Section 245R — Procedure on Receipt of Application
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: The procedural heart of the Chapter: forwarding the application to the Principal Commissioner/Commissioner; the admission stage (s.245R(2)) at which the application is allowed or rejected; the three statutory bars in the first proviso to s.245R(2) — (i) question already pending before an income-tax authority/Tribunal/court, (ii) determination of fair market value, (iii) transaction designed prima facie for avoidance of income-tax; mandatory hearing and reasons before rejection; pronouncement within six months (s.245R(6)); and the faceless-scheme enabling provisions (s.245R(9)–(11)).
Finance Act, 2024: Fourth proviso to s.245R(2) (Act No. 15 of 2024, w.e.f. 1 October 2024) lets the Board treat a transferred application as withdrawn by 31 December 2024 on the applicant’s s.245Q(4)-proviso request.
Status: The most heavily litigated section of the Chapter. The admission bars — especially the “already pending” and “avoidance” provisos — have generated a large and partly conflicting body of Authority rulings, since settled at the apex level by the Supreme Court (Hyosung; SAGE Publications; and, on avoidance, Tiger Global, 2026).
A. SECTION COMMENTARY
1. Two-stage procedure: admission, then ruling
Section 245R erects a two-stage process. At the first stage (sub-section (2)) the Authority/Board examines the application and the records called for and, by order, either allows or rejects it; if allowed, the second stage (sub-section (4)) is the pronouncement of the ruling on the question after examining such further material as the applicant places or the forum obtains. The admission stage is jurisdictional: the first proviso to sub-section (2) commands that the application “shall not” be allowed where any of three bars applies.
2. The three statutory bars
Bar (i): the question is already pending before any income-tax authority, the Appellate Tribunal or any court — subject to the carve-out for a resident applicant under s.245N(b)(iii). Bar (ii): the question involves determination of the fair market value of any property. Bar (iii): the transaction or issue is designed prima facie for the avoidance of income-tax — subject to carve-outs for the notified resident applicants. The use of “prima facie” in bar (iii) is significant: the forum forms a first-impression view of avoidance, exercising a discretion that must be principled, not arbitrary.
3. Bar (i) — what makes a question “already pending”
The most litigated question was whether the mere filing of a return, or the issue of a notice under s.143(2), renders the question “already pending” so as to oust jurisdiction. Early rulings took conflicting views. The controversy is now settled by the Supreme Court: in CIT v. Hyosung Corporation (affirming the Delhi High Court) the Court held that issuance of a s.143(2) notice seeking information, before the filing of the application, does not by itself attract the bar — especially a standard pre-printed notice not addressed to the question raised; and in DCIT v. SAGE Publications the Court took the same view, so that neither the filing of the return nor the mere issue of a s.143(2) notice bars the application. The temporal test is pendency “at the date of the application” (Monte Harris). Pendency of a s.195/197 application or order, or even a s.263 revision, does not bar the application (SEPCO III).
4. Bar (ii) — fair market value / arm’s-length price
The fair-market-value bar has been read to cover transfer-pricing benchmarking: in Instrumentarium Corporation the Authority held that determining whether a transaction is at arm’s length is, in substance, a determination of fair market value and is therefore outside its remit at the admission stage. (A separate, later Instrumentarium ruling decided a TP question on the merits where the bar was not in play; the two should not be conflated.)
5. Bar (iii) — “designed prima facie for the avoidance of income-tax”
This bar has produced the Chapter’s most consequential jurisprudence. The discretion may be exercised both at admission and at the final hearing (ABC International). It is not to rest on mere suspicion: the Bombay High Court in Mahindra-BT Investment held the forum may decline a ruling only where fraud or illegality is ex facie evident or established in some proceeding. Legitimate tax planning is not avoidance — a taxpayer may arrange affairs to reduce tax by lawful means (Canoro Resources). But where the structure is a colourable device — a paper company with no substance interposed to escape tax — the bar bites: in Groupe Industrial Marcel Dassault the Authority declined a ruling, finding the Mauritius/French holding entity a substance-less front created only to deal with the Indian shares. The Supreme Court has now authoritatively settled the look-through power in Tiger Global (2026): a Tax Residency Certificate is not conclusive, and the avoidance enquiry under bar (iii) permits scrutiny of control, management and real ownership of the entire arrangement.
