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

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ITA/153/2005HC UttarakhandUKHC01003031200501 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 appeal by addressing two specific questions of law. For the first question, concerning the deductibility of remuneration in another state, the Court held that this 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" (Income Tax Appeal No.165 of 2001), decided on July 22, 2005. That judgment answered the question in favour of the Revenue. For the second question, regarding the taxability of off-period salary under section 9(1)(ii), the Court referred to a 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). The Apex Court's decision answered this question in favour of the assessee. Consequently, the appeal was disposed of in light of these two decisions.

What were the facts?

The assessee, Sedco Forex International Drilling Inc., acting as agent for its employee Mr. Donald Grant, filed an appeal against the consolidated order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'E', New Delhi. The appeal pertains to the assessment year 1998-99. The appeal was preferred before the High Court of Uttaranchal at Nainital. The parties agreed that only two specific questions of law were to be determined, and the rest were not pressed. The appeal challenges the ITAT's decision on these two questions.

What were the issues?

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’? (Question of law) 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? (Question of law) Assessee's Contentions: The judgment does not record specific contentions made by the assessee for either question. However, the framing of the questions implies the assessee argued against the ITAT's findings. Revenue's Contentions: The judgment does not record specific contentions made by the revenue for either question. However, the framing of the questions implies the revenue supported the ITAT's findings.

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.153 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Donald Grant 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 Deputy 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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