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.

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;