Advance Rulings:-
Ruling means statement in writing by the tax authority to a taxpayer. Advance rulings given are binding on the tax authorities and application who had applied for such ruling.
Example: -ABC Ltd. a German company wants to do a technical collaboration with Indian company and ABC Ltd. wants to know the tax incidence in India, the answer of this problem will be given by authority for advance ruling .
As per section 245N(a) of Income-tax Act, 1961, Advance rulings means: –
Decision or Determination by the Authority :
- in relation to a transaction and tax liability which has been undertaken or is proposed to be undertaken by a non–resident applicant and in case of tax liability, determination shall include the determination of any question of law or of fact specified in the application.
- in respect of an issue relating to computation of total income :-
- which is pending before any income-tax authority or the Appellate Tribunal and such determination and
- decision shall include the determination or decision of any question of law or of fact
- relating to such computation of total income specified in the application.
- or decision by the Authority whether an arrangement, which is proposed to be undertaken
- by any person being a resident or a non-resident,
- is an impermissible avoidance arrangement as referred to in Chapter X-A or not
Applicant [Section 245N(b)] means any person who is: –
- a non-resident
- a resident
- a resident who has undertaken or propose to undertake one or more transactions of value of 100 crores or more in total
- a public sector company
Authority for Advance Rulings [Section 245-O]
Authority for advance rulings shall constitute by the Central Government.
Composition: – The Authority shall consist of a Chairman and such number of Vice-chairmen, revenue Members and law Members as the Central Government may, by notification, appoint.
Qualification:-
- Chairman: – a person who has been a Judge of the Supreme Court or the Chief Justice of a High Court or for at least 7 years a Judge of a High Court.
- Vice-chairman: – a person who has been Judge of a High Court.
- A revenue Member from the Indian Revenue Service: – a person who is who is (or is qualified to be), a Member of the Board.
- A revenue Member from the Indian Customs and Central Excise Service: -a person who is (or is qualified to be),
- a Member of the Central Board of Excise and Customs, on the date of occurrence of vacancy.
- A law Member from the Indian Legal Service: –
- who is (or is qualified to be), an Additional Secretary to the Government of India on the date of occurrence of vacancy.
Section 184 of Finance Act, 2017
- By notification, the Central Government may make rules regarding
- qualifications, appointment, salaries and allowances, term of office, resignation, removal and
- the other terms and conditions of service of the Chairman, Vice-chairman or member of the Authority.
- Term of Chairman, Vice-Chairman or Member of the Authority:-
- Not exceeding 5 years from the date on which he enters upon his office and shall be eligible for reappointment.
- Age :-
| In case of | Age |
|---|---|
| Chairman | 70 years |
| Vice-Chairman or any other Member | 67 Years |
Application for Advance Rulings : – As per section 245Q(2), the applicant shall make application in quadruplicate along with with a fee of ₹ 10,000 or prescribed, whichever is higher.
Rule 44 prescribes the fees: –
| Category of applicant | Category of case | Fee |
|---|---|---|
| A non-resident/ resident | Amount of transaction up to ₹ 100 crore | ₹ 2,00,000 |
| > ₹ 100 crore < ₹ 300 crore | ₹ 5,00,000 | |
| > ₹ 300 crore | ₹ 10,00,000 | |
| Any other | in all cases | ₹ 10,000 |
- on receipt of an application, the authority will send a copy to the Principal Commissioner or Commissioner concerned if necessary.
- Call upon the Principal Commissioner or Commissioner to furnish relevant records
- The Authority may allow or reject the application.
Constitution of Board for Advance Rulings [section 245-OB]: –
The Central Government vide Notification No.96/2021 dated 01.09.2021 constituted 3 boards for Advance Rulings.
- Board for Advance Rulings-I – headquarters in Delhi
- Board for Advance Rulings-II – headquarters in Delhi
- Board for Advance Rulings-III – headquarters in Mumbai
Section 245Q(1) : – Applicant may make an application
Section 245Q(2) : – Application has to be made in Quadruplicate along with fee of ₹ 10,000 or prescribed whichever is higher.
Restriction on Appellate Authority: -According to section 245RR, Income-tax and Tribunal shall not take any decision in respect of issue which is for decision of Board for Advance Rulings.
Note:- a resident assessee cannot pursue both the remedies i.e., appeal or revision.
Note: – The Board shall not allow an application where question raised in the application is pending with income-tax/tribunal/court, determination of fair market value and transaction designed for avoidance of income-tax.
Time Limit for Pronouncement of Advance Ruling: – 6 months from the receipt of application.
Note: – Copy of advance ruling has to be sent to applicant and PCIT/CIT.
Power of the Board for Advance Rulings: – [Section 245U] – All the power of Civil Court.
Note: – Applicant may appeal to High Court against ruling or order of the Board for Advance Rulings within 60 days from the date of the communication of ruling order.