2013 (11) TMI 902 - AT - Income Tax

Income accrues/arises or is deemed to accrue/arise in India Assessee-company is receiving the remittances of tickets sold by the Indian company outside India Held that - Following assessee s own case for the A.Y. 2008-09 - Assessee was not having any business connection in India within the meaning of section 9(1)(i) of the Act - No income has been accrued to the assessee in India in respect of booking or sale of tickets for tour packages of the cruises in India which was done through Star Cruises (India) Travel Services Pvt. Ltd. (SCITC) - Decided in favour of assessee.

Summary

Issues:
1. Dispute over business connection in India.
2. Taxability of income remitted from India.
3. Treatment of Indian company as agent.
4. Application of Canvasser Agency Agreement.
5. Double Tax Avoidance Agreement with Isle of Man.

Business Connection in India:
The appellant contested the Assessing Officer's decision regarding the existence of a business connection in India. The appellant argued that a previous decision by the Hon'ble ITAT ruled in their favor, stating that there was no business connection in India for the appellant company. The appellant emphasized that since they operated outside India and did not receive any income in India, the question of accrual of income or taxability in India did not arise. The appellant highlighted the rulings in their previous cases to support their position.

Taxability of Income Remitted from India:
The Assessing Officer treated the Indian company as an agent of the foreign entity and estimated the income accruing from operations in India at 5% of the cruise collection remitted from India. The appellant claimed that the sale proceeds of cruise tickets remitted by the Indian agent were not liable to tax in India. However, the AO referred to previous orders under section 195 of the Act and held that there existed a business connection of cruise activity of the assessee in India, leading to the assessment of income at 5% of the total receipt.

Treatment of Indian Company as Agent:
The AO's decision to treat Star Cruises India Travel Services Pvt. Ltd. (SCITSPL) as an agent of the appellant company was a key point of contention. The AO passed an order estimating 5% of the cruise collection made from India as income and directed the appellant to pay tax on the remittances. The appellant argued against this treatment, citing agreements and previous tribunal rulings to support their position that no business connection existed in India.

Application of Canvasser Agency Agreement:
The appellant highlighted the Canvasser Agency Agreement effective from a specific assessment year onwards to support their argument that the question of business connection did not arise. They referred to specific tribunal rulings and agreements to emphasize that the treatment of the Indian company as an agent was not justified.

Double Tax Avoidance Agreement with Isle of Man:
The Assessing Officer noted that the appellant company was registered in Isle of Man, a country with no Double Tax Avoidance Agreement. This fact was considered in the assessment of the appellant's income and tax liability. The absence of a tax treaty with Isle of Man was a factor in the AO's decision-making process.

In conclusion, the judgment highlighted the complex legal arguments and factual considerations surrounding the business connection, taxability of income remitted from India, treatment of the Indian company as an agent, application of specific agreements, and the impact of the absence of a Double Tax Avoidance Agreement with Isle of Man on the assessment. The appellant's reliance on previous tribunal decisions and agreements played a significant role in the final outcome of the case.