Asia-Pacific Transfer Pricing Handbook

Chapter Thirteen

Taxation of Travel Services in India

Sabre Inc. (Sabre) successfully defeated the Indian tax authority’s claim that a company that pays airline commissions for booking fees in India is a permanent establishment. Sabre rejected the Indian tax authority’s claim that the company is subject to tax on its profits in India. Sabre Inc.’s success follows Galileo International Inc.’s similar defeat of the Indian tax authorities. The Sabre and Galileo cases, taken together, provide some useful tax guideposts for the computer reservation services industry and for the travel services industry as a whole.

Both Sabre and Galileo are well-known large players in the competitive world of the global distribution services industry, also termed the computer reservation services industry. Their competitors include other major players, including Amadeus and Worldspan. Both Sabre and Galileo operated in India through InterGlobe, located in Guragon, India. The government of India taxed InterGlobe on their Sabre and Galileo operations, a fact having considerable consequences in both cases.

Both Sabre and Galileo are U.S. entities. Both entities are potentially subject to the 1989 income tax convention between India and the United States. Additionally, both Sabre and Galileo are potentially subject to the 2002 Competent Authority Agreement between India and the United States.

As tax practitioners, we suspect that, after the Sabre and Galileo cases, other countries are likely to provide ...