TMI Blog2015 (4) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... Software License Fees paid to foreign companies and therefore, the income chargeable to tax has been escaped due to the failure on the part of the assessee to disclose fully and truly all material facts. Under the circumstances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied. Once the case of the assessee is covered by the 1st proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. Thus the impugned reassessment proceedings of reopening assessment for the A.Y. 2007-2008 are hereby terminated. See Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT) - Decided in favaour of assessee. - SPECIAL CIVIL APPLICATION NO. 13859 of 2014 - - - Dated:- 7-4-2015 - MR. M.R. SHAH AND MR. S.H.VORA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections on merits also. 2.07. That vide communication / letter dated 6/9/2014, the Assessing Officer disposed of the objections raised by the petitioner assessee against the reopening of the assessment. Hence, the petitioner has preferred present Special Civil Application under Article 226 of the Constitution of India challenging the impugned reassessment proceedings for the A.Y. 2007-2008. 3.00. Mr.B.S. Soparkar, learned advocate appearing on behalf of the petitioner - assessee has vehemently submitted that the ground for reopening of the assessment is completely misconceived and baseless. It is submitted that in the present case reassessment proceedings have been initiated after a period of four years. It is submitted that therefore, escapement of income must also be occasioned by a failure on the part of the assessee to disclose fully and truly all the material facts. 3.01. Mr.B.S. Soparkar, learned advocate appearing on behalf of the petitioner - assessee has further submitted that in the present case, as such there is/ was no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. It is submitted that all detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment for the A.Y. 2007-2008, in exercise of powers under section 147 of the Income Tax Act. 4.02. Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has vehemently submitted that as such the present petition is filed at premature stage, as only a notice under section 148 read with section 147 of the Income Tax Act has been issued. It is submitted that in the events the petitioner assessee is aggrieved by the reassessment order, alternative efficacious remedy is available by way of an appeal to the CIT(A) and thereafter to the learned tribunal as per the provisions of the Act. Therefore, it is requested not to entertain the present petition. 4.03. On merits, Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has vehemently submitted that the impugned reassessment proceedings are absolutely just and proper and in accordance with the provisions of the Act, more particularly section 147 read with section 148 of the Income Tax Act. 4.04. Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has further submitted that in the case of the petitioner, the assessment was completed under section 143(3) of the Income Tax Act at the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 85,96,823/- and claimed the same as revenue expenditure. It is submitted that the payment was made to the foreign companies without withholding the tax at source though the payment was exclusively in the nature of Royalty . 4.07. Mr.M.R. Bhatt, learned counsel appearing on behalf of the revenue has further submitted that the assessee company simply availed the Software Services from the foreign companies and these Companies granted the assessee company only right to use Software License , as the the Software was owned by the parent Company itself. It is submitted that it is an admitted fact that the payment made by the assessee as Software License Fees is in the nature of Royalty and the same was not disclosed in the original return filed. It is submitted that nature of foreign remittance attracts the provisions of section 95 read with section 40(A)(i) of the Act and therefore, the income had escaped the assessment on account of the assessee not disclosing the full facts. It is submitted that therefore initiation of opening of the assessment and initiation of the reassessment proceedings are absolutely just and proper and in accordance with the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are communicated to the petitioner - assessee vide communication dated 20/5/2014 are as follows :- ...It has been observed that assessee has incurred expenditure of on software license fee for an amount of ₹ 85,96,823/- and claimed as revenue expenditure. Payment was made to foreign companies during the period 19/06/06 to 31/ 03/2007 as per chart mentioned below : - Sr. No. Name of supplier company Date Amount Rs. 1 Texas Instruments Inc. Dollas TX 75266, USA. 19/06/2006 09,17,800 2 Megma Designs Automation Inc. Bayfront Plaza, Santa Carla. 14/08/2006 25,27,649 3 Megma Designs Automation Inc. Bayfront Plaza, Santa Carla. 01/11/06 24,39,160 4 Megma Designs Automation Inc. Bayfront Plaza, Santa Carla. 31/03/2007 23,66,144 5 Texas Instruments Inc. Dollas TX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense Fees by the assessee to the foreign companies was disclosed. Not only that the assessee claimed the same as revenue expenditure. The notice was issued under section 143(3) of the Act and the Assessing Officer also vide communication / notice dated 12/11/2010 called upon the assessee to furnish necessary documents which include the complete details of Software License Fees . The assessee was also directed to furnish relevant documentary evidences to establish and prove that Software License Fees is in nature of revenue. The assessee submitted complete details of Software License Fees and justified its claim that the Software License Fees is in the nature of revenue expenditure and not capital expenditure. The assessee replied to the said query as under:- We have enclose herewith in Annexure C , the copy of Suppliers' Bills of each transaction. Please note that the license fees / expenses is not a Capital Expenditure. There is no enduring benefit in usage of these licenses. The ownership of license has not passed on to the assessee. The assessee has a limited right to use only for a certain period. The assessee has no right to modify the software under license o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if (1) the assessee failed to make a return under section I39 of the Act or in response to notice issued under section 142(1) or under section 148 of the Act, he failed to disclose truly and fully all material facts necessary for the assessment. Once all primary facts are before the assessing authority, no further assistance is required by way of disclosure. All inferences of facts and legal inference need to be drawn by the Assessing Officer. It is not for any one to guide the Assessing Officer in respect of inference factual or legal , which requires to be drawn by him alone. 17. Once the case of the assessee is covered by the 1st proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Ltd. (supra), has held thus: l0. It can be clearly noted from the reasons recorded that there is no mention at al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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