Introduction : We have seen that their Income Tax Act; is amended every year along with this there are notification/circular/press release which assessee is required to interpret. Sometimes there may be several interpretations of particular law, to avoid any controversy on later stage department has provided assessee with a remedy whereby he can sort Advance Ruling. In this article we will cover all the provisions relating to Advance Ruling under Income Tax Act, 1961.
Who can sort Advance Ruling?
Advance Authority Ruling can be sort by following person;
If the person is non-resident:
- For determination, in relation to a transaction which has been undertaken or is proposed to be undertaken by a Non-resident applicant, on any question of law or fact specified in the application.
If the person is resident:
- A resident who has undertaken or proposes to undertake a transaction with a non-resident may seek a ruling for determination on any question of law or fact in relation to such transaction involving the tax liability of the non-resident.
- A resident falling within notified categories may seek 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 fact relating to such computation of total income.
- *Notified Category
- A resident who has undertaken or propose to undertake one or more transactions of value of Rs.100 crore or more in total.
- Public Sector Company where case is pending in relation to said matter is pending in High Court or Supreme Court.
- Any person, being a resident or non-resident, can obtain an advance ruling to decide whether an arrangement proposed to be undertaken by him is an impermissible avoidance arrangement and may be subjected to General Anti Avoidance Rules or not.
- As after the amendment Advance Authority Ruling of Customs Act, 1962 and Central Excise Act, 1944; any person who wants to file application for obtaining Custom Authority Ruling and Central Excise Act, 1944 can file such application to above authority.
Points that are worth noting:
- In case being person is non-resident he may file the application without any threshold limit of transaction or tax liability.
- The transaction can be proposed or it may happen that it has already been undertaken.
- Resident person (when he is applying for determination of tax liability any non-resident) may apply without any threshold limit of transaction or tax liability.
- Resident person will be eligible to apply in his own matter only in case where the transaction amount is exceeding the specified limit and the said matter is not pending in relation to that assessee at any Income-tax Authority or the Appellate Tribunal.
Again, it shall be noted that assessment year for which matter is pending is not relevant i.e., if matter is pending for A.Y. 2018-19 and the assessee is will to raise the question for A.Y. 2019-20 than he will still not be eligible even the year is different. It will be implied that such assessee will not be eligible when such matter is pending at High Court or Supreme Court.
- Public Sector Company will be eligible only when the said issue relating to computation of Income is pending in High Court or Supreme Court. If the said matter is pending at lower authority than assessee will not be eligible to apply for advance authority ruling.
What time is the time limit for pronouncing ruling?
The advance ruling is required to be pronounced by the Authority within six months of the receipt of a valid application.
Whether ruling pronounced by Advance ruling authority is challengeable?
Ruling pronounce by assessee shall be binding to assessee for whom ruling is pronounce and will be final and conclusive. The said ruling cannot be challenged by assessee. Therefore, the said ruling will be binding
- On the Commissioner and the income-tax authorities subordinate to him in respect of the applicant; and
- On the applicant who has sought it.
What are the specific circumstances where filling of application to Advance Authority Ruling is not allowed?
In previous questions it has already been stated that whenever any matter is pending before income tax authority or at appellate authority than in such cannot be referred to Advance Authority Ruling (As stated above public sector company will fall under exception and will be allowed to file application only in cases where the matter is pending before High Court or Supreme Court).
Further if the matter for which Advance Authority Ruling is sorted is:
- Involving determination of fair market value of any property or where the question raised is relating to transaction which is designed prima facie for the avoidance of income-tax.
What will be the amount of fees that will be payable by applicant?
The fees paid by the assessee who has sorted advance ruling will be non-refundable; the following fees have been prescribed for application by the assessee:
In any other case and for any other applicant the amount of fees will be Rs. 10,000/-.
Whether in future advance ruling can be declared as void?
It may happen that on a representation made to it by the Principal Commissioner or Commissioner or Otherwise (i.e., by application made by any other person or Suo-moto) that an advance ruling pronounced by it has been obtained by the applicant by fraud or misrepresentation of facts, then the Authority may, by an order, declare such ruling to be void ab initio and thereupon all the provisions of the Act shall apply to the applicant as if such advance ruling had never been made. Therefore, it shall be ensured by assessee that all the material facts and reason for which advance ruling has been obtained has been declared to authority at the time of making application.