2010 (12) TMI 1231 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the interpretation of whether income accrues or arises in India for payments remitted to the assessee on account of cruise tickets booked by its Indian agent, and the applicability of section 5(2a) of the Act.

Interpretation of Income Accrual in India:
The case involved a foreign company entering into an agreement with an Indian company for selling cruise tickets on a principal to principal basis. The Indian company collected money and remitted it to the foreign company as per RBI guidelines and FERA, earning commission for its services. The foreign company did not operate in India, and the Indian customers had to take the cruise from foreign ports. The Assessing Officer (AO) computed the income of the assessee based on the sale of cruise tickets, but the CIT(A) deleted the addition, citing that no income accrues or arises in India as the sale was on a principal to principal basis outside India. The CIT(A) referred to Circular No. 23 of the CBDT and held that no income accrues or arises to the appellant in India regarding the sale of tickets through the sole selling agent. The revenue appealed the CIT(A)'s decision, arguing that section 5(2a) of the Act deems amounts received in India as the assessee's income, making it taxable in India.

Applicability of ITAT Decision:
The counsel for the assessee contended that the issue was covered by a previous ITAT decision in the assessee's own case for AYs 2001-02 and 2002-03. The ITAT had held that no income accrued to the assessee in India for the sale of tickets/booking of cruise tour packages through the Indian company. The ITAT's decision in the previous years was followed, upholding the CIT(A)'s order that no income accrues or arises to the appellant in India for the sale of tickets through the sole selling agent. Consequently, the revenue's ground was dismissed, and the Cross Objections raised by the assessee were also dismissed as infructuous since they supported the CIT(A)'s order upheld by the ITAT.

Conclusion:
In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision that no income accrued or arose in India for the payments remitted to the assessee on account of cruise tickets booked by its Indian agent. The appeal of the Revenue and the Cross Objections of the assessee were both dismissed based on the interpretation of relevant legal provisions and precedents set by the ITAT in previous years.