$ 1 * IN HIGH COURT OF DELHI AT NEW DELHI + W.P. (C) 5668/2020 & CM APPL. 20511/2020 COMMISSIONER OF INCOME TAX 1 (INT TAX), DELHI & ORS. Petitioners Through: Mr. Sunil Agarwal, Advocate. versus AUTHORITY FOR ADVANCE RULING, INCOME TAX, NEW DELHI & ANR. Respondents Through: Mr. Divyanshu Agrawal, Advocate for respondent No. 2. % Date of Decision: 27th August, 2020 CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MR. JUSTICE SANJEEV NARULA JUDGMENT MANMOHAN, J: (Oral) 1. petition has been heard by way of video conferencing. 2. Present writ petition has been filed challenging order dated 24th June, 2019 passed by Authority for Advance Rulings on ground that it is in violation of jurisdictional bar under proviso to Section 245R(2) of Income Tax Act, 1961 (hereinafter referred to as Act ). Petitioner also prays for declaration to effect that only petitioner has jurisdiction to deal with case of respondent No. 2 [ Crocs Europe BV] and Respondent No. 1 has no jurisdiction to deal with same. Petitioner further prays for stay on operation of impugned order. relevant W.P. (C) 5668/2020 Page 1 of 7 portion of impugned order is reproduced hereinbelow:- .It is vehemently urged before us that question on which notice under Section 143(2) of Act was issued was taxable income shown in revised return is less than taxable income shown in original return and large refund has been claimed and question whether royalty is taxable on paid basis has direct repercussion on determination of refund. It is submitted that therefore question raised by applicant is pending before Assessing Authority. At cost of repetition, we must state that notice under Section 143(2) merely asks applicant to produce any evidence on which it may like to rely in support of its return. It does not even remotely disclose any application of mind to return filed by applicant. It is clear from judgments of High Court of Delhi referred to hereinabove that if there is no application of mind to question raised by applicant in notice under Section 143(2), said question cannot be stated to be pending to attract clause (i) of proviso to Section 245R(2) of Act. Hence this objection raised by Departmental Representative is rejected. 3. Mr. Agarwal, Learned counsel for petitioners submits that impugned order is liable to be quashed as application of respondent No. 2 was not maintainable before respondent No. 1 because of non-existence of Jurisdictional Fact . He refers to report under Section 245R(2) filed by Deputy Commissioner of Income Tax to point out that main issue before Assessing Officer in scrutiny proceedings is same as before Authority for Advance Rulings namely whether royalty is taxable in hands of petitioners at time of actual receipt or otherwise. He argues that since questions raised in Application before Respondent No 1 were already pending before Assessing Officer, Respondent No 1 was barred from assuming jurisdiction in view W.P. (C) 5668/2020 Page 2 of 7 of threshold bar enshrined in clause (i) under Proviso to section 245 R (2) of Act. 4. Learned counsel further submits that Authority for Advance Rulings is bound to follow mandatory statutory procedure and if entire record and notice alone had not been examined by it, then conclusion of Authority would have been different. He states that though notice under Section 143(2) is in standard pre-printed format, yet it is in accordance with specific language used in Sections 142(1) and 143(2) of Act. In support of his submissions, learned counsel for petitioners relies upon judgment of Supreme Court in case of Sudhir Chandra Nawn Vs. Wealth Tax Officer, Calcutta & Ors., (1969) 1 SCR 108. relevant portion of judgment relied upon by learned counsel for petitioners is as under:- 3. tax which is imposed by Entry 86 List I of Seventh Schedule is not directly tax on lands and buildings. It is tax imposed on capital value of assets of individuals and companies, on valuation date. tax is not imposed on components of assets of assessee: it is imposed on total assets which assessee owns, and in determining net wealth not only encumbrances specifically charged against any item of asset, but general liability of assessee to pay his debts and to discharge his lawful obligations have to be taken into account. In certain exceptional cases, where person owes no debts and is under no enforceable obligation to discharge any liability out of his assets, it may be possible to break up tax which is leviable on total assets into components and attribute component to lands and buildings owned by assessee. In such case, component out of total tax attributable to lands and buildings may in matter of computation bear similarity to tax on lands and buildings levied on capital or annual value under Entry 49 List II. But legislative authority of Parliament is not determined by visualizing possibility of exceptional cases of W.P. (C) 5668/2020 Page 3 of 7 taxes under two different heads operating similarly on tax payers. Again Entry 49 List II of Seventh Schedule contemplates levy of tax on lands and buildings or both as units. It is normally not concerned with division of interest or ownership in units of lands or buildings which are brought to tax. Tax on lands and buildings is directly imposed on lands and buildings, and bears definite relation to it. Tax on capital value of assets bears no definable relation to lands and buildings which may form component of total assets of assessee. By legislation in exercise of power under Entry 86 List I tax is contemplated to be levied on value of assets. For purpose of levying tax under Entry 49 List II State Legislature may adopt for determining incidence of tax annual or capital value of lands and buildings. But adoption of annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make fields of legislation under two entries overlapping. 