Case: The Commissioner of Income Tax Vs. M/S. Umicore Finance Luxemborg

at the instance of the Respondents is not covered under clause (i) (ii) and (iii) of Section 245(N)(a) of the said Act. To examine such aspect, clause (i) of Section 245N(a) of the said Act defines advance ruling as thus :(a) Advance ruling means -(i) a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant.14. The learned AAR whilst dealing with such aspect has rightly observed in the Order dated 06.07.2009 at para 6 thus :6. It seems to us that the application is maintainable having regard to the wider language of sub-clause (i) of section 245N(a) in contrast with the language employed in sub-clause (ii). There is no specific requirement in sub-clause (i) that determination should relate to the tax liability of an on-resident. Going by the averments of the applicant, it is clear that the capital gain tax issue arising in the case of the acquired Indian company has a direct and substantial impact on the applicants business in view of the stipulations in share purchase agreement. Sub-clause (i) has to be construed in a wider sense and moreover a remedial provision shall be liberally construed. We are, therefore, of the view that the question raised by the applicant falls within the definition of advance ruling under section 245N9a) of the Act. Accordingly, the application is allowed under section 245R92) and posted for hearing on merits on 11th August, 2009.15. Considering the said aspect and as looking into the question as reformulated, the question as to whether capital gains are liable to be paid or not in terms by the transferee Company being a non resident Company, the Respondent herein, would be a matter which would come within the scope of advanced ruling in terms of the said depreciation.16. In this context, the High Court of Madras in the Judgment reported in (2009) 222 CTR (Mad) 270 in the case of Anurag Jain vs. Authority for Advance Rulings & anr.. has observed at paras 19, 20 and 24 thus :19. In that judgment, while dealing with the jurisdiction of the High Court under Article 226 of the Constitution of India apart from that of the Supreme Court under Article 136, the Supreme Court has confirmed with approval the earlier judgment in R.B. Shreeram Durga Prasad and Fatehchand Nursing Das v. Settlement Commission [1989]176ITR169(SC) that the court is concerned with the legality of the procedure followed and not the validity of the order and the courts under judicial review are concerned not with the decision but with the decision-making. The relevant portion of the judgment of the Supreme Court in this regard is as follows (page 623 of 201 ITR):The scope of enquiry, whether by the High Court under Article 226 or by this court under Article 136 is also the same whether the order of the Commission is contrary to any of the provisions of the Act and if so, apart from ground of bias, fraud and malice which, of course, constitute a separate and independent category, has it prejudiced the petitioner/appellant. Reference in this behalf may be had to the decision of this court in R.B. Shreeram Durga Prasad and Fatehchand Nursing Das v. Settlement Commission : [1989]176ITR169(SC) , which too was an appeal against the orders of the Settlement Commission. Sabyasachi Mukharji J., speaking for the Bench comprising himself and S.R. Pandian J., observed that, in such a case, this court is concerned with the legality of the procedure followed and not with the validity of the order. The learned judge added judicial review is concerned not with the decision but with the decision-making process. Reliance was placed upon the decision of the House of Lords in Chief Constable of North Wales Police v. Evans [1982] 1 WLR 1155 (HL). Thus, the appellate power under Article 136 was equated with the power of judicial review, where the appeal is directed against the orders of the Settlement Commission. For all the above reasons, we are of the opinion that the only ground upon which this court can interfere in these appeals is that the order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant. The main controversy in these appeals relates to the interpretation of the settlement deeds though it is true, some contentions of law are also raised. The Commission has interpreted the trust deeds in a particular manner. Even if the interpretation placed by the Commission on the said deeds is not correct, it would not be a ground for interference in these appeals, since a wrong interpretation of a deed of trust cannot be said to be a violation of the provisions of the Income Tax Act. It is equally clear that the interpretation placed upon the said deeds by the Commission does not bind the authorities under the Act in proceedings relating to other assessment years.20. Applying the said judicial dictum laid down by the Supreme Court to the facts of the present case even assuming that the first respondent authority has not interpreted the associated employment agreement which on fact forms part of the share purchase agreement in the proper manner, it is certainly not open to this court to go into the correctness or otherwise or validity or otherwise of the findings given by the first respondent.24. Hence, it is not necessary for this court to give any finding as to the jurisdiction of this court under Article 226 of the Constitution of India.17. Considering the said observations and taking note of the findings of the learned AAR, we find that there is no case made out for interference by this Court under Article 226 of the Constitution of India. The Petitioners were given an opportunity by the learned AAR and the contentions raised were duly considered whilst passing the impugned Orders. We find no reason to interfere in the impugned Orders passed by the learned AAR.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. On perusal of the said observations, we find that the learned AAR has in a very reasoned Order, has taken a view that no capital gains accrued or attracted at the time of conversion of the partnership firm into a Private Limited Company. In part IX of the Companies Act, therefore, notwithstanding thenoncompliance with clause (d) ofthe proviso of Section 47(xiii) of the Income Tax Act by premature transfer of shares, the said Company is not liable to pay capital gains tax. These findings have been arrived at essentially looking into the fact that there was revaluation of assets at the time of conversion of the firm M/s. Anandeya Zinc Oxides Private Limited. The said finding of fact has not been disputed by the learned Counsel appearing for the Petitioners and, as such, the finding of the learned AAR that there was no capital gains in the transaction in question cannot be faulted. It is also to be noted that even immediately after such conversion in question from the partnership firm into a Private Limited Company, the assessment with regard to the income of the new Company as well as of the respective partners were filed and there was no objection or grievances raised by the Assessing Officer that any capital gains had to be paid on account of the incorporation of the Company in terms of the said provisions. The transfer of shares in favour of the Respondent by the erstwhile partners who were shareholders of M/s. Anandeya Zinc Oxides Private Limited and such partners/share holders are liable to pay capital gains even if acceptable, would not affect the decision passed by the learned AAR whilst coming to the conclusion that there were no capital gains at the time of incorporation of the new Company by the said partnershipsuch circumstances, we find that the said contention of the learned Counsel appearing for the Petitioner that in view of the transfer of the capital assets or intangible assets, there are capital gain tax payable by the transferee Company, cannot be accepted. As pointed out herein above, there was no capital gains payable at the time of the incorporation of the Company from the erstwhile partnership firm.Considering the said observations and taking note of the findings of the learned AAR, we find that there is no case made out for interference by this Court under Article 226 of the Constitution of India. The Petitioners were given an opportunity by the learned AAR and the contentions raised were duly considered whilst passing the impugned Orders. We find no reason to interfere in the impugned Orders passed by the learned AAR.