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

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ITA/85/2004HC UttarakhandUKHC01004867200401 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided the two questions of law based on previous pronouncements. For the first question, regarding the deductibility of remuneration, the Court referred to its own earlier decision in "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" dated July 22, 2005, which answered the question in favour of the Revenue. For the second question, concerning the taxability of off-period salary, the Court 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). This decision answered the question in favour of the assessee. Consequently, the appeal was disposed of in light of these decisions.

What were the facts?

The appeal was filed by Sedco Forex International Drilling Inc., acting as the agent for its employee Mr. Stanley Rothell, a Panamanian company. The appeal challenged a consolidated order dated January 30, 2004, for the assessment year 1995-96, passed by the Income Tax Appellate Tribunal (Bench 'F' New Delhi). The respondents were the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income-Tax, Special Range, Dehradun. The parties agreed that only two specific questions of law were to be determined, and the rest were not pressed.

What were the issues?

The Tribunal had to decide two questions of law. The first question was 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) read with Explanation). The appellant argued that this condition was not met. The second question was whether off-period salary was taxable under Section 9(1)(ii) read with the Explanation as it stood at the relevant time. The appellant argued that it was not taxable, while the revenue contended otherwise. The judgment does not explicitly state the revenue's argument on the first question, other than implying it was in their favour.

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.85 of 2004

Sedco Forex International Drilling Inc. as agent of its employee Mr. Stanley Rothell 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, Cuffee 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. 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 1995-96, 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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