What is Authority on Advance On Ruling ?

What is Authority on Advance On Ruling ?

Advance Ruling been defined in section 245N(a) of the Income-tax Act, 1961 . A ruling can be obtained by an applicant -either a non-resident or a resident having a transaction with a non-resident- in respect of any question relevant to the tax liability of the non-resident arising out of a transaction undertaken or proposed to be undertaken.

Authority on Advance Ruling is headed by a retired judge of the Supreme Court of India. Rulings are binding both on the Income-tax Department and the applicant.

Procedure of application for advance ruling:

An applicant desirous of obtaining an advance ruling should apply to the Authority in following form accompanied by an account payee demand draft for 2,500 Indian rupees drawn in favour of the Authority for Advance Rulings and made payable at New Delhi. The application has to be made in quadruplicate in Form Nos:—

34C - applicable for a non-resident applicant

34D - applicable for a resident having transactions with a non-resident

The application may be withdrawn within 30 days from the date of the application.

Questions on which ruling can be sought:—

i.The non-resident can raise more than one question in one application.

ii. The question may be on points of law as well as on fact;

iii. No ruling is given on a purely hypothetical question.

No question not specified in the application can be urged.

Time limit for ruling:—

Advance ruling is given within 6 mo

nths of receipt of the application.

Advance Ruling is Binding

Ruling is binding on the Income tax Authority who will be the assessing Officer and the Applicant.

Question Limitations:

If the question concerned is pending before other authorities, the same can not be raised before AAR.Therefore , the authority shall not allow an application where the question raised by the non-resident applicant (or a resident applicant having transaction with a non-resident) is already pending before any income-tax authority or appellate Tribunal or any court of law.

Application can not eb filed raising following question in it:—

i. determination of fair market value of any property; or

ii. relates to a transaction or issue ,prima facie, for the avoidance of income-tax.