Delhi High Court – Orders
Mitsubishi Electric India Private … vs Deputy Commissioner Of Income-Tax … on 16 March, 2026
$~57
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3327/2026, CM APPLs. 16080/2026, 16081/2026 &
16101/2026
MITSUBISHI ELECTRIC INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Manuj Sabharwal, Adv.
versus
DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 16(1),
DELHI & ORS. .....Respondents
Through: Mr. Abhishek Maratha, SSC with Mr.
Apoorv Agarwal, JSC.
CORAM:
HON'BLE MR. JUSTICE DINESH MEHTA
HON'BLE MR. JUSTICE VINOD KUMAR
ORDER
% 16.03.2026
REPORTABLE
DINESH MEHTA, J. (ORAL)
1. By way of the present writ petition, the petitioner has challenged the
order dated 03.03.2026 passed under Section 142(1) of Income Tax Act,
1961 (hereinafter referred to as ‘Act of 1961’) and notice dated 09.03.2026,
whereby the respondent No.2-Assessing Officer (hereinafter referred to as
‘AO’) has decided to go ahead with the assessment proceedings which were
initiated pursuant to the notices dated 19.06.2024 and 18.11.2024 issued
under Section 143(2) and 142(1) of the Act of 1961 respectively, for
Assessment Year 2023-24.
2. Mr. Sabharwal, learned counsel for the petitioner informed the Court
that the petitioner had initially applied before the Authority for Advance
Ruling (hereinafter referred to as ‘AAR’) vide application dated 10.10.2018
under Section 245Q(1) of the Act of 1961 seeking a ruling on the following
question:-
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“Whether on facts and circumstances of the case, Section 43B of the
Income-tax Act, 1961 (“the Act”) allows deduction of custom duty paid
under protest to the custom authorities for clearance of goods, pursuant to
the order passed by the Commissioner of Customs rejecting duty exemption
benefit by the applicant and thereby loading the invoice with 5%/ 10%
duty.”
3. During the course of regular assessment proceedings under Section
143(3) of the Act of 1961, the AO issued various notices, raising certain
queries.
4. The petitioner moved another application dated 27.05.2024 under
Section 245Q(1) before the Board for Advance Rulings (hereinafter referred
to as ‘BFAR’) in relation to whether the fee for technical services paid to
expatriate employees reimbursed by it to its holding company namely,
Mitsubishi Electric Corporation, Japan (MELCO) qualifies as fee for
technical services as per Section 9(1)(vii) of the Act of 1961 by referring the
following questions:-
“1. On the facts and in the circumstances of the case, whether the amounts
(representing salary and benefits payable by MELCO to expatriate
employees) reimbursed by the Applicant to MELCO qualifies as fees for
technical services in the hands of MELCO under the provisions of Section
9(1)(vii) of the Income-tax Act, 1961 (‘the Act’)?
2. On the facts and in the circumstances of the case, whether the amounts
(representing salary and benefits payable by MELCO to expatriate
employees reimbursed by the Applicant to MELCO qualifies as Fees for
Technical Services in the hands of MELCO under Article 12(4) of the India-
Japan Double Taxation Avoidance Agreement (India-Japan Tax Treaty)?
3. Is there a permanent establishment of MELCO in India by presence of
seconded employees of MELCO under the Article 5 of the DAA and if so, is
the amount (representing salary and benefits payable by MELCO to
expatriate employees) received by MELCO from the Applicant in the nature
of ‘business profits’ attributable to such permanent establishment in India
under Article 7 of the DTAA?
4. If the answer to question No. 3 is in the affirmative, is the amount of
taxable income NIL, inasmuch as the reimbursements are on actual basis?
5. If the answer to question no.1 to 4 above is in the affirmative, whether the
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tax is liable to be deducted at source by the applicant under the provision of
Section 195 of the Income-tax Act, 1961? If yes, then at what rate?”
5. On 02.07.2024, the petitioner filed a reply/representation and
requested the AO to keep the proceedings in abeyance in view of the
provisions contained in Section 245RR of the Act of 1961 as the matter was
pending before the BFAR.
6. It is noteworthy to mention that all pending applications before the
AAR have now been transferred to BFAR consequent to the relevant
amendment introduced in the Act of 1961 by way of Finance Act, 2021
which led to constitution of BFAR.
7. It is admitted case of both the parties that the matter has been
transferred to and is now pending consideration before the Board for
Advance Rulings (earlier AAR).
