SEDCO FOREX INTERNATIONAL DRILLING vs. THE COMMISSIONER OF INCOME TAX

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ITA/13/2002HC UttarakhandUKHC01009106200320 March 2006Author: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court addressed the two questions of law based on previous judicial pronouncements. For the first question, concerning whether payments to the assessee were technical fees taxable under Section 44-D, the High Court held that the issue had already been decided by a Division Bench of the same court in the case of Commissioner of Income Tax and another Vs. O.G.C. as agent of M/s Foramer France, Dehradun, decided on 15.12.2005. That judgment answered the question in favour of the Revenue. For the second question, regarding the taxability of off-period salary under Section 9(1)(ii), the High Court held that this question had been decided by the Hon'ble Apex Court in Civil Appeal Nos. 351-355 of 2005, Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another. The Supreme Court's decision answered this question in favour of the assessee. Consequently, the High Court disposed of the appeal in view of these decisions.

What were the facts?

The appellant, M/s Sedco Forex Intl. Drilling Inc., a Panamanian company, filed an appeal against an order dated 27.11.2001 passed by the Income Tax Appellate Tribunal (ITAT), New Delhi, for the assessment year 1991-92. The appeal was preferred before the High Court of Uttaranchal at Nainital. The parties agreed that only two questions of law were to be determined, and the rest were not pressed. The appeal was disposed of by the High Court based on prior judgments.

What were the issues?

The Tribunal had to decide two questions of law: 1. Whether the learned ITAT was right in holding that payments made to the assessee company were technical fees and hence taxable under Section 44-D of the Income Tax Act, 1961. 2. Whether the Tribunal was right in holding that off-period salary was not taxable under Section 9(1)(ii) read with the Explanation as it stood at the relevant time. For the first issue, the Revenue's contention, as implied by the High Court's reliance on a previous judgment, was that the payments were indeed technical fees and taxable. For the second issue, the assessee's contention, as implied by the High Court's reliance on the Supreme Court judgment, was that off-period salary was not taxable under the specified provisions. The judgment does not explicitly record the arguments for each side for both issues, but rather refers to prior decisions that addressed these points.

Which sections of the Income-tax Act were involved?

Section 44-D,Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

COURT NO.2

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 13 of 2002

M/s Sedco Forex Intl. Drilling Inc. A company incorporated in the Republic of Panama, Having its registered office at No. 8, Acqutino de la Guardia Street, City of Panama, Republic of Panama, Present address C/o A.F. Ferguson & Co., Makers Towers, 4th Floor, Cuffe Parade, Mumbai

....... Appellant

Versus

1.

The Commissioner of Income Tax, Meerut having office at Income Tax Officer, Opp. Bhasali Ground, Meerut 2. The Deputy Commissioner of Income Tax, Special Rang-1, Dehradun having office at Subhash Road, Dehradun- 248001

......... Respondents

Ms. Menka Tripathi, Advocate for the appellant. Ld. Standing counsel for the Revenue.

Dated: March 20, 2006

Coram: Hon. P.C. Verma, J.

Hon. B.C. Kandpal, J.

Both the parties are ready to argue the matter today.

This appeal has been preferred against the order dated 27.11.2001 for the assessment year 1991-92, passed by the Income Tax Appellate Tribunal, (Bench ‘B’ New Delhi).

3.

The learned counsel for the parties agree that the following only two questions of law arises in this appeal for

the determination. They do not press the rest of the questions framed in the appeal:-

1.

Whether the learned I.T.A.T. was right in holding that the payments made to the assessee Company were technical fees and hence taxable under Section 44-D of the Act?

2.

Whether the Tribunal was right in holding that off period salary was not taxable under section 9(1) (ii) read with the Explanation as it stood at the relevant time?

4.

So far as the question No. 1 is concerned, this question has already been decided by a Division Bench of this Court {in which one of us (P.C. Verma,J.) was a member)in case of “Commissioner of Income Tax

and another Vs. O.G.C. as agent of M/s Foramer France, Dehradun, which was decided on 15.12.2005 in Income Tax Appeal No. 239 of 2001. In the said judgment, the question framed in the said appeal was answered in favour of the Revenue.

5.

The aforementioned second question has also been decided by the Hon’ble Apex Court in Civil Appeal Nos. 351-355 of 2005 “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639’’. In view of the aforesaid decision of the Hon’ble Apex Court, this question is answered in favour of the assessee.

6.

In view of the above, we dispose of the appeal accordingly.

(B.C.Kandpal, J.) (P.C. Verma, J.)

Rajeev Dang

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