1984 (7) TMI 137 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of salary income received by non-resident expatriate technicians.
2. Applicability of Explanation to section 9(1)(ii) of the Income-tax Act, 1961.
3. Jurisdictional applicability of the Income-tax Act to offshore drilling operations.

Summary:

Issue 1: Taxability of Salary Income Received by Non-Resident Expatriate Technicians
The assessments were made on the Oil and Natural Gas Commission (ONGC) as an agent of non-resident expatriate technicians deputed by foreign companies. The ONGC filed returns as a representative-assessee. The Income Tax Officer (ITO) did not accept the contention that remuneration paid outside India should not be considered income accrued in India, despite reliance on the Gujarat High Court decision in CIT v. S.G. Pgnatale [1980] 124 ITR 391. The first appellate authority directed the ITO to exclude salary income received outside India except for the salary shown as taxable in India by the individuals themselves. The revenue appealed against this decision.

Issue 2: Applicability of Explanation to Section 9(1)(ii) of the Income-tax Act, 1961
The revenue relied on the Explanation inserted with retrospective effect from 1-4-1979 by the Finance Act, 1983, which states: "income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India." The Tribunal noted that this provision applies from the assessment year 1979-80 onwards. For assessment years up to 1978-79, the Tribunal upheld the first appellate authority's orders, aligning with the Gujarat High Court's interpretation in S.G. Pgnatale's case, which differentiated between income "earned in India" and "from service rendered in India."

Issue 3: Jurisdictional Applicability of the Income-tax Act to Offshore Drilling Operations
For assessment years 1979-80 and 1981-82, the Tribunal considered the jurisdictional applicability of the Income-tax Act to offshore drilling operations. The Central Board of Direct Taxes (CBDT) had notified that income from offshore drilling operations about 80 miles off the Indian coast would not be regarded as income accruing within India. Additionally, the Government of India extended the Income-tax Act to the continental shelf and exclusive economic zone of India effective from 1-4-1983. The Tribunal restored the matter to the ITO to decide afresh, considering the relevant notifications and provisions of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976.

Conclusion:
The Tribunal dismissed the revenue's appeals for the assessment years 1976-77, 1977-78, and 1978-79, upholding the first appellate authority's orders. For the assessment years 1979-80 and 1981-82, the Tribunal set aside the lower authorities' orders and remanded the matter to the ITO for fresh adjudication in accordance with the law and relevant notifications.