M/S B J SERVICES CO. AGENT MIRKO KEGLEVIC vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/75/2005HC UttarakhandUKHC01001729200505 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following 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, i.e., for services rendered in India, under Section 9(1)(ii) of the Income Tax Act, 1961, and was therefore taxable. The High Court found no reason to deviate from this established position. The specific question regarding the retrospective or prospective application of the amendment to the explanation of Section 9(1)(ii) was implicitly answered by the reliance on the earlier judgment which dealt with the pre-amendment position.

What were the facts?

The appeal is filed by M/s B. J. Services Co. Middle East, acting as agent for Mr. Mirko Keglevic, 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 appellant is the assessee, and the respondents are the Income Tax Appellate Tribunal, Commissioner of Income Tax (Appeals), Dehradun, and Assistant Commissioner of Income Tax, Special Circle, Dehradun. The core of the dispute involves whether an amount paid for an "off period" should be treated as 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 in view of the explanation to section 9(1)(ii), despite no services being rendered in India during the off period? This question hinges on the interpretation of Section 9(1)(ii) of the Income Tax Act, 1961, and its explanation, particularly concerning payments for periods when services are not rendered in India. Assessee's Contention: The assessee argues 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 also point to a subsequent amendment to the explanation of 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, implying it was not the case for the assessment year in question. Revenue's Contention: The judgment does not explicitly record the revenue's arguments. However, it relies on a previous High Court judgment which held that "off period" salary was taxable under Section 9(1)(ii).

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. 75 of 2005 M/s B. J. Services Co. Middle East, as agent of Mr. Mirko Keglevic, 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. 3354/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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