6. Mandatory safeguards: hearing and reasons
An application may not be rejected under sub-section (2) without affording the applicant an opportunity of being heard, and the order of rejection must give reasons (second and third provisos). At the admission stage there is no corresponding requirement to hear the Commissioner or to record reasons for admission, unless the application is rejected (DIT v. AAR, AP HC). Before pronouncing the ruling, the forum must, on request, hear the applicant in person or through an authorised representative (s.245R(5)).
7. Amendment of the question; hypothetical questions
An applicant may, with leave, reframe or narrow the question, provided the complexion of the application is not changed (Fidelity Advisor Series VIII); but the forum will not entertain a ruling on a truncated or artificially severed transaction (ZD, In re). A ruling will not issue on a hypothetical question or where crucial facts/modus operandi are not on record (Royal Bank of Canada; Meenu Sahi Mamik).
8. The six-month timeline and the faceless scheme
Sub-section (6) requires the ruling to be pronounced in writing within six months of receipt of the application — a timeline more honoured in the breach before the Authority, and one of the spurs to the move to faceless Boards. Sub-sections (9)–(11) enable the faceless e-Advance Rulings Scheme, 2022, with elimination of interface, economies of scale and dynamic jurisdiction, subject to laying of notifications before Parliament.
9. Reviewability and the scope of writ/appeal
Because the forum is a Tribunal (Columbia Sportswear), its admission and final orders are reviewable. The High Court in writ examines the decision-making process — whether vital evidence was ignored or the law misconstrued — not the merits as an appellate court would (Anurag Jain). After the Finance Act, 2021, a ruling/order of the Board is appealable to the High Court under s.245W.
B. STATUTORY POSITION (verbatim text)
The text of section 245R, as it stands in the Act (Finance Act, 2025 base text), is set out below.
245R. (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Principal Commissioner or Commissioner and, if necessary, call upon him to furnish the relevant records :
Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the Principal Commissioner or Commissioner.
(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application :
Provided that the Authority shall not allow the application where the question raised in the application,— (i) is already pending before any income-tax authority or Appellate Tribunal [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or any court; (ii) involves determination of fair market value of any property; (iii) relates to a transaction or issue which is designed prima facie for the avoidance of income-tax [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or in the case of an applicant falling in sub-clause (iiia) of clause (b) of section 245N:
Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Provided also that where the application is rejected, reasons for such rejection shall be given in the order:
Provided also that on receipt of an application under the proviso to sub-section (4) of section 245Q, the Board for Advance Rulings may, by an order, reject the application referred to in sub-section (1) thereof as withdrawn on or before the 31st day of December, 2024.
(3) A copy of every order made under sub-section (2) shall be sent to the applicant and to the Principal Commissioner or Commissioner.
(4) Where an application is allowed under sub-section (2), 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.
(5) On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative.
Explanation.—For the purposes of this sub-section, "authorised representative" shall have the meaning assigned to it in sub-section (2) of section 288, as if the applicant were an assessee.
(6) The Authority shall pronounce its advance ruling in writing within six months of the receipt of application.
(7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Principal Commissioner or Commissioner, as soon as may be, after such pronouncement.
(8) On and from such date as the Central Government may, by notification in the Official Gazette, appoint, the provisions of this section shall have effect as if for the word "Authority", the words "Board for Advance Rulings" had been substituted and the provisions of this section shall apply mutatis mutandis to the Board for Advance Rulings as they apply to the Authority.
(9) The Central Government may, by notification in the Official Gazette, make a scheme for the purposes of giving advance rulings under this Chapter by the Board for Advance Rulings, so as to impart greater efficiency, transparency and accountability by— (a) eliminating the interface between the Board for Advance Rulings and the applicant in the course of proceedings to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a system with dynamic jurisdiction.
(10) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (9), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification:
Provided that no such direction shall be issued after the 31st day of March, 2023:
Provided further that the Central Government may amend any direction, issued under this sub-section on or before the 31st day of March, 2023, by notification in the Official Gazette.
