This Tax Alert
explains Notification No. 73/2014 dated 28 November 2014, issued by the
Government of India (GOI) notifying class of resident taxpayers who can seek
ruling from Authority for Advance Rulings.
Prior to amendment by Finance (No.2) Act 2014 (FA 2014), the facility of seeking advance ruling was available to (a) nonresidents (NRs); (b) residents undertaking transaction with NRs in relation to NRs’ tax liabilities and (c) residents being Public Sector Undertakings in respect of an issue relating to the computation of total income pending before any Tax Authority or Appellate Tribunal.
With a view to reduce litigation, FA 2014 extended1 facility of advance ruling to all resident taxpayers falling within such class or category as GOI may notify. Accordingly, the GOI has specified a category of residents, who in relation to their tax liability arising out of one or more transactions valuing INR1000M (approx. US$16.13M2 ) or more in total, which has been undertaken or proposed to be undertaken, can seek advance ruling.
The new Government elected to the lower house of Indian Parliament in May 2014 in its first Budget presented on 10 July 2014 has assured a stable and predictable tax regime that would be investor-friendly and spur growth. As one of the measures to reduce litigation in area of direct taxes, it had proposed to extend advance ruling facility to resident taxpayers in respect of their income tax liability. Pursuant to amendments carried out by FA 2014, the Notification has extended the facility with effect from 28 November 2014 to resident taxpayers who have undertaken or propose to undertake transaction of the value of INR 1000 M or more.
Subject to existing limitations on admission of application, resident taxpayers satisfying the transaction value threshold may be able to seek advance rulings on diverse aspects impacting their tax liability like characterization or timing of taxation of income, admissibility of depreciation or amortisation, deductibility of expenses (including impact of disallowance on account of failure to withhold tax), eligibility to investment-linked or income-linked tax holiday, etc. While certain issues may crop up on interpretation of threshold determination, the notification will be welcomed by resident taxpayers.
Prior to amendment by Finance (No.2) Act 2014 (FA 2014), the facility of seeking advance ruling was available to (a) nonresidents (NRs); (b) residents undertaking transaction with NRs in relation to NRs’ tax liabilities and (c) residents being Public Sector Undertakings in respect of an issue relating to the computation of total income pending before any Tax Authority or Appellate Tribunal.
With a view to reduce litigation, FA 2014 extended1 facility of advance ruling to all resident taxpayers falling within such class or category as GOI may notify. Accordingly, the GOI has specified a category of residents, who in relation to their tax liability arising out of one or more transactions valuing INR1000M (approx. US$16.13M2 ) or more in total, which has been undertaken or proposed to be undertaken, can seek advance ruling.
The new Government elected to the lower house of Indian Parliament in May 2014 in its first Budget presented on 10 July 2014 has assured a stable and predictable tax regime that would be investor-friendly and spur growth. As one of the measures to reduce litigation in area of direct taxes, it had proposed to extend advance ruling facility to resident taxpayers in respect of their income tax liability. Pursuant to amendments carried out by FA 2014, the Notification has extended the facility with effect from 28 November 2014 to resident taxpayers who have undertaken or propose to undertake transaction of the value of INR 1000 M or more.
Subject to existing limitations on admission of application, resident taxpayers satisfying the transaction value threshold may be able to seek advance rulings on diverse aspects impacting their tax liability like characterization or timing of taxation of income, admissibility of depreciation or amortisation, deductibility of expenses (including impact of disallowance on account of failure to withhold tax), eligibility to investment-linked or income-linked tax holiday, etc. While certain issues may crop up on interpretation of threshold determination, the notification will be welcomed by resident taxpayers.
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