9911796707
TMI Blog2013 (6) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... section 245R(2) of the Act and subsequent proceedings dated August 3, 2010, refusing to revoke the order of admission. Background (i) The transaction Shanta Biotechnics Ltd. (hereafter, "Shantha") is an Indian company with registered office at Hyderabad. Till November, 2006, 50 per cent. of its shares were held by residents, non-residents and overseas corporate bodies (OCBs). The remaining capital was held by a Mauritius Co., namely, United Overseas Investment Ltd. (UOIL). ShanH is a company incorporated in Lyon, France. It is wholly owned subsidiary of Merieux Alliance (MA) having its registered office at Lyon, France. On November 6, 2006, MA through its subsidiary entered into share purchase agreement on November 6, 2006 (first SPA, for brevity). Shantha, MA, UOIL and two directors were signatories to the first share purchase agreement. Resultantly, ShanH became majority stakeholder. In March, 2009, Groupe Industrial Marcel Dassault (GIMD), another French company acquired 20 per cent. stake of ShanH. As on March 31, 2009, MA and GIMD held 80 per cent. shares in Shantha. Thus, it came under the direct control and management of the MA group. There was a share purchase agreement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated companies of France. They have been paying their taxes in France. ShanH was formed as an entity to pursue the activities in developing countries in the field of immunotherapy and as a part of the larger vision they acquired the shares of an Indian company called Shantha Biotechnics Ltd. through its representatives by the share purchase agreement. The applicant and GIMD sold their equity in ShanH to Sanofi Pasteur Holding as per the transaction that concluded in August, 2009. In view of this transaction, the applicant seeks the ruling of this Authority on the following question : 'In terms of the provisions of the Double Taxation Avoidance Treaty dated 6th September, 1994, as amended from time to time, entered into between the Republic of India with the Government of French Republic ("Indo French Tax Treaty") read with section 90 of the Income-tax Act, 1961, whether the capital gains arising from the sale of shares of ShanH (French incorporated entity) by the applicant (French incorporated entity) to Sanofi (French incorporated entity) is liable to tax in France or in India ?' On examination of the application, we find that it is not hit by the proviso to section 245 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 29, 2009, the petitioners allegedly received the proceedings/order dated December 17, 2009. After receiving it, the first petitioner sent communications dated January 7, 2010, and January 27, 2010, reiterating their request to consider the preliminary issue of admissibility under section 245R(2) of the Act. The matter was then adjourned from time to time as the income-tax authority took time for want of clearance of the Central Board of Direct Taxes for engaging a special counsel. On July 8, 2010, and July 16, 2010, the second petitioner allegedly requested for a specific finding on the issue relating to admissibility. On July 26, 2010, the present writ petitions are filed assailing the order dated December 17, 2009. On July 26, 2010, the petitioners requested the Authority for Advance Rulings for postponement of the case to any other date on the ground that the special counsel was suffering from ill-health. The Authority for Advance Rulings then called upon the income-tax authority to file written submissions on all aspects which was duly complied with. On August 3, 2010, the Authority for Advance Rulings passed a common order observing that there are no compelling reasons t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of first hearing on July 8, 2010, this Authority heard the objections of the Department on the issue of admissibility in order to satisfy ourselves whether there was any valid ground to revoke the order of admission passed earlier, leaving aside the question whether it is legally permissible to set aside the order once passed under section 245R(2). Having been prima facie satisfied that there was no compelling reason to revoke the earlier order of admission and to refuse hearing on the merits and that a comprehensive final order could be passed as regards the grounds made out for revoking the admission as well as on the merits, the case was posted for hearing on the merits under section 245R(2) on the specified date. Thereafter, a series of requests for adjournment have come from the Department's side. We are anguished to note that there is an apparent attempt on the part of the Commissioner to defeat or delay the remedy invoked by the applicant under Chapter XIX-B of the Income-tax Act on tenuous pleas, unmindful of the principle that strictly speaking this is not an adversarial proceeding and, secondly, the possible impact the move of the Commissioner will have on the image of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pre-admission stage before the impugned order was passed. The writ petition is filed eight months thereafter, and, therefore, it is barred by delay. Thirdly, even after admission of the matter, on the request made by the petitioners, the Authority for Advance Rulings gave an opportunity to address on the preliminary issue. The Authority for Advance Rulings has considered the petitioners' objections and recorded proceedings on August 3, 2010, duly informing the parties that hearing would continue on the merits and that an order would be passed encompassing the preliminary issue as well as the merits. Fourthly, the Authority for Advance Rulings is a statutory creation required to subserve the specific purpose of ensuring qualitative and time bound disposal of important tax issues faced by resident/non-resident applicants ; that the advance ruling is required to be pronounced within six months and that in the scheme of things, there is no statutory compulsion warranting adjudication of preliminary issues and the main issues separately. The writ petitions are premature. These writ petitions are filed to delay and defeat the proceedings before the Authority for Advance Rulings bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil court in respect of discovery and inspection, enforcing attendance of any person including any officer of the banking company and examining them on oath, issuing commission and compelling production of books of account. It shall have power to regulate its own procedure while exercising their powers under the Act. In 1998 and 2000, there were amendments to sections 245N and 245R of the Act. In 2003 also, there were amendments of some significance. For ready reference, we may quote the provisions, as introduced by 1993, 1998, 2000 and 2003 Finance Acts. Finance Act, 1993 After the enactment of the Finance Act, 1993, with effect from June 1, 1993, sections 245N and 245R read as under: "245N. Definitions.-In this Chapter, unless the context otherwise requires,- (a) 'advance ruling' means the determination, by the Authority, of a question of law or fact specified in the application in relation to a transaction which has been undertaken, or is proposed to be undertaken, by the applicant ; (b) 'applicant' means a non-resident making an application ;(other portion is omitted as not relevant)." "245R. Procedure on receipt of application.-... (2) The Authority may, after examinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or any court ; (b) involves determination of fair market value of any property ; (c) relates to a transaction which is designed prima facie for the avoidance of income-tax : Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard : Provided also that where the application is rejected, reasons for such rejection shall be given in the order." "245RR. Appellate authority not to proceed in certain cases.-No income-tax authority or the Appellate Tribunal shall proceed to decide any issue in respect to which an application has been made by an applicant, being a resident, under sub-section (1) of section 245R." Finance Act, 2000 After amendment by the Finance Act, 2000, with effect from June 1, 2000, sections 245N and 245R read as under : "245N. Definitions.