SEDCO FOREX INTERNATIONAL DRILLING vs. THE COMMISSIONER OF INCOME TAX and ANR

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ITA/149/2005HC UttarakhandUKHC01003027200502 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

Regarding the first question, the High Court held that it had already been decided by a Division Bench of the same Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" on July 22, 2005. In that judgment, the question was answered in favour of the Revenue Department. For the second question, the High Court noted that it had been decided by the Hon'ble Apex Court in Civil Appeal Nos. 351-355 of 2005, "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another". In view of the Apex Court's decision, this question was answered in favour of the assessee. The appeal was disposed of accordingly, with the first issue decided against the assessee and the second in favour of the assessee.

What were the facts?

The appeal was filed by Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. Stephen Smith, a Panamanian company, against the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income-Tax, Dehradun. The appeal challenged a consolidated order dated January 28, 2005, for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, Bench 'E', New Delhi. The parties agreed that only two specific questions of law were to be determined, and the rest were not pressed. The High Court of Uttaranchal at Nainital was hearing this appeal.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether 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' (Section 9(1)(vi) of the Income Tax Act, 1961, implicitly relevant). 2. Whether off-period salary was taxable under Section 9(1)(ii) read with the Explanation as it stood at the relevant time. Assessee's contentions were not explicitly recorded for the first issue, but the fact that the question was framed implies a dispute. For the second issue, the assessee would have contended that off-period salary was not taxable under the specified provision. Revenue's contentions were not explicitly recorded for the first issue, but the framing of the question indicates they argued the condition was not met. For the second issue, the Revenue would have argued that off-period salary was taxable under Section 9(1)(ii) read with the Explanation.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 149 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Stephen Smith a company incorporated in Republic of Panama having its registered office at No.8 Acquitino de la Guardia Street, City of Panama, Republic of Panama, present Address C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai

…………….. Appellant

Versus

1.

The Commissioner of Income Tax, Dehradun

having office at Subhash Road, Dehradun-248001

2.

The Assistant Commissioner of Income-Tax,

Special Range, Dehradun having office

at Subhash Road, Dehradun-248001

…………… Respondents

Ms. Menka Tripathi, 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.

1.

Both the parties are ready to argue the matter today.

2.

This appeal has been preferred against the consolidated order dated 28.01.2005 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench ‘E’ 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 to 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 on of us (P.C.Verma,J.) was a member} in case of “Sedco 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 Department.

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 assessee.

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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