ENSCO MARITIME LTD. vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/171/2004HC UttarakhandUKHC01004937200417 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided the two questions of law as follows. Regarding the first question, the Court held that the issue 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 Income Tax Appeal No.165 of 2001). In that prior judgment, the question was answered in favour of the Revenue. Consequently, the High Court followed this precedent and answered the first question in favour of the Revenue. For the second question, the Court noted that it had been decided by the Hon'ble Apex Court in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another" (JT 2005(9) SC 639). The Supreme Court's decision was in favour of the assessee. Therefore, the High Court answered the second question in favour of the assessee. The appeal was disposed of in accordance with these decisions.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. Kevin Scott Chambliss, against the order dated 26.07.2004 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 arising from the ITAT's order were to be determined by the High Court. The rest of the questions framed in the appeal were not pressed. The procedural history involves an appeal to the High Court against the ITAT's order.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether the learned ITAT erred in law in 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 concerns the deductibility of remuneration under relevant provisions of the Income Tax Act, 1961, and its impact on taxability in another 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? This question pertains to the taxability of salary earned during periods when the employee was not actively rendering services, under Section 9(1)(ii) of the Income Tax Act, 1961. The appellant (assessee) did not explicitly state its arguments for these issues in the judgment. The revenue's contentions were also not recorded for these specific issues. However, the judgment refers to prior decisions that addressed these points.

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.171 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Kevin Scott Chambliss C/o Nangia & Company, Chartered Accountants, 75/7 Rajpur Road, Dehraudn …….… Appellant

Versus

The Commissioner of Income Tax, Dehradun

………..… Respondents

Ms. Krishi Shukla, Advocate for the appellant. Mr. S.K. Posti, Advocate for the respondents.

Dated: December 17, 2005

Coram: Hon. P.C. Verma, J. Hon. J.C.S. Rawat, 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 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 second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos.351-355 of 2005 “Sedco of Income Tax, 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.

(J.C.S. Rawat, J.)

(P.C. Verma, J.)

Rajeev Dang

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