-In this Chapter, unless the context otherwise requires,- (a) 'advance ruling' means- (i) a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant ; or (ii) a determination by the Authority in relation to a transaction which has been undertake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant ; or (ii) a determination by the Authority in relation to the tax liability of a non-resident arising out of a transaction which has been undertaken or is proposed to be undertaken by a resident applicant with such non-resident, and such determination shall include the determination of any question of law or of fact specified in the application ; (iii) a determination or decision by the Authority in respect of an issue relating to computation of total income which is pending before any income-tax authority or the Appellate Tribunal and such determination or decision shall include the determination or decision of any question of law or of fact relating to such computation of total income specified in the application : Provided that where an advance ruling has been pronounced, before the date on which the Finance Bill, 2003, receives the assent of the President, by the Authority in respect of an application by a resident applicant referred to in sub-clause (ii) of this clause as it stood immediately before such date, such ruling shall be binding on the persons specified in section 245S ; (b) 'applicant' means any person who- (i) is a non-resident referred to in sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned to it in sub-section (2) of section 288, as if the applicant were an assessee. (6) The Authority shall pronounce its advance ruling in writing within six months of the receipt of application. (7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner, as soon as may be, after such pronouncement." (ii) Analysis of Chapter XIX-B The history of legislation in relation to the "advance ruling" would show that initially the jurisdiction of the Authority for Advance Rulings was limited to determination of the tax liability of a non-resident applicant in relation to a transaction which has been undertaken. By subsequent amendments, the scope was enlarged. It may be mentioned that the legislative facilitation of advance ruling system in the field of direct taxes as well as in the field of indirect taxes (sections 23A to 23H of the Central Excise Act, 1944, and sections 28E to 28M of the Customs Act, 1962) is pursuant to WTO Negotiations on Trade Facilitation which requires the Member States to introduce advance ruling system in a timely manner, to encourage in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority for Advance Rulings proposes to give an advance ruling (section 245R(1) and rule 13 of the Authority for Advance Rulings (Procedure) Rules, 1996 ("the AAR Rules", for brevity). The third step is the rejection of the application for advance ruling for any reasons mentioned in the first proviso to section 245R(2). These are-(i) when the question raised in the application is already pending before any income-tax authority or the Appellate Tribunal or any court ; (ii) involves determination of fair market value of any property ; or (iii) relates to a transaction or issue which is designed for the avoidance of income-tax. The power to reject an application in limine is subject to two conditions, namely, (i) it cannot be rejected without giving an opportunity to the applicant of being heard ; and (ii) it cannot be rejected without giving reasons for such rejection. The copy of the order of rejection shall be sent to the applicant and to the Commissioner (section 245R(2) and (3)). The fourth step is alternative to the third step. If the application is not rejected in accordance with section 245R(2), the Authority for Advance Rulings shall issue notice of hearing to the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of Indo-French DTAT. To deny consideration ; in such circumstances due to alleged threshold bar, may not be proper and would tantamount to abdication of jurisdiction. The existence of jurisdictional facts is the sine qua non for any tribunal or authority to assume jurisdiction. The applicability of the proviso to section 245R(2) of the Act is a matter for enquiry into the facts as pleaded in the application and records produced by the Commissioner. As noticed supra, Parliament itself made a distinction between resident and non-resident applications while fettering the power of the Authority for Advance Rulings, when a question of inherent lack of jurisdiction is raised. If the enquiry as to existence or non-existence of jurisdictional facts itself involves detailed and in-depth enquiry, the Act a fortiori does not prohibit the Authority for Advance Rulings to decline adjudication of preliminary issue and proceed with the case. (iv) Judicial review of preliminary adjudication The jurisdiction under article 226 cannot ordinarily be allowed to correct any decision of the Tribunal refusing to decide on the preliminary objection as to its jurisdiction. The jurisdiction to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ask themselves whether such threshold part adjudication is really necessary and whether it will not lead to other woeful consequences. After all tribunals like Industrial Tribunals are constituted to decide expeditiously special kinds of disputes and their jurisdiction to so decide is not to be stifled by all manner of preliminary objections and journeyings up and down. It is also worthwhile remembering that the nature of the jurisdiction under article 226 is supervisory and not appellate while that under article 136 is primarily supervisory but the court may exercise all necessary appellate powers to do substantial justice. In the exercise of such jurisdiction neither the High Court nor this court is required to be too astute to interfere with the exercise of jurisdiction by Special Tribunals at interlocutory stages and on preliminary issues." (emphasis supplied) The Authority for Advance Rulings is headed by a retired judge of the Supreme Court, an Officer of the Indian Revenue Service who is qualified to be a member of the Central Board of Direct Taxes and an officer of the Indian Legal Service who is, or is qualified to be, an Additional Secretary to the Government of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate cases, where the judicial conscience of the High Court dictates it to act lest a gross failure of justice or grave injustice would occasion. When a certiorari is issued there must exist the conditions that the decision-maker acted without jurisdiction by assuming jurisdiction where there exists none, or in excess of jurisdiction by overstepping or crossing the limits of jurisdiction, or acted in flagrant disregard of the law or the rules of procedure or in violation of the principles of natural justice thereby occasioning failure of justice. Jurisdiction under article 227 is exercised over the subordinate courts and tribunals within the High Court territory when they assume jurisdiction which did not have or fail to exercise jurisdiction which they have or the jurisdiction though available was exercised in a manner not permitted by law. Importantly it was also held that if an error of jurisdiction can be corrected at a later stage or the wrong done, if any, could be set right subsequently, ordinarily, the jurisdiction either under article 226 or 227 is not exercised. The ouster of jurisdiction of the Authority for Advance Rulings on mere asking by the Commissioner for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal courts . . . Exclusion of jurisdiction of ordinary criminal courts can be brought about by setting up courts of limited jurisdiction in respect of the limited field, only if the vesting and the exercise of that limited jurisdiction is clear and operative and there is an adequate machinery for the exercise of the limited jurisdiction. But the rule against exclusion of jurisdiction of courts like other rules of construction is attracted only where two or more reasonably possible constructions are open on the language of the statute and not where the legislative intent is plain and manifest to oust the jurisdiction." (v) The impugned order of the Authority for Advance Rulings The assumption that the Authority for Advance Rulings did not consider the threshold bar before passing the impugned order, dated December 17, 2009, is not correct. Equally, the plea that there was no notice to the first petitioner is misconceived. The criticism of the senior counsel that the Authority for Advance Rulings proceeded with the application made by respondents without hearing the objections of the petitioners is without merit nor can we countenance the submission that the notice sent to the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection raised by the Department and the matter was posted for further hearing on the merits on July 16, 2010. Again, the Department sought time on the ground of