Case Law Details
Brief of the Case
Delhi High Court held In the case of Oracle Systems Corporation vs. DIT that it is a settled law that reopening based on change in opinion is not permitted. In the current case, revenue does not discovered another concealed permanent establishment but wanted to link the royalty received by the Petitioner by applying the principle of force of attraction to business income of PE in India. The reasons for forming a belief that income has escaped assessment also does not indicate that the royalty in question was earned by the Petitioner through a PE, it only alleges that it is observed that such royalty is linked to the Petitioner PE. Clearly, there was no other primary fact which was material to the assessment and not disclosed by the Petitioner. Further it is apparent that whereas the AO while framing the assessment had not applied the rule of force of attraction, he now infers that income by way of royalty can also be taxed under Section 44D as business income in terms of Article 7 of the Indo US DTAA. Clearly, this is a change of opinion. Hence, reopening of assessment on account of change in opinion is not permitted.
Facts of the Case
The Assessee is engaged in the manufacture and production of business support software. The Assessee has a wholly owned subsidiary in India, namely, Oracle India Private Limited (OIPL). The Assessee filed its return of income for AY 2005-2006 on 30th November, 2006 declaring an income of Rs.1,79,27,09,864/-. The Assessee has entered into a Software Duplication and Distribution License Agreement with OIPL pursuant to which OIPL sublicenses software products to various customers in India. The Assessee offered the royalty received under the Software Duplication and Distribution License agreement to tax in its return of income. After due scrutiny of the return and all explanations furnished by the Assessee, the AO concluded that the software development centres of OIPL located at Hyderabad and Bangalore constituted the Assessee‘s Permanent Establishment (PE) in India. Accordingly, the AO taxed the income of the Petitioner in respect of business of development of software as profits of the Assessee attributable to its PE in India. The AO also assessed income of the Petitioner from what he termed as Global Deals, as chargeable to tax under the Act. After culmination of the proceedings, an assessment order was passed on 21st November, 2008.
Later The Assessee received a notice dated 28th March, 2012 issued under Section 148 of the Act, inter alia, stating that the AO had reason to believe that income chargeable to tax for the AY 2005-06 had escaped assessment within the meaning of Section 147 of the Act and consequently, he proposed to re-assess the Assessee‘s income for the said year. The main controversy in the present petition is whether the conditions as laid down under Section 147 of the Act for re-opening the assessment for the AY 2005-06 were satisfied.
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