WHAT IS THE SCHEME OF ADVANCE RULING?

With a view to avoiding a dispute in respect of assessment of income-tax liability in the case of a non-resident, a Scheme of Advance Ruling has been introduced by incorporating Chapter XIX-B in the Income Tax Act, 1961 by the Finance Act, 1993. The Scheme now enables the non-residents to obtain in advance, a binding ruling from the Authority for Advance Rulings on issues, which could arise in determining their tax liabilities. Time-consuming and expensive appeals can, thus, be avoided. Such issues may relate to transactions undertaken or proposed to be undertaken by the non-resident applicant. The Authority for Advance Rulings (Procedure) Rules, 1996 provides detailed procedure for obtaining advance ruling.

WHAT IS THE MECHANISM FOR PRONOUNCING ADVANCE RULINGS?

The advance ruling is required to be pronounced by an authority known as the Authority for Advance Rulings, consisting of a Chairman, who is a retired Judge of the Supreme Court and two members of the rank of Additional Secretary to the Government of India, one each from the Indian Revenue Service and the Indian Legal Service.

WHAT ARE THE BENEFITS OF ADVANCE RULING?

• Helps non-residents in planning their income-tax affairs well in advance.
• Brings certainty in determining the tax liability.
• Helps avoiding long drawn and expensive litigation.
• It is inexpensive, expeditious and binding.

WHO CAN SEEK ADVANCE RULING?

Any non-resident person, whether individual, company, firm, association of persons or other body corporate, can make an application for seeking an advance ruling.

WHAT ARE THE QUESTIONS ON WHICH ADVANCE RULING CAN BE SOUGHT?

The advance ruling can be sought on any question of law or fact specified in the application in relation to a transaction, which has been undertaken, or is proposed to be undertaken, by the non-resident applicant.

However, an advance ruling cannot be sought where the question:

• is already pending in the case of the applicant before any income tax authority, the Appellate Tribunal or any court; or
• involves determination of fair market value of any property; or
• relates to a transaction, which is designed prima facie for avoidance of income tax.

HOW TO SEEK ADVANCE RULING?

The applicant may seek advance ruling by making an application to the Authority in the prescribed form i.e., Form No.34C in the manner indicated therein.

SIGNING OF APPLICATION

The application including the documents annexed thereto shall be signed in the manner indicated in Note 12 to Form No.34 C. When a person signing the application and other documents claims to have been duly authorized to do so, the application must include a power of attorney, authorizing him to sign and an affidavit setting out the unavoidable reasons which entitle him to sign it.

AUTHORIZED REPRESENTATIVE

The applicant is entitled to represent his case before the Authority either personally or through an authorized representative e.g., a Chartered Accountant, Advocate, any other tax practitioner etc.. If the applicant desires to be represented by an authorized representative, a duly authenticated document authorizing him to appear for the applicant should be enclosed in original.

INSTANCES OF ISSUES ON WHICH RULINGS CAN BE ASKED FOR

• Application of Double Taxation Avoidance Agreements (DTAAs) entered into by India and their use in determination of tax liability of the residents of the Contracting States,
• Conflicts between DTAAs and domestic legislation ,
• Taxation problems in India of international partnerships,
• Transfer of assets into and out of tax jurisdictions vis-a-vis Indian taxation,
• Consequences of international acquisitions, business combinations, mergers and demergers,
• Taxation of services, pensions, royalties, technical fees and income from supply of labour, equipment's etc.,
• Taxation of investment funds, venture capital funds, offshore funds, financial instruments and derivatives, cross border leasing ,
• Taxation of income arising from international sea bed, sea water and the space,
• Taxation of shareholders on distributed and undistributed income of domestic and foreign companies,
• Tax problems relating to thin capitalization, broadcasting through satellites, etc.,
• Problems relating to with-holding of tax and accompanying penal provisions

PAYMENT OF FEE

The application should be accompanied by a fee of Rs.2,500/-(two thousand five hundred Indian rupees) through a bank draft in favour of the ‘Authority for Advance Rulings’ payable at New Delhi.

WITHDRAWAL OF APPLICATION

The applicant may withdraw his application within 30 days from the date of filing the application.

WHAT IS THE TIME LIMIT FOR PRONOUNCING THE ADVANCE RULING?

The advance ruling is required to be pronounced by the Authority within six months of the receipt of a valid application.

IS ADVANCE RULING BINDING?

Advance ruling pronounced by the Authority would be binding in respect of the transaction(s) in relation to which ruling has been sought:

• on the commissioner and the income tax authorities subordinate to him in respect of the applicant; and

On the applicant who had sought it.

CONFIDENTIALITY

The contents of the application would not be disclosed to unauthorized persons.

WHERE TO GET ASSISTANCE?

Request for application forms may be sent to: