M/S B J SERVICES CO. AGENT VLADO POVLOVIC vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/70/2005HC UttarakhandUKHC01001724200505 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. reported in (2003) 264 ITR 320. In that case, the Court had held that payment of salary for an 'off period' constituted income earned in India for services rendered in India under Section 9(1)(ii) of the Income Tax Act, 1961, and was therefore taxable. The High Court found that the present appeal was on similar facts and circumstances. The Court did not explicitly address the impact of the subsequent amendment to the explanation to Section 9(1)(ii) w.e.f. 01.04.2000, as it was bound by the precedent set in the Sedco Forex case. The operative direction was the dismissal of the appeal.

What were the facts?

The appeal is filed by M/s B J Services Co. Middle East, acting as agent for Mr. Vlado Povlovic, against an order dated 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘C’. The dispute pertains to the Assessment Year 1999-2000. 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 Assistant Commissioner of Income Tax and the Commissioner of Income Tax (Appeals) as prior authorities.

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 no services were rendered in India during that period? 2. Whether the subsequent amendment to the explanation, 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? Assessee's Contention: The assessee argues that since no services were rendered in India during the 'off period', the payment for this period should not be treated as income earned in India. They rely on the fact that the amendment to the explanation to Section 9(1)(ii), which specifically includes 'off period' payments as income accrued in India, was effective only from 01.04.2000, implying it should not apply retrospectively to the assessment year in question. Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, it references a prior High Court judgment that the revenue likely relied upon.

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. 70 of 2005 M/s B J Services Co. Middle East as agent of Mr. Vlado Povlovic, Vikas Centre 2nd Floor, S.V. Road, Santacruz (W) Mumbai. … Appellant Versus 1. Income Tax Appellate Tribunal Delhi Bench ‘C’ 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 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 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi in I.T.A. No. 3372/Del/ 2001. The appellant is the assessee. The dispute relates to the Assessment Year 1999-2000. 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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