|DATE:||(Date of pronouncement)|
|DATE:||December 23, 2011 (Date of publication)|
|Click here to download the judgement (nuclear_power_advance_ruling_maintainability.pdf)|
S. 245R(2): Pendency of question in payee’s hands disbars payer’s application
The Applicant, a PSU, entered into an offshore services contract with a Russian company for setting up a power plant. The Applicant claimed that the income arising to the Russian company from offshore supply of equipment was not chargeable to tax in India and that it was not liable to deduct/ bear TDS thereon u/s 195. However, as in the assessment of the Russian company, the AO had already taken the view that the income from offshore supply was chargeable to tax u/s 44BBB and the issue was pending before the Tribunal, the question arose whether the application was maintainable in view of clause (1) of the Proviso to s. 245R(2) which provides that an application is not maintainable if the question raised in it “is already pending before any income-tax authority or Appellate Tribunal, or any Court.” The Applicant claimed that the pendency in the case of the recipient did not affect the maintainability in the context of the payer’s obligation to deduct tax u/s 195. HELD rejecting the application:
The argument that the pendency of the question in the case of the recipient cannot bar the application in the case of the payer is not acceptable because an “advance ruling” is a determination in relation to a “transaction”. A “transaction” always involves the payer and payee. It is not possible to separate an applicant from a transaction while he is seeking a Ruling, since the Ruling relates to a transaction undertaken by him or to be undertaken by him. A ruling also cannot be divorced from a transaction. The question posed before the income-tax authorities in the case of the recipient and before the AAR in the case of the payer is the same, namely, whether the income is assessable to tax. Consequently, the bar in s. 245R(2) applies and the payer’s application is not maintainable. The contrary view taken by the AAR in Airports Authority of India In re 168 Taxman 158 is not correct (Foster (AAR No. 975 of 2009) followed).