COMMISSIONER INCOME TAX vs. M/S READING and BATES CO.

ITA/32/2001HC UttarakhandUKHC01002824200420 July 2004Author: OTHER6 pages
AI SummaryPartly Allowed

What were the facts?

The appeal by the Revenue challenges the ITAT's order for Assessment Year 1993-94. The assessee, Mr. J. Dejean, is a non-resident foreign technician employed by Reading and Bates Exploration Company, which executed contracts in India. The assessee derived income from 'salaries' during his employment. The dispute centers on the taxability of salary paid for 'off' periods spent outside India, the taxability of free boarding and lodging, and the charging of interest under Section 234B.

What did the High Court hold?

The High Court held that the salary paid for the 'off' period outside India is taxable in India under Section 9(1)(ii). The court reasoned that the 'on' and 'off' periods form an integral part of the contract, and even if the 'off' period involved training or standby arrangements, it was directly connected to the services rendered in India, making the payment income earned in India. The court noted that the employer company paid the entire salary, including for the 'off' period, from Indian operations, indicating the parties' intention. Regarding free boarding and lodging, the court held it to be a necessity due to the hazardous and arduous nature of work on the rig, and thus not a perquisite. For interest under Section 234B, the court found it not justified without hearing and reasons, especially when there was a bonafide dispute and conflicting tribunal decisions, and the employer had not deducted tax at source as per law. The court answered the first question in the negative (in favour of the department) and the other two questions in the affirmative (in favour of the assessee).

What were the issues?

1. Whether salary paid to the assessee for the 'off' period outside India is chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961, especially given prior ITAT rulings to the contrary? 2. Whether free boarding and lodging facilities provided by the employer at the rig in high seas constitute a perquisite taxable in the hands of the assessee? 3. Whether interest under Section 234B of the Income Tax Act can be charged when the entire income was subject to Tax Deducted at Source (TDS), considering that interest is chargeable on assessed tax as defined by Explanation 1 below Section 234B? Assessee's arguments: - The 'off' period salary is not taxable in India. - Free boarding and lodging are necessities, not perquisites. - Interest under Section 234B is not leviable as the entire income was subject to TDS and there was a bonafide dispute regarding taxability. Revenue's arguments: - Salary for the 'off' period is taxable in India. - Free boarding and lodging are perquisites. - Interest under Section 234B is leviable on assessed tax.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 234B,Section 4,Section 5(2),Section 2(45),Section 191,Section 192,Section 208,Section 209(1)(a),Section 209(1)(d)

AI-generated summary — verify with the full judgment below

2004:UHC:2054

Assessment Year 1993-94

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 32 of 2001

The Commissioner of Income Tax, Meerut and another

............. Appellants Versus Reading & Bates Exploration Co., As agent of Mr. J. Dejean, Dehradun

............... 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 30.06.2000 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. Nos. 6535, 6536, 6537 & 6538/Del/1995. 2. Mr. J. Dejean., respondent is a non-resident foreign technician employed by a foreign company, Reading and Bates Exploration Company which, in the year under consideration, executed contracts in India. During the year consideration, respondent was in employment of this company and thus derived income from 'salaries' from it.

3.

The questions raised before us are as follows:-

QUESTION:

1.

Whet

The order continues below.

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