Commission earned from Indian accommodation providers not Taxable in India in absense of PE: ITAT

Booking.com B.V., a Netherlands tax resident, did not file a return in India for AY 2018-19. Based on AIR and Form 26AS data, reassessment proceedings were initiated, pursuant to which the assessee filed a NIL return. The Assessing Officer held that the assessee earned commission income of Rs. 396.09 crore from Indian accommodation providers and taxed it in India on the ground that it had a fixed place and dependent agent permanent establishment (PE) in India. The DRP upheld the draft order, leading to the final assessment dated 15.01.2025.

The assessee contended that it operated an online booking platform hosted outside India, functioned only as an intermediary, had no physical presence or agents in India, and was protected under the India-Netherlands DTAA.

Issue Raised: Whether commission income earned by Booking.com from Indian accommodation providers was taxable in India in the absence of a PE under the India-Netherlands DTAA.

ITAT’s Ruling: The ITAT held that the Revenue failed to establish the existence of either a fixed place PE or a dependent agent PE in India. It noted that the platform was hosted on servers outside India, bookings were concluded directly between customers and accommodation providers, and the assessee had no office, personnel, agents, or equipment in India.

Applying the Supreme Court ruling in Formula One World Championship Ltd., the Tribunal held that the conditions for a fixed place PE were not satisfied and that Indian accommodation providers could not be treated as agents, the relationship being on a principal-to-principal basis. Therefore, the assessment was set aside, and the commission income was held not taxable in India.

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