SEDCO FOREXINT.DRILLING INC.AGENT MR.MICHAEL TIMM vs. THE COMMISSIONER OF INCOME TAX, DEHRADUN AND ANR.

PDF · subscribers
ITA/123/2005HC UttarakhandUKHC01003008200503 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the two questions of law based on previous pronouncements. For the first question, concerning the deductibility of remuneration, the Court held that it had already been decided by a Division Bench of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" on July 22, 2005. That judgment answered the question in favor of the Revenue. For the second question, regarding the taxability of 'off period salary' under Section 9(1)(ii), the Court noted that the Hon'ble Apex Court had decided this issue 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 answered this question in favor of the assessee. Consequently, the appeal was disposed of in light of these decisions. No issue was expressly left undecided.

What were the facts?

The appellant, M/s Sedco Forex Intl. Drilling Inc., an agent of its employee Mr. Michael Timms, a Panamanian company, filed an appeal against an order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi, for the assessment year 1997-98. The appeal was preferred before the High Court of Uttaranchal at Nainital. The parties agreed that only two specific questions of law were to be determined, and the rest were not pressed. The procedural history involves the ITAT's order being challenged in the High Court.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the ITAT erred in law by holding that 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'? This question turns on the interpretation of provisions related to international taxation and deductibility of remuneration. 2. Whether the Tribunal was correct 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? This issue concerns the taxability of salary earned by an employee during periods when they were not actively working, based on the provisions of the Income Tax Act. Assessee's contentions: The judgment does not explicitly record the assessee's arguments for either question. However, the outcome suggests the assessee would have argued in favor of their position on both points. Revenue's contentions: The judgment does not explicitly record the revenue's arguments for either question. However, the outcome suggests the revenue would have argued in favor of their position on the first question and against their position on the second question.

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. 123 of 2005

M/s Sedco Forex Intl. Drilling In. As agent of its employee Mr. Michael Timms, 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 1997-98, 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 question 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

More judgments on Section 9(1)(ii)

All 123 judgments and leading authorities on Section 9(1)(ii) →

Recent GST High Court judgments

Search GST case law →