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

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ITA/35/2004HC UttarakhandUKHC01003804200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own prior judgment in Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases (2003) 264 ITR 320. In that precedent, a Division Bench of the High 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, even if no services were rendered in India during that specific off period. The High Court found that the principle laid down in the Sedco Forex case was directly applicable to the present appeal. Therefore, the Tribunal was legally justified in treating the amount paid for the "off period" as income earned in India for the Assessment Year 1997-98. No issue was expressly left undecided.

What were the facts?

The appellant, M/s B J Services Co. Middle East, acting as agent for Mr. Jeremy Ferguson, filed an appeal against an order dated 03.02.2004 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘D’. The dispute 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 is the assessee, and the respondents are the ITAT, the Commissioner of Income Tax (Appeals), and the Assistant Commissioner of Income Tax. The appeal was filed before the High Court of Uttaranchal at Nainital.

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? 2. Whether the 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, impacts the taxability for the Assessment Year 1997-98? 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 highlight that the amendment to the explanation of section 9(1)(ii) from 01.04.2000 clarifies that such payments are taxable as Indian income only from that date onwards, implying it was not taxable for the Assessment Year 1997-98. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, the revenue's position, as upheld by the Tribunal and the High Court, is that the "off period" salary is taxable 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. 35 of 2004 M/s B J Services Co. Middle East as agent of Mr. Jeremy Ferguson, 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 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 the above-mentioned judgment of a Division Bench of this Court, this appeal is dismissed.

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

14.09.

2005

14.09.

2005 A

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