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TMI Blog2003 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... efore they are decided all together by this common judgment. For the sake of convenience, we are mentioning hereinbelow the facts in I.T.A. No. 57 of 2002. Facts: Ronald Grey, the assessee, entered into a contract for employment with Sedco Forex International Drilling Company (hereinafter referred to as the said company) incorporated in Panama. The assessee was the resident of the U.K. Under the contract he was required to work on oil rigs in Bombay High as per alternating time schedule of 35/28 days, i.e., on period followed by 35/ 28 days of off period in the U. K. Before the Assessing Officer it was contended, on behalf of the assessee, that off period salary was not exigible to tax under section 9(1)(ii) of the Act as it was not earned in India. It was argued that the field break which followed the on period was not a rest period. The Assessing Officer rejected this contention. The order passed by the Assessing Officer was confirmed by the Commissioner of Income-tax (Appeals). Further, the Assessing Officer held that free food and free beverages and free boarding on the rigs, constituted a perquisite under section 17(2)(iii). He added their value to the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f failure to deduct tax at source by the employer the tax has to be paid by the assessee. It was contended that section 234B deals with levy of interest in cases of shortfall in payment of advance tax by the assessee. That sections 192, 202 and 208 of the Act do not rule out section 191 of the Act. That the Tribunal was wrong in holding that as tax was deductible at source under section 192 by the employer, the assessee did not incur any liability to pay advance tax under section 208 and since the assessee did not incur any liability under section 208, he was not liable to pay interest under section 234B. It was argued that sections 191, 208 and 234B all fall in Chapter XVII of the Act and therefore sections 192 and 208 cannot rule out section 191 of the Act which states that if the payer fails to deduct tax at source the tax shall be payable by the assessee directly. Mr. Porus Kaka, learned counsel for the assessee, on the other hand, contended that in the case of a contract for employment the right to receive accrues at the place where contract is entered. into or where the amount is payable. He argued that the place where the right to receive accrues would be the place where i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of salary which it has paid to the assessee. It was argued that the said company was taxed on presumed income and therefore the question of that company paying salary from its income from Indian operations was irrelevant. On the question of levy of interest under section 234B of the Act, it was argued on behalf of the assessee that under sections 207, 208 and 209(1)(a)(d) the assessee had to estimate his current income under section 234B and if the said company had made short deduction of the tax at source then the said company was liable under section 191 of the Act. That in such cases the Department had a right to move against the employer company under section 201 for recovery of balance tax with interest under section 201(1A). That where any income was liable to tax deducted at source, section 234B was not applicable. That even assuming that section 191 was applicable no interest is chargeable under section 234B on the assessee for failure on the part of his employer to deduct tax deducted at source. The first question which arises for determination is as follows: Question: Whether, the Tribunal was right in holding that off period salary was not taxable under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al scheme. That even under the Finance Act of 1999 the new Explanation uses the term "rest period/leave period". For the above reasons we find merit in the arguments of the Revenue. Further, even assuming that the period following the on period was a stand by arrangement and not a rest period, we find that the assessee had to undergo training during the said period. It is important to note that the work on the oil rigs is hazardous. The assessee had to remain fit during the rest period. Hence, he had to undergo demonstrations and training but all that has a nexus with the services which he had to render in India. Hence, the payment which he received was for his services in India. In this connection it may be noted that the Explanation to section 9(1)(ii) introduced by the Finance Act of 1983 refers to what constitutes "income earned in India". This Explanation was introduced by the Finance Act of 1983, with effect from April 1, 1979, to get over the judgment of the Gujarat High Court in CIT v. S.G. Pgnatale [1980] 124 ITR 391 in which it was held that in order to attract section 9(1)(ii) of the Act, liability to pay must arise in India. By the said Explanation, the original intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusions of the Tribunal, we prefer to give our own reasons in support of our conclusion that on the facts and circumstances of this case, levy of interest under section 234B on the assessee is not justified. Firstly, the decisions of the Tribunal on the interpretation of the contracts regarding on period and off period salary were conflicting. Ultimately, the Legislature has stepped into clarify the position by the Finance Act of 1999. In this connection, it is important to note that section 234B imposes interest, which is compensatory in nature and not as a penalty. Secondly, although section 191 of the Act is not overridden by sections 192, 208 and 209(1)(a)(d) of the Act, the scheme of sections 208 and 209 of the Act indicates that in order to compute advance tax the assessee has to, inter alia, estimate his current income and calculate the tax on such income by applying the rates in force. That under section 209(1)(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot be faulted. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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