STAR CRUISES (INDIA) TRAVEL SERVICES P.LTD, MUMBAI V. DCIT 5(3), MUMBAI

ITA 7590/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3995 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 17-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-12-2012
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Keywords: Transfer pricing

Judgement Text

, , K, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.7590/MUM/2012 ASSESSMENT YEAR: 2008-09 STAR CRUISES (INDIA) TRAVEL SERVICES P. LTD., C/O KANODIA CHAUHAN CO. G 15 EVEREST, TARDEO ROAD, MUMBAI-400034 / VS. DCIT 5(3), ROOM NO.573, AAYAKAR BHAVAN, M.K. RD, MUMBAI-400020 (ASSESSEE ) (REVENUE) P.A. NO. AAFCS4154H / ASSESSEE BY SHRI NISHIT GANDHI (AR) / REVENUE BY SHRI SAMBIT MISHRA (DR) / DATE OF HEARING : 31/03/2016 / DATE OF ORDER: 13/04/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1 5, MUMBAI {(IN SHORT CIT(A)}, DATED 16.10.2012 FOR THE ASSESSMENT YEAR 2008-09, PASSED AGAINST THE ASSESSM ENT ORDER PASSED BY THE ASSESSING OFFICER (IN SHORT AO ) U/S 144C(3) OF THE ACT, ON THE FOLLOWING GROUNDS: STAR CRUISES TRAVEL SERVICES LTD. 2 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE COMPUTATION OF TH E ARM'S LENGTH CANVASSING FEES OF 3% ON GROSS CRUISE FARE RECEIVED FROM THE TRAVEL AGENTS AND NOT ON NET CRUI SE FARE ON DEPARTURE BASIS; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ACCEPTING THE AUDITED FINANCIALS OF THE APPELLANT COMPANY PREPARED ON THE PROPER APPLICATION OF THE PRESCRIBED ACCOUNTING STANDARDS WHICH HAS BEEN ACCEPTED FOR ALL THE PREVI OUS ASSESSMENT YEARS 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI NISHIT GANDHI, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI SAMBIT MISHRA, DEPARTME NTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESS EE IS THAT WHETHER THE INCOME OF THE ASSESSEE SHOULD BE COMPUT ED ON THE BASIS OF 3% OF THE AMOUNT OF NET CRUISE FARE CO LLECTED BY THE ASSESSEE FROM VARIOUS TRAVEL AGENT AND OTHER CU STOMERS IN INDIA OR ON THE BASIS OF 3% OF NET CRUISE FARE OF T HE SHIPS ON DEPARTURE BASIS . 3.1. THE BRIEF FACTS CULLED OUT FROM THE ORDERS OF LOWE R AUTHORITIES ARE THAT THE ASSESSEE RECEIVES RETAINER SHIP FEES AS PER CANVASSER AGREEMENT DATED 01.03.2005 FOR CANVASSING BUSINESS FOR CRUISES PLYING OUTSIDE INDI A. THE RETAINERSHIP FEE IS RECEIVED FROM STAR CRUISE MANAG EMENT LTD. WHICH IS REGISTERED IN ISLE OF MANN WHICH IS A TAX HEAVEN COUNTRY. THE ASSESSEE EXPLAINED TO THE TPO T HAT IT STAR CRUISES TRAVEL SERVICES LTD. 3 RECEIVES 3% ON NET CRUISE FARES AS PER ARTICLE 4.1 OF THE AGREEMENT. IT WAS ALSO EXPLAINED THAT THE RATE WAS GUIDED BY IATA RESOLUTION WHICH FIXES RATE FOR GSA