2016 (5) TMI 698 - HC - Income Tax

High Court restores tax assessment applications for fresh decision. AAR order set aside.

Ls Cable & System Limited, Korea Through Mr. Jeong Suk Lee Versus The Commissioner of Income Tax – II & Anr.

The High Court set aside the Authority for Advance Ruling's order and restored the applications for Assessment Years 2012-13 and 2013-14 to the AAR for a ... AAR application rejected - whether the AAR was justified in rejecting the application on the ground that the question referred to it was pending consideration before the Income Tax authorities, by virtue of notice having been issued on 13th August 2013 under Section 143 (2) of the Act with reference to the return filed for AY 2012-13 thereby attracting the bar under clause (i) of the proviso to Section 245R (2) of the Act? - Held that:- The said question stands answered in favour of the Petitioner and against the Department in the recent judgment of this Court in Hyosung Corporation v. The Authority for Advance Rulings [2016 (2) TMI 575 - DELHI HIGH COURT ] as held that mere issuance of a notice under Section 143(2)(ii) of the Act which merely stated that the AO would like some further information on certain points in connection with the return that was filed would not result in attracting the bar under clause (i) of the proviso to Section 245R (2) of the Act. It is only if on the date of filing of the application before the AAR the question raised therein was already the subject matter of proceedings before the income tax authorities that the bar in terms of the proviso to Section 245R(2) of the Act would apply. If such application is not already pending on the date of the application, and is the subject matter of a notice issued thereafter by the income tax authority, it cannot be said that such question is 'already pending before such income tax authority'. What is relevant is not the date of consideration of the application by the AAR but the date of filing of such application before the AAR. For the above reasons, the impugned order dated 3rd August 2015 of the AAR rejecting the Petitioner’s four applications is unsustainable in law. The mere issuance of a notice under Section 143(2) of the Act to the Petitioner on 13th August 2013 in relation to the return filed for AY 2012-13 by merely stating that “there are certain points in connection with the return income submitted by you on 29th November 2012 for the assessment year 2012-13 on which I would like some other information” does not tantamount to the issues raised in the application filed by the Petitioner before the AAR on 20th September 2013 being already pending before the AAR. Issues:Challenge to the common order of the Authority for Advance Ruling (AAR) regarding taxability of profits arising from offshore supplies for Assessment Years (AY) 2012-13 and 2013-14.Analysis:1. Background and Dispute: The petitioner, a South Korean company engaged in manufacturing electric wires, had disputes with the Income Tax Department regarding taxability of profits from offshore supplies. Previous orders favored the petitioner.2. Previous AAR Applications: Earlier AAR applications for taxability of offshore supplies were allowed. Appeals by the Revenue were dismissed by the High Court and Income Tax Appellate Tribunal (ITAT) for various assessment years.3. Current Disputes: Disputes for AYs 2012-13 and 2013-14 arose when the petitioner filed returns and AAR applications. The AAR rejected the applications citing pending questions before the Income Tax authorities.4. Legal Precedents: The High Court referred to the judgment in Hyosung Corporation v. The Authority for Advance Rulings, which clarified that the mere issuance of a notice under Section 143(2) of the Act did not bar AAR from entertaining the application.5. Court's Decision: The High Court held that the AAR was unjustified in rejecting the applications. It emphasized that the bar under the proviso to Section 245R(2) of the Act did not apply as the issues raised were not pending before the Income Tax authorities at the time of filing the AAR applications.6. Outcome: The High Court set aside the AAR's order, restoring the applications to the AAR for a fresh decision on merits. The court allowed the writ petitions with no order as to costs, disposing of the applications.This detailed analysis of the judgment outlines the background, disputes, legal precedents, and the court's decision regarding the taxability of profits from offshore supplies for the specified assessment years.