2020 (8) TMI 770 - HC - Income Tax

Jurisdiction of AAR to decide an issue because of non-existence of Jurisdictional Fact u/s 245R(2) - Issue was already pending - scrutiny proceedings - question on which notice under Section 143(2) of the Act was issued was taxable income shown in revised return is less than the taxable income shown in the original return and large refund has been claimed - whether the royalty is taxable in the hands of the petitioners at the time of actual receipt or otherwise? HELD THAT - Two Division Benches of this Court in Hyosung Corporation vs. Authority for Advance Rulings Ors. 2016 (2) TMI 575 - DELHI HIGH COURT and Sage Publication Ltd. Vs. Deputy Commissioner of Income-Tax (International Taxation) 2 016 (9) TMI 299 - DELHI HIGH COURT have held that a question cannot be said to be pending under Clause (i) of proviso to Section 245R(2) upon issuance of a mere notice under Section 143(2) of the Act, especially when it has been issued in a standard pre-printed format and the questions raised before the authority for advance ruling do not appear to be forming the subject matter of the said notice. This is also more so when the notice fails to satisfy the particulars of claim of loss, exemption, deduction, allowance or relief as mandated by Section 143(2)(i) The AAR has followed the above-noted decisions and held notice under section 143(2) merely asks the applicant to produce any evidence on which it may like to rely in support of its return. It does not even remotely disclose any application of mind to the return filed by the applicant. For this reason, AAR has held that that question cannot be said to be pending to attract the bar under clause (i) of the proviso to Section 245R(2) of the Act. - the issues of law and fact raised by the learned counsel for petitioners are no longer res integra. We do not any infirmity in the approach adopted by the AAR. Judgement in the case of Sudhir Chandra Nawn 1968 (4) TMI 1 - SUPREME COURT is clearly inapplicable to the facts of the present case as it only states that even if the formula for calculation of tax liability under two different statutes enacted under different entries in List III of Schedule VII of the Constitution is similar, that would not make the fields of legislation under the two entries overlapping. Decided against the revenue.

Summary

Issues:
Challenge to order of Authority for Advance Rulings based on jurisdictional bar under proviso to Section 245R(2) of the Income Tax Act, 1961.

Analysis:
1. The petition challenges the order of the Authority for Advance Rulings, arguing that it violates the jurisdictional bar under the proviso to Section 245R(2) of the Income Tax Act, 1961. The petitioner seeks a declaration that only they have jurisdiction over the case of the respondent and requests a stay on the operation of the impugned order. The impugned order raised questions regarding taxable income and royalty taxation, leading to the jurisdictional dispute.

2. The petitioner contends that the application of the respondent before the Authority was not maintainable due to the non-existence of a "Jurisdictional Fact." The Deputy Commissioner's report under Section 245R(2) indicated that the main issue before the Assessing Officer was similar to that before the Authority for Advance Rulings. The petitioner argues that since the questions were already pending before the Assessing Officer, the Authority was barred from assuming jurisdiction under the proviso to Section 245R(2) of the Act.

3. The petitioner asserts that the Authority for Advance Rulings must follow the statutory procedure diligently. They argue that if the entire record and notice had been examined, the Authority's conclusion would have differed. Citing a Supreme Court judgment, the petitioner emphasizes the importance of adhering to statutory procedures in tax matters.

4. The Court notes that the revised return was selected for scrutiny under the computer-aided selection system, and a notice under Section 143(2) of the Act was issued to the petitioners. The Court compares the issues raised in the impugned order and the notice for ruling, highlighting the disparity in the questions addressed.

5. Referring to previous judgments, the Court emphasizes that a mere notice under Section 143(2) does not render a question pending under the proviso to Section 245R(2). The Court cites specific language requirements and the need for the notice to address specific claims or exemptions as mandated by the Act.

6. The Authority for Advance Rulings based its decision on the above-noted judgments, highlighting that the notice under Section 143(2) does not demonstrate an application of mind to the return filed by the applicant. Consequently, the Authority held that the question was not pending to trigger the jurisdictional bar under the proviso to Section 245R(2) of the Act.

7. The Court rejects the petitioner's argument for a fresh examination of the jurisdictional ground, citing previous decisions and dismissals of Special Leave Petitions challenging those judgments. The Court finds no infirmity in the Authority's approach and declines to entertain the petition to take a different view.

8. The Court concludes by stating that the judgment cited by the petitioner is inapplicable to the present case and dismisses the petition. The order is to be uploaded on the website and forwarded to the counsel.

This detailed analysis covers the jurisdictional dispute and the Court's reasoning based on statutory provisions and previous judgments.