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

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ITA/82/2005HC UttarakhandUKHC01001736200505 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, holding that the payment for the "off period" was income earned in India and taxable under Section 9(1)(ii) of the Income Tax Act, 1961. This decision was based on a prior judgment by a Division Bench of the same High Court in the case of Commissioner of Income Tax and another Vs. SEDCO Forex International Drilling Co. Ltd. and connected cases reported in (2003) 264 ITR 320. The ratio decidendi is that salary paid for "off periods" constitutes income earned in India for services rendered in India, and is thus taxable under Section 9(1)(ii). The operative direction was to dismiss the appeal. No issues were left undecided.

What were the facts?

The assessee, M/s B. J. Services Co. Middle East, acting as an agent for Mr. Boyko Ivanov, filed an appeal against an order dated 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘C’. The dispute pertains to the Assessment Year 1999-2000. The appeal was filed before the High Court of Uttaranchal at Nainital. The procedural history leading to this appeal involves the Tribunal's decision which is now under challenge by the assessee. The core of the dispute revolves around the taxability of payments made for an "off period".

What were the issues?

The Tribunal had to decide one substantial question of law: Whether, on the facts and in the circumstances of the case, the Tribunal was 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 that period, and considering that a subsequent amendment to the explanation, effective from 01.04.2000, regarded such payments as income accrued in India only from that date onwards. The appellant (assessee) argued that the payment for the "off period" should not be treated as income earned in India because no services were rendered in India during that time. They also pointed to the amendment effective from 01.04.2000, suggesting that the taxability of "off period" payments in India was only established from that date. The revenue's contentions are not explicitly recorded in the judgment.

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 2005

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

…Appellant

Versus

1.

Income Tax Appellate Tribunal

Delhi Bench ‘C’ 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 a/b Mr. A. Chatterji, 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 27.10.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi in I.T.A. No. 3353/Del/2001. The appellant is the assessee. The dispute relates to the Assessment Year 1999-2000.

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.) 19.09.2005

19.09.2005 A

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