SOCIETE GENERALE VS COMMISSIONER OF INCOME-TAX (and other appeals)
2002 P T D 1110
[251 I T R 6571
[Supreme Court of India]
Present: S.P. Bharucha, Y.K. Sabharwal and Brijesh Kumar, JJ.
SOCIETE GENERALE
Versus
COMMISSIONER OF INCOME-TAX (and other appeals)
Civil Appeal No. 3815 of 1999 with Civil Appeals Nos. 3816 and 3817 of 1999, decided on /01/.
th
July, 2001. (Civil Appeal No. 3815 of 1999 is by special leave from the ruling, dated December 4, 1998, of the Authority for Advance Rulings in A.A.R. No.362 of 1997).
Income-tax---
----Advance ruling---Double Taxation Avoidance Agreement---Article providing for non-discrimination---Non-resident company---Application for ruling on whether lesser rate of tax applicable to domestic companies should be available to it---Authority for Advance Rulings---Jurisdiction---Department raising objection---Authority seeing that objection was of some substance but ruling on merits against applicant-- Supreme Court---Appeal by special leave by applicant---Ruling set aside ---Indian Finance Acts, 1994, 1995, 1996, Sched. I, Part I, para. E--- Indian Income Tax Act, 1961, Ss.90, 2456 &k 2451-Double Taxation Avoidance Agreement between India and France, Art. 26.
On an application by the applicant, a non-resident banking company, under section 2456 of the Income Tax Act, 1961, for an advance ruling on the question whether it could claim the benefit of the lesser rate of tax on domestic companies in view of Article 26 of the Double Taxation Avoidance Agreement between India and France providing for non-discrimination, the Department raised a preliminary objection that, in view of the proviso to section 2458 the Authority for Advance Rulings had no jurisdiction to make a ruling. The Authority saw that the objection was of some substance but proceeded to give its ruling on the merits and ruled that the rate of tax fixed by an Act of Parliament, even if the rate of tax on nun-domestic companies was higher, cannot be whittled down by reference to the provisions of an earlier agreement between France and India, even if such agreement had the force of law; and, therefore, the rate of tax payable by a non-domestic company could not be reduced by relying upon Article 26 of the D.T.A.A. (see (1999) 236 ITR 103). The appellant appealed by special leave to the Supreme Court, to have the- ruling set aside. On the Department raising no objection and agreeing that it will not rely upon the ruling of the Authority before the Income-tax Authorities, and an application by counsel for the appellant for withdrawing the application before the Authority, the Supreme Court set aside the ruling of the Authority, observing that the appellant would be at liberty to raise the issue of the rate at which it was liable to pay tax before the Income-tax Authorities.
Ruling of the Authority for Advance Rulings in Application No.P-16 of 1998, in re: (1999) 236 ITR 103 set aside.
Soli E. Dastur and S. Ganesh, Senior Advocates (R.F. Kaka and Rustom B. Hathikhanawala, Advocates with them) for Appellant.
Harish N. Salve, Solicitor-General for India and M.L. Verma, Senior Advocate (Pritesh Kapur and B.V.B. Das, Advocates with them) for Respondent.
ORDER
These appeals by special leave impugn the judgment and order of the Authority for Advance Ruling (see (1999) 236 ITR 103) established under Chapter XIX-B of the Income Tax Act, 1961. The question that the Authority was called upon to answer, to the behest of the appellant, read thus (page 106):
"In the light of Article 26 of the agreement for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and on capital entered into by the Government of the Republic of India and the Government of the French Republic, whether the applicant is chargeable to tax in respect of income earned from business; as computed under Article 7 of the treaty from the assessment year 1996-97, at the rate applicable to a. domestic company, insofar as is beneficial to the applicant. "
Before the Authority the Revenue contended that the Authority did not have jurisdiction to decide the question in view of the fact that assessment proceedings in respect of the appellant relating to the assessment year 1996-97 were pending when the application before the Authority was filed, and attention was drawn to section 2458 of the Act, the proviso whereof states that the Authority shall riot allow an application where the question raised in it is already pending before an income-tax authority or the Appellate Tribunal or any Court. The Authority came to the conclusion that the appellant could not: "Be heard to say that even though the assessment proceedings are pending, determination of the rate of tax which is an integral part of the assessment process is not pending". The Authority was, therefore, of the view that the preliminary objection raised on behalf of the Revenue was of some substance". However, the Authority did not dispose of the application on that preliminary ground and it went on to decide it. The decision went against the appellant.
The same objection is raised before us on behalf of the Revenue. The objection has been argued for some time and now Mr. Dastur, learned counsel for the appellant, applies for leave to withdraw the application before the Authority. He submits that the issue regarding the rate of tax payable by the appellant for the assessment year 1996-97 and subsequent assessment years shall be raised by the appellant before the Authorities and that, having regard to his withdrawal of the application itself, the order thereon should be set aside.
The learned Solicitor-General, fairly, states that this may be done and that no objection shall be raised on behalf of the Revenue to the issue of the rate of tax being raised by the appellant before the authorities. He also states that the Revenue will not rely upon the impugned judgment of the Authority before the Authorities.
On the application of Mr. Dastur, learned counsel for the appellant, the application before the Authority for Advance Rulings (A.A.R. No.362 of 1997) is dismissed as withdrawn. Consequently, the impugned judgment and order is set aside.
The appellant shall be at liberty to raise the issue of the rate at which it is liable to pay tax before the Authorities, the Tribunal and the Courts thereafter and they shall come to a decision thereon independently of and without reference to the impugned judgment of the Authority.
The civil appeals are allowed accordingly.
No order as to costs.
M.B.A./1084/FCAppeal allowed.