Abstract

International Taxation is gaining importance because of the globalization of business activities and
business activities being spread over various countries. As large multinational organization have cross
country business operations, the manner in which they discharge the tax obligations in various countries also
becomes a bone of contention. India has introduced many measures to charge an appropriate tax in case of
cross country transactions.

Contemporary Issues in International Taxation

(A) Double Taxation Relief
1. Double Taxation Relief
Double taxation means taxation of same income of a person in more than one country. This results due
to countries following different rules for income taxation. There are two main rules of income taxation i.e.
(a) Source of income rule and (b) residence rule.
As per source of income rule, the income may be subject to tax in the country where the source of such
income exists (i.e. where the business establishment is situated or where the asset/property is located)
whether the income earner is a resident in that country or not.
On the other hand, residence rule stipulates that the power to tax should rest with the country in which
tax payee resides. In other words, the income earner may be taxed on the basis of his residential status in that
country. For example if a person is resident of a country, he may have to pay tax on any income earned
outside that country as well.
Further some countries may follow a mixture of the above two rules.
Thus problem of double taxation arises if a person is taxed in respect of any income on the basis of
source of income rule in one country and on the basis of residence in another country or on the basis of
mixture of above two rules.
In India, the liability under the Income-tax Act arises on the basis of the residential status of the assessee
during the previous year. In case the assessee is resident in India, he also has to pay tax on the income which
accrues or arises outside India, and also received outside India. The position in many other countries being
also broadly similar, it frequently happens that a person may be found to be a resident in more than one
country or that the same item of his income may be treated as accruing, arising or received in more than one
country with the result that the same item becomes liable to tax in more than one country.
Relief against such hardship can be provided mainly in two ways: (a) Bilateral relief, (b) Unilateral
relief.
2. Bilateral relief
The Governments of two countries can enter into Double Taxation Avoidance Agreements (DTAA's) so
that the same income may not be taxed twice. DTAA's lay down the rule of taxation of the income by the
source country and the residence country. Such rules are laid for various categories of income, for example
interest, dividend, royalties, capital gains, business income, salary income etc. Each such category is dealt
with by separate article in DTAA.
Thus DTAA's are entered into to provide relief against such Double Taxation, worked out on the basis of
mutual agreement between the two concerned sovereign states. This may be called a scheme of ‘bilateral
relief’ as both concerned powers agree as to the basis of the relief to be granted by either of them.
Bilateral relief may be granted in either one of the following two methods—
(a) Exemption method: Where two countries agree that income from various specified sources which are
likely to be taxed in both the countries should either be taxed only in one of them or that each of the
two countries should tax only a particular specified portion of the income so that there is no
overlapping. Such an agreement will result in a complete avoidance of double taxation of the same
income in the two countries. This is known as exemption method of relief.
(b) Tax credit method: This method does not envisage any such scheme of single taxability but merely
provides that, if any item of income is taxed in both the countries, the assessee should get relief in a
particular manner. Under this method, the assessee is liable to have his income taxed in both the
 countries but is given a deduction, from the tax payable by him in the country of residence, of a part
of the taxes paid by him thereon, in the source country usually the lower of the two taxes paid. This
is known as tax credit method of relief.
In practice the former type of method also works in the same way as the later.
If the agreement with the foreign country is under clause (b) above for relief against double taxation and
not under clause (a) for the avoidance of double taxation, the assessee must show that the identical
income has been doubly taxed and that he has paid tax both in India and in the foreign country, on the
same income. Further, relief from Indian income tax is to be granted on the production of proof of
assessment in that country.
3. Unilateral relief
The above procedure for granting relief will not be sufficient to meet all cases. No country will be in a
position to arrive at such agreement as envisaged above with all the countries of the world for all time. The
hardship of the taxpayer, however, is a crippling one in all such cases. Some relief can be provided even in
such cases by home country irrespective of whether the other country concerned has any agreement with
India or has otherwise provided for any relief at all in respect of such double taxation. This relief is known
as unilateral relief.

