M/S B J SERVICES CO. AGENT L.D. SARAFOV vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/76/2005HC UttarakhandUKHC01001730200505 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, holding that the Tribunal was legally justified in treating the amount paid for the 'off period' as income earned in India. The Court followed its own earlier Division Bench 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, 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) and was thus taxable. The High Court did not specifically address the argument regarding the subsequent amendment to the explanation to Section 9(1)(ii) as the appeal was dismissed based on the existing precedent. The operative direction was the dismissal of the appeal.

What were the facts?

The assessee, M/s B. J. Services Co. Middle East, acting as agent for Mr. L.D. Sarafov, filed an appeal against an order dated 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench 'C'. The dispute pertains to the Assessment Year 1999-2000. The appeal challenges the Tribunal's decision to treat an amount paid for an 'off period' as income earned in India. The assessee contended that no services were rendered in India during this 'off period'. The procedural history involves the Tribunal's order which is now under challenge before the High Court.

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 under the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, despite no services being rendered in India during that period? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) effective from 01.04.2000, which regards 'off period' or leave period payments as income accrued in India only from that date, supports the assessee's contention? Assessee's Contention: The assessee argued that since no services were rendered in India during the 'off period', the payment for this period should not be treated as income earned in India. They also highlighted that the amendment to the explanation to Section 9(1)(ii) from 01.04.2000 clarifies that such payments are taxable as income accrued in India only from that date onwards, implying it was not taxable for the Assessment Year 1999-2000. Revenue's Contention: The judgment records no specific contention from the revenue, but it relies on a previous High Court judgment.

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. 76 of 2005 M/s B. J. Services Co. Middle East, as agent of Mr. L.D. Sarafov, Vikas Centre, 2nd Floor, S.V. Road, Santacruz (W), Mumbai. …Appellant Versus 1. Income Tax Appellate Tribunal Delhi Bench ‘C’ 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 a/b Mr. A. Chatterji, 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 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi in I.T.A. No. 3377/Del/2001. The appellant is the assessee. The dispute relates to the Assessment Year 1999-2000. 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.

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.) 19.09.2005

19.09.

2005 A

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