HALLIBURTON OFFSHORE SERVICES INC.AGENT S.BOJKOV vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/131/2004HC UttarakhandUKHC01004907200402 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeal, answering the sole question of law in favour of the assessee. The Court noted that the issue was previously decided by a Division Bench of the same High Court in favour of the Revenue in the case of Commissioner of Income Tax and another Vs. Sedco Forest International Drilling Co. Ltd. (2003) 264 ITR 320. However, the Supreme Court, in the case of Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639, set aside the High Court's judgment. The Supreme Court held that the Explanation to Section 9(1)(ii) was amended prospectively by the Finance Act 1999 and could not be applied retrospectively to assessment years prior to 1999. Since the assessment year in the present case (1994-95) was prior to 1999, the assessee could not be taxed on the off-period salary based on the law laid down by the Apex Court. The appeal was allowed, and the question was answered accordingly.

What were the facts?

The assessee, M/s Halliburton Offshore Services Inc., acting as an agent for Mr. P. Hansen, filed an appeal against the consolidated order dated 31.03.2004 of the Income Tax Appellate Tribunal (Bench 'D' New Delhi) for assessment year 1994-95. The dispute concerned the taxability of salary paid to foreign technicians employed for drilling operations in India. These employees had a work schedule of 28 days on duty in India and 28 days off duty outside India, during which they were required to be available to the company. The Assessing Authority and the Commissioner of Income Tax (Appeals) held that the salary paid during the 'off period' was taxable in India. The Tribunal had partly allowed the assessee's appeal.

What were the issues?

1. 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? (Question of law) Assessee's Contention: The assessee argued that its employees did not earn any income in India during the 28 days off period, and therefore, the salary received outside India during this period should be excluded from Indian taxation under Section 9(1)(ii) and its Explanation. The assessee relied on the principle that income earned outside India is not taxable in India. Revenue's Contention: The revenue contended that the off-period salary was taxable in India and was in the nature of leave salary. The revenue relied on the orders of the Assessing Authority and the CIT(A).

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 Application No.131 of 2004

M/s Halliburton Offshore Services Inc. as agent of Mr. P. Hansen

……….. Applicant Versus The Commissioner of Income Tax, Dehradun ………….… Respondent

Ms. Arvind Vashisth, Advocate for the appellants. Mr. S.K. Posti, Advocate for the respondents.

Dated: December 02, 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 consolidated order dated 31.03.2004 for the assessment year 1994-95, passed by the Income Tax Appellate Tribunal, (Bench ‘D’ New Delhi).

3.

Brief facts of the case-giving rise to this appeal are that the appellant during the year under consideration employed foreign technicians for execution of contracts in India relating to drilling operation at a rig. In view of the contract of employment and work schedule, the normal work schedule of the employees was 28 days on the rig and 28 days off the rig outside India. During the 28 days outside India, the employees were required to be available to the Company for one or more of the purposes described in the work schedule. On the basis of this stipulation,

the contention of the assessee was that the assessee’s employees did not earn any income in India during the 28 days off period and as such the salary received outside India during off period was excluded from the income subject to tax in India under Section 9(1)(ii) and explanation there under. The Assessing Authority has held that the off period salary would be taxable in India and the same was in the nature of leave salary. On appeal, the Commissioner of Income Tax (Appeals), Dehradun affirmed the order of the Assessing Authority. In the second appeal, the Income Tax Appellate Tribunal partly allowed the appeal

4.

The learned counsel for the parties agree that only the following question of law arises in the appeal for the determination and they do not press the rest of the questions framed in the appeal:- 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?. 5 . into Civil Appeal Nos.351-355 of 2005 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”. has held that since the Explanation to section 9(1)(ii) of the Income Tax Act, 1961 was amended by the Finance

Act 1999 and was prospective, therefore, it could not be made applicable in the previous years i.e. to say that no retrospective effect can be given to the Explanation, if the assessment proceedings are pending after the said amendment and accordingly the judgment of Division Bench of this Court was set aside as the assessment year in dispute was prior to 1999. 6. In the present case also, the assessment year is prior to 1999, thus the assessee cannot be taxed in view of the law laid down by the Hon’ble Apex Court “Sedco Rajeev Dang

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