We are in a consortium supplying rolling stock to Delhi Metro. Our returns are filed and a writ about the TDS rate is pending. Can we still get an advance ruling?
Yes. The Authority held the applications maintainable and allowed them so that rulings could be pronounced. On the bar in clause (i) of the proviso to section 245R(2) it held that the mere filing of returns by the applicants would not fall within the mischief of that clause, no notice under section 143(2) having been issued to them before the date of the applications. The proceedings that were on foot - applications under section 197 for determination of the rate of deduction, an appeal against the order on them and a writ petition - concerned the rate of tax for deduction at source, and did not involve the questions the Authority was being asked to decide.
Pronounced by the Authority for Advance Rulings (Syed Shah Mohammed Quadri, J. (Chairman), K. D. Singh and A. S. Narang, Members) on 2005-03-30, reported as (2005) 195 CTR (AAR) 289. It bears on section 245R(2), section 143(2), section 197 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
The ruling to reach for on how far the pendency bar extends. Two propositions come out of it. Filing a return is not by itself enough: until a notice under section 143(2) issues, there is no proceeding in which the question can be said to be pending. And proceedings about the rate of withholding under section 197, including a writ against the order made in them, raise a different question from the substantive apportionment of a contract price that the applicant brings to the Authority. Both get used constantly, because a non-resident contractor almost always has a section 197 application running while it is deciding whether to seek a ruling.
Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them.
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Rotem Company and Mitsubishi Corporation, with Mitsubishi Electric Corporation of Japan, formed a consortium led by Mitsubishi Corporation. The consortium's tender was accepted for the design, manufacture, supply, testing and commissioning of passenger rolling stock for the Delhi Metro Rail Corporation, and the contract was executed on 22 May 2001 for a fixed lump sum of Rs 3,110,439,836 and US$260,997,269 payable to the consortium. The applicants filed similar applications seeking a ruling on the apportionment of the contract consideration among identified cost centres. Before they applied, the second applicant had made applications under section 197 for the financial years 2001-02, 2002-03 and 2003-04 for determination of the rate at which tax should be deducted; those for the first two years had been disposed of by the Deputy Director at 20 per cent, that order had been challenged before the Director, and a writ petition filed on 11 February 2003 was pending when the applications were made on 30 May 2003. An earlier order of 22 November 2004 had been recalled because the verification was incorrect.
The Authority held that the bar under clause (i) of sub-section (2) of section 245R was not attracted, and allowed the applications so that rulings could be pronounced. It gave three reasons. First, mere filing of returns by the applicants would not fall within the mischief of clause (i); no notice under section 143(2) of the Act had been issued to the applicants before the date of the applications, so there was no proceeding before an income-tax authority in which the question could be said to be pending. Second, the proceedings on foot before the Deputy Director, the Director and the High Court related to the determination of the rate of tax for deduction at source under section 197, and did not involve the questions the Authority was being asked to consider, the Authority not being concerned with determining a rate of deduction. Third, the defect that had caused the earlier order of 22 November 2004 to be recalled was an incorrect verification, and that had been cured by amended applications.
The Authority treated the bar as directed at a live contest, not at the existence of a file. A return by itself starts nothing that can be called a pending question: the assessee has stated a position and the Department has taken no issue with it. It is the notice under section 143(2) that opens the enquiry in which a question can be said to be before an income-tax authority, and no such notice had gone to these applicants before 30 May 2003. The second limb required the Authority to compare questions rather than proceedings. The section 197 machinery decides one thing - at what rate the payer must deduct while the year runs - and the order made under it had fixed 20 per cent, which was what the Director and then the High Court were being asked about. What the applicants brought to the Authority was the apportionment of a lump sum consideration among identified cost centres, which is a question about the substantive incidence of tax on the consortium members. Overlap of subject matter was not enough; the questions were not the same, and clause (i) bars only the question raised in the application. On the third point the Authority noted that the recall of its earlier order had been for a formal defect in verification, since cured by amended applications, and that nothing turned on it.
