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Informist, Thursday, Jul. 30, 2026

 

NEW DELHI – The Supreme Court Thursday held that the meaning of carriage does not change for calculating profit and gains under the Income Tax Act, 1961, irrespective of whether such a carriage had ancillary services such as providing hospitality and entertainment to its passengers or it was doing only a round trip. Consequently, the carriage's income be assessed at the statutory presumptive rate of 7.5% of gross cruise fare receipts for tax deduction under the 1961 Act rather than 25% of income, which is used for activities such providing entertainment and hospitality, said the court.

 

Rejecting the income tax department's plea, the Bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria upheld the Bombay High Court's 2011 order that the estimated income received by Star Cruises (India) Pvt. Ltd. for conducting the cruise of Superstar Libra Ltd., a non-resident entity, was 7.5% of the cruise fare collected from the sale of cruise packages and shore excursions in India. The meaning adopted by the assessing officer for the definition of carriage is restrictive, said the top court. 

 

The apex court rejected the income tax department's argument that to attract the meaning of the word "carriage", the movement should be from place 'A' to place 'B'. Here, Superstar Libra had cruise services originating from and terminating at Mumbai Port, which was a round trip. "We find it difficult to confine the meaning of the word 'carriage' as attributed by the assessing officer," said the top court.

 

The income tax department had argued that the statutory presumptive rate of 7.5% was applicable in cases of carriage of goods, passengers and the term "carrying" means taking or transporting from one place to another or from one port to another, not a round trip. Further, the activity of Superstar Libra falls under entertainment and hospitality and does not include carriage of passengers or goods within the meaning of section 44B of the Income Tax Act, 1961, said the department. Consequent to such a view, the assessing officer estimated deemed income at 25% of the cruise fare collected for and on behalf of Superstar Libra, not at 7.5% as claimed by Star Cruises, it said.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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