Taxpayers can approach Advance ruling on Tax liabilities on deals above Rs 100 cr

The Cen­tral Board of Direct Tax­es (CBDT) has noti­fied that res­i­dent tax­pay­ers who plan trans­ac­tions valu­ing Rs 100 crore or above can approach the Author­i­ty for Advance Rul­ings (AAR) for deter­mi­na­tion of their tax lia­bil­i­ties under such transaction.

This step will help reduce lit­i­ga­tion on merg­ers and acqui­si­tions (M&As) and trans­fer-pric­ing orders issued by the tax depart­ment after a trans­ac­tion is announced. Ear­li­er, this facil­i­ty was avail­able only for multi­na­tion­al com­pa­nies (MNCs) and their over­seas arms. How­ev­er, with this change, the local sub­sidiary of an MNC can approach the AAR for advance tax rulings.

The tax depart­ment has clar­i­fied the advance rul­ings will not be applic­a­ble if the ques­tion being sought to be raised before the AAR is already pend­ing before any tax author­i­ty or Appel­late Tribunal.

Ear­li­er, res­i­dent tax­pay­ers were allowed to approach the AAR only to deter­mine the tax lia­bil­i­ty of non-res­i­dent tax­pay­ers with respect to a trans­ac­tion, which they had entered into or pro­posed to enter into, with such non-res­i­dent tax­pay­ers. After this announce­ment, Indi­an tax­pay­ers can approach the AAR to get a rul­ing to deter­mine their own tax lia­bil­i­ty to a trans­ac­tion that they under­take or pro­pose to undertake.

The AAR forum will soon become func­tion­al with the gov­ern­ment appoint­ing V S Sir­purkar to take charge as the new chair­man of AAR. With this, the hear­ing of pend­ing cas­es and the new appli­ca­tions for advance rul­ings is expect­ed to com­mence soon.

Noti­fi­ca­tion

SECTION 245N(b)(iia) OF THE INCOME-TAX ACT, 1961 — TAX LIABILITY OF A RESIDENT APPLICANT DETERMINED BY AUTHORITY FOR ADVANCE RULINGS — SPECIFIED RESIDENT

NOTIFICATION NO. 73[F.NO.142/6/2014-TPL], DATED 28-11-2014

In exer­cise of the pow­ers con­ferred by sub-clause (iia) of clause (b) of sec­tion 245N of the Income-tax Act, 1961 (43 of 1961), the Cen­tral Gov­ern­ment here­by spec­i­fies a res­i­dent, in rela­tion to his tax lia­bil­i­ty aris­ing out of one or more trans­ac­tions valu­ing rupees one hun­dred crore or more in total which has been under­tak­en or pro­posed to be under­tak­en, being such class of per­sons, as appli­cant for the pur­pos­es of Chap­ter XIX‑B of the said Act.

2. This noti­fi­ca­tion shall come into force on the date of its pub­li­ca­tion in the Offi­cial Gazette.