M/S B J S.CO. M.EAST LUCKEY S. KANDOLHA vs. INCOME TAX APPELLANT TRIBUNAL and ORS

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ITA/204/2004HC UttarakhandUKHC01003878200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own previous 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, a Division Bench of the High Court had held that payment of salary for an "off period" was income earned in India, specifically for services rendered in India, and was taxable under Section 9(1)(ii) of the Income Tax Act, 1961. Therefore, applying this established legal principle, the High Court found no reason to interfere with the Tribunal's order. The operative direction was the dismissal of the appeal.

What were the facts?

The appeal is filed by the assessee, M/s B J Services Co. Middle East, as agent of Mr. Lucky S. Kandolha, against an order dated 28.07.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘F’. The dispute pertains to the Assessment Year 1994-95. The assessee is challenging the Tribunal's decision to treat an amount paid for an "off period" as income earned in India. The procedural history involves the Tribunal's order, which is now under challenge before the High Court.

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 no service was rendered during the off period in India? 2. Whether the subsequent amendment to the explanation to section 9(1)(ii) with effect 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? Assessee's arguments: The assessee contends 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 highlight that the amendment to the explanation of Section 9(1)(ii) made the treatment of "off period" payments as income accrued in India applicable only from 01.04.2000, implying it was not applicable for the assessment year in question. Revenue's arguments: The judgment does not record any specific arguments made by the revenue. However, the Tribunal's decision, which is being appealed, implies the revenue's position was that the "off period" payment constituted 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. 204 of 2004 M/s B J Services Co. Middle East as agent of Mr. Lucky S. Kandolha, Vikas Centre, 2nd Floor, S.V. Road, Santacruz (W) Mumbai. ……Appellant Versus 1. Income Tax Appellate Tribunal Delhi Bench ‘F’ 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 28.07.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘F’, New Delhi in I.T.A. No. 4110/Del / 1998. The appellant is the assessee. The dispute relates to the Assessment Year 1994-95. 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.)

17.09.

2005 17.09.2005 A

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