TMI Blog2013 (6) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... d nor hearing is contemplated to the Commissioner or his authorised representative. Only on such admission before pronouncing its advance ruling hearing of the Commissioner or his authorised representative is provided if the Authority for Advance Rulings considers necessary to hear but not at the threshold stage of admitting the application. The questions are accordingly answered against the petitioners. It is well settled that while exercising the jurisdiction under article 226 of the Constitution of India, if the High Court is of the opinion that there is no other convenient or efficacious remedy open to the petitioner, it will proceed to investigate the case on its merits and if the court finds that there is an infringement of the petitioner's legal rights, it will grant relief, otherwise relief should be rejected. The petitioners failed to substantiate the infringement of legal right conferred on them under the statute while allowing the applications for advance ruling. The writ petitions are devoid of merit and are accordingly dismissed. - Decided against the revenue. - - - - - Dated:- 15-7-2011 - RAO AND RAMESH RANGANATHAN V. V. S., GOPAL REDDY A. JJ. JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 million euros. MA filed an application being A. A. R. No. 847 of 2009 for obtaining advance ruling under section 245Q(1) of the Act before the Authority for Advance Rulings seeking advance ruling on the questions relating to the transactions under which MA effected sale of shares of ShanH to Sanofi. GIMD also filed a similar application being A. A. R. No. 846 of 2009. In both the applications filed on November 20, 2009, the common question on which advance ruling was sought is as follows: "In terms of the provisions of the Double Taxation Avoidance Treaty dated September 6, 1994, as amended from time to time, entered into between the Republic of India with the Government of French Republic ('Indo-French Tax Treaty') read with section 90 of the Income-tax Act, 1961, whether the capital gains arising from the sale of shares of ShanH (French incorporated entity) by the applicant (French incorporated entity) to Sanofi (French incorporated entity) is liable to tax in France or in India?" MA also sought the advance ruling on yet another question which is as follows: "Without prejudice to the above, whether the controlling interest (assuming while denying that it is a separate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, 2010." (ii) The case of the Revenue After the Sanofi acquisition of Shanta, a survey under section 133A was conducted on August 4, 2009. The transaction raised the issue of taxability of capital gains in India. The Deputy Director of Income-tax (International Taxation) (DDIT) addressed letters to Sanofi about its possible tax liability under section 195 of the Act. Sanofi sent a reply without furnishing a copy of the second share purchasing agreement as requested. A notice was issued to show cause as to why Sanofi should not be treated as an assessee in default under section 201(1) of the Act in respect of payments made by them to MA and GIMD for acquisition of controlling stake in Shantha, for its failure to deduct tax at source (TDS) under section 195 of the Act. After examining the replies furnished, the DDIT passed orders on May 25, 2010, under section 201(1) and (1A) of the Act treating Sanofi as an assessee in default for non-deduction of tax in respect of payments made to non-residents for purchasing Shantha shares during the financial years 2006-07 and 2007-08. Sanofi filed Writ Petition No. 14212 of 2010 before this court impeaching the said order. MA and GIMD filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present on behalf of the Department, on the last occasion and even today none appears for the Department, with the result that we have been left with no assistance from the Department's side. Within the limited time available to the chairman before laying down the office, it is not possible to consider the said written submissions in detail and to pronounce the ruling. Hence, the case be posted for hearing on September 22, 2010. We may, however, advert to one aspect highlighted in the written submissions of the counsel for the Commissioner. The picture is sought to be given that sufficient opportunity was not afforded to the Department to furnish the comments before the admission of the application under section 245R(2) of the Income-tax Act. It is pointed out that 15 days should be counted from the date of receipt of the application by the designated Commissioner from the office of the Central Board of Direct Taxes, Delhi. If the Revenue felt that on account of inter-Department correspondence or otherwise, the Commissioner did not get sufficient time to respond, nothing prevented the Commissioner from seeking further time. It is seen that the comments objecting to the admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the proceedings were initiated by the DDIT, Hyderabad, under section 201 read with section 195 of the Act, the first petitioner is necessary party being the designated Commissioner for the purpose of Chapter XIX-B. There was no notice to him. The communication of the Director General, International Taxation, was received by first petitioner on December 8, 2009. Even before proper comments could be submitted, without waiting for the response of the petitioners, the Authority for Advance Rulings passed order of admission on December 17, 2009, without reasons and in violation of the principles of natural justice. The same is void and non est. Alternatively, they would submit that when the comments were submitted by the first petitioner, vide communication dated December 23, 2009, the Authority for Advance Rulings ought to have reopened the proceedings and heard the admissibility aspect as a preliminary issue. The order dated August 3, 2010, is also without the reasons and is not in accordance with the scheme of Chapter XIX-B of the Act. (iii) The case of the second respondent MA and GIMD filed separate affidavits-in-reply, opposing the admission of the writ petitions and interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs on the merits of the case as well as the maintainability of the respondents' application under section 245R(2) of the Act. Therefore, the writ petition ought not to be entertained. Submissions and issues The senior counsel for the Revenue Sri S. R. Ashok, and the senior counsel for the second respondent, M/s. S. Ganesh, Kaka and S. Ravi, addressed the court by and large adhering to the parties' position in the pleadings. Therefore, it is not necessary to detail these submissions. The background and the relevant statutory scheme, give rise to the issues, which can be conveniently considered under the headings : Ruling on the preliminary issue ; Right to reasons ; and Delay and acquiescence. Ruling on the preliminary issue (i) Relevant provisions of law Chapter XIX-B consisting of sections 245N to 245R was inserted by the Finance Act, 1993, with effect from June 1, 1993. In his Budget Speech for 1993-94, the Minister for Finance does not specifically make a mention regarding "advance rulings". The Finance Bill, 1993, has detailed Notes on Clauses in the Bill. Clause 30 thereof says that a new Chapter is introduced, "in order to provide a scheme for giving advance rulings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, the Appellate Tribunal or any court ; (b) involves determination of fair market value of any property ; (c) relates to a transaction which is designed prima facie for the avoidance of income-tax : Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard: Provided also that where the application is rejected, reasons for such rejection shall be given in the order." Finance Act, 1998 After coming into force of the Finance (No. 2) Act, 1998, with effect from October 1, 1998, sections 245N, 245R and 245RR read as under : "245N. Definitions.-In this Chapter, unless the context otherwise requires,- (a) 'advance ruling' means- (i) a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant and such determination shall include the determination of any question of law or of a fact specified in the application ; (ii) a decision by the Authority in relation to an assessment which is pending before any of the income-tax authority or the Tribunal in case of an applicant who is a resident in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in respect of an issue relating to computation of total income which is pending before any income-tax authority or the Appellate Tribunal and such determination or decision shall include the determination or decision of any question of law or of fact relating to such computation of total income specified in the application : (b) 'applicant' means any person who- (i) is a non-resident referred to in sub-clause (i) of clause (a) ; or (ii) is a resident referred to in sub-clause (ii) of clause (a) ; or (iii) is a resident falling within any such class or category of persons as the Central Government may, by notification in the Official Gazette, specify in this behalf ; and (iv) makes an application under sub-section (1) of section 245Q ;" "245R. Procedure on receipt of application.