Authority: Supreme Court of India, Civil Appellate Jurisdiction

Order Date: 30 July 2026

Case Overview

  • Parties: Appellant – Director of Income Tax (International Taxation); Respondent – M/s Star Cruises (India) Pvt. Ltd. (Assessee). Companion appeal involves Superstar Libra Ltd., the non‑resident cruise operator.
  • Civil Appeal Numbers: 3334‑3336 of 2012 concerning assessment years 2006‑07, 2007‑08, 2008‑09; a companion appeal (2026) relating to a different assessment year.
  • Core Issue: Determination of whether income of Superstar Libra Ltd. from cruise operations is taxable under Section 44B of the Income Tax Act, 1961, with the deemed income to be calculated at the statutory presumptive rate of 7.5% of gross cruise‑fare receipts versus the Assessing Officer’s 25% estimate.
  • Procedural History:
  • Assessing Officer order dated 30‑03‑2007 applied 25% rate, interpreting “carriage” narrowly.
  • Commissioner of Income Tax (Appeals) order dated 15‑06‑2007 set aside the assessment and accepted the 7.5% rate.
  • Income Tax Appellate Tribunal order dated 01‑07‑2009 dismissed the Revenue’s appeal, affirming the 7.5% presumptive rate.
  • High Court judgment dated 01‑07‑2011 upheld the ITAT decision.
  • The present Supreme Court civil appeals were filed by the Revenue challenging the above determinations.
  • Arguments:
  • Revenue: Asserted that the term “carriage” under Section 44B should be limited to point‑to‑point transport; argued that the dominant purpose of the cruise was hospitality and entertainment, not transportation, thus the 25% rate should apply.
  • Assessee/Respondent: Contended that both conditions of Section 44B were satisfied, that a round‑trip voyage constitutes two separate acts of carriage, and that CBDT Circulars No. 763 (18‑02‑1996) and No. 169 (23‑06‑1975) support the 7.5% presumptive rate for foreign shipping enterprises.
  • Findings Referenced:
  • CBDT Circular No. 763 clarifies that carriage payments include handling charges.
  • CBDT Circular No. 169 explains that Section 44B was designed to simplify taxable profit computation for foreign shipping entities.
  • The Tribunal held that entertainment services were incidental to the primary carriage activity and that passengers could disembark at intermediate ports, confirming the applicability of Section 44B.

Final Outcome

  • The Supreme Court held that the Assessing Officer’s restrictive interpretation of “carriage” was untenable and affirmed that Section 44B applies to the cruise operations of Superstar Libra Ltd.
  • Deemed income of Superstar Libra Ltd. is to be assessed at the statutory presumptive rate of 7.5% of gross cruise‑fare receipts for tax deduction under Section 195 of the Act.
  • Civil Appeals Nos. 3334‑3336 of 2012 are dismissed.
  • The companion Civil Appeal (2026) is also dismissed, adopting the same view.
  • All pending applications, if any, are ordered to stand disposed of.

Topics: Taxation, Section 44B, Cruise Services