Director of Income Tax Vs Star Cruises (India) Private Limited (Supreme Court of India)
The Legal Case/Judgment concerns whether a foreign cruise operator conducting round-trip cruises beginning and ending at the same port is eligible for the presumptive taxation scheme under Section 44B of the Income-tax Act, 1961. Superstar Libra Ltd. operated cruise services in India through its Indian agent, which claimed that income should be computed at the statutory presumptive rate of 7.5% under Section 44B. The Assessing Officer rejected the claim, holding that the activity was primarily hospitality and entertainment rather than carriage of passengers, and estimated income at 25%. The CIT(A), ITAT, Bombay High Court, and ultimately the Supreme Court held that Section 44B applied. The Supreme Court observed that restricting “carriage” to transportation from one port to another was unsupported by Section 44B, and that a round-trip voyage still involves carriage of passengers. It accepted the factual findings that passengers could disembark at intermediate ports and that transportation remained the principal activity, while amenities provided during the voyage were ancillary and did not alter the character of the business. The Court dismissed the Revenue’s appeals and upheld the application of Section 44B.
Issue: Whether a foreign cruise operator carrying passengers on round-trip cruises originating and ending at the same port is engaged in the business of operation of ships so as to be entitled to the presumptive taxation scheme under Section 44B of the Income-tax Act, 1961, or whether its activity is essentially one of hospitality and entertainment outside the scope of Section 44B.
