2021 (2) TMI 410 - AAR - Income Tax

Permission to withdraw the present advance ruling application - HELD THAT - The provision of Section 245Q(3) of the Act stipulates that An applicant may withdraw an application within 30 days from the date of the application. In the present case, the request to withdraw the application has been made by the Applicant much beyond the eligibility period of 30 days, as stipulated under section 245Q(3) of the Act. In view of this specific provision, the Applicant cannot be allowed to withdraw the application at this stage. In the present case the order for admission of the application was passed on 30th January 2017, which was under section 245R(2) of the Act. Once the application has been admitted under section 245R(2) of the Act, the provision of Section 245R(4) is applicable which reads as under - Where an application is allowed under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority, pronounce its advance ruling on the question specified in the application. Since the Applicant does not wish to pursue the present application for advance ruling filed by it, we do not deem it necessary to examine the matter further and decline to pronounce the advance ruling. The contention of the Revenue that once the application is admitted it cannot be rejected in the proceeding under section 245R(4) of the Act is found to be misplaced. In a case where it is found that the transaction was designed prima-facie for avoidance of income-tax, such application can be rejected even under the proceeding under section 245R(4) of the Act. In the present case we are only declining to pronounce the advance ruling in view of the request of the Applicant not to pursue the matter further and to withdraw the application. Accordingly, the application is dismissed as not pressed or withdrawn by the Applicant.

Issues:
1. Request to withdraw an advance ruling application beyond the stipulated time period under Section 245Q(3) of the Act.
2. Interpretation of provisions under Section 245R(4) regarding the Authority's obligation to pronounce an advance ruling once an application is admitted.
3. Authority's discretion to decline pronouncing an advance ruling when the applicant requests to withdraw the application.
4. Possibility of rejecting an admitted application under Section 245R(4) in cases of prima facie tax avoidance.

Analysis:
1. The Applicant filed an advance ruling application under Section 245Q(1) of the Act but later requested to withdraw it beyond the 30-day eligibility period stated in Section 245Q(3). The Authority held that since the withdrawal request exceeded the specified time limit, the Applicant could not be allowed to withdraw the application at that stage.

2. The Revenue argued that once an application is admitted under Section 245R(2) of the Act, the Authority must pronounce the ruling as per Section 245R(4). However, the Authority clarified that while the provision mandates pronouncement of the ruling after admission, it does not require a mandatory ruling if the applicant wishes to withdraw the application. The Authority has the discretion to decline pronouncing the ruling in such cases.

3. The Authority emphasized that the power to decline pronouncing an advance ruling is inherent in Section 245R(4) of the Act. If an applicant decides not to pursue the application post-admission, there is no obligation to examine the issue further or pronounce a ruling. In this case, since the Applicant expressed a desire to withdraw the application, the Authority declined to pronounce the advance ruling.

4. The Revenue's contention that an admitted application cannot be rejected under Section 245R(4) was deemed misplaced. The Authority clarified that if a transaction is prima facie designed for tax avoidance, the application can be rejected even under Section 245R(4). However, in this instance, the Authority only declined to pronounce the ruling due to the Applicant's withdrawal request, dismissing the application as not pressed or withdrawn.

5. The Authority concluded by dismissing the application as withdrawn, allowing the Revenue to proceed as per the law. It clarified that the exclusion of time under Explanation 1 to Section 153 of the Act would still be available to the Revenue despite the withdrawal of the application during the proceeding under Section 245R(4).

This detailed analysis of the judgment addresses the issues raised regarding the withdrawal of an advance ruling application, the Authority's obligations under Section 245R(4), and the discretion to decline pronouncing a ruling in certain circumstances.

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