2013 (12) TMI 188 - 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 - 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:
- Interpretation of section 9(1)(i) of the Act regarding business connection between Indian and foreign companies.
- Tax liability on income accruing from sales proceeds of cruise tickets booked by Indian agents.
- Dispute over whether income accrues or arises in India for the foreign company.
- Validity of the order of ld CIT(A) in holding no business connection between the Indian and foreign companies.

Analysis:
1. The appeal before the Appellate Tribunal ITAT Mumbai involved the interpretation of section 9(1)(i) of the Act concerning the business connection between an Indian company and a foreign company. The dispute centered around the tax liability on the income arising from the sales proceeds of cruise tickets booked by the Indian agent of the foreign company.

2. The Indian company, engaged in travel and tour services, had entered into an agreement with the foreign company for canvassing their cruises in India. The Assessing Officer treated the Indian company as the agent of the foreign company and estimated the income accruing from operations in India. The assessee contended that the remitted sale proceeds were not taxable in India, leading to an appeal before the ld CIT(A).

3. The ld CIT(A), relying on a previous Tribunal order in a similar case for the assessment year 2006-07, held that no income accrued to the foreign company in India from the cruise tickets booked by Indian agents. The ld CIT(A) determined that there was no business connection as per section 9(1)(i) of the Act between the Indian and foreign companies, thus rejecting the tax liability imposed by the Assessing Officer.

4. During the hearing, the Departmental Representative supported the Assessing Officer's order, while the assessee's representative presented earlier Tribunal orders for assessment years 2001-02, 2002-03, and 2005-06, demonstrating a consistent stance on the issue. The Tribunal, in line with its previous decisions, upheld the ld CIT(A)'s order, emphasizing the absence of income accrual in India for the foreign company regarding the sale of tickets through the Indian agent.

5. The Tribunal reiterated its position by dismissing the revenue's appeal for the assessment year 2005-06 and 2006-07, emphasizing the similarity of facts and circumstances in the present case. Consequently, the Tribunal upheld the ld CIT(A)'s order, rejecting the Department's appeal and confirming the non-taxability of the income in India for the foreign company.

6. As a result of upholding the ld CIT(A)'s decision, the cross objection filed by the assessee in support of the order became infructuous and was dismissed. Ultimately, both the appeal filed by the Department and the cross objection filed by the assessee were dismissed by the Tribunal, with the decision pronounced in open court on October 16, 2012.