Mere filing of returns by the applicants would not fall within the mischief of Clause (i)
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Handle my notice → Ask a CA on WhatsAppYes. The Authority held the applications maintainable and allowed them so that rulings could be pronounced. On the bar in clause (i) of the proviso to section 245R(2) it held that the mere filing of returns by the applicants would not fall within the mischief of that clause, no notice under section 143(2) having been issued to them before the date of the applications. The proceedings that were on foot - applications under section 197 for determination of the rate of deduction, an appeal against the order on them and a writ petition - concerned the rate of tax for deduction at source, and did not involve the questions the Authority was being asked to decide. This was decided by the Advance Ruling (Syed Shah Mohammed Quadri, J. (Chairman), K. D. Singh and A. S. Narang, Members) and bears on section 245R(2), section 143(2), section 197 of the Income Tax Act 1961. It is reported as (2005) 195 CTR (AAR) 289. The ruling to reach for on how far the pendency bar extends. Two propositions come out of it. Filing a return is not by itself enough: until a notice under section 143(2) issues, there is no proceeding in which the question can be said to be pending. And proceedings about the rate of withholding under section 197, including a writ against the order made in them, raise a different question from the substantive apportionment of a contract price that the applicant brings to the Authority. Both get used constantly, because a non-resident contractor almost always has a section 197 application running while it is deciding whether to seek a ruling. If it applies to you, the first step is this: Check whether a notice under section 143(2) had issued before you filed: filing a return alone does not trigger the bar.
Rotem Company and Mitsubishi Corporation, with Mitsubishi Electric Corporation of Japan, formed a consortium led by Mitsubishi Corporation. The consortium's tender was accepted for the design, manufacture, supply, testing and commissioning of passenger rolling stock for the Delhi Metro Rail Corporation, and the contract was executed on 22 May 2001 for a fixed lump sum of Rs 3,110,439,836 and US$260,997,269 payable to the consortium. The applicants filed similar applications seeking a ruling on the apportionment of the contract consideration among identified cost centres. Before they applied, the second applicant had made applications under section 197 for the financial years 2001-02, 2002-03 and 2003-04 for determination of the rate at which tax should be deducted; those for the first two years had been disposed of by the Deputy Director at 20 per cent, that order had been challenged before the Director, and a writ petition filed on 11 February 2003 was pending when the applications were made on 30 May 2003. An earlier order of 22 November 2004 had been recalled because the verification was incorrect. The matter was decided on 2005-03-30 by the Advance Ruling (Syed Shah Mohammed Quadri, J. (Chairman), K. D. Singh and A. S. Narang, Members). On those facts the Advance Ruling held as follows. The Authority held that the bar under clause (i) of sub-section (2) of section 245R was not attracted, and allowed the applications so that rulings could be pronounced. It gave three reasons. First, mere filing of returns by the applicants would not fall within the mischief of clause (i); no notice under section 143(2) of the Act had been issued to the applicants before the date of the applications, so there was no proceeding before an income-tax authority in which the question could be said to be pending. Second, the proceedings on foot before the Deputy Director, the Director and the High Court related to the determination of the rate of tax for deduction at source under section 197, and did not involve the questions the Authority was being asked to consider, the Authority not being concerned with determining a rate of deduction. Third, the defect that had caused the earlier order of 22 November 2004 to be recalled was an incorrect verification, and that had been cured by amended applications.