COMMISSION AT 3%. THE COPY OF RESOLUTION WAS PROVIDED BY THE ASSE SSEE TO THE TPO. RATE OF COMMISSION AT 3% WAS THEREFORE, FO UND TO AT ARM'S LENGTH BY THE TPO. 3.2. IT WAS SEEN BY THE TPO THAT THE ASSESSEE HAD COLLECTED CRUISE FARE ON BEHALF OF SCML AMOUNTING T O RS.70,52,07,670/-. THE FARE WAS COLLECTED BEFORE TH E DEPARTURE OF THE CRUISE, AS PER REGULAR PRACTICE. T HE ASSESSEE HAD SHOWN A REMITTANCE OF RS.68,77,88,280/-. THE AS SESSEE WAS ASKED TO EXPLAIN AS TO WHY IT DID NOT RECEIVE 3 % OF CRUISE FARE COLLECTED ON BEHALF OF SCML I.E. RS.70,52,07,670/-. THE ASSESSEE SUBMITTED RECONCILIATION TO THE TPO VIDE L ETTER DATED 10.10.2011. HOWEVER, THE SAME COULD NOT BE RECONCILED BY THE ASSESSEE. THE RECONCILIATION WAS AS UNDER:- AS PER AUDITED A/C. RS. OPENING BALANCE 1/4/07 2,42,88,258 ADD: COLLECTIONS DURING THE YEAR 70, 52,07,670 LESS : COMMISSIONS ON CRUISE COLLECTION 1,73,67,4 09 LESS : REMITTANCES DURING THE YEAR 68,77,88, 280 LESS: AUDIT ADJUSTMENT DURING THE YEAR 1 ,69,89,8 94 CLOSING BALANCE PAYABLE TO SCML (AE) 4,13.3 0,133 3.3. THE TPO OBSERVED THAT THE AUDIT ADJUSTMENT WAS NOT EXPLAINED. NOR ANY EVIDENCE OF COLLECTION OF RS.70,52,07,670/- WAS FILED DESPITE REQUISITION DUR ING STAR CRUISES TRAVEL SERVICES LTD. 4 TRANSFER PRICING PROCEEDINGS. HE FURTHER OBSERVED T HAT THE AGREEMENT VERY CLEARLY PROVIDED THAT SCML SHALL PAY THE ASSESSEE FOR RETAINER FEES EQUIVALENT TO 3% OF CRUI SE FARES (THE RETAILER FEES). NET CRUISE FARES WAS DEFINED B Y THE ASSESSEE VIDE SUBMISSION DATED 10.10.2011 TO THE TP O AS GROSS FARE LESS DISCOUNT LESS AGENTS COMMISSION. TH E AO OBSERVED THAT AS PER AGREEMENT, THE ASSESSEE SHOULD HAVE RECEIVED 3% ON 'NET CRUISE FARE COLLECTED. THIS COM ES TO 3% OF RS.70,52,07,670/- = RS.2,11,56,230/-. THE TPO OBSERVED THAT AS AGAINST THIS THE ASSESSEE HAD RECE IVED AN AMOUNT OF RS. 1,73,67,409/-. THE SHORT PAYMENT RECE IVED WAS EQUAL TO RS.37,88,821/-. THEREFORE, AN ADJUSTMENT O F RS.37,88,821/- WAS MADE TO RETAINERSHIP FEES RECEIV ED BY THE ASSESSEE. THE AO PASSED HIS ORDER IN CONFORMITY WIT H THE ALP SO DETERMINED BY THE TPO. 3.4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AGAINST THIS ADJUSTMENT/ADDITION MADE BY THE TPO/AO. IT WAS SUBMITTED BY THE ASSESSEE IN THE FIRST APPEA L THAT DURING THE PROCEEDINGS BEFORE TRANSFER PRICING OFFICER, THIS FACT WAS CLEARLY STATED THAT INDIAN COMPANY HA D RECEIVED 3% RETAINERSHIP FEES ON THE DEPARTURE BASIS AND HENCE THE COLLECTION FIGURE IS NOT AT ALL RELEVANT FOR COMPUT ING THE QUANTUM OF RETAINERSHIP FEES. THE ASSESSEE ALSO SUB MITTED COPIES OF SUBMISSIONS MADE BEFORE THE TRANSFER PRIC ING OFFICER AS WELL AS ASSESSING OFFICER IN THIS REGARD. IT