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Director of Income Tax, International Taxation v. M/s Star Cruises (India) P. Ltd.

Civil Appeal · 2026 INSC 771Decided 30 Jul 2026
C.A. No.-003334-003336 - 2012
Justice S.V.N. Bhatti · Justice N.V. Anjaria

Background

A foreign company operated round-trip cruise ships out of Mumbai, with an Indian agent handling bookings and collecting fares. The dispute was over how much of the foreign company's income should be taxed in India: the assessee claimed a lower rate (7.5% of fares) available under Section 44B for entities engaged in the "carriage of passengers," while the tax department argued the cruises were really hospitality and entertainment packages, not simple transportation, and should be taxed at a higher rate (25%). Lower appellate authorities and the Bombay High Court sided with the assessee, prompting the tax department's appeal.

Decision Breakdown

The Supreme Court held that the tax officer's narrow view, that "carriage" only means point-to-point travel from Port A to Port B, was incorrect. It found that passengers could board round trips and disembark at intermediate ports without being compelled to return, that the primary fees collected were for cabin and transport, and that on-board entertainment was merely incidental to the core business of operating ships. On these facts, the cruise operator's activity qualified as "carriage of passengers" under Section 44B, so the concurrent findings of the tax tribunal and High Court were upheld and the Revenue's appeals (along with a companion appeal for a different assessment year) were dismissed.

Lesson Learnt

Providing amenities like meals or entertainment alongside transportation does not automatically strip an activity of its character as "carriage of passengers" for tax purposes. Courts will look at the primary purpose and how fares are structured, not just the presence of incidental services.

Official source (sci.gov.in)View Judgment (PDF)

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