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i Advance payment of tax is another method of
collection of tax by the central government in the
form of pre-paid taxes. Such advance tax is in
addition to deduction of tax at source or collection of
tax at source. Scheme of advance payment of tax is
also known as µpay as you earn¶ scheme i.e. the
assessee is required to pay tax during the course of
earning of income in the previous year itself, though
such income is chargeable to tax during the
assessment year.
i As per the various provisions of advance tax (sec.208 to
219), tax shall be payable in advance during the
financial year in respect of the total income of the
assessee which would be chargeable to tax for the
assessment year immediately following that financial
year. Such total income shall be referred to as ³current
income´. We know that income earned during the
financial year 2009-10 shall be charged to tax in the
assessment year 2010-2011. but the assessee is
required to pay tax in advance on the taxable income of
financial year 2009-10 during the financial year 2009-10
itself.
i Advance Tax, as computed in accordance with the
provision shall be payable during a financial year,
only when the amount of such advance tax
payable by the assessee during the year is
Rs.10000 or more.
i Amount of advance tax payable by an
assesses in the financial year on his own accord as per
section 210(1) or 210(2) or 210(5) 0r section 210(6)
on the estimated current income shell be computed as
follows:
1. Estimate the current income of the financial year for
which the advance tax is payable
2. compute tax on such estimated current income at the
rate(s) of tax given under part-3 of the first schedule of
the relevant finance act
i 3. In case of a company deduct credit, if allowable,
under section 115JAA(MAT credit) of the tax pad in
earlier years
i 4. On the net tax, if any, computed at step 3, add
surcharge if applicable. Surcharge is applicable in case
of a company ASSESSEE only
i 5. ADD education CESS+SHEC to the amont computed
under step 4
i 6. Allow relief, if any, under section 89, 90, 90A
and 91.
i 7. Deduct the tax deductible or collectable at
source during the financial year from ant income
which as been taken into amount in computing the
current income.
i 8. The balance amount is the advance tax payable
provided it is 1000Rs or more.
i Current income will include all items of income. Its
include capital gain, winnings from lotteries,
crossword puzzles, etc. For computation of
advance tax on the current non-agricultural
income, even agricultural income will be included
for rate purposes, wherever as per provisions of
the Income tax Act, it is required to be so included.
i (A) By the ASSESSEE on his own accord under
section 210(1): every person who is liable to pay
advance tax under section 208(wether or not he
has been previously assessed by way of regular
assessment) shall of his on own accord, pay, on or
before each of the due dates specified in section
211, the appropriate percentage, specified in that
section, of the advance tax of his current income
calculated in the manner laid down in section 209.
i Increase or decrease of subsequent installment
(section 210(2)): A person who pays any
installment or installments of advance tax under
sub-section(1),may increase or reduce the amount
of advance tax payable in the remaining
installment or installments to accord with his
estimate of his current income and the advance
tax payable thereon, and make payment of the
said amount in the remaining installment or
installments accordingly.
— ayment of advance tax in pursuance of an
order/amended order of assessing officer under
section 210(3) and 210 (4)
— Conditions to be satisfied:
1. Assesses has already been assessed by a way
of a regular assessment.
2. Whether assesses has paid any installment or
not.
3. Assessing officer is of the opinion that such
person is liable to pay advance tax.
4. Such order can be passed at any time during the
financial year but not later than last date of
February.
5. Order must be in writing.
6. Notice should specify the amount of advance tax
and the installments to be paid
i Computation of tax by assessing officer under
section 209(1)(b) read with section 209 (2)(a):
higher of the following:
i Total income of the latest previous year
i The total income returned by the assesse for any
previous year subsequent to the previous year for
which regular assessment has been made.
i Amendment of order for payment of advance tax
[section 210(4)]:
i Assesses can submit his own estimate if its
current income is likely to be a lower [section 210
(5)] rule 39.
i Assesses can submit his own estimate if its
current income is likely to be higher [section 210
(6)]
— For Company assesses:
1. On or before 15th June- not less than 15% of advance
tax liability.
2. On or before 15th September- not less than 45% of
advance tax liability, as reduced by the amount if any
paid in earlier installments.
3. On or before 15th December- not less than 75% of
advance tax liability , as reduced by the amount if any
paid in earlier installments.
4. On or before 15th March- whole amount of advance tax
liability , as reduced by the amount if any paid in earlier
installments.
— For non company assesses:
1. On or before 15th September- not less than 30% of
advance tax liability.
2. On or before 15th December- not less than 60% of
advance tax liability, as reduced by the amount if any
paid in earlier installments.
3. On or before 15th March- the whole amount of advance
tax liability, as reduced by the amount if any paid in
earlier installments.
i Advance tax is payable on all types of income, including
capital gains\wining lotteries etc. however it is not
possible for assesses to estimate his capital gains or
winnings from lotteries etc. if such income arises after
due date of any installment then the entire amount of tax
payable to be paid in remaining installments of advance
tax which are due or where such installments are not
due by 31st march of the relevant financial year. If the
entire amount of tax payable is so paid then no interest
on late payment will be leviable.
i If assesses do not pay on the specified dates any
installments of the advance tax that he is required
to pay he shall be deemed to be an assesses in
default in respect of such installments and shall be
liable to interest and penalty under sections 220
and 221.
i Any sum other than a penalty or interest, paid by
or recovered from an assessee as advance tax
shall be treated as a payment of tax in respect of
the income of the previous year and credit thereof
shall be given to the assessee in the regular
assessment.
i If advance tax is not paid or amount of advance tax paid
is less than 90% of the assessed tax, the assesses shall
be liable to pay Simple interest @1% per month from 1st
April following the financial year under section 234B.
i If the payment of advance tax is deferred beyond the
due dates interest, at the rate of 1% per month for a
period of three months ,will be payable for every
deferment except for the last installment of 15th march
where it will be 1% for 1 month under section 234C.
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With a view to avoiding a dispute in respect of assessment of income tax
liability in the case of non-resident, a scheme of advance ruling was
introduced by incorporating a chapter XIX-B in the Income Tax Act, 1961 by
the Finance Act 1993. The scheme enables the non-residents to obtain, on
advance, a binding ruling from the Authority for Advance Ruling on issue
which could arise in determining the tax liabilities so that time consuming and
expensive appeals can be avoided.

