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2009 (12) TMI 593 - ITAT, DELHIReassessment - Income escaping assessment - Addition - Business income or Agricultural income - In the assessment order for A.Y. 1998-99, the AO has given a finding that the activity of doing research and production of parent seeds are same, and the assessee was engaged in the business of research and development of parent seeds - Therefore, this observation made by the AO in the reasons cannot said to be irrelevant for the purpose of forming an opinion or belief that income had escaped assessment within the meaning of section 147 of the Act, in as much as for the reasons given by the AO, the assessee's claim of agricultural income has not been accepted by the AO in the A.Y. 1998-99 - This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction, and it is not necessary that at the time of recording reason u/s. 148 of the Act, the AO should have finally ascertained the fact by legal evidence or conclusion. At the initial stage what is required is "reason to believe" and not established fact of escapement of income - the reopening of the assessment u/s. 147 and issuance of notice u/s. 148 by the AO in year under consideration is justified and are valid In the assessment year 1998-99, the ten percent of total income from producing and sale of parent hybrid seeds is to be considered or recorded as agricultural income and the balance is to be assessed as business income liable to be taxed under the Act DTAA - e addition on account of apportionment of profit attributable to PE in India for use of research activity carried out in India by HO can be made in the present reassessment notwithstanding the fact that no specific reason relating to this issue were recorded by the AO while reopening the assessment u/s. 147 of the Act or at the time of issuance of notice u/s. 148 of the Act - Item "e" of para (3) of Article 5 of Indo-US Treaty provides that the term "permanent establishment" shall not include the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information for scientific research or for other activities which has a preparatory or auxiliary character, for the enterprise - the two activities are completely interlinked, interlaced and dependent on each other, and cannot be divorced or dissociated from each other the assessee's case is not covered by exclusionary provisions contained in Article 5(3)(e) of the Treaty between India and USA - the assessee's branch office in India do constitute a PE within the meaning of article 5 of DTAA between India and USA, and the income of the PE is, thus, to be taxed in India as per provisions of Article 7 of DTAA - In the result, all the assessee 's appeal as well as the revenue's appeal for all these assessment years i.e. A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 are partly allowed
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