2014 (2) TMI 748 - AAR - Income Tax

Admission of the application under Section 245R(2) of the Act - Whether the amounts received/receivable for offshore supply of Equipments & Materials is liable to tax in India under the provisions of the Income-tax Act, 1961 and/ or the DTAA between India and Korea Held that - Relying upon Hyosung Corporation, Korea Versus CIT-DR (AAR) and ADIT, (IT) Delhi 2013 (8) TMI 487 - AUTHORITY FOR ADVANCE RULINGS - Only when the issues are shown in the return and notice under section 143(2) is issued, the question raised in the application will be considered as pending for adjudication before the Income-tax Authorities - without issuance of the notice, the Assessing Officer does not have jurisdiction to examine and adjudicate the issues raised in the question - Pending proceeding in general and question already pending for adjudication are not the same - the Income-tax Authority assumes jurisdiction to adjudicate the issues that may consist of issues raised in the questions before this Authority - The question cannot be said to be already pending for adjudication before the Income-tax authority unless notice u/s 143(2) is issued before the application is filed - though return of income was filed before filing of the application before the Authority, notice u/s 143(2) was issued after the application was filed thus, the question cannot be said to be already pending before the Income-tax Authority irrespective of the notice u/s 143(2) being issued subsequently within the prescribed time limit under the Act - The application is admitted u/s 245R(2) of the Act Decided in favour of Applicant.

Issues:
1. Tax liability on amounts received for offshore supply contract.
2. Tax liability on interest on income-tax refund.
3. Maintainability of the application under Section 245R(2) of the Income Tax Act, 1961.

Issue 1: Tax liability on amounts received for offshore supply contract:
The applicant, a Korean company, sought a ruling on whether amounts received for offshore supply of equipment from an Indian company are taxable in India. The Revenue argued that the application should be dismissed as the relevant assessment year's return was filed before the application. However, the applicant contended that the question is pending only when a notice under section 143(2) is issued. The Authority analyzed the provisions under section 143(1) and emphasized that the Revenue can only examine issues mentioned in section 143(1) unless a notice under section 143(2) is issued. The Authority referred to past cases to support the view that the mere filing of a return does not mean the question is pending. It was concluded that the application is maintainable as there was no pending dispute between the applicant and the Income-tax Department regarding the assessability of the amount.

Issue 2: Tax liability on interest on income-tax refund:
The second question raised whether interest on income-tax refund is taxable under the India-Korea Tax Treaty. The Authority did not provide a detailed analysis of this issue in the summary provided.

Issue 3: Maintainability of the application under Section 245R(2) of the Income Tax Act, 1961:
The Revenue objected to the admission of the application under Section 245R(2) citing that the return for the relevant assessment year was filed before the application. The applicant argued that the question is pending only when a notice under section 143(2) is issued. The Authority clarified that the question raised in the application will be considered as pending for adjudication before the Income-tax Authorities only when issues are shown in the return and a notice under section 143(2) is issued. It was emphasized that the question cannot be said to be pending unless a notice under section 143(2) is issued before the application is filed. The Authority admitted the application under Section 245R(2) of the Act.

In conclusion, the Authority ruled on the tax liability of amounts received for offshore supply contracts, admitting the application under Section 245R(2) despite objections raised by the Revenue. The detailed analysis provided clarity on the interpretation of the provisions under the Income Tax Act and highlighted the importance of a notice under section 143(2) for a question to be considered pending for adjudication before the Income-tax Authorities.

← Previous Next →