COMMISSIONER INCOME TAX vs. HUGHES SERVICE

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ITA/18/2001HC UttarakhandUKHC01002969200507 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first question regarding the taxability of salary paid for the off period outside India was decided in favor of the assessee 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". For the second and third questions, the Court relied on its own Division Bench decision in "Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases" reported in (2003) 264 ITR 320. This decision held that free boarding facility provided by the employer on the rig was not a perquisite under Section 17(2)(iii) and its value could not be added to the assessee's income. It was also held that the imposition of interest under Section 234-B was not justified without proper hearing and reasons. Consequently, all questions were answered against the appellants and in favor of the assessee.

What were the facts?

The appeal was filed by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against an order dated April 6, 2000, passed by the Income Tax Appellate Tribunal (Delhi Bench 'B'). The dispute pertains to Assessment Year 1990-91. The assessee is M/s Hughes Services (FE) Pvt. Ltd., acting as the agent of Mr. O.Connor Anthony. The appeal challenges the Tribunal's decision on the taxability of salary paid for an off-period outside India, the taxability of free lodging and boarding as a perquisite, and the chargeability of interest under Section 234-B.

What were the issues?

The Tribunal had to decide three substantial questions of law: 1. Whether the salary paid to the assessee for the off period outside India was not chargeable to tax under Section 9(1)(ii) of the Income Tax Act, 1961. 2. Whether any benefit or perquisite or their value on account of free lodging and free boarding provided by the employer to its employee within the meaning of Section 17(2) of the I.T. Act cannot be taxed under Section (2)(24)(iva) of the Income Tax Act. 3. Whether the chargeability of interest under Section 234-B of the I.T. Act was justified on assessed tax as defined by Explanation 1 below Section 234-B. The appellants (Revenue) contended that the salary paid for the off period outside India was taxable, free lodging and boarding constituted a taxable perquisite, and interest under Section 234-B was correctly levied. The respondent (Assessee) argued that the salary was not taxable, the free facilities were not perquisites, and the interest was not justified.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 17(2),Section 2(24)(iva),Section 234-B

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 18 of 2001

1.

Commissioner of Income Tax, Meerut

2.

Assistant Commissioner of Income Tax, Special

Circle, Dehradun

… Appellants

Versus

M/s Hughes Services (FE) Pvt. Ltd. as agent of Mr. O.Connor Anthony, 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 06.04.2000, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘B’ New Delhi) in ITA No.1735/(Del) of 1994. The dispute relates to the Assessment Year 1990-91. 2. The substantial questions of law raised in the appeal are as follows: (i) Whether the Tribunal committed an error or law in holding that the salary paid to the assessee, for the off period, outside India was not chargeable to tax in terms of Section 9(1) (ii) of the Income Tax Act, 1961?”

(ii) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally correct in holding that any benefit or perquisite or their value on account of free lodging and free boarding provided by the employer to its employee within the meaning

of Section 17(2) of I.T. Act cannot be taxed under Section (2)(24)(iva) of the Income Tax Act?”

(iii) Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in allowing the appeal in favour of the assessee against chargeability of interest under Section 234-B of the I.T. Act whereas this interest is chargeable on assessed tax as defined by Explanation 1 below Section 234-B?”

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 held that the imposition of interest under Section 234-B was not justified without hearing and without reasons.

5.

In view of the above, we dismiss the appeal. All the questions in this appeal are answered against the appellants and in favour of the assessee.

(B.C. Kandpal, J.) (P.C. Verma, J.) Rajeev Dang

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