M/S B.J.SERVICES CO. AS AGENT OF MR. JOHN GERRIOH. vs. INCOME TAX APPELLATE TRIBUNAL and ORS.

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ITA/76/2004HC UttarakhandUKHC01003846200405 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own previous 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 High Court had held that payment of salary for an "off period" constituted income earned in India, taxable under Section 9(1)(ii) of the Income Tax Act, 1961, as it was considered income for services rendered in India. Therefore, applying this established principle, the Tribunal's decision to treat the "off period" payment as income earned in India was upheld. The court did not expressly leave any issue undecided.

What were the facts?

The appeal is filed by the assessee, M/s B J Services Co. Middle East, as agent of Mr. John Gerrish, against the order dated January 29, 2004, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’. The dispute pertains to the Assessment Year 1998-99. The core issue revolves around whether the amount paid for an "off period" should be treated as income earned in India. The assessee contends that no services were rendered in India during this off period and points to a subsequent amendment to the explanation of Section 9(1)(ii) of the Income Tax Act, 1961, which made such payments taxable only from April 1, 2000.

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, especially when no service was rendered during the off period in India and a subsequent amendment effective April 1, 2000, clarifies that amounts paid for "off period" or leave period are regarded as income accrued in India only from that date onwards? Assessee's Contention: The assessee argued that no services were rendered in India during the "off period" and highlighted that the explanation to Section 9(1)(ii) was amended prospectively from April 1, 2000, to tax "off period" payments, implying it was not taxable for the assessment year in question. Revenue's Contention: The judgment does not record specific arguments made by the revenue.

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. 76 of 2004

M/s B J Services Co. Middle East As agent of Mr. John Gerrish, 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 29.01.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in I.T.A. No. 32 (Del) / 2000. The appellant is the assessee. The dispute relates to the Assessment Year 1998-99.

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.)

16.09.2005

16.09.2005

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