Case nº AAR Nos. 1138, 1140-1144, 1150 of 2011 of Authority for Advance Rulings, August 07, 2013 (case In Re: Hyosung Corporation Vs)

JudgeFor Appellant: Mr. Deepak Chopra, Mr. Harpreet Singh Ajmani and Ms. Shruti Sinha, Advocates and For Respondents: Mr. R.S. Rawal, CIT-DR (AAR) and Mr. Bhupinderjit Kumar, ADIT, (IT) Delhi
PresidentArijit Pasayat, J. (Chairman) and T.B.C. Rozara Member
Resolution DateAugust 07, 2013


Arijit Pasayat, J. (Chairman)

  1. Since common questions of law are involved in all these applications, reference to the factual aspects is limited only to the factual scenario of the issues involved, which are also similar. The applicant company in each case filed application for advance ruling in terms of Section 245Q(1) of the Income-tax Act, 1961 (in short the Act). In response to the notice issued in each case the respondent Revenue has filed its objection (in the nature of preliminary objection) taking the stand that in view of the bar provided in section 245R(2) of the Act, the application needs to be rejected in each case. It has been specifically pointed out with reference to the dates of filing of return the date of filing of application before this Authority and the relevant assessment year that before filing of the application the return of income in each case had been filed and the question(s) raised/involved were pending before the Income-tax Authority. The data furnished by the Revenue is not disputed by the applicant. The same reads as follows:

    The applicant in each case has raised the following identical questions in the application filed by it:-

  2. On the facts and circumstances of the case, whether the amount received/receivable by Hyosung from PGCIL for Offshore supply of equipments and materials etc. under Offshore supply contract No. ('Offshore supply contract') read with letter of Award No. dated ('LOA for Offshore supply contract') for Substation (New) associated with ('Project') is liable to tax in India under the provisions of the Act and/or the Agreement for Avoidance of Double Taxation between India and Korea ('India Korea Tax Treaty')?

  3. Whether "Supervisory Activities" performed by Hyosung under ______Project results in establishment of a Permanent Establishment ('PE') of Hyosung in India under Article 5(3) of the India Korea Tax Treaty?

  4. If answer to second question is in the affirmative, then;

    3.1. Can any income other than income attributable to such 'Supervisory Activities' be liable to tax in India?

    3.2. Is 'Transactional Net Margin Method' or 'Comparable Uncontrolled Price Method' an appropriate method for determining fee for 'Supervisory Activities' in the absence of any specific supervisory fee under the Offshore supply contract?

  5. Reference has been made to two decisions of this Authority in the case of Wave Field Inseis ASA (AAR No. 951 of 2010), wherein it was observed as under:

    In our order in AAR No. 1009 of 2010 (SEPCO III Electric Power Corporation), we had taken the view that if the applicant before this Authority had already filed a return of income involving the amount arising out of the identical transaction on which a question for our ruling is raised by filing an application under section 245Q(1) of the Income-tax Act, the application before the Authority for Advance Rulings will be barred by the clause (i) of the proviso to section 245R(2) of the Act and the application will have to be rejected.

    It was further observed in the cited ruling as under:-

    One of the situations or circumstances, is when the question raised before it, has arisen before the Income-tax Authority. The question referred to in the proviso to section 245R(2) of the Act, is the question before the Authority for Advance Rulings. When a return is filed, so many aspects arise out of that return. The question of computation of total income, of computation of the exemptions and exclusions, acceptance or non-acceptance of an item of expenditure and ultimately the determination of chargeable income and the determination of the tax...

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