- . (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application : Provided that the Authority shall not allow the application where the question raised in the application,- (i) is already pending before any income-tax authority or Appellate Tribunal except in the case of a resident applicant falling in sub-clause (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial Gazette, specify in this behalf ; and (iv) makes an application under sub-section (1) of section 245Q ;" "245R. Procedure on receipt of application.-(1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner and, if necessary, call upon him to furnish the relevant records : Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the Commissioner. (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application : Provided that the Authority shall not allow the application where the question raised in the application,- (i) is already pending before any income-tax authority or Appellate Tribunal except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or any court ; (ii) involves determination of fair market value of any property ; (iii) relates to a transaction or issue which is designed prima facie for the avoidance of income-tax except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic growth and development. Therefore, while construing the provisions of Chapter XIX-B of the Act, the importance of adherence to timeliness in the advance rulings, cannot be ignored. Further, being essentially machinery provisions, these have to be construed in a manner that they are workable without complexity. The negative impact of delayed rulings by the court intervention at different stages before issue of advance ruling would be tremendous. A non-resident applicant not able to procure advance ruling within the time may not be willing to pursue any investment proposal with the same vigour and zeal. An advance ruling shall be binding on the applicant who sought it ; in respect of the transaction in relation to which the ruling had been sought. It is also binding on the income-tax authority in respect of the applicant and the said transaction. Therefore, timeliness is the key factor which has an effect of doing or undoing NRI participation in economic development of the nation. Parliament seems to be very much aware of importance of the timeliness. Therefore, under section 245V empowered the Authority for Advance Rulings to regulate its own procedure in all matters aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) The issue of threshold bar Chapter XIX-B nowhere indicates that it is mandatory for the Authority for Advance Rulings to decide the issue of threshold bar under section 245R(2) of the Act as and when the Commissioner raises objection. Nor is it possible to hold so, on the plain language of the text. The reasons for this conclusion are more than one. A plain reading of the three provisos to section 245R(2) together in harmonious manner would suggest that the requirement of giving reasons is contemplated only when an application is rejected. Only when an application is allowed for further consideration, the law contemplates a notice to the Commissioner (rule 13 of the Authority for Advance Rulings (Procedure) Rules). The first proviso to section 245R(2)-to reiterate ; bars the Authority for Advance Rulings from allowing the application where the question raised in the application (i) is already pending before any income-tax authority or appellate authority ; (ii) involves determination of fair market value of any property ; and (iii) relates to a transaction or issue which is prima facie designed for the avoidance of income-tax. If the question raised falls within the cate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified category of persons or classes of transactions. Whether or not a public authority with such power is barred from exercising the power depends on the procedure mandated by the applicable statute. If the court or tribunal is required to consider all issues in a lis, it is inferred that such public authority is barred from deciding a preliminary issue of ouster of the jurisdiction when the existence of jurisdictional facts is itself an intricate question warranting in-depth enquiry. Generally, given the object of dispensing expeditious justice, the court is not expected to procrastinate the conclusion by deciding the preliminary issues and retaining the case in the system for long. This would be more so when the relevant statute mandates time bound decisions.In D. P. Maheswari v. Delhi Administration [1983] 4 SCC 293 ; AIR 1984 SC 153, deprecating High Courts' judicial review of preliminary findings by the Industrial Tribunals and Labour Courts, the Supreme Court held : "There was a time when it was thought prudent and wise policy to decide preliminary issues first. But the time appears to have arrived for a reversal of that policy. We think it is better that tribunals, par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made by the Authority for Advance Rulings. Rule 16 is to the effect that on the prescribed day the Authority for Advance Rulings shall hear the applicant or his authorized representative in cases where it is proposed to reject the application. The Authority for Advance Rulings is required to hear the Commissioner or his authorized representative before pronouncing its advance ruling only when it considers it necessary. From a conjoint reading of the first proviso to section 245R(2) and rule 17 of the Authority for Advance Rulings (Procedure) Rules, it is inevitable to conclude that at the stage of considering the application with reference to the first proviso to section 245R(2) read with the other two provisos, the Commissioner or his authorized representative are nowhere in the picture. In a given case, the Authority for Advance Rulings can even refuse to admit or reject the application even without calling for records even though a copy of the application has had been forwarded to the Commissioner as per section 245R(1). The exclusive jurisdiction to decline to allow an application for advance ruling is vested in the Authority for Advance Rulings manned by men of outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute calls for literal interpretation. It is not open to opt another construction when the language of the provision permits only one meaning. In common law, it is well accepted, unless Parliament/Legislature expressly ousts the jurisdiction of the court, the law must be interpreted in a manner of conferring jurisdiction. The ouster of courts' jurisdiction-whether express or implied must be clear and unambiguous. The assumption of jurisdiction cannot ordinarily be negatived by implying limitations. If the language is not clear, the courts must interpret the restrictive clause in a narrow manner and sustain the jurisdiction of a court (Hakam Singh v. Gammon (India) Ltd. [1971] 1 SCC 286 ; AIR 1971 SC 740). In respect of statutory creations-adjudicatory bodies and/or tribunals-the principles are, however, different. A Tribunal established under an Act of competent Legislature is not empowered to examine the vires of creating statute (L. Chandra Kumar v. Union of India [1997] 228 ITR 725 (SC) ; [1997] 3 SCC 261 ; AIR 1997 SC 1125). Similarly such a Tribunal cannot act outside the purview of the statute nor make ultra vires procedural regulations. Even when a dispute arises whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zance of an application for the advance ruling. It contemplates the calling for the records. As per rule 13(1) if there is any doubt about a designated Commissioner, a copy of the application shall be forwarded to the Central Board of Direct Taxes calling upon it to specify or designate within a period of two weeks the Commissioner for the purpose of application, failing which, the application may be decided without hearing the Commissioner. There is no dispute that the Authority for Advance Rulings sent the notice to the Central Board of Direct Taxes on November 24, 2009. In turn, they sent it to the Director of International Taxation, Bangalore (DIT), which was received on December 8, 2009, who then forwarded to the jurisdictional Additional Commissioner of Income-tax -second petitioner, who