Loading judgment…
Facts
The Revenue appealed against the deletion of additions made regarding income received by the assessee from cruise ship operations. The assessee, incorporated in the Isle of Man, entered into a Canvasser Agreement with an Indian company for bookings from Indian passengers. The Revenue contended that the income accrued or arose in India due to business connection and the role of the Indian company.
Held
The Tribunal found that similar issues in the assessee's own cases for earlier assessment years were decided in its favor by the Tribunal and the CIT(A). The current appeals involved recurring issues where no distinguishing features were presented. Therefore, the Tribunal found no infirmity in the CIT(A)'s order and upheld its decision.
Key Issues
Whether income received by the assessee from cruise ship operations is taxable in India, considering the activities of its Indian agent and the absence of a DTAA.
Sections Cited
5(2)(a), 9(1)(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
PER BENCH
The present appeals have been filed by the Revenue challenging the separate impugned orders of even date 24/08/2023, passed u/s 250 of the
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment years 2018-19 to 2020-21.
Since these appeals pertain to the same assessee and involve a similar issue that arises out of a similar factual matrix, therefore, these appeals were heard together and are being decided by way of this consolidated order. With the consent of the parties, the appeal for the assessment year 2018-19 is taken up as a lead case and the decision rendered therein shall apply “mutatis mutandis” to the appeal for the assessment year 2019-20 and 2020-21 filed by the Revenue.
ITA no.3873/Mum./2023 Revenue Appeal – A.Y. 2018-19
In this appeal, the Revenue has raised the following grounds: - “1.“Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in law in holding that the gross amount received by the Star Cruise Management Lid (SCML) as principal from its agent in India is not chargeable to tax u/s 5(2)(a) of the Income Tax Act,1961, especially in view of the fact that there is no DTAA between India and Isle of Man and hence the taxation needs to be ascertained via-a-vis the provisions of the Act.” 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in holding that no income accrues or arises to the assessee in India from the business of the sale of tickets through the selling agents In India when on the facts of the case, as per the Canvasser Agreement, Star Cruises (India) Travel Services Pvt. Ltd. is in receipt of the entire amount on behalf of the assessee and is only paid a retainer of 3% subject to remittance of the income of the assessee from India and the case of the assessee is, therefore, squarely covered by section 5(2)(a) of the IT Act, 1961?” 3. “Whether on the facts and circumstance of the case and in law, the Ld CIT(A) erred in holding that there was no business connection of the assessee in India ignoring the judgement of Hon'ble Supreme Court in the case of Performing Rights Society Ltd [1977] 106 ITR 11 (SC) [10-08-1976] wherein it was clearly held that though the assessee received the income out of the agreement executed outside India, as is the case of the present assessee, the income undoubtedly accrued or arose in India and was received in India and Page | 2
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
therefore the question whether it should be „deemed‟ to accrue or arise in India is irrelevant. 4. “Whether on the facts and circumstance of the case and in law, the Ld CIT(A) erred in holding that there was no business connection of the assessee in India when it was clearly brought out in the assessment order that the assessee‟s Indian group company, Star Travel (India) Services Put Lid (“SCITSPL”), habitually secures orders in India, mainly or wholly for the non- resident assessee and is controlled by, or subject to the same common control, as that non-resident assesses and hence all income accruing or arising, whether directly or indirectly, through or from any such business connection should be deemed to accrue and arise to the assessee in India u/s 9(1)(i) of the Act.” 5. “Whether on the facts and circumstance of the case and in law, the ld CITA) erred in holding that Star Travel (India) Services Put Ltd (“SCITSPL) does not constitute an agency PE of the assessee within the meaning of Explanation 2 to section 9(1)(i) of the Act with regard to the business income received by it, especially in view of the fact that there is no DTAA between India and Isle of Man and hence the taxation needs to be ascertained vis-a-vis the provisions of the Act.” 6. “Whether on the facts and circumstance of the case and in law, the Ld CIT(A) erred in holding that if the consideration in the international transaction between the assessee and Star Travel (India) Travel Services Put Lid ("SCITSPL‟) is at an arm‟s length price, nothing further cut of the revenue is attributable to the assessee‟s Agency PE in India for offering to taxation in India, without considering the fact that no such analysis of functions and risks undertaken by the PE on behalf of the assessee has been undertaken in the year under consideration and therefore further profits needed to be attributed to the assessee‟s PE to correctly tax the total income of the assessee arising in India.” 7. “Whether on the facts and circumstance of the case and in law, the ld CIT(A) erred in holding that of the consideration in the international transaction between the assessee and Star Travel India) Travel Services Put Lid ("SCITSPL‟) is at an arm‟s length price, nothing further out of the revenue is attributable to the assessee‟s Agency PE in India for offering to taxation in India, without considering the fact that as per the Canvasser Agreement, its agent is performing not only the work of arranging sale of tickets for cruises, but also a whole range of functions consisting of advertising & promoting the cruise packages/shore excursions, collecting the monies received on its behalf, remitting the same to the assessee, preparing the books of account etc for which it is being paid a fee of 3% which is not even benchmarked vis-a-vis the functions performed and risks assumed by the assessee.”
