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AUTHORITY
With
a view to remove any confusion and to avoid disputes in respect
of determination of the income tax liability of a non resident or
of such specified class or category of residents as are notified
by the Central Government, a procedure of Advance Rulings has been
brought on statute by way of incorporating Chapter XIX-B in the
Income Tax Act, 1961 w.e.f. 1.6.1993. Initially the provisions applied
only to a non-resident but w.e.f. 1.10.98 specified categories of
residents can also avail of this scheme.
In
the case of the non-residents, the authority for advance tax enables
them to obtain, in advance, a binding ruling on the issues that
could arise in determining their tax liabilities.Therefore, time
consuming and expensive legal disputes can, thus, be avoided. The
Authority is empowered to determine any question of law or of fact
as specified in the application made before it in respect of a transaction
which has been undertaken or is proposed to be undertaken by a non-resident.
The
Authority, in the case of a resident assessee, is empowered to make
any decision in respect of an assessment which is pending before
any Income Tax Authority or the Income Tax Appellate Tribunal and
includes decision on any question of law or of fact which arises
out of the orders of assessment.
The
detailed procedures for obtaining an advance ruling are contained
in Authority for Advance Ruling (Procedure) Rules, 1996.
COMPOSITION
OF THE AUTHORITY
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 an Additional Secretary to the Government of India, one
each from the Indian Revenue Service and the Indian Legal Service.
HOW
TO SEEK AN ADVANCE RULING?
The
applicant may seek advance ruling by making an application to the
authority in the prescribed form and manner.
Preparation
and presentation of application
- The
application, in quadruplicate, should be presented in the prescribed
form (Form No. 34C, 34D or 34E) by the applicant in person or by an authorised
representative to the Secretary, Authority for Advance Ruling
or to any other Officer notified by the Secretary in writing or
can be sent by registered post and should be verified in the manner
indicated therein.
- The
application and the accompanying annexures may be neatly typed
on one side of plain paper of A-4 size (210 X 297mm) leaving a
minimum margin of 30mm on all the four sides and may be duly indexed
.
- Only
photocopies of the documents on A-4 size may be enclosed with
the application except when a document cannot be legibly reduced
to A-4 size on photocopier and, in the latter case , it should
be folded to A-4 size.
- All
copies of the application along with annexures and documents may
have loose sheets stapled on the left hand corner. These copies
need not be in the form of paper books.
- If
the applicant is not assessed to tax in India, he may indicate
this in Annexure-I to the application giving details of :
- his
head office in a country other than India; and
- place
in India where his office and residence are located or are
likely to be located.
- The
question(s) of law or fact on which advance ruling is sought may
be stated clearly in the application.
Signing
of Application
The
application, its verification and the annexures, statements and
documents accompanying it, are required to be signed in the manner
set out in Rule 44E (2) of the Income Tax Rules, 1962. Where a person
signing the application and other documents claims to have been
duly authorised to do so, the application must include a power of
attorney authorising him to sign and must append an affidavit setting
out the unavoidable reason which entitles him to sign the same.
Authorised
Representative
The
applicant is entitled to represent his case before the Authority
either personally or through an authorised representative. If the
applicant desires to be represented by an authorised representative,
a duly authenticated document authorising him to appear for the
applicant should be enclosed.
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 drawn 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.
THE
BENEFITS OF ADVANCE RULING ?
- Helps
non residents in planning their income tax affairs well in advance.
- Helps
specified residents to get a binding ruling for their tax matters
pending before any Income Tax Authority or the Tribunal.
-
Brings certainty in determinination of the tax liability.
-
Help in avoiding long drawn and expensive litigation.
-
It is inexpensive, expeditious and binding.
WHO
CAN SEEK ADVANCE RULING?
1. The
scheme of Advance Ruling enables a non resident to seek advance
ruling from the authority by following the prescribed procedure. Prescribed form,
Form 34C
2. Certain
categories of 'Residents' as notified in circular dated 21.6.99 namely :-
- A Public
Sector company as defined in clause 2 of the Income-tax Act. Prescribed form,
Form 34E; and
- A Person seeking
Advance ruling in relation to the tax liability of a non-resident arising out of a transaction undertaken by him with a non-resident. Prescribed form, Form 34D
WHO
IS A NON RESIDENT?
- Under
the existing provision of the Income Tax Act, 1961(Section 6)
the taxable entities are broadly divided into three groups, viz.
, Individual , Company and all other persons such as Hindu Undivided
Family , Firm, Association of Persons, etc.
- These
taxable entities are divided into three categories depending upon
their residential status. These categories are :-
-
Resident,
-
Resident but not ordinary resident and
-
Non - Resident
- As
already explained above, the benefit of seeking advance ruling
is now also available to certain residents :-
An
individual is a ' resident ' in any previous year:
1.
If he has been in India during the previous year for 182 days
or more.
2.
If the individual (not being one of the categories mentioned
in para 3 below ) has been in India during the previous year
for less than 182 days but has been in India for an aggregate
of 365 days or more in the four years preceding the previous
year and his stay in India during the previous year is 60
days or more.
3.
The categories of person mentioned above are :
a)
a citizen of India who has left India during the previous
year as a member of the crew of an Indian Ship or for the
purpose of employment outside India, and
b)
a citizen of India or a person of Indian origin* who,
being outside India, has come to India on a visit during the
previous year.
4.
Persons falling under para 3 are resident only if their stay
in India during the previous year is 182 days or more even
where the duration of their stay in India during the earlier
four years is 365 days or more.
*
A person of Indian origin is one if he, or either of his parents
or any of his grand parents, was born in undivided India.
Individual,
who are not resident in accordance with the above, are treated
as non resident under the Income Tax Act.
QUESTIONS
ON WHICH ADVANCE RULING CAN BE SOUGHT?
The
advance ruling can be sought on any question of law or the fact
specified in the application in relation to a transaction that has
been undertaken, or is proposed to be undertaken, by the non resident
applicant. In the case of a resident assessees the advance ruling
can be sought in relation to an assessment which is pending before
any Income Tax Authority or the Tribunal and includes decision on
question of law or fact arising out of such orders.
However, non-residents are not allowed to seek an
advance ruling in the following cases :-
- Where
the question raised in the application is already pending in the
case of the applicant before any income tax authority, the Appellate
Tribunal or any court; or
- Where
the question raised in the application involves determination
of fair market value of any property; or
-
Where the question raised in the application relates to a transaction
which is designed prima facie for avoidance of income tax.
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 is 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 unauthorised
persons.
WHERE
TO GET ASSISTANCE?
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