SEDCO FOREX INTERNATIONAL AGENT G.D. FOSTER vs. COMMISSIONER OF INCOME TAX

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ITA/113/2004HC UttarakhandUKHC01004892200430 November 2005Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court held that the first question of law, concerning the deductibility of remuneration in another state, had already been decided by a Division Bench of the same court in the case of "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" on July 22, 2005. That decision answered the question in favour of the Revenue. The second question of law, regarding the taxability of off-period salary under section 9(1)(ii), was decided by 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". The Apex Court's decision answered this question in favour of the assessee. Consequently, the appeal was disposed of in light of these prior judgments.

What were the facts?

This appeal was filed by Sedco Forex International Drilling Inc., acting as agent for its employee Mr. G.D. Foster, against the Commissioner of Income Tax, Dehradun, and the Assistant Commissioner of Income-Tax, Dehradun. The appeal challenges a consolidated order dated January 30, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Bench 'F', New Delhi, for the assessment year 1994-95. The appellant is a company incorporated in Panama. The High Court of Uttaranchal at Nainital was hearing the appeal. Both parties were ready to argue the matter.

What were the issues?

The Tribunal had to decide two questions of law. The first question was 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'. The second question was whether off-period salary was taxable under section 9(1)(ii) read with the Explanation as it stood at the relevant time. The appellant's contentions were not explicitly recorded for the first issue. The revenue's contentions were not explicitly recorded for the first issue. For the second issue, the appellant argued that off-period salary was not taxable. The revenue's arguments were not explicitly recorded 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.113 of 2004

Sedco Forex International Drilling Inc. as agent of its employee Mr. G.D. Foster 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, Cuffee 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 appellants. Mr. S.K. Posti, Advocate for the respondents.

Dated: November 30, 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 1994-95, 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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