received it on December 11, 2009. Thus, due to delayed response to the notice by them, the time of two weeks granted by the Authority for Advance Rulings expired. Only thereafter the Authority for Advance Rulings passed orders on December 17, 2009 allowing the application observing that the application is not hit by the proviso to section 245R(2) of the Act. After receiving the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act after providing adequate opportunity to the petitioners twice. As the Authority for Advance Rulings also expressed the view that all issues can be considered finally, no prejudice is caused to the petitioners. We, therefore, reject the plea of the petitioners and hold that in each and every case, it is not mandatory for the Authority for Advance Rulings to consider the question of threshold bar under the first proviso to section 245R(2) ; and that if any preliminary objection requires a thorough examination of facts and law, it is always within the powers of the Authority for Advance Rulings to decide the preliminary objection and proceeding with the examination before passing order under section 245R(4) and (6). We also hold that the law requires only to forward a copy of the application and call for the records from the Commissioner at the stage of admission. There is no requirement of hearing the Commissioner at the stage of admission. Such requirement would arise only when the Authority for Advance Rulings decides to proceed with the application for pronouncing the advance ruling when a notice has to be issued to the Commissioner. In this case, all the legal requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and quasi-judicial functions and the right to reasons. (iii) Legislative functions and the requirement of reasons The "legislative function" is the creation and promulgation of general rule of conduct without reference to a particular case. Ordinarily, what the majority decides is the "will" of the people and is to be enforced by the administrative authorities. The legislators make law, amend law and repeal the law. They would not implement the law or enforce the law. Legislators with an exception or two in the case of contempt of the Legislative House or impeachment proceedings-do not make any judicial decisions. The legislators make law for the people and the people have to enforce their rights through judicial process. The competent Legislature is presumed to know the need and requirement of the people. They are entitled to rely on any information received from any source. In addition to the general power of taxing, they have also power of eminent domain and police powers. When a law is made, in any of these areas, there is no constitutional rule requiring the Legislature to give reasons. The object and reasons for the legislation are to be gathered from the statement of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The common law countries for over more than a century there is increasingly codified common law. In India, the Code of Civil Procedure, 1908 (CPC), Code of Criminal Procedure, 1973 (CrPC) and the Evidence Act, 1872, form the trinity of procedure law. These cast duty on the courts trying the causes to record reasons for the conclusions arrived after adjudication (sections 2(9), 33 and Order XX of the Code of Civil Procedure and sections 235, 354(1)(a), 361 of the Code of Criminal Procedure). In Asst. Commissioner, Commercial Tax Department, Works Contract and Leasing v. Shukla and Brothers [2010] 30 VST 114 (SC) ; [2010] 4 SCC 785, the Supreme Court reiterated the rationale of a reasoned judgment. The observations read as under (page 129 of 30 VST) : "By practice adopted in all courts and by virtue of judge-made law, the concept of reasoned judgment has become an indispensable part of basic rule of law and, in fact, is a mandatory requirement of the procedural law. Clarity of thoughts leads to clarity of vision and proper reasoning is the foundation of a just and fair decision. In Alexander Machinery (Dudley) Ltd. v. Crabtree [1974] ICR 120 (NIRC), there are apt observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular course of action. The file dealing with such administrative process would contain reasons which are to be gathered when the decision is subjected to judicial scrutiny. In Union of India v. E. G. Nambudiri [1991] 3 SCC 38 ; AIR 1991 SC 1216, the Supreme Court held that there is no statutory duty cast upon an administrative authority to record reasons when an application for some benefit, concession or largesse is rejected. It would be suffice if minimum reasons are recorded for doing so. It was also observed that reasons need not be at one place by one officer and reasons can be gathered from the entire file. It was held: "In the absence of any statutory rule or statutory instructions requiring the competent authority to record reasons in rejecting a representation made by a Government servant against the adverse entries the competent authority is not under any obligation to record reasons . In the absence of any statutory or administrative provision requir-ing the competent authority to record reasons or to communicate reasons, no exception can be taken to the order rejecting representation merely on the ground of absence of reasons. No order of an administrative authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of the functions and acts of persons and bodies not strictly called judicial, not being courts or judges, but similar thereto in having authority or discretion to decide issues involving other persons ; it is a term commonly used of decisions involving discretion, but following on a judicial-type investigation, as where a minister, after local inquiry, decides to confirm a compulsory purchase order ; but this can equally, well, or better, be called an administrative function". In Black's Law Dictionary (sixth edition), "quasi-judicial" is defined as, "a term applied to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them, as a basis for their official action, and to exercise discretion of a judicial nature .The power of an administrative agency to adjudicate the rights of the persons before it, is 'quasi-judicial' power". According to Advanced Law Lexicon by P. Ramanatha Aiyar (Book 4, third edition, Reprint 2007), when the law commits an officer the duty of looking into certain facts not in a way which it specially dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs-pleadings, rules of evidence and procedure for adjudication. The quasi-judicial decisions affect personal liberty, rights, livelihoods, employment and sometimes impose legal sanctions. All quasi-judicial decisions by nonjudicial decision-makers are amenable to judicial review. Not only to render such review effective and purposeful but to enable the affected party to know as to why he received an adverse decision, compulsion to give reasons for quasi-judicial decisions is treated as part of the doctrine of fairness and the principles of natural justice. This is subject to well accepted exception. If the statute specifically excludes the reasons for the final decision or the preliminary decision or leaves the choice to the decision-maker to give reasons, the courts have always leaned in interpreting the law as not obliging the public authority to record reasons. The principles summed up infra-though not exhaustive ; are culled out from Madhya Pradesh Industries Ltd. v. Union of India, AIR 1966 SC 671, Bhagat Raja v. Union of India, AIR 1967 SC 1606, Som Datt Datta v. Union of India, AIR 1969 SC 414, Travancore Rayon Ltd. v. Union of India [1969] 3 SCC 868 ; AIR 1971 SC 862, Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by quasi-judicial decision maker, it cannot be insisted upon. Professor De Smith, referring to R v. Secretary of State for the Home Department [1994] 1 AC 531 comments that, "as a general proposition, it is still accurate to say that the law does not at present recognize a general duty to give reasons for an administrative decision", and that strictly speaking there is no obligation to give reasons, if a statute does not oblige to do so. The English Public Law (first edition 2004 edited by Professor David Fredman) reiterates that, "a duty to give reasons that would otherwise arise may be excluded where there is compelling public interest and the strength of the public interest is balance against the interest of the complaint". The law as to statutory exclusion of reasons by a statute is stated thus : "15.56 The common law requirements of procedural fairness can be excluded by statute, expressly or by necessary implication ; where that is done, and the outcome is also incompatible with a person's rights under the Human Rights Act, 1998 (HRA), a declaration of incompatibility