  
     
   means-
(i) a determination by the Authority in relation to a transaction which has been
undertaken or is proposed to be undertaken by a non- resident applicant; or
(ii) a determination by the Authority in relation to the tax liability of a non-
resident arising out of a transaction which has been undertaken
Or is proposed to be undertaken by resident applicant with such non-
resident
In both the above cases, such determination shall include the
determination of any question of law or fact specified in the application
(iii) a determination or decision by the authority in respect of an issue
relating to computation of total income which is pending before any
Income Tax Authority and the Appellate Tribunal

³ ´ means
(i) a non- resident for a transaction which has been undertaken or is
proposed to be undertaken by him; or
(ii) a resident for a transaction which has been undertaken or is
proposed to be undertaken by him with a non- resident; or
(iii) a resident falling within any such class or category of persons as the
central government may, by notification in the Official Gazette, specify
in this behalf, and makes an application under sub- section (1) of
Section 245Q.

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1. Where non- resident company sought advance ruling on questions
relating to a loan transactions b/w its two Indian subsidiary companies.
Here, the AAR observed that the definition of advance ruling under
section 245N(a) has two clauses:
(i) an applicant should be a non- resident & the transaction should be
undertaken or proposed to be undertaken by a non- resident applicant.
(ii) the question should relate to determination of tax liability of a non-
resident in respect of transaction undertaken or proposed to be
undertaken by a resident applicant with such non- resident.
2. A non- resident cannot seek ruling from AAR as to whether its Indian
subsidiary would entitled to tax exemption u/s 10A of the IT Act.
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The AAR, constituted by Central Government will consist of the following
members:
(i) A chairman who will be a retired judge of the Supreme Court
(ii) An officer of the Indian Revenue Service who is qualified to be a
member of CBDT, and
(iii) An officer of the Indian Legal Service who is qualified to be an
Additional Secretary to the GoI
The office of the Authority should be located in Delhi.