8. The AO passed the impugned order dated 03.03.2026, inter alia,
observing that the issues which are pending before the BFAR are only in
respect of (i) reimbursement of salary and benefits paid to expatriate
employees, and (ii) deductibility of customs duty paid under protest,
whereas, a host of other issues are to be considered by him while completing
the assessment proceedings. While turning down petitioner’s request for
deferring the assessment proceedings, the AO has observed in the present
case thus:
“…In the present case, the issues under examination in the assessment
proceedings include, inter alia, verification of relief claimed under section
90/91, reconciliation of disallowance under section 40(a)(ia), examination
of substantial deduction claimed under the head “any other amount
allowable”, verification of ICDS adjustments, allowability of depreciation
and additional depreciation, reconciliation of receipts as per Form
26AS/TDS statements, and matters arising pursuant to reference made
under section 92CA(1) and order passed under section 92CA(3) etc.. These
issues are independent and distinct from the matters stated to be pendingW.P.(C) 3327/2026 Page 3 of 11
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before the Hon’ble BFAR.
It is further observed that the issue relating to reimbursement of expatriate
salary does not explicitly and specifically arise from the queries presently
under consideration in the assessment proceedings. Even in respect of
customs duty paid under protest, the present examination pertains to
allowability of deduction claimed in the return of income, which necessarily
involves verification of the nature of payment, year of crystallisation of
liability and applicability of relevant provisions of the Act…”
9. Mr. Sabharwal, learned counsel for the petitioner took the Court
through the relevant provisions, more particularly Sections 245R and 245RR
read with Clauses (viii) and (ix) of Explanation 1 to Section 153 of the Act
of 1961 and argued that as per the scheme of the Act of 1961, the AO cannot
continue with the assessment proceedings, as the matter is admittedly
pending before BFAR.
10. He argued that if the AO is allowed to complete the proceedings and
pass assessment order, it will seriously prejudice petitioner’s rights on the
one hand and will lead to an anomaly on the other hand in the sense that in
case he decides those very issues, it will breach the mandate of Section
245RR of the Act of 1961 and in case he passes the order without touching
upon these issues, he shall have to pass two assessment orders which shall
be contrary to the scheme of the Act of 1961. Because, the Act does not
envisage two assessment orders to be passed for one assessment year. In
support of his contention, learned counsel for the petitioner relied upon the
following judgments of Allahabad High Court and Gujarat High Court :
(i) Debi Prasad Malviya v. Commissioner of Income-tax,
reported in [1952] 22 ITR 539 (Allahabad);
(ii) Commissioner of Income-tax v. Himatlal Bhagubhai, reported
in [1972] 86 ITR 481 (Gujarat)
11. Apart from the aforesaid judgments, learned counsel for the petitioner
W.P.(C) 3327/2026 Page 4 of 11
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placed heavy reliance upon the order dated 13.03.2024 passed by a
Coordinate Bench of this Court in W.P.(C) 3723/2024 being Mother Dairy
Fruit and Vegetable Private limited v. The Assessment Unit, National
Faceless Assessment Centre, New Delhi & Others so also the order dated
12.03.2024 in W.P.(C) 13121/2019 being HLS Asia Limited v. Assistant
Commissioner of Income Tax, Circle-II(1) Delhi and argued that in light of
aforesaid judgments of this Court, the action of the AO to choose to proceed
with the matter is liable to be quashed and assessment proceedings are
required to be stalled unless the matter is finally decided by the BFAR.
12. Mr. Maratha, learned senior standing counsel for the respondents, on
the other hand argued that the submissions of the petitioner-assessee cannot
be accepted inasmuch as the assessment proceedings need not be stalled for
an indefinite period. He added that the provisions contained in Section
245RR is only in relation to “the issue” and not in relation to the “entire
assessment proceedings”. He argued that a correct interpretation of
provision contained in Section 245RR would mean that the AO has to stay
the proceedings of the assessment in relation to the issue(s) which are
pending before the AAR or BFAR, as the case may be, and not the
proceedings in whole as such.
13. He argued that out of various issues which are pending before the AO,
the assessee may bonafidely or intentionally take one or more issues out of
them before the BFAR. The provision under Section 245RR may require the
assessment proceedings of the revenue department to be stalled, but the
revenue cannot be made to suffer until the matter is finally decided by the
BFAR. He argued that the order dated 03.03.2026 passed by the AO and his
decision to continue with the proceedings is strictly within the four corners
W.P.(C) 3327/2026 Page 5 of 11
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of the law and does not warrant interference.
14. Heard learned counsel for the parties.
15. Before adverting to the case in hand, we deem it appropriate to keep
relevant provisions handy for which, they are reproduced hereunder:
Section 245Q
“Application for advance ruling.
(1) An applicant desirous of obtaining an advance ruling under this Chapter
or under Chapter V of the Customs Act, 1962 (52 of 1962) or under Chapter
IIIA of the Central Excise Act, 1944 (1 of 1944) or under Chapter VA of the
Finance Act, 1994 (32 of 1994) may make an application in such form and
in such manner as may be prescribed, stating the question on which the
advance ruling is sought.
(2) The application shall be made in quadruplicate and be accompanied by
a fee of ten thousand rupees or such fee as may be prescribed in this behalf,
whichever is higher.
(3) An applicant may withdraw an application within thirty days from the
date of the application.
(4) Where an application for advance ruling under this Chapter is made
before such date as the Central Government may, by notification in the
Official Gazette appoint, and in respect of which no order under sub-section
(2) of section 245R has been passed or no advance ruling under sub-section
(4) of section 245R has been pronounced before such date, such application
along with all the relevant records, documents or material, by whatever
name called, on the file of the Authority shall be transferred to the Board for
Advance Rulings and shall be deemed to be the records before the Board for
Advance Rulings for all purposes:
[Provided that the applicant may, on or before the 31st day of October,
2024, request the Board for Advance Rulings in writing that the application
so transferred may not be proceeded with, if up to the date of such request,
the Board for Advance Rulings has not passed an order under sub-section
(2) of section 245R.]”
Section 245RR
Appellate authority not to proceed in certain cases.
245RR. No income-tax authority or the Appellate Tribunal shall proceed to
decide any issue in respect to which an application has been made by an
applicant, being a resident, under sub-section (1) of section 245Q.
(emphasis supplied)
Clause (viii) & (ix) of Explanation 1 to Section 153
“Time limit for completion of assessment, reassessment and recomputation.
W.P.(C) 3327/2026 Page 6 of 11
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153………
…(viii) the period commencing from the date on which an application is
made before the Authority for Advance Rulings or before the Board for
Advance Rulings under sub-section (1) of section 245Q and ending with the
date on which the order rejecting the application is received by the
Principal Commissioner or Commissioner under sub-section (3) of section
245R; or
(ix) the period commencing from the date on which an application is made
before the Authority for Advance Rulings or before the Board for Advance
Rulings under sub-section (1) of section 245Q and ending with the date on
which the advance ruling pronounced by it is received by the Principal
Commissioner or Commissioner under sub-section (7) of section 245R;
or…”
16. True it is, that Section 245Q provides for application for advance
ruling or adjudication of the issue(s) which the assessee deems appropriate
to be adjudicated before culmination of the transaction or assessment
proceedings. Section 245RR has been enacted in order to give effect to the
provisions of Section 245Q. A careful reading of Section 245RR makes it
abundantly clear that it talks of “any issue in respect to which an
application has been made by the applicant”. In this expression, the
above highlighted portion of provision of Section 245RR clearly suggests
that the AO is required to keep his hands off only in relation to the issue(s)
which are pending before the AAR or BFAR, as the case may be.
17. The legislature was conscious while enacting Section 245RR – its
intent and purport is very clear. It provides that the assessment shall be kept
in abeyance only in relation to the issue(s) which are pending consideration
pursuant to an application under Section 245Q. The entire assessment
proceedings, per-se, in our considered opinion, cannot be and need not be
deferred or kept in abeyance, awaiting the decision of the application under
Section 245Q. Clauses (viii) and (ix) of the Explanation 1 to Section 153, no
doubt gives an impression at the first blush that the period during which the
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application(s) remain(s) pending before the BFAR is required to be
excluded, however, such provision cannot be read in isolation or in
ignorance rather de hors the provisions of Section 245RR of the Act of 1961
and being oblivious of its contextual interpretation.
18. Needless to mention that Section 245RR comes after Explanation 1 to
Section 153. In case two provisions appear to be contrary to each other, the
rule of interpretation suggests that a provision which has been enacted
subsequently or later in point of time (in order of number) shall prevail. The
reason for such view is that when two provisions of same enactment have
some contradiction amongst them, it shall be presumed that each section has
been inserted or introduced one after another. In other words, since Section
153 is prior in point of time and Section 245RR is later, the provisions of
Section 153 of the Act of 1961 shall have to concede to Section 245RR or in
other words in case of doubt or even conflict between the provisions of
Section 153 vis-a-vis the provision of Section 245RR, what is contained in
Section 245RR shall prevail.
19. Accordingly, maybe, there is some room of doubt in the provisions in
clauses (viii) and (ix) of Explanation 1 to Section 153 if read in isolation, but
such doubt wanes rather vanishes, when we look at Section 245RR of the
Act of 1961, which clearly mandates that the proceedings shall be kept in
abeyance in relation to the issues which are pending before the BFAR.
