(i) The Amadeus system, by which subscribers in India are enabled to perform the functions of reservation and ticketing, represents a “business connection” because it extends to the Indian territory in the form of connectivity in India and generates income in India when the booking is completed on the subscribers’ computer;
(ii) In determining the extent of profits attributable to such business connection, one has to look into the factors like functions performed, assets used and risk undertaken. On facts, as the major part of the work was processed at the host computer in Germany, only 15% of the revenue accruing to the assessee in respect of bookings made in India can be said to have accrued or arisen in India;
(iii) In view of Circular No.23 of 23rd July 1969, where the income accruing in India is consumed by the payment made to the agents in India, no income is left to be taxed in India under the Act;
(iv) As the assessee has provided computers and connectivity to its subscribers, it has a ‘fixed place’ PE in India. As the Indian agent has the authority to entry into agreements with the subscribers and installs and configures the computers, and provides connectivity and is functionally and financially dependent on the assessee, there is also a ‘dependent agent’ PE in India;
(v) Only 15% of the revenue generated from the bookings made within India can be said to be attributable to the PE. Since the payment to the agent in India is more than what is the income attributable to the PE in India, it extinguishes the assessment and no further income is taxable in India under the DTAA.