The Assessee a US-based company, entered into Participating Carrier Distribution and services agreements with various airlines in India to facilitate ticket booking and related services through its computer reservation system (CRS).  The company also had subscriber agreements with global travel agencies, allowing them access to the CRS.  The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) held that the Assessee had a fixed place PE and agency PE in India based on earlier assessment years’ findings, despite changes in the business model post-2005. The Assessee contended that after 2005, there was a significant change in its business model.  The company no longer provided computers, printers, or communication lines to travel agents in India. Instead, global travel agencies independently sourced these requirements.  The Assessee argued that it did not have any office or employees in India and was not responsible for providing any equipment to Indian travel agents, thus negating the existence of a fixed place PE or agency PE in India. The Revenue contended that the Assessee had a fixed place PE and agency PE in India based on the company’s operations and income generated from India.  The AO and DRP relied on earlier assessment years’ findings, arguing that the CRS gateway used by travel agents constituted a fixed place of business in India.  They also maintained that the business model changes post-2005 did not materially alter the company’s operations in India.

The Hon’ble Tribunal ruled in favor of the Assessee holding that the company did not have a fixed place PE or agency PE in India post-2005 due to changes in its business model.  The Hon’ble Tribunal noted that the Assessee no longer provided equipment or communication links to Indian travel agents and had no office or employees in India.  That the burden of proving the existence of a PE lies with the Revenue, which failed to establish this in light of the changed business model.  (AY. 2012-13 to 2016-17)