SEDCO FOREX INTERNATIONAL DRILLING vs. THE COMMISSIONER OF INCOME TAX and ANR

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ITA/137/2005HC UttarakhandUKHC01003019200502 December 2005Bench: HON'BLE MR. JUSTICE P. C. VERMA2 pages
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What did the High Court hold?

The High Court decided both questions of law. For the first question, it held that the Tribunal erred in its finding. This question was answered in favour of the Revenue Department, referencing a previous decision by a Division Bench of the same High Court in "Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another" dated July 22, 2005. For the second question, the High Court held that the Tribunal was right in its finding. This question was answered in favour of the assessee, following a decision by the Hon'ble Apex Court in "Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another" (JT 2005(9)SC 639). The appeal was disposed of in accordance with these decisions.

What were the facts?

The appellant, Sedco Forex International Drilling Inc., acting as an agent for its employee Mr. Ian Chandler, filed an appeal against a consolidated order dated January 28, 2005, for assessment year 1998-99, passed by the Income Tax Appellate Tribunal, Bench 'E', New Delhi. The appeal was preferred before the High Court of Uttaranchal at Nainital. The parties agreed that only two specific questions of law arising from the Tribunal's order were to be determined, and the rest were not pressed. The appeal was disposed of based on previous decisions by the High Court and the Supreme Court.

What were the issues?

The High Court was to decide two questions of law: 1. Whether the learned I.T.A.T. has erred in law in holding that the appellant has failed to satisfy the condition that ‘the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State’? This question turns on the interpretation of provisions related to the deductibility of remuneration in international taxation. 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? This question concerns the taxability of salary earned during periods when the employee was not actively rendering services in India, as per Section 9(1)(ii) of the Income Tax Act. Contentions: Assessee: The judgment does not record specific contentions for the assessee on these issues, but their arguments would have supported the favourable outcomes mentioned in the 'held' section. Revenue: The judgment does not record specific contentions for the revenue on these issues, but their arguments would have opposed the favourable outcomes for the assessee.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 137 of 2005

Sedco Forex International Drilling Inc. as agent of its employee Mr. Ian Chandler a company incorporated in Republic of Panama having its registered office at No.8 Acquitino de la Guardia Street, City of Panama, Republic of Panama, present Address C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai

…………….. Appellant

Versus

1.

The Commissioner of Income Tax, Dehradun

having office at Subhash Road, Dehradun-248001 2. The Assistant Commissioner of Income-Tax,

Special Range, Dehradun having office

at Subhash Road, Dehradun-248001

…………… Respondents

Ms. Menka Tripathi, Advocate for the appellant. Mr. S.K. Posti, Advocate for the respondents.

Dated: December 02, 2005

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

Hon. J.C.S. Rawat, J.

Both the parties are ready to argue the matter today.

This appeal has been preferred against the consolidated order dated 28.01.2005 for the assessment year 1998-99, passed by the Income Tax Appellate Tribunal, (Bench ‘E’ New Delhi).

The learned counsel for the parties agree that the following only two questions of law arise 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. has erred in law in holding that the appellant has failed to satisfy the condition that ‘the remuneration is not deductible in computing the profits of an enterprise chargeable to tax in that other State’?

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?

So far as the question No. 1 is concerned, this question has already been decided by Division Bench of this Court {in which one of us (P.C.Verma,J.) was a member} in case of “Sedco Forex International Inc. Vs. The Commissioner of Income Tax and another”, which was decided on 22.07.2005 in Income Tax Appeal No.165 of 2001. In the said judgment, the question framed in the said appeal was answered in favour of the Revenue Department.

The 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.

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

(J.C.S. Rawat, J.) (P.C. Verma, J.) Shiv

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