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

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ITA/86/2005HC UttarakhandUKHC01001740200505 September 20052 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, following its own earlier judgment in Commissioner of Income Tax and another Vs. SEDCO Forex International Drilling Co. 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 the "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 covered by this earlier decision. The operative direction was 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. F. Vrlec, 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 respondents are the Income Tax Appellate Tribunal, Commissioner of Income Tax (Appeals), Dehradun, and the Assistant Commissioner of Income Tax, Special Circle, Dehradun. The appellant is the assessee, and the revenue is represented by the respondents.

What were the issues?

1. 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? 2. Whether the subsequent amendment to the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, 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. The assessee also pointed to the amendment to the explanation to Section 9(1)(ii) of the Income Tax Act, 1961, effective from 01.04.2000, which specifically makes such payments taxable from that date, implying it was not taxable for the Assessment Year 1999-2000. Revenue's Contention: The judgment records no specific arguments for 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. 86 of 2005

M/s B. J. Services Co. Middle East, as agent of Mr. F. Vrlec, 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. 3358/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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