M/S B.J.SERVICE CO. AS AGENT OF MR BARRY DOYLE. vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/47/2004HC UttarakhandUKHC01003817200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own prior judgment in Commissioner of Income Tax vs. Sedco Forex International Drilling Co. Ltd. and connected cases (2003) 264 ITR 320. In that precedent, a Division Bench of the same High Court had held that payment of salary for an 'off period' constituted income earned in India, specifically for services rendered in India under Section 9(1)(ii) of the Income Tax Act, 1961. Therefore, 'off period' salary was deemed taxable under Section 9(1)(ii). The High Court found this precedent directly applicable to the present case, leading to the dismissal of the appeal. No issue was expressly left undecided.

What were the facts?

The appellant, M/s B J Services Co. Middle East, acting as an agent for Mr. Barry Doyle, filed an appeal against an order dated 03.02.2004 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘D’. The appeal concerns the Assessment Year 1997-98. The core of the dispute revolves around the taxability of an amount paid for an 'off period'. The assessee contended that no services were rendered in India during this 'off period'. The ITAT's order, which is under challenge, treated this payment as income earned in India. The procedural history involves the assessee filing this appeal before the High Court after the ITAT's decision.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal is 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) of the Income Tax Act, 1961, when admittedly no service was rendered during the 'off period' in India? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) with effect from 01.04.2000, which regards amounts paid for 'off period' or leave period as income accrued in India only from that date, supports the assessee's contention that such payments were not taxable in India for the Assessment Year 1997-98? Assessee's Contentions: The assessee argued 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 further relied on the amendment to the explanation of Section 9(1)(ii) effective from 01.04.2000, suggesting that the taxability of 'off period' payments in India was only introduced from that date, implying it was not taxable for the Assessment Year 1997-98. Revenue's Contentions: The judgment does not record specific contentions from the revenue.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

AI-generated summary — verify with the full judgment below

THE HIGH COURT OF UTTARANCHAL AT NAINITAL

Income Tax Appeal No. 47 of 2004

M/s B J Services Co. Middle East as agent of Mr. Barry Doyle, Vikas Centre, 2nd Floor, S.V. Road, Santacruz (W) Mumbai.

….Appellant

Versus

1.

Income Tax Appellate Tribunal Delhi Bench ‘D’ New Delhi.

2.

Commissioner of Income Tax (Appeals) Dehradun.

3.

Assistant Commissioner of Income Tax, Special Circle, Dehradun

… Respondents

Mr. V.K. Bist, Senior Advocate/ Mr. A.Chatterjee, Advocate for the appellant. Mr. S.K.Posti, Advocate for the respondents.

Coram : Hon. Cyriac Joseph, C.J. Hon. J.C.S. Rawat, J.

JUDGMENT

CYRIAC JOSEPH, C.J. (Oral)

1.

This appeal is filed against the order dated 03.02.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in I.T.A. No. 50 to 81/ Del/ 2000. The appellant is the assessee. The dispute relates to the Assessment Year 1997-98.

2.

The substantial question of law raised in the appeal 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?”

3.

In Commissioner of Income Tax- and another Vs. Sedco Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320, a Division Bench of this Court held that the payment of salary for “off period” was income earned in India i.e. for services rendered in India under Section 9(1)(ii) and that “off period salary” was taxable under section 9(1)(ii) of the Income Tax Act, 1961.

4.

Following the above mentioned judgment of a Division Bench of this Court, this appeal is dismissed.

(J.C.S. Rawat, J.) (Cyriac Joseph, C.J.) 14.09.2005

14.09.2005

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