ENSCO MARITIME LTD AS AGENT KLABAT PELENKAHU vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/191/2004HC UttarakhandUKHC01004956200404 April 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided the two questions of law as follows. For the first question, concerning the deductibility of remuneration, the Court followed its own Division Bench decision in "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" (decided on 22.07.2005 in Income Tax Appeal No.165 of 2001). In that precedent, the question was answered in favour of the Revenue. Therefore, the High Court answered the first question in favour of the Revenue. For the second question, regarding the taxability of off-period salary under Section 9(1)(ii), the Court referred to 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, JT 2005(9) SC 639". The Apex Court's judgment answered this question in favour of the assessee. Consequently, the High Court answered the second question in favour of the assessee. The appeal was disposed of in view of these decisions.

What were the facts?

The appeal was filed by Ensco Maritime Ltd. (formerly Dual Offshore Ltd.), acting as an agent for Mr. Klabat Pelenkahu, 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 were ready to argue the matter. The parties agreed that only two specific questions of law arising from the ITAT's order were to be determined, and the rest of the framed questions were not pressed. The appeal was preferred against the ITAT's order.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the learned ITAT erred in law in holding that the appellant 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?' This question turns on the interpretation of relevant provisions concerning the deductibility of remuneration in international tax contexts. 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 an employee is not actively working in India. Assessee's contentions: The assessee did not explicitly state their arguments for these two questions in the judgment, but their position is implied by the questions framed and the subsequent rulings. Revenue's contentions: Similarly, the Revenue's specific arguments for each question are not detailed, but their stance is reflected in the outcome of the decided cases.

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.191 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Klabat Pelenkahu 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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