THE COMMISSIONER OF INCOME TAX vs. M/S HUGHES SERVICES

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ITA/329/2000HC UttarakhandUKHC01015101200417 April 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, answering both substantial questions of law against the appellants (Revenue) and in favour of the assessee. The Court followed its own Division Bench judgment in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320. In that precedent, it was held that free boarding facilities provided by the employer on a rig were not a perquisite under Section 17(2)(iii) and their value could not be added to the assessee's income. Furthermore, the precedent established that the imposition of interest under Section 234-B was not justified without proper hearing and reasons. Consequently, the High Court found no error in the Tribunal's decision on these points.

What were the facts?

The appeal was filed by the Commissioner of Income Tax and Dy. Commissioner of Income Tax against an order dated January 24, 2000, passed by the Income Tax Appellate Tribunal (Delhi Bench 'C', New Delhi) in ITA No. 421(Del) of 1993. The dispute pertains to the Assessment Year 1989-90. The respondent is M/s Hughes Services (FE) PTE Ltd., acting as the agent of Mr. Olsen P.W. The core of the dispute involves whether free boarding and lodging provided on a rig in high seas constitutes a perquisite, and whether interest under Section 234-B is chargeable when the entire income was subject to Tax Deducted at Source (TDS).

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether the Income Tax Appellate Tribunal erred in holding that free boarding and lodging facilities provided by the employer on board the rig in high seas cannot be construed as a perquisite, under Section 17(2)(iii) of the Income Tax Act. 2. Whether, on the facts and in the circumstances, the Income Tax Appellate Tribunal was legally justified in holding that interest under Section 234-B of the Income Tax Act cannot be charged since the entire income of the assessee was subject to TDS, whereas this interest is chargeable on assessed tax as defined by Explanation I below Section 234-B. Assessee's contentions: Not recorded in the judgment. Revenue's contentions: Not explicitly recorded, but implied by the questions raised in the appeal.

Which sections of the Income-tax Act were involved?

Section 17(2)(iii),Section 234-B

AI-generated summary — verify with the full judgment below

COURT NO. 2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 445 of 2001 (Old No.329 of 2000)

1.

The Commissioner of Income Tax, Meerut.

2.

Dy. Commissioner of Income Tax, Special Circle,

Dehradun

......Appellants Versus

M/s Hughes Services (FE) PTE Ltd. As agent of Mr. Olsen P.W., Dehradun

.....Respondent

Dated: April 17, 2006

Mr. P.Maulekhi, Advocate for the appellants. Mr. V.K. Bisht, Advocate for the respondent.

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

This appeal is against the order dated 24.01.2000, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘C’ New Delhi) in ITA No. 421(Del) of 1993. The dispute relates to the Assessment Year 1989-90. 2. The substantial questions of law raised in the appeal are as follows: “Whether the Income Tax Appellate Tribunal has erred in holding that free boarding and lodging facilities provided by the employer on board the rig in high seas cannot be construed to be perquisite?”

“Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that interest under Section 234-B of the I.T. Act cannot be charged since the entire income of the assessee was subject to T.D.S. whereas this interest is chargeable on

assessed tax as defined by Explanation I below Section 234-B”? 3. 234-B was not justified without hearing and without reasons.

4.

Following the above-mentioned judgment of a Division Bench of this Court, we dismiss the appeal. Both the questions are answered against the appellants and in favour of the assessee.

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

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