International Tax / Reassessment · F2J-C-2843
Elsevier BV v. Assistant Commissioner of Income Tax
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Holding (ratio)
Reassessment could not be used to cure the assessing officer's failure to record a conclusion after examining disclosed permanent-establishment material. With no failure of disclosure, the extended limitation period was unavailable.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
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Complete searchable judgment text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 10.09.2026
Date of uploading: 17.09.2026
# CNR No. DLHC010364002023
+ W.P.(C) 12114/2023 & CM APPL. 47591/2023
ELSEVIER BV .....Petitioner
Through: Mr. Ajay Vohra, Sr. Adv. with Mr.
Aditya Vohra & Mr. Tanmay Dhakras
Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX .....Respondent
Through: Mr. Puneet Rai, SSC with Mr. Ashvini
Kumar & Mr. Rishabh Nangia, JSCs.
CORAM:
HON'BLE MR. JUSTICE DINESH MEHTA
HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA
JUDGMENT
REPORTABLE
DINESH MEHTA, J. (ORAL)
1. The petitioner is a company incorporated in Netherlands and having tax
residence of Netherlands. During the Assessment Year under consideration,
the petitioner received subscription fee from Indian subscribers for providing
host of information stored on its database on subject/topics relating to Science
& Technology and Health Sciences.
2. The petitioner moved an application under Section 245Q(1) of the
Income Tax Act, 1961 (hereinafter referred to as „the Act of 1961‟) before the
Authority for Advance Rulings (hereinafter referred to as „AAR‟) in May
2013 seeking adjudication of a question about the taxability of its receipts
from Indian subscribers of its E-books and E-journals.
3. The AAR, vide its order dated 03.02.2020, passed under Section 245R
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of the Act of 1961 held that the amount which the petitioner had received
from Indian customers cannot be termed as royalty as per Article 12 of the
India-Netherlands Double Taxation Avoidance Agreement (hereinafter
referred to as „DTAA‟) and thus is not taxable as per the DTAA. The AAR
held that such receipts were in the nature of business income.
4. While holding so, the AAR had issued a direction that the Assessing
Officer (hereinafter referred to as „AO‟) shall ascertain as to whether the
petitioner-assessee has a Permanent Establishment (PE) in India, obviously,
in order to determine as to whether the income which the petitioner has earned
in India is liable to tax under the Act of 1961 as per Article 7 of DTAA.
5. The petitioner had filed its return of income for AY 2016-17 on
30.03.2017, declaring „nil‟ income. Petitioner's case was selected for scrutiny
and an assessment order under Section 143(3) of the Act of 1961 was passed
on 24.11.2021.
6. During the course of assessment proceedings, the AO had issued
various questionnaires and elicited host of information from the petitioner and
came to a conclusion that the petitioner did not have any permanent
establishment in India.
7. The matter did not rest here and the petitioner came to receive a notice
dated 31.03.2023 under Section 148A(b) of the Act of 1961, inter-alia,
alleging that he has received the information that the remitter, Syngene
International Limited has remitted a sum of Rs.1,91,58,479/- as professional
fee, yet not deducted tax on those remittance and the petitioner having
received such amount has not filed Return of Income, thus, income has
escaped assessment.
8. The petitioner filed a reply to the notice and submitted that the
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petitioner's assessment had been made under Section 143(3) of the Act and a
categorical finding about absence of Permanent Establishment has been
recorded and that in petitioner's own case the AAR had held (vide order dated
03.02.2020) that the receipts in question are not royalty and are in the nature
of business income, therefore, no tax under the Act of 1961 read with DTAA
is attracted. The petitioner also raised objection about the notice being time
barred as there had been no suppression or concealment by the petitioner.
9. Regardless of such objection, the Assessing Officer was not satisfied
with the petitioner's contention and rejected petitioner‟s objection cursorily,
vide order dated 28.04.2023 passed under Section 148A(d) of the Act and
issued notice of even date under Section 148 of the Act of 1961.
10. Mr. Ajay Vohra, learned Senior Counsel appearing for the petitioner
submitted that the impugned proceedings under Section 148 of the Act of
1961 are clearly void without jurisdiction, besides being arbitrary. He
submitted that since the AAR vide its order dated 03.02.2020 had recorded a
categorical finding that the amount received by the petitioner in relation to
subscription of e-magazine, e-article, etc. was not royalty and was in the
nature of business income, hence, such receipts cannot be treated to be
royalty.