(11) Every notification issued under sub-section (9) and sub-section (10) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Editorial note: the fourth proviso to sub-section (2) and the second proviso to sub-section (10) reflect Finance Act, 2024 and Finance Act, 2023 insertions respectively; sub-sections (8)–(11) carry the section to the Board for Advance Rulings and the faceless scheme. No statutory word is altered.
C. AUTHORITIES
The richest cluster in the Chapter. Authorities are grouped by the bar or procedural issue construed; the apex decisions (Supreme Court) are placed at the head of the relevant cluster. Rulings of the Authority dominate because admission/avoidance questions are decided by the forum and reviewed by the High Court/Supreme Court, not the Tribunal.
Cluster 1 — Bar (iii): avoidance / look-through (the leading line)
Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings, 2026 INSC 60 (SC, 15 January 2026; Civil Appeals 262–264 of 2026)
Facts: Mauritius entities sold shares of a Singapore company (Flipkart) deriving substantial value from Indian assets (c. USD 1.6 billion on the 2018 Walmart–Flipkart exit) and sought rulings claiming India–Mauritius treaty exemption; the Authority had rejected the applications under s.245R(2)(iii); the Delhi High Court (28 August 2024) had set that aside, treating the TRC as “sacrosanct.”
Held: Allowing the Revenue’s appeals and setting aside the High Court, the Supreme Court held that s.245R(2)(iii) expressly empowers the forum to decline a ruling where a transaction is prima facie designed to avoid income-tax; a Tax Residency Certificate is not by itself conclusive of beneficial ownership/substance; and the avoidance enquiry permits scrutiny of the entire arrangement — its control, management and real ownership. The Authority’s rejection was restored.
Relevance: The governing modern authority on bar (iii) and the look-through power; harmonises the AAR admission enquiry with GAAR (Chapter X-A) and treaty-abuse principles.
Groupe Industrial Marcel Dassault, In re (2012) 340 ITR 353 (AAR); AAR Nos. 846 & 847 of 2009, dated 28 November 2011
Facts: French holding companies proposed to sell shares of a French SPV (ShanH), which held shares of an Indian company (Shantha), to another French company (Sanofi); the Revenue contended the real subject was the controlling interest in the Indian company.
Held: The Authority declined to rule, finding the transaction prima facie a scheme for avoidance: the interposed entity had no office, employees, business or asset except the Indian shares and was a substance-less front created only to deal with those shares; a legally valid form used as a smokescreen to avoid tax attracts bar (iii).
Relevance: Pre-GAAR landmark on the avoidance bar and substance-over-form at the AAR; foreshadows Tiger Global.
Mahindra-BT Investment Co (Mauritius) Ltd v. DIT (2013) 359 ITR 485 (Bombay HC)
Held: The Authority may exercise the discretion to refuse a ruling on the avoidance ground only where fraud and/or illegality is ex facie evident or has been established in some proceeding; such discretion is not to be exercised on mere suspicion.
Relevance: Sets the evidentiary threshold for bar (iii); read with Tiger Global, the look-through must be principled, not speculative.
ABC International Inc, USA, In re (2011) 241 CTR 289 (AAR)
Held: The Authority has power to determine whether a transaction is designed for avoidance not only at the admission stage but also at the final hearing.
Relevance: Locates the avoidance enquiry at both stages of s.245R.
Canoro Resources Ltd, In re (2009) 313 ITR 2 (AAR)
Held: A convincing commercial explanation for restructuring having been given, the Revenue cannot complain when a taxpayer adopts a lawful method of tax planning beneficial to itself; the avoidance bar was not attracted (noted as possibly requiring reconsideration after the GAAR gateway, s.245N(a)(iv)).
Relevance: Marks the legitimate-planning boundary of bar (iii).
Cluster 2 — Bar (i): question “already pending” (apex-settled)
CIT v. Hyosung Corporation (2016) 244 Taxman 286 (SC), affirming Hyosung Corporation v. AAR (2016) 382 ITR 371 (Delhi HC)
Held: The issue of a s.143(2) notice asking for information before the filing of the application does not attract the pendency bar — especially where the notice is a standard pre-printed form and the questions before the AAR are not its subject-matter; neither the filing of the return nor the mere issue of a s.143(2) notice bars the application.
Relevance: Settles bar (i) at the apex level in the applicant’s favour on the return/143(2) point.