counsel's ill-health. From July 16, 2010, to August 2, 2010, and even thereafter, the parties before the Authority for Advance Rulings filed written submissions and made oral submissions in relation to the preliminary objection as well as on the merits of the case. Presumably for this reason on August 3, 2010, the Authority for Advance Rulings passed yet another order that there were no compelling reasons to revoke the earlier order of admission. The Authority for Advance Rulings expressed its anguish noting that there is an apparent attempt on the part of the Commissioner to defeat or delay the remedy under Chapter XIX-B of the Act on tenuous pleas, unmindful of the principle that it is not an adversarial proceeding and the possible impact, the move of the Commissioner will have on the image of the tax administration in the country. When the hearing in these writ petitions commenced, the matter was heard before the Authority for Advance Rulings. The petitioners filed written submissions and made oral submissions to abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the proceedings must be fair. In determining (i) the facts, (ii) the applicable principle, and (iii) applying the principle to the determined facts the decision-maker is expected to apply mind. This should manifest in the decision. Professor "De Smith'** points out that the public authority's failure to give reasons is procedurally unfair and indicates that the decision might be irrational. A reviewing court cannot effectively scrutinize if a decision is bereft of reasons. Though there is universal acceptance of these norms, there are variations in regard to the extent, the content, the elaborateness of giving reasons by the public authorities. (ii) Public functions and duty to give reasons The theory of separation of powers postulates trifurcation of public functions: legislative, judicial and administrative. Depending on the nature of functions, the extent of duty to support the decisions with reasons ; the stage of furnishing them, and quality of reasons would differ. Herein * Cases and Materials on Constitutional and Administrative Law by Michael J Allen and others Third edition ; Lawman [India] Private Limited, New Delhi 1995. ** De Smith's Judicial Review of Admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. It would be curious to mention that, "courts themselves are not obliged at common law to give reasons for their decisions" (para 7-089 Professor De Smith's Judicial Review, sixth edition,). In Som Datt Datta v. Union of India, AIR 1969 SC 414, a Constitution Bench, while observing that in English law, there is no general rule apart from the statutory requirement that the statutory Tribunal should give reasons, quoted with approval the following rule as stated by Lord Denning in R. v. Northumberland Compensation Appeal Tribunal [1952] 1 All ER 122 (CA) : "if there was a speaking order, a writ of certiorari could be granted to quash the decision of an inferior court or statutory Tribunal on the grounds of error on the face of record.....; that the record must at least contain a document which initiates the proceedings and the adjudication nor the reasons unless the Tribunal chooses to incorporate them in the decision. If the reasons are stated and are found to be wrong in law, a writ of certiorari might be granted by the High Court quashing the decision". The law, however ; for the good of it-has undergone tremendous changes. It is now universally accepted that not only the high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiries, issuing licences, ultimate conclusions, findings and the decision based on them, which is binding. In Rai Sahib Ram Jawaya Kapoor v. State of Punjab, AIR 1955 SC 549, the Supreme Court opined that, "ordinarily the executive power connotes the residue of Governmental functions that remain after legislative and judicial functions are taken away.......The executive function comprises both the determination of the policy as well as carrying it into execution. This evidently includes the initiation of legislation, the maintenance of order, the promotion of social and economic welfare, the direction of foreign policy, in fact the carrying on or supervision of the general administration of the State". Every executive action must be supported by reasons although some decisions do not require any reasons. Some times, the policy laid down by the political executive would itself be a sufficient reason for executive action. It must, however, be noted that when an action is taken under a statute, which itself requires a decision to be supported by reasons, they should be supported by reasons. But, in all situations the law does not require an administrative order to contain the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the court to justify its action." (emphasis supplied) Although in a different context, to the same effect are the following observations from the recent judgment of the Supreme Court in Jasbir Singh Chhabra v. State of Punjab [2010] 4 SCC 192, 209: "It must always be remembered that in a democratic polity like ours, the functions of the Government are carried out by different individuals at different levels. The issues and policy matters which are required to be decided by the Government are dealt with by several functionaries some of whom may record notings on the files favouring a particular person or group of persons. Someone may suggest a particular line of action, which may not be conducive to public interest and others may suggest adoption of a different mode in larger public interest. However, the final decision is required to be taken by the designated authority keeping in view the larger public interest." (vi) Quasi-judicial functions and right to reasons An administrative authority empowered to act in accordance with the principles of fairness while deciding adversarial rights, is presumed to be discharging duties akin to judicial functions and referred to as quas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the statute to act judicially. In State of Himachal Pradesh v. Raja Mahendra Pal [1999] 4 SCC 43 ; AIR 1999 SC 1786, the Supreme Court held that, "quasi-judicial acts are such acts which mandate an officer the duty of looking into certain facts not in a way which it specially directs but after a discretion, in its nature judicial. The exercise of power by such tribunal or authority contemplates the adjudication of rival claims of the persons by an act of the mind or judgment upon the proposed course of official action as to an object of the corporate power, for the consequences of which the official will not be liable, although his act was not well-judged. A quasi-judicial-function has been termed to be one which stands midway a judicial and an administrative function. The primary test is as to whether the authority alleged to be a quasi-judicial, has any express statutory duty to act judicially in arriving at the decision in question. If the reply is in the affirmative, the authority would be deemed to be quasi-judicial, and if the reply is in the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he quasi-judicial authority is subject to appeal or revision, the necessity for recording reasons is greater because the appellate or revisional authority cannot exercise their powers effectively without knowing the reasons which weighed with the quasi-judicial authority (Madhya Pradesh Industries, Bhagat Raja, Travancore Rayons Ltd. and Mahabir Prasad Santosh Kumar). (iv) Every quasi-judicial order which is subject to judicial review by the High Court ought to be speaking order. Without reasons, the judicial scrutiny would be ineffective and violates rule of law (Bhagat Raja, Travancore Rayons Ltd. and Mahabir Prasad Santosh Kumar). (v) The extent, elaboration, nature of the reasons depend on each case ; but quasi-judicial decision without reasons would negate the rule of law. If the reasons reveal the rationale nexus between the facts considered and conclusions reached, it would be sufficient compliance (Madhya Pradesh Industries, Bhagat Raja, M. L. Capoor, Woolcombers and Tara Chand). (vi) Irrespective of the requirement as to the stage at which an authority has to record reasons, if the applicable statute excludes the reasons for the decision, the order cannot be invalidated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Army Rules, 1954, was ordered against the appellant followed by a court martial for an offence under section 302 of the Indian Penal Code for the death of Serjeant Bishwanath Singh, who died in an internecine scuffle on the raising day of the unit