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

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ITA/147/2005HC UttarakhandUKHC01003025200501 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA3 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 the appellant had 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 was answered in favour of the Revenue, following a previous decision by a Division Bench of the same Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" dated July 22, 2005. 2. Regarding the second question, the Court held that off-period salary was not taxable under Section 9(1)(ii) read with the Explanation. This question was answered in favour of the assessee, in view of a decision 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". The appeal was disposed of accordingly.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. James Brown, filed an appeal against a consolidated order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (Bench 'E', New Delhi) for the assessment year 1998-99. The appeal was preferred against the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income-Tax, Special Range, Dehradun. The High Court of Uttaranchal at Nainital was to determine two specific questions of law that the parties agreed were the only ones arising from the appeal, with other framed questions not being 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 90 of the Income Tax Act, 1961, implicitly relevant due to the context of international taxation and Double Taxation Avoidance Agreements). 2. Whether off-period salary was taxable under Section 9(1)(ii) read with the Explanation as it stood at the relevant time. Contentions: Assessee: The assessee did not explicitly present arguments for these specific questions in the provided text, but their position is implied by the outcome of the High Court's decision on the second issue. Revenue: The revenue's position is implied by the High Court's decision on the first issue, which was answered in their favour. No specific authorities or precedents were mentioned for the revenue's arguments in the provided text.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii),Section 90

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No.147 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. James Brown 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 Road, Dehradun-248001

………. Respondents

Mr. Menka Tripathi, 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 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 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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