HIGH COURT OF DELHI
Remfry & Sagar
versus
Commissioner of Income-tax
W.P. (C) Nos. 8375 TO 8378 of 2010
JANUARY 17, 2013
ORDER
R.V. Easwar, J.
These are four writ petitions filed by the petitioner seeking quashing of the notices issued under section 148 of the Income Tax Act, 1961 (‘Act’, for short) and all proceedings consequent thereto.
2. The petitioner is a law firm specialising in intellectual property and corporate laws. It was founded in 1827 by one Henry Oliver at Calcutta. In the year 1957 certain Englishmen took over the firm. By deed dated 04.04.1973 these gentlemen by names Holloway and Silver Stone transferred the firm absolutely to Dr. V. Sagar, a lawyer. The transfer took effect from April, 1973 and the entire practice of the firm became that of Dr. Sagar. On 18.10.2000 a company, i.e. Remfry & Sagar Consultant Pvt. Ltd. was incorporated and one of its objects was that the goodwill of the firm Remfry & Sagar would vest in it in perpetuity.
3. On 01.06.2001, Dr. Sagar executed a gift deed by which the goodwill of the name “Remfry & Sagar” was transferred to the private limited company. For stamp duty purposes the gift was valued at Rs. 45 crores. Since a limited company cannot practice the legal profession, on 05.06.2001 Dr. Sagar entered into partnership with four other partners for carrying on legal practice. On the same day i.e. 05.06.2001 an agreement (hereinafter referred to as “licence agreement”) was entered into between the company and the firm constituted by Dr. Sagar and four others, which is known as Remfry & Sagar and which is the petitioner in all the writ petitions, under which a licence was granted to the petitioner for use of the goodwill and name of Remfry & Sagar subject to payment of licence fee @ 25% of the amount of the bills raised. The agreement would later appear to have been amended on 14.01.2002 but that is inconsequential for our purpose.
4. In the return of income filed by Remfry & Sagar, the petitioner herein, for the year ended 31.03.2002, the relevant assessment year being 2002-03, it claimed the payment made to the company under the licence agreement as revenue expenditure in the return of income. The return was processed under Section 143(1) and an intimation was issued to that effect. This effectively meant that the return was not being disturbed and consequently the payment made under the licence agreement was allowed as a deduction.
5. In the assessment made for the assessment years 2003-04 to 2006-07 also the amounts paid by the petitioner under the licence agreement were allowed as a deduction; in the first three assessment years, the assessments were completed under section 143(3) of the Act after scrutiny of the returns and in respect of the last year, the return was processed under section 143(1) of the Act. In all these years, it is common ground that the amounts paid by the petitioner under the licence agreement were claimed and allowed as deduction.
6. On 30.03.2010, the respondent issued notices under section 148 of the Act reopening the four assessments completed as above. The reasons recorded by him under section 148(2) of the Act are as under: –
“Reasons for reopening the case u/s. 147
