M/S HUGHES SERVICES LTD.AS AGENT MR. SUYDAM R.S. vs. THE COMMISSIONER OF INCOME TAX

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ITA/217/2000HC UttarakhandUKHC01000025200415 December 2005Author: HON'BLE MR. JUSTICE M. M. GHILDIYAL2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the substantial question of law framed in the appeal had already been decided by the Hon'ble Supreme Court in the case of Sedco Forex International Drill Inc. and others vs. Commissioner of Income Tax, Dehradun and another, reported in Judgment Today 2005(9) SC 639. Following the precedent set by the Supreme Court, the High Court answered the question in favour of the assessee and against the revenue. The reasoning implicitly adopted the Supreme Court's view that payments for off-periods, without services rendered in India, do not constitute income accrued or earned in India, especially considering the retrospective effect of amendments or the interpretation of the provision prior to the amendment. The appeal was decided on the same terms and conditions as the Supreme Court's judgment. No order as to costs was made. The operative direction was to decide the appeal accordingly.

What were the facts?

The assessee, Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Suydam R.S., filed an appeal under Section 260A of the Income Tax Act, 1961. The appeal challenged an order passed by the Income Tax Appellate Tribunal, C-Branch, New Delhi. The core of the dispute concerns whether an amount paid for an 'off period' (presumably leave or non-working period) should be treated as income earned in India. The assessee contended that no services were rendered in India during this off period. The revenue's position, as reflected in the Tribunal's order, was that this amount constituted income accrued in India.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in treating the amount paid for the off period as income earned in India, in view of the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, despite no services being rendered in India during the off period? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, effective from April 1, 2000, which regards amounts paid for off or leave periods as income accrued in India only from that date, supports the assessee's contention? Assessee's Contention: The assessee argued that the amount paid for the off period should not be treated as income earned in India because no services were rendered in India during that time. They further relied on the subsequent amendment to Section 9(1)(ii) of the Income Tax Act, effective from April 1, 2000, which specifically clarifies that such payments are considered income accrued in India only from that date, implying it was not the case prior to the amendment. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, the Tribunal's order, which is under challenge, treated the amount as income earned in India.

Which sections of the Income-tax Act were involved?

Section 260A,Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

HIGH COURT OF UTTARANCHAL AT- NAINITAL.

Income Tax Appeal No. 284 of 2001 (Old No. 217/2000)

Ms/ Hughes Services (Far East) Pvt. Ltd. As agent of Mr. Suydam R.S.

… Appellant.

Vs. The commissioner of Income Tax, Meerut.

…. Respondent

Sri V.K. Bisht, learned Sr. Counsel for the appellant. Sri S.K. Posti, learned counsel for the respondent.

Hon’ble M.M. Ghildiyal, J. Hon’ble J.C.S. Rawat, J.

Heard learned counsel for both the parties.

The assessee has filed the present appeal u/s 260A of Income Tax Act against the order passed by the Income Tax Appellate Tribunal C- Branch, New Delhi.

The following substantial question of law is framed in the memo of appeal:-

“Whether on the facts and in the circumstances of the case, Tribunal is legally justified in treating the amount paid for the off period as the income earned in India in view of the explanation to Section 9(1)(ii) while admittedly no service has been rendered during off period in India and inasmuch as, the subsequent amendment made in the explanation w.e.f. 01.04.2000 shows that the amount paid for off period or leave period is regarded as the income accrued in India only w.e.f. 01.04.2000?

Since the said question has already been decided by the Hon’ble Supreme Court in Civil Appeal nos. 351-355 December 15, 2005: NCM:

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