Explore the Authority for Advance Ruling under Income Tax. Learn about binding rulings, withdrawal procedures, application fees, and the purpose of advance rulings. Stay informed for a clear understanding of your tax liabilities.

Q.1 Are the Advance ruling, binding on taxpayers or tax authorities?

Ans. An advance ruling pronounced by the Authority is binding on the follows :-

  • The Applicant.
  • The Commissioner.
  • Commissioner of Income-tax (Appeals).
  • Income-tax authorities who are subordinate to Commissioner
  • In respect of transaction for which ruling had been sought​

Q.2 Can I withdraw the Application for Advance Ruling, once I have filed it ?

Ans.  Yes, you may withdraw the application within 30 days from the date of such application. If you with drawl after such period, you can withdraw it only with the permission of the Authority.​

Q.3 Can I pay the application fees in cash?

Ans.  No, the application fees payable should be in the form of a demand draft in favour of Authority for Advance Ruling.​

Q.4 What fees is to be paid along with application for advance ruling?

Ans.  ​The fees to be paid along with application shall be as follows ​

Category of case Fee
Amount of transaction(s) does not exceed Rs. 100 crore. Rs. 2 Lacs
Amount of transaction(s) exceeds Rs. 100 crore but does not exceed Rs.300 crore. Rs. 5 Lacs
Amount of transaction(s) exceeds Rs. 300 crore. Rs. 10 Lacs
Other Cases Rs. 10,000

Q.5 What are requirements of an application for Advance Ruling?

Ans.  An applicant desirous of obtaining an advance ruling 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.
  • Application should be in quadruplicate (4 Copy).
  • With prescribed fee.

Q.6 What is the meaning of advance ruling?

Ans. ​Advance ruling means the determination of a question of law or fact specified in the application in relation to tax liability of an applicant arising out of transactions which have been undertaken or proposed to be undertaken.

The Finance Act, 2021 has provided that the Authority for Advance Rulings shall cease to operate with effect from such date, as may be notified by the Central Government in the Official Gazette. Later, the Central Government, vide Notification S.O. 3562(E), dated 01-9-2021, notified September 01, 2021 as the date effect from Authority for Advance Rulings shall cease to operate.​ ​

Q.7 When can a resident apply for an advance ruling?

​​Ans. A resident can apply to AAR for advance ruling in relation to his tax liability only if transaction(s) undertaken or proposed to be undertaken is equal to 100 crores or more​

Q.8 Who can apply for an advance ruling?

Ans. “​​Applicant” can be any person who is :-

1. A non-resident desirous of setting-up a joint venture in India in collaboration with a non-resident or a resident; or.

2. A resident desirous of  setting-up a joint venture in India in collaboration with a non-resident; or

3. A resident;

4. Public Sector Company. (PSU)

Q.9 What is the purpose of Advance rulings?

Ans.​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.​​

​Q.10 What does AAR stand for and what are its functions?

Ans. ​​​​​​​​​AAR means Authority for Advance Rulings set-up by the Central Government for pronouncing advance rulings in respect applications filed before them.​

Q.11 What is Board for Advance Rulings?

Ans. ​The Finance Act, 2021 has inserted a new section section 245-OB to empower the Central Government to constitute one or more Board for Advance Rulings for giving advance rulings on and after the notified date. Every such Board shall consist of two members, each being an officer not below the rank of Chief Commissioner.

The CBDT vide, notification S.O. 3561(E), dated 01-09-2021 notified constitution of Boards for Advance Ruling in Delhi and Mumbai. ​

Q.12 How pending application before Authority for Advance Ruling shall be disposed off?

Ans. The pending application with the Authority for Advance Ruling in respect of which order has not been passed before the notified date shall be transferred to the Board for Advance Rulings along with all records, documents or material, by whatever name called and shall be deemed to be the records before the Board for all purposes.

[As amended by Finance Act, 2023]

(Source- Income Tax India Website , Republished with amendments)

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February 2024