M/S B.J.SERVICE CO.AS AGENT OF MR H.A.KARIMI vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/41/2004HC UttarakhandUKHC01003810200405 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 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 thus taxable. The High Court found that the present appeal was squarely covered by this earlier decision. Therefore, the Tribunal was legally justified in treating the amount paid for the 'off period' as income earned in India. The operative direction was to dismiss the appeal.

What were the facts?

The assessee, M/s B J Services Co. Middle East, acting as an agent for Mr. H. A. Karimi, filed an appeal against an order dated 03.02.2004 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘D’. The appeal pertains to the Assessment Year 1997-98. The core of the dispute involves the taxability of amounts paid for an 'off period'. The assessee contends that no services were rendered in India during this 'off period'. The ITAT's order, which is under challenge, treated this 'off period' payment as income earned in India. The procedural history indicates that 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) of the Income Tax Act, 1961, when admittedly no service was rendered during the 'off period' in India? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, effective from 01.04.2000, which regards amounts paid for 'off period' or leave period as income accrued in India only from that date, supports the assessee's contention that such payments for the Assessment Year 1997-98 were not taxable in India? Assessee's Contention: The assessee argued that no services were rendered in India during the 'off period', and therefore, the payment for this period should not be treated as income earned in India. They also relied on the amendment to Section 9(1)(ii) effective from 01.04.2000, suggesting it clarifies that 'off period' payments are taxable in India only from that date onwards. Revenue's Contention: The judgment does not explicitly record the revenue's arguments. However, the revenue's position, as reflected in the ITAT's order and the High Court's decision, is that the 'off period' payment 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. 41 of 2004 M/s B J Services Co. Middle East as agent of Mr. H. A. Karimi, 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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