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Direct Tax Alert - CBDT notifies e-Advance Ruling Scheme

31 January 2022

CBDT notifies e-Advance Ruling Scheme

With a view to fasten the process as well as reduce the pendency of applications before the Authority of Advance Ruling (AAR), the Finance Act, 2021 introduced Board of Advance Ruling (BAR) w.e.f. 01 April 2021. In order to empower the BAR, the Central Board of Direct Taxes (CBDT) has recently notified1 the e-Advance Ruling Scheme, 2022 (The Scheme).

We at, BDO in India, have analysed and summarised the aforesaid notification and provided our comments on its impact hereunder:

Process of e-Advance Ruling

How will the applications be allotted?

The Principal Director General of Income tax (PDGIT) (Systems) or Director General of Income tax (DGIT) (Systems), as the case may be, shall, with the approval of the CBDT design a process automating the allocation or transfer of the applications for advance ruling on a random basis. Further, the Board shall announce e-advance rulings of applications allocated or transferred.

Whether an application once made can be withdrawn?

The application filed with BAR can be withdrawn within 30 days from the date of application.

Whether either the taxpayer or the Revenue Authority can submit further / additional material or information?

Yes. Upon notice received from the BAR, the Revenue Authority or the Taxpayer can submit further/additional material or information. Furthermore, the Taxpayer or the Revenue Authority can suomotu submit any material or information, relevant to such proceedings to BAR.

Will an opportunity of being heard be granted before the BAR pronounces its Ruling?

As per section 245R(5) of the Income-tax Act, 1961, the BAR is to pronounce the advance ruling after providing an opportunity of being heard (through video conference or video telephony), on request of the taxpayer. Further, the copy of the Ruling shall be sent to the taxpayer and the Revenue Authority to whom the reference is made.

Whether the mistake, if any, in the Ruling can be rectified?

The BAR either suomotu or when the mistake is brought to its notice by the taxpayer or the Revenue Authority, may rectify any mistake apparent from the record or amend any order passed by it before the Ruling has been given effect by the Tax Officer (AO). Such amendment may be allowed only after allowing the Taxpayer and Revenue Authority a reasonable opportunity of being heard.

What shall be the language of BAR?

The language of BAR shall be in Hindi or English, at the option of the Taxpayer. However, where any document is in a language other than English or Hindi, an English translation thereof should also be filed along therewith. Further, the ruling, and other orders passed by the BAR may, at the discretion of the BAR, be in Hindi or English.

BDO Comments

In line with the Indian Government’s initiative of faceless regime, this Scheme provides for faceless disposal of Advance Ruling applications. Further, the Scheme also provides that 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), as the case may be, 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. Allowing hearing through video conference/video telephony both at the time of rejection of application as well as before pronouncing the Ruling, is a welcome provision.

1Notification no. 7 of 2022, dated 18 January 2022.