The question raised before the AAR was, “Whether  the applicant is justified in its contention that amount due / received from Ranbaxy Laboratories Limited (‘Ranbaxy India‘) is in the nature of ‘business profits’  and is not chargeable to tax in India under the provisions of the Act in the absence of business connection India under the provisions of the Act  in the absence of business connection in India as per section    9 (1)(i)  of the Act or under the provisions of article 7 read with article 5 of the India-Israel Double Taxation Avoidance agreement  (‘DTAA’)  in the absence of permanent establishment in India  ? “

“Whether the applicant is justified in its contention that amount due/ received from Ranbaxy India is not taxable as ‘royalty’ or ‘fees for technical services ‘  both under the Act or under the relevant provisions of India-Israel DTAA read with Protocol thereto ? “

The application was admitted on 6-7-2015,

The AAR held that the applicant is not found to be real owner of the transactions and income did not accrue in its hand but it was only a case of application of income of BP USA to the applicant. Further, the basic condition of the transaction of the non-resident arising out of  the transaction with a resident as stipulated under section 245N(a)(ii) was not fulfilled as the transactions of the applicant  were not on account but towards application of income of BP USA. The transactions were also hit by the mischief of clause (iii) of the section 245R(2) of the Act, as they were designed  prima facie for avoidance of tax. Accordingly the application is rejected. (AY.2016-17) (AAR No. 1476 of 2013 dt. 25-10-2019)