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TMI Blog2005 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... r) Present for the Department Mr. Yashwant Y. Chavan Addl. CIT (International Taxation), Bangalore Present for the Applicant Mr. P.J. Pardiwalla, Advocate RULING (By Mr. Justice Syed Shah Mohammed Quadri) - In this application, under section 245Q(1) of the Income-tax Act, 1961 (for short the 'Act'), X-Limited, the applicant, is a company incorporated under the laws of Netherlands and is a tax resident of Netherlands . The applicant seeks ruling of the Authority on the following questions:- • Whether the loan advanced would be taxable as the Applicant's income by way of deemed dividend on account of the fictional provisions of section 2(22)(e) of the Act? • Whether the Applicant is entitled to claim relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 100 per cent of the equity shares capital of the aforementioned subsidiaries. At the time when the loans were granted by 'A' Ltd to 'B' Ltd, the former had accumulated profits exceeding the amount of loan advanced to 'B' Ltd. It may be noted that 'A' Ltd is not a company in which the public are substantially interested. Reference is made to clause (e) of Section 2(22) of the Act, defining 'dividend' and it is added that as per explanation to section 115-Q, the provisions of section 115-O do not apply to sums deemed as 'dividend' under section 2(22)(e) as section 115-O of the Act was not operative in the financial year 2002-03 when the dividend would be deemed to be declared by 'A' Ltd. By March 31, 2003 (financial year 2002-03) the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85). After the amendment of section 245N(a)(ii), any determination by the Authority should relate to taxability of 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. Though the applicant holds 100% equity shares in the Indian companies, the transaction cannot be said to be between a resident and non-resident. The applicant is not entitled to the benefit of the ruling of the Authority under section 245N of the Act. It is submitted that even on merits, it is not entitled to any relief and the application is liable to be rejected. 5. Mr. Yashwant Y. Chavan, who appeared for the Commissioner, contended that the application is not maintainable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude the determination of any question of law or of fact specified in the application; • 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 Act, 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of para(a), referred to above, clause (iii) of the definition of 'advance ruling' and the proviso are not relevant for the present discussion. The issue needs to be resolved with reference to clauses (i) and (ii) of para (a) of Section 245N of the Act. We have noticed above that clause (i) has two ingredients-- (1) a transaction which has been undertaken or is proposed to be undertaken by a non-resident and (2) such non-resident is the applicant. From the facts stated above, it is evident that the applicant is a non-resident but the transaction of loans is between 'A' Ltd and 'B' Ltd which are resident in India. Here obviously the first requirement is not satisfied. Therefore, the determination would not fall under clause (i). In re Conne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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