The only issue raised by the Revenue pertains to the deletion of addition made in respect of income received by the assessee from the operation of cruise ships.
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
The brief facts of the case pertaining to this issue, as emanating from records, are: The assessee is a company incorporated in the Isle of Man. The assessee is engaged in the operation of cruise ships across the world in International water and has entered into an agreement with the Indian Company “Star Cruise India Travel Services Ltd for earning bookings from Indian passengers. The assessee entered into the Canvasser Agreement dated 01.03.2005, wherein the assessee remunerated the Indian Company at 3%. The said agreement was amended on 17.04.2017 to remunerate the Indian company at cost plus 8%. For the assessment year 2018-19, the assessee filed its return of income on 24.09.2018 declaring a total income of Rs.1,76,56,410/-. The return filed by the assessee was selected for scrutiny and statutory notices u/s 143(2) as well as section 142(1) of the Act were issued and served upon the assessee. During the assessment proceeding, the assessee was asked to show cause as to why the amount received from the Indian Company under the Canvasser Agreement be not taxable in India. In response thereto, the assessee submitted that as per the Canvasser Agreement, the Indian Company was canvassing the cruise ships plying in International Waters on principal to principal basis. It was further submitted that the tickets and final confirmation were given by the assessee to the customer/passenger directly. The assessee also submitted that none of its ships operate or touch any port in India, as Indian customers have to take the cruise ships from ports outside India. It was further submitted that in respect of its services, the Indian Company was paid the commission as agreed under the Canvasser Agreement, thus, no income was received or accrued or deemed to be received or deemed to be accrued in India by the assessee. The Page | 4
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
assessee also submitted that in preceding years this issue has been decided in its favour by the Tribunal and the First Appellate Authority.
The Assessing Officer (“AO”) vide order dated 02.03.2021 passed u/s 143(3) read with section 144C(3) of the Act did not agree with the submissions of the assessee and held that the Indian company makes the payments to the assessee in India and accordingly the income of the assessee arises in India. The AO further held that the assessee possessed a direct and strong business connection in India in respect of its cruise activity, which might have taken place outside the Indian Waters. Accordingly, the AO held that the income of the assessee is taxable in India and made an addition of 7.5% of the gross receipts in the hands of the assessee.
The learned CIT(A), vide impugned order, following the orders passed by the Tribunal in assessee’s own case for the preceding years deleted the addition made by the AO on account of income received from the operation of cruise ships. Being aggrieved, the Revenue is in appeal before us.
During the hearing, the learned Authorised Representative submitted that the issue arising in the present appeal has been decided in favour of the assessee by the Co-ordinate bench of the Tribunal in preceding years.
On the other hand, the learned Departmental Representative vehemently relied upon the assessment order and submitted that the Revenue has filed appeal against the decisions of the Tribunal before the Hon’ble Jurisdictional High Court.
