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2016 (9) TMI 864 - HC - Income TaxReopening of assessment - technology transfer - whether Sun Pharmaceutical alone had developed the technology and transferred through circuitous route to avoid taxation and Unimed Technologies Ltd. did not have any infrastructure facilities for such purpose? - Held that:- In the present case, as per the reasons recorded, previously Sun Pharma and Sun BVI had a Technology Transfer agreement. However, in the present case, technology was transferred by Unimed to Sun BVI for a declared consideration of 4 lac USD which, Sun BVI a subsidiary of Sun Pharma based in British Virgin Islands sold the same technology to M/s CARACO for 1.17 crores USD. The statement of Sudhir Valia key person in the group of companies and at that time director of Sun BVI and presently the director of Sun Pharma was recorded under Section 131(1A) of the Act in which he accepted that Sun BVI had no facility of R & D and manufacturing. During the inquiry, revenue also found material to suggest that Sun BVI had acquired technology from Unimed. Unimed also did not have elaborate R & D facility or necessary work force for such purpose. Such R & D facility was only available with the assessee and its research centre. The Assessing Officer therefore formed a belief that Sun BVI is shell company used only as a device to deviate the taxable profits of Sun Pharma as Sun BVI had also not developed any technology on its own. It was found that Sun BVI and CARACO both were subsidiaries of assessee. The assessee company had capacity to produce such technology and in fact between 199702, Sun Pharma had supplied such technology developed by it to M/s CARACO. In view of such evidence on record, the Assessing Officer concluded that technology in question transferred was actually done by the assessee to CARACO but was routed through other companies only to avoid payment of tax. In our opinion, these reasons do not lack validity. As noted, elaborate reasons have been recorded by the Assessing Officer which demonstrate how prima facie it can be shown that technology developed by Sun Pharma through use of its research and development facilities was routed to CARACO through Unimed and Sun BVI in British Virgin Islands which ensured that the entire amount escaped assessment in the hands of Sun Pharma. At the stage of considering notice for reopening, one has to see only prima facie whether on the basis of tangible material on record, the Assessing Officer could form a valid belief that income chargeable to tax has escaped assessment. At that stage, it is not necessary to verify whether invariably such income would be brought to tax. The contention that full and true disclosure have been made cannot be accepted. What was disclosed by Sun Pharma was that its subsidiary received consideration of 1.17 crores USD for transfer of penalty to CARACO. It obviously did not reveal whether Unimed or Sun BVI had any R & D development capabilities.
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