DDIT (IT) 2 (1), MUMBAI V. M/S STAR CRUISE (INDIA) TRAVEL SER.PVT.LTD., MUMBAI

ITA 3802/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55060 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: DR K SHIVRAMMR SATISH KANODIA
• Keywords: Advance ruling
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 3802/MUM/2010 ASSESSMENT YEAR: 2010-11 ASSTT. DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATI ON) APPELLANT R.NO. 120, 1 ST FLOOR, SCINDIA HOUSE, BALLARD ESTATE, N.M. ROAD, MUMBAI 400 038 VS. STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD., RESPONDENT C/O SEKHRI KANODIA & ASSOCIATES G-15, EVEREST, TARDEO ROAD, MUMBAI 400 034. (PAN AAFCS4154H APPELLANT BY : MR. G.P. TRIVEDI RESPONDENT BY : DR. K. SHIVRAM/MR. SATISH KANODIA ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A)-11, MUMBAI, PASSED ON 24 TH FEBRUARY, 2010 FOR THE ASSESSMENT YEAR 2010-11. 2. THE GROUND RAISED BY THE REVENUE IS AGAINST THE ACTION OF THE CIT(A) IN HOLDING THAT TAX IS NOT DEDUCTIBLE AT SOU RCE U/S 195 OF THE ACT ON PAYMENT TO STAR CRUISE MANAGEMENT LTD. (SCML ) OUT OF SALE PROCEEDS OF CRUISE TICKETS BOOKED BY THE ASSESSEE A ND, THEREFORE, CONSEQUENTIAL LEVY OF TAX AND INTEREST U/S 201(1) A ND 201(1A) BY HE AO. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS ENGAGED IN THE CANVASSING BUSINESS OF TRAVEL AND TO UR RELATED ITA NO. 3802/MUM/2010 M/S STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD.. 2 SERVICES. IT HAD ENTERED INTO A CANVASSOR AGENT AGR EEMENT DATED 1 ST MARCH 2005 WITH M/S STAR CRUISE MANAGEMENT COMPANY, ISLE OF MAN, A FOREIGN COMPANY, FOR MAINLY CANVASSING THEIR CRUI SE IN INDIA FOR AN AGREED REMUNERATION. THE ASSESSEE APPLIED TO THE DD IT (INTERNATIONAL TAXATION), 2 (1), MUMBAI, SEEKING A NO OBJECTION FOR REMITTING THE FUNDS TO THE FOREIGN COMPANY WITHOUT DEDUCTION OF TAX. THOUGH THE ASSESSEE CLAIMED THAT THE SALE PROCEEDS OF THE CRUI SE TICKETS BEING REMITTED TO THE FOREIGN COMPANY IS NOT LIABLE TO TA X IN INDIA, THE AO HELD THAT THE INCOME OF THE FOREIGN COMPANY ARISING OUT OF THE SALE PROCEEDS OF THOSE TICKETS TO BE TAXABLE IN INDIA ON THE GROUND THAT THERE EXISTS A BUSINESS CONNECTION IN INDIA AS PER SECTION 9(1)(I). ACCORDINGLY, THE AO DIRECTED THE ASSESSEE TO DEDUCT TAX AT SOURCE AT 2.05% AS DEEMED PROFIT OF AN ADHOC AMOUNT OF 5% AT THE PREVAILING RATE OF CORPORATE TAX AS APPLICABLE TO FOREIGN COMP ANIES 41% IS EQUAL TO 2.05%. AGGRIEVED, THE ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT O N IDENTICAL ISSUES THE CIT(A) PASSED THE ORDERS IN FAVOUR OF TH E ASSESSEE IN ASSESSEES OWN CASES FOR ASSESSMENT YEARS 2000-01 T O 2005-06 AND HELD THAT NO INCOME ACCRUES TO THE FOREIGN COMPANY IN INDIA AND THAT NO BUSINESS CONNECTION EXISTS BETWEEN THE INDIAN CO MPANY AND THE FOREIGN COMPANY U/S 9(I) F THE ACT READ WITH CIRCUL AR NO. 23 OF CBDT. IT IS FURTHER SUBMITTED THAT THE ORDERS OF THE CIT( A) WERE CHALLENGED BY THE DEPARTMENT BEFORE THE TRIBUNAL AND THE TRIBU NAL VIDE ITS CONSOLIDATED ORDER IN ITA NOS. 3818 TO 3823/MUM/200 4 AND ITA NO. 6499/MUM/06 DATED 30 TH NOVEMBER, 2009 FOR AY 2000-01 TO 2005-06 HELD THAT THERE IS NO BUSINESS CONNECTION BETWEEN T HE INDIAN COMPANY AND THE FOREIGN COMPANY VIDE THE ERSTWHILE GSA AGREEMENT DATED 1 ST APRIL, 2001, OPERATIVE TILL AY 2005-06, ON ACCOUN T OF WHICH NO TAX NEEDS TO BE DEDUCTED