M/S HUGHES SERVICES LTD.AS AGENT SHAWN FIELD vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/103/2002HC UttarakhandUKHC01007284200305 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Uttaranchal at Nainital dismissed the appeal filed by the assessee, M/s Hughes Services (Far East) Pvt. Ltd. The Court followed a previous judgment by a Division Bench of the same High Court in the case of Commissioner of Income Tax and another Vs. Sedco Forex International Drilling Col. Ltd. and connected cases reported in (2003) 264 ITR 320. In that precedent, it was held that payment of salary for an "off period" constitutes income earned in India, i.e., for services rendered in India, under Section 9(1)(ii) of the Income Tax Act, 1961, and is therefore taxable. The High Court found that the present case was squarely covered by this earlier ruling. Consequently, the Tribunal's decision to treat the "off period" salary as income earned in India was upheld, and the assessee's appeal was dismissed. No issue was expressly left undecided.

What were the facts?

The appellant, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Shawn Field, filed an appeal against an order dated 30.07.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘E’, New Delhi. The dispute pertains to the Assessment Year 1993-94. The core of the dispute involves the taxability of an amount paid for an "off period". The assessee contended that no services were rendered in India during this off period. The revenue, represented by the Assistant Commissioner of Income Tax, Special Circle, Dehradun, and Commissioner of Income Tax (Appeals), Dehradun, considered this amount as income earned in India. The procedural history involves an appeal 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), when admittedly no service has been rendered during the off period in India? 2. Whether the subsequent amendment made in the explanation to Section 9(1)(ii) with effect from 01.04.2000, which regards the amount paid for “off period” or leave period as income accrued in India only from 01.04.2000, supports the assessee's contention? Assessee's Contentions: 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 relied on the amendment to the explanation of Section 9(1)(ii) effective from 01.04.2000, suggesting that such payments are taxable as income accrued in India only from that date, implying it was not taxable for the Assessment Year 1993-94. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions. However, their position is implied by their challenge to the assessee's appeal and the Tribunal's order which treated the amount as income earned 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. 103 of 2002 M/s Hughes Services (Far East) Pvt. Ltd. as agent of Mr. Shawn Field, Madras ……Appellant Versus 1. Income Tax Appellate Tribunal Delhi Bench ‘B’ New Delhi. 2. Commissioner of Income Tax(Appeals) Dehradun. 3. Assistant Commissioner of Income Tax, Special Circle, Dehradun …Respondents Mr. V.K. Bist, 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 30.07.2002 passed by the Income Tax Appellate Tribunal , Delhi Bench ‘E’, New Delhi in I.T.A. No. 1433/Del/1997. The appellant is the assessee. The dispute relates to the Assessment Year 1993-94. 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 Col. 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.)

09.09.

2005 09.09.2005 A

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