Download Notesof law notes assignment and more Assignments Mock Trial and Moot Court in PDF only on Docsity!
-THE 2ND^ KIIT UNIVERSITY NATIONAL MOOT COURT COMPETITION, 2014-
I IN TNTHHEE HHIGIGHH CCOOUURRTT OOFF JJUDUDIICCAATTUURREE AATT BBOOMMBBAAYY
Ca Cassee ffiilleedd seseeekkiinngg wrwriitt ooff CCeerrttiioorraarrii uunnddeerr AArrttiiccllee 2 2226 6 ooff tthhee
Co Connssttiittuuttiioonn ooff IInnddiiaa, 1, 1995500
MEMORIAL ON BEHALF OF THE RESPONDENT IN W.P. NO. _____________ OF 2014
Civil Writ Petition No. of 2014
Ch Cheeeettaahh && CChheettaakk PPvvtt.. LLttdd.. ………………………………………………………………......PPeettiittiioonneerr
(A (A PPrriivvaattee CCoommppaannyy hhaavviinngg iittss
Re Reggiisstteerreedd OOffffiiccee iinn MMuummbbaaii))
vv..
In Inccoommee TTaaxx AAuutthhoorriittyy…………………………………………………………………………....RReessppoonnddeenntt
MMoosstt RReessppeeccttffuullllyy SSuubbmmiitttteedd bbeeffoorree tthhee HHoonn’’blblee CChhiieeff JJuussttiiccee aanndd OOtthheerr JJuuddggeess ooff HHiigghh CCoouurrtt ooff JJuuddiiccaattuurree aatt BBoommbbaayy
MM MEEMEMMOOORRRAAANNNDDDUUUMMM OOONNN BBBEEHEHHAAALLLFFF OOOFFF RRREESESSPPPOOONNNDDDEEENNNTTT
DD DRRARAAWWWNNN AAANNDNDD FFFIILILLEEEDDD BBBYYY TTTHHEHEE CCCOOUOUUNNNSSSEEELLLSSS FFFOORORR TTTHHEHEE RRREESESSPPPOOONNNDDDEEENNNTTT
Team Code: R
Memorandum Drawn And Filed By The Respondent A
TTABABLLEE OOFF^ CCONONTTEENNTTSS
LIST OF ABBREVIATIONS ................................................................................................................ B
INDEX OF AUTHORITIES ................................................................................................................. C
STATEMENT OF JURISDICTION ........................................................................................................ I
STATEMENT OF FACTS .................................................................................................................... J
ISSUES RAISED ................................................................................................................................ L
SUMMARY OF ARGUMENTS ........................................................................................................... M
ARGUMENTS ADVANCED ................................................................................................................. 1
I. WHETHER THE WRIT PETITION IS MAINTAINABLE?............................................. 1
II. WHETHER THERE HAS BEEN TRUE AND FULL DISCLOSURE OF MATERIAL
FACTS BY THE ASSESSEE TO THE ASSESSING OFFICER AT THE TIME OF
INITIAL ASSESSMENT? ...................................................................................................... 5
A. THAT THE ONUS TO DISCLOSE ALL THE MATERIAL FACTS IS ON THE ASSESSEE .................... 5
B. THAT FURNISHING OF DOCUMENTS DOES NOT AMOUNT TO TRUE AND FULL DISCLOSURE OF
ALL THE MATERIAL FACTS ..................................................................................................... 6
C. THAT THERE HAS BEEN CONCEALMENT OF MATERIAL FACTS BY THE ASSESSEE ................... 8
III. WHETHER PAYMENT MADE FOR THE USE OF SHRINK WRAPPED
SOFTWARE CONSTITUTES ROYALTY? ...................................................................... 12
A. THAT PAYMENT MADE BY THE PETITIONER TO ZEON IS FOR THE GRANT OF LICENSE TO USE
THE SOFTWARE ...................................................................................................................... 12
B. THAT THE GRANT OF LICENSE TO USE THE SOFTWARE AMOUNTS TO TRANSFER OF RIGHT TO
USE OR RIGHT IN RESPECT OF COPYRIGHT .............................................................................. 13
C. THAT THE PAYMENT MADE FOR THE GRANT OF LICENSE FOR TRANSFER OF RIGHT IN RESPECT
OF COPYRIGHT CONSTITUTES ROYALTY ................................................................................. 14
PRAYER ........................................................................................................................................... N
Memorandum Drawn And Filed By The Respondent C
INDEX OF AUTHORITIES
A. CASES
i. SUPREME COURT
- A. Venkatasubbiah Naidu v. S. Chellappan (2000) 7 SCC 695 .......................................... 3
- Associated Stone Industries (Kotah) Limited v. CIT, Rajasthan (1997) 3 SCC 323....... 5, 8
- Calcutta Discount Co. Ltd. v. ITO, Calcutta & Anr. [1961] 2 SCR 241: AIR 1961 SC 372: (1961) 41 ITR 191 ................................................................................................... 6, 8
- CIT v. Burlop Dealers Limited (1971) 1 SCC 462: AIR 1971 SC 1635: [1971] 79 ITR 609........................................................................................................................................ 5
- CIT v. Chhabil Das Agarwal (2014) 1 SCC 603 ................................................................. 2
- CIT v. Foramer France [2003] 264 ITR 566 (SC): (2003) 185 CTR 512 ........................... 6
- CIT v. Vijay Bhai N. Chandrani [2013] 357 ITR 13 (SC) .................................................. 2
- G.K.N. Driveshafts (India) Ltd. v. ITO (2003) 1 SCC 72 ................................................... 1
- Ganga Saran & Sons P. Ltd. v. ITO & Ors. (1981) 3 SCC 143: [1981] 130 ITR 1 ............ 8
- Indian Oil Corp. v. ITO (1986) 3 SCC 409: AIR 1987 SC 1897 ........................................ 8
- Indo-Aden Salt Manufacturing and Trading Company Pvt. Ltd. v. ITO AIR 1986 SC 1857: (1986) 2 SCC 33 ........................................................................................................ 7
- ITO v. Lakhmani Mewal Das (1976) 3 SCC 757 ................................................................ 7
- K.S. Rashid & Sons v. Income Tax Investigation Commission (1954) 25 ITR 167: AIR 1954 SC 207......................................................................................................................... 2
- K.S. Venkataraman and Co. (P) Ltd. v. State of Madras (1966) 60 ITR 112: AIR 1966 SC 1089...................................................................................................................................... 2
- Kantamani Venkata Naryana & Sons v. 1st^ Addl. ITO AIR 1967 SC 587, [1967] 63 ITR 638........................................................................................................................................ 6
- Kerala SEB v. Kurien E. Kalathil (2000) 6 SCC 293 .......................................................... 3
- L.L. Sudhakar Reddy v. State of A.P. (2001) 6 SCC 634 ................................................... 3
Memorandum Drawn And Filed By The Respondent
Memorandum Drawn And Filed By The Respondent F
iv. FOREIGN COURTS
- Neville v. London Express Newspapers Ltd. 1919 AC 368 ................................................ 4
- Wolverhampton New Waterworks Co. v. Hawkesford (1859) 141 ER 486 ....................... 4 v. INCOME TAX APPELLATE TRIBUNAL
- ADIT (International Taxation), Mumbai & Anr. v. Reliance Infocomm Ltd. & Ors. 2013 Indlaw ITAT 40 ........................................................................................................... 14, 15
- ADIT (International Taxation), Mumbai & Anr. v. Reliance Infocomm Ltd. & Ors. 2013 Indlaw ITAT 40. ................................................................................................................ 12
