Brief:
The Assessee filed application with AAR for for determination of the question regarding taxability of its profits arising from offshore sales. The AAR rejected the applications as notice Section 143(2)/ 142(1) were already issued prior to the filing of the application before the AAR, the transaction in respect of which the ruling of the AAR was sought was filed before the date of the application.
Thus Delhi High Court stated:
- AY 2008-09 & 2009-10 Notice 142(1) …………issued before application therefore application rejection is valid.
- AY 2010-11 Notice 142(1) ………..issued after application to AAR therefore Rejection is erred by AAR.
Facts of the Case:
The facts of the present case are that the Petitioner is a company incorporated in South Korea. It states that it is a comprehensive energy solution provider and manufactures transformers, switchgears, motors, decelerators and industrial pumps and is also engaged in the wind energy business. It supplies transformers to customers all over the world including in India. The Petitioner states that it has been engaged in several projects in India and has been regularly assessed to income tax since the Assessment Year (‘AY’) 2008-09. It is further stated that, it being a resident of South Korea, it is entitled to the benefit of the DTAA between the India and South Korea.
It is stated that Power Grid Corporation of India Ltd. (‘PGCIL’) floated tenders inviting global bids for setting up sub-stations in various locations in India. The Petitioner being a successful bidder, supplied equipments for the said projects. The case of the Petitioner is that supply of the equipment was effected outside India and all work related thereto was also to be performed outside India. As far as the on shore portion, including transportation, was concerned that was to be carried out in India by Larsen and Toubro Ltd. (‘L&T’) in terms of a memorandum of understanding (‘MOU’) entered into between the Petitioner and L&T.
It is stated that in relation to the invoices raised by the Petitioner on PGCIL for the supply of equipment, PGCIL released advance payment to the Petitioner after deducting tax at source. There were supplies of equipment by the Petitioner to PGCIL during AYs 2008-09, 2009-2010 and 2010-2011 for the various projects of PGCIL. Some portion of the payment was made by PGCIL after deducting TDS. While filing its return of income for the aforementioned AYs, the Petitioner took the stand that no portion of its revenue from off shore supplies was liable to be taxed in India. Consistent with this position, the Petitioner claimed refund of TDS deducted by PGCIL. In reference to each of the returns filed by the Petitioner, notices were issued both under Section 143(2) of the Act as well as 142(1) of the Act by the Assessing Officer (‘AO’) concerned.
Applications before the AAR
On 23rd September 2011, the Petitioner filed separate applications before the AAR seeking a ruling on the issue of taxability of the profits from off shore supplies made during the aforementioned AYs to PGCIL. On 10th October 2011, one more application was filed before the AAR with respect to the supply made for a project of PGCIL at Maharani Bagh. In fact there were seven applications filed by the Petitioner before the AAR for advance rulings.
The details of dates if issuance of notices under Section 143(2) & 142 (1), the dates of filing of the applications before the AAR for each of the transactions in the three AYs are as under:
