e-ADVANCE RULING SCHEME, 2022

[Mr. M. GOVINDARAJAN]

Advance Ruling

The concept of advance ruling was introduced under Income Tax Act, 1961 (‘Act’ for short) under Chapter XIX with effect from 01.06.1963.  It was conceptualized in the Direct Taxes Enquiry Committee, 1971 headed by Justice K. N. Wanchoo.   Advance rulings were conceived to furnish taxpayers with an avenue where interpretation of tax laws could be sought.

Definition

Section 245N of the Income Tax Act, 1961 defines the expression ‘advance ruling’ as-

• a determination by the Authority in relation to a transaction which has been undertaken or is proposed to be undertaken by a non-resident applicant; or
• a determination by the Authority in relation to the tax liability of a non-resident arising out of a transaction which has been undertaken or is proposed to be undertaken by a resident applicant with such non-resident; or,
• a determination by the Authority in relation to the tax liability of a resident applicant, arising out of a transaction which has been undertaken or is proposed to be undertaken by such applicant;

and such determination shall include the determination of any question of law or of fact specified in the application;

•  a 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 of fact relating to such computation of total income specified in the application;
• a determination or decision by the Authority whether an arrangement, which is proposed to be undertaken by any person being a resident or a non-resident, is an impermissible avoidance arrangement.

e-Advance Ruling

The Central Government made the ‘e-Advance Ruling Scheme, 2022’ vide Notification No.07/2022, dated 18.01.2022 with effect from 18.01.2022.

Scope

This Scheme shall be applicable to applications of advance rulings,–

• made to the Board for Advance Rulings under sub-section (1) of section 245Q of the Act; or
• transferred to Board for Advance Rulings under sub-section (4) of section 245Q of the Act.

Board for Advance Ruling

The Finance Act, 2021 provides for the constitution of the Board for Advance Ruling.  For this purpose Section 245-OB was inserted in the Act vide Finance Act, 2021 with effect from 01.04.2021.  The Board for Advance Rulings shall consist of two members, each being an officer not below the rank of Chief Commissioner, as may be nominated by the Board.

The Board for Advance Rulings shall have all the powers of a civil court under the Code of Civil Procedure, 1908.  It shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973 and every proceeding before the Board for Advance Rulings shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code.

If any difficulty arises in giving effect to any order of the Board for Advance Rulings, it may, on its own motion or on an application made by the applicant or the Principal Commissioner of Income-tax or the Commissioner of Income-tax, as the case may be, remove the difficulty in so far as it is not inconsistent with the provisions of the Act.

Application for Advance ruling

An application seeking for Advance Rule shall be made in-

• Form No. 34C - applicable to a non-resident applicant;
• Form No.  34D - applicable to a resident having transactions with a non-resident;
• Form No. 34DA - applicable to a resident seeking advance ruling in relation to his tax liability arising out of one or more transactions valuing ₹ 100 crore or more in total which has been undertaken or proposed to be undertaken by him;

• Form No. 34E - Applicable to Public Sector Company as notified by government via Notification No.11456, dated 3/8/2000;
• Form No. 34EA - for determining whether an arrangement is an impermissible avoidance arrangement as referred to in Chapter X-A or not,

 by the applicant, to the Secretary or any other officer authorized in writing by the Secretary of Board for Advance Rulings, by electronic mail.

If the applicant is not assessed in India, he shall indicate in Annexure I as provided in the relevant Forms to the application-

• his head office in any country,
• the place where his office and residence is located or is likely to be located in India, and
• the name and address of his representatives in India, if any, authorized to receive notices and papers and act on his behalf.

Fee

The application shall be accompanied by a fee of  ₹ 10,000/- or such fee as may be prescribed in this behalf, whichever is higher.

Language

The language of the Board for Advance Rulings shall be in Hindi or English, at the option of the applicant.  Where any document is in a language other than English or Hindi, an English translation thereof should also be filed along therewith.   The ruling, and other orders passed by the Board for Advance Rulings may, at the discretion of the Board for Advance Rulings, be in Hindi or English.

The Registrar of the Board, on receipt of the application, shall scrutinize the same to find out whether the application is in conformity with the Act, the rules and the procedure.  The Registrar shall point out defects in such application to the parties and require them to remove the defects by affording them a reasonable opportunity to do so and, where, within the time granted, the defects are not removed, to obtain necessary orders of the Board for Advance Rulings.  Such application shall be deemed to have been made on the date when it is re-submitted after removing the defects.

