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2015 (10) TMI 824 - DELHI HIGH COURT

2015 (10) TMI 824 - DELHI HIGH COURT - [2016] 380 ITR 412 - Validity of reopening of assessment - taxation of advertisement and distribution revenue was to be governed by MAP resolution and the competent authorities of USA and India had agreed to an attribution of 10% of the total revenue generated from the said distribution and advertisement sales agreement to be treated as business income - Held that:- A detailed questionnaire had been issued to the petitioner, which was duly replied to. As ma .....

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g of the assessment under Section 143. Not only was the same before the Assessing Officer, the Assessing Officer has referred to the same in the Assessment Year and taken note of the same.

Thus on perusal of the reasons we find that no fresh information or material has been referred to in the reasons recorded for seeking to reopen the assessment. The material that is referred to is the very same material that was already before the Assessing Officer at the time of framing of the asses .....

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assessee. - WP(C) No. 1874/2013, WP(C) No. 1984/2014 - Dated:- 8-10-2015 - Badar Durrez Ahmed And Sanjeev Sachdeva, JJ. For the Petitioner : Mr M.S. Syali, Sr Advocate with Mr Mayank Nagi, Ms Husnal Syali and Mr Harkunal Singh For the Respondent: Mr Rohit Madan, Mr Ruchir Bhatia, Mr Akash Vajpai and Mr Alay Kshatriya JUDGMENT Sanjeev Sachdeva, J 1. Since both the petitions involve common questions and pertain to the same petitioner, the same are being disposed of by a common judgment. WP(C) 1874 .....

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in India to sell advertising on the products and to distribute the products, namely, (a) Satellite Delivered Televisions Services called Cartoon Networks, TCM Turner, TCM Turner Classic Movies, POGO and Boomerang ; (b) from Interactive Entertainment Services known as cartoonnetworkindia.com and POGO.T.V.; and (c) from Entertainment Mobile Telecommunication Services Cartoon Network Mobile and Boomerang Mobile. WP(C) No. 1874/2013 (Assessment year 2007-2008) 3. The petitioner filed its return of i .....

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year; (ii) File copy of return of Income for AY 2007-08 with Balance-sheet, Profit and Loss account and Notes on accounts. (iii) Furnish Statement/ Computation of Income with supporting/ evidence in support of the return of income. (iv) Furnish report in Form 3CEB under Section 92E read with Rule 10E. (v) Copy of agreement / contract with Indian customer or any other party in India from whom payment is received during the year. (vi) Copy of all orders under Section 195(2), which Assessee might h .....

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at Petitioner was company incorporated under the laws of state of Georgia. During the AY in question, the Petitioner derived the largest portion of its Indian income from the grant of exclusive rights to Turner International India Private Ltd. ( TIIPL') in India to sell advertising on the products and to distribute the products. (ii) In reply to query no 2, a print of Corporate Tax Return e-filed for AY 2007-08 was submitted. (iii) In reply to query no. 3, a copy of computation of income alo .....

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ent. (viii) In reply to query no. 25, a copy of Tax Residency Certificate was filed. (ix) In reply to query no. 37, copy of last Assessment Order for AY 2006-07 was furnished. (x) Further, in response to query no. 10, inter alia, the Distribution and Advertising Sales Agreement, dated as of April 1, 2006 was filed before the Respondent vide letter dated 14.12.2009. 6. On 24.12.2009, the proceedings u/s 143 (3) of the Income Tax Act were concluded and the assessment was framed. The Assessing Offi .....

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uently for the assessment year 2005-06, assessment was concluded following the MAP resolution. The Assessing Officer in the assessment order has specifically recorded that since the facts of the year under consideration remain the same, therefore, following the agreement reached by the respective competent authorities in the earlier years, the tax was computed at 10% as per the MAP resolutions. 7. On 27.03.2012 notice under Section 147/148 was issued, within the period of four years and the said .....

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et profit chargeable to tax in India as per the MAP resolution for the A.Y. 2001-02 and A.Y. 2004-05. Even the ITO-TDS u/s 195 of the I.T.Act has held that there receipts are taxable as royalty and also as per article 12(3) of the DTAA with USA, tax is deductible at 10%. As the MAP Resolution was only for A.Y. 2001-02 to 2004-05 and the revenue was accruing the assessee in A.Y. 2007-08 in pursuance of the agreement, which is effective from 01.04.2006, it should have been offered and taxed at 10% .....

