ENSCO MARITIME LTD.AS AGENT OF JACK WAYNE BAILEY vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/176/2004HC UttarakhandUKHC01004941200423 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 framed questions of law based on previous pronouncements. For the first question, the Court held that it 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" (Income Tax Appeal No.165 of 2001, decided on 22.07.2005). That judgment answered the question in favour of the Revenue. For the second question, the Court noted that it had been decided by the Hon'ble Apex Court in Civil Appeal Nos.351-355 of 2005, "Sedco Forex International Drill Inc. and others Vs. Commissioner of Income Tax, Dehradun and Another". The Apex Court's decision answered this question in favour of the assessee. Consequently, the appeal was disposed of in accordance with these decisions.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. Jack Wayne Bailey, against an order dated July 26, 2004, passed by the Income Tax Appellate Tribunal (Banch 'F', New Delhi) for the assessment year 1998-99. The appellant and the revenue agreed that only two specific questions of law arose for determination in the appeal, and the rest of the framed questions were not pressed. The High Court of Uttaranchal at Nainital was hearing the appeal.

What were the issues?

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'? This question turns on the interpretation of provisions related to the deductibility of remuneration in international taxation. The assessee argued that the Tribunal erred in its finding, while the revenue contended that the condition was not satisfied. 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. The assessee argued in favour of non-taxability, relying on judicial precedents, and the revenue likely argued for its taxability.

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. 176 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Jack Wayne Bailey 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. Ld. Standing counsel for the Revenue.

Dated: March 23, 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, (Banch '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 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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