Therefore, the harmonious interpretation of clauses (viii) and (ix) of
Explanation 1 to Section 153 vis-a-vis Section 245RR of the Act of 1961
would mean that the proceedings shall be kept in abeyance in relation to the
issues which are pending before the BFAR. Meaning thereby, the AO can
proceed with the assessment, but he cannot touch the issue(s) which are
W.P.(C) 3327/2026 Page 8 of 11
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pending before the BFAR, as a result of the application filed under Section
245Q.
20. The question then crops up is that how the AO shall pass an order in
piecemeal and how will he pass another assessment order in case the
pending issue is decided by the BFAR at a subsequent stage. The answer is
not difficult to find; and the same lies in Section 150 of the Act of 1961,
which enables the AO to give effect to the order of the BFAR.
21. For the purpose of ready reference, Section 150 of the Act of 1961 is
reproduced herein-below:
“150. Provision for cases where assessment is in pursuance of an order on
appeal, etc.
(1)Notwithstanding anything contained in section 149, the notice under
section 148 may be issued at any time for the purpose of making an
assessment or reassessment or recomputation in consequence of or to give
effect to any finding or direction contained in an order passed by any
authority in any proceeding under this Act by way of appeal, reference or
revision or by a Court in any proceeding under any other law.
(2)The provisions of sub-section (1) shall not apply in any case where any
such assessment, reassessment or recomputation as is referred to in that
sub-section relates to an assessment year in respect of which an assessment,
reassessment or recomputation could not have been made at the time the
order which was the subject-matter of the appeal, reference or revision, as
the case may be, was made by reason of any other provision limiting the
time within which any action for assessment, reassessment or recomputation
may be taken.”
22. A simple look at the above noted provision reveals that it is not only
an order in appeal but also an order passed by any authority pursuant to an
application under Section 245Q of the Act of 1961, which shall give the AO
a right to issue notice for assessment, reassessment order or recomputation.
The nature of adjudication by the Authority for Advance Ruling is akin to
‘reference’, because it decides the question of law on set of facts or with
W.P.(C) 3327/2026 Page 9 of 11
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respect to a transaction. The answer per-se is not an order but maybe a
finding on the assessee and the authorities as enumerated under Clause (a) to
(c) of Section 245S(i) of the Act of 1961. In common parlance also, it is said
to be a ‘reference’ before the AAR or BFAR. That apart, the application
under Section 245Q is covered under the ambit of any proceedings as
mentioned in Section 150 of the Act of 1961.
23. Accordingly, if the BFAR decides the issues as raised by the
petitioner in its favour, then there is no question of passing a re-assessment
order or an order giving effect to the order of the BFAR, but in case the
issue(s) is/are decided against the assessee, the AO may issue a notice under
Section 148/150 of the Act of 1961.
24. Moving onto the judgments which Mr. Sabharwal, learned counsel for
the petitioner has cited – the judgments rendered in the cases of Debi Prasad
Malviya (supra) and Himatlal Bhagubhai (supra) of Allahabad High Court
and Gujarat High Court, respectively simply deal with the fragmented
assessment orders, which obviously, the Act of 1961 does not envisage.
Having gone through both the judgments, we find that the question of
pending application under Section 245Q was not at all involved in those
cases. We may mention here that Section 245Q by such time was not even
introduced.
25. So far as the judgment rendered in the case of HLS Asia Ltd. (supra)
is concerned, it appears to be in favour of the petitioner-assessee, but if the
facts noted therein are carefully examined, it transpires that no question or
plea was raised by the respondent that the issues which are pending before
the AAR or BFAR as the case may be are exactly the same issues which are
being sought to be adjudicated by the AO. In the absence of such facts or
W.P.(C) 3327/2026 Page 10 of 11
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pleadings, we are of the view that the aforesaid judgment is not the authority
precisely on the issues which are before us.
26. So far as decision of a coordinate bench of this Court in the case of
Mother Dairy (supra) is concerned, it takes almost the same view which we
have taken in the instant judgment.
27. The writ petition is, therefore, dismissed. It is hereby ordered that the
AO shall frame the assessment order in accordance with law, leaving the
issue(s) which are pending before BFAR pursuant to the petitioner’s
applications dated 10.10.2018 and 27.05.2024. He shall be free to pass
assessment order on all other issues and as and when pending issues before
the BFAR are decided, he shall pass appropriate order in accordance with
law.
28. We are conscious of this fact that Section 245RR uses the expression
“resident”. An application under Section 245Q may be filed by non-resident
as well, and, therefore, the applicability of the law which we have laid down
shall be obviously confined to the assessees who are residents of India and
not to the non-residents of India. In case of non-residents of India, the Court
may take an independent view as and when occasion so arises.
29. The writ petition stands dismissed alongwith pending applications.
DINESH MEHTA, J.
VINOD KUMAR, J.
MARCH 16, 2026/ ck
W.P.(C) 3327/2026 Page 11 of 11
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