COMMISSIONER INCOME TAX vs. HALLIBURTON OFSHORE SERVICES

ITA/102/2000HC UttarakhandUKHC01015049200430 June 2004Author: OTHER4 pages
AI SummaryDismissed

What were the facts?

The appeal concerns Assessment Year 1989-90. The Revenue (Commissioner of Income Tax, Meerut and another) filed an appeal under Section 260A of the Income Tax Act, 1961, against the judgment and order dated 5.10.1999 passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The respondent, Halliburton Offshore Service Inc., acting as agent for Mr. Yungul D., is a non-resident foreign technician employed by a foreign company. The dispute revolves around the taxability of salary paid to the assessee for an 'off period' spent outside India.

What did the High Court hold?

The High Court held that the salary paid to the assessee for the 'off period' outside India was indeed chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961. The Court reasoned that the contract for employment, which included 'ON' and 'OFF' periods, was for a two-year term with an alternating time schedule, making both periods an integral part of the contract. It was not possible to give separate tax treatments to salaries for these periods. The Court found that even if the 'off period' was considered a standby arrangement, the assessee had to undergo training during this time, which was directly connected to his hazardous work on oil rigs in India, ensuring he remained physically and mentally fit. This training and fitness maintenance had a nexus with the services rendered in India. The Court also noted that the employer company paid the entire salary, including for the 'off period', from the income of Indian operations, indicating the intention of the contracting parties. Therefore, the entire salary for both periods was taxable in India. The question was answered in the negative, in favour of the department and against the assessee.

What were the issues?

1. Whether, on the facts and circumstances of the case, the learned ITAT was legally correct to hold that the salary paid to the assessee for the 'off period' outside India was not chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961? Assessee's Contention: The judgment does not explicitly record the assessee's arguments. However, the context implies the assessee argued that salary for the 'off period' outside India was not taxable in India. Revenue's Contention: The revenue contended that the 'off period' was an integral part of the contract, not merely a rest period, and that the assessee had to undergo training and remain fit during this period, which had a nexus with services rendered in India. They argued that the entire salary, including for the 'off period', was taxable in India under Section 9(1)(ii). The revenue relied on the Explanation to Section 9(1)(ii) introduced by the Finance Act of 1983.

Which sections of the Income-tax Act were involved?

Section 260A,Section 4,Section 4(2),Section 5(2),Section 9(1)(ii),Section 2(45)

AI-generated summary — verify with the full judgment below

Assessment Year 1989-90 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No. 106 of 2001 OLD NO. 102 OF 2000 The Commissioner of Income Tax, Meerut and another

......... Appellants Versus Halliburton Offshore Service Inc., As agent of Mr. Yungul D., C/o Arthur Andersen & Co., 66, Maker Towers, F. Cuffe Parade, Bombay

......... Respondent

Mr. S.K. Posti, Advocate for appellants.

Date: 30.06.2004

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 5.10.1999 passed by the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 1344/Del/1993. 2. Mr. Yungul D., respondent is a non-resident foreign technician employed by a foreign company, Halliburton Offshore Services Inc.

3.

The question raised before us is as follows:-

QUESTION:

Whether on the facts and circumstances of the case, the Ld. ITAT was legally correct to hold that the salary paid to the assessee for the said off period outside India was not chargeable to Indian Income Tax Act in terms of section 9(1)(ii) of the I.T. Act, 1961?

The order continues below.

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