TaxTMI 
TaxTMI 
2025 (6) TMI 80
X X X X Extracts X X X X
X X X X Extracts X X X X
....rce. PREFATORY FACTS 2. The petitioner is a tax resident of the United Kingdom and had filed its return of income in respect of the Assessment Year [AY] 2017-18 on 30.11.2017, declaring an income of Rs. 53,88,600/-. During the previous year relevant to AY 2017-18, the petitioner had received an amount of Rs. 1,44,34,773/- on account of "finance, sales and corporate service charges" from its associated enterprise [AE] in India, M/s Springer Nature India Pvt. Ltd. [SNIPL]. According to the petitioner, the said receipts were not chargeable to tax in view of the Double Tax Avoidance Agreement between India and the United Kingdom [India-UK DTAA]. It is the petitioner's case that it did not have permanent establishment [PE] in India and the receipts from SNIPL could not be termed as royalty or 'fees for technical services' [FTS]. In any event, the petitioner claims that the said services did not transfer any technology, skill or knowledge and therefore, the same could not be termed as 'fee for technical services' within the meaning of paragraph 4 of Article 13 of the India-UK DTAA. 3. The petitioner's return was picked up for scrutiny and the Assessing Officer [AO] issued a notice dat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rsuant to the said order. This Court allowed the said writ petition by an order dated 04.09.2024 and set aside the order dated 10.04.2024 passed under Section 148A (d) of the Act and the consequential notice issued under Section 148 of the Act, on the ground of violation of the principles of natural justice. The Court found that the petitioner was not afforded an opportunity to be heard and its response to the notice issued under Section 148A (b) of the Act was not considered. 7. Thereafter, on 25.09.2024, the AO once again issued a notice under Section 148A (b) of the Act based on the same information that had triggered the earlier notice dated 30.03.2024. However, the Revenue contends that the notice dated 25.09.2024 was not a fresh notice but a continuation of the earlier proceedings. 8. The petitioner responded to the said notice on 03.10.2024, once again setting out its explanation as to why its receipts were not taxable as FTS or FIS. However, the AO rejected the said explanation and passed the impugned order, holding it a fit case for issuance of notice under Section 148 of the Act. 9. Aggrieved by the same, the petitioner has filed the present petition. 10. We have hear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m its AE M/s Springer Nature India Pvt. Ltd. (SNIPL) on account of Finance, sales and corporate service recharges. 3. In view of the above facts, receipt from Finance, sales and corporate service of Rs. 1,44,34,773/- provided under this agreement also comes under the purview of Fee for Technical services, both under provisions of Income-tax Act and Article-13 of Indo-UK DTAA. The same may be added to the income of the assessee for the A.Y. 2017-18 and charged to tax at prescribed rate. 4. Therefore, the aforesaid information suggests that income chargeable to tax in the case of the assessee for the given AY 2017-18 has escaped assessment. 5. Further, as is evident such income which is chargeable to tax and has escaped assessment is in the form of an asset amounting to Rs. 50 lakh or more as per the provisions of section 149 (1) (b) of the Act. ABHILASHA SHARMA CIRCLE INT TAX 3 (1) (2) DEL" 13. The above information is also set out in the notice dated 25.09.2024. 14. It is apparent from the record that the question whether amount of Rs. 1,44,34,773/- was chargeable to tax under the Act was examined by the AO during the assessment proceedings. During the assessment proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the assessee had entered into a Shared Service Agreement, dated 1 January 2015, with SNIPL. By virtue of the agreement, the assessee provides certain general management and controlling, IT and business support services to SNIPL. In this regard, we have also enclosed copy of sample invoices raised by the assessee on SNIPL during the year under consideration (enclosed as Annexure 5). The assessee now proceeds to explain why 'Finance sales and corporate service recharges' received by it during the year under consideration, is not attributable as FTS. (A) Taxability of Finance, sales and corporate service recharge as FIS under the provisions of the Act: In this regard, your goodself's attention is now drawn towards Section 9(1)(vii) of the Act which deals with the stream of income by way of FTS, which shall be deemed to accrue or arise in India. The specific clause that merits consideration in the instant case reads, as follows: "income by way of fees for technical services payable by- (a) .........; or (b) a person who to a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made for rendering any technical or consultancy service is considered as FTS under the DTAA, only if such services 'make available' technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. In other words, in order to categorize an income as FTS, the following twin tests must be cumulatively satisfied (and not alternatively): * Consideration is paid for rendering any technical or consultancy service; and * Such service should make available technical knowledge, experience, skill, know-how, or processes to the service recipient as a result of provision of such services. Further, your goodself will appreciate that the terms technical and/or consultancy have not been defined under the Act and or the DTAA, and it is a well settled law that they need to be interpreted based on their understanding in common parlance, commentaries and various judicial precedents. Therefore, the assessee now proceeds to explain as to why the services rendered by it does not fall under the ambit of technical and or consultancy' services under the provisions of both the Act and the DTAA in view of the mean....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer." [emphasis added] 19. We consider apposite to refer to the following observations made by the Division Bench in Jindal Photo Films Ltd. v. CIT: (1998) 234 ITR 170: "16. The power to re-open an assessment was conferred by the legislature but not with the intention to enable the ITO to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods. (See CIT v. Rao Thakur Narayan Singh, [1965] 56 ITR 234, 239)." 20. In Commissioner of Income Tax v. Techspan India (P) Ltd., (2018) 6 SCC 685, the Supreme Court had reiterated the law that assessment could not be reopened on the basis of a change of opinion. The Court had referred to the earlier decision in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited (supra) and explained t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings." 21. In the present case, the fact that the petitioner had received an aggregate amount of Rs. 1,44,34,773/- during the previous year relevant to AY 2017-18, which was not surrendered to tax, was not only within the AO's knowledge, but was subject matter of examination as to whether the said amount was now held to be chargeable to tax under the Act. Concededly, all relevant facts regarding the aspect of taxability of the aforesaid amount were examined by the AO. There is no additional material that has been discovered subsequently, which was not within the knowledge of the AO at the material time. 22. Un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has obtained prior approval of the specified authority to issue such notice. Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of Section 148-A to the effect that it is a fit case to issue a notice under this section. Explanation 1.-For the purposes of this section and Section 148-A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or ." 25. It is clear from the above that in terms of clause (ii) to Explanation I to Section 148 of the Act, an audit objection to the effect that the assessment in the case of an assessee was not made in accordance with the provisions of the Act, is information for the purpose of Section 148 as wel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fied in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under Section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... On the contrary, it requires the AO to furnish the information to the assessee and elicit the assessee's response. Thereafter, the AO is required - in terms of clause (d) of Section 148A of the Act - to take an informed decision whether it is a fit case for issuance of notice under Section 148 of the Act "on the basis of the material available on record including the reply of the assessee". Obviously, if the AO is satisfied with the reply furnished by the assessee and the material on record, the AO is bound to hold that it is not a fit case for issuance of notice under Section 148 of the Act. 31. In a case such as this, the AO was required to take an informed decision whether the issue raised had been considered and concluded in the assessment proceedings as contended by the petitioner. The said issue cannot be brushed aside by construing an audit objection as a ground of issuing a notice under Section 148 of the Act regardless of whether the assessee's income had escaped assessment. The expression "escaped assessment" by its very nature, means that the income has not been subjected to an assessment. The expression would not include a case where the AO made an informed assessmen....