WAS FURTHER CONTENDED THAT THE CANVASSER AGENCY AGREEMENT, NOWH ERE PROVIDES THAT 3% COMMISSION WOULD BE ON COLLECTION BASIS. STAR CRUISES TRAVEL SERVICES LTD. 5 THE ASSESSEE ALSO ENCLOSED TRANSFER PRICING ORDERS OF PRECEDING YEARS I.E. ASSESSMENT YEARS 2004-05, 2005-06, 2006- 07 AND 2007-08, WHEREIN THE TPO HAD CONSISTENTLY UPHELD TH E METHOD OF ACCOUNTING AND PRACTICE FOLLOWED BY THE ASSESSEE FOR SHOWING THE FEE @ OF 3% OF NET CRUISE FARE ON DEPAR TURE BASIS AND ACCEPTED THE SAME TO BE AT ARMS LENGTH FEES. I T WAS ALSO SUBMITTED THAT METHOD OF ACCOUNTING OF THE ASSESSEE HAS BEEN ALL ALONG ACCEPTED BY THE ASSESSING OFFICER. 3.5. HOWEVER, LD. CIT(A) WAS NOT SATISFIED WITH THE AR GUMENTS OF THE ASSESSEE. IT WAS HELD BY HIM THAT THE ASSESS EE HAS BEEN FOLLOWING ACCRUAL BASIS OF ACCOUNTING AND THEREFORE , THE ASSESSEE SHOULD CREDIT ITS INCOME ON THE BASIS OF A MOUNT OF FEE COLLECTED BY IT, BECAUSE AS SOON AS THE ASSESSEE CO LLECTS THE AMOUNT OF FARE, THE FEE BECOMES ACCRUED TO IT. IN V IEW OF THE DETAILED DISCUSSION MADE BY THE LD. CIT(A) IN HIS O RDER, THE ADDITION MADE BY THE ASSESSING OFFICER WAS UPHELD. 3.6. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE TRIBUNAL. 3.7. DURING THE COURSE OF HEARING BEFORE US, IT HAS BEE N SUBMITTED BY THE LD. COUNSEL THAT METHOD OF ACCOUNT ING HAS BEEN ACCEPTED BY INCOME TAX DEPARTMENT NOT ONLY IN THE PRECEDING YEAR BUT ALSO IN THE SUBSEQUENT YEARS. IN SUPPORT OF HIS CLAIM HE ALSO SUBMITTED ORDER PASSED BY THE ASS ESSING OFFICER FOR THE ASSESSMENT YEAR 2010 -11. HE ALSO S UBMITTED COPIES OF QUESTIONNAIRES ISSUED BY THE ASSESSING OF FICER AS WELL AS REPLIES FILED BY THE ASSESSEE DURING THE COURSE OF STAR CRUISES TRAVEL SERVICES LTD. 6 ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2010-11, SHOWING THAT THE DETAILED DISCUSSION WAS MADE ON TH IS ISSUE AND AFTER THAT ONLY THE CLAIM OF THE ASSESSEE WAS A CCEPTED AND INCOME DISCLOSED BY THE ASSESSEE @ OF 3% OF THE AMO UNT OF FEE ON DEPARTURE BASIS WAS ACCEPTED IN THE ASSESSMENT O RDER. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT TERMS OF AGREEMENT RELATED TO PAYMENT OF FEE N OWHERE MENTION THAT DEPARTURE OF SHIP SHALL BE THE BASIS F OR THE PAYMENT OF FEE. THE RIGHT OF THE ASSESSEE GETS ACCR UED THE MOMENT COLLECTION IS MADE FROM THE TRAVEL AGENTS/OT HER CUSTOMERS. THE AE SIGNS AGREEMENTS WITH THE TRAVEL AGENT SEPARATELY REGARDING THE PERFORMANCE OF ACTUAL SERV ICES OF THE CRUISE. THEREFORE, TO SAY THAT DEPARTURE IS THE BAS IS FOR THE COMMISSION IS NOT CORRECT. IT WAS SUBMITTED THAT TH ESE FACTS WOULD BE EVIDENT FROM THE AGREEMENTS ENCLOSED BY TH E ASSESSEE IN ITS PAPER BOOK. IT WAS ALSO SUBMITTED T HAT ACCOUNTING POLICY OF THE ASSESSEE MAKES A MENTION T HAT FEE IS COMPUTED ON COLLECTION BASIS WHEREAS IT HAS BEEN CR EDITED IN THE BOOKS OF ACCOUNTS ON THE BASIS OF DEPARTURE OF THE SHIP, SHOWING SELF CONTRADICTORY APPROACH OF THE ASSESSEE . 