commanded the delinquent officer. The court martial found guilty of culpable homicide not amounting to murder and of the charge of being a member of unlawful assembly. He was sentenced to cashiering and six years imprisonment. He filed a petition under section 164 of the Army Act. The Chief of Army Staff confirmed the conviction and sentence by the court martial. Som Datt then unsuccessfully filed an appeal under section 165 of the Army Act to the Central Government. Thereafter, he filed a writ petition in the Supreme Court invoking article 32 of the Constitution. It is necessary to point that section 162 of the Army Act provides that the proceedings of every summary court martial shall be forwarded to the officer commanding the division or brigade within which the trial was held or to the Chief of the Army Staff, who may "for reasons based on the merits of the case" set aside the proceedings or reduce the sentence. Section 164 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, reject the argument of the petitioner that the order of the Chief of the Army Staff, dated May 26, 1967, confirming the finding of the court martial under section 164 of the Army Act or the order of the Central Government dismissing the appeal under section 165 of the Army Act are in any way defective in law. (emphasis supplied) The question whether it was incumbent for the Chief of the Army Staff, while confirming the findings and the sentence of the court martial, and for the Central Government, while rejecting the post-confirmation petition, to record their reasons for the orders passed by them, came to be considered again by another Constitution Bench in S. N. Mukherjee. It was contended therein that Som Datt to the extent it holds that there is no general principle or rule of natural justice that the statutory Tribunal should always and in every case give reasons in support of its decision needs re-consideration. The unanimous Bench affirmed Som Datt and held thus : 'With regard to post-confirmation proceedings we find that sub-section (2) of section 164 of the Act provides that any person subject to the Act who considers himself aggrieved by a finding or sentence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the second respondent after recording a finding that they are not hit by the proviso to section 245R(2) and that after hearing the petitioners again on August 3, 2002, the Authority for Advance Rulings found no compelling reasons to revoke the earlier order of admission. Therefore, it is not a case where the Authority for Advance Rulings has not considered the objections raised by the petitioners. Even otherwise, as we presently show the plain reading of the provisions would show that the Authority for Advance Rulings is required to give reasons only when an application is rejected. There is no such requirement while admitting an application.In the advance ruling process, the applications under section 243Q of the Act and rule 10 of the Authority for Advance Rulings (Procedure) Rules shall have to be made in Form 34C of the Income-tax Rules, 1962. The form has thirteen columns. In column 8, the applicant is required to mention the questions relating to the transaction on which advance ruling is required, and the statement of relevant facts having a bearing on the questions has to be included in column 9. On hearing the applicant and also the Commissioner, the Authority for Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. There is no scope to construe these provisions as enabling the income-tax authority to press for a preliminary ruling on the assumption of the jurisdiction. They may, of course-bring to the notice of the Authority for Advance Rulings about such bar under the first proviso to section 245R(2). Secondly, a perusal of sub-sections (4), (5) and (6) of section 245R and rule 16(1) of the Authority for Advance Rulings (Procedure) Rules makes it clear that even at the stage of final consideration it is not mandatory for the Authority for Advance Rulings to hear the Commissioner. If the Authority for Advance Rulings considers it not necessary, they may do so and pronounce the advance ruling providing an opportunity to the applicant of being heard. Thirdly, as a quasi-judicial authority, though the Authority for Advance Rulings is required to give reasons when the application is rejected, or when the advance ruling is pronounced or when the advance ruling is declared to be void ab initio, a specific provision requiring the reasons for assumption of jurisdiction is conspicuous by its absence. The ratio in Som Datt and S. N. Mukherjee applies and no reasons are required to be given while all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 226 would depend on the facts of each case. There may be situations where even a delay of a day or week would be fatal and the court may feel compelled to deny judicial review for any relief might harm good governance or have the effect of wiping out competing rights. Ordinarily, a period of six months for filing writ petition is considered reasonable (S. S. Rathore v. State of M. P. [1989] 4 SCC 582 ; AIR 1990 SC 10).In a case where the judicial review is sought in relation to the exercise of preliminary jurisdiction like admitting a case for further enquiry, issuing show-cause notice, issuing summons to produce records, issuing summons to appear for recording statement, the prematurity is a ground for exclusion of judicial review. Equally important is when knowing the rights a party submits to the jurisdiction and simultaneously pursues the remedy of judicial review. In both these case, ordinarily, discretionary jurisdiction is withheld. The relevant factual background for consideration of the point has been discussed above (paras 31 to 34 supra). The senior counsel for the second respondent has placed before this court various orders/proceedings of the Authority for Advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed without any order as to costs. Ramesh Ranganathan J.-These two writ petitions are filed by the Director of Income-tax (International Taxation), Bangalore, (DIT), and the Additional Director of Income-tax (International Taxation), Hyderabad, (ADIT) to declare the order of the Authority for Advance Rulings (AAR) dated December 17, 2009, admitting the applications filed by the second respondent under section 245Q(1) of the Income-tax Act, 1961 (hereinafter called "the Act"), as illegal, void and inoperative. A further direction is sought to the first respondent to consider the objections of the petitioners, to the admissibility of the applications filed by the second respondent, afresh. The petitioners would submit that a survey, under section 133A of the Act, was conducted on August 4, 2009, in the office premises of M/s. Shantha Biotechnics Ltd. (hereinafter called "Shantha") a company incorporated under the provisions of the Indian Companies Act, 1956, based on the information that Sanofi Aventis (for short "SA"), a French pharmaceutical group was to acquire more than 80 per cent. of the stake in "Shantha" through M/s. Shan H SAS ("ShanH" for short), a subsidiary of Merieux A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct on the payments made to the non-resident Indians ; proceedings under section 201(1)/(1A) of the Act, for non-deduction of tax under section 195 of the Act, was completed raising demands in these cases ; the share purchase agreement of 2009 was an arrangement primarily and exclusively carried out for transferring control and management of "Shantha", through ShanH, to the SA group by transfer of 80 per cent. of the equity stake in Shantha ; this transaction was akin to transfer of capital assets located in India by alienation of equity shares of an Indian company "Shantha" through transfer of a French entity ShanH by one controlling entity of France to another ; and these, and other, transactions involved effective transfer of capital assets located in India, and alienation of equity shares representing participating rights in the Indian company "Shantha" by one controlling entity of France to another. Reference is made to several letters issued to "Sanofi", after the survey in August, 2009, including the show-cause notice dated September 17, 2009. The petitioners would state that other proceedings continued till May, 2010, when a final order, under section 201(1)/(1A) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the current year by issue of notice to Sanofi (i.e., the deductor) as early as on September 17, 2009, and information had been called or from the deductee, i.e., the second respondent by letters dated