THE COMMISSIONER OF INCOME TAX vs. HUGHES SERVICE PVT. LTD.

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ITA/567/2001HC UttarakhandUKHC01000022200407 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court addressed the two questions of law. For the first question concerning the taxability of salary paid for off-periods outside India, the Court noted that the Hon'ble Apex Court had already decided this issue in Civil Appeal Nos. 351-355 of 2005, titled "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another." Following the Apex Court's decision, this question was answered in favour of the assessee. Regarding the second question on whether free boarding facility provided on board the rig constituted a perquisite, the Court referred to a Division Bench decision of the same High Court in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320. This precedent held that such free boarding facilities were not perquisites under Section 17(2)(iii) and their value could not be added to the assessee's income. Consequently, this question was also answered in favour of the assessee. The appeal was dismissed, with both questions answered against the appellants and in favour of the assessee.

What were the facts?

The appeal before the High Court of Uttaranchal at Nainital concerns Assessment Year 1991-92. The appellants are the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income Tax, Special Circle Dehradun. The respondent is M/s Hughes Services (FE) Pvt. Ltd., acting as the agent of Mr. Parker E.L. The appeal challenges an order dated February 27, 2001, passed by the Income Tax Appellate Tribunal (Delhi Bench ‘SMC’) in ITA No. 1681/(Del) of 1994. The core dispute revolves around the taxability of salary paid to the assessee for periods spent outside India and the taxability of free boarding facilities provided by the employer.

What were the issues?

The High Court was required to decide two substantial questions of law: 1. Whether, on the facts and in the circumstances, the Income Tax Appellate Tribunal was legally correct in holding that salary paid to the assessee for the off-period outside India was not chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961, especially when the ITAT itself had previously held such off-period salary to be taxable in India in several prior orders and had referred a question of law on this issue to the High Court. 2. Whether, on the facts and in the circumstances, the Income Tax Appellate Tribunal was legally correct in holding that a free boarding facility provided by the employer on board a rig in high seas cannot be construed as a perquisite. Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The revenue argued that the ITAT's decision on the taxability of off-period salary was incorrect, citing previous ITAT orders and a reference to the High Court on the same issue. The revenue also contended that the free boarding facility should be considered a perquisite.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 17(2)(iii)

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 567 of 2001

1.

Commissioner of Income Tax, Dehradun

2.

Assistant Commissioner of Income Tax, Special Circle Dehradun

.....Appellants

Versus

M/s Hughes Services (FE) Pvt. Ltd. as agent of Mr. Parker E.L. C/o G.C. Nagalia (Advocate) 20-A New Road, Dehradun

....Respondent

Dated: March 7, 2006

Mr. Pitamber Maulekhi, Advocate for the appellants. Mr. Ambrish Chaterji, Advocate for the respondent

Coram: Hon. P.C. Verma, J.

Hon. B.C. Kandpal, J.

This appeal is against the order dated 27.02.2001, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘SMC’ New Delhi) in ITA No. 1681/(Del) of 1994. The dispute relates to the Assessment Year 1991-

92.2.

The substantial questions of law raised in the appeal are as follows:

(i)

Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was legally correct to hold that the salary paid to the assessee for the off-period outside India was not chargeable to Indian Income Tax Act in terms of Section 9(1)(ii) of the I.T. Act, 1961, whereas the ld. ITAT has itself held vide order dated 25.03.1992 in ITA No. 5649/D/92, dated 28.07.1999 in ITA No. 1079/D/91, dated 24.01.2000

in ITA No. 411/D/93 and dated 15.05.2000 in ITA No. 1648/D/94, that off period salary is taxable in India and vide order dated 18.11.1996 in RA No. 433 to 511/D/96 has referred question of law on this issue for esteemed opinion of this Court?’’

(ii)

Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally correct in holding that free boarding facility provided by the employer on board the rig in high seas cannot be construed to be perquisite?

3.

The first question has 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, JT 2005(9) SC 639”. In view of the aforesaid decision of the Hon’ble Apex Court, this question is answered in favour Rajeev Dang

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