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As per section 245N(a), of the Income Tax Act,1961, Advance Ruling means written opinion or authoritative decision by an Authority empowered to render it with regard to the tax consequences of a transaction or proposed transaction or an assessment in regard thereto.

Purpose of Advance Ruling

​​The purpose of Advance rulings is to provide clarity on important issues to taxpayers so that they have a clear-cut idea of their tax liability in advance for a given set of transactions.​​

Applicant to Advance Ruling

An application for advance ruling can be made by the following-

  • A non-resident
  • A resident-undertaking proposing to undertake a transaction with a non-resident can obtain advance ruling in respect of any question of law or fact in relation to the tax liability of non-resident arising out of such transaction.
  • A resident who has undertaken or propose to undertake one of more transactions of value of Rs. 100 crore or more in total
  • A notified public sector company
  • Any person whether a resident or non-resident, can obtain advance ruling to decide whether an agreement proposed to be undertaken by him is an impermissible avoidance arrangement and may be subjected to General Anti Avoidance Rules or not.
  • An applicant defined under section 28E(c) of the Customs Act,1962
  • An applicant defined under section 23A(c) of the Central Excise Act,1944
  • An applicant as defined under section 96A(b) of the Finance Act,1994

Procedure of Application of Advance Ruling

Section 245N(a) - Advance Ruling

An applicant desirous of obtaining advance ruling should apply to the authority in prescribed form stating the question(s) on which the advance ruling is sought. The application has to be made in quadruplicate. Below are the list of Forms-

Form No.

Nature of Applicant

34C

Non-resident applicant

34D

Resident having transaction with Non-resident

34DA

Resident seeking advance ruling in relation to his tax liability arising out of one or more transactions valuing Rs.100 crore or more in total which has been undertaken or proposed to be undertaken by him

34E

Public Sector Company

34EA

Resident or Non-resident for determining whether an arrangement is an impermissible avoidance arrangement or not

 

The fees payable along with application for advance ruling is as follows-

Category of Case

 Fee Payable

Amount of transaction(s) does not exceed Rs. 100 crore.

Rs. 2,00,000/-

Amount of transaction(s) exceeds Rs. 100 crore but does not exceed Rs.300 crore.

Rs. 5,00,000/-

Amount of transaction(s) exceeds Rs. 300 crore.

Rs. 10,00,000/-

Any Other Case

Rs. 10,000/-

 

The application has to be accompanied by an account payee demand draft drawn in favour of Authority of Advance Ruling and made payable at New Delhi.

Time Limit for Advance Ruling

On receipt of application from the applicant the Authority of Advance Ruling shall pronounce the advance ruling in writing within 6 months of receipt of application after examining the application and the records called for by order.

Opportunity of Being Heard

Before pronouncing the advance ruling, the Authority shall, on the request of the applicant, provide an opportunity of being heard , either in person or through a duly authorised representative. The copy of advance ruling shall be sent to the applicant and the Principal Commissioner or the Commissioner.

Binding Nature of Advance Ruling

The Advance Ruling pronounced shall be binding the following-

  • The Applicant
  • The Commissioner
  • The Commissioner of Income Tax (appeals)
  • Income Tax Authorities who are subordinates to Commissioner
  • In respect of transaction for which advance ruling has been sought

Withdrawal of Application of Advance Ruling

The application for advance ruling made can be withdrawn within a period of 30 days from the date of making the application.

Non-allowability of Advance Ruling

The Authority shall not allow the application of advance ruling in certain cases where the question raised in application-

  • Is already pending before any income-tax authority or Appellate Tribunal
  • Involves determination of fair market value of any property
  • Relates to a transaction or issue which is designed prima facie for the avoidance of income-tax

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Category Income Tax, Other Articles by - Neethi V. Kannanth 



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