M/S HUGHES SERVICES F.E. PVT. LTD STEWARD AIDEW vs. INCOME TAX APPELLATE TRIBUNAL and ORS

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ITA/80/2002HC UttarakhandUKHC01007272200305 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own Division Bench judgment in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Col. Ltd. and connected cases reported in (2003) 264 ITR 320. In that precedent, the Court had held that payment of salary for an "off period" constituted income earned in India for services rendered 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 squarely covered by this earlier decision. No specific issue was left undecided. The operative direction was the dismissal of the appeal.

What were the facts?

The assessee, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Stewart Aiden, filed an appeal against an order dated 29.07.2002 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘B’. The dispute pertains to the Assessment Year 1990-91. The core of the dispute involves the taxability of an amount paid to the employee for an "off period". The assessee contended that no services were rendered in India during this off period, and a subsequent amendment 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 regarded as 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 is 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) of the Income Tax Act, 1961? Assessee's contention: The assessee argued that no services were rendered in India during the "off period". Furthermore, the assessee pointed to the subsequent amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, effective from 01.04.2000, which, according to the assessee, indicates that payments for "off period" or leave period are regarded as income accrued in India only from 01.04.2000 onwards. Revenue's contention: The judgment does not record any specific contentions made by the revenue. However, the revenue would have implicitly supported the ITAT's order treating the "off period" payment as income earned in India.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No. 80 of 2002 M/s Hughes Services (Far East) Pvt. Ltd. as agent of Mr. Stewart Aiden, Mumbai ….Appellant Versus 1. Income Tax Appellate Tribunal Delhi Bench ‘B’ New Delhi. 2. Commissioner of Income Tax (Appeals) Dehradun. 3. Assistant Commissioner of Income Tax, Special Circle, Dehradun … Respondents Mr. V.K. Bist, 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 29.07.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi in I.T.A. No. 3088/Del/1994. The appellant is the assessee. The dispute relates to the Assessment Year 1990-91. 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 Col. 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 the above mentioned judgment of a Division Bench of this Court, this appeal is dismissed.

(J.C.S. Rawat, J.) (Cyriac Joseph, C.J.) 08.09.2005 08.09.2005

A

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