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

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ITA/318/2000HC UttarakhandUKHC01015093200407 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court answered the first question in favour of the assessee, relying on the Hon'ble Apex Court's decision 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 referred to its own Division Bench decision in Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases, which held that free boarding facilities on a rig were not perquisites under Section 17(2)(iii) and their value could not be added to the assessee's income. The same judgment also held that imposing interest under Section 234-B was not justified without proper hearing and reasons. Therefore, the appeal was dismissed, with all questions answered against the appellants and in favour of the assessee.

What were the facts?

This appeal by the Commissioner of Income Tax and Assistant Commissioner of Income Tax (Appellants) is against the order dated 27.04.2000, passed by the Income Tax Appellate Tribunal (Delhi Bench 'B') in ITA No. 1705/(Del) of 1994. The dispute pertains to the Assessment Year 1990-91. The assessee is M/s Hughes Services (FE) Pvt. Ltd., acting as an agent for Mr. Olsan Peter. The appeal challenges the Tribunal's decision regarding the taxability of salary paid for off-periods outside India, the classification of free boarding facilities as perquisites, and the charging of interest under Section 234-B.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the 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 I.T. Act, 1961, despite previous ITAT rulings holding such off-period salary as taxable. (Assessee's contention: Not taxable; Revenue's contention: Taxable based on prior ITAT decisions). 2. Whether the free boarding facility provided by the employer on board the rig in high seas could be construed as a perquisite. (Assessee's contention: Not a perquisite; Revenue's contention: Is a perquisite). 3. Whether interest under Section 234-B of the I.T. Act could be charged when the entire income was subject to TDS, given that this interest is chargeable on assessed tax as defined by Explanation 1 below Section 234-B. (Assessee's contention: Not chargeable; Revenue's contention: Chargeable).

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 17(2)(iii),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. 456 of 2001 (Old No. 318/2000)

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. Olsan Peter, Bombay … 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 27.04.2000, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘B’ New Delhi) in ITA No. 1705/(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 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 and in ITA No.411/D/93 that off period salary is taxable in India?”

(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?”

(iii) Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that interest under Section 234-B of the I.T. Act cannot be charged since the entire income of the assessee was subject to TDS 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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