SEDCO FOREX INTERNATIONAL DRILLING vs. THE COMMISSIONER OF INCOME TAX and ANR

PDF · subscribers
ITA/156/2005HC UttarakhandUKHC01003034200523 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the appeal based on previous pronouncements. For the first question, concerning the deductibility of remuneration, 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 July 22, 2005. In that prior judgment, the question was answered in favor of the Revenue. For 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 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 was in favor of the assessee. Consequently, the appeal was disposed of in light of these decisions.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., as agent of its employee Mr. Michael Kingston, a Panamanian company, filed an appeal against a consolidated order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT) for the assessment year 1998-99. The appeal was preferred against the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income Tax, Special Range, Dehradun. The parties agreed that only two questions of law were to be determined, and the rest were not pressed. The High Court of Uttaranchal at Nainital was hearing the appeal.

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 provisions related to the deductibility of remuneration in international taxation. 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 in India, under Section 9(1)(ii) of the Income Tax Act. Contentions: Assessee: The assessee did not explicitly state its contentions for these specific questions in the provided text, but the outcome suggests arguments were made in their favor for the second issue. Revenue: The revenue's contentions are not explicitly detailed for either question, but the judgment indicates that for the first question, the revenue's position was upheld by a previous Division Bench of the High Court.

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. 156 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Michael Kingston a company incorporated in the Republic of Panama having its registered office at No. 8 Acquitino de la Guardia Street, City of Panama, Republic of Panama, present Address C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai

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

Versus

1.

The Commissioner of Income Tax, Dehradun having office at Subhash Road, Dehradun-248001

2.

The Assistant Commissioner of Income Tax

Special Range, Dehradun having office

at Subhash Road, Dehradun-248001

.................

Respondents

Ms. Menka Tripathi, Advocate for the appellant. Mr. Pitamber Maulekhi, Advocate for the respondents.

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 consolidated

order dated 28.01.2005 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench ‘E’ 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 Division Bench of this Court {in Which one of us (P.C. Verma, J.) was a member} in case of “Sedco another”, which was decided on 22.7.2005 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 second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos. 351-355 of 2005 “Sedco 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

More judgments on Section 9(1)(ii)

All 123 judgments and leading authorities on Section 9(1)(ii) →

Recent GST High Court judgments

Search GST case law →