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.

While conducting a survey u/s 133A the department has no power to examine any person on oath. Consequently, such a statement has no evidentiary value and no addition can be made solely on the basis of such statement;

Though s. 50C has been introduced by the Legislature to check the modus operandi of understating the sale consideration in the activity of civil construction and provides that the value determined or assessed by the stamp duty authorities shall be deemed to be the “full value of consideration”, its scope is confined to property held as a “capital asset”. It has no application to property held as “stock-in-trade”. Accordingly, additions on account of s. 50C cannot be made in the case of dealers in real estate.

Where the AO made a disallowance u/s 14A by estimating 10% of the expenses as being attributable to the tax free receipts and in the appeal before the Tribunal the department argued that in view of the judgement of the Special Bench of the ITAT in Daga Capital 26 SOT 603 the matter had to be remanded to the AO for applicability of Rule 8D and the judgement in Assam Travels 199 ITR 1 (SC) was relied on to contend that the remand could result in a larger disallowance than had been calculated by the AO, HELD that:

(i) While the matter had to be remitted to the AO to recalculate the disallowance under Rule 8D as held by the Special Bench, the assessee could not be worse off than it would have been if it had not filed an appeal against the assessment order. Accordingly, the AO was directed to restrict the disallowance to the original figure.

The judgement of the Supreme Court in UOI vs. Dharmendra Textile Processors 174 TM 571 fortifies the interpretation that where the assessee offers an explanation, the onus is on the assessee to substantiate the explanation or prove the bona fides and show that there is full disclosure of all the facts relating to the explanation. The AO is not obliged to prove that there was a wilful attempt by the assessee or that the explanation of the assessee is not bona fide;

No Permanent Establishment if only personnel supplied. (1) Where a Malaysian company supplied technical personnel to the assessee (a Dutch company) on terms that the personnel would remain under the control of the assessee and that the Malaysian company would …

DDIT vs. Stock Engineer Contractor (ITAT Bombay) Read More »

Under Article 24 (4) of the India-Germany DTAA, Enterprises of India, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of Germany, cannot be subjected in India to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of India are or may be subjected;

Where the assessee, a Co.op Housing Society became entitled, by virtue of the Development Control Regulations, to Transferable Development Rights (TDR) and the same were sold by it for a price to a builder and the question arose whether the transaction of sale receipt could be taxed, HELD that though the TDR was a ‘capital asset’, there being no ‘cost of acquisition’ for the same, the consideration could not be taxed.

The judgement in Sun Engineering had to be confined to a case where the issue had attained finality in the original proceedings. Such an issue could not be permitted to be agitated by the assessee in reassessment proceedings. However, as the facts showed that the issue had not attained finality in the original proceedings, there was no bar in the assessee raising such issues in the reassessment proceedings.

On facts, the assessee had rendered support services to its subsidiaries and some employees of the latter had worked under the guidance of the assessee, but the work so done by the employees was for the business of the Indian subsidiaries and not for the assessee. There is a distinction between business of the foreign company and that of its Indian subsidiaries. What was done by the employees of the Indian subsidiaries was running the business of the Indian subsidiaries with the guidance of the assessee. The work done by the employees of Indian subsidiaries did not mean that these employees were doing business of the foreign principal unless the work so done by these employees entitled the assessee for rewards of the work so done. The situs and manner of rendering of services, by anyone other than the employees or sub-contractees of the foreign principal, cannot govern whether or not the foreign principal will have a PE in India.