Withdrawal of application

An applicant may withdraw an application within thirty days from the date of the application.

Allocation

The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems) shall, with the approval of the Central Board of Direct Taxes, devise a process to randomly allocate or transfer the applications for advance ruling, referred to in paragraph 3, to the Board for Advance Rulings through an automated allocation system.

On receipt of the application for Advance Ruling the Board for Advance Rulings shall intimate the applicant about the allocation.

Admission/Rejection of application

Upon allocation of an application the Board for Advance Rulings shall forward a copy of the application-

•  to the Principal Commissioner or Commissioner, if the applicant is assessed in India;
• to the Joint Secretary (Foreign Tax and Tax Research) if the applicant is not assessed in India,

along with a requisition to furnish the relevant records within such time as allowed by the Board for Advance Rulings.

If the authority to whom the reference has been made fails to furnish relevant records, the Board for Advance Rulings may proceed to allow or reject the application, by order, without waiting for the said records. 

If the relevant records have been submitted by the authority to whom the reference has been made, the Board for Advance Rulings, after examination of the application and the said records may-

• by an order allow the application; or
• call upon the applicant to explain as to why the application may not be rejected and direct him to submit any relevant material or information in support of such application within such time as allowed by the Board for Advance Rulings.

If the applicant fails to submit within such time or extended time, as may be allowed by the Board of Advance Rulings, it may proceed to pass the order without waiting for the said explanation.  If the applicant submits the records or information within the time, the Board of Advance Ruling may, by an order, allow the application or reject the application.  If the application is rejected the reasons for such rejections will be informed in the order of rejection.

Hearing

The Registrar shall fix the date of hearing for the applications in consultation with the members of the Board for Advance Rulings and direct the issue of notices therefor.    

In case of an explanation has been called from the applicant, the applicant may also request the Board for Advance Rulings to provide him a hearing which may be provided through video conference or video telephony.           

The opportunity for hearing through video conferencing or video telephony shall be facilitated by any income-tax authority as authorized by the Board for Advance Rulings, who will provide the link and password to the applicant and concerned parties in advance.

Personal appearance

The applicant shall not be required to appear either personally or through authorized representative in connection with any proceedings under this Scheme before the Board for Advance Rulings or before the Secretary, ministerial staff, executive or consultant posted with the Board for Advance Rulings.    The Principal Director General of Income Tax (Systems) or Director General of Income Tax (Systems), shall establish suitable facilities for video conferencing including telecommunication application software which supports video telephony at such locations as may be necessary, so as to ensure that the applicant, or his authorized representative, is not denied the benefit of this Scheme merely on the ground that such applicant or his authorized representative, or any other person does not have access to video conferencing at his end.

The opportunity for hearing through video conferencing or video telephony shall be facilitated by any income-tax authority as authorized by the Board for Advance Rulings, who will provide the link and password to the applicant and concerned parties in advance.

Additional facts

The Board for Advance Rulings may at its discretion permit or require the applicant to submit such additional facts as may be necessary to enable it to pronounce its advance ruling.   Where in the course of the proceedings before the Board for Advance Rulings, a fact is alleged which cannot be borne out by, or is contrary to, the record, it shall be stated clearly and concisely and supported by a duly sworn affidavit.

Any fact not contained in the application for advance ruling (including the annexure and the statements and other documents accompanying such annexure) are sought to be relied upon, they shall be submitted to the Board for Advance Rulings in writing and shall be verified in the same manner as provided for in such application.

Additional questions

The applicant shall not, except by leave of the Board for Advance Rulings, urge or be heard in support of any additional question not set forth in the application.  But in deciding the application the Board for Advance Rulings shall, at its discretion, consider all aspects of the questions set forth as may be necessary to pronounce a ruling on the substance of the questions posed for its consideration.

Proceedings not open to public

The proceedings before the Board for Advance Rulings shall not be open to the public. No person, other than the applicant, his employee, the concerned officers of the Board for Advance Rulings or the Income-tax authority or the authorized representatives, shall, without the permission of the Board for Advance Rulings, remain present during such proceedings, even on video conferencing or video telephony.

Authorization

An authorized representative appearing for the applicant at the hearing shall file, before the commencement of the hearing, a document authorizing him to appear for the applicant.  If he is a relative of the applicant, the document shall state the nature of his relationship with the applicant.   If he is a person regularly employed by the applicant the capacity in which he is at the time employed.