August 7, 2009, August 31, 2009, October 15, 2009, November 6, 2009, and September 17, 2009, calling upon them to examine their advance tax liability, and to ensure payment of tax, the transaction or issue had already been initiated and must be deemed to be pending before the income-tax authorities within the meaning of clause (i) of the proviso to section 245R(2) of the Act which is as a threshold bar for maintenance of the application before the Authority for Advance Rulings ; and further it involved formulation of own designed plan of evasion of income-tax in Indian territory which is also a bar for admission of the application under clause (iii) of the proviso to section 245R(2) of the Act. In the interregnum the Authority for Advance Rulings admitted the applications by order dated December 17, 2009.The petitioners would assert that, by the time the letter of the Authority for Advance Rulings was received in the office of the ADIT where the case was initiated after su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as on the merits, the case be posted for hearing on the merits under section 245R(4) of the Act. No interim order was initially passed, and we invited counter-affidavits from the second respondent. On completion of pleadings we heard counsel on either side. At the fag end of the oral submissions, we noticed that the order dated August 3, 2010, passed by the Authority for Advance Rulings, subsequent to the filing of the writ petitions, were not subjected to challenge in these writ proceedings. We gave liberty to the petitioners to file applications to amend the prayer in both the writ petitions. Applications were filed seeking amendment of the prayer to include a challenge to the order dated August 3, 2010. The second respondent also filed its counter affidavits thereto referring to the subsequent hearings before the Authority for Advance Rulings. They objected to the amendment of the prayer contending that the amendment petition had the potential to jeopardise the smooth and efficient functioning of the Authority for Advance Rulings by subjecting every admission order of the Authority for Advance Rulings to scrutiny in writ proceedings. An affidavit dated February 11, 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner's objections could not have passed the order dated August 3, 2010, postponing passing of a reasoned order till the advance ruling was pronounced. Sri S. Ganesh and Sri S. Ravi, learned senior counsel appearing on behalf of the second respondent in both these writ petitions, would submit that the petitioners were seeking to interfere with the judicial process of the Authority for Advance Rulings, and prevent it from giving its ruling ; the scheme of the Authority for Advance Rulings is to ensure expeditious disposal of cases and, accordingly, the process followed by the Authority for Advance Rulings ought to be respected ; a copy of the application was served on the petitioners, and the comments of the jurisdictional officer in relation to the admissibility of the application was specifically requested by the Authority for Advance Rulings ; as no comments were received from them, the Authority for Advance Rulings had proceeded to pass the order dated December 17, 2009, admitting the applications to be heard on the merits ; only after the order dated December 17, 2009, was passed by the Authority for Advance Rulings did the petitioners file their comments on December 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioning of the Authority for Advance Rulings would come to a stand still ; the question of the threshold bar, provided by the first proviso to section 245R(2) of the Act in relation to admitting the application by the Authority for Advance Rulings, would be dealt with by the Authority for Advance Rulings in its final order ; and this court should refrain from ruling on the same. Scheme of advance rulings under Chapter XIX-B of the Act Before examining the rival contentions, it is useful to briefly refer to the scheme of "advance ruling" under Chapter XIX-B of the Act. As is evident, from the title of Chapter XIX-B, the ruling which the Authority for Advance Rulings is required to give should be in "advance". The word "advance" means made or given ahead of time. It is only a ruling given ahead of time which is an "advance ruling". The object of giving a ruling in advance, as is evident from section 245S(1)(b) is to ensure uniformity in orders of assess-ment, appellate and revisional orders in respect of the transactions in relation to which the ruling is given, thereby avoiding conflicting orders being passed by different assessing/appellate/revisional authorities under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority for Advance Rulings had received an application, under section 245Q(1) of the Act, submitted by the second respondent seeking advance ruling on the stated questions of law/facts ; as per the provisions of section 245R(1) of the Act a copy of the application was to be forwarded to the concerned Commissioner of Income-tax for compliance with the provisions of Chapter XIX-B of the Act ; and, since the applicant was not assessed to tax in India, rule 13(1) of the Rules required a copy of such application to be forwarded to the Central Board of Direct Taxes for designating a Commissioner. The Central Board of Direct Taxes was requested to designate a Commissioner, and to forward a copy of the application to the Commissioner so designated with the request that he should send his comments along with the records, if any, to the office of the Authority for Advance Rulings within fifteen days. The Central Board of Direct Taxes was further requested to endorse a copy, of the communication addressed to the concerned Commissioner, to the office of the Authority for Advance Rulings also. The Director General of Income-tax, New Delhi, vide letter dated December 5, 2009, forwarded a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the income-tax authorities include the Director of Income-tax or the Commissioner of Income-tax. Section 2(12) of the Act defines "Board" to mean the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (hereinafter called "the Revenue Act"). The Revenue Act is an Act to provide for the constitution of separate Boards of Revenue for Direct Taxes and for Excise and Customs, and to amend certain enactments for the purpose of conferring powers and imposing duties on the said Boards. Section 2(a) thereof defines "Board" to mean the Central Board of Direct Taxes or the Central Board of Excise and Customs constituted under section 3. Section 3(1) of the Act requires the Central Government to constitute two separate Boards of Revenue to be called the Central Board of Direct Taxes and the Central Board of Excise and Customs, in the place of the Central Board of Revenue, and for such Board, subject to the control of the Central Government, to exercise such powers and perform such duties as may be entrusted to them by the Central Government or by or under any law. It is evident, therefore, that the "Central Board of Direct Taxes" is not the "Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chapter XIX-B of the Act including section 245R. The rules so made must be read harmoniously with the provisions of Chapter XIX-B of the Act and not as running contrary thereto. In case of conflict, between the provisions of the Act and the Rules, the former will prevail. The Rules should be interpreted in a manner so as to be in conformity with the provisions of the Act (Ispat Industries Ltd. v. Commissioner of Customs [2006] 12 SCC 583), and not the other way round. A rule has to be read as supplemental to the provisions of the parent Act. It cannot be interpreted in a way as to come into conflict with the parent Act (STO v. H. Farid Ahmed and Sons [1975] 36 STC 767 (SC) ; [1976] 1 SCC 245). A piece of subordinate legislation should be read in the light of the statutory scheme of the Act (Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental Action Group [2006] 3 SCC 434). Rules made for carrying out the purposes of the Act cannot be so framed as not to carry out the purpose of the Act, and cannot be in conflict therewith (Laghu Udyog Bharati v. Union of India) [1999] 6 SCC 418). Rules should be consistent with the provisions of the Act (State of U. P. v. Babu Ram Upadhya, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Authority for Advance Rulings may not be aware whether or not the application filed under section 245Q(1) of the Act is barred, by any one or more of clauses (i) to (iii) of the first proviso to section 245R(2) of the