Section 148 Reopening Quashed for No Failure to Disclose Material Facts: Delhi HC

Elsevier BV Vs ACIT (Delhi High Court)

Summary: The Delhi High Court allowed Elsevier BV’s writ petition and quashed the notice dated 28.04.2023 issued under Section 148 of the Income-tax Act, 1961 for Assessment Year 2016-17. Elsevier BV, a Netherlands tax resident, had received subscription fees from Indian subscribers for access to information stored in its database relating to Science & Technology and Health Sciences. In May 2013, it had approached the Authority for Advance Rulings under Section 245Q(1) concerning the taxability of receipts from e-books and e-journals. By order dated 03.02.2020, the AAR held that the receipts were not taxable as royalty under Article 12 of the India-Netherlands DTAA but were in the nature of business income. The AAR directed the Assessing Officer to ascertain whether Elsevier BV had a Permanent Establishment in India for determining taxability under Article 7 of the DTAA.

For AY 2016-17, Elsevier BV filed its return declaring nil income. Its case was selected for scrutiny and an assessment under Section 143(3) was completed on 24.11.2021. During the scrutiny proceedings, the Assessing Officer issued questionnaires and sought information relevant to the existence of a Permanent Establishment in India. The High Court found that the assessee had furnished detailed replies to questions specifically concerning PE. Although the assessment order did not expressly elaborate upon the existence of PE, the material before the Court showed that the issue had been examined during the scrutiny assessment.