Meaning 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. It has been defined in section 245N (a) of the Income-tax Act, 1961 as amended from time to time. Under section 245N, a ruling can be obtained by an applicant (who may be either a non-resident or a resident having a transaction with a non-resident) in respect of any question of law or fact in relation to the tax liability of the non-resident arising out of a transaction undertaken or proposed to be undertaken.

Authority For Advance Ruling

It consist of a chairman who is a retired Judge of the Supreme Court and two other members drawn from the Indian Revenue Service and Indian Legal Service.

The headquarters of the Authority is in Delhi.

Meaning Of The “Applicant” And Advance Ruling Under

Sec.245n(a)and(b)

(I) Applicant- A non resident who makes an application under sec. 245Q(1).

Advance ruling- Determination by the authority in relation to a transaction which has been undertaking by a non-resident applicant.

(II) Applicant- A resident who makes an application in respect of a transaction which has been undertaken by him or it with a non-resident.

Advance ruling- Determination by the Authority in relation to the tax liability of a non-resident arising out of a transaction which has been undertaken by a resident applicant with a non-resident.

(III) Applicant- A resident falling in any class specified by the central government in this behalf.

Advance Ruling- 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.

Non Resident In Which Year?

Residence or Non-Residence for the purposes of the Act has to be determined with reference to a previous year and not with reference to a particular date.

Procedure Of Filing Application

Application form number- An application shall be made in the forms given below:

- when applicant is non-resident, 34C - when applicant is resident and he is seeking advance ruling in relation to a transaction with a non-resident, 34D - person falling in class of persons as notified Central Govt., 34E

FEES- The application should be accompanied with a demand draft of Rs. 2,500 in favor of authority for advance ruling.

Who should sign the application- it shall be signed by the following:

- in case of an Individual, by Individual himself. - in case of HUF, by the karta. - in case of a Company, by the Managing director. - in case of a Firm, by the Managing partner. - in case of an Association of Persons, by any member

or the principal officer thereof. - in case of any other person, by that person or by some other competent to act on his behalf.

Other points- The application shall be presented by the applicant in person or by an authorized representative to the Secretary or sent by the registered post addressed to the Secretary.

- it should be made on the date on which it is received in the office of the Authority. - if the applicant is not assessed in India, he shall indicate in Annexure I. - the secretary may send the application back to the applicant if it is defective in any manner for removing the defects within such time as he may allow.

Withdrawal of application- An applicant may withdraw an application within 30 days from the date of the application.

Modification in application- After stating questions for seeking advance ruling, the applicant cannot at the time of hearing, so modify questions as to change the very complexion of the application. But if the applicant wants to confine a question to only some of the items/aspects mentioned therein and/or give up some parts of the question, there can be no valid objection to such a course.

Procedure On Receipt Of Application Sec 245 R On receipt of an application, the Authority shall cause a

copy thereof to be forwarded to the Commissioner and, if

necessary, call upon him to furnish the relevant records.

Provided that where any records have been called for by

the Authority in any case, such records shall, as soon as

possible, be returned to the Commissioner.

The Authority may, after examining the application and

the records called for, by order, either allow or reject the

application.

Provided that the Authority shall not allow the application where the question raised in the 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.

Pronouncement Of Advance Tax

Where an application is allowed, the authority shall, pronounce its

advance ruling on the question specified in the application.

The application can, on request appear in person or can represent

through a authorized representative.

A time limit of 6 months is provided for the pronouncement of

advance ruling after the receipt of application by the authority.

A copy of advance ruling pronounced by the authority shall be sent

to the applicant and the commissioner, after such pronouncement.

Continuation for proceedings after the death etc of the applicant

Where the applicant dies or is wound up pr is dissolved

or disrupted or amalgamated or succeeded by any

other person or otherwise comes to an end the

application shall no abate and mat be permitted by the

authority to be continued by the executor,

administrator or legal representative as the case may

be, on an application made on this behalf.

Hearing of application ex parte

Where on the date fixed for hearing the applicant or the

commissioner does not appears in person when called up

for the hearing, the authority may dispose off the

application ex parte on merits. If the applicant or the

commissioner applies within 15 days of receipt of the order

and satisfies the authority that their was sufficient cause for

non-appearance when the application called up for hearing,

the authority may make an order setting aside the ex parte

order and restore the application for fresh hearing.

Modification Of Order

Where the authority finds suo motu or on a representation made

to it by the applicant or the commissioner but before the ruling

pronounced by the authority has been given effect to by the

assessing officer, that there is a change in law or facts on the

basis of which the ruling was pronounced, it may by order

modify such ruling in such respect as it considers appropriate,

after allowing the applicant and the commissioner a reasonable

opportunity of being heard.

Rectification

The authority may with a view to rectify any mistake apparent from the record, amend any order passed by it before the ruling pronounced by the authority has been given effect to by the assessing officer.

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 245 Q(1).

Applicability of advance ruling Sec (245S)

The advance ruling pronounced by the Authority under shall be binding only —

(a) On the applicant who had sought it. (b) In respect of the transaction in relation to which

the ruling had been sought; and (c) On the Commissioner, and the income-tax

authorities subordinate to him, in respect of the applicant and the said transaction.

The advance ruling will continue to be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.

Advance Ruling To Be Void In Certain Circumstances.

Sec 245T Where the Authority finds(on a representation

made to it by the Commissioner or otherwise) that an advance ruling pronounced by it 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.

Powers of the Authority The Authority shall, for the purpose of exercising its

powers, have all the powers of a civil court under the Code

of Civil Procedure.

The Authority shall be deemed to be a civil court for the

purposes of section 195 of the Code of Criminal Procedure,

1973 and every proceeding before the Authority shall be

deemed to be a judicial proceeding under certain

provisions of the Indian Penal Code.