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No proceedings of the Authority will be questioned or shall be invalid
merely on ground of the existence of any vacancy or defect in the
constitution of the Authority.
 
    (
1. An application for obtaining an Advance Ruling u/s 245Q(1) shall be
made in quadruplicate:
a) in form no. 34C in respect of a non- resident applicant;
b) in form no. 34D in respect of a resident applicant seeking advance
ruling in relation to a transaction undertaken or proposed to be
undertaken by him with a non- resident; and
c) in form no. 34E in respect of a resident, falling within such class or
category of persons notified by the Central Government.

2. The application should state the question o which the Advance Ruling is
sought.
3. The application should be accompanied by a fee of Rs. 2500 in the form
of a demand draft drawn in favour of AAR.
4. The application, its verification, the annexures, to the said application
and the statement and documents accompanying it shall be signed
by a person mentioned in rule 44E. Where the authorized
representative
signs the application and the documents, the application shall be
accompanied by a power of attorney authorizing him to append this
signature and an affidavit setting out the unavoidable reasons which
entitles him to sign it.
5. The application should be addressed to the Secretary and can be
submitted either in person or by registered post. If it is sent by
registered post, it shall deemed to have been made on the date when it
is received in the office of authority.
6. If the applicant is not hitherto assessed in India, he shall indicate in
Annexure I to the application:
(a) his head office in any other country
(b) the place where his office and residence is located or likely to be
located in India, and
(c) the name and address of his representative in India, if any,
authorized to receive notices and papers and act on his behalf.
7. If the application is found to be defective, the Secretary of the Authority
may send the application back to the applicant for removing the defect
Within such time as he may allow. Such application shall in that case shall
be deemed to have been made on the date on which the application
after rectification is submitted.

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While considering the maintainability of the application, the question to be
decided is whether the applicant is a non- resident as nowhere is
specifically stated that he should be a non- resident as on the date of
the application. AAR has ruled that the question of residence must be
determined w.r.t the previous year and not w.r.t a particular date. The
only previous year w.r.t to which the status of the applicant is
determinable for the purpose of section 245N must be the previous
year preceding the financial year in which application is made.
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As the applicant was not a non- resident on that date, a revised
application
was held to be maintainable if the applicant was non- resident at the
time of making the revised application.

{NOTE: The applicant may withdraw an application within 30 days


from date of the application« section 245Q(3)«}
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 7": Where on the date fixed for hearing
or any other day to which the hearing may be adjourned, the applicant
or the commissioner does not appear in person or through an
authorised representative when called on for hearing, the authority
may dispose of the application ex-parte on merits.
*. '   
   : The authority shall, after
examining such further material as may be placed before it by the
applicant or obtained by the authority, pronounce its advance ruling on
the question specified in the application.
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    The authority
shall pronounce its advance ruling in writing within 6 months of the
receipt of application.
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    - : A copy of the advance ruling
pronounced by the authority, duly signed by the members and certified
in prescribed manner, shall be sent to the applicant and the
commissioner as soon as may be, after such pronouncement.
i ''52,>2523?#4$,0152@ The advance ruling
shall be binding:
a). On the applicant who had sought it, and
b). In respect of specific transactions in relation to which advance
ruling was sought.

Section 245T
i $,0152@3#>0$#22,032,2,1:3,0:
The advance ruling shall be void if it is subsequently found by the
authority, on a representation made to it by commissioner or
revenue, to have been obtained by fraud or misrepresentation of
facts.
i '#ð0:#413;#23? The authority has all the powers of a
civil court in respect of;
*Discovery and inspection
-*Enforcing the attendance of any person including an officer of a
banking company and examining him on oath
*Issuing commissions and compelling the production of books of
account and other records.
: $
i '#,010#413;#23? The authority, subject to the
provision given above, has the power to regulate its own procedure
in all matters arising out of the exercise of its power under this Act.
i ,#42032523? The contents of the applicant would not be
disclosed to unauthorised persons.
''0553013;#23?#33#'#,002,032,:0:

No income tax authority or the Appellate Tribunal shall proceed to


decide any issue in respect to which an application has been made
by an applicant, being a resident, under subsection (1) of section
245Q.