The judgement of the Supreme Court in Dharmendra Textiles Processors which holds that penalty u/s.271(I)(c) is a civil liability and that “willful concealment” and “mens rea” are not essential ingredients for imposing penalty cannot be read to mean that in all cases where addition is confirmed, penalty shall mechanically follow. In order to attract s. 271 (1) (c), there must be “concealment” – the fact that the same is willful or unintentional is irrelevant.

Where the assessee suo motu filed returns as “agent” of a non-resident but no assessment was made and after the expiry of two years from the end of the assessment year a notice under section 148 of the Act seeking to assess the income and the question arose whether the said notice was barred by limitation u/s 149 (3), HELD:

(i) Ss 160 to 166 are machinery and enabling provisions and give the department the option to either assess the non-resident or his agent;

(ii) U/ss 160 to 166, agents are of two types: (1) agents who admit their liability as agents of a non-resident either expressly or impliedly. In such cases, there is no obligation to give a hearing or even to pass an order treating them as an agent u/s 163. (2) Agents u/ss 160(1)(i) or 163(1) who deny their liability to be agents of the non-resident. In such cases, an opportunity of a hearing and a formal order is require to be passed. Whether a person falls in one or the other category depends on the facts of the case;

(iii) S. 149 (3) applies only in a case where a person is “treated as an agent” of a non-resident u/s 163 i.e. persons disputing their liability as agent. It does not apply to persons who have voluntarily treated themselves as an agent of the non-resident.

(iv) On facts, as the assessee had treated himself as the “agent”, it was not necessary for authorities in this case to provide any opportunity of being heard to the assessee as regards his liability to be treated as an agent under the Act. The time limit prescribed in s. 149 (3) was also not applicable.

Where the assessee entered into an agreement with the Vidharbha Irrigation department for supply, erection and installation of dam gates and the question arose whether it was “developing an infrastructural facility” so as to be eligible for deduction u/s 80-IA(4) or it was a mere contractor, HELD:

(i) Though the Explanation to s. 80IA (4) inserted by the FA 2007 w.r.e.f 1.4.2000 provides that s. 80-IA shall not apply to a person executing a works contract, the assessee was not a mere “contractor”. The term “developer” means a person who makes things happen and as the assessee was mobilizing and synthesizing people, plans, technical expertise, supervision, co-ordination and control etc, it could be regarded as the developer. The term “contractor” is not essentially contradictory to the term “developer”.

(ii) The Explanation to s. 80IA does not apply to a works contract entered into by the Government and the enterprise. It only applies to a work contract entered into between the enterprise and other party’s “sub-contractor”. The amendment merely aims at denying deduction to the sub-contractor who executes a works contract with the enterprise;

(iii) It is not required that the developer should also “operate and maintain” the infrastructure facilities so as to be eligible for deduction.

Where the assessee entered into a ‘secondment agreement’ with a US Company and obtained the services of an employee and the question arose whether the reimbursement by the assessee to the US Company of the salary paid by the US Company was chargeable to tax as “fees for technical services” HELD:

(i) Though the US Co was the employer in a legal sense but since the services of the employee had been seconded to the assessee and since the assessee was to reimburse the emoluments and it controlled the services of the employee, it was the assessee which for all practical purposes was the employer. Accordingly, the salary reimbursed to the US Co was not chargeable to tax;

(ii) Though the person deputed by the US Co was a technical person, the consideration paid under the secondment agreement was not “fees for technical services” because the fact that the seconded employee was responsible and subservient to the payer (assessee) and was required to also act as officer or authorized signatory or nominee of the assessee made it inconsistent with an agreement for providing technical services.

AT & S India P. Ltd 287 ITR 421 (AAR) – where a secondment agreement was held to constitute technical services distinguished.