M/S HUGHES SERVICES F.E. AS AGENT A.G.FURGUAOW vs. INCOME TAX APPEALLATE TRIBUNAL and ORS

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ITA/82/2002HC UttarakhandUKHC01007273200305 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 and another Vs. Sedco Forex International Drilling Col. Ltd. and connected cases reported in (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 for services rendered in India under Section 9(1)(ii) of the Income Tax Act, 1961, and was therefore taxable. The High Court found that the present case was identical to the facts in the Sedco Forex case. Consequently, the Tribunal's decision to treat the "off period" payment as income earned in India was upheld. The operative direction was the dismissal of the appeal.

What were the facts?

The assessee, M/s Hughes Services (Far East) Pvt. Ltd., acting as an agent for Mr. J.A.G. Furguson, filed an appeal against an order dated 29.07.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi, in I.T.A. No. 3045/Del/1994. The dispute pertains to the Assessment Year 1989-90. The core of the dispute revolves around whether an amount paid for an "off period" should be treated as income earned in India. The assessee contended that no services were rendered in India during this "off period".

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, despite no services being rendered in India during the "off period"? 2. Whether the subsequent amendment to the explanation to section 9(1)(ii) effective 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? Assessee's Contention: The assessee argued that the amount paid for the "off period" should not be treated as income earned in India because no services were rendered in India during that period. They also pointed to the subsequent amendment to the explanation of Section 9(1)(ii) from 01.04.2000, suggesting it clarifies that such payments are only taxable from that date. Revenue's Contention: The judgment does not record any specific contentions 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. 82 of 2002

M/s Hughes Services (Far East) Pvt. Ltd. as agent of Mr. J.A.G. Furguson, Mumbai

….Appellant

Versus

1.

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

2.

Commissioner of Income Tax (Appeals) Dehradun.

3.

Assistant Commissioner of Income Tax, Special Circle, Dehradun

… Respondents

Mr. V.K. Bist, 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 29.07.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi in I.T.A. No. 3045/Del/1994. The appellant is the assessee. The dispute relates to the Assessment Year 1989-90.

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 Col. 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.) 08.09.2005 08.09.2005

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