3.8. WE HAVE HEARD BOTH THE SIDES AND ALSO GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE ONLY DISPUTE T O BE RESOLVED BY US IS THAT WHETHER THE COMPUTATION OF 3% OF THE AMOUNT OF NET CRUISE FARE RECEIVABLE FROM THE AE SHOULD BE CR EDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ON THE BASIS O F AMOUNT COLLECTED BY IT FROM VARIOUS CUSTOMERS OR ON THE BA SIS OF DEPARTURE OF SHIPS. WE FIND THAT TO DECIDE THIS ISS UE WE DO NOT STAR CRUISES TRAVEL SERVICES LTD. 7 NEED TO TRAVEL MUCH BECAUSE THE INCOME TAX DEPARTME NT HAS ALREADY RESOLVED THIS ISSUE, IN PRINCIPLE, IN PRECE DING AND SUBSEQUENT YEARS. IT IS NOTED THAT IN THE EARLIER Y EARS, SAME METHOD OF ACCOUNTING HAS ALWAYS BEEN ACCEPTED BY TH E INCOME TAX DEPARTMENT. THE INCOME CREDITED BY THE ASSESSEE HAS ALWAYS BEEN ACCEPTED. IT IS FURTHER NOTED THAT IN T HE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 201011, THIS ISSUE HAS BEEN ANALYSED IN DETAIL BY THE ASSESSING OFFICER. I T IS NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF AY 2 010-11, VIDE LETTER DATED 27.11.12, THE ASSESSING OFFICER R AISED SPECIFIC QUERY ON THIS ISSUE. THE ASSESSEE GAVE REPLY VIDE ITS LETTER DATED 14-12-2012, WHEREIN IT EXPLAINED IN DETAIL AS HOW THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS CORRECT AS PER LAW AND FACTS. IT WAS A LSO EXPLAINED IN DETAIL THAT IT WAS NOT FEASIBLE FOR TH E ASSESSEE TO CREDIT THE INCOME ON THE BASIS OF COLLECTION OF AMO UNT FOR VARIOUS CUSTOMERS. THE RELEVANT PORTION OF THE REPL Y FILED BY THE ASSESSEE IS REPRODUCED BELOW: NOW WITH THIS BACK GROUND AND DETAIL NOTE REFERRED ABOVE, WE ANSWER YOUR SHOW CAUSE - WHY 3% ON NET CRUISE FARE AS MENTIONED IN THE AGREEMENT SHOULD NO T APPLIED TO RS. 88,96,77,049/- (GROSS CRUISE FARE RECEIVED FROM PSA) I.E. RS. 2,66,90,3111- SHOULD NOT BE CONSIDERED AS GROSS REVENUE AS AGAINST RS.2,36,00,486/- CREDITED TO PROFIT & LOSS ACCOUNT. I. THE AMOUNT OF RS.88,96,770491- IS THE AMOUNT OF GROSS CRUISE FARE. COLLECTED BY THE TRAVEL AGENT FR OM THE PASSENGER AND FORWARDED TO THE ASSESSEE COMPANY TO REMIT THE SAME TO SCML, AND ACCORDINGLY, RS.8896,77,0491- HAS NOTHING TO DO WITH THE ACTIVITY OF CANVASSING AND REVENUE RECOGNI TION. II. REFERRING TO 2.1(B) AND (E), MONIES RECEIVED FR OM TRAVEL AGENT (NOT CUSTOMER) ARE VARIED, E.G., CRUISE PACKA GES, STAR CRUISES TRAVEL SERVICES LTD. 8 SHORE EXCURSIONS, IN RELATION TO SALES BOOKING AND