IMPORTANT POINT
Sub-section (1) of Section 245S of Income Tax Act, 1961, insofar as, it makes the advance ruling of the Authority binding on the applicant, in respect of the transaction and on the Commissioner and income-tax authorities subordinate to him, does not bar the jurisdiction of Apex Court under Article 136 of the Constitution or the jurisdiction of the High Court under Articles 226 and 227 of the Constitution to entertain a challenge to the advance ruling of the Authority.

Headnote:Income Tax Act, 1961- Chapter XIX-B -Advance ruling pronounced by Authority -Whether can be challenged by applicant or by Commissioner or any income-tax authority subordinate to him under Article 226/227 of the Constitution before the High Court or under Article 136 of Constitution before Apex Court- As Section 245S expressly makes the Advance Ruling binding on the applicant, in respect of the transaction and on the Commissioner and the income tax authorities subordinate to him, the Authority is a body acting in judicial capacity- Hence Authority is a body exercising judicial power conferred on it by Chapter XIX-B of Act and is a tribunal within the meaning of the expression in Articles 136 and 227 of the Constitution- Unless, a Special Leave Petition raises substantial questions of general importance or a similar question is already pending before Court for decision, Court does not entertain a Special Leave Petition directly against an order of the tribunal-In present Special Leave Petition, no substantial question of general importance arose nor was it shown that a similar question was already pending before ApexCourt for which the petitioner could be permitted to approach Court directly against the advance ruling of the Authority-Hence Special Leave Petition disposed of granting liberty to petitioner to move appropriate High Court under Article 226 and/or 227 of the Constitution (Paras 13, 14)
       Facts of the Case :
        Present petition has been filed under Article 136 of the Constitution of India seeking special leave to appeal against the order of the Authority for Advance Rulings (Income Tax) constituted under Chapter XIX-B of the Income Tax Act, 1961. The preliminary question that arose for consideration in present case was whether an advance ruling pronounced by the Authority can be challenged by the applicant or by the Commissioner or any income-tax authority subordinate to him under Article 226/227 of the Constitution before the High Court or under Article 136 of the Constitution before this Court.
       Findings of the Court :
        Unless, a Special Leave Petition raises substantial questions of general importance or a similar question is already pending before Court for decision, Court does not entertain a Special Leave Petition directly against an order of the tribunal.In present Special Leave Petition, no substantial question of general importance arose nor was it shown that a similar question was already pending before Apex Court for which the petitioner could be permitted to approach Court directly against the advance ruling of the Authority. Hence Special Leave Petition was disposed of granting liberty to petitioner to move appropriate High Court under Article 226 and/or 227 of the Constitution.
       Result : Petition disposed of

ORDER

A. K. Patnaik, J.-Special Leave Petition (C) No. 31543 of 2011:

1. This is a petition under Article 136 of the Constitution of India seeking special leave to appeal against the order dated 08.08.2011 of the Authority for Advance Rulings (Income Tax) constituted under Chapter XIX-B of the Income Tax Act, 1961 (for short ‘the Act’) in A.A.R. No.862 of 2009.

2. The petitioner is a company incorporated in the United States of America (for short ‘the USA’) and is engaged in the business of designing, developing, marketing and distributing outdoor apparel. For making purchases for its business, the petitioner established a liaison office in Chennai with the permission of the Reserve Bank of India (for short ‘the RBI’) in 1995. The RBI granted the permission in its letter dated 01.03.1995 subject to the conditions stipulated therein. The permission letter dated 01.03.1995 of the RBI stated that the liaison office of the petitioner was for the purpose of undertaking purely liaison activities viz. to inspect the quality, to ensure shipments and to act as a communication channel between head office and parties in India and except such liaison work, the liaison office will not undertake any other activity of a trading, commercial or industrial nature nor shall it enter into any business contracts in its own name without the prior permission of the RBI. The petitioner also obtained permission on 19.06.2000 from the RBI for opening an additional liaison office in Bangalore on the same terms and conditions as mentioned in the letter dated 01.03.1995 of the RBI.

3. On 10.12.2009, the petitioner filed an application before the Authority for Advance Rulings (for short ‘the Authority’) on the questions relating to its transactions in its liaison office in India set out in Annexure-II to the application. Questions No. 1 to 6 as set out in Annexure-II to the application of the petitioner before the Authority are extracted hereinbelow:

“1. Whether based on the nature of activities carried on by the Liaison Office [‘India LO’] of the Applicant in India, as listed in the Statement of relevant facts [Annexure III], any income accrues or arises in India as per Section 5(2)9B) of the Act?

2. Whether based on the nature of activities carried on by the India LO, as listed in the Statement of relevant facts [Annexure III], the Applicant can be said to have a business connection in India as per the provisions of Section 9(1)(i) of Act read with its Explanation 2?

3. If the answer to Query 2 is in the affirmative, whether various activities carried out by the India LO, as listed in the Statement of relevant facts [Annexure III], are covered under the phrase ‘through or from operations which are confined to the purchase of goods in India for the purpose of export’ as stated in part (b) of Explanation 1 to Section 9(1)(i) of the Act?

4. If the answer to Query 3 is in the negative, how would the profits attributable to the ‘operations in India’ be determined and what would be the broad principles to be borne in mind for attributing income to the India LO?

5. Whether the India LO creates a permanent establishment [‘PE’] for the Applicant in India under Article 5(1) of the Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains entered into between the Government of the Republic of India and the Government of the United States of America [‘Treaty’] read with the PE exclusion available for purchase function in terms of paragraph 3(d) of Article 5 of the Treaty?

6. If the answer to Query 5 is in the affirmative, how would the profits attributable to the PE in India be determined and what would be the broad principles to be borne in mind for attributing income to India LO under the Treaty?’

4. The respondent filed his reply dated 10.12.2010 to the aforesaid application of the petitioner before the Authority. The petitioner also filed its response dated 08.02.2011 to the reply of the resp

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2012 Supreme(SC) 501

Cases Referred (9)