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he petitioner has thus impugned the notice under Section 148 as well as the order disposing of the objections in this petition. WP(C) 1984/2014 (Assessment Year 2008-09) 9. On 05.03.2010, the petitioner filed its return of income declaring an income of ₹ 11,17,78,295/-. 10. On 25.08.2010, notice under Section 143 (2) of the Act was issued by the respondent asking the petitioner to produce documents, accounts and any other evidence on which the petitioner relied in support of the return of .....

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the material filed during the assessment proceedings, the Assessing Officer framed the assessment on 20.12.2010 concluding and holding that 10% of the total advertisement and distribution revenue received from India was taxable in India. The Assessing Officer in the Assessment Order has specifically noted that in case for Assessment Years 2001-02 to 2004-05, the respective competent authorities of India and USA have reached a mutual agreement to avoid double taxation under Article 27 of India/U .....

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ment year 2007-08, therefore, following the agreement reached by the respective competent authorities in the earlier years, the returned income was being assessed. The advertisement revenues received were assessed at 10%. 14. On 28.03.2013, notice was issued by the respondents under Section 147/148 seeking to reopen assessment concluded under Section 143 (3). The reasons recorded for reopening as supplied to the petitioner are as under:- The assessment of M/s Turner Entertainment Network Asia In .....

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only for assessment years 2001-02 & 2004-05, and the current revenue was accruing to the assessee in assessment year 2008-09 (FY 2007-08) in pursuance of the agreement, which is effective from 01.04.2006. Hence, it would have been taxed at the rate of 10% on gross basis as per the provisions of section 115A of the Income Tax Act, 1961, In view of the above, I have reason to believe that the income chargeable to tax has escaped has assessment within the meanings of section 147/148 of the Act .....

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sessment orders in both the petitions clearly show that an opinion was formed by the Assessing Officer that taxation of advertisement and distribution revenue was to be governed by MAP resolution and the competent authorities of USA and India had agreed to an attribution of 10% of the total revenue generated from the said distribution and advertisement sales agreement. The same was agreed to be treated as business income. 17. A detailed questionnaire had been issued to the petitioner, which was .....

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the time of the framing of the assessment under Section 143. Not only was the same before the Assessing Officer, the Assessing Officer has referred to the same in the Assessment Year and taken note of the same. 18. In Commissioner of Income Tax Versus Usha International Ltd. 348 ITR 485 (Del.) (FB), Full Bench of Court laid down the following propositions of law: (i) The expression 'change of opinion' postulates formation of opinion and then a change thereof. In the context of section 14 .....

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of opinion'. (iii) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because .....

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of the assessee to disclose all the primary facts (in contradistinction with inferential facts) which have a bearing on the liability of the income earned by the assessee being subjected to tax. It is for the Assessing Officer to draw inferences from the facts and apply the law determining the liability of the assessee. The law does not require the assessee to state the conclusions that can reasonably be drawn from the primary facts. Once that is done and assessment order framed, the Assessing O .....

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e meaning of section 147. Here also such facts which could have been discovered by the assessing authority but were not so discovered at the time of original assessment may not constitute a new information. - Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456, 477 (SC), A.L.A. Firm v. CIT [1991] 189 ITR 285, 298/ 55 Taxman 497 (SC), Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996, 1004 (SC), ITO v. Lakshmani Mewal Das [1976] 103 ITR 437, 445 (SC), CIT V. Bhanji Lavji [1971] 79 IT .....

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ken to have overridden the consistently laid down law. Where the ITO (very often successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or more often, by a predecessor ITO), was in his opinion incorrect, judicial decisions have consistently held that this could not be done. - Indian Eastern Newspaper Society s case (supra) and A.L.A. firm s case (supra). 16. The power to reopen an assessment was conferred by the Legislature but not with the intention .....

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tion 147 as it stood in the assessment year 1963-64:- ". . . An Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for .....

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of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by .....

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