Section 245R — Procedure on Receipt of Application (Income-tax Act, 1961)

Section 245R of the Income-tax Act, 1961 outlines the procedure to be followed upon receipt of an application by the Authority for Advance Rulings (AAR). This section is significant as it provides a mechanism for taxpayers to seek clarity on tax liabilities before undertaking a transaction, thus reducing litigation. The AAR must admit or reject the application within six months from the date of receipt. The section specifies that the application will not be admitted if the question raised is already pending before any income-tax authority, Appellate Tribunal, or any court. The burden of proof lies with the applicant to demonstrate that the question is not pending elsewhere. This provision is crucial for non-residents and certain categories of residents who wish to obtain an advance ruling on their tax liabilities, providing them with certainty and aiding in tax planning.

Common Litigation Flashpoints

1. Whether the question raised in the application is already pending in any court or tribunal
2. Timeliness of the AAR's decision to admit or reject an application
3. Interpretation of 'question of law' versus 'question of fact'
4. Eligibility of the applicant to seek an advance ruling

Judgments on Section 245R — Procedure on Receipt of Application (Income-tax Act, 1961)

• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.
• Commissioner of Income Tax, Bangalore vs B. C. Srinivasa Setty — SC,
  Goodwill generated in a newly commenced business cannot be described as an 'asset' within the terms of Section 45 and therefore its transfer is not subject to income-tax under the head 'capital gains'