SEDCO FOREX INTERNATIONAL DRILLING INC. vs. THE COMMISSIONER OF INCOME TAX, DEHRADUN AND ANR.

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ITA/122/2005HC UttarakhandUKHC01003007200501 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided the two questions of law as follows: 1. Regarding the first question, the Court held that it had already been decided by a Division Bench of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" on 22.07.2005 in Income Tax Appeal No.165 of 2001. In that judgment, the question was answered in favour of the Revenue. Therefore, the Tribunal's finding on this issue was upheld. 2. Regarding the second question concerning the taxability of off-period salary, the Court held that this question 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, JT 2005(9) SC 639". In view of the Apex Court's decision, this question was answered in favour of the assessee. The appeal was disposed of accordingly.

What were the facts?

The appeal was filed by Sedco Forex International Drilling Inc., an agent of its employee Mr. Michael Boutevin, 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). The appellant is a company incorporated in the Republic of Panama. The respondents are the Commissioner of Income Tax, Dehradun, and the Deputy Commissioner of Income-Tax, Special Range, Dehradun. The parties agreed that only two questions of law were to be determined in this appeal, and the rest were not pressed.

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)(ii) of the Income Tax Act, 1961, read with Explanation). 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: - The assessee did not explicitly argue for the first question, but the appeal implies disagreement with the Tribunal's finding. - For the second question, the assessee 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, JT 2005(9) SC 639". Revenue's contentions: - For the first question, the revenue contended that the appellant failed to satisfy the condition regarding non-deductibility of remuneration in the other state. - The revenue's contentions for the second question are not recorded as the matter was decided based on the Apex Court's ruling.

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. 122 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Michael Boutevin a company incorporated in the 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 Deputy 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 01, 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 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 that 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 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 assessee.

6.

In view of the above, we dispose of the appeal accordingly.

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

(P.C. Verma, J.)

Rajeev Dang

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