The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the services rendered by Indian Company to non-resident assessee on principal-to-principal basis based on Canvasser Agent Agreement not taxable in India.
The Assessee Star Cruise Management Ltd was a company registered in Isle of Man engaged in the canvassing business of travel and tour related services. The Assessee had entered into Canvasser Agent Agreement, dated 01/04/2005, with Star Cruises (India) Travel Services Pvt. Ltd., (the Indian Company) for canvassing the cruise in India for an agreed remuneration.
For the Assessment Year 2013-14, the Assessee filed a return of income declaring ‘Nil’ income. The case of the Assessee was selected for scrutiny. During the assessment proceedings, justifying ‘nil’ income offered to tax, the Assessee submitted that the Canvasser Agent Agreement, dated 01/04/2005 between the Assessee and the Indian company was on principal-to-principal basis.
The tickets and final confirmation were being given by the Assessee to the customers and passengers directly. None of the ships of the Assessee either touched any Indian port or entered into Indian territorial waters. Indian customers had to take cruises from foreign ports. The Indian company collected the money and remitted the same to the Assessee in return for the agreed commission. The Assessee had no operations in India.
Thus, the Assessee received the remittances of tickets sold by the Indian company outside India. On the basis of the aforesaid, the Assessee contended that no income was liable to tax in India. The Assessing Officer concluded that the Assessee had a business connection in India; and also received payments in India. Therefore 7.5% of the receipts of INR from India, were held liable to tax and passed under Section 143(3) read with Section 144C(3) of the Income Tax Act.
Anil Sant appeared on behalf of the revenue and Madhur Agarwal appeared on behalf of the assessee.
The two-member Bench of S. Rifaur Rahman, (Accountant Member) and Rahul Chaudhary, (Judicial Member) dismissed the appeal filed by the revenue holding that, “when the Agreement was in operation, concluded that the Indian Company
was acting in ordinary course of business rendering services to the Assessee on principal-to-principal basis; the Assessee did not have a business connection in India; no operations were carried out by the Assessee in India; and therefore, no income was liable to tax in India in terms of Section 5(2) and Section 9(1)(i) of the Act.”
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