- DCIT v Gupta Overseas 2014 Indlaw ITAT 20................................................................. 10
- HCL Limited v. ACIT 2004 Indlaw ITAT 565 ................................................................. 10
- MMTC v. DCIT [2009] 119 ITD 175: 2009 (309) ITR(AT) 361 ....................................... 7
- Qualcomm Incorporation v. ADIT, International Taxation [2013] 23 ITR (Trib) 239 ..... 10 vi. AUTHORITY FOR ADVANCED RULINGS
- Citrix Systems Asia Pacific Pte Ltd [2012] 343 ITR 1 (AAR).......................................... 13 vii. PRIVY COUNCIL
- Attorney General of Trinidad and Tobago v. Gordon Grant and Co. Ltd. 1935 AC 532 (PC) ...................................................................................................................................... 4
- Secy. of State v. Mask and Co. AIR 1940 PC 105. ............................................................. 4
B. BOOKS & TREATISES
- A. LEMLEY, PETER S. MENELL, ROBERT P. MERGES & PAMELA SAMUELSON, SOFTWARE & INTERNET LAW 307 – 311 (3rd^ Ed. 2006)............................................................................ 13
- ACHARYA SHUKLENDRA, LAW OF INCOME TAX 1526 (3rd^ Ed. 2001). .................................. 8
- B.B. LAL & N. VASHISHTH, DIRECT TAXES: INCOME TAX, WEALTH TAX AND TAX PLANNING 27 – 29 (29th^ Ed. 2008). ...................................................................................... 5
- D.D. BASU, COMMENTARY ON THE CONSTITUTION OF INDIA 1032 (8th^ Ed., 1989) .............. 2
- DOUGLAS E. PHILIPS, THE SOFTWARE LICENSE UNVEILED: HOW LEGISLATION BY LICENSE CONTROL SOFTWARE ACCESS? 6 – 15 (1st^ Ed. 2009) ......................................................... 13
Memorandum Drawn And Filed By The Respondent G
- DR. GIRISH AHUJA & DR. RAVI GUPTA, DIRECT TAXES: LAW & PRACTICE 953 – 1030 (5th Ed. 2013) .............................................................................................................................. 8
- DR. VINOD K SINGHANIA AND DR. KAPIL SINGHANIA, DIRECT TAXES: LAWS & PRACTICE 449 (45th^ Ed. 2010). ........................................................................................................... 14
- GURMEET BEDI AND MANPREET SINGH SACHDEVA, HALSBURY‟S OF LAW INDIA: INCOME TAX – II 393 (41st^ Vol. 2008). ............................................................................................ 14
- H.M. SEERVAI, CONSTITUTIONAL LAW OF INDIA 1112 (4th^ Ed. 1991).................................. 2
- JUSTICE S. RANGANATHAN, SAMPATH IYENGAR‟S LAW OF INCOME TAX 2190 (8th^ Ed.
- .................................................................................................................................. 14
C. JOURNALS AND REPORTS
- Archi Agnihotri & Medha Srivastava, Interpretation of Section 147 of the Income Tax Act, 1961: Judicial Trends MANU 1 – 11 (2005) ................................................................. 6
- H. Ward Classen, Fundamentals of Software Licensing 37 IDEA 1 – 93 (1996).............. 12
- Praxity, Cross Border Taxation of Software Contracts, 1 BKD 1 – 15 (2010) ................. 15
- Rangesh Banka, Core Principles of Reassessment with Important Case Laws 1 ITATONLINE.ORG 1 – 9 (2010). ............................................................................................ 10
D. LAW LEXICONS
- P. RAMANATHA AIYAR, ADVANCED LAW LEXICON 551 (4th^ Ed. 2013). ............................ 12
- TAXMANN‟S DIRECT TAXES LAW LEXICON 395 – 407 (1st^ Ed. 2008) .................................. 9
E. STATUTES REFERRED
- THE CONSTITUTION OF INDIA, 1950
- THE COPYRIGHT ACT, 1957 [ ACT NO. 14 OF 1957]
- THE FINANCE ACT, 2012 [ACT NO. 23 OF 2012]
- THE INCOME TAX ACT, 1961 [ ACT NO. 43 OF 1961]
F. RULES REFERRED