(B) Transfer Pricing & Other Anti-Avoidance Measures

The increasing participation of multinational groups in economic activities in the country has given rise
to new and complex issues emerging from transactions entered into between two or more enterprises
belonging to the same multinational group.
Business may be carried on between a resident and a person who is non-resident or not ordinarily
resident in India, and owing to close connection between them, the course of business may be so arranged
that the resident makes either no profits or less than the ordinary profits in that business. Such an
arrangement would deprive that Indian revenue of the tax which would otherwise be payable by the resident.
With a view to provide a statutory framework which can lead to computation of reasonable, fair and
equitable profits and tax in India, in the case of such multinational enterprises, new set of special provisions
relating to avoidance of tax have been introduced under Chapter X in the Income-tax Act. These provisions
are also known as Transfer Pricing provisions.
The transfer price is that price which is arrived at when two associated or related enterprises deal with
each other. Since, the enterprises involved are related entities, they can manipulate prices in a manner
whereby the profits are transferred to the entity of that country, where the tax rates are lower. To prevent this
erosion of tax which was otherwise leviable in India, these provision have been introduced.
These provisions relate to:
(a) Computation of income from international transactions having regard to the arm's length price
[Section 92];
(b) Meaning of associated enterprise [Section 92A];
(c) Meaning of international transaction [Section 92B];
(d) Computation of arm's length prices [Section 92C];
(e) Reference to transfer pricing officer [Section 92CA];
(f) Power of Board to make safe harbour rules [Section 92CB];
(g) Advance pricing agreement [Section 92CC];
(h) Effect to advance pricing agreement [Section 92CD];
(i) Secondary adjustment in certain cases [Section 92CE]
(j) Maintenance and keeping of information and documents by persons entering into international
transactions [Section 92D];
(k) Report from an accountant to be furnished by persons entering into international transaction [Section
92E];
(l) Definitions of certain terms relevant to computation of arm's length price [Section 92F].
Besides the above, Chapter X also contains the following sections relating to avoidance of tax by
entering into transactions with non-residents.
Section 93: Avoidance of income tax by transactions resulting in transfer of income to non-residents.
Section 94A: Special measures in respect of transactions with persons located in notified jurisdictional
area.
Section 94B: Limitation on interest deduction in certain cases.
Chapter X also contains section 94 which is relating to avoidance of tax by certain transactions in
securities. The same is not specifically meant for non-residents.

(C) Limitation of interest deduction in certain cases [Section 94B]

A company is typically financed or capitalized through a mixture of debt and equity. The way a
company is capitalized often has a significant impact on the amount of profit it reports for tax purposes as
the tax legislations of countries typically allow a deduction for interest paid or payable in arriving at the
profit for tax purposes while the dividend paid on equity contribution is not deductible. Therefore, the higher
the level of debt in a company, and thus the amount of interest it pays, the lower will be its taxable profit.
For this reason, debt is often a more tax efficient method of finance than equity. Multinational groups are
often able to structure their financing arrangements to maximize these benefits. For this reason, country's tax
administrations often introduce rules that place a limit on the amount of interest that can be deducted in
computing a company's profit for tax purposes. Such rules are designed to counter cross-border shifting of
profit through excessive interest payments, and thus aim to protect a country's tax base.
Under the initiative of the G-20 countries, the Organization for Economic Co-operation and
Development (OECD) in its Base Erosion and Profit Shifting (BEPS) project had taken up the issue of base
erosion and profit shifting by way of excess interest deductions by the MNEs in Action plan 4. The OECD
has recommended several measures in its final report to address this issue.
In view of the above, the Act has inserted a new section 94B, in line with the recommendations of
OECD BEPS Action Plan 4, which provides as under:

(D) General Anti-Avoidance Rule [Chapter X-A]