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
We have considered the submissions of both sides and perused the material available on records. We find that the Co-ordinate Bench of the Tribunal in assessee’s own case in DCIT Vs. M/s. Star Cruise Management, in ITA. No 6415/Mum/2016, for the assessment year 2012-13, vide order dated 08.01.2019 decided a similar issue in favour of the assessee by following the decision of the Co-ordinate Bench in assessee’s own case in preceding years. The relevant finding of the Co-ordinate Bench, in the aforesaid decision, is reproduced as under: -
“6. We have gone through the material on record in the light of the rival submissions. As pointed out by the Ld. counsel for the assessee, the coordinate Bench of the Tribunal has decided the identical issues in favour of the assessee in the assessee‟s own case ITA No. 2632 and 2633/Mum/2016 for the A.Y. 2010- 11 and 2011-12 respectively. The operative part of the order of the coordinate Bench reads as under: “9. We have heard both the counsel and perused the records. We find that this tribunal in assessee‟s own case has decided the issue in favour of the assessee. The references to these decisions are as under:- 1 ITA No. 4973/M/2005 ITA No. 497/M/2006 2 ITA No. 5713/M/2007 3 ITA No. 2521/M/2008 4 ITA No. 6112/M/2008 5 ITA No. 3805/M/2010 6 ITA No. 7759/M/2010 7 ITA No. 7486/M/2011 8 ITA No. 1809, 1810 & 1811/M/2013 MA No. 2& 3/M/2016
The ld. Counsel of the assessee submitted that in the hands of the payer i.e. Star Cruise (India) Travel Services Pvt. Ltd. It has been held that the said company was not responsible for tax at source as the income of the assessee M/s SCML cannot be held as taxable in India to the extent of amount of sale of the cruise tickets in India. In this regard, the ld. counsel of the assessee referred to the order of the tribunal in the case of M/s Star Cruise (India) Travel Services P. Ltd. in ITA No. 3802/Mum/2010 for assessment year 2010-11 and ITA No. 7487/Mum/2011 for assessment year 2011-12, in which the tribunal has similarly held that no income has accrued or arisen in India in respect of booking or sale of tickets for tour packages of the cruise in India. 11. Thus from the above it is amply evident that this tribunal has consistently decided the issue in favour of the assessee. No case has been made out that there are any distinguishing features in the present year or that the earlier decision of Page | 6
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
the tribunal has been reversed by the Hon‟ble jurisdictional High Court. Hence, in accordance with the aforesaid discussion and precedent, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly, we uphold the same.” 7. We further notice that the coordinate Bench has decided the identical issues in favour of the assessee by following the orders passed by the Tribunals in asseessee‟s own cases for earlier assessment years. Since, the issues involved in the present case are covered in the favour of the assessee by the order of the coordinate Bench of the Tribunal and since the order passed by the Ld. CIT(A) is in accordance with the order of the Tribunal, we do not find any infirmity in the order interfere with. Hence, respectfully following the decision of the coordinate Bench, we uphold the findings of the Ld. CIT(A) and dismiss the appeal of the revenue.”
The learned Departmental Representative could not show any reason to deviate from the aforesaid order and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the Co– ordinate Bench of the Tribunal in the preceding assessment years. It is evident from the record that while deciding the appeal in favour of the assessee, the learned CIT(A) has followed the decision of the Co-ordinate Bench rendered in the preceding year. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A). As a result, the grounds raised by the Revenue in its appeal for assessment year 2018-19 are dismissed.
In the result, the appeal by the Revenue for the assessment year 2018- 19 is dismissed.
ITA nos. 3871 & 3886/Mum./2023 Revenue Appeal – A.Ys. 2019-20 & 2020-21
The only issue raised by the Revenue, in these appeals, pertains to the deletion of addition made in respect of income received by the assessee from the operation of cruise ships. Since a similar issue has already been decided in Page | 7
M/s. Star Cruise Management Ltd. ITA no.3873, 3871 & 3886/Mum/2023
Revenue’s appeal for the assessment year 2018-19, therefore, our findings/conclusions rendered therein shall apply mutatis mutandis. Accordingly, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue, and the same is upheld. As a result, the grounds raised by the Revenue for the assessment years 2019-20 and 2020-21 are dismissed.
In the result, the appeal by the Revenue for the assessment years 2019- 20 and 2020-21 are dismissed.
To sum up, all appeals by the Revenue are dismissed. Order pronounced in the open Court on 30/05/2024
Sd/- Sd/- PRASHANT MAHARISHI SANDEEP SINGH KARHAIL ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30/05/2024 Vijay Pal Singh, (Sr. PS)
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order
Assistant Registrar ITAT, Mumbai