ENSCO MARITIME LTD.AS AGENT MR SAWALLUDDIN vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/180/2004HC UttarakhandUKHC01004946200431 March 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: 1. On the first question, concerning the deductibility of remuneration in another state, the Court held that this issue had already been decided 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" on July 22, 2005. In that judgment, the question was answered in favour of the Revenue. Therefore, the High Court followed this precedent and answered the first question against the appellant. 2. On the second question, regarding the taxability of off-period salary under Section 9(1)(ii), the Court noted that this issue had been decided 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". The Apex Court's decision was in favour of the assessee. Consequently, the High Court answered the second question in favour of the assessee. Operative Directions: The appeal was disposed of in view of the decisions on the two questions.

What were the facts?

The appellant, Ensco Maritime Ltd. (formerly Dual Offshore Ltd.), acting as agent for Mr. Sawalluddin, filed an appeal against an order dated July 26, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi, for the assessment year 1998-99. The appeal was preferred before the High Court of Uttaranchal at Nainital. 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 procedural history indicates that the appeal was ready for argument on March 31, 2006.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the ITAT erred in law by 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 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 rendering services in India. Contentions: Assessee: The assessee did not explicitly state its contentions for the first issue, but its appeal implies disagreement with the ITAT's finding. For the second issue, the assessee's position is that off-period salary is not taxable under Section 9(1)(ii) as it stood at the relevant time. Revenue: The revenue's position, implied by the High Court's decision on the first issue, is that the condition regarding non-deductibility of remuneration in the other state was not satisfied by the appellant. For the second issue, the revenue's argument would be that off-period salary is taxable under Section 9(1)(ii).

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.180 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Sawalluddin 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: March 31, 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 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 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 decide 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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