THE COMMISSIONER OF INCOME TAX and ORS vs. READING and BATES EXPLORATION

ITA/46/2003HC UttarakhandUKHC01006249200303 November 2003Author: OTHER2 pages
AI SummaryPartly Allowed

What were the facts?

This case involves an appeal by the Commissioner of Income Tax, Dehradun, and the Income Tax Officer, Special Ward, Dehradun (the Revenue) against M/s Reading & Bates Exploration Co., acting as agent for Mr. K.D. Sullivan (the assessee). The appeal was filed before the High Court of Uttaranchal at Nainital. The assessment years are not explicitly stated. The appeal challenges an order passed by the Income Tax Appellate Tribunal. The procedural history indicates that the High Court had previously decided a similar matter on October 9, 2003, in Income Tax Act Appeal No. 57 of 2002, between the Commissioner of Income Tax and SEDCO Forex International Drilling Co. Ltd. The High Court considered the present appeal to be squarely covered by that earlier decision. No arguments were presented by the respondent assessee.

What did the High Court hold?

The High Court, in view of its prior decision in Commissioner of Income Tax vs. SEDCO Forex International Drilling Co. Ltd., answered the referred questions. For the first question, the Court held that 'OFF Period Salary' was taxable, thus answering in the negative, in favour of the Department and against the assessee. This implies the Tribunal's earlier finding on this point was reversed. For the second question, the Court held that the free boarding facility provided by the employer on the rig was not a perquisite, answering in the affirmative, in favour of the assessee and against the Department. This means the Tribunal's finding on this issue was upheld. The appeal was disposed of, with no order as to costs. The ratio decidendi for the first question is that salary earned during the 'OFF Period' is taxable. For the second question, the ratio is that free boarding on a rig is not a perquisite under the relevant section.

What were the issues?

The High Court was asked to decide two questions of law referred under section 260A of the Income Tax Act: 1. Whether the Tribunal was correct in holding that 'OFF Period Salary' was not taxable under section 9(1)(ii) read with the Explanation as it stood at the relevant time? 2. Whether the Tribunal was correct in holding that a free boarding facility provided by the employer on the rig is not a perquisite under section 17(2)(iii)? The Revenue contended that 'OFF Period Salary' was taxable and that free boarding facilities constituted a perquisite. The assessee's contentions are not recorded as none appeared for the respondent. The Revenue relied on the decision in the case of Commissioner of Income Tax vs. SEDCO Forex International Drilling Co. Ltd.

Which sections of the Income-tax Act were involved?

Section 260A,Section 9(1)(ii),Section 17(2)(iii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Application No. 46 of 2003

1.

The Commissioner of Income Tax, Dehradun

2.

The Income Tax Officer, Special Ward, Dehradun ........................ Appellants

Versus

M/s Reading & Bates Exploration Co., As agent of Mr. K.D. Sullivan, New Delhi. ........................ Respondent

Mr. S. K. Posti, Adovocate for appellants. None for the respondent.

Coram: Hon. S.H. Kapadia, C.J.

Hon. M.M. Ghildival, J.

Date: 03.11.2003

PC:-

Affidavit proving service taken on record.

The matter is squarely covered by our decision dated 9th October 2003 in Income Tax Act Appeal No. 57 of 2002; The Commissioner of Income Tax, Dehradun & another V/s SEDCO Forex International Drilling Co. Ltd.

The questions referred to us for opinion under section 260A of the Income Tax Act are as follows:- QUESTIONS: 1. "Whether, the Tribunal was right in holding that "OFF Period Salary" was not taxable u/s 9/(1)(ii) read with the Explanation as it stood

The order continues below.

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