1. Applicability of General Anti-Avoidance Rule [Section 95]
Notwithstanding anything contained in the Act, an arrangement entered into by an assessee may be
declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising
therefrom may be determined subject to the provisions of this Chapter. [Section 95(1)]
This Chapter shall apply in respect of any assessment year beginning on or after 1.4.2018. [Section
95(2)]
Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter may be
applied to any step in, or a part of, the arrangement as they are applicable to the arrangement.
(1) Meaning of arrangement [Section 102(1)]: "Arrangement" means any step in, or a part or whole of,
any transaction, operation, scheme, agreement or understanding, whether enforceable or not, and
includes the alienation of any property in such transaction, operation, scheme, agreement or
understanding.
(2) Meaning of step [Section 102(9): "Step" includes a measure or an action, particularly one of a series
taken in order to deal with or achieve a particular thing or object in the arrangement.
Chapter X-A not to apply in certain cases [Rule 10U]
(1) The provisions of Chapter X-A shall not apply to—
(a) an arrangement where the tax benefit in the relevant assessment year arising, in aggregate, to all the
parties to the arrangement does not exceed a sum of rupees three crore;
(b) a Foreign Institutional Investor, –
(i) who is an assessee under the Act;
(ii) who has not taken benefit of an agreement referred to in section 90 or section 90A as the case
may be; and
 (iii) who has invested in listed securities, or unlisted securities, with the prior permission of the
competent authority, in accordance with the Securities and Exchange Board of India (Foreign
Institutional Investor) Regulations, 1995 and such other regulations as may be applicable, in
relation to such investments;
(c) a person, being a non-resident, in relation to investment made by him by way of offshore derivative
instruments or otherwise, directly or indirectly , in a Foreign Institutional Investor;
(d) any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be
received by, any person from transfer of investments made before the 1st day of April, 2017 by such
person.
(2) Without prejudice to the provisions of rule 10U(1)(d), the provisions of Chapter X-A shall apply to
any arrangement, irrespective of the date on which it has been entered into, in respect of the tax benefit
obtained from the arrangement on or after the 1st day of April, 2017.
For the purposes of rule 10U,—
(i) “Foreign Institutional Investor” shall have the same meaning as assigned to it in the Explanation to
section 115AD;
(ii) “off shore derivative instrument” shall have the same meaning as assigned to it in the Securities and
Exchange Board of India (Foreign Institutional Investor) Regulations, 1995 issued under Securities
and Exchange Board of India Act, 1992;
(iii) “Securities and Exchange Board of India” shall have the same meaning as assigned to it in clause
(a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992;
(iv) “tax benefit” as defined in section 102(10) [See box under section 96(1)] and computed in
accordance with Chapter X-A shall be with reference to—
(a) sub-clauses (a) to (e) of the said clause , the amount of tax; and
(b) sub-clause (f) of the said clause, the tax that would have been chargeable had the increase in loss
referred to therein been the total income.
2. Impermissible avoidance arrangement [Section 96]
(1) Meaning of impermissible avoidance arrangement [Section 96(1)]: An impermissible avoidance
arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it—
(a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm's
length;
(b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act;
(c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or
in part; or
(d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona
fide purposes.
(2) Arrangement to be presumed for obtaining a tax benefit unless proved to the contrary [Section
96(2)]: An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been
entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in,
or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the
whole arrangement is not to obtain a tax benefit.
3. Arrangement to lack commercial substance [Section 97]
(1) When will an arrangement be deemed to lack commercial substance? [Section 97(1)]: An
arrangement shall be deemed to lack commercial substance, if—
(a) the substance or effect of the arrangement as a whole, is inconsistent with, or differs significantly
from, the form of its individual steps or a part; or
(b) it involves or includes—
(i) round trip financing;
(ii) an accommodating party;
(iii) elements that have effect of offsetting or cancelling each other; or
(iv) a transaction which is conducted through one or more persons and disguises the value, location,
 source, ownership or control of funds which is the subject matter of such transaction; or
(c) it involves the location of an asset or of a transaction or of the place of residence of any party which