CONFIRMATION, ETC. CONSEQUENTLY, IT WOULD BE DIFFIC ULT TO IMPUTE RECOGNITION OF REVENUE AN 'ALL MONIES RECEIV ED', AS THE MONIES COLLECTED MAY NOT ALL PROPERLY RELATE TO CRUISE FARES. III. WHAT IF THE VARIOUS TRAVEL AGENTS OPT TO REMIT THE CRUISE FARE COLLECTED FROM THE PASSENGER DIRECTLY T O SCML (ASSESSEE COMPANY IS NOT IN PICTURE), HOW THE REVEN UE WOULD BE RECOGNIZED IN SUCH SCENARIO AND THERE WILL BE UNDER REPORTING OF REVENUE. IV. THE ACCOUNTS OF THE INDIAN COMPANY FOR ALL THE YEARS ARE AUDITED UNDER THE COMPANIES ACT AS WELL AS INCOME TAX ACT BY THE EMINENT CHARTERED ACCOUNTANTS AND THE SAME HAS BEEN FILED BEFORE THE REGISTRAR OF COMPANIES, INCOME TAX AND HAS BEEN ACCEPTED BY THE SHARE HOLDER IN THE ANNUAL GENERAL MEETING OF THE COMPANY. THERE HAS BEEN NO QUESTION FROM ANY GOVERNMENT AGENCY ON THE TRUE AND FAIRNESS OF ACCOU NTS. V. THE ASSESSEE COMPANY IS IN OPERATIONS SINCE ASST . YEAR 1999-2000 I.E. ALMOST 10 YEARS OF OPERATION CONSIDERING THE PRESENT CASE I.E. AY 2010-11 ) ALL THESE YEARS THE REVENUE RECOGNIZED ON MONTHLY BASIS @3% ON NET CRUISE FARE OF CRUISE DEPARTED HAS BEEN ACCEPTE D BY THE PREVIOUS ASSESSING OFFICERS AS WELL AS THE TRAN SFER PRICING OFFICERS. ATTACHED IS THE ORDERS OF THE T P 0 FOR THE PREVIOUS YEARS. VI. PLEASE READ PARA 5.3 (III) ON PAGE 5 OF THE CIT (A) ORDER FOR ASSESSMENT YEAR 2008-09 ) THE TRANSFER PRICING OFFICER AS WELL AS CIT(A) HAS MISUNDERSTOOD THE FACTS OF TH E CASE THAT THE ASSESSEE COMPANY IS DOING THE BOOKING FOR PASSENGER AND COLLECTING THE MONEY FROM THE CUSTOMERS TOWARDS SUCH TRAVELS AND THE DUTY OF THE ASSESSEE AS CANVASSER GETS COMPLETED AND HENCE THE AMOUNT OF COLLECTION TO BE BASIS FOR DETERMINING TH E REVENUE AND NO POINT IN POSTPONING THE REVENUE RECO GNITION - WHICH IS NOT CORRECT FACT, THE ASSESSEE COMPANY N EITHER BOOKS THE CRUISE NOR COLLECTS CRUISE FARE FROM THE PASSENGER. IN FACT IF ONE READ CLOSELY THE OPERATIN G PARA AND SEE THE FACTS OF THE CASE, THE VARIOUS SECTION OF THE ACCOUNTING STANDARD QUOTED BY THE CIT(A) ARE IN FAC T IN STAR CRUISES TRAVEL SERVICES LTD. 9 FAVOUR OF THE ASSESSEE COMPANY'S REVENUE RECOGNITIO N PRINCIPLE. FURTHER, THE ASSESSMENT HAS NOT REACH TH E FINALITY SINCE THE ASSESSEE IS IN PROCESS OF FILING THE APPEAL BEFORE THE HONBLE TRIBUNAL. VII. EVEN ON ASSUMPTION (NOT ADMITTING) THAT THE AS SESSEE COMPANY RECOGNIZE THE UNILATERALLY, THERE IS A GREA T- UNCERTAINTY FOR RECOVERING THE SAME FROM SCML, PLEASE REFER, AS 9 - PARA 9 PROVIDES EFFECT OF UNCERTAINTI ES ON REVENUE RECOGNITION - RECOGNITION OF REVENUE REQUIR ES THAT REVENUE IS MEASURABLE AND THAT AT THE TIME OF SALE OR THE RENDERING OF THE SERVICE IT WOULD NOT BE UNREAS ONABLE TO