5. Having heard learned counsel for petitioners and having perused records on record, this Court finds that revised return has been selected for scrutiny under computer aided selection system (CASS) and notice dated 16th August, 2018 under Section 143(2) of Act had been issued to petitioners. admitted reason for selection of respondents case for scrutiny is taxable income shown in revised return is less than taxable income shown in original return and large refund has been claimed . In contrast question admitted for Ruling is Whether on facts and circumstances of case and in law, Royalty receivable by Applicant from Crocs India Private Limited ( Crocs India ) for use of intellectual property rights ( IPR ) relating to design, development, marketing, distribution etc would be taxable in hands of Applicant only at time of actual receipt under Article 12 of Agreement between India and Netherlands for avoidance of double taxation and prevention of fiscal W.P. (C) 5668/2020 Page 4 of 7 evasion ( Treaty ) ? 6. Two Division Benches of this Court in Hyosung Corporation vs. Authority for Advance Rulings & Ors., (2016) 382 ITR 371 (Delhi) and Sage Publication Ltd. Vs. Deputy Commissioner of Income-Tax (International Taxation), (2016) 387 ITR 437 (Delhi) have held that question cannot be said to be pending under Clause (i) of proviso to Section 245R(2) upon issuance of mere notice under Section 143(2) of Act, especially when it has been issued in standard pre-printed format and questions raised before authority for advance ruling do not appear to be forming subject matter of said notice. This is also more so when notice fails to satisfy particulars of claim of loss, exemption, deduction, allowance or relief as mandated by Section 143(2)(i) of Act. relevant portions of said judgments are respectively reproduced hereinbelow:- A) Hyosung Corporation Vs. Authority for Advance Rulings & Ors. When can question be stated to be pending ? xxx xxx xxx 27. As far as notice under Section 143(2) of Act is concerned, that provision itself stipulates that such notice will be issued by AO where he has reason to believe that any claim of such exemption, deduction, allowance or relief made in return is inadmissible. It mandates that notice should specify particulars of such claim, loss, exemption, deduction or relief. Turning to notice issued in instant case to Petitioner under Section 143(2) of Act, it is seen that it is in standard pre-printed format which merely states that there are certain points in connection with return of income on which AO would like some further information . said notice fails to satisfy particulars of claim of loss, exemption, deduction, allowance or relief as mandated by Section 143(2)(i) W.P. (C) 5668/2020 Page 5 of 7 of Act. In any event question raised in applications by Petitioner before AAR do not appear to be forming subject matter of notices under Section 143(2) of Act. Consequently, mere fact that such notice was issued prior to filing of application by Petitioner before AAR will not constitute bar, in terms of clause (i) to proviso to Section 245R(2) of Act, on AAR entertaining and allowing applications. B) Sage Publication Ltd. Vs. Deputy Commissioner of Income Tax (International Taxation) It is evident on plain reading of notice that it does not address itself to any specific question; it does not even disclose application of mind to returns save and except fact that they conform to instructions which compelled Assessing Officer to issue scrutiny notice on account of international transaction reported by assessee. previous authority of this Court in Hyosung (supra) and L.S. Cable (supra) had occasion to deal with identical notices. It was positively ruled that such notices ipso facto would be insufficient to attract automatic rejection route under proviso to Section 245R(2) of Act. Consequently, we have no hesitation in holding that impugned order of Ruling Authority in rejecting application is untenable. Consequently, order is quashed and set aside. petitioner's application shall now be processed and independently dealt with on its merits in accordance with law by Ruling Authority. parties shall be present before Advance Ruling Authority on 13.09.2016. writ petition is allowed in above terms. 7. AAR has followed above-noted decisions and held notice under section 143(2) merely asks applicant to produce any evidence on which it may like to rely in support of its return. It does not even remotely disclose any application of mind to return filed by applicant. For this reason, AAR has held that that question cannot be said to be pending to W.P. (C) 5668/2020 Page 6 of 7 attract bar under clause (i) of proviso to Section 245R(2) of Act. 8. Mr. Agarwal tried to impress upon us that aforesaid judgments do not deal with jurisdictional ground urged by him in present petition and we should examine matter afresh or refer matter to larger bench. We are not inclined to agree with Mr. Agarwal. precise question urged by Mr. Agarwal has been answered against Revenue in above- noted decisions. It is also pertinent note that Special Leave Petitions challenging judgments of Division Benches have been dismissed. Consequently, issues of law and fact raised by learned counsel for petitioners are no longer res integra. We do not any infirmity in approach adopted by AAR. We are therefore not inclined so as to exercise our jurisdiction under Article 226 and entertain present petition to take different view. Dismissed. 9. Before parting, we would like to add that judgement in case of Sudhir Chandra Nawn (supra) is clearly inapplicable to facts of present case as it only states that even if formula for calculation of tax liability under two different statutes enacted under different entries in List III of Schedule VII of Constitution is similar, that would not make fields of legislation under two entries overlapping. 10. order be uploaded on website forthwith. Copy of order be also forwarded to learned counsel through e-mail. MANMOHAN, J SANJEEV NARULA, J AUGUST 27, 2020/KA W.P. (C) 5668/2020 Page 7 of 7 Commissioner of Income-tax 1 (Int Tax), Delhi & Ors. v. Authority For Advance Ruling, Income-tax, New Delhi & Anr