SEDCO FOREX INTERNATIONAL DRILLING vs. THE COMMISSIONER OF INCOME TAX

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ITA/11/2002HC UttarakhandUKHC01009104200306 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court addressed two specific questions of law. Regarding the first question, concerning whether payments made to the assessee were technical fees taxable under Section 44-D, the Court held that this issue had already been decided by a Division Bench of the same High Court in the case of Commissioner of Income Tax and another Vs. O.N.G.C. as agent of M/S Foramer France, Dehradun, decided on December 15, 2005. In that precedent, the question was answered in favour of the Revenue. Therefore, the High Court applied this ruling to the present appeal, answering the first question in favour of the Revenue. For the second question, concerning the taxability of off-period salary under section 9(1)(ii), the Court noted that this 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 favour of the assessee. Consequently, the High Court answered the second question in favour of the assessee. The appeal was disposed of in view of these decisions.

What were the facts?

This Indian Income Tax Appellate Tribunal (ITAT) judgment concerns an appeal filed by M/s Sedco Forex Intl. Drilling Inc. (the assessee) against an order dated November 27, 2001, passed by the ITAT, Bench 'B', New Delhi, for the assessment year 1992-93. The appeal was filed before the High Court of Uttaranchal at Nainital. The assessee is a company incorporated in Panama. The respondents are the Commissioner of Income Tax, Meerut, and the Deputy Commissioner of Income Tax, Special Range-1, Dehradun (collectively referred to as the Revenue). The High Court noted that the parties agreed to argue only two specific questions of law, not pressing the rest. The procedural history indicates the appeal is against the ITAT's order.

What were the issues?

The High Court was asked to decide two questions of law concerning the assessment year 1992-93. 1. Whether the learned ITAT was right in holding that the payments made to the assessee company were technical fees and hence taxable under Section 44-D of the Income Tax Act, 1961? 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? Assessee's Contentions: The judgment does not explicitly record the assessee's contentions for either issue. However, by implication, the assessee would argue against the findings of the ITAT on the first issue and in favour of its position on the second issue. Revenue's Contentions: The judgment does not explicitly record the Revenue's contentions for either issue. However, by implication, the Revenue would argue in favour of the ITAT's findings on the first issue and against the assessee's position on the second issue.

Which sections of the Income-tax Act were involved?

Section 44-D,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.11 of 2002

M/s Sedco Forex Intl. Drilling Inc. A company incorporated in the Republic of Panama, Having its registered office at No.8, Acqutino de la Guardia Street, City of Panama, Republic of Panama, Present address C/o A.F. Ferguson & Co., Makers Towers, 4th Floor, Cuffe Parade, Mumbai ………. Appellant Versus

1.

The Commissioner of Income Tax, Meerut having office at income Tax Officer, Opp. Bhasali Ground, Meerut

2.

The Deputy Commissioner of Income Tax, Special

Range- 1, Dehradun having office at Subhash Road,

Dehradun- 248001

………. Respondents

Ms. Menka Tripathi, Advocate for the appellant. Ld. Standing counsel for the Revenue.

Dated: March 6, 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 27.11.2001 for the assessment year 1992-93, passed by the Income Tax Appellate Tribunal, (Bench 'B' 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. was right in holding that the payments made to the assessee Company were technical fees and hence taxable under Section 44-D of the Act?

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 "Commissioner of Income Tax and another Vs. O.N.G.C. as agent of M/S Foramer France, Dehradun, which was decided on 15.12.2005 in Income Tax Appeal No.239 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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