THE COMMISSIONER OF INCOME TAX DEHRADUN and ORS vs. M/S SAIPEM APA C/O, M/S ARTHER ANDERSON and CO.

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ITA/511/2001HC UttarakhandUKHC01009199200307 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the free accommodation, food, and beverages provided to employees working on a rig in high seas are a necessity due to the hazardous, arduous, and continuous nature of the work. Therefore, these facilities cannot be construed as a luxury or a perquisite. Consequently, the Department cannot levy interest on the employer under Section 201/201(1-A) of the Income-Tax Act. The questions of law were answered in the affirmative, in favour of the assessee and against the Department. The appeal was dismissed accordingly. The ratio decidendi is that essential provisions for employees engaged in hazardous and continuous work in remote locations are not taxable perquisites.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Dehradun, and the Dy. Commissioner of Income Tax, Special Range (1), Dehradun (the appellants/revenue) against an order dated February 26, 2001, passed by the Income Tax Appellate Tribunal (Delhi Bench 'C'), New Delhi. The dispute pertains to Assessment Year 1991-92. The respondent is M/s Saipem, SPA. The core of the dispute revolves around whether free accommodation provided by the employer on board a rig in high seas constitutes a perquisite. The High Court referred to its earlier decision in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was legally justified in holding that the free accommodation facility provided by the employer on board the rig in high seas cannot be construed as a perquisite? The provision of the Income Tax Act involved is Section 201/201(1-A). Assessee's Contention: The judgment does not record any specific arguments made by the assessee. However, the reasoning provided by the High Court implies that the assessee argued that the accommodation, food, and beverages were a necessity due to the hazardous, arduous, and continuous nature of the work on the rig, and therefore not a perquisite. Revenue's Contention: The judgment does not record any specific arguments made by the revenue. However, the revenue's stance, as indicated by the appeal, is that the free accommodation facility provided on board the rig should be construed as a perquisite, and consequently, interest under Section 201/201(1-A) could be levied on the employer.

Which sections of the Income-tax Act were involved?

Section 201,Section 201(1-A)

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No.511 of 2001

1.

The Commissioner of Income Tax, Dehradun.

2.

Dy. Commissioner of Income Tax, Special Range (1), Dehradun

………….Appellants

Versus

M/s Saipem, SPA C/o M/s Arther Anderson & Co. 66 Marker Towers, F. Curre Road, Bombay-400005

… Respondent

Dated: December 07, 2005

Mr. S.K. Posti, Advocate for the appellants. Ms. Krishi Shukla, learned counsel for respondent.

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

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

This appeal is against the order dated 26.02.2001, passed by the Income Tax Appellate Tribunal, (Delhi Bench ‘C’ New Delhi) in TDS No.331(Del) of 1995. The dispute relates to the Assessment Year 1991-92. 2. The substantial questions of law raised in the appeal are as follows:

1.

“Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was not legally justified in holding that free accommodation facility provided by the employer on board the rig in high seas cannot be construed to be perquisite”?

3.

9th October, 2003; the reasoning regarding these questions are given as under:-

In this case, assessee had to work on the rig. It was hazardous, arduous and continuous. Under such circumstances, free accommodation, food and beverages is a necessity. It is not a luxury. It is not a perquisite. Therefore, the Department cannot levy interest on the employer under Section 201/201 (1-A) of the Income-Tax Act.

4.

In view of the above discussion, the above questions of law are answered in the affirmative i.e. in favour of the assessee and against the Department.

5.

The appeal is dismissed accordingly. No order as to costs.

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

(P.C. Verma, J.)

Rajeev Dang

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