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TMI Blog2009 (11) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... for disposal. The Revenue has taken the multiple grounds, but the solitary issue which arises for our consideration is whether the Ld. CIT(A) is justified in holding that the tax is not deductible at source by the assessee on the payments made to M/s. Star Cruises Management Ltd. which was in respect of the sale proceeds collected on the cruise booking tickets. As there is no Treaty between India and Isle of Man, we are examining the issues under the normal provisions of the Income-tax Act. The grounds in all the appeals are almost identical which are as under : "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that tax is not deductible at source on payments to Star Cruises Management Ltd. out of sale proceeds of cruise tickets booked by the assessee and, therefore, consequential levy of tax and interest under section 201(1) and 201(1A) by the Assessing Officer was not justified, ignoring the fact ( i )That the assessee has been appointed as an agent to provide sale and marketing services relating to cruises and holiday packages for Star Cruise Vessels and appointment as General Sales Agent in India is mainly for the purpose of coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent rates treating 7.5 per cent as deemed profit as per section 44B of the Act. The Assessing Officer also passed the orders under section 201(1)/201(1A) of the Act and huge demand was raised against the assessee for failure to deduct the tax in respect of the proceeds collected on the sale of the cruise tickets which were remitted to M/s. SCML. The assessee challenged the orders passed by the Assessing Officer raising the demand for failure to deduct the tax and deposit the same with the Government. The assessee took different contention before the Ld. CIT(A). The assessee also relied on the CBDT Circular No. 23 dated 23-7-1969. After considering the facts and contentions of the assessee, the Ld. CIT(A) came to the conclusion that the action of the Assessing Officer directing the assessee to deduct tax on payment made to M/s. SCML out of the sale proceeds of cruise tickets booked by the assessee and consequential levy of tax and interest under section 201(1) and 201(1A) of the Act was not justified. The operative part of the reasons and findings of the Ld. CIT(A) are as under: "4. I have carefully considered the submission of the appellant as well as the observations made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed agents and FIT customers. Any discounts and/or commission due to the non-appointed agents and/or FIT customers shall be borne by SCTS; ( b )3 per cent (three per centum) of the Gross Package Fare received from cruise tickets sold by SCTS through travel agents appointed by SCTS. Any discounts and/or commission due to the travel agents appointed by SCTS shall be reimbursed at costs from SCML, or deducted from the cruise collections due to SCML. 6. As submitted by the appellant, it is no body s case that the Star Cruises actually operate in India. In fact except for taking bookings through SCTS from those persons in India who wish to avail of the services of star cruises abroad, SCML is not carrying out any other activity in India. The taxability of the sale proceeds from tickets booked in India shall be governed in such a situation by the principles as laid down in Board s Circular No. 23 dated 23-7-1969. As per para 6( c ) of the said circular where a non-resident s sales to Indian customers are secured through the services of an agent in India, the assessment in India of the income arising out of the transaction will be limited to the amount of profit which is attributable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made outside India, and ( iii ) the sales are made on a principal-to-principal basis. In the assessment of the amount of profits, allowance will be made for the expenses incurred, including the agent s commission, in making the sales. If the agent s commission fully represents the value of the profit attributable to his service; it should prima facie extinguish the assessment. 6. Though in the present case SCML being a company incorporated in Isle of Man, i.e., a non-treaty country, there is no question of availability of DTAA benefit, yet it will not be out of place to mention here that in a treaty situation also the taxability in a case where arm s length consideration is paid to a dependant agent, is governed by the same principle. According to Article 7(2), where an enterprise carries on business in India through a PE, the profits attributable to such PE shall be the profits that the PE would have made, if it were a distinct and separate enterprise dealing independently with the enterprise of which it is a PE. In other words, Article 7(2) postulates that the profits of the PE would be those profits which a distinct and an independent enterprise would make when dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L after retaining certain percentage of the commission. Another aspect to be considered here is that M/s. SCML is a non-resident company in India and treatment in respect of the income of the non-resident is provided in section 5 of the Act read with section 9 of the Act and relevant part of respective provisions read as under : ( a ) Section 5 : "(1)****** (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which ( a )is received or is deemed to be received in India in such year by or on behalf of such person; or ( b )accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1. Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2. For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident should be in India and the amount should be paid or payable, whether in or out of India to the said non-resident or any person on behalf, on account of carriage by passengers or goods, ship at any port in India and the amount received or deemed to be received in India on account of carriage of the passengers, live stock, goods, and ship at any port outside India. Hence, as per the language used by the Legislature in section 44B, income of the non-resident shipping company, as the present one, cannot be charged to tax in India unless either the passengers who have booked the Cruise Package, are travelling from or to any port in India. Hence, the finding of the Assessing Officer that the amount received on the sale of the Cruise tickets of M/s. SCML is otherwise liable to tax in view of the provisions of section 44B is not correct. As per well settled legal principles that unless any income is chargeable to tax in India as per the charging provisions of the Income-tax Act, no effect can otherwise be given to other provisions of the Act. Moreover, as per the Board Circular No. 23 dated 23-7-1969, where the non-resident sales to Indian customers through the services of an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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