COM. INCOME TAX vs. READINGH and BATES CO.

ITA/35/2002HC UttarakhandUKHC01006238200320 July 2004Author: OTHER5 pages
AI SummaryPartly Allowed

What were the facts?

The appeal by the Revenue concerns Assessment Year 1993-94 against an order of the Income Tax Appellate Tribunal (ITAT). The assessee, Mr. R.C. Justinick, is a non-resident foreign technician employed by Reading & Bates Exploration Company, which executed contracts in India. The assessee derived income from salaries during his employment. The dispute centers on whether salary paid for 'off periods' outside India is taxable in India and whether free boarding facilities provided at a rig in high seas constitute a taxable perquisite. The ITAT had previously ruled on similar matters, creating a potential inconsistency.

What did the High Court hold?

The High Court answered the first question in the negative, in favour of the Revenue and against the assessee. The Court reasoned that the 'ON' and 'OFF' periods formed an integral part of the contract, which was for two years with an alternating time schedule. The 'OFF' period followed the 'ON' period and was considered part of an integral scheme. Even if considered a standby arrangement or rest period, training undertaken during this time had a nexus with the services rendered in India, making the payment for the 'OFF' period income earned in India under Section 9(1)(ii). The Court also noted that the employer company paid the entire salary, including for the off period, from Indian operations, indicating the parties' intention. For the second question, the Court answered in the affirmative, in favour of the assessee and against the Revenue. It held that free food and beverages provided at the rig, given the hazardous, arduous, and continuous nature of the work, were a necessity, not a luxury or a perquisite, and their value could not be added to the assessee's income.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was legally correct in holding that salary paid to the assessee for off periods outside India was not chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961, especially given the ITAT's prior contradictory rulings? The Revenue contended that the off period salary is taxable in India, citing the ITAT's previous decisions. 2. Whether, on the facts and circumstances, the ITAT was legally correct in holding that free boarding facility provided by the employer at the rig in high seas cannot be construed as a perquisite? The assessee argued that it was not a perquisite, while the Revenue likely contended it was. The judgment does not explicitly state the Revenue's argument on the second issue.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 4,Section 5(2),Section 2(45)

AI-generated summary — verify with the full judgment below

Assessment Year 1993-94

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 35 of 2002

The Commissioner of Income Tax, Dehradun and another

……… Appellants

Versus

Reading & Bates Exploration Co., As agent of Mr. R.C. Justinick., C/o Arthur Anderson & Co., 426, World Trade Centre, Barakhamba Lane, New Delhi ……… Respondent

Mr. S.K. Posti, learned counsel for the Tax Department. Ms. Krishi Shukla, learned counsel for the respondent.

Date: 20.07.2004

Hon’ble P.C. Verma, A.C.J. Hon’ble P.C. Pant, J.

1.

This is an appeal under section 260A of the Income Tax Act, 1961 filed by the Revenue against the judgment and order dated 22.06.2001 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 398/Del/1996. 2. Mr. R.C. Justinick, respondent is a non-resident foreign technician employed by a foreign company, Reading & Bates Exploration Company which, in the year under consideration, executed contracts in India. During the year under consideration, respondent was in employment of this company and thus derived income from ‘salaries’ from its.

3.

The question raised before us are as follows

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 9(1)(ii)

All 117 judgments and leading authorities on Section 9(1)(ii) →

Latest GST High Court judgments

Search GST case law →