9911796707
TMI Blog2016 (3) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts for the purposes of its assessment. - Decided in favour of assessee - W. P. (C) 8221/2010 - - - Dated:- 21-3-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr M. S. Syali, Senior Advocate with Ms Husnal Syali, Mr Mayank Nagi and Mr Aditya Raj Singh, Advocates For the Respondent : Mr Raghvendra Singh, Junior Standing Counsel for Mr Rahul Chaudhary, Senior Standing Counsel ORDER Vibhu Bakhru, J 1. The Petitioner, BBC Worldwide Limited (hereafter 'the Assessee') has filed the present petition under Article 226 of the Constitution of India, inter alia, impugning a notice dated 30th March, 2009 issued under Section 148 of the Income Tax Act, 1961 (hereafter 'the Act') for reopening the assessment for Assessment Year (AY) 2002-03. 2. The Assessee is a company incorporated under the laws of UK and is a tax resident of UK within the meaning of Article 4 of the Double Taxation Avoidance Agreement between India and UK (hereafter 'the DTAA'). During the Previous Year relevant to AY 2002-03, the Assessee (through BBC World Division) operated the 'BBC World International News and Information Channel' (hereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it did not have a PE in India - he held that BIPL constituted Assessee's Dependent Agent PE - but accepted the Assessee's claim that it had incurred a loss. The AO restricted the loss allocable to India to ₹ 7,29,39,000/- and attributed 20% of that loss to the activities in India; thus, assessing the loss attributable to the Indian PE at ₹ 1,45,87,800/-. 9. The AO issued a notice under Section 148 of the Act on 30th March, 2009; that is, after a lapse of four years from the end of the relevant AY. In compliance with the aforesaid notice, the Assessee sent a letter on 4th May, 2009 stating that its revised return be treated as a return filed in response to the notice under Section 148 of the Act. The Assessee also sought reasons for reopening of the assessment. Subsequently, the AO issued notices under Section 143(2) of the Act and thereafter, on 10th August, 2010, provided the Assessee with the reasons for reopening the assessment. 10. On 20th August, 2010, the Assessee filed its objections to the initiation of reassessment proceedings under Section 147 of the Act, which the AO rejected by an order dated 1st December, 2010. And, this led the Assessee to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Assessee for AY 2002-03 - the reopening of which is impugned in this petition - and had concluded that the AO had examined the India specific income and expenditure of the Assessee relating to channel activities in that year. The Court had, inter alia, on the aforesaid basis concluded that reassessment notice issued for AY 2003-04 was hit by the principle of change in opinion as the assessment order dated 16th March, 2005 indicated that the same AO had examined the question of attribution of income to the PE - that is, BIPL- in India for the AY 2002-03. 14. Mr Raghvendra Singh, learned counsel appearing for the Revenue countered the contentions advanced by Mr Syali and submitted that the principle of change of opinion was not applicable in the facts of the present case as, according to him, the Assessee had failed to provide the necessary records as mandated under Section 44AB of the Act. He submitted that in absence of the Assessee not discharging its onus to produce all primary materials, the question of a change of opinion would not arise as the AO would have no occasion to form an opinion. He argued that the assessment order was passed on the statement produced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss connection or PE in India; however, without prejudice to its contentions that it had no business connection/PE in India, the Assessee filed details of receipts and expenses attributable to Indian operations. These indicated that the Assessee had incurred a loss during the relevant period. The AO rejected such computation on the ground that the accounts were not audited and could not be relied upon. The AO then proceeded to estimate the taxable income attributable to Assessee s activities in India at 20% of the total revenue of ₹ 13,89,09,000/-. Accordingly, the Assessee s taxable profits were determined at ₹ 2,77,81,800/-. 21. The Assessee appealed against the said order before the Commissioner of Income Tax (Appeals) [hereafter the CIT(A) ]. The CIT(A) did not accept the Assessee s contention that it did not have a PE in India. However, relying on CBDT s Circular No.742/765, he concluded that it was reasonable to estimate the Assessee s profits as being 10% of the total revenues attributable to India. Accordingly, he estimated the taxable profit of the Assessee from sale of airtime at ₹ 13,89,000/-. Aggrieved by the aforesaid order dated 21st January, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities since BIPL - which was held to be the Assessee's PE in India - was taxed on its income. The Assessee relied upon the decision of the Supreme Court in Morgan Stanley (supra) and the decision of the Bombay High Court in SET Satellite (Singapore) Pvt. Ltd. (supra). The aforesaid contentions were accepted and the ITAT allowed the Assessee's appeals by a common order dated 23rd July, 2010. 27. The Revenue appealed against the order dated 23rd July, 2010 passed by the ITAT for AY 2001-02 and 2003-04 as well as the ITAT's order dated 15th January, 2010 for AY 2000-01 in this Court. The said appeals (being ITA No.1341/2010, ITA No. 703/2011 and ITA 705/2011) were heard together and disposed of by a common order dated 30th September, 2011 whereby this Court concurred with the ITAT's view and held that no question of law arose in those appeals. 28. In the aforesaid backdrop, we now proceed to examine the reasons recorded by the AO for forming a belief that income of the Assessee for AY 2002-03 has escaped assessment. 29. The reasons recorded by the AO are lengthy and runs into 11 pages. However, examination of the said reasons indicate that the AO had, essentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% of the net proceeds from sale of advertisement time. Further, the AO also called for information under Section 133(6) of the Act from some of the major advertisement agencies, which were clients of the Assessee. In response to the information sought, one of the large advertisement agency, M/s R.K. Swamy BBDO Advertising Private Limited, responded by, inter alia, stating that they did not deal with the overseas offices of the Assessee but interacted and negotiated only with the representatives from the local office and had presumed that the local office in India was an authorised agent of the Assessee. 