No Permanent Establishment In India, Booking. com’s ₹3,960 Cr Commission Not Taxable: ITAT
Booking. com Versus ACIT
Case No.: ITA No.2033/Del/2025
Facts:
1. The company had not filed a return of income in India despite receiving substantial payments from Indian accommodation providers.
2. Based on information from AIR data and Form 26AS, the department noted that the company had received various payments, including commission and professional fees, during the relevant financial year.
3. Subsequently, proceedings were initiated under Sections 147 and 148 of the Income Tax Act. The assessee later filed a return declaring nil income, asserting that its commission income was not chargeable to tax in India under the India–Netherlands Double Taxation Avoidance Agreement (DTAA).
4. The AO passed a draft assessment order holding that Booking. com had a fixed place PE and a dependent agent PE in India through Indian hotels and accommodation providers. The entire commission income was attributed to such alleged PE.
5. The assessee contended that it operates a digital platform hosted entirely outside India and acts only as an intermediary between travellers and accommodation providers. Bookings are concluded directly between the customer and the hotel, and the company earns commission only after the guest completes the stay. The company has no office, employees, servers, agents, or equipment in India, and that Indian hotels operate on a principal-to-principal basis.
6. The assessee relied on SC decisions, including Formula One World Championship Ltd. v. CIT and CIT v. eFunds IT Solutions, to submit that the burden to establish the existence of a PE lies on the Revenue. It was also contended that the concept of Significant Economic Presence was inoperative for the relevant assessment year and, in any case, could not override treaty protection under the DTAA.
7. The department argued that the assessee had a business connection in India and that Indian accommodation providers effectively functioned as dependent agents.
ITAT Delhi held as below:
1. The AO had failed to bring any cogent evidence to establish the existence of a fixed place PE or a dependent agent PE in India. The assessee’s core business activities were carried out through a digital platform hosted on servers located outside India, and that Indian accommodation providers merely listed their rooms and set prices independently.
2. The transactions between the assessee and Indian hotels were on a principal-to-principal basis and did not create any agency relationship.
3. For a fixed place PE to exist, there must be a clearly identified place in India, such place must be at the disposal of the foreign enterprise, and core business activities must be carried out through it. None of these conditions were satisfied in the present case.
4. Revenue had failed to discharge its burden of proving the existence of a PE. Appeal of the assessee is allowed.
The copy of the order is as under:
