The AAR in their 100+ pages order in  435 ITR 456 (AAR) held the applications
as non-maintainable and further rejected them under clause (iii) of the proviso to section 245R(2) citing it as a case of a transaction designed prima facie for tax avoidance.
The 3rd proviso in such cases require upon AAR to provide in their order reasons for rejection.
The AAR issued certain pointers as reasons and issued further directions to the authorities in paragraphs 187-189 reading as below:
187. We are in agreement with the Revenue that in the instant case certain events inter alia do serve as a pointer towards prima facie tax avoidance. These are :
– Investment for the acquisition of VCL shares not made by applicants but funds were routed through them and on top of that they bound them selves in restrictive covenants of loan agreements ;
– Further loans were raised by pledging these shares for the benefit of Capex group ;
– When shares were sold, consideration immediately moved out from accounts of applicants to lenders on the directions of executives of Capex group ;
– Shares were bought, pledged, sold by Capex group and the entities merely lent their name to seek treaty benefits ;
– The shares in MCL/VCL have been acquired by CCLM by voluntary liquidation of CTIL. The sole purpose, it seems is to transfer the situs of ownership of 15.85 per cent. of MCL/VCL shares owned by Capex group, to Mauritius to avoid capital gains tax in India.
188. In view of the foregoing, we hold that the present applications are barred under clause (iii) of the proviso to section 245R(2).
189. We have held earlier that the applications are not maintainable and are liable to be dismissed and that the applicants can pursue their cases in other proceeding in forum other than Authority for Advance Rulings, it would be in fitness of things that the concerned authorities would also consider this aspect of tax avoidance in detail at the time of merit proceedings.
Now the vital question would be whether the AO can go against this ruling if upon examination of each of such aspects pointed in the ruling he arrives at a conclusion that the prima facie view held by AAR is actually not correct. Section 245S does not so allow him to do so as it reads that the ruling by the authority shall be binding on the jurisdictional PCIT and authorities under it.
Thus mere writing by the AAR in their order that Prima facie means what appears as true even though it may be proved false later is a fake premise given the binding effect of any and every ruling.