The presumptive taxation provision for shipping enterprises applies to cruise operations even when they include ancillary hospitality or on-board entertainment. The term 'carriage of passengers' pertains to the business of operating ships and is not limited to simple point-to-point transit.

JUDGMENT :

S.V.N. BHATTI, J.

1. The Civil Appeals arise from the Judgment and Order dated 01.07.2011, in Income Tax Appeal Nos. 485, 486 and 683 of 2010 (for short, ‘impugned Order’) of the High Court of Judicature at Bombay. The Director of Income Tax, International Taxation (for short, ‘the Revenue’) is the Appellant.

2. M/s Star Cruises (India) Pvt. Limited is the Assessee/Respondent. The Civil Appeals relate to the assessment years 2006-07, 2007-08, and 2008-09.

3. The Superstar Libra Ltd. (for short, ‘SLL’), a non-resident entity, operated a cruise known as “Superstar Libra” in India. The Assessee, the Agent of SLL, was responsible for conducting the cruise and collecting revenue from the sale of cruise packages and shore excursions in India.

4. The impugned Order has considered the claim of the Assessee under Section 44B of the Income Tax Act, 1961 (for short, ‘the Act’) for withholding tax determined under Section 195 of the Act on the remittances by the Assessee in favour of SLL. The Assessee stated that income accruing in favour of SLL is computed by applying Section 44B of the Act and that the estimated income was 7.5% of the cruise fare collected by the Assessee. The Assessee further claimed consideration for granting a certificate for TDS under Section 195 of the Act, at the rate of 7.5% of the estimated income under Section 44B of the Act. The Assessee claimed that, as an Agent, it received receipts for providing carriage of passengers operated by SLL, and that the estimated income was 7.5% of the cruise fare collected by the Assessee.

5. The Assessing Officer, vide order dated 30.03.2007, held that Section 44B of the Act is applicable in cases of carriage of goods, passengers, etc., and, in the view of the Assessing Officer, the term “carrying” means taking or transporting from one place to another or from one port to another. SLL conducted cruise services originating from and terminating at Mumbai Port, i.e., a round trip. During the round trip, SLL extended hospitality and provided entertainment. Therefore, the activity of SLL falls under entertainment and hospitality and does not include carriage of passengers/goods within the meaning of section 44B of the Act. Consequent to such view, the Assessing Officer estimated deemed income at 25% of the cruise fare collected for and on behalf of SLL, not at 7.5% as claimed by the Assessee.

6. The Assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals) [for short, ‘CIT(A)’], Mumbai. By Order dated 15.06.2007, the CIT(A) allowed the Appeal and set aside the Assessment Order dated 30.03.2007.

7. The Appellate Authority appreciated all the circumstances of the case under Section 44B of the Act and held that the deemed income of SLL was estimated at 7.5% of the receipts received from the cruise fare.

8. The Revenue carried the matter in appeal before the Income Tax Appellate Tribunal (for short, ‘ITAT’), and the Tribunal, by the Order dated 01.07.2009, dismissed the Appeal. The Tribunal’s finding of fact is summarised as follows:-

A. While rejecting the Assessing Officer’s interpretation of the term ‘carriage’, it affirmed that a round-trip voyage constitutes two separate acts of carriage, i.e., from station A to station B and back to station A. Further, the Assessee also offered one-way cruises, and passengers booking round-trip cruises are entitled to disembark at intermediate ports without being compelled to return to Mumbai.

B. Booking slips establish that the primary fees collected from passengers were for cabin and transport fares. Any on-board entertainment, whether