SEDCO FOREX INT.DRILLING AGENT MR. ARNO JACOBSEN vs. THE COMMISSIONER OF INCOME TAX and ANR

ITA/128/2005HC UttarakhandUKHC01004241200522 December 2005Author: HON'BLE MR. JUSTICE M. M. GHILDIYAL2 pages

AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the two questions based on its prior judgment and the judgment of the Apex Court. For the first issue, concerning exemption under Article 16 of the DTAA between India and Denmark, the High Court followed its own judgment dated July 22, 2005, which had answered the question in the negative, in favour of the revenue and against the appellant. For the second issue, regarding the taxability of 'off period' salary under Section 19(1)(ii) of the Income Tax Act, the High Court followed the Apex Court's decision reported in JT 2005 (9) SC 639, which held in favour of the assessee/appellant and against the department. Consequently, the appeal was disposed of in line with these decisions. No specific operative directions were mentioned beyond disposing of the appeal.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., as agent for its employee Mr. Arno Jacobsen, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT), New Delhi, dated January 28, 2005. The ITAT had rejected the appellant's claim for exemption from double taxation for assessment year 1998-99 and held that 'off period' salary was taxable in India. 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. The appeal was heard by the High Court of Uttaranchal at Nainital.

What were the issues?

1. Whether, on the facts and circumstances of the case, the Tribunal erred in law by holding that exemption under Article 16 of the Double Taxation Avoidance Agreement (DTAA) between India and Denmark was not available to the appellant technician? The appellant contended that the exemption under Article 16 of the DTAA should be available. The revenue's contentions are not recorded. 2. Whether, on the facts and circumstances of the case, the Tribunal erred in law by holding that 'off period' salary was taxable in India under Section 19(1)(ii) of the Income Tax Act? The appellant contended that the 'off period' salary was not taxable in India. The revenue's contentions are not recorded. The High Court noted that the first question had been decided by its previous judgment dated July 22, 2005, in Income Tax Appeal No. 165 of 2001, in favour of the department and against the appellant. The second question had been decided by the Apex Court in JT 2005 (9) SC 639, in favour of the assessee/appellant and against the department.

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. 128 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Arno Jacobsen 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 Denmark 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 question 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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