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

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ITA/97/2004HC UttarakhandUKHC01004877200401 December 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided both questions of law. Regarding the first question, the Court held that it 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 22.07.2005). In that prior judgment, the question was answered in favour of the Revenue. For the second question, the High Court noted that the Hon'ble Apex Court had already decided this issue in Civil Appeal Nos.351-355 of 2005, "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another". The Supreme Court's decision was in favour of the assessee. Consequently, the High Court disposed of the appeal in accordance with these prior rulings.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. Carlan Hagan, a Panamanian company, filed an appeal against a consolidated order dated January 30, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi. The appeal pertains to the assessment year 1995-96. The appellant and the revenue agreed that only two specific questions of law were to be determined by the High Court, and the rest were not pressed. The High Court was to decide whether the ITAT erred in holding that the appellant failed to satisfy a condition regarding the deductibility of remuneration in another state, and whether the Tribunal was correct in holding that off-period salary was not taxable under Section 9(1)(ii) as it stood at the relevant time.

What were the issues?

The High Court was 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 outside the period of employment in India, under Section 9(1)(ii) of the Income Tax Act. Contentions: Assessee: The appellant did not explicitly state its contentions for these specific issues in the provided text, but the framing of the questions implies arguments against the ITAT's findings. Revenue: The revenue, through its counsel, argued in favour of the ITAT's findings on the first question, as indicated by the High Court's reference to a previous decision in favour of the Revenue. For the second question, the revenue's position is implied to be against the assessee's favour, as the Supreme Court's decision was in favour of the assessee.

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. 97 of 2004

Sedco Forex International Drilling Inc. as agent of its employee Mr. Carlan Hagan 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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