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

ITA/25/2003HC UttarakhandUKHC01006226200303 November 2003Author: OTHER2 pages
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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 appellants/Revenue) against M/s Reading & Bates Exploration Co., acting as agent for Mr. McDonald JD (the respondent/assessee). The appeal concerns assessment years not explicitly stated in the judgment. The matter was referred to the High Court under Section 260A of the Income Tax Act, 1961. The High Court's decision is based on a prior judgment delivered on October 9, 2003, in a similar case, Income Tax Act Appeal No. 57 of 2002, involving The Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd. The respondent was not represented before the High Court.

What did the High Court hold?

The High Court, in view of its prior decision in the SEDCO Forex International Drilling Co. Ltd. case, answered the referred questions. On the first question, concerning 'OFF Period Salary', the Court held in the negative, meaning it ruled in favour of the Department and against the assessee. This implies that the Court found 'OFF Period Salary' to be taxable. For the second question, regarding the free boarding facility, the Court held in the affirmative, favouring the assessee and against the Department. This indicates that the Court agreed with the Tribunal that the free boarding facility was not a taxable perquisite. The appeal was disposed of accordingly, with no order as to costs. The ratio decidendi is that 'OFF Period Salary' is taxable, while free boarding on a rig is not a perquisite, as per the established precedent.

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' is taxable, and free boarding is a perquisite. The judgment does not record specific arguments from the assessee's side, but their position, as reflected in the Tribunal's prior ruling, was that 'OFF Period Salary' was not taxable and free boarding was not a perquisite. The Revenue relied on the principles established in the SEDCO Forex International Drilling Co. Ltd. case.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 25 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. McDonald JD, New Delhi. ........... Respondent

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

Coram: Hon'ble S.H. Kapadia, C.J. Hon'ble M.M. Ghildiyal, 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 Vs 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 at the relevant time

The order continues below.

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