SEDCO FOREX INTERNATIONAL DRILLING INC. vs. THE COMMISSIONER OF INCOME TAX, DEHRADUN AND ANR.

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ITA/125/2005HC UttarakhandUKHC01003010200503 May 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court addressed the two questions of law. For the first question, the Court held that the ITAT had erred in law. This finding was based on a previous decision by a Division Bench of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" (Income Tax Appeal No. 165 of 2001), decided on July 22, 2005, which answered this question in favor of the Revenue. For the second question, the Court held that the Tribunal was right in its finding. This was in view of a decision by the Hon'ble Apex Court in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another" (JT 2005(9) SC 639), which answered this question in favor of the assessee. The appeal was disposed of accordingly.

What were the facts?

The appeal was filed by Sedco Forex Intl. Drilling Inc., acting as an agent for its employee Mr. Normal Selves, against an order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'E', New Delhi. The assessment year in question was 1997-98. The appellant is a company incorporated in Panama. The appeal challenged the ITAT's decision on two specific questions of law, with other framed questions not being pressed. The High Court noted that both parties were ready to argue the matter. The procedural history involves the ITAT order being the subject of the present appeal to the High Court.

What were the issues?

The Tribunal had to decide two questions of law. The first question was: 1. Whether the learned I.T.A.T. has erred in law in holding that the appellant has failed to satisfy the condition that ‘the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State’? The second question was: 2. Whether the Tribunal was right 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? The appellant did not press other questions. The revenue's contentions were not explicitly recorded for either question. The appellant's contentions were also not explicitly recorded, but the framing of the questions implies their stance.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 125 of 2005

Sedco Forex Intl. Drilling Inc. as agent Of its employee Mr. Normal Selves, a Company incorporated in the Republic of Panama having its registered office at No.8 Cquitino de la Guardia Street, City of Panama, Republic of Panama, present address C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai

………… Appellant

Versus

1.

The Commissioner of Income Tax, Dehradun, having office at Subhash Road, Dehradun 248001

2.

The Deputy Commissioner of Income Tax, Special Circle, Dehradun having its office at Subhash Road, Dehradun 248001

………Respondents

Ms. Menka Tripathi, Advocate for the appellant. Mr. S.K. Posti, Advocate for the respondents.

Date: May 03, 2006

Coram: Hon.P.C. Verma, J. Hon. B.C. Kandpal, J.

Both the parties are ready to argue the matter today.

2.

This appeal has been preferred against the order dated 28.01.2005 for the assessment year 1997-98, passed by the Income Tax Appellate Tribunal, (Bench ‘E’ New Delhi).

3.

The learned counsel for the parties agree that the following only two questions of law arise in this appeal for the determination. They do not press the rest of the questions framed in the appeal:-

1.

Whether the learned I.T.A.T. has erred in law in holding that the appellant has failed to satisfy the condition that ‘the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State’?

2.

Whether the Tribunal was right 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?

4.

So far as the question No. 1 is concerned, this question has already been decided by Divisoin Bench of this Court {in which one of us (P.C.Verma,J.) was a member} in case of “Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another”, which was decided on 22.07.2005 in In3come Tax Appeal No. 165 of 2001. In the said judgment, the question framed in the said appeal was answered in favour of the Revenue.

5.

The second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos.351-355 of 2005 “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639”. In view of the aforesaid decision of the Hon’ble Apex Court, this question is answered in favour of the assessee.

6.

In view of the above, we dispose of the appeal accordingly.

(B.C. Kandpal, J.)

(P.C. Verma, J.) Rajeev Dang

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