TMI Blog2016 (2) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in terms of clause (i) of the proviso to Section 245R(2) of the Act, the bar would apply equally to both a resident and a non-resident. In other words, the provision would become equally burdensome to both a resident and a non-resident. Consequently, neither Article 25 of the DTAA can come to the aid of the Petitioner. For all of the aforementioned reasons, the Court finds that it serves no purpose, and certainly not that of the Petitioner, to pronounce on the validity of the portion of clause (i) of Section 245R(2) of the Act, that exempts resident PSUs from the bar of that provision, to be violative of Article 14 of the Constitution. Therefore, the Court declines the prayer to declare clause (i) of the proviso to Section 245 R (2) of the Act to be violative of Article 14 of the Constitution. The applications filed by the Petitioner in respect of the transaction of supply of equipment for AY 2008-09 and 2009-10 were rightly rejected by the AAR since on the date of filing of such applications before the AAR, the question raised therein was already pending before the income tax authorities by virtue of the notices under Section 142 (1) of the Act having already been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et App BV and Sin Oceanic Shipping ASA v. The Authority for Advance Rulings (2013) 357 ITR 102 (Del) held that where a return of income has been filed, the bar in terms of clause (i) of the proviso to Section 245R (2) of the Act would be attracted and the AAR would be justified in such a case in declining to entertain the application for advance ruling at the instance of a non-resident. The said decision of this Court was set aside by the Supreme Court in Sin Oceanic Shipping ASA v. AAR (2014) 223 Taxman 102 (SC) . The Supreme Court took note of the fact that the AAR itself had subsequently, by an order dated 13th December 2013, taken the view that the mere filing of a return would not constitute a bar to entertaining an application for advance ruling in terms of Section 245N of the Act. Relevant facts 6. The facts of the present case are that the Petitioner is a company incorporated in South Korea. It states that it is a comprehensive energy solution provider and manufactures transformers, switchgears, motors, decelerators and industrial pumps and is also engaged in the wind energy business. It supplies transformers to customers all over the world including in India. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the applications before the AAR for each of the transactions in the three AYs are as under: 11. Before the AAR, a preliminary objection raised by the Revenue was that the above applications of the Petitioner could not be entertained in view of the bar under proviso to Section 245R(2) of the Act. In other words, it was contended that the question involved in the applications filed by the Petitioner was already pending before the AO and therefore the AAR could not entertain the applications. 12. The Petitioner resisted the above applications on the ground that the bar contained in clause (i) of the proviso to Section 245R (2) made a distinction between resident and non-resident applicants. While the bar applied to non-resident applicants like the Petitioner, it did not apply to a resident applicant falling under the ambit of sub-clause (iii) of clause (b) of Section 245N which defines applicant . In other words, the Public Sector Undertakings ( PSUs ) notified by the Government of India in the official gazette were exempt from the bar in terms of clause (i) of the proviso to Section 245R(2). Such PSUs notified by the Central Government could maintain an application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that had no nexus to the object of the legislation. However, Mr. Chopra was candid to submit that the attempt by the Petitioner was not to deny the benefit to the PSUs but to ensure that non-resident applicants like the Petitioner are also extended the same benefit i.e. being exempted from the bar imposed by clause (i) of the proviso to Section 245R (2) of the Act. In other words, the Petitioner states that it would not be satisfied by removal of the offending part of clause (i) of the proviso to Section 245R(2) but would want the Court to rule that non-residents will also be exempted from the bar just as resident applicant in terms of sub-clause (iii) of clause (b) of Section 245N. 15. Mr. Chopra urged that Section 90 of the Act would require the Central Government to give effect to the provision of DTAA notwithstanding the discriminatory provision under clause (i) of the first proviso to Section 245R(2) of the Act. It is further submitted by Mr. Chopra that the mere issuance of a notice under Section 143(2) of the Act would not amount to the question raised in the applications being pending before the income tax authorities. Referring to the notice issued to the Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a resident applicant, arising out of a transaction which has been undertaken or is proposed to be undertaken by such applicant, and such determination shall include the determination of any question of law or of fact specified in the application; (iii) a determination or decision by the Authority 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; (iv) a determination or decision by the Authority whether an arrangement, which is proposed to be undertaken by any person being a resident or a non-resident, is an impermissible avoidance arrangement as referred to in Chapter X-A or not: Provided that where an advance ruling has been pronounced, before the date on which the Finance Act, 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 bindin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace simultaneously before two different fora in respect of the same question. Therefore, the proviso is per se not irrational. Decision on constitutional validity 22. The Court at this stage notes that the Petitioner is not content with getting the Court to declare that the exception carved out in favour of PSUs notified by the Central Government as discriminatory or violative of Article 14 of the Constitution of India or Article 25 of the DTAA. The Petitioner realises that merely declaring the exception as unconstitutional will not benefit the Petitioner unless the Court is prepared to say that the benefit of such exception should also be extended to the Petitioner as a non-resident. In other words, what the Petitioner is seeking is not merely a declaration of the invalidity of the discriminatory part of clause (i) of the proviso to Section 245R (2) of the Act but that the Court should read into clause (i) words to the effect that even non-resident applicants would be exempt from the bar. Apart from the fact that the Court cannot possibly re-write the statute, extending the exemption from the applicability of clause (i) of the proviso to Section 245R(2) of the Act would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction by the PGCIL in respect of the payment for the equipments supplied by the Petitioner overseas will not tantamount to the question raised in the applications before the AAR being pending before the income tax authorities. The decision to the contrary of this in Net App BV v. The Authority for Advance Rulings (supra) stands overruled by the Supreme Court in Sin Oceanic Shipping ASA v. The Authority for Advance Rulings (supra). 27. As far as the notice under Section 143(2) of the Act is concerned, that provision itself stipulates that such notice will be issued by the AO where he has reason to believe that any claim of such exemption, deduction, allowance or relief made in return is inadmissible. It mandates that the notice should specify the particulars of such claim, loss, exemption, deduction or relief. Turning to the notice issued in the instant case to the Petitioner under Section 143(2) of the Act, it is seen that it is in a standard pre-printed format which merely states that there are certain points in connection with the return of income on which the AO would like some further information . The said notice fails to satisfy the particulars of claim of loss, exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was issued prior to the date when the AAR took up for decision the applications filed by the Petitioner, it could be said that the question raised in the applications were already pending before the income tax authorities. The above submission appears to be contrary to the legislative intent spelt out in Section 245R(2) of the Act that the question raised in the application for advance ruling should be already pending . The words already pending should be related to the date of filing of the application and not what happens subsequent to the filing of such application. In other words, it is only if on the date of filing of the application before the AAR the question raised therein was already the subject matter of proceedings before the income tax authorities that the bar in terms of the proviso to Section 245R(2) of the Act would apply. If such application is not already pending on the date of the application, and is the subject matter of a notice issued thereafter by the income tax authority, it cannot be said that such question is already pending before such income tax authority . What is relevant is not the date of consideration of the application by the AAR but th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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