TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2380
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....disposing the objections both dated 11.09.2009 in respect of both the assessment years were passed by the Dy. Assistant Director, Department of Income Tax rejecting the objections. Being aggrieved thereby, the present writ petitions have been filed. 2. The facts and circumstances are virtually identical in respect of both the assessment years and, therefore, we shall be referring to the facts of the assessment year 2002-03. In respect of this year, the original assessment under Section 143(3) was completed on 28.03.2005. More than 4 years from the end of the said assessment year, the impugned notice under Section 148 of the said Act was issued on 10.12.2008. Pursuant to the reasons having been furnished, the petitioner/assessee submitted its objections to the reopening of assessment on 31.08.2009 which, as indicated above, has been rejected by virtue of the impugned order dated 11.09.2009. The learned counsel for the petitioner/assessee submitted that the impugned notices and the orders rejecting the objections are liable to be set aside, primarily on two grounds. First of all, it is contended that there has been a change of opinion and, secondly, it has been contended that the pr....
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....ments which have been received by the assessee from its Indian subsidiary (Oracle Indian Private Limited - OIPL). The allegation is that since the assessee has a Permanent Establishment (PE) in India and that the receipts by the assessee from licensing of the duplicate software has been treated as „royalty‟ the „force of attraction rule‟ would be attracted and that the income in the nature of royalty should also be attributed to the Permanent Establishment by virtue of the said rule. It is therefore, alleged that as per Section 44D of the said Act, no expenses would be allowable and the receipts are to be taxed as royalty under section 115A of the Act at the rate of 20% in place of 15% as was done and accepted in the assessment order. On the basis of this, it has been recorded by the Assessing Officer that he has reasons to believe that the income chargeable to tax in excess of Rs. 1 lakh had escaped assessment within the meaning of section 147 of the Act. It was also contended that the case was covered under the provision of deemed escapement of the income incorporated in Explanation -2 under Section 147 of the Act. At this juncture, it may be clarified tha....
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....rolling, controlled by or subject to the same common control as that enterprise. In any case where the correct amount of profits attributable to a permanent establishment is incapable of determination or the determination thereof presents exceptional difficulties, the profits attributable to the permanent establishment may be estimated on a reasonable basis. The estimate adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article." 7. On a reading of Article - 7 (1), it becomes clear that profits of the assessee, which is a US company, would be taxable only in USA until and unless and the assessee carries on business in India through a Permanent Establishment situated here. It is further clear that if the assessee carries on business as aforesaid, the profits of the assessee may be taxed in India but only so much of them as are attributable to; (a) that permanent establishment; (b) sales in USA of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business activities carried on in USA of the same or similar kind as those effected through that permanent establish....
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....tate independent personal services from a fixed base situated therein, and the royalties or fees for included services are attributable to such permanent establishment or fixed base. In such case the provisions of Article 7 (Business Profits) or Article 15 (Independent Personal Services), as the case may be shall apply." 9. Article 12 (1) clearly indicates that Royalty and Fees for included services arising in India and paid to a resident of United States may be taxed in USA. However, by virtue of the provisions of Article 12(2) such royalty and fees for included service could also be taxed in India. But there is a cap on the tax. The cap (as is applicable in the present case) is to the extent of 15% of the gross amount of royalty and fees for included services. This is so because in the present case Article 12 (2) (a) (ii) would be applicable according to the learned counsel for the assessee. Article 12(6) carves out an exception, in as much as, the provisions of paragraphs 1 and 2 of Article 12 would not apply where the beneficial owner of the royalties or fees for included services, being a resident of a Contracting State (USA) carries on business in the other Contracting State....
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....) (a) (ii) at the rate of 15%. It has to be presumed that the Assessing Officer‟s attention was attracted to the entire Article 12 of the DTAA. As stated above, that Article itself carves out an exception under clause (6) thereof. Therefore, it cannot be accepted, as is sought to be made out by the learned counsel for the Revenue, that the Assessing Officer had not applied his mind to this aspect of the matter. In this context, we may refer to CIT vs. Usha International Ltd: (2012) 348 ITR 485 (Delhi). A full bench of this Court clearly observed that there may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/original proceedings may have examined the subject matter, claim, etc., because the aspect or question may be too apparent and obvious. The court also observed that in such cases it would be contrary and opposed to normal human conduct to hold that the Assessing Officer in the first round did not examine the question or subject-matter and form an opinion. Of course, the cases have to be examined individually. In the present case, having examined all the relevant facts and circumstances, it....
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....ed upon a proper application of mind. 14. Therefore, in our view, what the Assessing Officer is now seeking to do amounts to a clear change of opinion and that is not permissible. 15. Apart from this the second point urged by the learned counsel for the petitioner/assessee has also to be accepted. The point was that the Revenue has been unable to point out as to which material fact had not been disclosed fully or truly. Even the reasons do not specify or indicate as to which material fact had not been disclosed fully or truly by the assessee. 16. In Swarovski India Pvt. Ltd. Vs. Deputy Commissioner of Income Tax 368 ITR 601 (Delhi), a division bench of this court observed that the escapement of income by itself is not sufficient for reopening the assessment in a case covered by the proviso to section 147 of the said Act, unless and until there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. It was also made clear that unless and until the recorded reasons specifically indicated as to which material fact or facts was/were not disclosed by the petitioner in the course of the original assessment under section 143(....