SEDCO FOREX DRILLING vs. THE COMMISSIONER OF INCOME TAX

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ITA/17/2002HC UttarakhandUKHC01009111200327 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 appeal based on prior pronouncements. For the first issue, concerning whether payments were technical fees taxable under Section 44-D, the Court referred to its own Division Bench decision in the case of "Commissioner of Income Tax and another Vs. O.N.G.C. as agent of M/s Foramer France, Dehradun," decided on December 15, 2005. In that judgment, the question was answered in favor of the Revenue. Therefore, on this issue, the High Court upheld the Revenue's position. For the second issue, regarding the taxability of off-period salary under Section 9(1)(ii), the Court relied on the Hon'ble Apex Court's decision in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another." The Supreme Court had answered this question in favor of the assessee. Consequently, the High Court ruled in favor of the assessee on this point. The appeal was disposed of in accordance with these decisions.

What were the facts?

This Indian Income Tax Appellate Tribunal (ITAT) judgment concerns an appeal filed by M/s Sedco Forex Intl. Drilling Inc. (the assessee) against an order dated November 27, 2001, passed by the ITAT, Bench 'B', New Delhi, for the assessment year 1991-92. The appeal was filed before the High Court of Uttaranchal at Nainital. The assessee is a company incorporated in Panama. The respondents are the Commissioner of Income Tax, Meerut, and the Deputy Commissioner of Income Tax, Special Range-1, Dehradun (the Revenue). The appeal was listed for hearing, and both parties were ready to argue. The parties agreed that only two specific questions of law arose for determination, and the rest were not pressed.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the learned ITAT was right in holding that payments made to the assessee company were technical fees and hence taxable under Section 44-D of the Income Tax Act, 1961. 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. Arguments: Assessee: The assessee did not explicitly present arguments for these specific issues in the provided text, but the outcome of the second question indicates their position. Revenue: The Revenue's position is implied by the favorable outcome for them on the first question. For the second question, the Supreme Court's decision in favor of the assessee suggests the Revenue's argument was unsuccessful.

Which sections of the Income-tax Act were involved?

Section 44-D,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.17 of 2002

M/s Sedco Forex Intl. Drilling Inc. A company incorporated in the Republic of Panama, Having its registered office at No.8, Acqutino de la Guardia Street, City of Panama, Republic of Panama, Present address C/o A.F. Ferguson & Co., Makers Towers, 4th Floor, Cuffe Parade, Mumbai

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

Versus

1.

The Commissioner of Income Tax, Meerut having office at Income Tax Officer, Opp. Bhasali Ground, Meerut

2.

The Deputy Commissioner of Income Tax, Special Range-1, Dehradun having office at Subhash Road, Dehradun- 248001

…............ Respondents

Ms. Menka Tripathi, Advocate for the appellant. Shri P.Maulekhi, ld. Standing counsel for the Revenue.

Dated: March 27, 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 27.11.2001 for the assessment year 1991-92, passed by the Income Tax Appellate Tribunal, (Bench 'B' 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. was right in holding that the payments made to the assessee Company were technical fees and hence taxable under Section 44-D of the Act?

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 "Commissioner of Income Tax and another Vs. O.N.G.C. as agent of M/s Foramer France, Dehradun, which was decided on 15.12.2005 in Income Tax Appeal No.239 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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