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2016 (4) TMI 634 - ITAT DELHI

2016 (4) TMI 634 - ITAT DELHI - TMI - Reopening of assessment - receipts earned by the assessee from provision of satellite transmission services are liable to tax in India as royalties for use of process as well as equipment falling within the ambit of section 9(1)(vi) of the Act and article 12 of the India-USA DTAA - Held that:- We concur with the ld. CIT (A) that there is no whisper / allegation that there was any failure on the part of the assessee to disclose truly and fully all material fa .....

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s necessary for the original assessment.

We take note of the fact that while passing the order u/s 263 r.w.s. 143(3) of the Act, the clauses of the agreement with the customer was examined in detail to hold that the revenues earned under the said agreement falls within the taxable ambit of royalty as defined under section 9(1)(vi) of the Act as well as Article 12 of the India USA DTAA. Therefore, such royalty income was subject to tax @ 15% and even though PE was also alleged and Arti .....

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essee - ITA No.6355/Del./2013 - Dated:- 4-3-2016 - SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER, JJ. For The Assessee : Shri Pawan Kumar and Arvind Rajan, CA For The Revenue : Shri S.K. Jain, DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : This is revenue s appeal against the order of the CIT (Appeals)-XXIX, New Delhi dated 07.09.2013 for the assessment year 2003-04. 2. The sole ground of the revenue is against the order of the CIT (A) quashing the reopening u/s 147/148 o .....

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a, the Philippines and South Asia including India. 3.2. During the year under consideration, the assessee provided data transmission services to Antrix Corporation Limited (' Antrix '), the commercial arm of Indian Space Research Organisation ('ISRO'), a Government of India company. Antrix sells these services to VSAT operators. For providing the service, the assessee has entered into a 'Satellite Transponder Service Agreement" with Antrix. Under the present policy of th .....

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e on October 25, 2003 (however the date mentioned in assessment order is 25.11.2003) contending that its revenue being in the nature of business profits were not subject to tax in India in accordance with Article 7 of the India-USA Double Tax Avoidance Agreement ("DT AA"). The case was picked up for scrutiny assessment and an order U/S 143(3) of the Act dated 23.03.2006 was passed accepting NIL income. Thereafter, proceedings U/S 263 of the Act were initiated by the Ld. CIT and vide or .....

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e assessee has a fixed place PE in India in the form of an office in New Delhi and a master control facility at Hassan in South India. Furthermore, that the customer of the assessee constitutes dependent agent PE of AAP in India as per the provisions of Article 5(4) of India US DTAA. Consequently, income was assessed at ₹ 7,05,24,639/- taxable under Article 12 of the India-USA DTAA as being royalties. On the aspect of income attributable to PE, it was held that income would be such on whic .....

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sessee is a company incorporated under the laws of United States of America and is engaged in the business of operating satellites and related communication equipments. The Assessee provides transmission services through satellite under contract entered into with various parties around the world. During the relevant year, the assessee has entered into contracts with Antrix Corporation limited and Bharti BT limited for provision of data transmission services through the use of satellite and recei .....

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ve a PE in India. On this basis the return of Income was filed at NIL income. The assessment order in this case was passed on 19.12.2008 under section 143(3) read with section 263 of the IT Act, 1961 wherein the Assessing Officer has held that the payment received by the assessee is covered by the provision of Royalty income as defined both under the Act and the DTAA. The assessee has a fixed place permanent establishment in India and income of the assessee would also be taxed as business income .....

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eads as below: "Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to incometax; (b) where a return of income has been furnish .....

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nce or any other allowance under this Act has been computed" In view of the above, I have reason to believe that the income of the assessee for the AY 2003-04 chargeable to tax has escaped assessment. In this case, not more than 6 years have elapsed from the end of the relevant Asstt. Year (i.e. AY 2003-04) and income of more than 1 Lakh has escaped assessment, therefore, the notice under section 148 read with section 147 of the IT Act, 1961 satisfies the time limit for issue of notice as p .....

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e the agreement between the assessee and Antrix Corporation was entered on 21.08.2001, therefore, as per the provisions of section 44D r.w.s. 115A of the Act, such assessed income is chargeable to tax at 20% on a gross basis. Subsequently, the said draft assessment order was finalized on 27.02.2012. 4. Aggrieved, the assessee preferred an appeal before the ld.CIT (A) who was pleased to quash the reopening u/s 147/148 and subsequent reassessment. 5. The revenue being aggrieved is in appeal before .....

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d on the order of the CIT (A) and submitted that the very same AO had issued similar notice u/s 147/148 to reopen a number of reassessments which has been quashed by the Hon ble High Court of Delhi and cited the case of Alcatel-Lucent France dated 15.05.2012 in WP (C) 8739/2011. The ld. AR pointed out that in the present case, scrutiny assessment was done u/s 143(3) and u/s 263 by the CIT and the reopening notice was issued after four years after end of the relevant assessment year and, therefor .....

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ords. Further, there is no dispute as to the fact that notice for reopening was issued four years after end of the relevant assessment year, so 1st Proviso to section 147 needs to be satisfied before issuance of notice u/s 147/148. For ready reference, 1st Proviso to section 147 is reproduced below :- "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the ex .....

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sume jurisdiction u/s 147, in a case where assessment has already been made u/s 143(3) of the Act, two conditions are required to be satisfied, viz.: (i) The AO must have reason to believe that income chargeable to tax has escaped assessment; and (ii) He must also have a reason to believe that such escapement occurred by reason of failure on the part of the assessee either: (a) to make a return of income U/S 139 or in response to notice issued under sub-section (1) of section 142 or section. 148 .....

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the very initiation of proceedings u/s 147 of the Act shall be wholly without jurisdiction. There are a plethora of judgments on this issue. 8.1 We concur with the ld. CIT (A) that there is no whisper / allegation that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. The AO himself admits that while perusing the records of the relevant assessment year, he came across the date of execution of agreement with the PE and that .....

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