Pronouncement of Advance Ruling

On the admission of an application for advance rulings the Board for Advance Rulings may send a notice to the applicant and the authority to whom the reference has been made, to submit such further material, information or evidence, as may be relevant to the proceedings, within such time or extended time, as may be allowed by the Board for Advance Rulings.    The applicant or the authority to whom the reference has been made, shall respond to the notice, within the specified time or such time as may be extended by the Board for Advance Rulings, on the basis of a request made in this behalf.   

The applicant or the authority may after the application has been allowed, suomotu submit any further material, information or evidence, as may be relevant to such proceedings, to the Board for Advance Rulings.    The Board for Advance Rulings shall, after considering the response and after providing an opportunity of being heard (through video conferencing or video telephony) on the request of the applicant pronounce the advance ruling on the question specified in the application and send a copy thereof to the applicant and the authority to whom the reference has been made.

Publication of Order

The Board for Advance Rulings, if deems fit its order to be published in any authoritative report or the press, may be sent for publication with such conditions as the Board for Advance Rulings specify.

Rectification of mistakes

The Board for Advance Rulings may, with a view to rectifying any mistake apparent from the record, amend any order passed by it before the ruling pronounced by the Board for Advance Rulings has been given effect to by the Assessing Officer.

Such amendment may be made suo motu or when the mistake is brought to its notice by the applicant or the Principal Commissioner of Income-tax or Commissioner of Income-tax, as the case may be, but only after allowing the applicant and the Principal Commissioner of Income-tax or Commissioner of Income-tax, as the case may be, reasonable opportunity of being heard.

Appeal

An appeal against an order for advance ruling passed by the Board for Advance Rulings under this Scheme shall lie before the High Court.   The Assessing Officer, having jurisdiction over the applicant, on the directions of the Principal Commissioner or Commissioner, may file an appeal to the High Court against an order of Board for Advance Rulings.

Functions of the Registrar

The following are the functions of Registrar, in addition to receipt of application, its scrutiny-

•  to issue the service of notices or other processes and to ensure that the parties are properly served;
• to requisition records from the custody of any person including a Commissioner of Income-tax or any other authority;
• to allow inspection of records of the Board for Advance Rulings ;
• to direct any formal amendment of the records of the Board for Advance Rulings ;
• to grant certified copies of the orders of the Board for Advance Rulings to the parties;
•  to grant certified copies of documents filed in the proceedings to the parties in accordance with the rules;
• to bring on record legal representatives, in case of death or retirement of any party to the proceedings and to make such appropriate amendments in the cause title as may become necessary in the other situations; and
•  to discharge any other function as may be assigned by the Board for Advance Rulings by special or general order.

Communications

All communications between-

• the Board for Advance Rulings and the applicant, or his authorised representative, 
• the Board for Advance Rulings and the Principal Commissioner of Income-tax or the Commissioner of Income-tax,

shall be exchanged by electronic mode. 

Every notice or order or any other electronic communication under this Scheme from the Board for Advance Rulings shall be delivered to the addressee, being the applicant by sending an e-mail to the registered email address of the applicant or his authorized representative.   The applicant or the authorized representative shall file his response to any notice or order or any other electronic communication to the Board for Advance Rulings through his registered email address.

The Principal Commissioner of Income-tax or the Commissioner of Income-tax, as the case may be, shall file his response to any notice or order or any other electronic communication to the Board for Advance Rulings through official electronic mail facility.          

Powers of Principal Chief Commissioners

The Principal Chief Commissioner of Income-tax (International Taxation) shall, wherever required, in consultation with-

• Principal Director General of Income Tax (Systems); or
•  Director General of Income Tax (Systems),

with the approval of Board, lay down the standards, procedures and processes for effective functioning of the conduct of e-advance rulings proceedings under this Scheme, including format, mode, procedure and processes in respect of the following-

• service of the notice, order or any other communication;
• receipt of any information or documents from the person in response to the notice, order or any other communication;
•  issue of acknowledgment of the response furnished by the person;
• provision of ‘e-advance rulings’ facility including login account facility, tracking status of eadvance rulings proceedings, display of relevant details, and facility of download;
• accessing, verification and authentication of information and response including documents submitted during the e-advance rulings proceedings;
• receipt, storage and retrieval of information or documents in a centralized manner; and
• general administration and grievance redressal mechanism in the respective Boards for advance ruling.