S. 44B Income Tax Act | Cruise Voyages Remain Shipping Business Though Providing Entertainment & Hospitality Services : Supreme Court

The Supreme Court has recently held that a foreign cruise ship operator that provides hospitality and entertainment services during a voyage would still qualify as a shipping business under Section 44B of the Income Tax Act. Thus, its taxable income would be computed on a presumptive basis at 7.5% of the specified receipts by an assessee under the provision.

Dismissing the Revenue's appeal, a bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria held that the expression “carriage” under Section 44B of the Income Tax Act cannot be given a restrictive interpretation limited merely to the transportation of passengers. The Court observed that a cruise vessel remains engaged in the business of carriage even when it provides hospitality, and entertainment services during the voyage, and would therefore continue to be taxable under the presumptive taxation scheme prescribed under Section 44B.

“On a voyage, the providing of ancillary services does not take away from the meaning of 'carriage' as per Section 44B of the Act. The meaning adopted by the Assessing Officer is restrictive in the facts and circumstances of this case.”, observed the court, while affirming the Income Tax Appellate Tribunal (ITAT) decision to uphold the determination of the Respondent-assessee's liability under Section 44B of the Act.

The dispute arose from the assessment of Superstar Libra Ltd. (SLL), a non-resident entity that operated a cruise ship known as "Superstar Libra" in India through its Respondent assessee agent, M/s Star Cruises (India) Pvt. Ltd. The Assessee collected revenue from the sale of cruise packages and shore excursions and remitted the same to SLL.

The Assessing Officer held that Section 44B of the Act was not applicable as SLL's activity fell under "entertainment and hospitality" rather than "carriage" of passengers. The Officer estimated the deemed income at 25% of the cruise fare collected, rejecting the Assessee's claim that the estimated income should be 7.5% under Section 44B.

The Commissioner of Income Tax allowed the assessee's appeal and set aside the assessment order. The Revenue thereafter appealed to the ITAT; however, aggrieved by the dismissal of its appeal, it appealed to the Supreme Court.

Refusing to interfere with the impugned findings, the judgment authored by Justice Bhatti rejected the Revenue's argument that a cruise ship operator must carry passengers from point A to point B without providing any hospitality or entertainment to qualify as a shipping business under Section 44B of the Act.

“The Assessing Officer insists that, to attract the meaning of the word 'carriage', the movement should be from place 'A' to place 'B'…We find it difficult to confine the meaning of the word 'carriage' as attributed by the Assessing Officer", the Court observed.

“In the facts and circumstances of this case, SLL, being a foreign entity, was providing cruise services in India through the Assessee. The finding recorded is that the possibility of passengers de-boarding at intermediate ports was not taken into account by the Assessing Officer. On a voyage, the providing of ancillary services does not take away from the meaning of 'carriage' as per Section 44B of the Act. The meaning adopted by the Assessing Officer is restrictive in the facts and circumstances of this case. The illegality was factually corrected by the impugned Orders.”, the Court held.

In terms of the aforesaid, the appeal was dismissed.

Cause Title: THE DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION). VERSUS M/S STAR CRUISES (INDIA) P. LTD.

Citation : 2026 LiveLaw (SC) 750

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Appearance:

For Appellant(s) Mr. Raghavendra P Shankar, A.S.G. Mr. Arijit Prasad, Sr. Adv. Ms. Pallavi Mishra, Adv.(argued by) Mr. Anmol Chandan, Adv. Mr. A A Pandey, Adv. Mrs. Anita Sahni, Adv. Mr. Nikhil Aradhe, Adv. Mr. Sudarshan Lamba, AOR

For Respondent(s) Ms. Meera Mathur, AOR Mr. Anand Varma, AOR (argued by) Ms. Apoorva Pandey, Adv. Mr. Ayush Gupta, Adv.