Justice Arijit Pasayat
Retd. Supreme Court Judge
Justice Arijit Pasayat completed his graduation with Honours in English & obtained LL.B. from M.S. Law College, Cuttack securing First Rank. As an advocate, he had practiced in Constitutional, Taxation and almost all other branches of Law. He was appointed as an Additional Judge of the Orissa High Court on 20.3.1989 and a permanent Judge of that Court on 20.9.1990. He was appointed as Acting Chief Justice of Orissa High Court on 2.4.1999. He was elevated as Chief Justice of Kerala High Court on 20.9.1999. &Transferred as Chief Justice, Delhi High Court on 10.5.2000. He was then elevated as Judge of the Supreme Court on 19.10.2001. He Retired on 9.5.2009 after delivering more than 2500 judgments. He was Awarded Doctorate in Law by Utkal University, Bhubneshwar and Degree of LL.D. (Honoris Causa) by Fakir Mohan University, Balasore. He is the ViceChairman of Special Investigation Team on Black money.
The concept of Advance Rulings has global background and perspectives. The system is in vogue in several countries though procedurally there may be dissimilarities. The ﬁrst document which shed light on this important concept is the International Bureau of Fiscal Documentation (IBFD) which was published in 1997-2000. It contained articles by authors of various countries on the fundamentals of Advance Rulings. The ﬁrst conference i.e. 1999 IFA Congress is a milestone in the journey of forums for Advance Rulings. A large number of participating countries reported on the Advance Rulings System prevalent in their countries.
1) The concept of Advance Rulings has global background and perspectives. The system is in vogue in several countries though procedurally there may be dissimilarities. The first document which shed light on this important concept is the International Bureau of Fiscal Documentation (IBFD) which was published in 1997-2000. It contained articles by authors of various countries on the fundamentals of Advance Rulings. The first conference i.e. 1999 IFA Congress is a milestone in the journey of forums for Advance Rulings. A large number of participating countries reported on the Advance Rulings System prevalent in their countries. The importance for Advance Rulings has been stated by Professor Maarten J. Ellies in the following words:-
“A more or less binding statement from the revenue authorities upon the voluntary request of a private person, concerning the treatment and consequences of one or a series of contemplated future actions or transactions”.
Though Advance Rulings facility serves almost similar purposes in all countries, significant differences can be noticed in the procedures adopted. Some countries provide for highly developed systems statutorily prescribed, in case of some others, very informal and almost adhoc procedures are provided. The first report relating to establishment of a formal ruling system was recommended by the Carter Commission in its 1967 Report. In India, the scheme was first recommended by the Wanchoo Committee in mid 70s and was formally introduced by Finance Act, 1993. Chapter XIX-B of the Income Tax Act, 1961 (in short “the Act”) was introduced with effect from 01.06.1993. Under the provision, the scheme empowering the giving of Advance Rulings was entrusted to an adjudicatory body.
Advance Rulings is the written opinion or the authoritative adjudication 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.
The salient features are:
1. It relates to a transaction entered into or proposed to be entered into by the Applicant (the Advance Rulings is to be given on questions specified in relation to such a transaction by the Applicant);
2. Questions on which Rulings can be sought are:
Under Section 245-R of the Income Tax Act, certain restrictions have been imposed on the admissibility of an application, if the question concerned is pending before other authorities.
An Advance Rulings cannot be sought where, as noted above, (a) in the case of a non-residents applicant the matter is pending before any Income Tax Authority, the Appellate Tribunal or any Court; (b) it involves determination of fair market value of any property, or relates to a transaction which is designed prima facie for avoidance of income tax. An Advance Rulings pronounced by the Authority is binding in respect of the transactions in relation to which ruling has been sought; (a) on the Commissioner and the Income Tax Authorities subordinate to him in respect of the applicant and (b) on the applicant who has sought it. The Advance Rulings is in the nature of a policy guide to the applicant as well as tax authorities. It is significant that under Section 245-N of the Income Tax Act, an Advance Ruling can be obtained by the following persons:
After noticing the utility of the Advance Rulings mechanism under the Income Tax Act, similar provisions have been made under the CGST / SGST Act and UTGST Act. As per Section 95 of CGST / SGST Act and Section 12 of UTGST Act, “Advance Ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in Section 97(2) or Section 100(1) of CGST / SGST Act as the case may be, in relation to the supply of goods and / or services proposed to be undertaken or being undertaken by the applicant, (Unlike the Income Tax Act, the CGST / SGST Act and UTGST Act provide for an appeal before the AAAR) the provisions of appeal before AAAR dealt with in Sections 100 and 101 of CGST / SGST Act or Section 14 of the UTGST Act. For each state, there is one AAR and AAAR. The AAAR constituted under the SGST Act or UTGST Act is deemed to be the AAAR under the CGST Act in respect of the respective state or union territory. The broad features and objectives for setting up the mechanism of Advance Rulings is to: (1) to provide certainty in tax liability in relation to an activity proposed to be undertaken by the applicant; (2) to attract Foreign Direct Investment (FDI); (3) to reduce litigation; (4) pronounce rulings expeditiously and in inexpensive manner. The objective for Advance Ruling both under the Income Tax regime and the Goods & Services Tax are in pari materia.
The large number of applications that have been filed is a happy indication that tax payers intend to have clarity and certainty so far as their tax liabilities are concerned and in the process avoid litigation which is not only expensive but also time consuming.