TaxTMI 
TaxTMI 
2026 (9) TMI 1342
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....ut the taxability of its receipts from Indian subscribers of its E-books and E-journals. 3. The AAR, vide its order dated 03.02.2020, passed under Section 245R of the Act of 1961 held that the amount which the petitioner had received from Indian customers cannot be termed as royalty as per Article 12 of the India-Netherlands Double Taxation Avoidance Agreement (hereinafter referred to as 'DTAA') and thus is not taxable as per the DTAA. The AAR held that such receipts were in the nature of business income. 4. While holding so, the AAR had issued a direction that the Assessing Officer (hereinafter referred to as 'AO') shall ascertain as to whether the petitioner-assessee has a Permanent Establishment (PE) in India, obviously, in order to determine as to whether the income which the petitioner has earned in India is liable to tax under the Act of 1961 as per Article 7 of DTAA. 5. The petitioner had filed its return of income for AY 2016-17 on 30.03.2017, declaring 'nil' income. Petitioner's case was selected for scrutiny and an assessment order under Section 143(3) of the Act of 1961 was passed on 24.11.2021. 6. During the course of assessment proceedings, the AO had i....
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....ly issued questionnaire but had also gathered relevant information and recorded a categorical finding (in his order dated 24.11.2021) that the petitioner does not have any Permanent Establishment. He vehemently argued that on any of the two counts, the AO cannot allege that there has been escapement of income. 12. Learned Senior Counsel argued that the proceedings not only suffer from change of opinion, but are also fundamentally void and a colourable exercise of powers under Sections 147/148 of the Act of 1961, available with the AO. 13. Mr. Puneet Rai, learned Senior Standing Counsel, on the other hand, submitted that during the course of subsequent proceedings (for AY 2020-21), the AO found that the petitioner has a permanent establishment as the operations are carried out by an entity known as RELX India - a company which is acting as an agent of the petitioner-company and on the basis of the nature of the transaction undertaken by said RELX India, petitioner is having dependent agent PE in India. 14. Learned Senior Standing Counsel for the respondent further argued that while passing order under Section 143(3) of the Act of 1961, the AO has not recorded any finding ab....
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....g questions as well) demystify any such doubt that whether inquiry about PE was made by the AO or not. 19. Hence, even if one finds some substance in what Mr. Puneet Rai has contended that the inscription "The receipts are held to be in the nature of business income and in absence of PE not taxable in India" is prone to doubt, and it may be reproductions of AAR's finding, because apart from this line the assessment order dated 24.11.2021 does not contain any finding or observation about the existence of PE. On ultimate analysis, it transpires that after inquiry, the AO did not find existence of any Permanent Establishment in India. 20. Be that as it may. Since there was direction by the AAR and the most important issue which was required to be examined by the AO in the proceedings under Section 143(3) of the Act of 1961 was, with regards existence of PE, even if for the sake of argument it is assumed that AO had failed to record such a finding, he himself is to be thanked. He cannot undertake the exercise under Section 148 of the Act of 1961 for his own fault, folly or failure, because the same would fall foul to the scope of Section 148 of the Act of 1961 and hit at the root....
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....n the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Section 149 Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c)....