on the latter ground can of course be made. However, the obligation, where appropriate, to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It further stipulated that the confirming authority may take such steps as may be considered necessary to satisfy itself as to the correctness, legality or propriety of the order passed or to the legality of the proceeding, to which an order relates. Under sub-section (2) of section 164, a further remedy is provided by way of a petition to the Central Government, the Chief of Army Staff or any prescribed officer superior in Command to the one who confirmed the finding and under section 165 power is vested in the Central Government or the Chief of Army Staff or any prescribed authority to annul the proceedings of the court martial if they are found to be illegal and unjust.It was contended that the order of the Chief of Army Staff confirming the proceedings under section 164 of the Army Act is illegal since no reason had been given in support of the order. The Constitution Bench negatived the contention, observing as under: "In the present case, it is manifest that there is no express obligation imposed by section 164 or by section 165 of the Army Act on the confirming authority or upon the Central Government to give reasons in support of its decision to confirm the proceedings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed officer superior in command to the one who confirmed such finding or sentence and the Central Government, the Chief of the Army Staff or other officer, as the case may be, may pass such orders thereon as it or he thinks fit. In so far as the findings and sentence of a court martial and the proceedings for confirmation of such findings and sentence are concerned it has been found that the scheme of the Act and the Rules is such that reasons are not required to be recorded for the same. Has the Legislature made a departure from the said scheme in respect of post-confirmation proceedings ? There is nothing in the language of sub-section (2) of section 164 which may lend support to such an intention. Nor is there anything in the nature of post-confirmation proceedings which may require recording of reasons for an order passed on the post-confirmation petition even though reasons are not required to be recorded at the stage of recording of findings and sentence by a court martial and at the stage of confirmation of the findings and sentence of the court martial by the confirming authority. With regard to recording of reasons the considerations which apply at the stage of recording of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon in relation to a transaction undertaken or proposed to be undertaken by the applicant would certainly involve the recording of reasons for the ruling on the questions before it. As noticed above, as required under the third proviso to section 245R(2), when the application is rejected the authority is required to give reasons for the same. There is yet another context in which the Authority for Advance Rulings is required to pass a reasoned order. Such a situation is contemplated under section 245T. It confers power on the Authority for Advance Rulings to declare an advance ruling to be void ab initio when a representation is made by the Commissioner that such advance ruling pronounced by it had been obtained by fraud or misrepresentation of the facts. Thus, except in three situations as above, the statute either expressly or impliedly does not require the Authority for Advance Rulings to record reasons for any other decisions. On receiving an application under section 245R(1) of the Act read with rule 10 of the Authority for Advance Rulings (Procedure) Rules, if the Authority for Advance Rulings accepts the application for further examination leading to pronouncement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anging expeditious advance rulings in relation to trade transactions (six months as per section 245R(6)). Therefore, if section 245R(2) is construed as mandating the recording of reasons while allowing the applications filed under section 245Q, the same would defeat the object of ensuring expeditious advance rulings. And, lastly, the provisions for advance rulings are intended to facilitate economic growth and development by attracting foreign investment, and, therefore, the issue of advance rulings cannot be allowed to be impeded by too many court interventions. If any objection is raised by the Central Board of Direct Taxes or the Commissioner, it will be within the powers of the Authority for Advance Rulings to deal with all objections while pronouncing advance rulings and if so persuaded can decline to pronounce advance ruling solicited by an applicant. Delay and acquiescence The judicial review under article 226 of Constitution of India is discretionary jurisdiction. Even if the petitioner is able to show that the quasi-judicial authority acted unlawfully or an order is vitiated by error apparent on the face of record, the court can refuse to exercise discretion. Generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on December 23, 2009, the first petitioner sent a communication to the Authority for Advance Rulings raising preliminary objections. The record further shows that the matter stood posted to March 15, 2010, and thereafter for a period of four months the petitioners acted tardily. About a year after submitting objections, they filed instant writ petition on October 27, 2010. No explanation is forthcoming for the delay, which in the facts of the case, in our opinion, militates against exercising the discretionary jurisdiction. This court heard the matter on November 10, 2010, November 30, 2010, December 7, 2010, February 11, 2011 and February 14, 2011. Simultaneously before the Authority for Advance Rulings the petitioners appeared through senior counsel, filed written submissions raising preliminary objections, and also opposing the applications for advance rulings on the merits. Oral submissions were also made in the last week of January and first week of February, 2011. Thus, on one hand, the petitioners appeared before the Authority for Advance Rulings, and actively participated in the proceedings and on the other hand, pursued these writ petitions. When the Authority for Advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the past acquisition of shares of "Shantha" by "MA" through its subsidiary "ShanH" from different NRIs, and would submit that there was a possibility of TDS, under section 195 of the Act, on payments made by ShanH to NRIs. According to the petitioners, MA acquired majority stake in "Shantha" in November, 2006, through its newly created subsidiary ShanH pursuant to a sale/purchase agreement executed on November 6, 2006, between MA and the other major stake holders in "Shantha", i.e., United Overseas Investment Ltd. (UOIL) and its directors ; in March, 2007, Groupe Industrial Marcel Dassault (for short "GIMD"), a company incorporated in France, acquired 20 per cent. stake in MA's French subsidiary ShanH ; as on March 31, 2009, MA, together with GIMD and their subsidiary ShanH, held approximately 80 per cent. of the shares of "Shantha" ; on the share purchase agreement coming into force in the year 2006 "Shantha" had become part of the MA group through its subsidiary ShanH ; as a result thereof the overall control and management of "Shantha" must be deemed to have been taken over by MA ; a strategic agreement was entered into between the SA group and MA and GIMD on July 10, 2009, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Sanofi against the order dated May 25, 2010, passed under section 201(1)/(1A) of the Act. The petitioners would further state that, after survey was conducted in August, 2009, both MA and GIMD were made aware of their possible capital gains tax liability ; they were requested to examine their advance tax liability under section 209 of the Act and to make necessary arrangement for payment of tax under the Act ; after detailed correspondence and, after issuance of the show-cause notice dated September 17, 2009, to Sanofi, both GIMD and MA had filed two separate applications, under section 245Q(1) of the Act, on November 20, 2009, i.e., Authority for Advance Rulings Applications Nos. 846 and 847 of 2009 seeking the ruling of the Authority for Advance Rulings on the taxability of the subject transaction. They sought a ruling by the Authority for Advance Rulings on the following question: "Whether, in terms of the provisions of the Double Taxation Avoidance Treaty dated September 6, 1994, as amended from time to time, entered into between the Republic of India with the Government of French Republic ('Indo-French Tax treaty') read with section 90 of the Income-tax Act, 