M/S HUGHES SERVICE AS AGENT OF MR. DR. PASSOST vs. INCOME TAX APPLLATE TRIBUNAL and ORS

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ITA/91/2002HC UttarakhandUKHC01003854200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own Division Bench judgment 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, 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 case was squarely covered by this earlier ruling. Therefore, the Tribunal's decision to treat the "off period" payment as income earned in India was upheld. No specific issue was left undecided.

What were the facts?

The appellant, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. DR Passos E., filed an appeal against an order dated July 29, 2002, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’. The dispute pertains to the Assessment Year 1990-91. The core issue revolves around the taxability of an amount paid for an "off period" as income earned in India. The assessee contended that no services were rendered in India during this off period. 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 was legally justified in treating the amount paid for the "off period" as income earned in India under the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, despite no services being rendered in India during that period? 2. Whether the subsequent amendment to the explanation, effective from April 1, 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? 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 time. They also highlighted that the amendment to the explanation of Section 9(1)(ii) from April 1, 2000, indicates that such payments are considered income accrued in India only from that prospective date. Revenue's Contention: The judgment does not record specific arguments made by the revenue.

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. 91 of 2002 M/s Hughes Services (Far East) Pvt. Ltd. as agent of Mr. DR Passos E., Mumbai ……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 29.07.2002 passed by the Income Tax Appellate Tribunal , Delhi Bench ‘B’, New Delhi in I.T.A. No. 3079/Del/1994. The appellant is the assessee. The dispute relates to the Assessment Year 1990-91. 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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