Componentsource Company Ltd. Vs ACIT (Delhi High Court)
Whether a foreign company whose income is not taxable in India on account of application of DTAA can be issued notice u/s 148 for filing return of income without dealing with objections filed in response to notice u/s 148A(b)
Delhi HC held that since
at the stage of initiating action under Section 148, the respondent must be subjectively satisfied that income which was taxable has in fact escaped assessment. This aspect of criticality has clearly been ignored by the respondent while passing the impugned order. Even though objections were raised against the notice u/s 148A(b) which was issued, however the same were disposed off in a perfunctory manner since the objections raised were at the very root of assumption of jurisdiction and on these facts the notice was quashed with a direction to consider the matter afresh.
The Delhi high court in this case was dealing with notice u/s 148 which was issued for taxing sale of software by the petitioner company which was incorporated in Japan and the income of the company was claimed to be exempt in pursuance of the DTAA between India and Japan.
The income earned by the Assessee from the sale/trade of the canned software is not liable to tax under Article 5, read with Article 7 of the DTAA as entered between India and Japan, because of the fact that the Assessee does not have any permanent establishment in India and in the absence of any PE the income as earned under the Article Business Income is not liable to tax in India. Reliance in this regard is placed upon the below mentioned judgements of the Hon’ble Apex Court:
