M/S B.J.SERVICES CO. AS AGENT OF MR. SALIM LUBIO vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/74/2004HC UttarakhandUKHC01003844200405 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 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, as it was for services rendered in India. The High Court's reasoning in the present case is that the principle established in the Sedco Forex case directly applies to the facts of this appeal, thereby justifying the Tribunal's decision. The operative direction was to dismiss the appeal. No issues were expressly left undecided.

What were the facts?

The appellant, M/s B J Services Co. Middle East, acting as an agent for Mr. Salim Lubis, filed an appeal against an order dated January 29, 2004, passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘D’. The dispute pertains to the Assessment Year 1998-99. The core of the dispute involves the taxability of an amount paid for an "off period". The appellant contended that no services were rendered in India during this off period and that a subsequent amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, effective from April 1, 2000, specifically regarded such payments as income accrued in India only from that date onwards.

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), given that no service was rendered during the off period in India? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) w.e.f. 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 1998-99? Assessee's Contentions: The assessee argued that no services were rendered in India during the "off period". They further contended that the explanation to Section 9(1)(ii) was subsequently amended, effective April 1, 2000, to specifically include payments for "off period" or leave period as income accrued in India only from that date, implying it should not apply retrospectively to the Assessment Year 1998-99. Revenue's Contentions: The judgment does not record specific contentions made by the revenue. However, the revenue's position was implicitly upheld by the Tribunal's order which treated the "off period" payment 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. 74 of 2004 M/s B J Services Co. Middle East as agent of Mr. Salim Lubis, 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 29.01.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in I.T.A. No. 24 (Del) / 2000. The appellant is the assessee. The dispute relates to the Assessment Year 1998-99. 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.)

16.09.

2005 16.09.2005 A

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