Delhi High Court Quashes Section 148 Notice Against Elsevier Bv For Ay 2016-17

The Case

ELSEVIER BV Vs ASSISTANT COMMISSIONER OF INCOME TAX
Case No.: W.P.(C)/12114/2023
Decided on: 09/10/2026
CNR: DLHC010364002023 ·
High Court of Delhi

The Legal Issue

The Court decided whether the notice dated 28.04.2023 issued under Section 148 of the Income Tax Act, 1961 for AY 2016-17 was valid, given that the AAR had held the receipts were not royalty but business income and the AO had conducted an inquiry into the existence of a Permanent Establishment. The Court also examined whether the invocation of the extended period of limitation beyond four years was justified absent any failure by the assessee to disclose material facts.

Facts of the Case

The petitioner, a company incorporated in the Netherlands and a tax resident there, received subscription fees from Indian subscribers for access to its database on Science & Technology and Health Sciences. It applied to the AAR under Section 245Q(1) in May 2013 seeking adjudication on the taxability of receipts from Indian subscribers of its E-books and E-journals. The AAR, by order dated 03.02.2020 under Section 245R, held that the receipts were not royalty under Article 12 of the India-Netherlands DTAA and were business income, and directed the AO to ascertain whether the petitioner had a PE in India. For AY 2016-17, the petitioner filed a nil return on 30.03.2017, which was selected for scrutiny and assessed under Section 143(3) on 24.11.2021. The AO issued a notice dated 31.03.2023 under Section 148A(b), alleging that Syngene International Limited had remitted Rs.1,91,58,479 as professional fee without TDS and the petitioner had not filed a return, causing escapement of income. The petitioner replied, raising the AAR finding, absence of PE, and limitation. The AO rejected the objection and issued notice under Section 148 on 28.04.2023.

Summary of the Decision

The Court allowed the writ petition and quashed the notice dated 28.04.2023 issued under Section 148 of the Act of 1961, holding that the proceedings were illegal, arbitrary, and beyond the scope of Section 148. It found that the notice was liable to be quashed because the AO invoked the extended period of limitation beyond four years despite there being no concealment or failure on the part of the assessee to disclose true and correct facts. The jurisdiction fact of failure on the part of the assessee was absent, as all facts, including the nature of subscription and the existence of Syngene International Limited, were in the AO's knowledge and were disclosed and discussed during scrutiny. The notice also failed on the ground of limitation under Section 149(1)(b), as the six-year window expired on 31.03.2023 but the notice was issued on 28.04.2023, and the pre-condition of the first proviso to Section 147 was not satisfied. The Court clarified that it quashed the notice only on jurisdictional grounds and did not record any finding on the existence or otherwise of a PE in India. The AO and the petitioner were free to take their respective stances and independent views on the PE issue if it crops up in any other subsequent year. The petition was allowed and the pending application disposed of.

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