AT THE TIME OF REMITTAN CE TO THE FOREIGN COMPANY OF THE CRUISE TICKET MONIES. AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD AS UND ER:- ITA NO. 3802/MUM/2010 M/S STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD.. 3 2.9 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT COMPANY AS WELL AS THE OBSERVATIONS MADE BY THE AO AND THE FACTS OF THE CASE. EVEN THOUGH A NEW AGREEM ENT CALLED CANVASSER AGREEMENT HAS BEEN EXECUTED BETWEEN THE APPELLANT AND M/S SCML, THE ACTIVITIES UNDERTAKEN BY THE APPE LLANT COMPANY UNDER THE CANVASSER AGENCY AGREEMENT ARE NE ARLY SIMILAR TO THE ACTIVITIES UNDERTAKEN BY THE APPELLA NT IN THE ERSTWHILE GSA AGREEMENT AND THE DUTIES ASSIGNED TO THE APPELLANT ARE LESSER IN THE CANVASSER AGREEMENT T HAN WHAT THE APPELLANT WAS ASSIGNED IN THE GSA AGREEMENT. HOWEV ER, THE MARKETING OF CRUISES AND TOUR PACKAGES IS THE CENTR AL THEME OF BOTH THE AGREEMENTS. IN THIS REGARD A COMPREHENSIVE COMPARISON CHART (WHICH IS A PART OF APPELLATE RECORD) BETWEEN GENERAL SALES AGENT AGREEMENT DATED 1 ST APRIL, 2001 AND THE CANVASSER AGENT AGREEMENT DATED 1 ST MARCH, 2005 HAS BEEN MADE, TO DRAW PARALLEL BETWEEN BOTH THE AGREEMENTS FOR THE EXPRES S PURPOSE OF EXAMINING WHETHER THE NEW CANVASSER AGREEMENT HAD ANY CLAUSES WHEREBY A BUSINESS CONNECTION COULD BE IM PUTED. HOWEVER, NO SUCH CLAUSE COULD BE IDENTIFIED. 2.10 I HAVE ALSO PERUSED THE ORDER OF MY PREDECESSO R CIT(A) FOR AY 2000-01 TO 2005-06. MY PREDECESSORS HAVE, ON SIM ILAR FACTS, CONSISTENTLY HELD THAT THERE IS NO BUSINESS CONNECT ION OF THE APPELLANT WITH M/S SCML AND THAT THE APPELLANT COMP ANY IS BEING REMUNERATED AT ARMS LENGTH FOR THE SERVICES RENDERED BY IT. THE FACTS OF THE PRESENT CASES ARE SIMILAR TO THE F ACTS OF THE EARLIER CASES WHEREIN THE APPELLANT HAS BEEN ALLOWE D RELIEF BY BOTH THE CIT(A) AND THE MUMBAI ITAT. FOLLOWING THE DECISIONS OF MY PREDECESSORS IN CIT(A) ORDER DATED 20 TH JAN 2004 AND FOR THE DETAILED REASONS RECORDED THEREIN WHICH ARE NOT BEI NG REPRODUCED HERE AND FOLLOWING THE DECISION OF THE HONBLE TRIB UNAL IN THE CONSOLIDATED ORDER DATED 30 TH NOVEMBER, 2009 IN THE APPELLANTS OWN CASE I HOLD THAT IN THE PRESENT CASES SERVICES RENDERED BY THE ASESSSEE ARE GENERAL IN NATURE AS ITS ROUTINE B USINESS ACTIVITIES AND THAT CANNOT BE INTERPRETED TO GIVE C OLOUR OF BUSINESS CONNECTION AS CONTEMPLATED IN SEC. 9(1)( I) OF THE ACT. 2.11 IN VIEW OF THE FOREGOING FACTS, THE ACTION OF THE AO IN DIRECTING THE APPELLANT TO DEDUCT TAX AT SOURCE ON REMITTANCE TO STAR CRUISES MANAGEMENT LTD. OUT OF SALES PROCEEDS OF CRUISE TICKETS BOOKED BY THE VARIOUS TRAVEL AGENTS AND CON SEQUENTIAL LEVY OF TAX U/S 195 WAS NOT JUSTIFIED. THE APPELLAN T COMPANY SUCCEEDS IN APPEAL. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 3802/MUM/2010 M/S STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD.. 4 6. BEFORE US, THE LEARNED DR SUBMITTED THAT THE ASS ESSEE HAS BEEN APPOINTED AS AN AGENT TO PROVIDE SALE AND MARKETING SERVICES RELATING TO CRUISES AND HOLIDAY PACKAGES FOR STAR CRUISES VE SSELS AND APPOINTMENT AS GSA IN INDIA IS MAINLY FOR THE PURPO SE OF COLLECTING MONEY IN INDIA, THEREFORE, THE ENTIRE SALE PROCEEDS RECEIVED BY THE AGENTS IN THIS CASE WERE RECEIVED ON BEHALF OF THE SCML AND BELONGED TO IT SUBJECT TO THE RIGHTS OF THE AGENTS. IT IS SU BMITTED THAT THE BOARDS CIRCULAR NO. 23 DATED 23/07/1969 IS NOT APP LICABLE IN THE ASSESSEES CASE AS IT IS WITHDRAWN ON 23/07/2009. I T IS FURTHER SUBMITTED THAT THE AO WAS RIGHT IN HOLDING THAT THE GROSS RECEIPTS RECEIVED BY THE SCML AS PRINCIPAL FROM THE AGENT IS CHARGEABLE TO TAX U/S 3(2)(A) OF THE ACT. 