SEDCO FOREX INT. DRILLING AGENT MR.RON ALDERWELD vs. THE COMMISSIONER OF INCOME TAX and ANR

ITA/131/2005HC UttarakhandUKHC01004243200522 December 2005Author: HON'BLE MR. JUSTICE M. M. GHILDIYAL2 pages

AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the first question in favour of the revenue and against the appellant, by following its own prior judgment dated July 22, 2005, in Income Tax Appeal No. 165 of 2001 (Sedco Forex International Inc. Vs. The Commissioner of Income Tax, Dehradun and another). The second question was decided in favour of the assessee/appellant and against the department, by following the judgment of the Hon'ble Apex Court reported in JT 2005 (9) SC 639 (Sedco Forex International Drill Inc. and others Vs. Commissioner of Income Tax, Dehradun and Anr.). The appeal was disposed of in accordance with these judgments, with no order as to costs. The specific reasoning of the High Court on each question is not detailed, as it relied on prior pronouncements.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., as agent for its employee Mr. Ron Alderweld, filed an appeal against an order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), New Delhi. The ITAT had rejected the appellant's claim for exemption from double taxation for the assessment year 1998-99 and held that 'off period' salary was taxable in India. The appeal was filed before the High Court of Uttaranchal at Nainital. The appellant is a company incorporated in Panama. The respondents are the Commissioner of Income Tax, Dehradun, and the Deputy Commissioner of Income Tax, Special Circle, Dehradun.

What were the issues?

The High Court had to decide two questions of law: 1. Whether on the facts and circumstances of the case, the Tribunal erred in law in holding that the exemption under Article 16 of the Double Taxation Avoidance Agreement (DTAA) between India and Netherland was not available to the appellant technician? 2. Whether on the facts and circumstances of the case, the Tribunal erred in law in holding that 'off period' salary was taxable in India under Section 19(1)(ii) of the Income Tax Act? The appellant contended that the exemption under Article 16 of the DTAA should have been available and that the 'off period' salary was not taxable in India. The revenue contended that the exemption was not available and the 'off period' salary was taxable in India.

Which sections of the Income-tax Act were involved?

Section 19(1)(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL.

Income Tax Appeal No. 131 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Ron Alderweld a company incorporated in Republic of Panama having its registered office at no. 8, Acquitino de la Guardia Street, City of Panama, Republic of Panama, present address, C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai. …………. Appellant

Versus

The Commissioner of Income Tax, Dehradun having office at Subhash Road, Dehradun.

The Deputy Commissioner of Income Tax, Special Circle, Dehradun, having its office at Subhash Road, Dehradun.

……………… Respondents

Hon’ble M.M. Ghildiyal, J. Hon’ble B. S. Verma, J.:

Heard Ms. Menka Tripathi, learned counsel for the appellant and Sri S. K. Posti, learned standing counsel for respondent.

Appellant has preferred this appeal against the order passed by Income Tax Appellate Tribunal, New Delhi dated 28.01.2005 rejecting the claim in respect of exemption from double taxation of the appellant for the assessment year 1998 ‐99 and holding that off period salary is liable to be taxed in India.

Two questions have risen for decision, which are as under:

“Whether on the facts and circumstances of the case the Tribunal erred in law holding that the exemption under Article 16 of DTAA between India and Netherland was not available to the appellant technician? Whether on the facts and circumstances of the case the Tribunal erred in law for holding off period salary was taxable in India under Section 19 (1) (ii) of the Income Tax Act?” Hon’ble Apex Court reported in JT 2005 (9) SC 639 (Sedco / appellant and against the department.

Following the above mentioned judgments, the questions are decided accordingly.

In view of the above, the appeal is disposed of. No order as costs.

(B.S. Verma, J.) (M.M. Ghildiyal, J.)

December 22, 2005 SKSharma

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