32. Based on the information received, the AO concluded that the BIPL constituted a Dependent Agent Permanent Establishment of the Assessee under the DTAA. As noticed earlier, a similar conclusion was also drawn by the AO for the AY 2000-01, 2001-02 and 2003-04. The Assessee, without prejudice to its contention that it did not have a PE in India submitted that the sale of airtime in India had resulted in a net loss and, therefore, no tax was payable. In support of its contention, the Assessee submitted the audited statement indicating worldwide loss of BBC World Division (the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table to the Indian activities. He decided to consider only those expenses which were incurred specifically in relation to the channel activities in India. Accordingly, the Assessee submitted another computation which also indicated a loss. The said statement is reproduced below: Computation of loss in respect of Indian footprint of BBC World Channel (only on the basis of expenses specifically relating to India) Assessment Year 2002-03 Financial Year 2001-02 Particulars Amount in UKP Amount in Rupees Revenue from advertisement/ sponsorship earned in India In USD 250,000 17,278,000 * In Rs. 677,000 48,628,000 * Hotel Distribution Revenues 41,000 2,823,000 Total 968,000 68,729,000 Less: Specific costs relating to India footprint/Activities Digitisation and other distribution costs 191,000 13,204,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activities in India. The AO had examined the statement of computation of loss provided by the Assessee (as reproduced above) and also examined the relevant vouchers which the AO found to be 'satisfactory'. Concededly, there is no material which would indicate that any of the accounts, vouchers or details provided by the Assessee was inaccurate or false. 38. In this view, it is apparent that the impugned notice under Section 148 of the Act has been issued only on account of change of opinion, the same is liable to be set aside. 39. It is now well settled that the provisions of Section 147 of the Act do not permit review of an assessment order but permit assessment/ reassessment if the AO has reason to believe that the income of the Assessee has escaped assessment; and, admittedly, a change of opinion provides no such reason. The Supreme Court in its decision in CIT v. Kelvinator of India Limited: (2010) 2 SCC 723 has authoritatively held that reopening of assessment on a mere change of opinion is not permissible and the said reason is excluded from the purview of Section 147 of the Act. 40. The reliance placed by Mr Singh on the decision of this Court in Dalmia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kamal Singh v. Commissioner of Income Tax (supra), Commissioner of Income Tax v. Raman and Company (supra) and Bankipur Club Ltd. v. Commissioner of Income Tax : [1971]82ITR831(SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. Commissioner of Income Tax (supra) suggesting the contrary do not, we say with respect, lay down the correct law. 42. In Commissioner of Income Tax v. Usha International: (2012) 348 ITR 485 (Delhi) - this Court after referring to its earlier decision in CIT v. DLF Powers Limited: (2012) 345 ITR 446 (Delhi) and BLB Limited v. ACIT: (2012) 343 ITR 129 (Delhi) observed as under: Thus where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that year . It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. 48. The question whether the Assessee had failed to produce the primary facts would depend, first of all, on the primary facts as are necessary for assessing the income of the Assessee; and secondly, on the facts as available with the Assessee. In the present case, the Assessee did not maintain any India specific books of accounts for BBC World Channel as its operations were not limited to India alone and further, according to the Assessee, its business income was not chargeable to tax in India. Nonetheless, the Assessee had produced a statement of its global accounts and also produced details of India specific expenditure, which was examined and verified by the AO. 49. It is necessary to observe that the issue in the present case is not that the Assessee has not correctly recorded its affairs in its books of accounts but one of attribution of income. The primary accounting data is recorded in vouchers and posted in ledgers; the attribution of income or profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fully disclose all material facts and reopen the assessment on the basis that he should have estimated the income by adopting a different method. In the present case, there is no material to hold that the Assessee had withheld or concealed any material information; on the contrary, the Assessee had specifically pointed out that it had not maintained India specific books of accounts. The Assessee had furnished the records that it maintained and also answered all the queries raised by the AO; the fact that another AO had adopted a different method of estimating the income attributable to Indian activities can hardly be a reason to reopen the assessment or to allege that the Assessee had failed to truly and fully disclose material facts for the purposes of its assessment. 52. In our view, the controversy in the present petition is also fully covered by the decision of this Court in BBC World News Ltd. (supra). Although, the said decision was rendered in the case of BBC World News Ltd. (formerly known as BBC World Ltd.), the Court had noticed that the same AO who had passed the assessment order in that case had also examined the questions involved in detail in the case of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L income. The assessment order in this case was passed on 24.03.2006 wherein the Assessing Officer has held that the assessee has an agency PE in India in the form of BBC Worldwide (India) Private Limited (BWIPL). And attributed a loss of ₹ 69,42,475 to Indian activities. While perusing the records of the case it is noticed that during the assessment proceedings the actual expenditure incurred on the activities related to the Indian operations were not submitted by the assessee. In the orders for A.Ys. 2004-05 to 2006-07, in the case of the assessee, it has been held that that the global loss, if any, is not on account of activities of the assessee in India and such loss cannot be attributed to the PE of the assessee in India. It is therefore held that the statements furnished by the assessee showing loss from Indian activities do not represent the correct position and the same has been found not reliable. This office believes that in the absence of such crucial information assessment of the income of the assessee for the A.Y. 2003-04 could not be completed properly. This also satisfies the pre-requisite condition stated under explanation 2 to section 147. Relevant port ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
