TaxTMI 
TaxTMI 
2010 (3) TMI 800
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....unds in all the three appeals. 4. For the assessment years 2000-01 and 2001-02, the following common additional grounds are raised : 1. The Commissioner of Income-tax (Appeals) erred in confirming the reopening of the assessment as the assessee has furnished all the materials and particulars fully and truly. Hence, as per the proviso to section 147, reassessment is beyond the time and without jurisdiction inasmuch as the assessment under section 143(3) was completed on March 28, 2003 and notice under section 148 was issued beyond the period of four years from the end of the assessment year. 2. The Commissioner of Income-tax (Appeals) ought to have appreciated that addition made in the reassessment has arisen only due to change of opinion and not on account of concealment of any particulars by the assessee ; hence the order is to be quashed as being without jurisdiction. 5. For the assessment year 2002-03, the following additional grounds are raised : 1. The Commissioner of Income-tax (Appeals) erred in confirming the reopening of the assessment as the assessee has furnished all the materials and particulars fully and truly while completing the assessment under sectio....
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....ds, we find that this issue was very well raised before the learned Commissioner of Income-tax (Appeals) and the Commissioner of Income-tax (Appeals) has decided the issue against the assessee in paragraph 9 as under : "In view of the facts of the case and the relevant provisions of the Act, it is hereby held that the reopening proceedings had been validly initiated by the Assessing Officer and the assessee-company's appeal on this ground for all the three assessment years is hereby dismissed." 9. Since the additional grounds raised by the assessee is purely legal in nature and does not require any fresh material, facts or evidence to be examined for its adjudication, therefore, in view of the decision of the hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. as well as the decision of the hon'ble Delhi High Court in the case of M.K. Yashwant Singh (supra), we admit the additional grounds/issues raised by the assessee in these appeals for adjudication. 10. Since the additional grounds/issues are purely legal in nature and go to the root of the matter, we first take up the additional grounds raised by the assessee. 11. Learned counsel for the assessee h....
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....ssessing Officer for forming a belief that the income assessable to tax with respect to royalty payment has escaped assessment. He has contended that, when the assessee furnished all the relevant and necessary details and information along with the return of income before the Assessing Officer at the time of scrutiny assessment, and the Assessing Officer has considered the same and allowed the claim of the assessee, then reopening of the assessment is not permitted merely on the basis of change of opinion. He has relied upon the Full Bench decision of the hon'ble Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1, which has been upheld by the hon'ble Supreme Court CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561. He has also relied upon the hon'ble jurisdictional High Court decision in the case of CIT v. Abdul Rahman Sait [2008] 306 ITR 142 (Mad). Learned counsel for the assessee has referred to the impugned reassessment orders and submitted that there is no recording by the Assessing Officer that the assessee failed to furnish the relevant and necessary material required for the assessment. Therefore, the reopening for all the assessment years is ba....
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....ly by the assessee. There is no whisper or indication in the assessment orders about failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. As far as reopening for the assessment years 2000-01 and 2001-02 is concerned, the case falls under the proviso to section 147, as held by the various hon'ble High Courts including the hon'ble jurisdictional High Court in the decisions referred to and relied upon by learned counsel for the assessee. The assessment can be reopened after four years only if it is established that there is a failure on the part of the assessee to disclose fully and truly all material facts. From the records, it is evident that there is no finding by the Assessing Officer that there is a failure on the part of the assessee to disclose fully and truly all material facts. Even otherwise, when all the material facts are available at the time of making the original assessment under section 143(3), then, the Assessing Officer is not permitted to reopen the assessment after the expiry of four years from the end of the relevant assessment year. 16. As regards the question of reopening on the basis of change of opinio....
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....ly on the basis of change of opinion. The hon'ble Supreme Court has upheld the decision of the hon'ble High Court in the case of Kelvinator of India Ltd. (supra) and held as under (page 564) : "Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to c....
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....ance received, subject to approval by the collaborator. Accordingly, he has opined that 10 per cent of lump sum payment of Rs. 2 crores for each assessment year could be treated as payment for acquisition of capital asset in the form of a commercial right, which was capable of being transferred to another party through a sub-licensing arrangement. Both the assessee as well as the Revenue has challenged the order of the learned Commissioner of Income-tax (Appeals) before us. The assessee is aggrieved on treating 10 per cent of the lump sum payment as payment for acquisition of capital asset whereas the Revenue is aggrieved by the allowance of 90 per cent of this lump sum payment as business expenditure. 21. Before us, learned counsel for the assessee has submitted that the royalty is payable to Matsushita Electric Industrial Company Ltd. for use of know-how and not for transfer of any technology. The assessee has been using the know-how under the licence and, therefore, no right was transferred to the assessee but only technical know-how was allowed to be used by the assessee for its production purposes. He has referred to article 1 of the technical assistance agreement and submi....
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....s payment made for acquiring the capital asset being technical know-how and the learned Commissioner of Income-tax (Appeals) has committed an error in treating 90 per cent. of the lump sum payment as revenue expenditure. He has relied upon the order of the Assessing Officer. 23. We have considered the rival contentions and relevant material on record. It is an undisputed fact that the assessee is making payment of lump sum royalty after deducting the advance tax and the claim is also made only when the assessee is depositing the advance tax. Even the letter of approval of the Government refers to deduction of advance tax while making the payment of royalty. The learned Commissioner of Income-tax (Appeals) has referred to various clauses of the agreement and has recorded that as per articles 5 and 6 of the agreement, Matsushita Electric Industrial Company Ltd. has agreed to grant to the assessee the right to use a non-exclusive and non-transferable right to manufacture the products in India under one or more patents applicable to the products. Once it is evident from the agreement between the parties that the assessee has not acquired any exclusive right under collaboration agree....
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....ar that the assessee had entered into the agreement with the object of improving its business and it is not a case of a new business. Viewing the matter from any angle, we are of the view that the Appellate Tribunal has come to the correct conclusion in holding that the payment made by the assessee under the collaboration agreement should be regarded as revenue expenditure. Following the decisions of the Supreme Court in Alembic Chemical Works Co. Ltd.'s case [1989] 177 ITR 377 and Jonas Woodhead and Sons (India) Ltd.'s case [1997] 224 ITR 342 and the decision of this court in Aquapump Industries' case [1996] 218 ITR 427, all cited supra, we hold that the Tribunal was correct in holding that the payment made under the collaboration agreement should be allowed as revenue expenditure." 27. In the case of Shriram Pistons & Rings Ltd. (supra) the hon'ble Delhi High Court has held in paragraphs 32 to 34 as under (page 371): "Applying the various principles that have been laid down, we find that there was in fact no absolute transfer of any right in the documentation given by Riken to the assessee. The assessee was entitled to use the technical know-how for a period of five years o....