M/S B.J SERVICE CO.AS AGENT OF MR RABAH BEKRI vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/32/2004HC UttarakhandUKHC01003801200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own previous judgment in Commissioner of Income Tax and another Vs. SEDCO Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320. In that precedent, a Division Bench of the same High Court had held that payment of salary for an "off period" constituted income earned in India under Section 9(1)(ii) of the Income Tax Act, 1961, and was therefore taxable. The High Court found that the present case was on similar facts and circumstances and thus bound by its prior ruling. The appeal was dismissed on the basis of this established legal position, without separately addressing the argument regarding the subsequent amendment to the explanation of Section 9(1)(ii).

What were the facts?

The appellant, M/s B. J. Services Co. Middle East, acting as agent for Mr. Rabah Bekri, filed an appeal against an order dated 03.02.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’. The appeal pertains to the Assessment Year 1997-98. The core of the dispute involves the taxability of an amount paid for an "off period". The appellant contended that no services were rendered in India during this off period and that subsequent amendments to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, effective from 01.04.2000, indicated that such payments were only considered income accrued in India from that date onwards.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in treating the amount paid for the "off period" as income earned in India, in view of the explanation to Section 9(1)(ii), given that no services were rendered in India during the off period? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) effective from 01.04.2000, which regards amounts paid for "off period" or leave period as income accrued in India only from that date, impacts the taxability of the amount in question for Assessment Year 1997-98? Assessee's Contentions: The assessee argued that no services were rendered in India during the "off period", and therefore, the payment for this period should not be treated as income earned in India. They further contended that the amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, effective from 01.04.2000, clarifies that payments for "off period" or leave are considered income accrued in India only from that date, implying it should not apply retrospectively to the Assessment Year 1997-98. Revenue's Contentions: The judgment does not record specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 32 of 2004

M/s B. J. Services Co. Middle East, as agent of Mr. Rabah Bekri, Vikas Centre, 2nd Floor, S.V. Road, Santacruz (W), Mumbai.

……Appellant

Versus

1.

Income Tax Appellate Tribunal,

Delhi Bench ‘D’ New Delhi. 2. Commissioner of Income Tax (Appeals),

Dehradun. 3. Assistant Commissioner of Income Tax,

Special Circle, Dehradun

…Respondents

Mr. V.K. Bist, Senior Advocate for the appellant. Mr. S.K.Posti, Advocate for the respondents.

Coram: Hon. Cyriac Joseph, C.J. Hon. J.C.S. Rawat, J.

JUDGMENT

CYRIAC JOSEPH, C.J. (Oral)

1.

This appeal is filed against the order dated 03.02.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in I.T.A. No. 50 to 81/Del/2000. The appellant is the assessee. The dispute relates to the Assessment Year 1997-98.

2.

The substantial question of law raised in the appeal is as follows:

“Whether on the facts and in the circumstances of the case, Tribunal is legally justified in treating the amount paid for the “off period” as the income earned in India in view of the explanation to section 9(1)(ii) while admittedly no service has been rendered during off period in India and inasmuch as, the subsequent amendment made in the explanation w.e.f. 01.04.2000 shows that the amount paid for “off period” or leave period is regarded as the income accrued in India only w. e. f. 01.04.2000?”

3.

In Commissioner of Income Tax and another Vs. SEDCO Forex International Drilling Co. Ltd. and connected cases reported in

(2003) 264 ITR 320, a Division Bench of this Court held that the payment of salary for “off period” was income earned in India, i.e for services rendered in India under Section 9(1)(ii) and that “off period salary” was taxable under section 9(1)(ii) of the Income Tax Act, 1961.

4.

Following 0the above mentioned judgment of a Division Bench of this Court, this appeal is dismissed.

(J.C.S. Rawat, J.) (Cyriac Joseph, C.J.)

13.09.2005 13.09.2005 G

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