SEDCO FOREX INT.DRILLING AS AGENT MR. JOHN WRENN vs. THE COMMISSIONER OF INCOME TAX and ANR

ITA/130/2005HC UttarakhandUKHC01004242200522 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 previous judgments. For the first question, regarding exemption under Article 15 of the DTAA, the Court referred to its own judgment in Income Tax Appeal No. 165 of 2001 (Sedco Forex International Inc. Vs. The Commissioner of Income Tax, Dehradun and another) dated July 22, 2005. In that judgment, the question was answered in the negative, in favor of the Department and against the appellant. For the second question, concerning the taxability of 'off period' salary under Section 19(1)(ii) of the Income Tax Act, the Court referred to the Hon'ble Apex Court's judgment reported in JT 2005 (9) SC 639 (Sedco Forex International Drill Inc. and others Vs. Commissioner of Income Tax, Dehradun and Anr.). This judgment was in favor of the assessee/appellant and against the Department. The appeal was disposed of following these judgments.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. John Wrenn, a Panamanian company, appealed an order from 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 the assessment year 1998-99, holding that 'off period' salary was taxable in India. The appeal was filed before the High Court of Uttaranchal at Nainital. The respondents were 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 by holding that exemption under Article 15 of the Double Taxation Avoidance Agreement (DTAA) between India and Australia was not available to the appellant's technician? 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 exemption under Article 15 of the DTAA should have been available. The revenue contended that the 'off period' salary was taxable in India under Section 19(1)(ii) of the Income Tax Act. The judgment does not explicitly detail the arguments for each side beyond the framing of the questions and the reliance on specific precedents.

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. 130 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. John Wrenn 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 15

of DTAA between India and Australia 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 in favour of assessee / 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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