EXPECT ULTIMATE COLLECTION. WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLECTION WITH REASONABLE CERTAINTY I S LACKING AT THE TIME OF RAISING ANY CLAIM, E.G., FOR ESCALATION OF PRICE, EXPORT INCENTIVES, INTEREST ET C., REVENUE RECOGNITION IS POSTPONED TO THE EXTENT OF UNCERTAIN TY INVOLVED. IN SUCH CASES, IT MAY BE APPROPRIATE TO RECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAI N THAT THE ULTIMATE COLLECTION WILL BE MADE. WHERE TH ERE IS NO UNCERTAINTY AS TO ULTIMATE COLLECTION, REVENUE I S RECOGNIZED AT THE TIME OF SALE OR RENDERING OF SERV ICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALLMENTS. VIII. EVEN IF IT IS ASSUMED THAT 3% TO BASE ON CRUI SE FARE RECEIVED FROM AGENTS (NOT ADMITTING), RS.88,9677049 /- IS A GROSS AMOUNT OF CRUISE FARE WHEREAS THE AGREEMENT PROVIDES FOR NET CRUISE FARE. FOR DETAILE D OF DEDUCTIONS FROM THE GROSS CRUISE FARE, PLEASE REFER THE COMMUNICATION LETTER/ ADDENDUM TO AGREEMENT. IX. THE CRUISE FARE SO RECEIVED FROM THE PSAS (TRAV EL AGENTS) TO BE REMITTED TO SCML, FOREIGN COMPANY ARE BEING KEPT IN SHORT TERM DEPOSITS WHICH HAS EARNED TAXABL E INTEREST INCOME AND OFFERED TO TAX. 3.9. THE ASSESSING OFFICER CONSIDERED THE REPLY OF THE ASSESSEE AND ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE A ND ACCORDINGLY HE DID NOT MAKE ANY ADDITION IN THIS RE GARD. WE HAVE ALSO CAREFULLY EXAMINED THIS ISSUE AND FIND FO RCE IN THE STAR CRUISES TRAVEL SERVICES LTD. 10 SUBMISSIONS OF THE ASSESSEE. IN OUR OPINION ALSO, C OLLECTION OF AMOUNT FROM THE CUSTOMERS AND ITS REMITTANCE TO THE AE IS ALTOGETHER A SEPARATE ACTIVITY WHICH IS INDEPENDENT FROM THE ACCRUAL INCOME OF THE ASSESSEE ON THE BASIS OF TERM S OF AGREEMENT WHICH MAY BE VERY MUCH BASED UPON HAPPENI NG OF SOME OTHER EVENT(S). FURTHER, IF THE ASSESSEE HAS B EEN CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF ACCOU NTING WHEREIN IT RECOGNIZES ITS INCOME ON THE BASIS OF NE T CRUISE FARE OF SHIPS DEPARTED, WE DO NOT FIND ANYTHING WRONG TH EREIN. THE BUSINESS ORGANIZATIONS ARE EXPECTED TO FOLLOW PRUDE NT ACCOUNTING POLICIES KEEPING IN VIEW FACTS OF THE CA SE, NATURE OF THEIR BUSINESS ACTIVITIES AND OTHER RELATED CIRCUMS TANCES. WHEN THE INCOME TAX DEPARTMENT HAS ITSELF ACCEPTED THIS METHOD OF ACCOUNTING IN ALL THE YEARS, THEN IN A PA RTICULAR YEAR IT IS NOT EXPECTED FROM IT TO COMPEL THE ASSESSEE T O DEVIATE FROM THE SAME. THUS, KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE PRINCIPALLY AGREE WIT H THE APPROACH AND METHOD OF ACCOUNTING FOLLOWED BY THE A SSESSEE. BUT, WE SHALL ALSO LIKE TO TAKE CARE OF THE APPREHE NSION EXPRESSED BEFORE US BY THE LD. DR. IT HAS BEEN CONT ENDED THAT THERE