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SESSSEE HAS CANVASSED THAT THE ISSUE UNDER CONSIDERATION IS SQU ARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006-07 IN ITA NO. 3941/MUM/10 VIDE ORDER DATED 22 ND JULY, 2011. A COPY OF THE SAID ORDER HAS BEEN FILED ON RECORD. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, PERUSIN G THE RECORD AND GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE ITAT IN ASSESSEES OWN CASE FOR AY 2006-07, WHEREIN THE ITAT HELD AS UNDER:-. 20. HOWEVER, THE OBSERVATIONS SO MADE BY PROF LANG, AND THE RULING RENDERED BY AUTHORITY FOR ADVANCE RULING IN THE CASE OF RAJIV MALHOTRA (284 ITR 564), DID NOT HAVE THE BENE FIT OF EXAMINING THE IMPACT OF EXPLANATION 1 (A) TO SECTIO N 9(1)(I) OF THE ACT. AS A MATTER OF FACT, IN RAJIV MALHOTRAS C ASE (SUPRA), THE AUTHORITY FOR ADVANCE RULING DOES OBSERVE THAT THE FACTS THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PU RSUING AND SOLICITING THE PARTICIPANTS AND THAT THE COMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING THE SITUS OF HIS INCOME BUT THEN THIS OBSERVATION OVERLOOKS THE FACT THAT IN TERMS OF EXPLANATION 1(A ) TO SECTION 9(1)(I), IN THE CASE OF A BUSINESS OF WHICH ALL TH E OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINES S DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE ITA NO. 3802/MUM/2010 M/S STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD.. 5 OPERATIONS CARRIED OUT IN INDIA BUT THEN SINCE NO PART OF THE OPERATIONS WAS CARRIED OUT IN INDIA, NO PART OF SS ESSEES INCOME COULD HAVE BEEN THUS TAXABLE IN INDIA. IT WOULD THU S SEEM TO US THAT WHEN NO BUSINESS OPERATIONS ARE CARRIED OUT IN INDIA, EVEN IF A NON RESIDENT HAS A BUSINESS CONNECTION IN INDI A, NO PART OF INCOME OF SUCH BUSINESS CAN BE DEEMED TO HAVE ACCRU ED OR ARISEN IN INDIA. THE VIEWS EXPRESSED BY THE LEARNED AUTHORITY FOR ADVANCE RULING, WHICH DO NOT FETTER OUR INDEPEN DENT OPINION ANYWAY IN VIEW OF ITS LIMITED BINDING FORCE UNDER S ECTION 245 S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME. REVENUE THUS DERIVES NO SUPPORT FROM THES E OBSERVATIONS EITHER. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE RELIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS) AND DECLINE TO INTER FERE IN THE MATTER. THIS CONCLUSION IS ALSO IN HARMONY WITH THE CONCLUSIONS ARRIVED AT BY A COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06, REPORTED IN 13 4 TTJ AT PAGE 204 AS DDIT VS STAR CRUISE INDIA TRAVEL SERVIC ES PVT LTD AND VICE VERSA. 9. SINCE THE FACTS OF THE CASE UNDER CONSIDERATION IS IDENTICAL TO THAT OF AY 2006-07 IN ASSESSEES OWN CASE, WE RESPE CTFULLY FOLLOW THE DECISION OF THE ITAT IN THAT YEAR AND IN THE LIGHT OF THAT WE UPHOLD THE ORDER OF THE CIT(A) ON THIS COUNT AND DISMISS THE A PPEAL FILED BY THE REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2011. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 30 TH AUGUST, 2011 KV ITA NO. 3802/MUM/2010 M/S STAR CRUISE (INDIA) TRAVEL SERVICES PVT. LTD.. 6 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.