COMMISSIONER INCOME TAX vs. HALLIBURTON OFFSHORES SERVICE

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ITA/120/2000HC UttarakhandUKHC01025148200311 May 2004Author: OTHER2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the salary paid to the assessee for the 'off period' outside India was chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961. The Court's decision was squarely covered by its earlier judgment dated October 9, 2003, in Income Tax Appeal No. 57 of 2002 (The Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd.). In that precedent, the Court had ruled that payment of salary for the 'off period' constituted income earned in India for services rendered in India under Section 9(1)(ii). The Court further noted that the employer company paying the entire salary, including for the off period, from the income of Indian operations demonstrated the intention of the contracting parties, making the entire salary taxable in India. The High Court answered the question in the negative, favoring the department and against the assessee.

What were the facts?

The appeal concerns Assessment Year 1990-91. The Commissioner of Income Tax (CIT) and another are the appellants, and Halliburton Offshore Services Inc., as agent of Mr. M.L. Onde, is the respondent. The case involves the taxability of salary paid to the assessee for an 'off period' outside India. The High Court is considering an appeal against an order passed by the Income Tax Appellate Tribunal (ITAT). The procedural history indicates that the High Court's decision is based on a prior ruling in a similar case, ITA No. 57 of 2002, involving the Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd., decided on October 9, 2003.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned ITAT was legally correct to hold that the salary paid to the assessee for the 'off period' outside India was not chargeable to Indian Income Tax Act in terms of Section 9(1)(ii) of the Income Tax Act, 1961? Assessee's contentions: The judgment does not record any specific contentions made by the assessee. The decision relies on a prior ruling which implies the assessee's argument was against the taxability of the 'off period' salary. Revenue's contentions: The revenue, through the Commissioner of Income Tax, argued that the salary paid for the 'off period' outside India was indeed chargeable to Indian Income Tax under Section 9(1)(ii) of the Income Tax Act, 1961. This contention is supported by the revenue's reliance on the High Court's previous decision in the SEDCO Forex International Drilling Co. Ltd. case.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

Assessment Year 1990-91

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

I.T.A No. 117 of 2001 Old No. 120/2000

The Commissioner of Income Tax, Meerut & another

……… Appellants

Versus

Halliburton Offshore Services Inc. As agent of Mr. M.L. Onde

……..… Respondent

Mr. S.K. Posti, learned counsel for Income Tax Department.

Hon. P.C. Verma, A.C.J. Hon. Rajesh Tandon, J.

The matter is squarely covered by our decision dated 9th October, 2003 in Income Tax Appeal No. 57 of 2002; The Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd.

The question raised before us is as follows: “Whether on the facts and in the circumstances of the case, Ld. ITAT was legally correct to hold that the salary paid to the assessee for the said off period outside India was not chargeable to Indian Income Tax Act in terms of section 9(1) (ii) of the Income Tax Act, 1961?”

In our decision dated 9th October 2003 in Income Tax Act Appeal No. 57 of 2002; The Commissioner of Income Tax, Dehradun & another V/s SEDCO Forex International Drilling Co. Ltd., it has been held as under: “Therefore the payment of salary for OFF period was income earned in India i.e. for services rendered in India u/s 9(1)(ii). Lastly, we would like to point out that in this case the assessment records show that from the income of the Indian operations the salary in its entirety (including salary for the off period) has been paid by the employer Company. This conduct

shows the intention of the contracting parties. Hence the entire salary for both the periods was taxable in India u/s 9(1)(ii).”

For the reasons aforesaid, we answer the above question in the negative i.e. in favour of the department and against the assessee.

Appeal disposed of. No order as to costs.

(Rajesh Tandon, J.) (P.C. Verma, A.C.J.) Dt. 11.05.2004. G

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