supported the appellant’s position that the assessment order was erroneously issued without proper jurisdiction and should be annulled.

The tribunal acknowledged that the assessing officer had also erred in mechanically attributing the receipts shown in Form 26AS to the appellant without verifying the actual beneficiaries of those transactions, further misinterpreting the tax implications based on outdated assessments.

Conclusion and Impact

The ITAT allowed the appeal of Travelport LP, setting aside the assessment order and ruling it void ab initio. This decision not only underscores the critical examination of jurisdictional aspects in tax assessments but also emphasizes the need for clarity in defining the taxable entity and the applicability of specific tax provisions. The ruling serves as a significant precedent for other entities facing similar jurisdictional and procedural challenges in tax assessments.

The outcome of ITA No. 6503/DEL/2019 reflects the tribunal’s commitment to upholding the principles of justice and proper application of tax laws, ensuring that entities are not wrongfully subjected to tax liabilities based on erroneous interpretations and procedural oversights.

Travelport LP Challenges Void Assessment Order in ITA No. 6503/DEL/2019