Section 245N

Section 245N — the law in short

What the courts have decided on section 245N, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Columbia Sportswear Company v DIT Supreme CourtHelps taxpayer
  The Authority for Advance Rulings has ruled against me and section 245S says the ruling is binding. Is there anything I can do about it?
  Yes. The Supreme Court held that the Authority for Advance Rulings is a tribunal within Articles 136 and 227, exercising judicial power, so its rulings can be challenged in the High Court under Articles 226 and 227 and, in this Court's discretion, under Article 136. Section 245S making a ruling binding on the applicant and the income tax authorities cannot oust a jurisdiction conferred by the Constitution. But the Court will ordinarily send the applicant to the High Court unless a substantial question of general importance arises. Such a writ petition should be heard directly by a Division Bench and decided as expeditiously as possible.
• In re Mustaq Ahmed (admission) Advance RulingHelps taxpayer
  The Department says my advance ruling application is barred because scrutiny of my return had already begun. Does a section 143(2) notice issued before I applied shut me out?
  No, on these facts - and this decision goes no further than that. The Authority allowed the application under section 245R(2) and posted it for hearing; it did not rule on whether the applicant's income from buying gold jewellery in India for export is taxable. The applicant, resident in Singapore, had filed returns for assessment years 2005-06 and 2006-07 claiming no exemption, applied to the Authority on 26 March 2007, and only then filed revised returns on 30 March 2007 claiming the exclusion in Explanation 1 to section 9(1)(i). The Authority held that no question was pending on the date of the application, and that claiming a statutory exemption is not a design for avoidance.
• Mustaq Ahmed v DIT (International Taxation) Advance RulingHelps taxpayer
  I applied to the Authority on 26 March and filed a revised return claiming an exemption on 30 March. The Department says my question was already pending. Was it?
  No. The Authority allowed the application under section 245R(2), rejecting the Department's objection under clause (i) of the proviso. The applicant, resident in Singapore, had filed returns for assessment years 2005-06 and 2006-07 on 30 October 2005 and 31 October 2006 which claimed no exemption; he applied to the Authority on 26 March 2007; and he filed revised returns claiming the exclusion in Explanation 1 to section 9(1)(i) only on 30 March 2007. The Authority held that pendency is judged as on the date of the application, so nothing was in issue on 26 March 2007. It also rejected the objection that the transaction was designed for avoidance.
• In re Fidelity Advisor Series VIII Advance RulingHelps taxpayerSuperseded by amendment
  Our US fund buys and sells Indian shares through local brokers and a custodian bank. Are our gains business profits or capital gains, and does the custodian give us a permanent establishment?
  Business profits, and no permanent establishment - so the fund won. The Authority ruled that the gains arising to Fidelity Advisor Series VIII from sales of its portfolio investments in India were its business profits covered by article 7 of the India-US convention, the shares and securities being held as business assets. It further ruled that the fund had no permanent establishment in India under article 5: it had no branch, office, employee or dependent agent here, and Standard Chartered Bank, its domestic custodian, was an independent agent within paragraph 5 of article 5. Without a permanent establishment the fund was not taxable in India under the convention. The ruling binds only that applicant.
• Steffen Robertson and Kirsten v CIT Advance RulingHelps departmentSuperseded by amendment
  Part of our consultancy work for an Indian client is done in our own office abroad, and the contract puts every Indian tax on the client. Is the offshore part of the fee still taxable in India - and can we even ask the Authority when the tax is not ours to bear?
  Yes to both. The Authority held that the whole of the US $ 203,090 payable by TISCO to a South African engineering consultancy - the part for work done at Johannesburg, the part for work done in India, and the part described as daily allowances and travelling costs - was deemed to accrue or arise in India under s.9(1)(vi) and s.9(1)(vii), because the statutory test is where the services are utilised, not where they are rendered. TISCO had to deduct at 55 per cent for payments in financial year 1996-97 and 48 per cent for 1997-98, or at 30 per cent if both conditions in s.115A(1)(b) were shown to be met. The Authority also held the application maintainable despite a clause making TISCO bear all Indian taxes, because the non-resident still carries its own advance-tax and return obligations. The ruling binds only SRK.
• Monte Harris v CIT Advance RulingHelps taxpayerSuperseded by amendment
  I have become resident in India by the time I want an advance ruling, and I have filed my return in the meantime because the due date came round. Can the Authority still hear my application?
  Yes, on both objections. The Authority held that residential status for Chapter XIX-B is tested by the financial year immediately preceding the year in which the application is made, so an American software manager who had become resident in 1994-95 was still a non-resident applicant when he applied on 31 March 1995. It also held that the bar in clause (a) of the proviso to s.245R(2) bites only where the question was already pending on the date of the application, so a return filed afterwards does not defeat it. On the merits it ruled that he was a technician in information technology within the notified field and entitled to exemption under s.10(5B). The ruling binds only Monte Harris.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.