2014 (2) TMI 747 - 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.

Summary

Issues:
1. Whether amounts received by LSCSL from Indu for offshore supply are liable to tax in India?
2. Whether interest on income-tax refund is liable to tax under the India Korea Tax Treaty?

Analysis:

Issue 1:
The applicant, LS Cable & System Limited (LSCSL), received offshore supply contracts from Indu Projects Limited for the supply of goods to India. The applicant sought a ruling on whether the amounts received for this offshore supply contract are taxable in India under the Income-tax Act, 1961, or the India Korea Tax Treaty. The Revenue objected to the admission of the application, arguing that the relevant assessment year had already begun before the application was filed. The Revenue contended that the question was pending before the Income-tax Authority due to the filing of the return. However, the applicant argued that the question is only considered pending when a notice under section 143(2) is issued. The Authority held that the question is not pending until such notice is issued, and therefore, admitted the application under section 245R (2) of the Act.

Issue 2:
The second question raised was whether interest on income-tax refund is taxable under the India Korea Tax Treaty. The Authority's decision to admit the application under section 245R (2) of the Act applies to this issue as well. The ruling emphasized that the question is not considered pending for adjudication before the Income-tax Authority unless a notice under section 143(2) is issued before the application is filed. In this case, although the return was filed before the application, the notice under section 143(2) was issued after the application was filed. Therefore, the question cannot be deemed to be pending before the Income-tax Authority, and the application was admitted.

In conclusion, the Authority admitted the application of LS Cable & System Limited under section 245R (2) of the Income Tax Act, 1961, for ruling on the tax liability of amounts received for offshore supply contracts and interest on income-tax refund under the India Korea Tax Treaty. The decision clarified the criteria for considering a question as pending before the Income-tax Authority, emphasizing the necessity of a notice under section 143(2) for such consideration.