TMI Blog1997 (11) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently the assessment was reopened by resorting to the provisions of section 147 of the Income-tax Act, 1961. The assessee made a claim in respect of a sum of Rs. 7,02,292 as 'technical collaboration fee'. The amount was debited in the profit and loss account. It was allowed by the Assessing Officer. The audit party while scrutinising the records, found that the assessee-company started a new instrumentation division for which machinery and technical know-how was imported. A copy of the technical collaboration agreement dated25-2-1982was available on record. It was stipulated in this agreement that the assessee will pay royalty equivalent to 3% of the net sale price of all instruments manufactured and sold by the division. This provision was contained in clause 5 of the agreement. In clause 6 of the said agreement there was a stipulation for consideration. It was laid down that the assessee shall pay 1,00,000 U.S. Dollars (equivalent to Rs. 7,02,292) for transfer of technical property after deduction of Indian taxes. 4. The sales of the assessee during the year amounted to Rs. 3,20,633 only as against Rs. 4,78,794 in the earlier year. From this it was inferred that no item w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invited on clause 6 of the agreement dated25-2-1982. It is laid down in this agreement that the assessee will in consideration of transfer of technical property as defined in Article 1(b) pay to the Bandt. Industries (USA) lump sum of 1,00,000U.S.Dollars subject to the deduction of Indian taxes. This payment shall be made in three instalments as follows : (a) 1/3rd after the agreement has been taken on record; (b) 1/3rd at the time of transfer of technical property; and (c) 1/3rd within 30 days after the commencement of commercial production. 7.1 Mr. Srivastava vehemently argued that the audit party only reveted the attention of the Assessing Officer on certain factual aspects. Those factual aspects were available on records. The Assessing Officer did not make recourse to those aspects. He, therefore, made a mistake in deciding the issue. The information was, therefore, in possession of the Assessing Officer on the basis of which it was concluded that the income had escaped assessment. According to the learned Departmental Representative, it is well within the power of the audit part to draw the attention of the Assessing Officer in relation to the actual error. The audit p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opinion of an internal audit party of the Income-tax Department on a point of law cannot be regarded as "information" within the meaning of section 147(b) and the same cannot lead to proper and valid initiation of reassessment proceedings under that section. 8.1 The learned Counsel further invited our attention on the following two judgments of the Delhi High Court : (1) Shriram Refrigeration Industries Ltd. v. CIT [1981] 127 ITR 746/6 Taxman 50. In this case there was collaboration agreement. The licence was granted to manufacture and sell the product. There was no transfer of technical knowledge to the assessee. The Hon'ble High Court has held that lumpsum payment in addition to royalty based on sale price of manufactured articles is a revenue expenditure. (2) Triveni Engg. Works Ltd. v. CIT [1982] 136 ITR 340/10 Taxman 136. In this case amount was paid to the collaborator for conversion of measurement of drawings etc., to metric system. Assessee agreed to buy technical know-how and licence for ten years. Foreign collaborators continued to hold copyright in know-how. Lumpsum payment made to the collaborator was held to be a revenue expenditure. 8.2 Relying on the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the ITO constitutes "information" within the meaning of section 147(b); the part which embodies the opinion of the audit party in regard to the application or interpretation of the law cannot be taken into account by the ITO. In every case, the ITO must determine for himself what is the effect and consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or color the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the ITO." 9.1 In view of the aforesaid decision, it is beyond the competence of the audit party to make interpretation of the law. The Assessing Officer cannot act on the basis of such an interpretation. However, if the audit party finds that some factual errors have crept in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te which was erroneous, reopening was held to the invalid. 9.6 Reopening of a concluded assessment is not permissible simply on the ground that a new view may be entertained on the same facts. This is so because if it is permitted, litigation will have no end except when legal ingenuity is exhausted. It hath been well said declared Lord Coke: Interest Republica UT sit finis Litum (It concerns the State that law suits be not protracted, otherwise great oppression might be done under the colour and pretence of law). 9.7 We find that there was no omission or failure on the part of the assessee-company to make the return. All the relevant facts, necessary for making the assessment, were disclosed by the assessee. The bona fide of the claim cannot be doubted. Assessing Officer changed his opinion on the basis of the objection raised by the audit party. The case of the assessee therefore stands covered by the decision of theApex Courtrendered in the case of Indian Eastern Newspaper Society. 9.8 We have perused the order of the CIT(Appeals). We find that correct view was taken in the matter and his order calls for no interference. Accordingly, we uphold the same. 10. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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