Section 245R of the Income-tax Act, 1961 - Advance ruling

Court :
AUTHORITY FOR ADVANCE RULING (INCOME TAX), NEW DELHI

Brief :
Section 245R of the Income-tax Act, 1961 - Advance ruling - Procedure on receipt of application for - Assessment years 2005-06 and 2006-07 -Whether in order to decide whether question raised in application is already pending before income-tax authority, as laid down in proviso to section 245R(2), crucial point of time to be taken into account is date on which application was filed before authority and it is on that date, that factual position as regards pendency of question has to be decided - Held, yes - Whether mere fact that exemption is claimed by assessee relying on a particular provision of Act cannot be construed to be a design for avoidance of income-tax, and in order to clamp bar under clause (iii) of proviso to section 245R(2) at threshold, there must be necessary facts pointing to prima facie inference of a design to avoid tax by illegal or improper means - Held, yes - Whether where assessee/applicant made claim for relief/exemption under provisions of Act for first time in revised return subsequent to filing of application before AAR seeking advance ruling on issue of said claim for relief/exemption, no question or issue can be said to be pending before Assessing Officer on date of filing application before AAR, so as to reject application in terms of proviso to section 245R(2) - Held, yes Facts The applicant was the sole proprietor of a business under the name and style of ‘M Mart’ at Chennai engaged in the purchase, manufacture and sale of gold jewellery. The applicant was also the managing director of Mustafa Pte. Limited, having its registered office in Singapore. Apart from the business as above, the applicant was also engaged in the activity of purchasing gold jewellery in India for the purpose of export. The applicant had been submitting its returns of business income derived from local sales and export sales with Assistant Director (International Taxation), Chennai. The returns for the assessment years 2005-06 and 2006-07 were filed on 30-10-2005 and 31-10-2006, respectively. In the returns, the income included the income derived from purchase and export of gold ornaments. However, the applicant filed revised returns on 30-3-2007 claiming exemption of the income relating to purchase of gold ornaments for export under Explanation’s (a) and (b) to section 9(1)(i). He also filed advance ruling application on 26-3-2007 seeking advance ruling on the question as to whether the income derived by the applicant on the purchase in India and export of gold jewellery accrues or arises in India and is taxable in India. Before authority applicant submitted that the income arising from the operations confined to purchase of gold ornaments and gold converted into ornaments for the export purpose does not accrue or arise in India and, therefore, not liable to be included in his total income assessable to tax. The revenue raised objection that the application is liable to be rejected in terms of proviso to section 245R(2) on the ground that the question raised in the application is already pending for adjudication before the assessing authority.

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