AAR-New Delhi : Only when issues are shown in return and notice under section 143(2) is issued, question will be considered as pending for adjudication before Income-tax Authorities

Authority For Advance Rulings (Income Tax), New Delhi

Mitsubishi Corporation, Japan, In Re

Section : 245R, 143

Justice Dr. Arijit Pasayat, Chairman And T.B.C. Rozara, Member

A.A.R. No. 1309 Of 2012

December 13, 2013

ORDER

1. The applicant is a company incorporated in Japan and is a tax resident of Japan, as per Article 4 of the Agreement for Avoidance of Double Taxation between India and Japan(India-Japan Tax Treaty). The registered/principle office of the applicant is situated at Mitsubishi Shoji Building, 3-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo, 100-8086, Japan.

2. The applicant established a Branch Office in India in April, 2008 after obtaining the necessary approvals from the Reserve Bank of India. The activities carried out by the Branch Office in India primarily relate to provision of support services to the applicant.

3. The applicant received off-shore supplies contract from Power Grid Corporation India Ltd. and entered into two separate contracts with the Power Grid Corporation India Ltd., i.e. (i) Offshore supply contract and (ii) Onshore service contract.

4. The applicant seeks ruling from the Authority for Advance Rulings on the following questions:—

Que.1 : On the facts and circumstances of the case, whether the amounts received/receivable by Mitsubishi Corporation, Japan (‘Applicant’ or ‘MC Japan’) from Power Grid Corporation of India Limited (‘PGCIL’) under Contract Agreement No.C-61912-LO79-7/G-10/CA-1/3170 dated December 22, 2009 by PGCIL for Insulator Package 14-420kN Antifog Disc Insulators for Islampur – Saharsa – Gopalganj – Grakpur section of +/-800kV HVDC Bipole Biswanath Chariyali-Agra Transmission Line associated with North Eastern – Northern/Western Interconnector-I Project by PGCIL, for offshore supply of all goods including mandatory spares are liable to tax in India under the provisions of the Income-tax Act, 1961 (‘Act’) and the Agreement for Avoidance of Double Taxation between India and Japan (‘India-Japan Tax Treaty’)?

Que.2 : On the facts and in the circumstances of the case, whether MC Japan and Allcargo Global Logistics Limited (‘Allcargo’ or ‘Assignee’), for the purpose of executing the Contract Agreement No.C-61912-L079-7/G-10/CA-1/3171 dated December 22, 2009 by PGCIL as the “On Shore Services Contract” for all services to be performed in India inter-alia including port handling, customs clearance, inland freight and insurance, loading and transportation to site for delivery at site in relation to the supply of goods, could be assessed as independent companies under section 2(31)(iii) of the Act in India or as an Association of Persons (‘AOP’) under section 2(31)(v) of the Act?

5. The Revenue objected to the admissibility of the application stating that return of income was filed before filing the application. Relying on the decision by the AAR in the case of SEPCO III Electric Power Corpn., In re [2012] 340 ITR 225/[2011] 202 Taxman 149/13 taxmann.com 158 (AAR – New Delhi and the decision in the case of NetApp B.V., In re [2012] 347 ITR 461/206 Taxman 176/19 taxmann.com 79 (AAR – Delhi) dated 2.2.2005 that was confirmed by the Hon’ble Delhi High Court reported in (W.P.(C) 3959/2012 dated 14.8.2012), Revenue submitted that when the return of income is filed it should be treated as pending before the Income-tax Authority. In this case the return of income was filed on 30.11.2011 and the application was filed on 4.4.2012 before the Authority and therefore the matter is already pending before the Income-tax Authority before filing the application and the application is barred by proviso section 245R(2) of the Act.

6. The applicant on the other hand submitted that mere filing of return does not attract the bar unless the question raised in the application for Advance Ruling is an issue pending for adjudication before the Income Tax Authorities. Reliance is placed on the decision of this Authority in the case of Hyosung Corporn. Korea , In re [2013] 357 ITR 123/218 Taxman 36/36 taxmann.com 150 (AAR – New Delhi) .

7. We have considered rival submissions of the applicant and the Revenue and also considered the facts and case decisions cited in their submissions. When returns are filed under section 139 or in response to a notice under sub-section (1) section 142, they are processed under section 143(1) of the Act. While processing the return under section 143(1) the total income or loss are computed after making the following adjustments i.e. (i) any arithmetical error in return; or (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return. It is also provided that no intimation under that section shall be sent after the expiry of one year from the end of the financial year in which the return is made. In Explanation to section 143(1) of the Act, the expression “incorrect claim apparent from any information in the return” is also defined. The Revenue does not have any jurisdiction to examine or adjudicate any issue other than those mentioned in Section 143(1) of the Act. There is no scope for examining or adjudicating any debatable issue that requires long drawn arguments. Again only in those cases where the Assessing Officer has reason to believe that any claim of losses, exemption, deduction, allowances or relief made in the return is inadmissible or if he considers it necessary or expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, he can serve notice under section 143(2). Before or without issuing notice under section 143(2) or notice under section 142(1) in cases whether return is not filed, there is no jurisdiction to examine or adjudicate debatable issue claimed or shown in the return of income.

8. The decision in the cases of SEPCO III Electric Power Construction Corpn. (supra) and NetApp BV (supra) are based on the premise that by filing a return, an assessee invites adjudication of the question arising out of the returns. It will be seen from analysis of provisions under section 143(2) and 142(1) of the Act, that this was not so. By issue of notice under section 143(2) only, the Assessing Officer assumes jurisdiction to adjudicate all the questions arising out of the return. In the case of Jagtar Singh Purewal v. CIT [1995] 213 ITR 512/78 Taxman 600 (AAR – New Delhi) , this Authority considered the issue where though applicant declared amount in question in return, his application for advance ruling was maintainable in as much as no dispute was pending between applicant and department as return had been processed under section 143(1) and refund had been granted and, further, even in return, assessee had raised no dispute regarding assessability of amount but only claimed refund of excess tax paid. It was held that there was no pending dispute between the applicant and the Income-tax Department because the return had been processed under section 143(1) and the refund as prayed for by the applicant had been granted. Secondly, even in the return the assessee raised no dispute regarding the assessability of the amount. On the other hand, he voluntarily showed it and paid tax thereon claiming refund of only the balance. There was, therefore, no ground to reject the application on any of the grounds mentioned in section 245R(2).

9. In the case of Hyosung Corpn. Korea (supra) it was held that mere filing of return does not attract bar on the admission of the application as provided in section 245R(2) of the Act. We are of the view that only when the issues are shown in the return and notice under section 143(2) is issued, the question raised in the application will be considered as pending for adjudication before the Income-tax Authorities. In the present case the application was filed on 4.4.2012. Return of income was filed on 30.11.2011 i.e. before filing the application. However, notice under section 143(2) was issued on 8.8.2012 i.e. after the date of the application. Following which ruling in Hyosung Corpn. (supra) we hold that the question raised by the applicant in the present case is not already pending before the Income-tax Authorities and therefore, the application is admitted.

[Citation : 360 ITR 704]