Sedco Forex International Drilling Inc. as agent of its employee Mr. Nick Divkovick V. The Commissioner of Income Tax, Dehradun and The Assistant Commissioner of Income-Tax, Special Range, Dehradun

ITA/103/2004

AI Insights

The case involves Sedco Forex International Drilling Inc., which appealed against the taxability of its employee's off-period salary under Section 9(1)(ii) of the Income Tax Act, 1961. The appellant argued that the salary received during the off-period from the rigs in India should not be taxed, as the relevant legal provision was amended after the assessment year in question (1996-97). The Income Tax Appellate Tribunal had partly allowed the appeal, which led to this further appeal. The High Court of Uttaranchal at Nainital, referencing a similar case decided by the Supreme Court, ruled in favor of the appellant, stating that the law as it stood before the 1999 amendment applied, and thus the off-period salary was not taxable for the assessment year 1996-97.

• Counselvise Citation: [2005] 140 COUNSELVISE.COM (IT) 681167 (HC-UTTARANCHAL)
• Appeal Type: Others
• Pronouncement Date: 30-11-2005
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax and another Vs. Sedco Forest International Drilling Co. Ltd. (2003) 264 ITR 320, Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S K POSTI
• Assessee Lawyers: ARVIND VASHISTH
• Keywords: Assessment Year; Income Tax; Off Period Salary; Retrospective effect; Taxable salary
• Section: 9(1)(ii)

Judgement Text

"COURT NO.2 IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL Income Tax Appeal No.103 of 2004 Sedco Forex International Drilling Inc. as agent of its employee Mr. Nick Divkovick a company incorporated in the Republic of Panama having its registered office at No.8 Acquitino de la Guardia Street, City of Panama, Republic of Panama, present Address C/o A.F. Ferguson & Co. Maker Towers, Cuffe Parade, Mumbai ………. Appellant Versus 1. The Commissioner of Income Tax, Dehradun having office at Subhash Road, Dehradun-248001 2. The Assistant Commissioner of Income-Tax, Special Range, Dehradun having office at Subhash Road, Dehradun-248001 ………. Respondents Mr. Arvind Vashisth, Advocate for the appellants. Mr. S.K. Posti, Advocate for the respondents. Dated: November 30, 2005 Coram: Hon. P.C. Verma, J. Hon. J.C.S. Rawat, J. Both the parties are ready to argue the matter today. 2. This appeal has been preferred against the consolidated order dated 30.01.2004 for the assessment year 1996-97, passed by the Income Tax Appellate Tribunal, (Bench ‘F’ New Delhi). 3. Brief facts of the case-giving rise to this appeal are that the appellant is on the rigs in India. The appellant normally resides on the rigs for a period of 28/35 days and thereafter he is off the rigs for 28/35 days. The Assessing Authority has held that the off period salary is chargeable to tax under Section 9(1)(ii) and accordingly taxed the salary. On appeal, the Commissioner of Income Tax (Appeals), Dehradun affirmed the order of the Assessing Authority. In the second appeal, the Income Tax Appellate Tribunal partly allowed the appeal. 4. The learned counsel for the parties agree that only the following question of law arises in the appeal for the determination and they do not press the rest of the questions framed in the appeal: - Whether the Tribunal was right in holding that off- period salary was not taxable under section 9(1)(ii) read with the Explanation as it stood at the relevant time? 5. This question was answered by the Division Bench of this Court in the favour of the Revenue Department in the case of Commissioner of Income Tax and another Vs. Sedco Forest International Drilling Co. Ltd. reported in (2003) 264 ITR 320. The Special Leave Petition was filed against the judgment by the Sedco Forest International Drilling Co. Ltd., which was converted into Civil Appeal Nos.351-355 of 2005. The Hon’ble Apex Court in “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another, JT 2005(9) SC 639” has held that since the Explanation to Section 9(1)(ii) of the Income Tax Act, 1961 was amended by the Finance Act 1999 and was prospective, therefore, it could not be made applicable in the previous years i.e. to say that no retrospective effect can be given to the Explanation, if the assessment proceedings are pending after the said amendment and accordingly the judgment of Division Bench of this Court was set aside as the assessment year in dispute was prior to 1999. 6. In the present case also, the assessment year is prior to 1999, thus the assessee cannot be taxed in view of the law laid down by the Hon’ble Apex Court “Sedco Forex International Drill Inc. and Others Vs. Commissioner of Income Tax, Dehradun and Another (Supra). 7. Accordingly, the appeal is allowed. The question is answered accordingly. No order as to costs. (J.C.S. Rawat, J.) (P.C. Verma, J) Rajeev Dang "