ENSCO MARITIME LIMITED vs. THE COMMISSIONER OF INCOME - TAX DEHRADUN

ITA/5/2005HC UttarakhandUKHC01004223200521 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 pronouncements. For the first question, concerning exemption under Article 16 of the India-USA DTAA, the Court followed its own prior decision in Income Tax Appeal No. 165 of 2001 (Sedco Forex International Inc. Vs. The Commissioner of Income Tax, Dehradun and another). This precedent answered the question in the negative, favoring the Department and against the appellant. For the second question, regarding the taxability of 'off period' salary under Section 19(1)(2) 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 Supreme Court decision was interpreted as being in favor of the assessee/appellant and against the department. Consequently, the appeal was disposed of in line with these judgments.

What were the facts?

The appellant, Ensco Maritime Ltd. (formerly Dual Offshore Ltd.), acting as an agent for Mr. Gene Joseph Crumley, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had rejected the appellant's claim for exemption from double taxation for the assessment year 1998-99. Specifically, the ITAT held that 'off period' salary was taxable in India. The appeal was filed under Section 260A of the Income Tax Act before the High Court of Uttaranchal at Nainital. The procedural history indicates the ITAT's decision was the subject of challenge.

What were the issues?

The High Court was called upon to decide two questions of law: 1. Whether, on the facts and in the 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 USA was not available to the appellant technician? 2. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law by holding the 'off period' salary received by the appellant technician liable to tax in India in terms of Section 19(1)(2) of the Income Tax Act? The appellant contended that exemption under Article 16 of the DTAA should have been granted and that the 'off period' salary was not taxable in India. The revenue contended that the ITAT's decision was correct. The judgment does not explicitly detail the arguments of each side beyond the framing of the questions and the subsequent reliance on precedent.

Which sections of the Income-tax Act were involved?

Section 260A,Section 19(1)(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL.

Income Tax Appeal No.05 of 2005

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Gene Joseph Crumley C/o Nangia & Company, Chartered Accountants, 75/7 Rajpur Road, Dehradun. …………… Appellant

Versus

The Commissioner of Income Tax, Dehradun

…………….Respondents

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

Heard Sri Udyog Shukla, learned counsel for the appellant and Sri S. K. Posti, learned standing counsel for respondent.

Appellant has preferred this appeal under Section 260 A of the Income Tax Act against the order passed by Income Tax Appellate Tribunal dated 14.10.2004 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 USA 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 received by the

appellant technician liable to tax in India in terms of Section 19 (1) (2) 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 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 21, 2005 SKSharma

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