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2019 (10) TMI 1397 - AAR - Income TaxEligibility of Advance ruling - Income taxable India - Double Taxation Avoidance Agreement signed between India and Finland ('India-Finland Tax Treaty') - whether amount received by the Applicant from Valmet Chennai and Valmet Automation, for reimbursement of third party cost incurred for providing IT support services without any income element embedded therein, would not be chargeable to tax in India? - HELD THAT:- Matter was selected for scrutiny to examine the Transfer Pricing parameter and the accounting of tax credit available in 26AS. No evidence has been brought on record to establish that the Assessing Officer had raised any specific question on the taxability of IT service agreement of the applicant with Valmet Chennai and/or Valmet Automation. A notice u/s 142(1) dated 01/04/2001 (same date as filing of present application) was issued with a questionnaire and this specific question is not found appearing in that notice as well. In the absence of any specific question in respect of IT service agreements, it cannot concluded that the question raised in the present application was already pending before the Income-tax Authority. The general notice as issued in this case is found insufficient to attract the rejection of the application under clause (i) of Proviso to Section 245R(2) It is evident on a plain reading of the notice that it does not address itself to any specific question; it does not even disclose application of mind to the returns save and except the fact that they conform to the instructions which compelled the A.O. to issue a scrutiny notice on account of the international transactions reported by the assessee. In the present case also the notice u/s 143(2) was issued in response to CASS selection reasons. The selection of international transaction on T.P. risk parameter was already referred to the T.P.O. who had passed the order u/s 92CA (3) of the Act dated 26/03/2019, wherein no adverse inference was drawn in respect of the international transactions undertaken by the assessee. The specific question in respect of IT service agreements was never raised by the A.O. in any of the notices or the questionnaire. As held by the Hon'ble Courts such notice can't attract the automatic rejection route under clause (i) of proviso to Section 245R(2) of the Act as the question raised in the present application is not found pending before the income tax authority. It can't be concluded that the transaction was designed prima facie for avoidance of income tax merely because similar income was offered for tax in the past year. In order to claim bar under clause (iii) of Section 245R(2), there must be some necessary facts pointing to prima facie inference to a design to avoid tax by any illegal or improper means. No such fact has been brought on record by the revenue in this case. Merely because the applicant had offered such receipt for tax in the earlier years does not imply that the transaction was designed for tax avoidance. Accordingly, the objection of the revenue in this regard is overruled. The application is admitted only in respect of the transaction with Valmet Chennai and the reference of Valmet Automation in the application will be ignored while giving the final ruling. The application is allowed to be proceeded accordingly.
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