SEDCO FOREX INTERNATIONAL DRILL.INC.&ORS vs. COMMNR. OF INCOME TAX, DEHRUDUN

C.A. No.-000351-000355 - 2005Supreme Court17 November 20055 pages
For Petitioner: RUSTOM B. HATHIKHANAWALAFor Respondent: B. V. BALARAM DAS
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What did the Supreme Court hold?

The Supreme Court held that the High Court's decision was contrary to the legislative history and construction of Section 9(1)(ii) of the Income Tax Act. The Court found that the 1999 amendment to Section 9(1)(ii), which included 'rest period or leave period' as income earned in India, was intended to be prospective and did not apply to the assessment years in question.

What were the facts?

The appellant, an agent for its employees, entered into a wet lease agreement with ONGC to supply oil rigs and personnel for offshore drilling in India. Employees, residents of the UK, had contracts stipulating work periods in India followed by 'field breaks' in the UK, which included training and readiness for global assignments. The issue was whether salaries paid during these field breaks were taxable in India.

What were the issues?

Whether salary paid to non-resident employees for 'field breaks' outside India, which included training and readiness for global assignments, was taxable in India under Section 9(1)(ii) of the Income Tax Act, particularly in light of the 1999 amendment to the Explanation.

Which sections of the Income-tax Act were involved?

Section 9(1)(ii)

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Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5 CASE NO.: Appeal (civil) 351-355 of 2005 PETITIONER: Sedco Forex International Drill. Inc. & Ors. RESPONDENT: Commissioner of Income Tax, Dehradun & Anr. DATE OF JUDGMENT: 17/11/2005 BENCH: Ruma Pal & Tarun Chatterjee

JUDGMENT: J U D G M E N T With Civil Appeal Nos.375-426, 428-447, 462, 465-472, 474-476, 478, 480-481, 483-484, 545, 502-511, 513-521, 526-530, 534-544,546 of 2005 RUMA PAL, J The appellant has filed these appeals as the agent of its employees who are the assessees in the present case. The appellant itself is a company which was incorporated in Panama. It entered into a wet lease with the Oil and Natural Gas Commission (ONGC) under which the appellant agreed to supply oil rigs and the employees to man the rigs to enable ONGC to carry on offshore drilling within the territorial waters of this country. The appellant also entered into agreements (which were executed in the United Kingdom) with each of its employees who are residents of the United Kingdom. The schedule of work as specified in the agreements envisaged 35 days or 28 days work in a foreign location (in this case India) follo

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