INCOME TAX ACT, 1961

Section 148

Reassessment - Notice for reopening - Validity -

Assessee was in business of producing sound recordings of music and, for such purpose, it obtains assignment of the copyright from the first owners against royalty paid or payable upon exploitation of such rights. Assessee claims that a substantial part of assessee's business was of issuing licence for its sound recordings to be played all over the country. AO issued notice under section 148 and asked assessee as to why AO perceived that some of income pertaining to the relevant assessment year had escaped assessment. It was evident from such recorded reasons that provision made for royalties in respect of licence fees earned by assessee and discrepancy between purchase price shown in assessee's books and sale price recorded for corresponding assets in the vendor's books have prompted the notice. Held: The accounts are somewhat convoluted as regards royalty. While it was possible that it might be difficult for assessee to immediately discover the persons entitled to receive the royalty on account of licence fees earned by assessee or quantum of royalty payable to such persons, it was evident that provision made to carry forward a certain amount during a financial year almost invariably substantially exceeds the pay-out during the following year. The notice did not pertain to such aspect of matter and recorded reasons reveal that AO might have mixed up between the royalties paid or payable by assessee for its sound recordings and the royalty paid or payable by assessee in respect of the licence fees earned. As a consequence, notice would remain stayed pending disposal of petition before court and order was modified accordingly.

REFERRED :

FAVOUR : Directions issued

A.Y. :

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