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

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ITA/144/2005HC UttarakhandUKHC01003022200503 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided the first question of law in favor of the Revenue. This decision was based on a previous judgment of a Division Bench of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another," decided on July 22, 2005, in Income Tax Appeal No.165 of 2001, which answered the similar question in favor of the Revenue. For the second question, the High Court answered it in favor of the assessee. This was in view of the decision of 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 appeal was disposed of accordingly, with the first issue decided against the appellant and the second issue decided in favor of the appellant.

What were the facts?

This appeal was filed by M/s Sedco Forex Intl. Drilling Inc., acting as an agent for its employee Mr. William Clinton, against an order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'E', New Delhi. The assessment year in question is 1998-99. The appellant is a company incorporated in Panama. The High Court of Uttaranchal at Nainital was considering the appeal. Both parties were ready to argue the matter. The appeal was preferred against the order of the ITAT.

What were the issues?

The Tribunal had to decide two questions of law. The first question was whether 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'. The second question was whether off-period salary was taxable under Section 9(1)(ii) read with the Explanation as it stood at the relevant time. The appellant's contentions were not explicitly recorded for the first issue, but the revenue's position was implicitly that the condition was not satisfied. For the second issue, the appellant argued that off-period salary was not taxable under Section 9(1)(ii). The revenue's argument was not explicitly recorded, but the ITAT's decision implies they argued for its taxability.

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.144 of 2005

M/s Sedco Forex Intl. Drilling In. As agent of its employee Mr. William Clinton, 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

The Commissioner of Income Tax, Dehradun

………. Respondents

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

Dated: March 3, 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 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 a Division Bench of this Court {in which one of us (P.C.Verma,J.) was a member} in case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another", which was decided on 22.07.2005 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 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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