ENSCO MARITIME LTD AS AGENT DAVID MORGAN SANDERS vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/192/2004HC UttarakhandUKHC01004957200420 February 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided the appeal by referring to previous judgments. For the first issue, concerning the deductibility of remuneration, the Court held that the question 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" (decided on 22.07.2005). In that precedent, the question was answered in favour of the Revenue. For the second issue, regarding the taxability of off-period salary under section 9(1)(ii), the Court noted that the Hon'ble Apex Court had decided this in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another" (JT 2005(9) SC 639). Following the Supreme Court's decision, this question was answered in favour of the assessee. Consequently, the appeal was disposed of in light of these pronouncements.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. David Morgan Sanders, against an order dated July 26, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi, for the assessment year 1998-99. The appellant and the respondent (The Commissioner of Income Tax, Dehradun) agreed that only two specific questions of law were to be determined by the High Court, and the rest were not pressed. The judgment does not specify the amount in dispute or the procedural history leading to the ITAT order.

What were the issues?

The High Court was asked 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 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? This question concerns the taxability of salary earned during periods when the employee was not actively working, under the specified section of the Income Tax Act. The appellant's contentions were not explicitly recorded for either issue. The revenue's contentions were also not explicitly recorded. However, the judgment refers to prior decisions that addressed these questions.

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. 192 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. David Morgan Sanders C/o Nangia & Company, Chartered Accountants, 75/7 Rajpur Road, Dehradun

..............Appellant

Versus

The Commissioner of Income Tax, Dehradun

.............. Respondents

Mr. Krishi Shukla, Advocate for the appellant.

Dated: February 20, 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 26.07.2004 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench 'F' 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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