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

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ITA/90/2004HC UttarakhandUKHC01004872200401 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
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What did the High Court hold?

The High Court decided both questions of law. For the first question, concerning the deductibility of remuneration, the Court held that the issue 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" on July 22, 2005, in Income Tax Appeal No.165 of 2001. That judgment answered the question in favour of the Revenue. For the second question, regarding the taxability of off-period salary, the Court referred to a decision of 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". In view of the Apex Court's decision, this question was answered in favour of the assessee. The appeal was disposed of accordingly.

What were the facts?

The appeal was filed by Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. Doug Lacroix, against a consolidated order dated January 30, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi. The assessment year in question was 1995-96. 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 parties agreed that only two specific questions of law arising from the ITAT's order were to be determined, and the rest were not pressed.

What were the issues?

The Tribunal had to decide two questions of law: 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’? This question turns on the interpretation of provisions related to the deductibility of remuneration paid to non-residents. 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 paid for periods when the employee was not in India, under Section 9(1)(ii) of the Income Tax Act, 1961. Assessee's contentions: The judgment does not explicitly record the assessee's arguments for both issues. However, by implication, the assessee would argue in favor of their position on both questions. Revenue's contentions: The judgment does not explicitly record the revenue's arguments for both issues. However, by implication, the revenue would argue in favor of their position on both questions.

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.90 of 2004

Sedco Forex International Drilling Inc. as agent of its employee Mr. Doug Lacroix 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. Arvind Vashisth, 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 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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