2014 (2) TMI 749 - AAR - Income Tax

Admission of the application u/s 245R(2) of the Act - proposed setting up of the subsidiary and the partnership firm - Allowability of deduction u/s 80IA(4)(i) of the Act Held that - The applicant Umesh H Ashar is an individual whereas the statement of facts mentions the applicant as a company registered in UAE - There is no transaction or proposed transaction with the Indian companies mentioned - In order to bring in the question within the scope of section 245N of the Act, there has to be either a transaction undertaken or proposed transaction to be undertaken by the non-resident applicant - This is not the case in the present application - Transaction or proposed transaction are not the same as mere intention. The applicant intends to invest in a 100 per cent subsidiary company in India which in turn intends to set up a consortium by way of partnership firm with the Indian company and the partnership firm propose to acquire the undertaking of the Indian company which is stated to be eligible for deduction u/s 80IA of the Income-tax Act, 1961 - the 100 per cent subsidiary company has to exist in reality and the partnership firm has to be set up in order to make transaction or proposed transaction of the applicant with the Indian company/subsidiary - The question relates to proposed setting up of the subsidiary and the partnership firm with the Indian company and as to whether the subsidiary or the partnership firm will be eligible to 100 per cent deduction u/s 80IA of the Income-tax Act - the questions posed do not fall under the purview of the Authority thus, the application is not admitted Decided against Applicant.

Issues:
1. Whether the transfer of Undertaking from one entity to a partnership firm would affect the deduction under section 80IA(4)(i)?
2. Whether the newly formed partnership will be eligible for deduction under section 80IA?
3. Calculation of the 20-year period under section 80IA(2) for deduction eligibility.
4. Treatment of each bridge as an independent infrastructure facility for deduction purposes.
5. Treatment of the transferred Undertaking as a new undertaking eligible for benefits under section 80IA(4).
6. Consideration paid for toll rights as an intangible asset for depreciation purposes.

Analysis:
1. The applicant, a UAE company, sought a ruling on various questions related to its investment in an Indian subsidiary forming a partnership with an Indian company to acquire an infrastructure undertaking. The Revenue objected, stating the questions did not fall under the Authority's purview as the applicant was not directly involved in the transactions. The Authority agreed, noting the lack of a specific transaction involving the applicant with Indian companies, leading to the application's rejection as incompetent.

2. The questions raised by the applicant involved the potential impact on deductions under section 80IA for the partnership firm acquiring the Undertaking. However, as the proposed transactions did not directly involve the applicant with Indian entities, the Authority found the questions did not fall within its jurisdiction, emphasizing the necessity of actual transactions or proposed transactions involving the non-resident applicant.

3. The Authority highlighted the requirement for a tangible transaction or proposed transaction involving the non-resident applicant with Indian entities to fall under its jurisdiction. In this case, the applicant's intention to invest in an Indian subsidiary and form a partnership did not constitute a transaction, leading to the rejection of the application as the questions did not relate to actual or proposed transactions involving the applicant.

4. The Authority emphasized the need for a concrete transaction or proposed transaction between the non-resident applicant and Indian entities for the questions to be considered within its scope. As the questions raised by the applicant did not involve direct transactions with Indian companies, the application was rejected due to the lack of relevance to the Authority's mandate.

5. The Authority pointed out that the questions posed by the applicant regarding deductions under section 80IA did not pertain to actual or proposed transactions with Indian entities, leading to the rejection of the application as incompetent. The lack of direct involvement of the applicant in transactions with Indian companies rendered the questions outside the Authority's jurisdiction.

6. The Authority clarified that the questions raised by the applicant regarding deductions under section 80IA did not relate to specific transactions or proposed transactions involving the non-resident applicant with Indian entities. As the questions did not meet the criteria of involving the applicant in tangible transactions, the application was rejected for being outside the Authority's scope.

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