Agency of Non-Resident: absence of receipt through alleged agent and no business connection, so agency treatment rejected.

Assessee not an agent of a non-resident where sale deeds and accounts show the disputed units fell to the assessee's share and consideration was paid to and reported by the assessee; the statutory test for agency requires a non-resident to receive income from or through the alleged agent, which was absent here. Partnership income is received by the partnership and apportioned to partners, not received through the assessee, and no agreement or business connection established agency. Consequently the addition invoking section 163(1)(c) was held unsustainable and deleted.

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Issues: Whether the assessee can be treated as an agent of a non-resident under section 163(1)(c) of the Income-tax Act, 1961 for the two sales of constructed units and whether the addition invoking section 163(1)(c) is sustainable.

Analysis: The Tribunal examined the development agreement, supplemental agreements, and the two sale deeds dated 05.03.2009. The sale deeds expressly record that the disputed units fell to the share of the developer (the assessee) and that the sale consideration was paid to the assessee. Section 163(1) of the Income-tax Act, 1961 defines an agent of a non-resident and requires that a non-resident be in receipt of income from or through the person alleged to be the agent. The Tribunal noted that the development agreement was with the partnership firm (which had five partners including an NRI partner) and that any income of the partnership would be received by the partnership and apportioned to partners, not received through the assessee. The Tribunal further noted that the remand directed earlier required opportunity to be given; on remand the assessee's position and the sale deeds on record show the transactions were from the assessee's share and reported in its accounts. Applying the statutory test in section 163(1)(c), the Tribunal found no direct or indirect receipt of income by the NRI through the assessee and no business connection or agreement making the assessee the NRI's agent for the transactions in question.

Conclusion: The addition made by invoking section 163(1)(c) of the Income-tax Act, 1961 treating the assessee as agent of the non-resident is not sustainable on the facts or in law and is deleted; the appeal is allowed in favour of the assessee.

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