M/S HUGHES SERVICE PVT. LTD. vs. THE COMMISSIONER OF INCOME TAX

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ITA/236/2000HC UttarakhandUKHC01015081200406 May 2004Author: OTHER2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the amount paid for the 'off period' is to be treated as income earned in India under Section 9(1)(ii). The Court's decision is squarely covered by its earlier judgment dated 9th October 2003 in Income Tax Appeal No. 57 of 2002, Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd. In that precedent, the Court held that payment of salary for the 'off period' was income earned in India for services rendered in India under Section 9(1)(ii). Furthermore, the Court noted that the assessment records showed the salary, including that for the off period, was paid by the employer company from the income of Indian operations, indicating the intention of the contracting parties. Therefore, the entire salary for both periods was taxable in India. The question is answered in the negative, in favour of the department and against the assessee.

What were the facts?

The assessee, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Rele Dioscorito S., is in appeal before the High Court of Uttaranchal at Nainital. The assessment year in question is 1992-93. The appeal challenges an order from the Commissioner of Income Tax, Meerut. The core of the dispute concerns whether an amount paid for an 'off period' should be treated as income earned in India. The assessee argues that no services were rendered in India during this off period. The procedural history indicates this matter is being decided based on a previous decision of the same court.

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, in view of the explanation to section 9(1)(ii), when no services were rendered during the off period in India? 2. Whether the subsequent amendment made in the explanation to section 9(1)(ii) effective from 01.04.2000, which regards amounts paid for off or leave periods 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 also highlight that the subsequent amendment to the explanation of Section 9(1)(ii) from 01.04.2000, which specifically includes off-period payments as income accrued in India, indicates that such treatment was not applicable prior to that date. Revenue's Contention: The judgment does not explicitly record the revenue's arguments but implies their stance by stating the court's decision is in favour of the department.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

Assessment Year 1992-93

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

I.T.A No. 303 of 2001 Old No. 236/2000

M/s Hughes Services (Far East) Pvt. Ltd. As agent of Mr. Rele Dioscorito S.

……… Appellant

Versus

Commissioner of Income Tax, Meerut …....… Respondent

Mr. V.K. Bisht, learned counsel for the appellant. 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, 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?”

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. 06.05.2004. G

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