- THE INCOME TAX RULES, 1962
- THE BOMBAY HIGH COURT (ORIGINAL SIDE) RULES
Memorandum Drawn And Filed By The Respondent I
STATEMENT OF JURISDICTION
THE HON‟BLE HIGH COURT OF JUDICATURE AT BOMBAY EXERCISES JURISDICTION TO HEAR
AND ADJUDICATE OVER THE MATTER UNDER ARTICLE 226 (1) OF THE CONSTITUTION OF INDIA,
THE RESPONDENTS HUMBLY SUBMITS TO JURISDICTION OF THE HON‟BLE COURT WHICH HAS
BEEN INVOKED BY THE PETITIONER. HOWEVER, THE RESPONDENT RESERVES THE RIGHT TO
CHALLENGE THE SAME. THE PROVISION UNDER WHICH THE PETITIONER HAS APPROACHED THE
HONORABLE COURT IS READ HEREIN UNDER AS:
A ARTRTIICCLLEE 222266 – – PPOOWWEERR OOFF HCHCSS TTOO IISSSSUUEE CCEERRTTAAIINN WWRIRITTSS
N N O TOT WW II TT HH SS TT AA NN DD II NN GG AA NN YY TT HH II NN GG I NIN AA RR TT II CC LL EE 3 2 32 EE VV EE RRYY HH CC SS HH AA LL LL HH AAVV EE
PP OO WW EE RR SS ,, T HTH RR OO UU GG HH OO UU TT T HTH EE T ETE RR RR II TT OO RR II EE SS II NN RR EE LL AA TT II OO NN TT OO WW HH II CC HH I TIT E XEX EE RR CC II SS EE
JJ UU RR II SS DD II CC TT II OO NN^ ,,^ TT OO^ II SS SS UU EE^ TT OO^ AA NN YY^ PP EE RR SS^ OO NN^ OO RR^ A UAU TT HH OO RR II TT YY,,^ II NN CC LL UU DD II NN GG^ II NN
AA PP PP RR OO PP RR II AA TT EE C ACA SS EE SS ,, AA NN YY GG OOVV EE RR NN MM EE NN TT ,, WW II TT HH II NN T HTH OO SS EE TT EE RR RR II TT OO RR II EE SS
DD II RR EE CC TT II OO NN SS ,, OO RR DD EE RR SS OO RR WW RR II TT SS ,, I NIN CC LL UU DD II NN GG W RWR II TT SS I NIN TT HH EE NN AA TT UU RR EE O FOF H AHA BB EE AA SS
CC OO RR PP UU SS ,, M AMA NN DDAA MM UU SS ,, P RPR OO HH II BB II TT II OO NN SS ,, Q UQU OO WAWA RR RR AA NN TT OO A NAN DD CC EE RR T ITI OO RR AA RR II ,, OO RR A NAN YY
OO FF^ T HTH EE MM^ ,,^ FF OO RR^ T HTH EE^ E NEN FF OO RR CC EE MM EE NN TT^ OO FF^ A NAN YY^ OO FF^ TT HH EE^ RR II GG HH TT SS^ C OCO NN FF EE RR RR EE DD^ B YBY^ PPAA RR TT
I I II II A NAN DD FF OO RR AA NN YY OO TT HH EE RR PP UU RR PP OO SS EE
Memorandum Drawn And Filed By The Respondent J
STATEMENT OF FACTS
I.
ZEON: A MULTINATIONAL IT SECTOR COMPANY
Zeon is a private company incorporated in the Cayman Islands but carries on its software business primarily through Singapore. It is an I.T. and I.T.E.S. company. Zeon is a multi – national company having several employees across the world including India. It had presence in India through a liaison office. The Indian liaison office is primarily engaged in liaising with potential clients, and provided them with presentations that discussed the various software products that Zeon has to offer. Irrespective of the above, Zeon has not been able to obtain Singapore Tax Residency Certificate to claim Singapore tax residency for Indian tax purposes. II. NEO: SHRINK WRAP SOFTWARE BY ZEON
Zeon, after number of years of hard work and dedication, developed software named Neo. The software was in nature of shrink wrapped software. The software could predict how well a new recruit would perform in an organization that was going to hire him/her. Moreover, the software also predicted how well the employee would blend in the organization with respect to culture, values etc. of the organization.
III. AGREEMENT BETWEEN ZEON AND CHEETAH & CHETAK PRIVATE LIMITED FOR NEO
In A.Y. 2003 – 04 Cheetah & Chetak Private Limited, an Indian private manufacturing company, having its registered office in Mumbai decided to buy this software as it was facing some issues with the employees that it was hiring. Cheetah & Chetak Private Limited entered into an agreement with Zeon for purchase of software. The price of software after negotiations was fixed at INR 35,00,000 (Indian Rupees Thirty Five Lakhs Only.) The payment for the software was on year to year basis.
