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TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 514
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....ted (hereinafter, „RCCL‟ for short), responsible for marketing and selling Royal Caribbean and Celebrity Cruise all over the world. The respondent/assessee filed the return for Assessment Year 2003-04 declaring income at Rs. 79,59,400/- on 20.11.2003. 3. On perusal of balance sheet as well as tax audit report, the AO noticed that assessee had disclosed a sum of Rs. 1,44,76,873/- as money received in advance against booking by customers in INR and USD. Though the said amount was received during the year, the same was not taken into account as income of the current year. The AO observed that the assessee was receiving booking amount in nominal percentage, substantial money was being received before the sailing of cruise and upon receipt of full amount, the money was being remitted to RCCL after deducting commission @ 25%. He also observed that if the person did not want to sail and cancel the trip then the entire advance would get forfeited. Accordingly, AO treated the entire amount of Rs. 1,44,76,873/- as the income of the assessee. 4. During the assessment proceedings, the Assessing Officer further noticed that the assessee had incurred loss of Rs. 17,41,940/- ....
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.... (A) to the extent of 15% of the advances, treating the same as income of the assessee? (b) Whether the receipts on account of booking of cruise tickets assumed character of income in the hands of the assessee when the amount was received from the customers or when the cruise departed? (c) Whether the ITAT was correct in law in allowing the assessee to adjust the losses incurred on share transactions against the profit of commission agency business under the name and style of M/s Tirun Travel Marketing?" 8. The learned counsel for the revenue contends that there was principal and agent relationship between RCCL and the assessee. It was RCCL who was liable to render the services and not the assessee. By booking the ticket, assessee created a legal relationship between RCCL and the customer who wanted to sail on cruise. As soon as the ticket was booked, agency came into existence and the assessee became entitled to commission. Assessee was liable to his principle only for booking of the tickets and to remit the entire amount of ticket. Even in case were the ticket was cancelled, assessee was entitled to commission thereon. Hence, the order of CIT (A) that the assessee was e....
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....s held by the SC in Raja Mohan Raja Bahadur, (Supra). In State Bank of Travancore (Supra) also, the SC has held that it is the income which has really accrued or arisen which is taxable. Similar view has been expressed by this court in Devsons (Supra). It was observed as under: "... Even in the mercantile system of accounting it is the real income which has accrued in a practical sense that is to be brought to tax. In CIT v Shoorji Vallabhdas and Co. [1959] 36 ITR 25, the Bombay High Court held that the question whether the income accrued or not is not a mere matter of cogency of the entries made in the account books of the assessee, but is essentially one of substance and of the real nature of what happened. A mere book entry is not conclusive of the question whether the assessee had become entitled to the sums or not and whether the income is accessable" 11. In Amiantit International (Supra), it was observed as under: "We shall now look to the meaning of the expression" accrue or arise". The dicta of Mukherji, in Rogers Pyatt SI llac and Co. v Secretary of State for India [1925] 1 ITR 363 has been quoted with approval in a series of decisions of the Supreme Court (vide E....
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....ncome on a particular date". The court further explained that a right to receive a particular sum under the agreement would not be sufficient unless the right accrued by rendering of services and not by promoting for services and where the right to receive is anterior to rendering of service, the income, therefore, would accrue on rendering of services.... (para 13) " 13. The question for our consideration is as to when the income can be said to be accrued to the assessee. It is when the ticket is booked by the assessee or when the customer boarded the cruise and it departed? We find force in the contention of the learned counsel for the revenue, that it was RCCL and not the assessee who was responsible to render all post booking services to the customers. As per Section 5 of Article (2) of 2002 International Representation Agreement as executed between the Assessee and RCCL, all bookings which become sailed which were made in accordance with RCCL‟s applicable policy and procedures and for which full payment is received by RCCL in accordance with this agreement are termed as qualified bookings. It also provides that bookings that are made by the customers on the Cruis....
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....ion forms, or absence of insurance. 15. As per this section, the assessee shall be liable to RCCL for payment of cancellation charges in accordance with the applicable cancellation charges schedule as may be amended from time to time. Assuming that in some cases, the assessee, in case of cancellation of trip, is liable to return the commission earned, it would be open for the assessee to seek adjustment or claim a refund of tax from the Authorities. We therefore, hold that the stand taken by the CIT (A) in this regard was correct and 25% of the booking advances received should be treated as income of the assessee assuming that there are no cancellations. However, the assessee shall be entitled to 10% credit on account of travel agents commission after ascertaining actual outgoings in this regard. 16. The learned counsel for the revenue further contends that the AO had treated the loss from share trading business as "Capital Loss" since the assessee had not furnished any details i.e. contact notes, mode of payments, details of shares etc. No specific finding has been given by the CIT(A) as to whether loss incurred and claimed by the assessee was a business loss or a capital....