2021 (5) TMI 566 - AAR - Income Tax

Admissibility of application for Advance ruling under section 245R - only objection of the Department is that the proceeding was pending on the date of filing of present application, therefore, the application was not admissible under clause (i) of the proviso to section 245R(2) - HELD THAT - The question No. 21 was in respect of dividend income earned by the applicant and had no relevance to the dividend declared by the applicant. Further, question No. 23 regarding difference in tax credit in form 26AS and return, large outward remittance to non-resident, the gross total income being less than value of foreign remittances and high ratio of refund to TDS are also not found connected with the dividend declared by the applicant and dividend distribution tax made thereon. As already mentioned earlier the applicant had not only deducted and paid dividend distribution tax under section 115-O of the Act on the dividend declared at the prescribed rate but no refund of dividend distribution tax was claimed in the return. Therefore, there could have been no basis to raise this issue in the questionnaire. From the copy of questionnaire sent with notices under section 142(1) of the Act brought on record, we do not find the issue of dividend distribution tax appearing in any of the questions. The claim for the refund of excess dividend distribution tax was made vide applicant's letter dated November 30, 2018 which was after the filing of the present application. The pendency has to be considered on the date of filing of the application and there was no pendency on that date. Merely because the applicant had raised the issue of excess dividend distribution tax in his subsequent letter dated November 30, 2018, it does not create any pendency of the date of application filed earlier. Thus, the questions raised in the present application is not found pending before the Income-tax authority on the date of filing of the application. As held in the case of Hyosung Corporation v. AAR 2016 (2) TMI 575 - DELHI HIGH COURT that a notice under section 143(2) merely asking for certain information from the assessee issued prior to filing of application before Authority for Advance Rulings will not constitute bar in terms of clause (i) of the proviso to section 245R(2), on Authority for Advance Rulings entertaining and allowing the application. Consequently, the mere fact that such a notice was issued prior to the filing of the application by the petitioner before the Authority for Advance Rulings will not constitute a bar, in terms of clause (i) of the proviso to section 245R(2) of the Act, on the Authority for Advance Rulings entertaining and allowing the applications . The same principle applies in respect of other notices issued under section 142(1) of the Act. As already discussed earlier the specific questions of dividend distribution tax being a tax on dividend or otherwise and lower rate of 10 per cent. in respect of dividend distribution tax payable to non-resident shareholder under article 10 of the India-Japan DTAA did not form part of any of the questionnaires or notices. Therefore, such notices issued prior to filing of the application cannot be a bar in terms of clause (i) of the proviso to section 245R(2) of the Act, for admitting the application. As found that the issue involved in the questions raised in the application filed before us was not pending before the Income-tax authority and the bar in terms of clause (i) of the proviso to section 245R(2) is not found attracted. Therefore, the application is admitted under section 245R(2) of the Act.

Summary

Issues:
1. Admissibility of application for advance ruling under section 245Q of the Income-tax Act, 1961.
2. Whether the questions raised in the application were pending before any Income-tax authority or Appellate Tribunal.
3. Interpretation of the proviso to section 245R(2) of the Act regarding the admissibility of the application.

Analysis:

Issue 1: Admissibility of application for advance ruling
The applicant, a tax resident of India, sought an advance ruling on three questions related to dividend distribution tax (DDT) paid to its Japanese parent company. The Revenue objected to the admissibility of the application citing pending proceedings at the time of filing. The Department argued that notices under section 143(2) and 142(1) were issued prior to the application, indicating pending proceedings. However, the applicant contended that the issues raised in the application were not part of the previous notices. The Authority reviewed the timeline of events and found that the questions in the application were not the subject of pending proceedings, thus admitting the application under section 245R(2) of the Act.

Issue 2: Pending questions before Income-tax authority
The Revenue claimed that questions raised in the application were already pending based on the questionnaire issued with previous notices. However, the Authority found that the questions in the questionnaire were unrelated to the specific issues raised in the application regarding DDT and tax treaty provisions. The applicant had already paid DDT at the prescribed rate and had not claimed a refund in the return of income. Therefore, the Authority concluded that the questions in the application were not pending before the Income-tax authority at the time of filing.

Issue 3: Interpretation of the proviso to section 245R(2)
The Authority referred to a previous judgment by the Delhi High Court, which held that notices under section 143(2) issued before the application filing date do not constitute a bar if the questions raised in the application were not part of the notices. Similarly, in this case, the Authority determined that the specific issues regarding DDT and tax treaty provisions were not part of the previous notices, allowing the application to be admitted under section 245R(2) of the Act. The Authority emphasized that the pendency of issues must be assessed based on the date of filing the application.

In conclusion, the Authority admitted the application for advance ruling as the questions raised were not found to be pending before any Income-tax authority or Appellate Tribunal at the time of filing. The decision was based on a thorough analysis of the timeline of events and the specific issues raised in the application, in line with the provisions of the Income-tax Act and relevant legal precedents.