2017-TIOL-1419-HC-DEL-IT
ORACLE INDIA PVT LTD Vs ACIT: DELHI HIGH COURT (Dated: July 26, 2017)
Income Tax - Writ - Sections 80-IB, 143(3), 147 & 148.
Keywords - Cost of software master copy - Due diligence - Full disclosure - Re-assessment - Royalty
Whether, for initiating reassessment, the onus falls on the AO to prove that the assessee failed to make full disclosure of materials necessary for the assessment - YES: HC
Whether Explanation 1 under Sec 147 tends to dilute the responsibility of the AO to establish the failure on account of the assessee to furnish all the necesarry materials for the assessment - NO: HC
Assessee is the Indian subsidiary of Oracle Systems Corporation, USA. It entered into an agreement for duplication and distribution of software. It claimed deductions under Ss 80IB & 10A in its return. While assessing the AO made disallowances with respect to royalty payments, deduction claimed u/s 80IB and import cost of master copy of the software and also the income from the software development centre. On appeal, the CIT(A) and the Tribunal partly ruled in favour of the assessee.
In a writ petition, the HC held that,
++ the explanation (1) u/s 147 clarifies that the mere production of the account books or other evidence by the Assessee before an AO from which the AO, with due diligence, could have discovered 'material evidence' would not necessarily amount to disclosure. In other words, the fact of production of the account books and other evidence should not be presumed to be the making of a disclosure of 'all material facts' by the Assessee. Nevertheless, the burden is on the AO to show that there has been a failure by the Assessee to disclose fully and truly all material facts necessary for the assessment. It has been repeatedly emphasized in several decisions including the CIT v. Kelvinator of India Ltd. that the re-opening of an assessment on the same material that was available with an AO during the original assessment proceedings would be a case of mere change of opinion. In a situation where the Assessee has already produced all the account books and other evidence, while Explanation (1) may not lead to an automatic presumption of disclosure, unless there is some fresh tangible material available with the AO, he will not be able to show that there was a failure on the part of Assessee to disclose fully and truly all material facts. If the material is that which was already available during the original assessment proceedings, the AO will be unable to show that there has been a failure by the Assessee to disclose fully and truly all material facts. The expression "will not necessarily amount to disclosure" as used in Explanation 1 to Section 147 of the Act brings in an element of subjectivity and also the requirement of assessing on a case-to-case basis where in fact there has been a full disclosure by virtue of the Assessee producing the account books and other evidence in the first instance. This explanation, therefore, would not relieve the AO of the burden of demonstrating the Assessee's failure to make a full and true disclosure of all material facts necessary for the assessment for the AY in question.
Assessees's writ allowed
2017-TIOL-269-SC-IT
PR CIT Vs MAHESH KUMAR GUPTA: SUPREME COURT OF INDIA (Dated: July 21, 2017)
Income Tax - Sections 2(22)(e), 153A & 263
Keywords - deemed dividend - original assessment - revision petition & fresh appraisal of the existing materials
The Revenue Department preferred the present SLP challenging the judgment, whereby the High Court had held that when search operations did not yield any fresh material warranting addition u/s 153A, it could not clothe the CIT with the authority to add an amount on the basis of fresh appraisal of the existing materials that already form part of original assessment.
Having heard the parties, the Supreme Court condoned the delay and granted leave to the Department to defend their case on the issue of 'Authority of CIT to add an amount on the basis of fresh appraisal of the existing materials'.
Leave granted
2017-TIOL-268-SC-IT
UNITECH HOSPITALITY SERVICES LTD Vs ACIT: SUPREME COURT OF INDIA (Dated: July 21, 2017)
Income Tax - license - external development charges - original allottees - conversion charges & stamp duty charges
The assessee company preferred the present SLP challenging the judgment, whereby the High Court had held that voluntary expenses incurred towards conversion & development of commercial complex, could not be claimed as part of development cost, if the same was included in sale consideration.
Having heard the parties, the Supreme Court dismisses the SLP, thus concurring with the opinion of HC regarding treatement of conversion & development expenses.
Assessee's SLP dismissed
2017-TIOL-267-SC-IT
CIT Vs NAGARBAIL SALT OWNERS COOPERATIVE SOCIETY LTD: SUPREME COURT OF INDIA (Dated: July 21, 2017)
Income Tax - Co-operative Society – Bye laws - Distribution Pool Fund Account – business expenditure
The Revenue Department preferred the present SLP challenging the judgment, whereby the High Court had held that the amount transferred to 'Distribution Pool Fund Account' could not be taxed in the hands of Society, if the principal object of Society was to 'manufacture salt on co-operative basis' and its cumulative income was not more than the commission earned on manufacture & sale of salt, interest on loans advanced to members and deposits with the Bank.
Having heard the parties, the Supreme Court condoned the delay and allowed the application for exemption from filing certified copy of the impugned order. However the Apex Court dismisses the SLP concurring with the opinion of HC as regards taxability of amount transferred by Cooperative society to 'Distribution Pool Fund Account'.
Revenue's SLP dismissed
