X-LIMITED, THE NETHERLANDS Vs. CIT (INTERNATIONAL TAXATION)

JUDGEMENT

(1.) IN this application, under section 245Q(1) of the Income -tax Act, 1961 (For short the 'Act'), X -Limited, the applicant, is a company incorporated under the laws of Netherlands as is a tax resident of Netherlands. The applicant seeks ruling of the Authority on the following questions :

(2.) THE applicant has been carrying on a systematic and organized course of activity in the matter of holding shares. It claims to be engaged in the business of holding shares of various companies. 'A' Limited and 'B' Limited are Indian companies, which are wholly owned subsidiaries of the applicant. During the financial year 2002 -03, 'A' Limited granted interest -bearing loans to 'B' Limited amounting to Rs. 36,30,23,497/ -. The date of disbursement of the loan, the quantum of loan and the rate of interest are given in the following table :

(3.) THE Commissioner of Income -tax (International Taxation), Bangalore (hereinafter referred to as the 'Commissioner') submitted his comments to the application. It is stated that both the parties to the transaction of the loan are Indian companies. There is no transaction between the applicant, a non -resident, and the resident companies. Under section 245N(a) of the Act, an advance ruling may be given only in respect of tax liability of a non -resident arising out a transaction undertaken or is proposed to be undertaken by it. Reliance is placed on the ruling of the Authority in Hindustan Power Plus Ltd. : 267 ITR 685. After the amendment of section 245N(a)(ii), any determination by the Authority should relate to taxability of non -resident arising out of a transaction which has been undertaken or is proposed to be undertaken by a resident applicant with such non -resident. Though the applicant holds 100% equity shares in the India companies, the transaction cannot be said to be between a resident and non -resident. The applicant is not entitled to the benefit of the ruling of the Authority under section 245N of the Act. It is submitted that even on merits, it is not entitled to any relief and the application is liable to be rejected.