COMMISSIONER INCOME TAX vs. M/S HUGHES SERVICES AS AGENT OF MR HALE KENNETH

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ITA/359/2000HC UttarakhandUKHC01015113200407 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, following its own Division Bench judgment in Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320, dismissed the appeal. The Court held that free boarding facilities provided by the employer on the rig were not a perquisite under Section 17(2)(iii) and their value could not be added to the assessee's income. Furthermore, the Court affirmed the Tribunal's finding that the imposition of interest under Section 234-B was not justified without proper hearing and reasons. Both substantial questions of law were answered against the appellants (revenue) and in favor of the assessee. The operative direction was to dismiss the appeal.

What were the facts?

The appeal was filed by the Commissioner of Income Tax and Dy. Commissioner of Income Tax against an order dated January 24, 2000, passed by the Income Tax Appellate Tribunal (Delhi Bench 'C'), New Delhi. The dispute pertains to the Assessment Year 1989-90. The assessee is M/s Hughes Services (FE) PTE Ltd., acting as an agent for Mr. Hale Kenneth. The core of the dispute revolves around whether free boarding and lodging provided to the employee on a rig at sea constitutes a perquisite, and whether interest under Section 234-B is chargeable when the entire income was subject to Tax Deducted at Source (TDS).

What were the issues?

The Tribunal had to decide two substantial questions of law: 1. Whether, on the facts and in the circumstances, the learned Income Tax Appellate Tribunal was legally justified in holding that free boarding and lodging facilities provided by the employer on board a rig in high seas cannot be construed as a perquisite, under Section 17(2)(iii) of the Income Tax Act, 1961. 2. Whether, on the facts and in the circumstances, the learned Income Tax Appellate Tribunal was legally justified in holding that interest under Section 234-B of the Income Tax Act, 1961, cannot be charged since the entire income of the assessee was subject to TDS, whereas this interest is chargeable on assessed tax as defined by Explanation I below Section 234-B. The revenue contended that the free boarding and lodging should be treated as a perquisite and interest under Section 234-B is chargeable. The judgment does not explicitly record the assessee's arguments but implies they were in favor of the Tribunal's decision.

Which sections of the Income-tax Act were involved?

Section 17(2)(iii),Section 234-B

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 72 of 2001

( Old No.359 of 2000)

1.

The Commissioner of Income Tax, Meerut.

2.

Dy. Commissioner of Income Tax, Special Circle, Dehradun

…Appellant

Versus

M/s Hughes Services (FE) PTE Ltd. As agent of Mr. Hale Kenneth, Dehradun

……………. Respondent

Dated: December 07, 2005

Mr. S.K. Posti, Advocate for the appellant. Ms. V.K. Bisht, Advocte for the respondent.

Coram: Hon. P.C. Verma, J.

Hon. J.C.S. Rawat, J.

This appeal is against the order dated 24.01.2000, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘C’ New Delhi) in ITA No.415(Del) of 1993. The dispute relates to the Assessment year 1989-90. 2. The substantial questions of law raised in the appeal are as follows: “Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding the free boarding and lodging facilities provided by the employer on board the rig in high seas cannot be construed to be perquisite? “

“Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that interest under Section 234-B of the I.T. Act cannot be charged since the entire income of the assessee was subject to T.D.S. whereas this interest is chargeable on assessed tax as defined by Explanation I below Section 234-B”?

3.

under Section 234-B was not justified without hearing and without reasons.

4.

Following the above-mentioned judgment of a Division Bench of this Court, we dismiss the appeal. Both the questions are answered against the appellants and in favour of the assessee.

(J.C.S. Rawat, J.) (P.C. Verma, J.) Rajeev Dang

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