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

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ITA/69/2005HC UttarakhandUKHC01001723200505 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own Division Bench judgment in Commissioner of Income Tax vs. Sedco Forex International Drilling Co. Ltd. (2003) 264 ITR 320. In that case, 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 precedent. The reasoning was that the "off period" salary was considered income accrued or arising in India for services rendered in India, as per Section 9(1)(ii). The ratio decidendi is that "off period" salary is taxable in India under Section 9(1)(ii) if it relates to services rendered in India. The operative direction was to dismiss the appeal.

What were the facts?

The appellant, M/s B J Services Co. Middle East, acting as an agent for Mr. L.S. Alexandrov, 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 core of the dispute involves whether an amount paid for an "off period" should be treated as income earned in India. The assessee contended that no services were rendered in India during this "off period". The revenue's position, as reflected in the Tribunal's order, is that such payments are taxable 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) of the Income Tax Act, 1961, despite no services being rendered in India during the "off period", and considering that the subsequent amendment to the explanation, effective from 01.04.2000, 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 further pointed to the amendment to the explanation of Section 9(1)(ii) effective from 01.04.2000, which specifically includes payments for "off period" or leave as income accrued in India, implying that prior to this amendment, such payments were not taxable in India on this basis. Revenue's Contention: The revenue's position, as upheld by the Tribunal, is that the payment for the "off period" is taxable in India under Section 9(1)(ii) of the Income Tax Act, 1961. The judgment does not explicitly detail the revenue's arguments beyond this.

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. 69 of 2005 M/s B J Services Co. Middle East as agent of Mr. L.S. Alexandrov, 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 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. 3346/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.

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.)

17.09.

2005

17.09.

2005

A

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