The Authority treated the bar as directed at a live contest, not at the existence of a file. A return by itself starts nothing that can be called a pending question: the assessee has stated a position and the Department has taken no issue with it. It is the notice under section 143(2) that opens the enquiry in which a question can be said to be before an income-tax authority, and no such notice had gone to these applicants before 30 May 2003. The second limb required the Authority to compare questions rather than proceedings. The section 197 machinery decides one thing - at what rate the payer must deduct while the year runs - and the order made under it had fixed 20 per cent, which was what the Director and then the High Court were being asked about. What the applicants brought to the Authority was the apportionment of a lump sum consideration among identified cost centres, which is a question about the substantive incidence of tax on the consortium members. Overlap of subject matter was not enough; the questions were not the same, and clause (i) bars only the question raised in the application. On the third point the Authority noted that the recall of its earlier order had been for a formal defect in verification, since cured by amended applications, and that nothing turned on it. In the words reproduced by the source cited on this page: "Mere filing of returns by the applicants would not fall within the mischief of Clause (i)"
It was decided by the Advance Ruling on 2005-03-30 and is reported as (2005) 195 CTR (AAR) 289. Binding only on the applicant who sought it, in respect of the transaction the ruling was sought on, and on the Principal Commissioner or Commissioner and the authorities subordinate to him in respect of that applicant and that transaction — and only until the law or the facts change (section 245S). It binds nobody else. The Tribunal and the courts nonetheless treat a considered ruling as persuasive, which is why practitioners cite them. An advance ruling binds only the applicant who sought it, only for the transaction it was sought on, and only the Commissioner and the officers under him in relation to that applicant and that transaction — and only until the law or the facts change. That is section 245S, and it means the ruling is not a precedent and binds nothing in your case. You cite it because the Authority reasoned the point out, often first and most fully, and the Tribunal and the courts treat a considered ruling as persuasive. Check before you rely on one: most of these were pronounced before 2009, and a great deal of cross-border tax has been rewritten since by amendment, protocol and judgment. On section 245R(2), section 143(2), section 197, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Authority held that the bar under clause (i) of sub-section (2) of section 245R was not attracted, and allowed the applications so that rulings could be pronounced. It gave three reasons. First, mere filing of returns by the applicants would not fall within the mischief of clause (i); no notice under section 143(2) of the Act had been issued to the applicants before the date of the applications, so there was no proceeding before an income-tax authority in which the question could be said to be pending. Second, the proceedings on foot before the Deputy Director, the Director and the High Court related to the determination of the rate of tax for deduction at source under section 197, and did not involve the questions the Authority was being asked to consider, the Authority not being concerned with determining a rate of deduction. Third, the defect that had caused the earlier order of 22 November 2004 to be recalled was an incorrect verification, and that had been cured by amended applications. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 245R(2), section 143(2), section 197 of the Income Tax Act 1961, and was decided by Syed Shah Mohammed Quadri, J. (Chairman), K. D. Singh and A. S. Narang, Members. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where a section 197 proceeding is on foot, frame your question so that it is not the rate of deduction that the officer is already deciding. Get the verification on the application right - the Authority had recalled an earlier order in these very applications for a defect in verification. Date everything, because the bar is tested against the state of affairs when the application is filed.
Still good law. Checked the current official text of section 245R. Clause (i) of the proviso to sub-section (2), barring a question already pending before any income-tax authority or Appellate Tribunal or any court, stands in the terms the Authority construed, having last been substituted by the Finance Act 2000, so both propositions in the ruling still answer the question they were given for. What has changed is the forum: the Authority for Advance Rulings has been replaced by Boards for Advance Rulings constituted under section 245-OB by Notification Nos. 96/2021 and 97/2021 dated 1 September 2021, and an appeal now lies to the High Court under section 245W. I searched for later judicial treatment of this decision and found none. Under section 245S it binds only these applicants and their own transaction. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The input note says the ruling is about how far the pendency bar extends to questions raised by a consortium member rather than by the applicant itself. That is not the ratio. The Authority decided the point on the absence of a notice under section 143(2) and on the difference between a section 197 rate determination and the apportionment question before it. The Indian Kanoon reproduction does not set out the questions verbatim, describing them only as similar questions on the apportionment of the contract consideration among identified cost centres, so I cannot give the applicants' own wording. I could not reach an official AAR text. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Authority held that the bar under clause (i) of sub-section (2) of section 245R was not attracted, and allowed the applications so that rulings could be pronounced. It gave three reasons. First, mere filing of returns by the applicants would not fall within the mischief of clause (i); no notice under section 143(2) of the Act had been issued to the applicants before the date of the applications, so there was no proceeding before an income-tax authority in which the question could be said to be pending. Second, the proceedings on foot before the Deputy Director, the Director and the High Court related to the determination of the rate of tax for deduction at source under section 197, and did not involve the questions the Authority was being asked to consider, the Authority not being concerned with determining a rate of deduction. Third, the defect that had caused the earlier order of 22 November 2004 to be recalled was an incorrect verification, and that had been cured by amended applications.
TaxSphere, “In re Rotem Company and Mitsubishi Corporation”, https://taxnotice.vittsphere.com/caselaw/case/rotem-company-mitsubhishi-vs-unknown-aar-2005/ (validity last checked 2026-09-02)
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