11. He further submitted that as per Section 245R of the Act of 1961, the
findings of the AAR are binding on the AO and the AAR had clearly directed
the AO to see as to whether the petitioner is having a Permanent
Establishment in India, and pointed out that during the course of scrutiny
assessment, the AO had not only issued questionnaire but had also gathered
relevant information and recorded a categorical finding (in his order dated
24.11.2021) that the petitioner does not have any Permanent Establishment.
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He vehemently argued that on any of the two counts, the AO cannot allege
that there has been escapement of income.
12. Learned Senior Counsel argued that the proceedings not only suffer
from change of opinion, but are also fundamentally void and a colourable
exercise of powers under Sections 147/148 of the Act of 1961, available with
the AO.
13. Mr. Puneet Rai, learned Senior Standing Counsel, on the other hand,
submitted that during the course of subsequent proceedings (for AY
2020-21), the AO found that the petitioner has a permanent establishment as
the operations are carried out by an entity known as RELX India – a company
which is acting as an agent of the petitioner-company and on the basis of the
nature of the transaction undertaken by said RELX India, petitioner is having
dependent agent PE in India.
14. Learned Senior Standing Counsel for the respondent further argued
that while passing order under Section 143(3) of the Act of 1961, the AO has
not recorded any finding about existence of PE in India and therefore, the
proceedings in question have rightly been initiated against the petitioner.
15. Heard learned counsel for the parties and perused the material.
16. Indisputably, the amount which the petitioner company had received
from Indian subscriber has been held not to be royalty by the AAR. While
doing so, the AAR had also categorically held that such receipts are business
income and in absence of any permanent establishment, the same cannot be
subjected to tax under the Act of 1961. The order of the AAR did not end
here; the Authority had simultaneously directed the AO to conduct an inquiry
in relation to existence of permanent establishment in India. It will not be out
place to reproduce relevant/operative part of the order dated 03.02.2020
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passed by the AAR:
“54. In view of foregoing the questions raised in the
Application are answered as under:
1. The receipt by the applicant from the Indian subscribers
and customers for e-books/e-journals/e-articles is not
taxable as 'Royalty' as per Article 12 of the Double Tax
Avoidance Agreement (the DTAA) but is in the nature of
'Business Income'.
2. Assessing Officer may ascertain whether Permanent
Establishment (PE) exists in India or not.
3. The Indian subscribers are not required to withhold any
tax on the payment made to the applicant under section
195 of the Act.”
17. That apart, not only the petitioner's case was selected for scrutiny
assessment during the course of the proceedings under Section 143(3) but the
AO had also conducted detailed inquiry and had seemingly recorded a finding
in third line of page 129 of the paper book (internal page 4 of the assessment
order).
18. A perusal of the order dated 24.11.2021 passed under Section 143(3) of
the Act of 1961 for very same Assessment Year shows that the assessing
officer has assessed the petitioner at returned income. While doing so, he has
not dilated upon or recorded a finding about the existence of petitioner‟s PE in
India. But if the petitioner‟s reply dated 23.04.2021 (Annexure F) is taken
into account, it leaves no manner of doubt that pointed questions relevant for
existence of PE were put to the petitioner and it had given detailed
explanation/reply. A simple look at paragraph nos.15, 16, 17, 18, 19 and 20 of
the reply (which contains corresponding questions as well) demystify any
such doubt that whether inquiry about PE was made by the AO or not.
19. Hence, even if one finds some substance in what Mr. Puneet Rai has
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contended that the inscription “The receipts are held to be in the nature of
business income and in absence of PE not taxable in India” is prone to doubt,
and it may be reproductions of AAR‟s finding, because apart from this line
the assessment order dated 24.11.2021 does not contain any finding or
observation about the existence of PE. On ultimate analysis, it transpires that
after inquiry, the AO did not find existence of any Permanent Establishment
in India.
20. Be that as it may. Since there was direction by the AAR and the most
important issue which was required to be examined by the AO in the
proceedings under Section 143(3) of the Act of 1961 was, with regards
existence of PE, even if for the sake of argument it is assumed that AO had
failed to record such a finding, he himself is to be thanked. He cannot
undertake the exercise under Section 148 of the Act of 1961 for his own fault,
folly or failure, because the same would fall foul to the scope of Section 148
of the Act of 1961 and hit at the root of basic fabric of tax adjudication viz,
certainty and finality of the assessment proceedings.
21. In any case, the notice under Section 148 of the Act of 1961 is also
liable to be quashed as the AO has invoked extended period of limitation
(beyond four years), in spite of the fact that there is no concealment or failure
on the part of the assessee to disclose true and correct facts. All the facts,
including nature of subscription and the existence of agent, namely, Syngene
International Limited was very much in the knowledge of the AO, which were
duly disclosed by the petitioner and discussed by the AO in the scrutiny
assessment. The invocation of extended period of limitation was thus
fundamentally void because, the jurisdiction fact “failure on the part of the
assessee” was absent.
