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

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ITA/132/2005HC UttarakhandUKHC01003014200501 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 based on prior judgments. 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. 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 the Hon’ble Apex Court's decision 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 ruling, this question was answered in favour of the assessee. The appeal was disposed of accordingly.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., as agent of its employee Mr. Keith Stevens, filed an appeal against the consolidated order dated January 28, 2005, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'E', New Delhi, for the assessment year 1998-99. The appeal was preferred against the Commissioner of Income Tax, Dehradun, and the Deputy Commissioner of Income-Tax, Special Range, Dehradun. The parties agreed that only two questions of law were to be determined, and the rest were not pressed. The procedural history involves a prior decision by a Division Bench of the High Court and a decision by the Apex Court on related matters.

What were the issues?

The Tribunal was asked to decide two questions of law: 1. 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'? This question pertains to the deductibility of remuneration under the relevant provisions of the Income Tax Act and international tax principles. 2. Whether off-period salary was 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, as defined by Section 9(1)(ii) of the Income Tax Act. The appellant did not press certain questions. The revenue's contentions are not explicitly recorded for either question, beyond their involvement in the prior proceedings. The appellant relied on the Apex Court's decision for the second 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. 132 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Keith Stevens 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

Ms. Menka Tripathi, 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 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 that 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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