ENSCO MARITIME LTD. vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/195/2004HC UttarakhandUKHC01004960200402 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided both questions of law. For the first question, concerning the deductibility of remuneration and its impact on taxability in another state, the Court held that the ITAT erred. This decision was based on a prior judgment of the same High Court's Division Bench (which included one of the presiding judges) in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income tax and another" decided on 22.07.2005. In that precedent, the question was answered in favor of the Revenue. For the second question, regarding the taxability of off-period salary under Section 9(1)(ii), the Court held in favor of the assessee. This was in view of the decision of 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", which answered this question in favor of the assesse. The appeal was disposed of accordingly.

What were the facts?

The appellant, Ensco Maritime Ltd. (formerly Dual Offshore Ltd.), acting as an agent for Mr. William Scott Saba, filed an appeal against an order dated 26.07.2004 passed by the Income Tax Appellate Tribunal (ITAT), Bench ‘F’, New Delhi. The appeal pertains to the assessment year 1998-99. The High Court of Uttaranchal at Nainital was seized of this appeal. The parties agreed that only two specific questions of law required determination, and the rest were not pressed. The procedural history indicates that the ITAT had previously passed an order which is now under challenge before the High Court.

What were the issues?

The High Court was to decide two questions of law: 1. Whether the ITAT erred in law by holding that the appellant failed to satisfy the condition that 'the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State'? This question concerns the deductibility of remuneration and its impact on taxability in another state. 2. Whether the Tribunal was correct in holding that off-period salary was not taxable under Section 9(1)(ii) of the Income Tax Act, 1961, read with the Explanation as it stood at the relevant time? This question relates to the taxability of salary earned during periods when the employee was not actively working. Contentions: Assessee: The assessee did not explicitly present arguments for these specific questions in the provided text, but their success on the second question implies they argued for the non-taxability of off-period salary. They relied on the Hon'ble Apex Court's decision in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another". Revenue: The revenue argued in favor of the taxability of off-period salary and against the assessee on the first question. They relied on the Division Bench of the High Court's decision in "Sedco Forex International Inc. Vs. The Commissioner of Income tax and another".

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 Appeal No.04 of 2005

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. William Scott Saba C/o Nangia & Company, Chartered Accountants, 75/7 Rajpur Road, Dehradun ………..Appellant Versus

The Commissioner of Income Tax, Dehradun ………… Respondents Ms. Krishi Shukla, Advocate for the appellant. 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 the order dated 26.07.2004 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench ‘F’ New Delhi).

3.

The learned counsel for the parties agree that the following only two questions of law arise in this appeal for the determination. They do not press the rest of the questions framed in the appeal: -

1.

Whether the learned I.T.A.T. has erred in law in holding that the appellant has failed satisfy the condition that ‘the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State’?

2.

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?

4.

So far as the question No.1 is concerned, this question has already been decided by Division Bench of this Court {in which one of us (P.C. Verma,J.) was a member} in case of “Sedco Forex International Inc. Vs. The Commissioner of Income tax and another”, which was decided on 22.07.2005 in Income Tax Appeal No.165 of 2001. In the said judgment, the question framed in the said appeal was answered in favour of the Revenue.

5.

The second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos.351-355 of 2005 “Sedco of Income Tax, Dehradun and Another, JT 2005(9) SC 639”. In view of the aforesaid decision of the Hon’ble Apex Court, this question is answered in favour of the assesse.

6.

In view of the above, we dispose of the appeal accordingly. (J.C.S. Rawat, J.) (P.C. Verma, J.) shiv

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