Authority for Advance Rulings can only determine tax liability of an applicant and not any of its affiliates or AOP

CTCI Overseas Corporation Ltd., In re (AAR - New Delhi)

It would be impermissible for the authority ‘Authority for Advance Rulings’ (AAR) to determine tax liability of person other than the applicant

Facts

The applicant, a foreign company, formed a consortium with an Indian company to execute a project (i.e., ‘contract’) in India. The contract was awarded to the consortium. Under the contract, the applicant was responsible for offshore supplies, offshore services and the Indian company was responsible for onshore supplies, construction and erection. The applicant approached the AAR to determine the taxability of income receivable from offshore supplies made to Indian company. The AAR ruled that the applicant’s income from offshore supplies would not be taxable in India in view of the Supreme Court’s decision in Ishikawajima. Revenue filed an application for rectification of apparent mistake as the contract was awarded to consortium (AOP) and not to applicant, thus, ruling of AAR that applicant was not liable to be taxed was inconsistent with the finding that AOP was the assessing unit. The AAR allowed the rectification application of revenue and posted the application for main hearing as to whether AOP could be liable to be taxed in respect of offshore supplies?

Held

Section 245N of the Act doesn't permit AAR to rule on tax liability of a person other than the applicant. The AAR couldn’t give a ruling that the applicant was not liable to be taxed and somebody else would be liable to be taxed. The proposed question framed by AAR for determination could only relate to applicant's tax liability. It would be impermissible for AAR to determine tax liability of person other than the applicant (i.e., AOP).