MAY BE POSSIBILITY OF LEAKAGE OF REVENUE. IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAS NOWHERE SHOWN THAT THE INCOME EARNED BY IT ON THE NET AMOUNT OF FARE COLLE CTED BY IT HAS FINALLY BEEN CREDITED IN ITS BOOKS OF ACCOUNT O F THE ASSESSEE IRRESPECTIVE OF THE YEAR. IT WAS SUBMITTED THAT IF THE INCOME HAS NOT BEEN CREDITED IN THIS YEAR BECAUSE T HE DATE OF DEPARTURE OF THE SHIP FALLS IN THE NEXT YEAR, THEN THE ASSESSEE IS EXPECTED TO SHOW THAT IN THE NEXT YEAR WHENEVER THE SHIP STAR CRUISES TRAVEL SERVICES LTD. 11 DEPARTED, THE CORRESPONDING INCOME OF THE ASSESSEE HAS BEEN CREDITED BY THE AE IN THE ACCOUNT OF THE ASSESSEE A ND ACCORDINGLY THE ASSESSEE HAS ALSO CREDITED THE SAME IN ITS PROFIT AND LOSS ACCOUNT IN THE RELEVANT YEAR. WE FI ND FORCE IN THE ARGUMENT OF THE LD. DR. ACCORDINGLY, PRINCIPALL Y AGREEING WITH THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSES SEE, WE SEND THIS ISSUE BACK TO THE ASSESSING OFFICER FOR T HE LIMITED PURPOSE OF VERIFICATION OF FACTS. THE ASSESSEE SHAL L SHOW BEFORE THE ASSESSING OFFICER THAT THE INCOME ACCRUED TO TH E ASSESSEE AT THE RATE OF 3% OF NET CRUISE FARE HAS BEEN ULTIM ATELY CREDITED IN ITS BOOKS OF ACCOUNTS, IF NOT IN THE YEAR UNDER CONSIDERATION, THEN IN THE SUBSEQUENT YEARS AS AND WHEN THE DEPART URE OF THE SHIP HAD TAKEN PLACE. THE SOLE PURPOSE OF THIS EXERCISE IS TO ENSURE THAT THERE IS NO REVENUE LEAKAGE AND THE TOTAL AMOUNT OF INCOME ACTUALLY EARNED BY THE ASSESSEE HA S BEEN CREDITED IN ITS BOOKS OF ACCOUNTS AND HAS BEEN ACTU ALLY OFFERED TO TAX IN THE TERRITORY OF INDIA. THE ASSESSING OFF ICER SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO ASSESSEE AND SHA LL TAKE INTO ACCOUNT ALL THE DETAILS AND EVIDENCES AS MAY B E BROUGHT ON RECORD BY THE ASSESSEE. THE ASSESSEE IS FREE TO RAISE ALL LEGAL AND FACTUAL ISSUES IN THIS REGARD. AT THE COST OF T HE REPETITION, WE AGAIN CLARIFY THAT WE HAVE PRINCIPALLY ACCEPTED THE METHOD OF ACCOUNTING OF THE ASSESSEE AND THEREFORE ASSESSI NG OFFICER IS NOT ALLOWED TO REOPEN THAT ISSUE. THE EXERCISE TO BE DONE BY THE ASSESSING OFFICER SHALL BE LIMITED TO VERIFY TH E FACT AS STATED ABOVE. THUS WITH THESE DIRECTIONS THIS ISSUE IS REM ITTED BACK THE FILE OF THE ASSESSING OFFICER. THUS, GROUNDS RA ISED BY THE STAR CRUISES TRAVEL SERVICES LTD. 12 ASSESSEE MAY BE TREATED AS PARTLY ALLOWED FOR STATI STICAL PURPOSES. 4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016. SD/- (SAKTIJIT DEY) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER MUMBAI; DATED : 13/04/2016 CTX? P.S/. .. # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI 5. ()* # !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI