Authority For Advance Rulings
Instrumentarium Corporation, In Re
AAR (Procedure) Rules, 1996 r. 12, AAR (Procedure) Rules, 1996 R. 19
Syed Shah Mohammed Quadri, J., Chairman & K.D. Singh, Member
AAR No. 609 of 2003
2nd February, 2005
Counsel Appeared
Rahul Krishna Mitra, for the Applicant : Sanjay Puri, for the CIT concerned
Ruling
Syed Shah Mohammed Quadri, J., chairman :
This petition under r. 19(1) of AAR (Procedure) Rules, 1996 (for short the “Rules”) is by the applicant in Application No. AAR/609/2003 praying the Authority to rectify its ruling dt. 25th Nov., 2004 [reported as Instrumentarium Corporation, In re (2005) 193 CTR (AAR) 347—Ed.] on the ground that it suffers from a mistake apparent from the record. The petitioner states that question No. (iii) is reframed by the Authority on its own without there being any request of or consent by the applicant or its authorized counsel. In the light of the ruling on question No. (i), the application should have been dismissed without answering question No. (iii). The ruling pronounced on the reframed question precludes it from raising the plea of applicability of the Circular of the Board and getting the benefit of the observations made by the Authority in the ruling on question No. (i).
The CIT filed his comments to the petition denying that there is a mistake apparent from the record; reliance is placed on r. 12 to show that the Authority has power to reframe the question and therefore, no error has been committed by the Authority in reframing question No. (iii). Heard Mr. Rahul Krishna Mitra for the applicant and Mr. Sanjay Puri for the CIT. Rule 19(1) of the Rules which is relevant for our purpose is in the following terms : “19(1). Rectification of mistakes.—The Authority may, with a view to rectifying any mistake apparent from the record, amend any order passed by it before the ruling pronounced by the Authority has been given effect to by the AO.”
From a plain reading of this rule, it is evident that the Authority is empowered to amend any order subject to the following two conditions : (1) There must be a mistake apparent from the record in the order sought to be rectified; and (2) rectification of such a mistake can be made before the ruling pronounced by it is given effect to.
In regard to the first condition, it is stated that without the consent of the petitioner or its authorized counsel question No. (iii) is reframed and a ruling is pronounced in respect thereof. There can be no doubt that if the Authority pronounced the ruling on reframing a question which is in substance different from the one proposed by the applicant without the request or the consent of the petitioner, the order would be vitiated by mistake apparent from the record. But if what the Authority has done is to separate the narration of facts forming part of the question set forth by the petitioner and reframe the question keeping intact the rest of the question after putting it to the counsel of the petitioner, the order cannot be said to suffer from any mistake much less mistake apparent
from the records. In regard to the second condition, the petition for rectification is filed before giving effect to the ruling. We shall now examine the contentions.
The power of the Authority to reframe a proposed question under r. 12 of the Rules, is not in dispute. The contention, however, is that there has been reframing of the question without the consent of the applicant or its counsel. It is regrettable that factually the submission is incorrect. We may observe that at the commencement of the arguments in the main application, the Authority has pointed out to the learned counsel appearing for the applicant that question No. (iii) was more a paraphrase than a question and that the first limb records the factual basis and that the second limb represents the real question to which he has conceded and accordingly that question was reframed. It would be appropriate to have the questions as set forth by the petitioner in the application and as reframed by the Authority for purposes of pronouncing ruling: Question No. (iii) set forth by the applicant Question No. (iii) reframed by the Authority (iii) Whether, having regard to the statement of Whether the applicant is required to comply objects and reasons of the legislation relating to with the provisions of the IT Act, 1961 transfer pricing, which clarifies the legislative intent (hereinafter referred as the “Act”) in enacting the same, namely, to curb the practice containing the legislation relating to adopted by multinational group of companies in transfer pricing, namely, ss. 92 to 92F of India of manipulating the prices charged and paid the Act, with respect to the said transaction in intra-group transactions, which led to erosion of of loan and accordingly charge interest as tax revenues, where the granting of loan per the principles of arm’s length price from amounting to Rs. 360 million by the applicant in Datex. favour of Datex without charging any interest and accordingly without adhering to the principles of arm’s length price, actually results in the Government exchequer or the tax revenue of the country being benefited, the applicant is required to comply with the provisions of the IT Act, 1961 (hereinafter referred as the “Act”) containing the legislation relating to transfer pricing, namely, ss. 92 to 92F of the Act, with respect to the said transaction of loan and accordingly charged interest as per the principles of arm’s length price from Datex ?
5. From the above table, it is evident that only the first limb, shown in italics is excluded from the question proposed by the petitioner and the second limb which contains the substance of the question is kept intact and that is really the reframed question. It may be seen that in all other aspects the reframed question is part of the proposed question. Indeed, it is on the factual basis mentioned in the first limb of the question that the ruling on question No. (iii) was pronounced. Therefore, it is clear that there is no merit in the contention that question No. (iii) is altered without the consent of the petitioner. We are unable to accede to the contention that in view of ruling on question No. (i), we should not have answered question No. (iii). In our view the ruling on question No. (iii) is consequential to the ruling on question No. (i). In regard to the plea that in view of the ruling on reframed question, the petitioner is precluded from raising the plea of applicability of the Circular of the Board, we find nothing in the ruling to support the apprehension of the petitioner. There is thus no merit in the petition. However, we hasten to add that dismissal of this petition does not preclude the petitioner from raising necessary pleas including the plea of the applicability of Circular of the Board before the assessing authority in light of the observations made in the ruling.
6. Subject to above observations, the petition shall stand rejected.
[Citation : 274 ITR 83]
