Decided on February 14,2014

In Re: L.S. Cable and System Limited Appellant


- (1.)THE applicant LS Cable & System Limited (LSCSL), Korea is a company incorporated under the laws of Korea and has its head office at (12 -16F) LS Tower, 1026 -6, Hogye -dong, Dongan -gu, Anyang -si, Gyeonggi -do, Korea. The applicant has received offshore supplies contracts from M/s. Indu Projects Limited (Indu) for offshore supply order for design, manufacture, supply of 220, 132 kv XLPE insulated UG Cable and accessories against specification No. JB 24 JBIC 1 -2 XLPE Cable/2008. The scope of work of LSCSL under the offshore supply contract entails CIF delivery of goods from outside India to Chennai, India. The title to the plant and equipment supply under the off -shore supply contract shall be transferred in favour of Indu outside India. In consideration, for the scope of work under the off -shore supply contract, LSCSL would receive USD 4,50,36,037.40. It was also agreed between LSCSL and Indu that the aforesaid payment would be paid by Indu outside India through irrevocable Letter of Credit (L/C).
(2.)PRESENTING the above facts the applicant seeks ruling on the following questions: -
(1) On the facts and circumstances of the case, whether the amounts received/receivable by LSCSL from Indu Project Limited ('Indu') for Offshore supply of Equipments & Materials etc. under offshore supply contract No. Indu/UCP/PO/001 dated 12th October 2009 (off Shore supply contract) for design, manufacture, supply of 220, 132 kv XLPE insulated UG Cable and accessories against specification No. JB 24 JBIC 1 -2 XLPE cable/2008 [hereinafter referred to as 'Hyderabad project'] is liable to tax in India under the provisions of the Income -tax Act, 1961 ('Act') and/or the Agreement for Avoidance of Double Taxation between India and Korea ('India Korea Tax Treaty')?

(2) If answer to first question is in the negative, then whether on the facts and circumstances of the case, interest on income -tax refund is liable to tax as per clause 2 of article 12 of India Korea Tax Treaty?

The Revenue objected to admission of the application under Section 245R(2) of the Income Tax Act, 1961 (the Act) on the ground that the first relevant assessment year in respect of the said contract is Assessing Year 2011 -12 and the return for that assessment year was filed on 29.11.2011, that is before filing the application before the Authority on 30.4.2012 and notice u/s. 143(2) has been issued on 24.9.2012. Relying on the ruling of this Authority in the case of SEPCO III Electric Power Construction Corporation, AAR/1009/2010 dated 25.8.2011 and NetApp B.V., AAR No. 955 of 2010, it was submitted that the question was already pending before Income -tax Authority. It was further submitted that issue of notice under section 143(2) is only procedural and the Assessing Officer can serve the notice on the assessee upto expiry of six months from the end of the financial year in which return is furnished. The notice was issued within the limited time permitted under the Act though it was issued after filling of the application before the authority. The question was, therefore, pending before the Assessing Officer till the time available to him under the proviso to section 143(2) of the Income -tax Act. It is, therefore, argued that the application may be dismissed as non -maintainable.

(3.)THE applicant on the other hand submitted that mere filing of return does not mean that the question is already pending before the Income -tax authority. Relying on the ruling of this Authority in the case of Mitsubishi Corporation, Japan (AAR No. 1309 of 2012) decided on 13th December, 2013 it was submitted that the question can be said to be pending only when notice section 143(2) is issued by the Department.

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