Memorandum Drawn And Filed By The Respondent L
ISSUES RAISED
I. WHETHER THE WRIT PETITION IS MAINTAINABLE?
II. WHETHER THERE HAS BEEN TRUE AND FULL DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEE TO THE ASSESSING OFFICER AT THE TIME OF INITIAL ASSESSMENT?
III. WHETHER PAYMENT MADE FOR THE USE OF SHRINK WRAPPED
SOFTWARE CONSTITUTES ROYALTY?
Memorandum Drawn And Filed By The Respondent M
SUMMARY OF ARGUMENTS
I. WHETHER THE WRIT PETITION IS MAINTAINABLE?
Firstly , the redressal mechanism has been provided under the statute which must be followed in case an assessee is aggrieved.
Secondly , the writ jurisdiction under Article 226 is an extraordinary jurisdiction and can only be exercised in exceptional circumstances which is absent in the instant case.
II. WHETHER THERE HAS BEEN TRUE AND FULL DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEE TO THE ASSESSING OFFICER AT THE TIME OF INITIAL ASSESSMENT?
Firstly , that the onus to disclose all the material facts is on the assessee.
Secondly , that furnishing of documents does not amount to true and full disclosure of all the material facts.
Thirdly , that there has been concealment of material facts by the assessee as there was no disclosure of the agreement & also there was concealment of primary facts.
III. WHETHER PAYMENT MADE FOR THE USE OF SHRINK WRAPPED SOFTWARE CONSTITUTES ROYALTY?
Firstly , that payment made by the petitioner to Zeon is for the grant of license to use the software.
Secondly , the grant of license to use the software amounts to transfer of right to use or right in respect of copyright.
Thirdly , the payment made for the grant of license for transfer of right in respect of copyright constitutes royalty.
Memorandum Drawn And Filed By The Respondent 2
by passing a speaking order, before proceeding with the assessment in respect of the above said five AYs.”
- It is contended that a writ in exercise of the power under Article 226 of the Constitution is discretionary and extraordinary, that too, when a complete mechanism for efficacious remedy is provided under the statute, more so, a fiscal one.^2 In a writ of certiorari , the Court is concerned with the decision making process adopted by an authority, rather than the decision itself. Such a writ cannot be issued to cure all the defects even assuming they are available on record. Till the assessment order is passed, the proceedings are under adjudication before AO. The power of the AO u/s 147 of the Act is not in dispute. A notice issued by the AO is only at the stage of process of determination and not a determination by itself. The process of assessment is not required to be challenged before Court of law, as it is a still born child. Therefore, the Petitioner cannot have a legal right as there is no legal injury suffered by it at that stage.
- The Apex Court has adjudicated over the issue that whether the HC is justified in interfering with the order passed by the AO u/s 148 in exercise of its jurisdiction under Article 226 when an equally alternate efficacious remedy was available to the assessee under the Act in negative.^3 The Apex Court in the case of CIT v. Chhabil Das Agarwal^4 relied upon its earlier decisions and held that:
“Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal v. Supdt. of Taxes ,^5 Titagarh Paper Mills v. State of Orissa^6 and other similar judgments that the HC will not entertain a petition
(^2) JCIT & Ors. v. Kalanithi Maran & Anr. Writ Appeal No. 347 of 2014. (^3) D.D. BASU, COMMENTARY ON THE CONSTITUTION OF INDIA 1032 (8th (^) Ed., 1989); H.M. SEERVAI, C 4 ONSTITUTIONAL LAW OF INDIA 1112 (4th^ Ed. 1991). 5 CIT v. Chhabil Das Agarwal^ (2014) 1 SCC 603^ CIT v. Vijay Bhai N. Chandrani [2013] 357 ITR 13 (SC). Thansingh Nathmal v. Superintendent of Taxes AIR 1964 SC 1419: [1964] 6 SCR 654 [HEREINAFTER REFERRED AS “THANSINGH”]; K.S. Rashid & Sons v. Income Tax Investigation Commission (1954) 25 ITR 167: AIR 1954 SC 207; Sangram Singh v. Election Tribunal, Kotah [1955] 2 SCR 1: AIR 1955 SC 425; U.O.I. v. T.R. Varma AIR 1957 SC 882: (1958) 2 LLJ 259; State of U.P. v. Mohd. Nooh AIR 1958 SC 86. 6 K.S. Venkataraman and Co. (P) Ltd. v. State of Madras (1966) 60 ITR 112: AIR 1966 SC 1089; Titagarh Paper Mills v. State of Orissa (1983) 2 SCC 433; N.T. Veluswami Thevar v. G. Raja Nainar AIR 1959 SC 422;
Memorandum Drawn And Filed By The Respondent 3
under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.”
