Court :Authority for Advanced Ruling
Citation: Advanced Ruling (AAR), in the case of LS Cable Ltd. (AAR No. 858- 861 of 2009)
Brief: Recently, the Authority for Advanced Ruling held that pendency of a similar matter of the applicant in respect to transaction with a different party, before a statutory forum, is no bar to seek advance ruling in respect of another transaction.
Background- As per clause (i) of proviso to Section 245R of the Income-tax Act, 1961 (the Act), the AAR shall not allow an application, where the question raised in the application is already pending before any income-tax authority or Appellate Tribunal or any court.
Facts of the case
- · The applicant, a tax resident of Korea, was engaged in the business of manufacturing electric wire and cable for power distribution. The applicant entered into the following three separate contracts with Delhi Transco Limited (DTL)
– Onshore supply contract
-Onshore service contract
-Offshore supply contract including supply of equipments and materials.
- · The applicant contended that in the offshore supply contract, the sale would be concluded outside India and payment would be received outside India and therefore the income was not taxable either under the Act or India-Korea tax treaty (the tax treaty). Accordingly, the applicant sought the ruling of AAR on the tax ability of income from offshore contract under Section 245 of the Act.
- · The tax department contended that the application of the applicant was not maintainable before the AAR since similar question of law was pending before the Delhi High Court in a case involving the applicant and Power Grid Corporation Limited (PGCL).
Applicant’s contentions:- The applicant contended that the transaction under consideration is with a different party and is different from the transaction challenged before the judicial authorities.
Tax department’s contentions:- The tax department contended that a similar issue involving the offshore supply of goods, in the applicant’s own case was pending before certain judicial authorities, and hence, the application made before the AAR was not maintainable. Also, allowing the application notwithstanding the pendency of the matter before the High Court would lead to conflicting verdicts and might create confusion.
AAR’s ruling