1961, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission was passed on February 17, 2009 ; and, consistent with the scheme of the Act, it has been the practice of the Authority for Advance Rulings to cause service of notice on the Commissioner concerned, or the designated Commissioner, for submission of his report. The petitioners received a letter dated December 29, 2009, from the Authority for Advance Rulings informing them that the order, as to the admission of the application, had already been passed on December 17, 2009. The petitioner, subsequently, addressed a letter dated January 7, 2010, requesting the Authority for Advance Rulings to reconsider the issue of admissibility under section 245R(2) of the Act taking into account the department's letter dated December 23, 2009. According to the petitioners, as they had received the communication from the Authority for Advance Rulings on December 8, 2009, and had submitted their comments within 15 days thereof on December 23, 2009, the objections filed by them could not be said to be belated. Reference is made by the petitioners to certain events subsequent thereto which are wholly irrelevant for deciding the petitioner's contentions that the order of the Authority for Advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions before the reconstituted Authority for Advance Rulings ; the matter has been finally posted to February 15, 2011, for rejoinder arguments ; the petitioners herein had not sought deferment of the hearing before the Authority for Advance Rulings ; and had in fact questioned the order of the Authority for Advance Rulings dated December 17, 2009, allowing the application under section 245R(2), even in the written submissions filed before the reconstituted Authority for Advance Rulings. As noted hereinabove, we did not earlier injunct the Authority for Advance Rulings from proceeding with the hearing and, as such, the petitioners could not have objected to the Authority for Advance Rulings proceeding with the hearing of the applications. We reserved orders on the writ petitions on February 14, 2011. An interlocutory order was passed on the same day requesting the Authority for Advance Rulings to withhold the pronouncement of its advance ruling for a period of four weeks. As the validity of the order of the Authority for Advance Rulings dated December 17, 2009, is subjected to challenge, since the order of the Authority for Advance Rulings dated August 3, 2010, was passed subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinue on the merits, and, thereafter, a combined judgment, on the preliminary issue and on the merits, would be passed ; there is no ruling of the Authority for Advance Rulings which either binds the petitioner or against which they can approach this court ; the Authority for Advance Rulings is statutorily created for ensuring qualitative and expeditious disposal of important tax issues faced by resident/non-resident applicants ; the scheme of the Authority for Advance Rulings, under section 245R(6) of the Act, requires it to pronounce its advance ruling within six months from the date of receipt of the application ; to subserve this object, the constitution of the Authority for Advance Rulings mandates that it is presided by an ex judge of the Supreme Court, and other members with recognised skill and experience on tax issues ; the present writ proceedings are actuated solely with the intention of delaying and defeating the proceedings before the Authority for Advance Rulings ; the Income-tax Department was given notice, and had an opportunity to appear before the Authority for Advance Rulings prior to the order dated December 17, 2009, being passed ; despite the opportunity, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act respectively prohibit the Authority for Advance Rulings, and the income-tax authorities or the Income-tax Appellate Tribunal, from entertaining an application seeking a ruling, or to decide the issue in respect of which an application has been made under section 245Q(1) of the Act. The effect of these two provisions is that the applicant is required to seek a ruling from the Authority for Advance Rulings prior to proceedings being initiated against them by the income-tax authorities. Likewise, the Authority for Advance Rulings is prohibited from entertaining an application filed under the Act when the quasi-judicial/judicial authorities under the Act have already initiated appropriate proceedings for, in such an event, the ruling given by the Authority for Advance Rulings would no longer be an advance ruling, and would fetter exercise of quasi-judicial functions under the Act. The statutory bar under section 245RR would require the income-tax authorities/Income-tax Appellate Tribunal to defer passing of assessment/appellate/revisional orders under the Act, and await the ruling of the Authority for Advance Rulings. The binding effect of the ruling, under section 245S(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245Q(1), to the DIT informing him that he had been designated for sending comments to the Authority for Advance Rulings along with the records, if any, on the application filed by the applicant ; and the same may be sent to the Additional Commissioner of Income-tax in the office of the Authority for Advance Rulings. A copy of the said letter was also marked to the Additional Commissioner of Income-tax in the office of the Authority for Advance Rulings. That the Authority for Advance Rulings received a copy of the letter dated December 5, 2009, designating the DIT as the designated Commissioner, is evident from the order of the Authority for Advance Rulings dated December 17, 2009, wherein the Commissioner concerned is shown as the DIT. A copy of the order dated December 17, 2009, is also marked to him. On receipt of the said letter dated December 5, 2009, on December 8, 2009, the DIT, vide letter No. 53/DIT(IT)/the Authority for Advance Rulings Nos. 847 of 2009-10/1253, dated December 8, 2009, forwarded a copy of the letter dated November 24, 2009, and the letter of the Director General of Income-tax, to the ADIT along with the application preferred, under section 245Q(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245Q(1), required to be forwarded to. It is only if the applicant, who has sought the ruling, has been assessed under the Act would it be possible for the Authority for Advance Rulings to know who the relevant Commissioner is and, in cases where the applicant is not so assessed, it may not be possible for the Authority for Advance Rulings to identify the Commissioner to whom the application is to be forwarded to in terms of section 245R(1) of the Act. It is with a view to overcome this difficulty that rule 13(1) of the Rules requires a copy of the application to be forwarded to the Central Board of Direct Taxes in cases where the applicant has not been assessed, or no Commissioner has been designated, calling upon them to specify or designate, within a period of two weeks, the Commissioner for the purposes of the application. As noted hereinabove, the Authority for Advance Rulings was informed, vide letter dated December 5, 2009, that the first petitioner had been designated as the Commissioner for the purposes of Chapter XIX-B of the Act. Even the Central Board of Direct Taxes may be unaware whether filing of the application, under section 245Q(1), is barred in view of clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, or is contrary to, what the section contemplates the rule must yield to the statute (Central Bank of India v. Their Workmen [1959] 29 Comp Cas 367 (SC) ; [1960] 1 SCR 200). As section 245R(1) stipulates that a copy of the application shall be forwarded by the Authority for Advance Rulings to the Commissioner, service of notice on, and forwarding a copy of the application to, the Central Board of Direct Taxes is neither a substitute for, nor is it in sufficient compliance with, the mandate of section 245R(1) of the Act. Rule 2(i) of the "Authority for Advance Rulings (Procedure) Rules, 1996", (hereinafter called "the Rules"), defines "Commissioner" to mean (1) the Commissioner as defined in section 2(16) of the Act in respect of an applicant assessed under the Income-tax Act ; and (2) the Commissioner designated by the Central Board of Direct Taxes in this behalf in respect of an applicant not hitherto assessed. Rule 2(m) defines "secretary" to mean the Commissioner of Income-tax designated as the secretary of the Authority and includes an Additional Commissioner of Income-tax, and the Deputy Commissioner of Income-tax, appointed to assist the secretary in his functions. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is necessary to note that by December 8, 2009, when the DIT was intimated by the Director-General of Income-Tax, New Delhi, the 15 days time granted by the secretary to the Authority for Advance Rulings in the letter dated November 24, 2009, had almost expired. It is not as if the DIT slept over the matter and took an unduly long time to submit his objections, for the objections were filed by letter dated December 23, 2009. Strict compliance with section 245R(1) read with rule 13 of the Rules by the secretary to the Authority for Advance Rulings would have obviated an order being passed by the Authority for Advance Rulings on December 17, 2009, without giving the first petitioner a reasonable opportunity of being heard. As the first petitioner has not been intimated by the Authority for Advance Rulings, as required under section 245R(1) of the Act, the impugned order dated December 17, 2009, must be set aside. Order passed by the Authority for Advance Rulings, under section 245R(2), should contain reasons Section 245R(2) enables the Authority for Advance Rulings, after examining the application and the records called for, by order, to either allow or reject the application. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing Co. of India Ltd. v. Union of India [1976] 2 SCC 981 and S.N. Mukherjee v. Union of India [1990] 4 SCC 594). When important rights of parties, of far-reaching consequence to them, are adjudicated upon the Tribunal should tell the party why the decision is going against him (Bhagat Raja v. Union of India [1967] 3 SCR 302). The compulsion of disclosure of mind guarantees consideration. It introduces clarity and gives satisfaction to the party against whom the order is made. It also enables an appellate or supervisory court to keep the Tribunals within bounds. A reasoned order is a desirable condition of judicial disposal (Madhya Pradesh Industries Ltd. v. Union of India [1966] 1 SCR 466 ; AIR 1966 SC 671). The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities, when exercising initial jurisdiction, is essential for various reasons. It is calculated to prevent unconscious unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of unfairness in the conclusion. Unreasoned conclusions may be just but they may not appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it override it. The power under article 226 is conceived to serve the ends of law and not to transgress them (Mafatlal Industries Ltd. v. Union of India [1997] 5 SCC 536). We are conscious, and need not be reminded, that the High Court in exercise of its jurisdiction under article 226 of the Constitution of India would not, ordinarily, exercise its discretion to interfere with the order of the Authority for Advance Rulings considering its composition and that it is an expert body whose chairman is a retired judge of the Supreme Court. That does not, however, mean that the High Court is barred from exercising jurisdiction under article 226 of the Constitution of India in every case where the Authority for Advance Rulings allows the application filed under section 245Q(1), and proceeds to hear it in order to pronounce its advance ruling thereupon. The power of judicial review vested in the High Courts under article 226 is an integral and essential feature of the Constitution, constituting part of its basic structure (L. Chandra Kumar v. Union of India [1997] 228 ITR 725 (SC) ; [1997] 3 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scarriage of justice. These rules can operate in areas not covered by any law validly made. They do not supplant the law but supplement it. If a statutory provision can be read consistently with the principles of natural justice, the courts should do so as it must be presumed that the Legislature intended that the statutory authorities act in accordance with principles of natural justice (C. B. Gautam [1993] 199 ITR 530 (SC) ; A. K. Kraipak v. Union of India, AIR 1970 SC 150). There is no express prohibition in Chapter XIX-B of the Act excluding the requirement of giving reasons. In the light of what we have stated hereinabove, we do not see any reason to hold that the statute, by necessary implication, excludes the requirement of reasons being given by the Authority for Advance Rulings when an application is allowed, i.e., entertained for the purpose of pronouncing its advance ruling. Principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary (Institute of Chartered Accountants of India v. L. K. Ratna [1987] 61 Comp Cas 266 (SC) ; [1986] 4 SCC 537). When so read the requirement of giving reasons, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for exercise of its power exist, it cannot accede to a request made to it for the exercise of the conferred power (S. B. P. and Co. v. Patel Engineering Ltd. [2005] 128 Comp Cas 465 (SC) ; [2005] 8 SCC 618). The jurisdiction of the Tribunal, which is a creature of a statute, is conferred by the statute under which it is created. If a jurisdictional question is disputed before a tribunal, it must necessarily decide it unless the statute provides otherwise (Cellular Operators Assn. of India ; Judicial Review of Administrative Law by H. W. R. Wade and C. F. Forsyth, page 260). Although the Tribunal may have jurisdiction to enter on the enquiry, it may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice. It may, in perfect good faith, have misconstrued the provisions giving it power to act. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. But if it decides a question without committing any of these errors it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse that decision if it appears to it, on the materials before it, to be erroneous (Raman and Raman Ltd. v. State of Madras [1956] SCR 256 ; Halsbury's Laws of England, third edition, volume 11). When the Legislature lays down that the power can be exercised only if a certain state of facts exists, the authority cannot act if the condition is not fulfilled. If it wrongly holds that the condition exists, although it actually does not, its assumption of jurisdiction would be unsupportable, and can be removed by a writ of certiorari (Province of Bombay v. Khushaldas S. Advani [1950] SCR 621 ; AIR 1950 SC 222). Aquasi-judicial authority cannot confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari (Raza Textiles Ltd.v. ITO [1973] 87 ITR 538 (SC) ; [1973] 1 SCC 633). If the Tribunal deciding the case has misconstrued the provisions of the relevant Act, or has misunderstood the scope of its jurisdiction, the constitutional power of the High Court under articles 226 can be invoked to set rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advance ruling within six months Learned senior counsel, appearing on behalf of the second respondent, would contend that, in view of the stipulation in section 245R(6) which prescribes six months as the time within which the Authority for Advance Rulings is required to pronounce its advance ruling, it would not be appropriate for this court to now examine whether the Authority for Advance Rulings ought to have considered the objections raised by the petitioners, to the exercise of its jurisdiction under section 245R(2), as the Authority for Advance Rulings by its order dated August 3, 2010, and even after it was reconstituted, has afforded an opportunity of hearing to the petitioners both on the question of maintainability of the application and on the merits. Learned senior counsel would submit that, since the Authority for Advance Rulings has given a post-decisional hearing, it is in sufficient compliance with the statutory requirement of section 245R(2) of the Act. Reliance is placed by them on Canara Bank v. V. K. Awasthy [2005] 6 SCC 321. The importance attached to the threshold scrutiny under section 245R(2), by the scheme of "advance rulings" under Chapter XIX-B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority for Advance Rulings binds the assessing authority he is required to pass an order of assessment following the ruling given by the Authority for Advance Rulings. The Commissioner of Income-tax is also not entitled to revise an order of assessment, under section 263(1) of the Act, contrary to the ruling of the Authority for Advance Rulings, as the said ruling is binding on him also. In cases where the Authority for Advance Rulings has erroneously assumed jurisdiction, and has allowed the application under section 245R(2), and, thereafter, pronounced its advance ruling in favour of the applicant and against the Revenue, despite the application being barred under any one or more of clauses (i) to (iii) of the first proviso to section 245R(2), the only recourse which the Income-tax Department has is to question the order of the Authority for Advance Rulings allowing the application under section 245R(2), along with the advance ruling pronounced