- In the instant case, no such condition has arisen which would invoke the exceptions as the case is at a premature stage, where the rights and liabilities are still to be crystallised. The AO based on his reason to believe and his finding that there has been concealment of primary facts by the Petitioner, has issued the notice u/s 148 which is as per procedure and well within his jurisdiction. In Nivedita Sharma v. Cellular Operators Assn. of India ,^7 Hon‟ble Apex Court held that where hierarchy of appeals is provided by the statute, party must exhaust the statutory remedies before resorting to writ jurisdiction for relief. In Thansingh Nathmal v. Supdt. of Taxes ,^8 the Apex Court adverted to the rule of self-imposed restraint that the writ petition will not be entertained if an effective remedy is available to the aggrieved person and observed: “The HC does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up.”
- In Titaghur Paper Mills Co. Ltd. v. State of Orissa,^9 Apex Court observed that “ It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of .” The
Municipal Council, Khurai v. Kamal Kumar AIR 1965 SC 1321: (1965) 2 SCR 653; Siliguri Municipality v. Amalendu Das (1984) 2 SCC 436. 7 Nivedita Sharma v. Cellular Operators Assn. of India (2011) 14 SCC 337; S.T. Muthusami v. K. Natarajan (1988) 1 SCC 572; Rajasthan SRTC v. Krishna Kant (1995) 5 SCC 75; Kerala SEB v. Kurien E. Kalathil (2000) 6 SCC 293; A. Venkatasubbiah Naidu v. S. Chellappan (2000) 7 SCC 695. 8 Shri Sant Sadguru Janardan Swami (Moingiri Maharaj) Sahakari Dugdha Utpadak Sanstha v. State of Maharashtra (2001) 8 SCC 509; Pratap Singh v. State of Haryana (2002) 7 SCC 484; L.L. Sudhakar Reddy v. State of A.P. (2001) 6 SCC 634; 9 Supra THANSINGH at 5. Titagarh Paper Mills v. State of Orissa (1983) 2 SCC 433.
Memorandum Drawn And Filed By The Respondent 5
II. WHETHER THERE HAS BEEN TRUE AND FULL DISCLOSURE OF
MATERIAL FACTS BY THE ASSESSEE TO THE ASSESSING OFFICER AT THE TIME OF INITIAL ASSESSMENT?
- §147 of the Act provide power to the AO to reopen assessment completed under the Act in case there is „reason to believe‟ that any income of the assessee taxable under the provisions of the Act has escaped assessment. However, as per proviso to § 147, assessment can reopened after four years only when there occurs failure on the part of the assessee to disclose material facts fully and truly.
- It is contended by the Respondent that there has been gross failure on the part of the Petitioner to disclose facts at the time assessment. It is due to these non-disclosures on the part of the assessee that the payment made to Zeon by the Petitioner without withholding of tax was allowed.^11 Thus, the income has escaped assessment due to failure on the part of assessee to truly and fully disclose all material facts.
