A Non-resident Foreign Company entered into contracts with several Indian Companies for installation of mobile telephone system and made an…

Application for Advance Ruling As per section 245R, the Board for Advance Rulings (BAR), after examining the application and the records called for, may either allow or reject an application. However, the Board shall not allow an application where the question raised in the application is already pending before any income-tax authority, or Appellate Tribunal or any court. In the present case, the question raised by a non-resident foreign company with respect to tax liability on income arising from installation of mobile telephone system is already pending before the Assessing Officer on account of application made by one of the Indian Companies for determination of question of law with regard to the payments made to the said foreign company. Since such question is already pending before the Income-tax Authority, the rejection of application of the foreign company by the BAR is justified in law. Alternate Answer However, as per the Explanatory Memorandum to the Finance Bill, 2020 (See Note below) the BAR shall not allow the application only if the question raised is already pending in the applicant's case before any income-tax authority. Accordingly, based on this view, the rejection of application by the BAR is not justified in law, since the question raised in the application made by the foreign company is pending before the Assessing Officer in the case of one of the Indian Companies, and not in the applicant's case. Note The first proviso to section 245R(2) has been substituted by the Finance Act, 2000 with effect from 1.6.2000. Clause (i) of the first proviso, prior to and post amendment, reads as follows: Prior to 1.6.2000 On or After 1.6.2000 Provided that the Authority shall not allow the application except in the case of a resident applicant where the question raised in the application is already pending in the applicant's case before any income-tax authority, the Appellate Tribunal or any court; Provided that the Authority shall not allow the application where the question raised in the application is already pending before any income-tax authority or Appellate Tribunal or any court. The words "except in the case of a resident applicant" and "in the applicant's case” has been removed in clause (i) of the first proviso with effect from 1.6.2000. However, the Explanatory Memorandum to the Finance Act, 2000, explaining the impact of the substitution, reads as follows: "It is proposed to substitute the proviso to provide that the Authority shall not allow the application when the question raised is already pending in the applicant's case before any income-tax authority, Appellate Tribunal or any court in regard to a non-resident applicant and resident applicant in relation to a transaction with a non-resident". Therefore, according to the intent expressed in the Explanatory Memorandum, the AAR shall not allow the application both in the case of resident and non-resident applicant if the question raised is already pending in the applicant's case before any income-tax authority. Thus, as per the Explanatory Memorandum, it is possible to take a view that even post-amendment, the Authority shall not allow the application only where a question is pending in the applicant's case before any income-tax authority.