THE COMMISSIONER OF INCOME TAX vs. READING and BATES EXPLORATION CO. AGENT M.SMART

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ITA/537/2001HC UttarakhandUKHC01004968200416 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court answered the first question in favour of the assessee, relying on the Supreme Court's decision in Sedco Forex International Drill Inc. & others Vs. Commissioner of Income Tax, Dehradun. For the second question, the Court held that the free boarding facility provided on the rig in high seas was not a perquisite under section 17(2)(iii) and its value could not be added to the assessee's income, citing a Division Bench decision in Commissioner of Income Tax and another Vs. SEDCO Forex International Drilling Co. Ltd. Regarding the third issue, the Court held that the imposition of interest under section 234-B was not justified without hearing and without reasons. The appeal was disposed of in light of these findings.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Dehradun and the Income Tax Officer, Spl. Ward, Dehradun (the Revenue) against an order dated 28.02.2001 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘E’, Delhi. The dispute pertains to Assessment Year 1992-93. The assessee is Mr. M. Smart, represented by Reading & Bates Exploration Co. The High Court of Uttaranchal at Nainital was considering three questions of law arising from the ITAT's order. The parties agreed that these three questions were the only ones for consideration.

What were the issues?

The Tribunal had to decide three questions of law: 1. Whether 'Off Period Salary' was taxable under section 9(1)(ii) read with the Explanation as it stood at the relevant time. 2. Whether 'Free Boarding Facility' provided by the employer on the rig in high seas could be construed as a perquisite. 3. Whether interest under section 234-B, as amended by the Finance Act, 2001 with retrospective effect from 1.4.1989, was legally justified. The Revenue contended that 'Off Period Salary' was taxable. The Revenue also argued that 'Free Boarding Facility' constituted a perquisite. For the third issue, the Revenue sought to charge interest under section 234-B. The judgment does not record specific arguments from the assessee for each issue, but implies their position through the High Court's findings which favored the assessee.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 17(2)(iii),Section 234-B

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No.537 of 2001 1. The Commissioner of Income Tax Dehradun 2. Income Tax Officer Spl. Ward Dehradun ... Appellants Versus Reading & Bates Exploration Co. As agent of Mr. M. Smart C/o Arthur Anderson & Co. 426, World Trade Centre Barakhamba Lane, New Delhi ... Respondent Mr. S.K. Posti, Advocate for the appellants. Coram: Hon. P.C. Verma, J. Hon. J.C.S. Rawat, J.

JUDGMENT

1.

This appeal is filed against the order dated 28.02.2001 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘E’, Delhi in I.T.A. No. 1719/Del/1995. The dispute relates to the Assessment Year 1992-93. The assessee is Mr. M. Smart, represented by Reading & Bates Exploration Co.

2.

The learned counsel for the parties agree that the following only three questions of law arise in this appeal for consideration:-

(i) “Whether on the facts and circumstances of the case, the ITAT 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?” (ii) “Whether on the facts and in the circumstances of the case, the ITAT was legally correct in holding that “Free Boarding Facility” provided by the employer on the board the rig in high seas cannot be construed to be perquisite?” (iii) “Whether on the facts and in the circumstances of the case, the ITAT was legally justified in directing the AO to charge interest u/s 234-B which also stands amended by the Finance Act, 2001 with retrospective effect from 1.4.1989?”

3.

So far as the question No.1 is concerned, this question has been decided by the Hon’ble Supreme Court in Sedco Forex International Drill Inc. & in J.T. 2005(9) S.C. p/639. In view of this decision, this question is answered further held that the imposition of interest under section 234-B was not justified without hearing and without reasons. 5 In view of the above, we dispose of the appeal accordingly.

(J.C.S. Rawat, J.) (P.C. Verma, J) Dated 16.12.2005 LSR

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