Act, it is for the designated Commissioner, on receipt of intimation under rule 13(2), to submit his objections to the application being allowed, i.e., entertained by the Authority for Advance Rulings. After the Director General of Income tax had designated the DIT as the Commissioner, by his letter dated December 5, 2009, the secretary to the Authority for Advance Rulings, in compliance with the requirements of section 245R(1), ought to have forwarded a copy of the application to the designated Commissioner (the first petitioner) herein, and only after it was served on the first petitioner, and a reasonable opportunity had been afforded to him to furnish the records (and/or submit his objections), if any, could the Authority for Advance Rulings have proceeded to decide upon the admissibility of the application. The power conferred on the secretary to the Authority for Advance Rulings, under clauses (v) and (vi) of rule 7(3), of service of notices and requisitionin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified in the first proviso to section 245R(2) arises, the Authority for Advance Rulings is barred from allowing the application and is bound to reject it. It is true that the third proviso to section 245R(2) requires reasons, for rejection of an application, to be given in the order. This, according to Sri S. Ganesh and Sri S. Ravi, learned senior counsel appearing on behalf of the second respondent in these two writ petitions, would mean that where the Authority for Advance Rulings allows an application, in the sense that it decides to entertain it for the purpose of pronouncing its advance ruling thereupon, no reasons need be assigned as, according to them, the Act has by necessary implication excluded the requirement of giving reasons in such an event. Where an Authority makes an order, in the exercise of its quasi-judicial functions, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasijudicial process. This rule must be observed in its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution of India cannot be barred by plenary legislation Though no limits can be placed upon the discretionary powers of the High Courts, under article 226 of the Constitution, they are exercised along recognised lines and subject to certain self-imposed limitations. The expression "for any other purpose" in article 226 makes the jurisdiction of the High Court's more extensive, but yet its exercise is with certain restraints and within certain parameters (Director of Settlements, A. P. v. M. R. Apparao [2002] 4 SCC 638). Unlike the jurisdiction conferred upon a statutory tribunal, which must be construed in terms of the statute under which it was created, the power of judicial review of the High Court is of wide amplitude. It is subject to certain restrictions which the High Court imposes on itself as a measure of self-discipline. The scope of judicial review may vary from case to case depending upon the nature of the matter, as also the statute to be dealt with by the court (Cellular Operators Association of India v. Union of India [2003] 3 SCC 186). While the jurisdiction of the High Courts, under article 226 of the Constitution, remains unaffected by legislative provisions, suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be barred by legislation-plenary or subordinate. It is only if the order of the Authority for Advance Rulings contains reasons as to why it has chosen to allow the application, i.e., to entertain it for the purpose of pronouncing its advance ruling, would the High Court, while exercising its power of judicial review under article 226 of the Constitution of India, be in a position to decide whether the order necessitates interference or not. The consequences which, an order bereft of reasons, may entail is that the High Court, acting as a court of first instance, could determine whether or not the application, filed under section 245Q(1) of the Act, should be rejected on the touchstone of clauses (i) to (iii) of the first proviso to section 245R(2) of the Act. Principles of natural justice must be read into the unoccupied interstices of a statute It is no doubt true that the implication of natural justice being presumptive may be excluded by express words of the statute or by necessary intendment (Swadeshi Cotton Mills v. Union of India [1981] 51 Comp Cas 210 (SC) ; [1981] 1 SCC 664 ; Union of India v. Tulsiram Patel [1985] 3 SCC 398). It must, however, be borne in mind that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is confined to the provisions of the Act under which it has been created. While the Act, in section 245R(2), confers jurisdiction on the Authority for Advance Rulings to decide whether or not to allow an application, i.e., to entertain it for the purpose of pronouncing its advance ruling, the Authority for Advance Rulings cannot conclusively decide its jurisdiction in this regard. Order of the Authority for Advance Rulings to allow an application under section 245R(2): not conclusive The word "jurisdiction" has both a narrow and a wider meaning. In the sense of the former, it means the Authority to embark upon an enquiry; in the sense of the latter it is used in several aspects, one of which is that the decision of the Tribunal is not in compliance with the provisions of the Act (Cellular Operators Assn. of India). A tribunal, conferred with the power to act under a statute, has the jurisdiction to satisfy itself that the conditions for the exercise of that power exists, and that the case calls for the exercise of that power. Such an adjudication relating to its own jurisdiction, which could be called a decision on jurisdictional facts, is not, generally, final unless it is made s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 245R(4) would depend on its having jurisdiction to allow an application under section 245R(2) of the Act. Once the Authority for Advance Rulings is deprived of its jurisdiction over the subject-matter, in view of the bar under clauses (i) to (iii) of the first proviso to section 245R(2), it can no more proceed with the application which was earlier filed. If it has lost its jurisdiction over the application, in view of the bar under clauses (i) to (iii) of the first proviso to section 245R(2), the Authority for Advance Rulings will have to decline jurisdiction to pronounce an advance ruling on the question stated in the application filed under section 245Q(1) of the Act (See Durga Hotel Complex v. Reserve Bank of India [2007] 136 Comp Cas 631 (SC) ; [2007] 5 SCC 120). Where the jurisdiction of a tribunal depends upon the fulfilment of some conditions precedent this issue is collateral to the actual matter which the tribunal has to try, and the determination of whether it is fulfilled or not is logically, and in sequence, prior to the determination of the actual question which the tribunal has to try. In such a case, in certiorari proceedings, a court can enquire into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty for Advance Rulings in this regard would the High Court be in a position to decide whether the Authority for Advance Rulings has acted within or in excess of its jurisdiction, and whether or not it should exercise its discretion to interfere. Learned senior counsel, appearing both on behalf of the petitioners and the second respondent, did not address this court on the question whether the Authority for Advance Rulings had the jurisdiction to pass the order dated December 17, 2009, allowing the application filed by the second respondent under section 245Q(1), or whether the bar under clauses (i) and (iii) of section 245R(2) applied. Learned senior counsel submitted that it would suffice if this court were to decide on the construction to be placed on section 245R(2), the first and third provisos thereto, and section 245R(4), and it was wholly unnecessary for this court, whichever view it may take, to examine whether or not the Authority for Advance Rulings had the jurisdiction to allow the application filed by the second respondent in the light of the contention of the petitioners that clauses (i) to (iii) of the first proviso to section 245R(2) barred such an application being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245R(4) of the Act. Accepting the contention of the learned senior counsel, appearing on behalf of the second respondent, that the order of the Authority for Advance Rulings admitting an application is not subject to judicial review by the High Court as, otherwise, it would bring the functioning of the Authority for Advance Rulings to a stand still, would mean that, even if the order is ex facie