ENSCO MARITIME LIMITED vs. THE COMMISSIONER OF INCOME - TAX DEHRADUN

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ITA/3/2005HC UttarakhandUKHC01002960200501 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 based on previous judgments. For the first question, concerning the deductibility of remuneration, 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" (decided on July 22, 2005, in Income Tax Appeal No.165 of 2001). In that prior judgment, the question was answered in favour of the Revenue. For the second question, regarding the taxability of off-period salary under section 9(1)(ii) read with the Explanation, the Court referred to the decision of the Hon’ble Apex Court in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another" (JT 2005(9) SC 639). Following the Supreme Court's ruling, this question was answered in favour of the assessee. Consequently, the appeal was disposed of in accordance with these decisions.

What were the facts?

The appellant, Ensco Maritime Ltd. (earlier Dual Offshore Ltd.), acting as agent for Mr. James Nelson McCain, filed an appeal against the consolidated order dated October 14, 2004, for assessment year 1998-99, passed by the Income Tax Appellate Tribunal, Bench 'F', New Delhi. The appeal was preferred before the High Court of Uttaranchal at Nainital. The parties agreed that only two questions of law were to be determined, and the rest were not pressed. The appeal was listed for hearing on December 1, 2005.

What were the issues?

The High Court was to decide two questions of law: 1. Whether the learned I.T.A.T. erred in law 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’? This question turns on the interpretation of provisions related to the deductibility of remuneration in international taxation. 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 concerns the taxability of salary earned during periods when the employee was not actively working, under the specified provisions of the Income Tax Act. The appellant did not press the rest of the questions framed in the appeal. The judgment does not record specific arguments made by the assessee or the revenue for each of these two questions, other than referencing prior judicial pronouncements.

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.03 of 2005

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. James Nelson McCain 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 14.10.2004 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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