Advance Ruling

Section

Definitions

Applicant​​ 

245N

advance ruling" means—

• • a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be​​ undertaken by​​ a non-resident applicant; or

  • a determination by the Authority in relation to the tax liability of a​​ non-resident arising out of a transaction which has been undertaken or is proposed to be undertaken by a​​ resident applicant​​ with such non-resident;​​ or

iia​​  a determination by the Authority in relation to the​​ tax liability​​  of a​​ resident applicant, arising out of a transaction which has​​  been undertaken or is proposed to be undertaken by such​​  applicant;​​ 

and such determination shall include the​​ determination of any question of law or of fact specified in the application;

• • a determination or decision by the Authority 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 or 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;

• • a determination 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:

U/s 245N(b) and files application u/s 245Q

Non Resident

Resident Applicant

Resident Applicant falling withing any class or category as notified by Central Govt.

Resident Applicant falling withing any class or category as notified by Central Govt.

As defined in the clause itself

245 O

Authority for Advance Rulings--- Constitution​​ and Mechanism of Appointments

• The Central Government shall constitute an Authority for advance rulings to be known as​​ Authority for Advance Rulings.

• The Authority shall consists of a Chairman and such number of Vice-Chairman, Revenue Members and Law Members as the Central Government, may by notification appoint.

• ​​ Chairman, who has been a Judge of the Supreme Court or the Chief Justice of a High Court or for at least seven years a Judge of a High Court

Vice-chairman, who has been Judge of a High Court

A​​ revenue Member​​ can be from IRS or anyone who qualified to be Member of the Board

from the Indian Customs and Central Excise Service, 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

• The central Government shall prescribe for the salaries/allowances etc. to be payable to members

• The number of officers/employees to be provided by the Central Government for efficient discharge of the duties.

• Chairman will decide and constitute the benches from amongst the members themselves for discharging their functions.

In case of any vacancy in​​ the office of chairman by any reason the senior most vice chairman will act as chairman until new chairman enters his office.

If chairman is unable to discharge his duties due to illness, absence or any other reason the senior most vice chairman will act as chairman until chairman resumes his duties.

• A Bench shall consist of the Chairman or Vice Chairman and one revenue Member and one law member.

In case of matters relating to Income Tax Act then the Revenue Member should be from IRS or who qualified to member of the Board only.

• The Authority shall be located in the NCT of Delhi and its Benches shall be located at such locations as the Central Government may notify.

245OA

Section 184 of the Finance Act, 2017 deals with the qualifications, appointment, terms of office, salaries and allowances, resignation and other terms and conditions of service of the Chairman, Vice Chairman and other members of the Authority.​​ 

Section 245P

Any Vacancy or defect in constitution of the authority will not affect the proceeding before or pronouncement of advance ruling by the Authority.​​ 

Section 245 Q

An Applicant seeking advance ruling shall file the application in the prescribed form​​ clearly stating the question on which advance ruling is sought along with fee of Rs.​​ 10000/- or such amount as may be specified (whichever is higher).

Application has to be filed in quadruplicate and can be withdrawn within 30 days of filing.

Section 245R

Procedure on receipt of Application

• On receipt of application the authority shall forward the copy thereof to Principal Commissioner or Commissioner and if required call upon him to furnish the records and these records will be returned back as soon as possible.

• The Authority, by order,​​ may allow or reject the application​​ after examining​​ the application and records.​​ Rejection can be made only after giving any opportunity of being heard to applicant.​​ Reasons for rejection shall be given in the order in case of rejection of application.

Application will not be allowed where the question raised in application​​ 

• • is already pending before any income-tax authority or Appellate Tribunal [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of​​ section 245N] or any court;

  • 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 [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of​​ section 245N​​ or in the case of an applicant falling in sub-clause​​ (iiia) of clause (b) of​​ section 245N:

• A copy of every order shall be sent to applicant and to the Principal Commissioner/Commissioner.

• In case of allowance of application the Authority shall after examining such further material placed before it by the applicant or obtained by the authority, pronounce its advance ruling​​ on the question specified in the application.

• The Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative (as defined u/s 288 of the Act), if requested by the applicant.

• The Authority shall pronounce its advance ruling​​ in writing within 6 months from the date of receipt of application.

• A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Principal Commissioner or Commissioner, as soon as may be, after such pronouncement.

Section 245RR

Appellate authority not to proceed in certain cases.

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.

Section 245S

Applicability of Advance Ruling

The advance ruling pronounced by the Authority under​​ section 245R​​ shall be binding only—

• • on the​​ applicant​​ who had sought it;

  • in respect of the​​ transaction in relation to which the ruling had been sought; and

  • on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction.

The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.

Section 245T

Advance ruling to be void in certain circumstances.

Where the Authority finds,​​ on a representation made to it by the Principal Commissioner or Commissioner or otherwise, that an​​ advance ruling pronounced by it under sub-section (6) of​​ section 245R​​ has been obtained by the​​ applicant by fraud or misrepresentation of facts, it may, by order, declare such ruling to be void​​ ab initio​​ and thereupon all the provisions of this Act shall apply (after excluding the period beginning with the date of such advance ruling and ending with the date of order under this sub-section) to the applicant as if such advance ruling had never been made.

A copy of the order made under sub-section (1) shall be sent to the applicant and the Principal Commissioner or Commissioner.

Section 245U

The Authority shall have powers equivalent to Civil Court and every proceeding shall be deemed to be a judicial proceedings.

Section 245V

Procedure of Authority

The Authority shall, subject to the provisions of this Chapter, have power to regulate its own procedure in all matters arising out of the exercise of its powers under this​​ Act.