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

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ITA/4/2005HC UttarakhandUKHC01002961200501 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 as follows: 1. On the first question, concerning the deductibility of remuneration, the Court held that the Income Tax Appellate Tribunal had erred. This question was answered in favour of the Revenue, following the Division Bench's decision in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" dated 22.07.2005. The reasoning was that the conditions for non-deductibility were not met, implying the remuneration was indeed deductible in the other state. 2. On the second question, regarding the taxability of off-period salary under section 9(1)(ii), the Court held in favour of the assessee. This decision was based on the Hon’ble Apex Court's judgment in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another", JT 2005(9) SC 639. The ratio is that off-period salary, as per the Apex Court's interpretation of Section 9(1)(ii) and its Explanation, was not taxable in India. The appeal was disposed of in view of these decisions.

What were the facts?

The appeal was filed by Ensco Maritime Ltd., acting as the agent of Mr. James Martin Kennedy Jr., against the consolidated order dated 14.10.2004 passed by the Income Tax Appellate Tribunal (Bench ‘F’ New Delhi) for the assessment year 1998-99. The appellant and the respondent, represented by their respective counsel, agreed that only two questions of law were to be determined by the High Court, and the rest were not pressed. The appeal challenged the Tribunal's findings on these two specific questions.

What were the issues?

The High Court was asked 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 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 in India. Contentions: Assessee: The assessee did not explicitly present their arguments for these specific issues in the provided text, but their position is implied by the questions framed and the subsequent decisions. Revenue: The revenue's arguments are not detailed in the provided text, but their stance is implied by the issues raised and the decisions made in favor of the revenue on the first issue.

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.04 of 2005

Ensco Maritime Ltd. (earlier known as Dual Offshore Ltd.) As agent of Mr. James Martin Kennedy Jr. 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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