Facts

The Petitioner before the Hon’ble Supreme Court is a company incorporated in USA and is engaged in the business of designing, developing, marketing and distributing outdoor apparel. The Petitioner, after obtaining approval from the RBI established a liaison office in Chennai for making purchases for its business. The RBI granted the permission with the condition that the office of the petitioner shall be  purely for liaison activities and the liaison office will not undertake  any other activity of trading, commercial or industrial nor shall it enter into any business contracts in its own name without the prior permission of the RBI. The Petitioner filed an application before the Authority for Advance Ruling [hereinafter referred to as “AAR”] on the questions relating to its transactions in its liaison office in India. The AAR  gave its ruling in favour of the department and against  the petitioner.

The Petitioner being aggrieved by the ruling of the AAR filed the present SLP before the Hon’ble Supreme Court of India.

Issue

Whether a ruling of AAR can directly be challenged before the Supreme Court under Article 136 of the Constitution or it has to be first challenged before the   High Court under articles 226 and/or 227 of the Constitution.

View

AAR exercises judicial power and is a “tribunal” whose rulings can be challenged under Articles 136 and 227 of the Constitution. Binding nature of the AAR ruling does not affect the jurisdiction of the Court to entertain a challenge to the ruling under Article 136 or under Articles 226 and 227 of the Constitution. The ruling should in the first instance be challenged before the High Court. Ordinarily, an aggrieved party should not be encouraged to appeal directly to the Supreme Court unless it appears to the Court that the SLP raises substantial questions of general importance or a similar question is already pending before it for decision.

Held

Hon’ble  Supreme Court rejected the SLP and granted liberty to  the Petitioner   to approach the High Court under Article 226and/or 227 of the Constitution

by observing that AAR is a body exercising judicial power conferred on it by Chapter XIX-B  of the Act and is a tribunal within the meaning of the expression    in Articles 136 and 227 of the Constitution. Sub-section (1) of section 245S of     the Income Tax Act, 1961 makes the advance ruling pronounced by the AAR binding on the applicant, in respect of the transaction and on the Commissioner and the Income-tax Authorities subordinate to him in respect of the applicant. However, this would not affect the jurisdiction of either Supreme Court under article 136 of the Constitution or of the High Court under articles 226 and 227      of the constitution to entertain a challenge to the advance ruling pronounced by  the AAR. Thus, it cannot be said that an advance ruling of the AAR can only be challenged under article 136 of the Constitution before the Hon’ble Supreme Court and not under Articles 226 and/or 227 of the constitution before the High Court. (SLP(C) 3318, 13760 and 31543 of 2011, CA Nos. 2996, 5839 of 2008, 6987 of

2010, 7035, 10064 and 11327 of 2011 dt. 30-7-2012)

Editorial : From the Ruling of Columbia Sportswear Company, In re (2011) 337  ITR 407/243 CTR 42/59 DTR 233/201 Taxman 214 (AAR).

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