Authority on Advance Ruling

The Finance Act, 1993, Chapter XIX-B of the Income Tax Act introduced the scheme of Advance ruling, which came into force from 1st June, 1993.

Advance ruling means written opinion or authoritative decision by an Authority empowered to render it with regard to tax consequences of a transaction or proposed transaction or an assessment in regard thereto.

The scheme of Advance ruling helps the non-residents and the residents having transaction with non-residents to bring the certainty of income tax liability and thus help them to plan their tax affairs in advance. It is faster and less expensive than litigation in the courts.


Following category of person can request for the advance ruling under Income Tax Act:
(i) Non-resident applicants
(ii) Resident applicants having residents having transactions with a non-resident.
(iii) Public sector companies

One of the salient features of the scheme of advance ruling is that it provides expeditious solutions to the income-tax problems. The time limit prescribed for the authority to pronounce its ruling is within 6 months from the date of receipt of the application.

Another important feature of this scheme is that it provides binding solution. Although the ruling is binding to the parties appear before the authority and the transaction in relation to which the ruling was given because the ruling was rendered on a set of facts and cannot be of general application. However, it may have persuasive value. It is important to note that no proceeding before, or pronouncement of advance ruling by, the Authority shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.


However, certain restrictions have been imposed on the admissibility of an application:

i. If the question is pending before any other authority;
ii. If the question related to the determination of market value of the property
iii. If the purpose of application is to avoid the income tax

Further, if the authority finds that the advance ruling pronounced by it, has been obtained by the applicant by fraud or misrepresentation of facts, the same may be declared void ab initio.

Eligible applicant can make a request for advance ruling in the prescribed form stating the question. The application should be accompanied by an account payee demand draft for requisite amount in favour of the Authority for Advance Rulings and made payable at New Delhi.

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