A. THAT THE ONUS TO DISCLOSE ALL THE MATERIAL FACTS IS ON THE ASSESSEE
- It is humbly submitted before the Hon‟ble Court that the assessment of assessee‟s income is done by the AO on the basis of the material disclosed by the assessee. In the case of CIT v. Burlop Dealers Limited^12 the Apex Court held that in every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, required to know all the facts which help him in coming to the correct conclusion_._ Thus, it is duty of the assessee to disclose all the material facts to the AO at the time of assessment.^13
- Reliance is placed on the case of Ketan B. Mehta v. ACIT^14 wherein the Gujarat HC observed that it is the duty of the assessee to disclose all the primary facts to the AO. The Supreme Court has also observed in the case of Associated Stone Industries (Kotah) Limited v. CIT, Rajasthan^15 that:
(^11) Moot Proposition, p. 3 ¶ 5. (^12) CIT v. Burlop Dealers Limited (1971) 1 SCC 462: AIR 1971 SC 1635: [1971] 79 ITR 609. (^13) B.B. LAL & N. VASHISHTH, DIRECT TAXES: INCOME TAX, WEALTH TAX AND TAX PLANNING 27 – 29 (29th (^) Ed. 2008). 14 15 Ketan B Mehta v. ACIT [2012] 346 ITR 254G. Venkatesh Murthy v. CIT [1966] 62 ITR 244 (Kar). Associated Stone Industries (Kotah) Limited v. CIT, Rajasthan (1997) 3 SCC 323 [HEREINAFTER REFERRED AS “STONE”]; Parashuram Pottery Works Company Limited v. ITO (1977) 1 SCC 408: AIR 1977 SC 429.
Memorandum Drawn And Filed By The Respondent 6
“It is now well settled by the decisions of this Court that the duty of the assessee is only to fully and truly disclose all material facts. The expression "material facts" contained in § 34(1)(a) of the Act refers only to Primary facts, and it is the duty of the assesses to disclose such primary facts.”
- Thus, relying on the aforesaid judgments of the hon‟ble Apex Court and the HC, it is most respectfully submitted before the Hon‟ble Court that the onus was upon the Petitioner to disclose all the primary facts to the AO at the time of the initial assessment pertaining to its transaction with Zeon.^16 The Petitioner had duty to provide all material information relating to the purchase of shrink wrapped software, Neo, from Zeon^17 which would allow the AO to form correct opinion regarding the taxability of the payment made by the Petitioner to Zeon.
B. THAT FURNISHING OF DOCUMENTS DOES NOT AMOUNT TO TRUE AND FULL DISCLOSURE OF ALL THE MATERIAL FACTS
- It is humbly submitted before the Hon‟ble Court that Explanation I to §147 stipulates that mere production of books of accounts or other evidence from which material information can be deduced with the help of due diligence does not necessarily amount to disclosure of facts.^18
- In the case of CIT v. Foramer France,^19 hon‟ble Supreme Court has elucidated on the term „true and full disclosure of material facts.‟ The Apex Court held that true and full disclosure refers to the disclosure of all the primary facts which are necessary for the completion of assessment by the AO. Omission of certain primary facts or disclosure of wrong facts does not amount to true and full disclosure. Similarly, in the case of Kantamani Venkata Naryana and Sons v. 1 st^ Addl. ITO,^20 Supreme Court observed that production of evidence from which material facts can be discovered cannot be held to be full disclosure of facts. Reliance is also placed on the case of Calcutta Discount Co. Ltd. v. ITO, Calcutta & Anr.^21
- It is submitted that in the instant case, the assessment of the Petitioner was completed u/s 143 (3) of the Act for the AYs 2003-04, 2004-05, 2006-07, 2007-08 and 2008-09 while
(^16) Moot Proposition, p. 1 ¶ 2. (^17) Id. at 16. (^18) Archi Agnihotri & Medha Srivastava, Interpretation of Section 147 of the Income Tax Act, 1961: Judicial Trends 19 MANU 1 – 11 (2005). 20 CIT v. Foramer France [2003] 264 ITR 566 (SC): (2003) 185 CTR 512. 21 Kantamani Venkata Naryana & Sons v. 1st^ Addl. ITO AIR 1967 SC 587, [1967] 63 ITR 638. Calcutta Discount Co. Ltd. v. ITO, Calcutta & Anr. [1961] 2 SCR 241: AIR 1961 SC 372: (1961) 41 ITR 191.
