Ernst And Young Emeia Services Limited Vs ACIT (Delhi High Court)
The Delhi High Court addressed a petition filed by Ernst And Young Emeia Services Limited (Assessee), a foreign company and tax resident of the United Kingdom, challenging reassessment proceedings initiated for Assessment Year (AY) 2018-19. The Assessee sought to quash the notice issued under Section 148A(b) of the Income Tax Act, 1961 (the Act), the subsequent order passed under Section 148A(d) of the Act, and the notice issued under Section 148 of the Act.
Prefatory Facts: For AY 2018-19, the Assessee, which provides common area and market development support services to EY Network entities, including Indian entities, filed an income tax return declaring a total income of ₹5,14,21,33,981/-. The Assessee claimed this income was exempt under the India-UK Double Taxation Avoidance Agreement (DTAA), asserting that it did not have a Permanent Establishment (PE) in India and its receipts did not constitute fees for included services (FIS) or royalty. The Assessee noted that the taxability of similar services was previously considered by the Authority for Advance Ruling (AAR) in a related matter, and the AAR had found them non-taxable.
Initiation of Reassessment: The proceedings were initiated by a notice dated 20.06.2024 under Section 148A(b), citing information received regarding a foreign remittance of ₹10,63,384/- for professional services, and noting the Assessee’s claim of exempt income (₹5,14,21,33,981/-) in its Income Tax Return (ITR). The notice primarily stated that the Assessee should have offered the receipts for taxation as they were prima facie in the nature of Royalty/FTS (Fee for Technical Services) or Business income as per the DTAA and the Act, leading to a reason to believe that income had escaped assessment. The Assessee contested this notice.
