SEDCO FOREX INTERNATIONAL DRILLING INC. vs. COMMISSIONER OF INCOME TAX

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ITA/95/2004HC UttarakhandUKHC01004876200401 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the first question in favour of the Revenue, referencing its own prior Division Bench judgment in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" decided on July 22, 2005. This implies the Tribunal's finding that the condition regarding non-deductibility of remuneration was not satisfied was upheld. For the second question, the High Court answered in favour of the assessee, relying 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". This means the off-period salary was held not to be taxable under section 9(1)(ii) as it stood at the relevant time. The appeal was disposed of accordingly.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., as agent for its employee Mr. Keith Stevens, filed an appeal against a consolidated order dated January 30, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi. The appeal pertains to the assessment year 1996-97. The appellant is a company incorporated in Panama. The respondents are the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income-Tax, Special Range, Dehradun. The High Court of Uttaranchal at Nainital was seized of this appeal.

What were the issues?

The Tribunal had to decide two questions of law. The first question was whether the ITAT erred in 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'. The second question was 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. The appellant's contentions were not explicitly recorded for either question. The revenue's contentions were also not explicitly recorded for either question. However, the judgment indicates that the parties agreed to these two questions of law for determination.

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. 95 of 2004

Sedco Forex International Drilling Inc. as agent of its employee Mr. Keith Stevens 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 Assistant Commissioner of Income-Tax,

Special Range, Dehradun having office

at Subhash Raod, Dehradun-248001

........... Respondents

Mr. Arvind Vashisth, Advocate for the appellants. 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 30.01.2004 for the assessment year 1996-97, 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 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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