M/S B.J.SERVICES CO. AS AGENT OF MR. PETER GRUBIC. vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/80/2004HC UttarakhandUKHC01003850200405 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 vs. Sedco Forex International Drilling Co. Ltd. and connected cases (2003) 264 ITR 320. In that precedent, a Division Bench of the Court had held that payment of salary for an "off period" constituted income earned in India, taxable under Section 9(1)(ii) of the Income Tax Act, 1961. The High Court found that the present case was on similar facts and circumstances. Therefore, the Tribunal was legally justified in treating the amount paid for the "off period" as income earned in India. The reasoning was based on the interpretation of Section 9(1)(ii) as applied in the Sedco Forex case, which did not differentiate based on the subsequent amendment's effective date for the assessment year in question. The operative direction was the dismissal of the appeal.

What were the facts?

The appellant, M/s B J Services Co. Middle East, acting as an agent for Mr. Peter Grubic, filed an appeal against an order dated January 29, 2004, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’. The dispute pertains to the Assessment Year 1998-99. The core of the dispute concerns the taxability of an amount paid for an "off period". The appellant contends 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 April 1, 2000, clarifies that such payments are taxable as income accrued in India only from that date onwards. The revenue's position is not explicitly detailed in the provided text, but the Tribunal's decision implies it treated the amount as taxable income earned in India.

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 under Section 9(1)(ii) of the Income Tax Act, 1961, despite no services being rendered in India during that period, especially considering the subsequent amendment to the explanation of Section 9(1)(ii) effective from April 1, 2000, which regards such payments as income accrued in India only from that date? Assessee's Contention: The assessee argued that the amount paid for the "off period" should not be treated as income earned in India because no services were rendered in India during that period. They relied on the subsequent amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, effective from April 1, 2000, which specifically states that amounts paid for "off period" or leave periods are regarded as income accrued in India only from April 1, 2000, onwards. This implies that for the Assessment Year 1998-99, such income should not be taxable in India. Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, the Tribunal's decision to follow a previous High Court judgment suggests the revenue likely argued that the payment was taxable in India for the relevant assessment year.

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 2004 M/s B J Services Co. Middle East as agent of Mr. Peter Grubic, 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/ Mr. A. Chatterjee, 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 29.01.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in I.T.A. No. 34 (Del) / 2000. The appellant is the assessee. The dispute relates to the Assessment Year 1998-99. 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 the above mentioned judgment of a Division Bench of this Court, this appeal is dismissed.

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

16.09.

2005 16.09.2005 A

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