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The Tax Publishers2012 TaxPub(DT) 1710 (Del-HC) : (2012) 343 ITR 0129 : (2012) 254 CTR 0615 : (2012) 072 DTR 0194 INCOME TAX ACT, 1961 --Reassessment --Change of opinionNature of non-compete fees --Assessee had claimed deduction of non-compete fees paid as revenue expenditure which was allowed in the original assessment order. Later on AO issued reassessment notice under section 148 on change of opinion that non-compete fees is capital expenditure which was wrongly allowed and therefore, income had escaped assessment. Assessee filed a writ petition against the notice issued under section 148 and order passed under section 147. Held: Was justified. The writ petition was allowed and notice under section 148 and order passed under section 147 were quashed. As assessee had fully and truly disclosed all material facts relating to non-compete fees, the reassessment proceedings cannot be initiated on the ground that AO had misapplied and wrongly understood the law. The reassessment proceedings were not validly initiated as condition of the proviso to section 147 was not satisfied. Income Tax Act, 1961 Section 147 Income Tax Act, 1961 Section 148 IN THE DELHI HIGH COURT SANJIV KHANNA & R.V. EASWAR JJ. BLB Limited v. Asstt. CIT W.P.(C) 6884/2010 1 December, 2011 Petitioner by : Salil Aggarwal, Respondent by : Suruchi Aggarwal, Sr. Standing Counsel, JUDGEMENT *Sanjiv Khanna, J* The petitioner BLB Ltd. has filed the present writ petition impugning notice under section 148 dated 1-2-2010 and the order dated 16-9-2010 passed by the assessing officer dismissing their objections to the re-opening. 2. Reasons given for re-opening of the assessment for assessment year 2003 -04 under section 147/148 of the Income Tax Act, 1961 (Act, for shot) are as under : 'The return in this case for the assessment year 2003-04 was filed on 31-10-2003 declaring on income of Rs. 22447176 at MAT under section 115JB which was processed under section 143(1) of the Income Tax Act. 1961 on 22-3-2004. The case was selected for scrutiny and the asstt. was completed under section 143(3) of the Act on 30-1-2006 on an income of Rs. 22447176 at MAT under section 115JB. The perusal of asstt. records for the assessment year 2003-04 reveals that the assessee claimed and was allowed a deduction of Rs 15807848 on a/c of non-compete fees as revenue expenditure. As the non-compete fees given an advantage of enduring benefit to the assessee it was required to be capitalized and added back to the income of the assessee. Section 37 of the Act provides that 'any expenditure, not being in the nature of capital expenditure, laid out wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head 'profit and gains of business or profession.' In view of above facts of the case, I have reasons to believe that the income to the tune of 15807848 has escaped assessment owing to the failure on part of assessee to disclose fully and truly material facts necessary for asstt. and hence notice under section 148 is hereby issued for reopening the asstt. Under section 147 of the Income Tax Act for the assessment year 2003-04'. 3. As is noticeable from the reasons noted above, the return for the assessment year 2003-04 was filed by the assessee-petitioner on 31-10-2003 declaring income of Rs.2,24,47,176 under the provisions of section 115JB. The case was taken up for scrutiny and an assessment order under section 143(3) of the Act was passed on 30-1-2006. Income was assessed at Rs. 2,24,47,176. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 1710 (Del-HC) : (2012) 343 ITR 0129 : (2012) 254 CTR 0615 : (2012) 072 DTR 0194

INCOME TAX ACT, 1961

--Reassessment --Change of opinionNature of non-compete fees --Assessee had claimed deduction of non-compete fees paid as revenue expenditure which was allowed in the original assessment order. Later on AO issued reassessment notice under section 148 on change of opinion that non-compete fees is capital expenditure which was wrongly allowed and therefore, income had escaped assessment. Assessee filed a writ petition against the notice issued under section 148 and order passed under section 147. Held: Was justified. The writ petition was allowed and notice under section 148 and order passed under section 147 were quashed. As assessee had fully and truly disclosed all material facts relating to non-compete fees, the reassessment proceedings cannot be initiated on the ground that AO had misapplied and wrongly understood the law. The reassessment proceedings were not validly initiated as condition of the proviso to section 147 was not satisfied.

Income Tax Act, 1961 Section 147

Income Tax Act, 1961 Section 148

IN THE DELHI HIGH COURT

SANJIV KHANNA & R.V. EASWAR JJ.

BLB Limited v. Asstt. CIT

W.P.(C) 6884/2010

1 December, 2011

Petitioner by : Salil Aggarwal,

Respondent by : Suruchi Aggarwal, Sr. Standing Counsel,

JUDGEMENT

Sanjiv Khanna, J

The petitioner BLB Ltd. has filed the present writ petition impugning notice under section 148 dated 1-2-2010 and the order dated 16-9-2010 passed by the assessing officer dismissing their objections to the re-opening.

2. Reasons given for re-opening of the assessment for assessment year 2003 -04 under section 147/148 of the Income Tax Act, 1961 (Act, for shot) are as under :

'The return in this case for the assessment year 2003-04 was filed on 31-10-2003 declaring on income of Rs. 22447176 at MAT under section 115JB which was processed under section 143(1) of the Income Tax Act. 1961 on 22-3-2004. The case was selected for scrutiny and the asstt. was completed under section 143(3) of the Act on 30-1-2006 on an income of Rs. 22447176 at MAT under section 115JB.

The perusal of asstt. records for the assessment year 2003-04 reveals that the assessee claimed and was allowed a deduction of Rs 15807848 on a/c of non-compete fees as revenue expenditure. As the non-compete fees given an advantage of enduring benefit to the assessee it was required to be capitalized and added back to the income of the assessee.

Section 37 of the Act provides that 'any expenditure, not being in the nature of capital expenditure, laid out wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head 'profit and gains of business or profession.'

In view of above facts of the case, I have reasons to believe that the income to the tune of 15807848 has escaped assessment owing to the failure on part of assessee to disclose fully and truly material facts necessary for asstt. and hence notice under section 148 is hereby issued for reopening the asstt. Under section 147 of the Income Tax Act for the assessment year 2003-04'.

3. As is noticeable from the reasons noted above, the return for the assessment year 2003-04 was filed by the assessee-petitioner on 31-10-2003 declaring income of Rs.2,24,47,176 under the provisions of section 115JB. The case was taken up for scrutiny and an assessment order under section 143(3) of the Act was passed on 30-1-2006. Income was assessed at Rs. 2,24,47,176.