COMMISSIONER OF INCOME TAX vs. BROWN AND ROOT INTERNATIONAL INC.

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ITR/30/1994HC UttarakhandUKHC01014658200625 April 2006Author: HON'BLE MR. JUSTICE M. M. GHILDIYAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the learned Income Tax Appellate Tribunal was legally correct in its decision. Both substantial questions of law were answered in the affirmative, meaning in favour of the assessee and against the Department. The Court relied on its previous judgment in the case of Commissioner of Income Tax and another Vs. Atwood Oceanics International S.A. The reasoning, as per the cited precedent, would likely establish that the continental shelf and the Exclusive Economic Zone were not considered part of India for Income Tax Act purposes prior to April 1, 1983, and consequently, salary income earned for services rendered in such offshore areas outside territorial waters before that date was not chargeable to tax. The application was dismissed, with no order as to costs.

What were the facts?

This case concerns Income Tax Reference No. 21 of 2003, arising from an order dated 04.05.1993 of the Income Tax Appellate Tribunal (ITAT) in I.T.A. No. 6685/Del/91. The dispute pertains to the Assessment Year 1983-84. The applicant is the Commissioner of Income Tax, Meerut, and the respondent is Brown & Root International, acting as an agent for Mr. Cooking K.D. The core of the dispute revolves around the taxability of salary income earned by an employee for services rendered prior to April 1, 1983, on a rig located in offshore areas outside India's territorial waters. The High Court of Uttaranchal at Nainital is hearing this reference.

What were the issues?

The High Court had to decide two substantial questions of law: 1. Whether the learned Income Tax Appellate Tribunal was legally correct in treating the continental shelf to the Exclusive Economic Zone as not forming part of India prior to 01.04.1983 for the purposes of the Income Tax Act, 1961? 2. Whether the learned Appellate Tribunal was justified in holding that the salary income earned by the respondent employee for services rendered prior to 01.04.1983 in a rig located in the offshore areas outside the territorial waters of India, was not chargeable to tax under the Income Tax Act, 1961 for the assessment year 1983-84? The applicant (Revenue) contended that the Tribunal's decision was incorrect. The respondent (assessee) argued that the income was not taxable in India. The Court noted that these questions were considered by a Division Bench in the case of Commissioner of Income Tax and another Vs. Atwood Oceanics International S.A., reported in Income Tax Reports, Vol. 264 {2003} Page 761.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

COURT NO.2 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Reference No.21 of 2003 (Old No. 30/1994)

The Commissioner of Income Tax, Meerut

….Applicant

Versus

Brown & Root Intl. As an agent of Mr. Cooking K.D. 66, Maker Towers, F. Cuffe, Parade, Bombay 400005

….. Respondent

Dated: April 25, 2006

Mr. Pitamber Maulekhi, ld. Standing counsel for the appellants.

Coram: Hon. M.M. Ghildiyal, J. Hon. B.C. Kandpal, J.

This is an application under Section 256 (1) of the Income Tax Act, 1961 arising out of order dated 04.05.1993 of the Tribunal in I.T.A. No.6685/Del/91. The dispute related to the Assessment Year 1983-84. 2. The substantial questions of law raised in the appeal are as follows:

“Whether the learned Income Tax Appellate Tribunal

was legally correct to treat the continental shelf to the Exclusive Economic Zone as not forming part of India

prior to 01.04.1983 for the purposes of Income Tax

Act, 1961?

“Whether the Ld. Appellate Tribunal was justified in holding that the salary income earned by the respondent employee for services rendered prior to 01.04.1983 in a rig located in the offshore areas

outside the territorial waters of India, was not chargeable to tax under the Income Tax Act, 1961 for the assessment 1983-84?”

3.

Tax Reports, Vo1.264 {2003} Page 761. 4. For the reasons given in the above judgment, we answer both the questions in the affirmative that is in favour of the assessee and against the Department.

5.

The application is dismissed accordingly. No order as to costs.

(B.C. Kandpal, J.)

(M.M. Ghildiyal, J.)

Rajeev Dang

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