Pranav B Prem

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, comprising Vimal Kumar (Judicial Member) and M. Balaganesh (Accountant Member), has held that commission income earned by Booking.com B.V., a Netherlands-based online accommodation booking platform, is not taxable in India in the absence of a Permanent Establishment (PE) in the country. The Tribunal allowed the appeal and set aside the assessment order which had sought to tax over ₹3,960 crore as business income allegedly attributable to a PE in India.

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The case arose after the Income Tax Department initiated reassessment proceedings on the ground that the company had not filed a return of income in India despite receiving substantial payments from Indian accommodation providers. 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.

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).

The Assessing Officer 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 of ₹3,96,09,81,782 was attributed to such alleged PE and brought to tax. The Dispute Resolution Panel upheld this view, leading to the final assessment order dated 15 January 2025.

Before the Tribunal, 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. It was argued that the company has no office, employees, servers, agents, or equipment in India, and that Indian hotels operate on a principal-to-principal basis.

The assessee relied on Supreme Court 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.

The department argued that the assessee had a business connection in India and that Indian accommodation providers effectively functioned as dependent agents. It also attempted to characterise the income as royalty or fees for technical services by drawing parallels with decisions involving other booking platforms.

The Tribunal, after examining the material on record, held that the Assessing Officer had failed to bring any cogent evidence to establish the existence of a fixed place PE or a dependent agent PE in India. It observed that 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.

The Bench noted that the assessee had no place of business, personnel, agents, or equipment in India, and no premises in India were at its disposal. It further observed that transactions between the assessee and Indian hotels were on a principal-to-principal basis and did not create any agency relationship.

Relying on settled legal principles, the Tribunal reiterated that 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. It held that none of these conditions were satisfied in the present case.

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Accordingly, the Tribunal held that the Revenue had failed to discharge its burden of proving the existence of a PE. It set aside the final assessment order and allowed the appeal, holding that the commission income earned by Booking.com from Indian accommodations was not taxable in India for Assessment Year 2018–19.

Appearance

For Appellant: Ajay Vohra, Sr. Adv.

For Respondent: M.S. Nethrapal, CIT, DR

Cause Title: Booking.com Versus ACIT

Case No.: ITA No.2033/Del/2025

Coram: Vimal Kumar (Judicial Member) and M. Balaganesh (Accountant Member)