Case Law Details
RELEVANT PARAGRAPH
4. We have given our anxious considerations to the rival submissions of the parties. We have also carefully considered the facts which are placed before us. In our opinion, the controversy is in a very narrow compass. There is no dispute about the fact so far as M/s. SCML is concerned, it is a foreign company which is operating the Cruises in the international waters. The said company has entered into the agreement with the assessee company and as per the terms of the agreement, the assessee has to canvass the sale of the Cruise tickets in India and the sale proceeds collected are to be remitted to M/s. SCML with the approval of the RBI and for said work the assessee was paid commission. It is also not disputed in this case that the Cruises operated by M/s. SCML do not touch any port in India nor M/s. SCML provide any service to the passengers in or from India for operating between the Indian port and port from where the cruises are going to start. The entire Cruise operations without any connection with the Indian territory are made from the different foreign countries. The only limited role of the assessee company is to sale the cruise packages in India and amount collected on the sale/booking is to be remitted to M/s. SCML 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 r/w. Sec. 9 of the Act and relevant part of respective provisions read as under:
a) Sec.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 not again be so included on the basis that it is received or deemed to be received by him in India.
b) Income deemed to accrue or arise in India.
9, (1) The following incomes shall be deemed to accrue or arise in India :—
(i) all income accruing or arising, whether directly or Indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.
Explanation.— For the purposes of this clause—
(a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India;
(b) in the case of a non-resident no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export;
(c) etc etc.”
5. Merely because, the assessee company is doing booking of different Cruise Tour packages for M/s. SCML, that can not per se be decisive for holding that M/S. SCML is having “business connection’ in India within the meaning of Sec. 9(l)(i) of the Act. The expression “business connections’ is of wide meaning but at the same time it is also well settled principles by different judicial pronouncements that there should be close and intimate relationship between the business operations of the non-resident and his agent in India. In the present case services rendered by the assessee are general in nature as it s routine business activities and that can not be interpreted to give colour of “business connection as contemplated in sec. 9(l)(t) of the Act. In our opinion, it cannot be said that any income has been accrued to M/s. SCML in India in respect of the booking of tour packages of Cruise made by Assessee in India.
6. So far as applicability of the Section 43B is concerned, it is a deeming provision and in case of a non-resident engaged in the business operation of the ships, 7.5% of the aggregate amount specified in Section 44B(2) shall be deemed to be profits and gains of said business chargeable to tax in India. On the perusal of the language in Section 44B(2), it is clear that the 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 Sec. 44B, income of the nonresident shipping company, as the present one, can not be charged to tax in India unless either the passengers who have book the Cruise Package, are travelling from or to any port in India. Hence, the finding of the A.O 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 I. T. Act, no effect can otherwise be given to other provisions of the Act. Moreover, as per the Board Circular No.23 date 23.7.69, where the non-resident sales to Indian customers through the services of an agent in India, the assessment in respect of the income arising out of the transactions will be limited to the amount of profit which is attributable to the agents’ services provided that –
i) the non-resident principal’s business activities in India are only channeled through his agents.
ii) the contract to sale are made outside India and
iii) the sales are made principal to principal basis.
7. So far as the facts before us are concerned, M/S. SCML and the assessee company are separate legal entities and the management of both the Companies is totally independent of one another. For the above reasons, in our opinion, the income of M/s. SCML, a foreign company cannot be held as taxable in India to the extent of the amount of sale of the Cruise tickets in India. On the perusal of the reasons given by the Ld CIT (A), in our considered opinion, no interference is called for. We, accordingly, confirm all the orders of the CIT(A) in these appeals.