is without any substantial commercial purpose other than obtaining a tax benefit (but for the
provisions of this Chapter) for a party; or
(d) it does not have a significant effect upon the business risks or net cash flows of any party to the
arrangement apart from any effect attributable to the tax benefit that would be obtained (but for the
provisions of this Chapter).
(2) Round trip financing [Section 97(2)]: For the purposes of section 97(1), round trip financing
includes any arrangement in which, through a series of transactions—
(a) funds are transferred among the parties to the arrangement; and
(b) such transactions do not have any substantial commercial purpose other than obtaining the tax
benefit (but for the provisions of this Chapter),
without having any regard to—
(A) whether or not the funds involved in the round trip financing can be traced to any funds transferred
to, or received by, any party in connection with the arrangement;
(B) the time, or sequence, in which the funds involved in the round trip financing are transferred or
received; or
(C) the means by, or manner in, or mode through, which funds involved in the round trip financing are
transferred or received.
(3) Accommodating party [Section 97(3)]: For the purposes of this Chapter, a party to an arrangement
shall be an accommodating party, if the main purpose of the direct or indirect participation of that party in
the arrangement, in whole or in part, is to obtain, directly or indirectly, a tax (but for the provisions of this
Chapter) for the assessee whether or not the party is a connected person in relation to any party to the
arrangement.
(4) Clarification on arrangement lacks commercial substance [Section 97(4)]: For the removal of
doubts, it is hereby clarified that the following may be relevant but shall not be sufficient for determining
whether an arrangement lacks commercial substance or not, namely:—
(i) the period or time for which the arrangement (including operations therein) exists;
(ii) the fact of payment of taxes, directly or indirectly, under the arrangement;
(iii) the fact that an exit route (including transfer of any activity or business or operations) is provided by
the arrangement.
4. Consequences of impermissible avoidance arrangement [Section 98]
(1) Consequences in relation to tax of impermissible avoidance arrangement [section 98(1)]: If an
arrangement is declared to be an impermissible avoidance arrangement, then, the consequences, in relation
to tax, of the arrangement, including denial of tax benefit or a benefit under a tax treaty, shall be
determined, in such manner as is deemed appropriate, in the circumstances of the case, including by way of
but not limited to the following, namely:—
(a) disregarding, combining or recharacterising any step in, or a part or whole of, the impermissible
avoidance arrangement;
(b) treating the impermissible avoidance arrangement as if it had not been entered into or carried out;
(c) disregarding any accommodating party or treating any accommodating party and any other party as
one and the same person;
(d) deeming persons who are connected persons in relation to each other to be one and the same person
for the purposes of determining tax treatment of any amount;
(e) reallocating amongst the parties to the arrangement—
(i) any accrual, or receipt, of a capital nature or revenue nature; or
(ii) any expenditure, deduction, relief or rebate;
(f) treating—
(i) the place of residence of any party to the arrangement; or
(ii) the situs of an asset or of a transaction,
 at a place other than the place of residence, location of the asset or location of the transaction as
provided under the arrangement; or
(g) considering or looking through any arrangement by disregarding any corporate structure.
Determination of consequences of impermissible avoidance arrangement [Rule 10UA]
For the purposes of section 98(1), where a part of an arrangement is declared to be an impermissible
avoidance arrangement, the consequences in relation to tax shall be determined with reference to such part
only.
(1) Meaning of benefit [Section 102(3)]: "benefit" includes a payment of any kind whether in tangible or
intangible form.
(2) For the purposes of section 98(1),—
(i) any equity may be treated as debt or vice versa;
(ii) any accrual, or receipt, of a capital nature may be treated as of revenue nature or vice versa; or
(iii) any expenditure, deduction, relief or rebate may be recharacterised. [Section 98(2)]
5. Treatment of connected person and accommodating party [Section 99]
For the purposes of this Chapter, in determining whether a tax benefit exists,—
(i) the parties who are connected persons in relation to each other may be treated as one and the same
person;
(ii) any accommodating party may be disregarded;
(iii) the accommodating party and any other party may be treated as one and the same person;
(iv) the arrangement may be considered or looked through by disregarding any corporate structure.

(E) Equalisation Levy

With the expansion of information and communication technology, the supply and procurement of
digital goods and services have undergone exponential expansion everywhere, including India.
Currently in the digital domain, business may be conducted without regard to national boundaries and
may dissolve the link between an income-producing activity and a specific location. From a certain
perspective, business in digital domain doesn't seem to occur in any physical location but instead takes place
in the nebulous world of "cyberspace." Persons carrying business in digital domain could be located
anywhere in the world. Entrepreneurs across the world have been quick to evolve their business to take
advantage of these changes. It has also made it possible for the businesses to conduct themselves in ways
that did not exist earlier, and given rise to new business models that rely more on digital and
telecommunication network, do not require physical presence, and derives substantial value from data
collected and transmitted from such networks.
These new business models have created new tax challenges. The typical direct tax issues relating to e-
commerce are the difficulties of characterizing the nature of payment and establishing a nexus or link
between a taxable transaction, activity and a taxing jurisdiction, the difficulty of locating the transaction,
activity and identifying the taxpayer for income tax purposes. The digital business fundamentally challenges
physical presence-based permanent establishment rules. If permanent establishment (PE) principles are to
remain effective in the new economy, the fundamental PE components developed for the old economy i.e.
place of business, location, and permanency must be reconciled with the new digital reality.
The Organization for Economic Cooperation and Development (OECD) has recommended, in Base
Erosion and Profit Shifting (BEPS) project under Action Plan 1, several options to tackle the direct tax
challenges which include modifying the existing Permanent Establishment (PE) rule to include that where an
enterprise engaged in fully de-materialized digital activities would constitute a PE if it maintained a
significant digital presence in another country's economy. It further recommended a virtual fixed place of
business PE in the concept of PE i,e creation of a PE when the enterprise maintains a website on a server of
another enterprise located in a jurisdiction and carries on business through that website. It also
recommended to impose of a final withholding tax on certain payments for digital goods or services
provided by a foreign e-commerce provider or imposition of a equalisation levy on consideration for certain
digital transactions received by a non-resident from a resident or from a non-resident having permanent
establishment in other contracting state.
 Considering the potential of new digital economy and the rapidly evolving nature of business operations
it is found essential to address the challenges in terms of taxation of such digital transactions as mentioned
above. In order to address these challenges, Chapter VIII titled "Equalisation Levy" has been inserted in the
Finance Act, which provides as under:

(F) Power of Board to make safe harbour rules [Section 92CB]

Section 92C of the Income-tax Act provides for adjustment in the transfer price of an international
transaction with an associated enterprise if the transfer price is not equal to the arm's length price. As a
result, a large number of such transactions are being subjected to adjustment giving rise to considerable
dispute.
To overcome this, section 92CB was inserted to empower Board to formulate safe harbour rules. Section
92CB(1) provides as under:
The determination of arm's length price under section 92C or section 92CA shall be subject to safe
harbour rules.
Further as per section 92CB(2), the Board may, for the purposes of section 92CB(1), make rules for safe
harbour.
"Safe harbour" means circumstances in which the income-tax authorities shall accept the transfer price
declared by the assessee.
Safe harbour rules for international transactions have since been notified by the CBDT by Notification
No. 73/2013, dated 18.9.2013 as amended by Notification No. 11/2015, dated 4.2.2015 and further amended
by Notification No. 46/2017, dated 7.6.2017 which contain rules 10TA to 10TG.

