M/S HUGHES SERVICE LTD.AS AGENT DENEL GRAHIM vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/102/2002HC UttarakhandUKHC01007283200305 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. 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. Therefore, the "off period" salary was considered taxable under Section 9(1)(ii). The High Court found no reason to deviate from this established legal position. The operative direction was to dismiss the appeal, upholding the Tribunal's decision.

What were the facts?

The appeal is filed by M/s Hughes Services (Far East) Pvt. Ltd., acting as the agent of Mr. Daniel Grahim Henderson, against an order dated 30.07.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘E’. The dispute pertains to the Assessment Year 1993-94. The appellant is the assessee. The core of the dispute involves the taxability of an amount paid for an "off period". The procedural history leading to this appeal involves the Tribunal's decision on the taxability of this payment.

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 that period? Furthermore, does the subsequent amendment to the explanation, effective from 01.04.2000, which regards "off period" or leave period payments as income accrued in India only from that date, impact the current assessment year? Assessee's Contention: The assessee argues that no services were rendered in India during the "off period", and the subsequent amendment to section 9(1)(ii) effective from 01.04.2000 clarifies that such payments are taxable as Indian income only from that date, implying it should not apply to the Assessment Year 1993-94. Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, the Tribunal's decision, as challenged by the assessee, implies the revenue contended for the taxability of the "off period" payment 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. 102 of 2002 M/s Hughes Services (Far East) Pvt. Ltd. as agent of Mr. Deniel Grahim Henderson ….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. 1432/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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