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22. That otherwise also, the impugned notice is liable to be quashed on the
ground of limitation contemplated in Section 149(1)(b) of the Act of 1961, as
the six-year window under the said section expired on 31.03.2023, whereas
the subject notice under Section 148 came to be issued only on 28.04.2023.
Moreover, the impugned notice does not satisfy the pre-condition provided in
the first proviso to Section 147 which was in force at the time of the relevant
assessment year, according to which unless there is failure or omission on the
part of the assessee to disclose fully and truly all material facts, no action can
be taken after the expiry of four years from the relevant assessment year.
23. In the instant case, the facts including nature of subscription and the
existence of agent, namely, Syngene International Limited was very much in
the knowledge of the AO, and the same were duly disclosed by the petitioner
and discussed by the AO during the scrutiny assessment. The invocation of
extended period of limitation was thus fundamentally void because, the
jurisdiction fact “failure on the part of the assessee” was absent. The relevant
provisions are reproduced as under:
“Section 147
Income escaping assessment.
147. If the Assessing Officer has reason to believe that any
income chargeable to tax has escaped assessment for any
assessment year, he may, subject to the provisions
of sections 148 to 153, assess or reassess such income
and also any other income chargeable to tax which has
escaped assessment and which comes to his notice
subsequently in the course of the proceedings under this
section, or recompute the loss or the depreciation
allowance or any other allowance, as the case may be, for
the assessment year concerned (hereafter in this section
and in sections 148 to 153 referred to as the relevant
assessment year) :
Provided that where an assessment under sub-section (3)
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of section 143 or this section has been made for the
relevant assessment year, no action shall be taken under
this section after the expiry of four years from the end of
the relevant assessment year, unless any income
chargeable to tax has escaped assessment for such
assessment year by reason of the failure on the part of the
assessee to make a return under section 139 or in
response to a notice issued under sub-section (1)
of section 142 or section 148 or to disclose fully and truly
all material facts necessary for his assessment, for that
assessment year:
Section 149
Time limit for notice.
149. (1) No notice under section 148 shall be issued for
the relevant assessment year,—
(a) if four years have elapsed from the end of the relevant
assessment year, unless the case falls under clause (b) or
clause (c);
(b) if four years, but not more than six years, have elapsed
from the end of the relevant assessment year unless the
income chargeable to tax which has escaped assessment
amounts to or is likely to amount to one lakh rupees or
more for that year;
(c) if four years, but not more than sixteen years, have
elapsed from the end of the relevant assessment year
unless the income in relation to any asset (including
financial interest in any entity) located outside India,
chargeable to tax, has escaped assessment.
Explanation.—In determining income chargeable to tax
which has escaped assessment for the purposes of this
sub-section, the provisions of Explanation 2 of section
147 shall apply as they apply for the purposes of that
section.
(2) The provisions of sub-section (1) as to the issue of
notice shall be subject to the provisions of section 151.
(3) If the person on whom a notice under section 148 is to
be served is a person treated as the agent of a
non-resident under section 163 and the assessment,
reassessment or recomputation to be made in pursuance
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of the notice is to be made on him as the agent of such
non-resident, the notice shall not be issued after the expiry
of a period of six years from the end of the relevant
assessment year.
Explanation.—For the removal of doubts, it is hereby
clarified that the provisions of sub-sections (1) and (3), as
amended by the Finance Act, 2012, shall also be
applicable for any assessment year beginning on or
before the 1st day of April, 2012.”
24. For the reasons aforesaid and in view of the discussion foregoing, we
are of the view that the proceedings initiated against the petitioner under
Section 148 of the Act of 1961 are illegal, arbitrary and beyond the scope of
Section 148 of the Act of 1961. The notice dated 28.04.2023 is hereby
quashed.
25. While allowing the writ petition, we hereby make it clear that we have
quashed the notice only on the jurisdictional ground(s) and not recorded any
finding or observation about existence or otherwise of Permanent
Establishment of the petitioner in India. The AO and the petitioner shall,
therefore, be free to take their respective stance and independent view of the
issue, if such issue crops up in any other subsequent year.
26. Petition stands allowed in the aforesaid terms. Pending application also
stands disposed of.
DINESH MEHTA
(JUDGE)
RAJNEESH KUMAR GUPTA
(JUDGE)
SEPTEMBER 10, 2026/sid
Signature Not Verified
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By:NAVEEN KUMAR
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