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

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ITA/239/2000HC UttarakhandUKHC01015084200428 April 2004Author: OTHER2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the amount paid for the 'off period' was income earned in India, i.e., for services rendered in India under Section 9(1)(ii). The reasoning was based on a prior decision in Income Tax Appeal No. 57 of 2002, Commissioner of Income Tax, Dehradun & another Vs SEDCO Forex International Drilling Co. Ltd. In that decision, it was held that the payment of salary for the off period was income earned in India for services rendered in India. Furthermore, the Court noted that the assessment records showed the salary for the entire period, including the off period, was paid by the employer company from the income of Indian operations. This conduct was interpreted as demonstrating the intention of the contracting parties, making the entire salary taxable in India under Section 9(1)(ii). The question was answered in the negative, in favour of the department and against the assessee. The appeal was disposed of without costs.

What were the facts?

The assessee, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. Henderson D.G., appealed against an order from the Commissioner of Income Tax, Meerut. The assessment year in question is 1992-93. The dispute concerns whether an amount paid for an 'off period' should be treated as income earned in India. The assessee argued that no services were rendered in India during this off period. The High Court noted that a subsequent amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, effective from April 1, 2000, specifically regarded amounts paid for off periods or leave periods as income accrued in India only from that date. The High Court's decision was based on its prior ruling in a similar case.

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), given that no services were rendered in India during the off period and a subsequent amendment effective April 1, 2000, clarified such payments as income accrued in India only from that date? (Question of law and fact, concerning Section 9(1)(ii)). Assessee's contentions: - No services were rendered in India during the off period. - The subsequent amendment to the explanation of Section 9(1)(ii) effective April 1, 2000, indicates that amounts paid for off periods are considered income accrued in India only from that date, implying it was not the case for the assessment year in question. Revenue's contentions: - The judgment does not explicitly record the revenue's contentions but refers to a prior decision where it was held that payment for the off period was income earned in India for services rendered in India under Section 9(1)(ii). The conduct of the parties, where the employer company paid the entire salary from Indian operations, showed their intention, making the entire salary taxable in India.

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. 306 of 2001 Old No. 239/2000

M/s Hughes Services (Far East) Pvt. Ltd. As agent of Mr. Henderson D.G.

……… 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. 28.04.2004. G

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