(G) Board with the approval of Central Government allowed to

enter into Advance Price Agreement [Section 92CC]
1. CBDT may enter into advance pricing agreement with any person [Section 92CC(1)]: The
Board, with the approval of the Central Government, may enter into an advance pricing agreement with
any person, determining the arm’s length price or specifying the manner in which arm’s length price is to
be determined, in relation to an international transaction to be entered into by that person.
Advance pricing agreement cannot be entered for Specified Domestic Transactions.
2. Manner of determination of arm's length price [Section 92CC(2)]: The manner of determination
of arm’s length price referred to in section 92CC(1), may include the methods referred to in section
92C(1) (i.e. 5 methods) or any other method, with such adjustments or variations, as may be necessary or
expedient so to do.
3. Advance pricing agreement to override section 92C or section 92CA [Section 92CC(3)]:
Notwithstanding anything contained in section 92C or section 92CA, the arm’s length price of any
international transaction, in respect of which the advance pricing agreement has been entered into, s hall be
determined in accordance with the advance pricing agreement so entered. Thus, in this case A.O. can
neither use the methods given in a section 92C or nor can refer the case to TPO under section 92CA.
4. Period of validity of advance pricing agreement [Section 92CC(4)]: The agreement referred to in
section 92CC(1) shall be valid for such period not exceeding five consecutive previous years as may be
specified in the agreement.
5. Binding nature of advance pricing agreements [Section 92CC(5)]: The advance pricing
agreement entered into shall be binding—
(a) on the person in whose case, and in respect of the transaction in relation to which, the agreement
has been entered into; and
(b) on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to
him, in respect of the said person and the said transaction.
6. Agreement not to be binding if there is a change in law or facts [Section 92CC(6)]: The
agreement referred to in section 92CC(1) shall not be binding if there is a change in law or facts having
bearing on the agreement so entered.
 7. Agreement may be declared void ab initio in certain circumstances [Section 92CC(7)]: The
Board may, with the approval of the Central Government, by an order, declare an agreement to be void ab
initio, if it finds that the agreement has been obtained by the person by fraud or misrepresentation of facts.
8. Consequences if agreement is declared void ab initio under section 92CCC(7) [Section
92CC(8)]: Upon declaring the agreement void ab initio,—
(a) all the provisions of the Act shall apply to the person as if such agreement had never been entered
into; and
(b) notwithstanding anything contained in the Act, for the purpose of computing any period of
limitation under this Act, the period beginning with the date of such agreement and ending on the
date of order under section 92CC(7) shall be excluded.
However, where immediately after the exclusion of the aforesaid period, the period of limitation,
referred to in any provision of this Act, is less than sixty days, such remaining period shall be extended to
sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.
9. Board to prescribe scheme, manner and procedure in this case [Section 92CC(9)]
The Board may, for the purposes of this section, prescribe a scheme (including for rollback years, see
section 92CC(9A) below) specifying therein the manner, form, procedure and any other matter generally in
respect of the advance pricing agreement.
In this connection, the Board has notified the advance pricing scheme (including for rollback years)
which contains rules from 10F to 10T (Rule 10MA and Rule 10RA specifically cover rollback of the
agreement and procedure thereof).
10. Agreement so entered may also be made applicable for international transactions entered into
in maximum four preceding previous years [Section 92CC(9A)]
The agreement referred to in section 92CC(1), may, subject to such conditions, procedure and manner as
may be prescribed, provide for determining the arm's length price or specify the manner in which arm's
length price shall be determined in relation to the international transaction entered into by the person during
any period not exceeding four previous years preceding the first of the previous years referred to in section
92CC(4), and the arm's length price of such international transaction shall be determined in accordance with
the said agreement.
11. Proceeding shall be deemed to be pending if application made under section 92CC(1)
[Section 92CC(10)]: Where an application is made by a person for entering into an agreement referred to
in section 92CC(1), the proceeding shall be deemed to be pending in the case of the person for the
purposes of the Act.
Effect of Advance Price Agreement [Section 92CD]
1. Assessee to file modified return of income in accordance with the advance pricing agreement
[Section 92CD(1)]
Notwithstanding anything to the contrary contained in section 139, where any person has entered into
an agreement and prior to the date of entering into the agreement, any return of income has been furnished
under the provisions of section 139 for any assessment year relevant to a previous year to which such
agreement applies, such person shall furnish, within a period of three months from the end of the month in
which the said agreement was entered into, a modified return in accordance with and limited to the
agreement.
Save as otherwise provided in this section, all other provisions of this Act shall apply accordingly as if
the modified return is a return furnished under section 139.
2. Assessing Officer to assess or reassess the completed assessment according to advance price
agreement [Section 92CD(3)]
If the assessment or reassessment proceedings for an assessment year relevant to a previous year to
which the agreement applies have been completed before the expiry of period allowed for furnishing of
modified return under section 92CD(1), the Assessing Officer shall, in a case where modified return is
filed in accordance with the provisions of section 92CD(1), proceed to assess or reassess or recompute the
total income of the relevant assessment year having regard to and in accordance with the agreement.
3. Assessing Officer to complete assessment according to modified return if it is pending on the
date of filing modified return [Section 92CD(4)]
Where the assessment or reassessment proceedings for an assessment year relevant to the previous
year to which the agreement applies are pending on the date of filing of modified return in accordance
with the provisions of section 92CD(1), the Assessing Officer shall proceed to complete the assessment or
reassessment proceedings in accordance with the agreement taking into consideration the modified return
so furnished.
4. Period of completion of assessment on the basis of modified return [Section 92CD(5)]
(A) In case assessment or re-assessment has been already completed
Notwithstanding anything contained in section 153 or section 153B or section 144C, the order of
assessment, reassessment or recomputation of total income under section 92CD(3) shall be passed within a
period of one year from the end of the financial year in which the modified return under section 92CD(1) is
furnished.
(B) In case assessment or reassessment is pending
Similarly, the period of limitation as provided in section 153 or section 153B or section 144C for
completion of pending assessment or reassessment proceedings referred to in section 92CD(4) shall be
extended by a period of twelve months.