with-out jurisdiction, the Revenue must await the advance ruling to challenge the validity of the order of the Authority for Advance Rulings admitting the application filed under section 245Q(1) of the Act. Even if the application merited acceptance under section 245R(4), and the question raised therein may be required to be answered in favour of the applicant, the threshold bar under the clauses to the first proviso to section 245R(2) would disable the Authority for Advance Rulings from allowing/admitting/entertaining the application for the purpose of pronouncing its advance ruling thereupon. The advance ruling pronounced by the Authority for Advance Rulings under section 245R(4) would, in terms of section 245S(1)(c), bind the Commissioner, and the income-tax authorities subordinate to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) prohibits the Authority for Advance Rulings from allowing an application, (i.e., entertaining an application for pronouncement of its advance ruling), if any one of the three eventualities mentioned in clauses (i) to (iii) thereunder has arisen. It is only in cases where the application, filed under section 245Q(1), is allowed under section 245R(2) does section 245R(4) permit the Authority for Advance Rulings to examine further material and, thereafter, pronounce its advance ruling on the questions stated in the application filed under section 245Q(1) of the Act. A post-decisional hearing would mean that the Authority for Advance Rulings, even after it has allowed the application under section 245R(2), can review and revoke the said order if it is satisfied that the threshold bar under the first proviso to section 245R(2) is attracted. The power of review is not an inherent power. Where a Tribunal or a quasi-judicial authority, having jurisdiction to adjudicate on the merits, proceeds to do so, its order can be reviewed only if the Tribunal or the quasi-judicial authority is vested with the power of review by express provision or by necessary implication (Dr.Smt. Kuntesh Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the admission of the application or pass an order afresh thereupon. We have noted with concern the anguish expressed by the Authority for Advance Rulings in several of its proceedings, including the proceedings dated August 3, 2010. As we have confined our order only to the scheme of advance rulings under Chapter XIX-B of the Act, and on the legal submissions of senior counsel on either side, we refrain from making any observations either on the merits or on the conduct of parties before the hon'ble Authority for Advance Rulings. Examining the application, filed under section 245Q(1) of the Act, on the touchstone of the threshold bar under the first proviso to section 245R(2) goes to very root of the jurisdiction of the Authority for Advance Rulings, as it is only in cases where the threshold bar does not apply can the Authority for Advance Rulings entertain an application and pronounce its advance ruling. An application, filed under section 245Q(1) of the Act, cannot be allowed as a matter of course for it is only if Authority for Advance Rulings is satisfied, for reasons to be recorded in writing, that the threshold bar, under any one or more of clauses (i) to (iii) of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Advance Rulings to decide a preliminary issue as to the threshold bar or to record reasons while admitting an application for further examination leading to giving or not giving an advance ruling under section 245R(4) and (6) of the Act dismissed the writ petitions. But, however, dealing with the same question, Justice Ramesh Ranganathan while holding that "Examining the application, filed under section 245Q(1) of the Act, on the touchstone of the threshold bar under the first proviso to section 245R(2) goes to the very root of the jurisdiction of the Authority for Advance Rulings, as it is only in cases where the threshold bar does not apply can the Authority for Advance Rulings entertain an application and pronounce its advance ruling. An application, filed under section 245Q(1) of the Act cannot be allowed as a matter of course for it is only if the Authority for Advance Rulings is satisfied, for reasons to be recorded in writing, that the threshold bar, under any one or more of clauses (i) to (iii) of the first proviso to section 245R(2) of the Act are not attracted can it allow the application, examine further material, if any, placed before it, and then pronounce its advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion (1) : "Whether, in terms of the provisions of the Double Taxation Avoidance treaty dated September 6, 1994, as amended from time to time, entered between the Republic of India with the Government of French Republic ("Indo-French Tax Treaty") read with section 90 of the Income-tax Act, 1961, whether the capital gains arising to the applicant from the sale of shares of ShanH (french incorporated entity) by the applicant (french incorporated entity) to Sanofi (french incorporated entity) is liable to tax in France or in India?" Question (2) : "Without prejudice to the above, whether controlling interest (assuming while denying that it is a separate asset) is liable to be taxed In France under article 14(6) of the Indo-French Tax Treaty ?" On receipt of the applications, they were forwarded by the Authority for Advance Rulings to the Central Board of Direct Taxes (CBDT) on November 24, 2009, as provided under rule 13 of the Authority for Advance Rulings (Procedure) Rules, 1996 (hereinafter referred to "the Rules"). As per rule 13(1), if there is no Commissioner designated, a copy of the application shall be forwarded to the Central Board of Direct Taxes calling upon it to spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in Indian territory, which is also a bar for admission of the application under clause (iii) of the proviso to section 245R(2) of the Act. Before the DIT sending the report, the Authority for Advance Rulings allowed the applications by orders dated December 17, 2009. On receipt of the letter dated December 29, 2009, from the Authority for Advance Rulings informing the petitioners that the order, as to the admission of the application, had already been passed on December 17, 2009, the first petitioner addressed a letter dated January 7, 2010, requesting the Authority for Advance Rulings to reconsider the issue of admissibility of the application under section 245R(2) of the Act taking into account the report submitted through letter dated December 23, 2009. It is the case of the petitioners that they had received communication from the Authority for Advance Rulings on December 8, 2009, and had submitted their comments within 15 days thereof on December 23, 2009, and the objections filed by them could not be said to be belated. The first petitioner sent another letter dated June 15, 2010, to the Authority for Advance Rulings stating as under: "The scheduled hearing of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for advance ruling ; that the first petitioner who is the necessary party to the proceedings under section 245Q(1) was not put on notice by the Authority for Advance Rulings ; that though the Authority for Advance Rulings granted 15 days time for submission of the records, and comments, it should have waited for records and comments from the first petitioner before admitting the application ; that as neither of the petitioners had the knowledge about posting of the case on December 17, 2009, the order of admission passed by the Authority for Advance Rulings is in violation of the principles of natural justice and hence it is void and non est and that the Authority for Advance Rulings ought to have reopened the proceedings and heard the issue on admissibility aspect in view of the facts and circumstances of the case. Sri S. R. Ashok, learned senior counsel appearing on behalf of the petitioners, while reiterating the contentions raised in the writ petitions, urged that passing the impugned order dated December 17, 2009, was without notice to the petitioners and without giving an opportunity of hearing and therefore, the order passed is in violation of the principles of natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel appearing for the second respondent, contended that whenever an application under section 245Q is received by the Authority for Advance Rulings from an applicant, not hitherto assessed, and there is no Commissioner designated in respect thereof under rule 2(i)(2), a copy of the application and enclosures thereto shall be forwarded to the Board calling upon it to specify or designate within a period of two weeks , the Commissioner for the purposes of the application, failing which the application may be decided without hearing the Commissioner. Under sub-rule (2) of rule 13, the Commissioner is defined in rule 2(i)(1) or a Commissioner has been designated by the Board under rule 2 (i)(2) the Authority has to notify the applicant and the Commissioner of the date and place of hearing and forward a copy of the applicant to the Commissioner calling upon him to furnish the relevant records of the case along with comments, if any, and nominate his authorised representative if he desires to be heard. Rule 16 postulates hearing of application before pronouncing its advance ruling but not allowing application for hearing. The proviso to section 245R(2) provides hearing the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies confined their arguments with regard to the interpretation of section 245R as referred to above. In order to answer the questions set out above, it is necessary to examine the relevant statutory provisions of the Finance Act, 2003, and the Authority for Advance Rulings (Procedure) Rules, 1996. After amendment to the Finance Act, 2003, with effect from June 1, 2003, sections 245N and 245R read as under: "245N. Definitions.