M/S GARCIA FERNANDO THR.M/S FORAMER FRANCE and ORS vs. COMMISSIONER INCOME TAX and ANOTHER

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ITA/365/2000HC UttarakhandUKHC01013054200530 November 2005Author: HON'BLE MR. JUSTICE P. C. VERMA3 pages
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What did the High Court hold?

The High Court allowed the appeal, setting aside the orders of the lower authorities. The Court followed the decision of the Hon'ble Apex Court in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another". The Supreme Court had held that the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961, as amended by the Finance Act, 1999, was prospective and could not be applied retrospectively to previous years. Therefore, since the assessment years in the present case were prior to 1999, the assessees could not be taxed based on this Explanation. The questions framed were answered in favour of the assessees, and the appeal was allowed. No order as to costs was made.

What were the facts?

The appellants are technicians employed by a foreign non-resident company, M/S Foramer, France, to execute jobs for ONGC in India. The Assessing Authority imposed income tax on salaries earned or received outside India during their off periods when they were not physically present in India. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal affirmed the Assessing Authority's order. The appeals were filed before the High Court of Uttaranchal at Nainital against the Tribunal's judgment and order dated July 28, 1999, which upheld the CIT(A)'s order dated November 20, 1990. The assessment years in dispute are prior to 1999.

What were the issues?

1. Whether, in the facts and circumstances, the Income Tax Tribunal was correct in law in concluding that the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961, as amended by the Finance Act, 1999, was retrospective in operation and applicable from April 1, 1962? (Question of law). 2. Whether the Explanation to Section 9(1)(ii), as substituted by the Finance Act, 1999, can be described as declaratory or clarificatory in nature? (Question of law). Assessee's contentions: The assessee argued that the Explanation to Section 9(1)(ii) could not be applied retrospectively to assessment years prior to the amendment by the Finance Act, 1999. They relied on the Supreme Court's decision in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another". Revenue's contentions: The judgment does not record specific contentions for the revenue, but it refers to the High Court's earlier decision in favour of the revenue in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd., which was later set aside by the Supreme Court.

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.78 of 2001 (Old No. 365 of 2000)

1.

Mr. Garcia Fernando, through M/S Foramer, France

2.

Mr. Gonzalez Jean, through M/S Foramer, France

3.

Mr. Shell Jarry, through M/S Foramer, France

4.

Mr. Margarida Sebatien, through M/S Foramer, France

5.

Mr. Papke Robert, through M/S Foramer, France

6.

Mr. Van Heuveh, through M/S Foramer, France ………. Appellants

Versus

1.

The Commissioner of Income-tax (appeals) Dehradun

2.

The Income Tax Officer, Special Ward, Dehradun

………. Respondents

Coram: Hon’ble P.C. Verma, J. Hon’ble J.C.S. Rawat, J.

Dated: November 30, 2005

This appeal has been preferred against the judgment and order dated 28.07.1999 passed by Income Tax Appellate Tribunal in ITA No.1079/Del of 1991, 1080/Del of 1991, 1081/Del of 1991, 1082/Del of 1991, 1083/Del of 1991, 1084/Del of 1991, 1085/Del of 1991, 1086/Del of 1991 and 1087/Del of 1991. The said appeal was filed against the order of Commissioner of Income Tax (Appeals) Dehradun dated 20.11.1990 passed in the case of each of the assessees.

2.

Brief facts of the case-giving rise to this appeal are that all the assessees in these cases are technicians employed by foreign non-resident company to execute certain jobs in India from ONGC undertaken by employer foreign non-resident company. The Assessing Authority passed an order imposing income tax on the salary earned or received outside India for the period when they were not physically present in India and were enjoying their off period. The First Appellate Tribunal as well as Commissioner of Income Tax (Appeals) affirmed the order of the Assessing Authority. Accordingly, the questions that have been framed for the answer by this Court are as follows: -

(A) Whether in the facts and circumstances of the case, the Income Tax Tribunal was right in law in arriving at the conclusion that the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961 as amended by Finance Act, 1999 could be said to be retrospective in operation and to apply from 01.04.1962? (B) Whether the Explanation to Section 9(1)(ii) as substituted by the Finance Act, 1999 be described as declaratory or clarificatory in nature?

3.

converted into Civil Appeal Nos.351-355 of 2005. The Hon’ble Apex Court in “Sedco Forex International Drill Inc. and Another, JT 2005(9) SC 639” has held that since the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961 was amended by the Finance Act 1999 and was prospective, therefore, it could not be made applicable in the previous years i.e. to say that no retrospective effect can be given to the Explanation, if the assessment proceedings are pending after the said amendment and accordingly the judgment of Division Bench of this Court was set aside as the assessment year in dispute was prior to 1999. 4. In the present case also, the assessment year is prior to 1999, thus the assessee cannot be taxed in view of the law laid down by the Hon’ble Apex Court “Sedco Rajeev Dang

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