ENSCO MARITIME LTD.AS AGENT OF ALLEN RONALD TURVEY vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/179/2004HC UttarakhandUKHC01004944200404 April 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided both questions of law. For the first question, concerning the non-deductibility of remuneration in another state, the Court held that the ITAT had erred. This decision was based on a prior Division Bench judgment of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" (decided on 22.07.2005), which answered a similar question in favor of the Revenue. However, for the second question, regarding the taxability of off-period salary under Section 9(1)(ii), the High Court answered in favor of the assessee. This was in view of the Hon’ble Apex Court's decision in Civil Appeal Nos.351-355 of 2005, "Sedco Forex International Drill Inc. and Otheres Vs. Commissioner of Income Tax, Dehradun and Another". The appeal was disposed of in accordance with these decisions. No issue was expressly left undecided.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. Allan Ronald Turvey, against an order dated July 26, 2004, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi Bench, for the assessment year 1998-99. The appellant and the revenue agreed that only two specific questions of law were to be determined by the High Court, and the rest of the framed questions were not pressed. The High Court was to decide whether the ITAT erred in holding that the appellant failed to satisfy a condition regarding the non-deductibility of remuneration in another state, and whether the Tribunal was correct in holding that off-period salary was not taxable under Section 9(1)(ii) as it stood at the relevant time.

What were the issues?

The High Court had to decide two questions of law: 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 enterprises chargeable to tax in that other State?’ (This question turns on the interpretation of provisions related to international taxation and deductibility of remuneration). 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? (This question concerns the taxability of salary earned during periods when the employee was not actively working, under Section 9(1)(ii) of the Income Tax Act). Contentions: Assessee: The assessee did not explicitly argue their case in the provided text, but the outcome suggests their position on the second issue was upheld. Revenue: The revenue's position was that the remuneration was not deductible in the other state, as per the first question. For the second question, the revenue's argument is not explicitly stated, but the Supreme Court's decision in a similar case favored the assessee.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No.179 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Allan Ronald Turvey C/o Nangia & Company, Chartered Accountants, 75/7 Rajpur Road, Dehradun

............. Appellant

Versus

The Commissioner of Income Tax, Dehradun

............... Respondents

Ms. Krishi Shukla, Advocate for the appellant. Sri P.Maulekhi, Id. Standing counsel for the Revenue.

Dated: April 4, 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 26.07.2004 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench ‘F’ 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 enterprises 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 a Division 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 Income 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 aforementioned second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos.351-355 of 2005 “Sedco Forex International Drill 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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