ENSCO MARITIME LTD. vs. COMMISSIONER OF INCOME TAX DEHRADUN

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ITA/194/2004HC UttarakhandUKHC01004959200401 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the appeal based on two previously decided judgments. For the first issue, concerning the condition that remuneration is not deductible in computing profits chargeable to tax in another state, the High Court held that the ITAT had erred. This decision was based on a Division Bench judgment of the same High Court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" (decided on July 22, 2005), which answered this question in favour of the Revenue. For the second issue, regarding the taxability of off-period salary under section 9(1)(ii), the High Court held that the Tribunal was right in its conclusion. This was in view of 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), which answered this question in favour of the assessee. Consequently, the appeal was disposed of in light of these pronouncements.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. Richard Joseph Dust, against the consolidated order dated July 26, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi, for the assessment year 1998-99. The appellant is represented by Ms. Krishi Shukla, and the respondent Revenue by Mr. S.K. Posti. Both parties agreed that only two specific questions of law required determination by the High Court, and the rest were not pressed. The procedural history involves the ITAT's order which is now under challenge before the High Court.

What were the issues?

The High Court was asked 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 under relevant provisions of the Income Tax Act. 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? This question pertains to the taxability of salary earned during periods when the employee was not actively working. The appellant's contentions are not explicitly detailed for each issue, but the judgment indicates they are relying on the High Court's decision in the Sedco Forex International Inc. case for the first issue and the Supreme Court's decision in Sedco Forex International Drill Inc. for the second issue. The Revenue's contentions are also not explicitly detailed, but their position is implied by the outcome of the cited cases.

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. 194 of 2004

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. Richard Joseph Dust 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 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 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 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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