Booking.com’s Commission Income Not Taxable in India in Absence of PE : ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) 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 bench of Vimal Kumar (Judicial Member) and M Balaganesh (Accountant Member) allowed the appeal filed by Booking.com B.V. for the Assessment Year 2018–19, setting aside an assessment order that had sought to tax over Rs. 3,960 crore as business income allegedly attributable to a PE in India. The case arose after the Income Tax Department initiated reassessment proceedings against Booking.com B.V. on the ground that it had not filed a return of income in India despite receiving substantial payments from Indian accommodation providers. Based on information available through 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, reassessment proceedings were initiated under Sections 147 and 148 of the Income Tax Act. Booking.com 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, however, 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 (DRP) upheld the draft order, leading to the final assessment order dated 15 January 2025. Booking.com contended that it operates a digital platform hosted entirely outside India and merely acts as an intermediary between travellers and accommodation providers. It argued that bookings are concluded directly between the customer and the hotel, while Booking.com earns commission only after the guest completes the stay. The company emphasized that it has no office, employees, servers, agents, or equipment in India and that Indian hotels operate on a principal-to-principal basis. It relied on the Supreme Court’s rulings in Formula One World Championship Ltd. and eFunds IT Solutions, asserting that the burden to establish the existence of a PE lies squarely on the Revenue. The company argued that the concept of “Significant Economic Presence” was inoperative for the relevant year, and in any event, could not override treaty protection under the DTAA. The Department argued that Booking.com had a business connection in India and that Indian accommodation providers effectively functioned as dependent agents. It also attempted to draw parallels with earlier rulings involving CRS and airline booking platforms, contending that the income could alternatively be characterized as royalty or fees for technical services. The Tribunal held that the Assessing Officer had failed to bring any cogent evidence on record to establish the existence of a fixed place PE or a dependent agent PE in India. The Bench observed that Booking.com’s core business activities are carried out through a digital platform hosted on servers outside India and that Indian accommodation providers merely list their rooms and set prices independently. The Tribunal noted that no part of the platform, infrastructure, or personnel was located in India, nor was any place in India at the disposal of the foreign company. Relying on settled principles laid down by the Supreme Court, 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. None of these conditions were satisfied in the present case. The Tribunal also rejected the Revenue’s attempt to treat third-party Indian hotels as PEs of Booking.com, holding that mere commercial relationships on a principal-to-principal basis cannot give rise to a PE under Article 5 of the India–Netherlands DTAA. Concluding that the department had failed to discharge its burden of proving the existence of a PE, the ITAT set aside the final assessment order and allowed the appeal. It held that the commission income earned by Booking.com from Indian accommodations was not taxable in India for AY 2018–19. Case Details Case Title: Booking.com Versus ACIT Case No.: ITA No.2033/Del/2025 Date: 06.02.2026 Counsel For Appellant: Ajay Vohra, Sr. Adv. Counsel For Respondent: M.S. Nethrapal, CIT, DR Click Here To Read Order

Booking.com’s Commission Income Not Taxable in India in Absence of PE : ITAT

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