-In this Chapter, unless the context otherwise requires,- (a) 'advance ruling' means- (i) a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant ; or (ii) a determination by the Authority in relation to the tax liability of a non-resident arising out of a transaction which has been undertaken or is proposed to be undertaken by a resident applicant with such non-resident, and such determination shall include the determination of any question of law or of fact specified in the application ; (iii) a determination or decision by the Authority in respect of an issue relating to computation of total income which is pending before any income tax authority or the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (2) shall be sent to the applicant and to the Commissioner. (4) 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. (5) On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorized representative. Explanation.-For the purposes of this sub-section, 'authorized representative' shall have the meaning assigned to it in sub-section (2) of section 288, as if the applicant were an assessee. (6) The Authority shall pronounce its advance ruling in writing within six months of the receipt of application. (7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Commissioner, as soon as may be, after such pronouncement." Rules 13, 16 and 17 of the Authority for Advance Rulings (Procedure) Rules, 1996 read as under (see [1996] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority that there was sufficient cause for his non-appearance when the application was called upon for hearing, the Authority may, after allowing the opposite party a reasonable opportunity of being heard, make an order setting aside the ex parte order and restore the application for fresh hearing." It is well settled that judicial review being a part of the basic structure of the Constitution the power of the High Court under article 226 of the Constitution cannot be circumscribed in any way by any law. Judicial review is available against every quasi-judicial order and can be challenged at any stage and the artificial distinction between pre-decisional and post-decisional challenge is inconsistent with and alien to the wide powers conferred under articles 226 of the Constitution, but, of course limited ground if the challenge is with regard to pre-decisional order. In Gurdev (supra), the Supreme Court, while analyzing the purpose for which section 100 of the Code of Civil Procedure was amended, curtailing the powers of the High Court and interference with the concurrent findings held that in a series of cases, this court was compelled to interfere was because the true legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or information received by it. Language of sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contradistinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under section 26(2), the Commission is not only expected to forward the copy of the report, issue notice, Invite objections or suggestions from the informant, the Central Government, the State Government, statutory authorities or the parties concerned, but also to provide an opportunity of hearing to the parties before arriving at any final conclusion under section 26(7) or 26(8) of the Act, as the case may be. This obviously means that wherever the Legislature has intended that notice is to be served upon the other party, it has specifically so stated and we see no compelling reason to read into the provisions of section 26(1) the requirement of notice, when it is conspicuous by its very absence........" (paragraph 71) The Supreme Court, after referring to regulation 17(2) of the Competition Commission of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a summary court martial are set aside or the sentence is reduced and not when the findings and sentence are confirmed. Section 162 thus negatives a requirement to give reasons on the part of the confirming authority while confirming the findings and sentence of a court martial and it must be held that the confirming authority is not required to record reasons while confirming the findings and sentence of the court martial." (paragraph 46) In Chembra Orchard Produce Ltd. v. Regional Director of Company Affairs [2009] 147 Comp Cas 677 (SC), the question that fell for consideration before the Supreme Court was whether an application filed by the Company under section 391(1) of the Companies Act, 1956 (for short "the 1956 Act"), seeking directions to convene a meeting of creditors and members to consider a scheme of amalgamation is required to be heard and decided ex parte as per rule 67 of the Companies (Court) Rules, 1959 ? While considering the above question, the Supreme Court after referring to the Bombay High Court in Sakamari Steel and Alloys Ltd., In re [1981] 51 Comp Cas 266 (Bom), wherein it was held (page 689 of 147 Comp Cas): "that section 391(1) is not a sign-post but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or any court ; (ii) involves determination of fair market value of any property ; and (iii) relates to a transaction or issue which is prima facie designed for the avoidance of income-tax in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N. The second proviso provides that no application shall be rejected unless an opportunity has been given to the applicant of being heard. If the application is rejected, reasons for such rejection shall be given as per the third proviso to section 245R. A plain reading of the above provision makes it clear that the Authority for Advance Rulings shall not allow the application when question raised in the application is pending before any income-tax authority or Appellate Tribunal and it shall not reject without assigning reasons. If it wants to reject the application at the threshold, an opportunity of hearing should be provided to the applicant and reasons have to be recorded. In the entire section, it is nowhere stated that the Commissioner from whom records were called for is called upon to make his objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) when the applicant seeks/has sought an opportunity of being heard, and (iii) hearing of the Commissioner or his authorised representative as well if the Authority considers it necessary before pronouncing its advance ruling. Thus, it is manifestly clear hearing is provided to the Commissioner only before pronouncing the advance ruling but not at the stage of allowing application or rejecting the application. In appropriate cases, the Authority may call upon any person to supply such material as it may consider to assist the Authority in arriving a decision and the Authority can adjourn the hearing of application if the circumstances require such adjournment. Rule 17 of the Rules contemplates hearing of application ex parte and power to set aside the ex parte order if an application is presented within 15 days of the ex parte order on satisfying the authority that there was sufficient cause for his non-appearance. The entire exercise to be undertaken by the Authority for Advance Rulings under the Act and the Rules for allowing the application is only to verify the records called for whether an advance ruling on the question specified in the application is required to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