(H) Advance Rulings

Advance ruling under the Income Tax Act could be sought by:
(A) any person who is—
(i) a non-resident.
(ii) resident having transactions with non-residents.
(iii) a resident.
(iv) a public sector company
(B) an applicant as defined in section 28E(c) of the Customs Act, 1962;
(C) an applicant as defined in section 23A(c) of the Central Excise Act, 1944;
(D) an applicant as defined in section 96A(b) of the Finance Act, 1994 relating to service tax law;
Further, the advance ruling is to be given on questions specified in relation to transaction by the
applicant himself and not by any other person. However, the applicant can be a representative assessee on
behalf of trust through which it has made investments in India.
Questions on which advance ruling can be sought
The advance rulings can be sought on any question in relation to a transaction by the applicant. The
following points however in this regard may be noted:
(a) Even though the word used in the definition is 'question', it is clear that the applicant can raise more
than one question in one application. This has been made amply clear by Column No. 8 of the form
of application for obtaining an advance ruling (Form No. 34C) and Column No. 7 of Form Nos. 34D
and 34E.
(b) Though the word "question" is unqualified, it is only proper to read it as a reference to questions, of
law or fact, pertaining to the income-tax liability of the applicant qua the transaction undertaken or
proposed to be undertaken by him.
(c) The questions may be on points of law as well as on fact; therefore, mixed questions of law and fact
can also be included in the application. The questions should be so drafted that each question is
capable of a brief answer. This may need breaking-up of complex questions into two or more simple
questions.
(d) The questions should arise out of the statement of facts given with the application. No ruling will be
given on a purely hypothetical question. Questions not specified in the application can not be urged.
Normally, a question is not allowed to be amended but in deserving cases the Authority may allow
amendment of one or more questions.
(e) Subject to the limitations referred to above the question may relate to any aspect of the applicant's
liability including international aspects and aspects governed by double tax agreements. The
 questions may cover aspects of allied Laws that may have a leaning on tax liability such as the Law
of Contracts, the Law of Trusts and the like, but the question must have a direct bearing with Indian
Income-tax Act.
Kinds of questions on which ruling is mostly sought for non-resident
Questions relating to the transactions undertaken or proposed to be undertaken:
(a) by a non-resident
or
(b) between a resident and a non-resident
mostly relates to section 9(1) dealing with income deemed to accrue or arise in India, which can be
classified as under:
1. Income from any Business Connection/Permanent Establishment in India
2. Income from the operation of ships or air craft
3. Interest payable outside India
4. Royalty payable outside India
5. Fee for technical services payable outside India
6. Salary earned in India
7. Capital Gain from transfer of a capital assets situate in India
8. Income from property, asset or any source in India
Beside the above, the questions can relate to withholding tax under section 195 of the Income Tax Act.

Reference
Chapter 1 to 5 of Part II of Direct Tax Laws and International Taxation, 38th Edition,
by. Dr. Girish Ahuja and Dr. Ravi Gupta

Dr. RAVI GUPTA did his graduation and post-graduation from Shri Ram College of
Commerce. Thereafter, he did LL.B. from Delhi University and MBA (Finance) from Faculty of
Management Studies, Delhi. He has been awarded a Ph.D. degree in International Finance by the
Delhi University. He is a faculty member at Shri Ram College of Commerce (Delhi University) and
also has vast practical experience in handling tax matters of trade and industry. He has addressed
more than 2000 seminars on Direct Taxes organized by ICAI, Chambers of Commerce,
Universities, etc. He was appointed by the Government of India as a member of the Committee
constituted for Simplification of Income Tax Act. He is an independent director of many reputed
companies. He had been nominated by the Government to the Central Council of the Institute of
Chartered Accountants of India.