Section 245N and Section 245O of Income Tax Act, 1961
Section 245N contains the statutory definitions used in the advance ruling chapter of the Income-tax Act, including the meaning of advance ruling, applicant and application. Section 245O historically constituted the Authority for Advance Rulings and prescribed its composition and functioning.
Section 245N - Definitions for advance rulings
Section 245N defines key expressions used in Chapter XIX-B of the Income-tax Act. These definitions determine the kinds of questions and transactions that may fall within the advance ruling mechanism and the persons who may qualify as applicants.
Meaning of advance ruling
Under Section 245N, an advance ruling includes specified determinations concerning transactions undertaken or proposed to be undertaken, tax liability arising from transactions, specified questions of law or fact, certain issues relating to computation of total income, and whether a proposed arrangement is an impermissible avoidance arrangement under Chapter X-A.
- A determination concerning a transaction undertaken or proposed by a non-resident applicant.
- A determination concerning the tax liability of a non-resident arising from a transaction undertaken or proposed by a resident applicant with that non-resident.
- A determination concerning the tax liability of an eligible resident applicant arising from a transaction undertaken or proposed by that applicant.
- A determination or decision on a specified issue relating to computation of total income that is pending before an income-tax authority or the Appellate Tribunal, where the statutory requirements apply.
- A determination whether a proposed arrangement is an impermissible avoidance arrangement referred to in Chapter X-A.
Meaning of applicant and application
The expression applicant covers the persons and classes specified in Section 245N who make an application under Section 245Q. Depending on the applicable statutory category, this historically included non-residents, residents entering transactions with non-residents, notified classes of resident applicants and persons seeking a ruling concerning an impermissible avoidance arrangement.
The expression application means an application made under Section 245Q(1) for an advance ruling.
Historical meaning of Authority
In the earlier statutory framework, Authority meant the Authority for Advance Rulings constituted under Section 245O. The Finance Act, 2021 subsequently introduced the Board for Advance Rulings framework. References in older rulings, applications and statutory material should therefore be read in their applicable temporal context.
Section 245O - Authority for Advance Rulings
Section 245O historically required the Central Government to constitute the Authority for Advance Rulings. The provision dealt with its composition, qualifications of members, staffing, benches, vacancies and location.
Composition under the historical framework
The Authority consisted of a Chairman and such number of Vice-chairmen, revenue Members and law Members as the Central Government appointed by notification. The provision prescribed qualifications for each category and authorised the Authority's powers and functions to be discharged through Benches.
Bench structure
Under the historical Section 245O framework, a Bench ordinarily consisted of the Chairman or Vice-chairman together with one revenue Member and one law Member. Where an application concerned the Income-tax Act, the revenue Member was required to be the member drawn from the Indian Revenue Service category specified in the provision.
Location
Section 245O provided that the Authority would be located in the National Capital Territory of Delhi and that its Benches could be located at places notified by the Central Government.
Board for Advance Rulings after Finance Act, 2021
The Finance Act, 2021 restructured the income-tax advance ruling mechanism. Section 245OB provides for one or more Boards for Advance Rulings, each consisting of two members not below the rank prescribed by the Act. The later framework also introduced an appeal mechanism against advance rulings under Section 245W, subject to the statutory provisions applicable to the case.
Sections 245N and 245O at a glance
| Provision | Subject | Function |
|---|---|---|
| Section 245N | Definitions | Defines advance ruling, applicant, application and other expressions used in Chapter XIX-B. |
| Section 245O | Authority for Advance Rulings | Contains the historical statutory framework for constitution and functioning of the Authority. |
| Section 245OB | Board for Advance Rulings | Provides the post-Finance Act, 2021 institutional framework for Boards for Advance Rulings. |
| Section 245Q | Application | Governs an application for an advance ruling. |
| Section 245W | Appeal | Provides the statutory appeal mechanism for rulings under the restructured regime. |
Position before Bharatiya Sakshya Adhiniyam, 2023
Sections 245N and 245O primarily concern definitions and the institutional structure for advance rulings rather than rules of evidence. For proceedings arising before commencement of the Bharatiya Sakshya Adhiniyam, 2023, any separate evidentiary question is governed by the law applicable to that period. The advance ruling provisions themselves are governed by Chapter XIX-B of the Income-tax Act and the amendments applicable to the relevant proceeding.