AI Drafter 
TaxTMI 
TaxTMI 
2005 (2) TMI 19
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.... under the laws of Netherlands and is a tax resident of Netherlands . The applicant seeks ruling of the Authority on the following questions:- • Whether the loan advanced would be taxable as the Applicant's income by way of deemed dividend on account of the fictional provisions of section 2(22)(e) of the Act? • Whether the Applicant is entitled to claim relief under the provisions of the DTAA in determining the tax liability in India in respect of such 'deemed dividend income'? • Whether such 'deemed dividend income' would be taxable as 'dividend' as per the provisions of Article 10 of the DTAA? • If the answer to question (3) above is in negative, given the fact that the Applicant does not have a Permanent Establishment....
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....per explanation to section 115-Q, the provisions of section 115-O do not apply to sums deemed as 'dividend' under section 2(22)(e) as section 115-O of the Act was not operative in the financial year 2002-03 when the dividend would be deemed to be declared by 'A' Ltd. By March 31, 2003 (financial year 2002-03) the entire loan of Rs. 36,30,23,497/-, advanced by 'A' Ltd together with interest due, was repaid by 'B' Ltd. 3. On 21 st January, 1989 , the Government of the Republic of India and the Kingdom of the Netherlands have entered into an agreement for avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, which was notified on 27.3.1989 (hereinafter referred to as the 'Treaty').....
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....tled to the benefit of the ruling of the Authority under section 245N of the Act. It is submitted that even on merits, it is not entitled to any relief and the application is liable to be rejected. 5. Mr. Yashwant Y. Chavan, who appeared for the Commissioner, contended that the application is not maintainable and the question of maintainability be taken up first. Mr. P.J. Pardiwalla, advocate for the applicant, on the other hand contended that whether the transaction is between the applicant, non-resident, and the resident companies will become clear only when the Authority would decide the matter on merits. He has therefore, requested that the questions be answered and the issue of maintainability be decided along with questions set-for....
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....tal income specified in the application: [Provided that where an advance ruling has been pronounced, before the date on which the Finance Act, 2003 receives the assent of the President, by the Authority in respect of an application by a resident applicant referred to in sub-clause (ii) of this clause as it stood immediately before such date, such ruling shall be binding on the persons specified in section 245S;] A perusal of the aforementioned definition of 'advance ruling' shows that it has three clauses. The first clause speaks of a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant. The second clause relates to a determination by the Auth....
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.... such non-resident is the applicant. From the facts stated above, it is evident that the applicant is a non-resident but the transaction of loans is between 'A' Ltd and 'B' Ltd which are resident in India. Here obviously the first requirement is not satisfied. Therefore, the determination would not fall under clause (i). In re Connecteurs Cinch SA, this Authority ruled that where the determination under clause (i) is sought and its requirements are not fulfilled, the application is not maintainable. The germane parts of clause (ii) are: (1) a transaction has been undertaken or is proposed to be undertaken by a resident who is the applicant; (2) the determination by the Authority should relate to the tax liability of such non-resident. Ob....