under section 245R(4), by way of judicial review proceedings before the High Court under article 226 of the Constitution of India. While the time limit specified under section 245R(6) for the Authority for Advance Rulings to pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Pradyumansinghji Arjunsinghji, AIR 1970 SC 1273 ; SBI v. S. N. Goyal [2008] 8 SCC 92 ; Kapra Mazdoor Ekta Union v. Birla Cotton Spg. and Wvg. Mills Ltd. [2005] 13 SCC 777 and H. C. Suman v. Rehabilitation Ministry Employees' Co-op. House Building Society Ltd. [1991] 4 SCC 485). Except in case of fraud and misrepresentation of facts, falling within the ambit of section 245T, Chapter XIX-B of the Act does not confer powers on the Authority for Advance Rulings to review its earlier orders. In V. K. Awasthy, the respondent-employee did not raise any objection, regarding violation of the principles of natural justice, either in the memorandum of appeal or at the time of personal hearing, before the appellate authority. He did not also show that he was prejudiced thereby. The Supreme Court held that the findings of the enquiry officer and the disciplinary authority were challenged in the appeal before the appellate authority ; the question of prejudice did not, therefore, arise ; and that, in a given case, post-decisional hearing could obliterate the procedural deficiency of a pre-decisional hearing. The law laid down in V. K. Awasthy has no application to the case on hand. The sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication, examine further material, if any, placed before it, and then pronounce its advance ruling on the question stated in the application filed under section 245Q(1) of the Act. On both counts, i.e., as the first petitioner was not intimated by the Authority for Advance Rulings as required under section 245R(1), and as it is bereft of reasons, the orders of the Authority for Advance Rulings dated December 17, 2009, allowing the application under section 245R(2) of the Act are quashed. As submissions, both oral and written, are stated to have been made before the Authority for Advance Rulings, even after it was recently reconstituted, we request the honourable Authority for Advance Rulings to pass a reasoned order under section 245R(2) of the Act. Both the writ petitions are allowed. However, in the circumstances, without costs. On a difference of opinion A. Gopal Reddy J.-A short question that falls for consideration in these two writ petitions is "while allowing the application filed under section 245Q(1) of the Income-tax Act, 1961 (hereinafter called as "the Act"), is it essential for the Authority for Advance Rulings (AAR) to consider the issue of admissibility as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act and on both counts, i.e., as the first petitioner was not intimated by the Authority for Advance Rulings as required under section 245R(1), and as it is bereft of reasons, the orders of the Authority for Advance Rulings dated December 17, 2009, allowing the application under section 245R(2) of the Act are quashed. As submissions, both oral and written, are stated to have been made before the Authority for Advance Rulings, even after it was recently reconstituted, we request the honourable Authority for Advance Rulings to pass a reasoned order under section 245R(2) of the Act" allowed the writ petitions quashing the orders of the Authority for Advance Rulings dated December 17, 2009, passed in Authority for Advance Rulings Applications Nos. 846 and 847 of 2009 allowing the application under section 245R(2) of the Act. In view of the conflicting opinions on the question raised in the writ petitions, the Division Bench directed the Registry to place the matters before the honourable the Chief Justice for appropriate orders for referring the matter to a third judge for his opinion. In view of placing the matter before the honourable the Chief Justice, the Chief Jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of application, failing with application may be decided without hearing the Commissioner. Under rule 13(2), on receipt of an application under section 245Q in respect of which there is a Commissioner as defined in rule 2(i)(1) or a Commissioner has been designated by the Board under rule 2(i)(2) or under sub-rule (1), the Authority shall notify the applicant and the Commissioner of the date and place of hearing of the application, and forward a copy of the application to the Commissioner calling upon him to furnish the relevant records of the case along with his comments, if any, on the contents of the application and nominate his authorised representative if he desires to be heard. Copies of the applications were received by the Director of Income-tax (International Taxation) (DIT) from the Central Board of Direct Taxes on December 8, 2009, On the very same day, the said applications were forwarded by the DIT to the second petitioner, namely, Additional Director of Income-tax (International Taxation), Hyderabad (ADIT). Consequently, a report was submitted by the ADIT to the DIT on December 18, 2009, and December 22, 2009. A report was, in turn, sent by the DIT to the Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In this connection ; it is stated that in continuation to this office letter in F. No. ARR/Merieux/DIT(IT)/2009-10, dated December 24, 2009, on the issue of admissibility of the applications of these two applicants (paragraph 4(e) and (f)), the order under section 201(1)/(1A) of the Income-tax Act has been passed on May 25, 2010, treating the prayer of the subject transaction, Sanofi Pasteur Holdings, as an assessee in default." On July 8, 2010, on which date case was listed for hearing, the Authority for Advance Rulings passed the following order: "Heard the arguments partly especially with regard to the belated preliminary objection raised by the Department. Post it for further hearing on the merits on July 16, 2010." The same was intimated to the second petitioner by the even letter dated. On receiving a fax message dated July 14, 2010, requesting for an adjournment, the Authority for Advance Rulings by letter dated July 15, 2010, informing the first petitioner and the second respondent that the case will be heard on July 16, 2010, at 2-30 p.m. and the applicant's counsel may commence his arguments and the Departmental representative concerned may be present and suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Authority for Advance Rulings continuously from January 7, 2010, onwards to decide the admissibility of the application and the case was posted on July 8, 2010, to hear the preliminary objection and after hearing some time case was adjourned to July 26, 2010. In compliance with rule 13(2) of the Rules notice has not been issued by the Authority for Advance Rulings and the Commissioner got information from the Central Board of Direct Taxes on December 8, 2009, and objections which were submitted on December 22, 2009, were within 15 days and the impugned order passed before the period allowed, is nullity and the same is liable to be set aside. Rule 17 of the Rules contemplates setting aside the orders passed ex parte is only an advance ruling but not a preliminary order nor order allowing the application, therefore, the Authority for Advance Rulings could not review its earlier order. Negative language not to allow applications in the proviso to section 245R(2) indicates giving of reasons while allowing applications and since no reasons were assigned while allowing applications, they are liable to be set aside. He further contended that when the writ petitioners wanted reasons whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reject the application, reasons have to be recorded for such rejection. If notice is insisted at the stage of allowing application, it is death nail to the Authority entertaining application in view of time fixed for issuing advance ruling. He further contended that at the request of the petitioners, hearing was started on July 8, 2010, on the Department preliminary objection and arguments were completed on July 16, 2010, but nothing prevented the petitioners to participate and put forth their arguments and entire procedure adopted by the writ petitioners is only to prevent the Authority for Advance Rulings to pass orders. He further contended that even assuming that there is a defect in allowing the applications on December 17, 2009, for hearing the representative of the applicant on July 16, 2010, the matter was posted to hear the petitioners-Department to a future date and the same has been recorded by learned Justice Ramesh Ranganathan in paragraph 5 of his judgment. Further, during the pendency of the writ petition, the Authority for Advance Rulings heard the applicant and the Department on all issues including the objections on the admissibility of the application and meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall include the determination or decision of any question of law or of fact relating to such computation of total income specified in the application: Provided that where an advance ruling has been pronounced, before the date on which the Finance Bill, 2003, receives the assent of the President, by the Authority in respect of an application by a resident applicant referred to in sub-clause (ii) of this clause as it stood immediately before such date/such ruling shall be binding on the persons specified in section 245S ; (b) 'applicant' means any person who- (i) is a non-resident referred to in sub-clause (i) of clause (a) ; or (ii) is a resident referred to in sub-clause (it) of clause (a) ; or (iii) is a resident falling within any such class or category of persons as the Central Government may, by notification in the Official Gazette, specify in this behalf ; and (iv) makes an application under sub-section (1) of section 245Q." "245R. Procedure on receipt of application.-(1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner and, if necessary, call upon him to furnish the relevant records : Provided that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date and place of hearing to be notified.-(1) Where an application under section 245Q is received from an applicant not hitherto assessed and there is no Commissioner designated in respect thereof under rule 2(i)(2), a copy of the application and enclosures thereto shall be forwarded to the Board calling upon it to specify or designate, within a period of two weeks, the Commissioner for the purposes of the application, failing which the application may be decided without hearing the Commissioner. (2) On receipt of an application under section 245Q in respect of which there is a Commissioner as defined in rule 2(i)(1) or a Commissioner has been designated by the Board under rule 2(i)(2) or under sub-rule (1) of this rule, the Authority shall notify the applicant and the Commissioner of the date, and place of hearing of the application and forward a copy of the application to the Commissioner calling upon him to furnish the relevant records of the case along with his comments, if any, on the contents of the application and nominate his authorized representative if he desires to be heard. 16. Hearing of application.-(1) On the day fixed, or any other day to which the hearing may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd scope of section 100 of the Code of Civil Procedure have neither been appreciated nor applied, and, according to the legislative mandate, the interference by the High Court is permissible only in cases involving substantial questions of law. The Supreme Court in M. Pentiah, AIR 1961 SC 1107, 1114, while interpreting the provision incorporating negative language, held as under: "That recognises that in every case it is for a corporation of this kind to show that it has affirmatively an authority to do particular acts ; but that in applying that principle, the rule is not to be applied too narrowly, and the corporation is entitled to do not only that which is expressly authorised but that which is reasonably incidental to or consequential upon that which is in terms authorized." In Competition Commission of India's case [2010] 10 SCC 744, 762 the points that arise for determination before the Supreme Court were: "(1) Whether the directions passed by the Commission in exercise of its powers under section 26(1) of the Act forming a prima facie opinion would be appealable in terms of section 53A(1) of the Act ? (2) What is the ambit and scope of power vested with the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al) Regulations, 2009, held as under: "Regulation 17(2) empowers the Commission to invite the information provider and such other person, as is necessary, for the preliminary conference to aid in formation of a prima facie opinion, but this power to invite cannot be equated with requirement of statutory notice or hearing . . . (paragraph 73) The Supreme Court further held: "Issue of notice to a party at the initial stage of the proceedings, which are not determinative in their nature and substance, can hardly be implied ; wherever the Legislature so desires it must say so specifically (paragraph 77) It is difficult to state as an absolute proposition of law that in all cases, at all stages and in all events the right to notice and hearing Is a mandatory requirement of principles of natural justice."(paragraph 79). In S. N. Mukherjee's case [1990] 4 SCC 594, 618 the Supreme Court while considering the following question that fell for consideration, (i) is there any general principle of law which requires an administrative authority to record the reasons for its decision ; and (ii) if so, does the said principle apply to an order confirming the findings and sentence of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... check-post whereat it is a duty of the court to examine the genuineness and the bona fides of the scheme for itself. A reading of the above judgment would, therefore, show that at the stage of issuance of summons for directions to convene a meeting, though the Company Judge has to apply his mind, prima facie, on the genuineness of the scheme, basically the entire exercise is to verify whether the numerous conditions prescribed in rule 69 are satisfied read with Form No. 33 and Form No. 34" and Allahabad High Court in Hind Auto Industries Ltd. v. Premier Motors (P.) Ltd. [1969] 39 Comp Cas 137 (All) wherein it was held that if at the threshold stage of directions to convene a meeting hearing is required to be given to the members, the scheme of the Companies (Court) Rules, 1959, will become unworkable, and while observing that there is a clear dichotomy between the threshold stage of issuance of directions to convene a meeting and the subsequent stage of a notice of meeting which is contemplated by rule 73 and for that precise reason rule 67 states that the summons shall be moved ex parte, while disagreeing with the view expressed by the Allahabad High Court agreed with the view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the admission of application and record reasons when it allowed the application for an advance ruling. Learned senior counsel for the respondents contended that on the day when the application is made by the petitioners for advance ruling, no proceedings are pending under section 195 of the Income-tax Act as a threshold bar for allowing the application. In that connection, learned senior counsel brought to my notice the letter addressed by the Deputy Director of Income-tax (International Taxation)-II, Hyderabad, dated November 6, 2009, to the principal officer, Merieux Alliance, France, whereunder it has been clarified as under: "At the outset I wish to clarify that in the letter dated October 15, 2009, the proceeding was inadvertently mentioned as under section 195 of the Income-tax Act. The error is regretted. The purpose of that letter and the earlier communications sent to you in this regard was to make you aware about your tax liability under the provisions of Income-tax Act in India on the capital gains arising to your company." Rule 13 of the Rules contemplates notification of the date and place of hearing. Sub-rule (1) of rule 13 provides that where an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made or not. There is a clear dichotomy between the threshold stage of allowing the application for advance ruling and pronouncing of advance ruling. If the Authority for Advance Rulings admits the application for pronouncing an advance ruling recording of reasons at that stage is not at all required nor hearing is contemplated to the Commissioner or his authorised representative. Only on such admission before pronouncing its advance ruling hearing of the Commissioner or his authorised representative is provided if the Authority for Advance Rulings considers necessary to hear but not at the threshold stage of admitting the application. The questions are accordingly answered against the petitioners. It is well settled that while exercising the jurisdiction under article 226 of the Constitution of India, if the High Court is of the opinion that there is no other convenient or efficacious remedy open to the petitioner, it will proceed to investigate the case on its merits and if the court finds that there is an infringement of the petitioner's legal rights, it will grant relief, otherwise relief should be rejected. For the conclusions reached as above, on the questions posed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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