DCIT v. SAGE Publications India (P) Ltd (2016) 246 Taxman 57 (SC)
Held: Following the same reasoning, the Supreme Court confirmed that the mere filing of a return / issue of a s.143(2) notice does not render the question “already pending.”
Relevance: Reinforces Hyosung; the two together are the controlling authority on bar (i).
Monte Harris v. CIT (1996) 218 ITR 413 (AAR)
Held: “Already pending” is to be tested as at the date of the application; maintainability cannot be made to depend on the pendency of the issue before the authorities on some later date.
Relevance: Fixes the temporal point for bar (i).
SEPCO III Electric Power Construction Corpn, In re (2011) 340 ITR 225 (AAR)
Held: Mere pendency of an application under s.195 or 197, or an order under s.197, or even the pendency of a s.263 revision on the date of the AAR application, does not bar the Authority’s jurisdiction.
Relevance: Defines what does not count as “already pending” for bar (i).
Cluster 3 — Bar (ii): fair market value / arm’s-length price
Instrumentarium Corporation Ltd, In re (2005) 272 ITR 499 (AAR)
Held: Benchmarking a transaction at arm’s-length price is, in substance, a determination of fair market value and falls within the bar in s.245R(2)(ii).
Relevance: Brings transfer-pricing valuation within bar (ii) at the admission stage.
Cluster 4 — Admission procedure: hearing, reasons, Commissioner’s role
DIT (International Taxation) v. Authority for Advance Ruling (2013) 352 ITR 185 (Andhra Pradesh HC)
Held: At the admission stage there is no requirement for the Commissioner or his representative to be heard, or for reasons to be recorded for admission, unless the application is rejected (in which case the applicant must be heard and reasons given).
Relevance: Construes the second/third provisos to s.245R(2) and the asymmetry between admission and rejection.
Cluster 5 — Hypothetical questions and amendment of the question
Royal Bank of Canada, In re (2010) 323 ITR 380 (AAR)
Held: Though a ruling can be on a proposed transaction, it would be inappropriate to rule on a hypothetical basis where crucial facts — the actual pattern of dealings or modus operandi — are not known; application dismissed.
Relevance: No ruling on hypothetical/under-developed facts under s.245R(4).
Ms Meenu Sahi Mamik, In re (2007) 287 ITR 514 (AAR)
Held: Where neither the nature of the business nor the agreement was on record, the application was premature and not maintainable; the question could not be answered hypothetically.
Relevance: Completeness of facts is a condition of a ruling.
Fidelity Advisor Series VIII, In re (2004) 271 ITR 1 (AAR)
Held: The applicant may amend/narrow the question (e.g., confine it to some items or give up parts), but not so as to change the very complexion of the application.
Relevance: Defines the permissible scope of reframing a s.245Q question at the s.245R stage.
ZD, In re (2012) 348 ITR 351 (AAR)
Held: Seeking a ruling on only part of, or a truncated, transaction is not a practice to be encouraged; the Authority must rule on the question as raised, and interlinked aspects cannot be artificially severed.
Relevance: Limits selective/severed questions at the ruling stage.
Cluster 6 — Reviewability and scope of writ
Anurag Jain v. Authority for Advance Ruling (2008) 308 ITR 302 (Madras HC)
Held: The writ remedy lies against the decision-making process, not the decision on merits; where the Authority considered the factual issues in the best possible way, there was no ground to interfere, and the writ court would not sit in appeal over the correctness of the ruling.
Relevance: Defines the supervisory (not appellate) scope of review of a s.245R order — the pre-2021 counterpart to the s.245W appeal.
Onmobile Global Ltd v. Chairman, Authority for Advance Ruling (2015) 279 CTR 518 (Karnataka HC)
Held: Rule 17 of the AAR (Procedure) Rules allows dismissal of an application ex parte only on merits for non-appearance; an application could not be rejected where the notice of hearing was never within the applicant’s knowledge.
Relevance: Natural-justice limit on ex parte disposal at the s.245R stage.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; no statutory word is altered. Chapter XIX-B (Advance Rulings, ss.245N–245W) was inserted by the Finance Act, 1993; the Authority for Advance Rulings was replaced, for fresh income-tax applications, by the Board for Advance Rulings (s.245-OB, Finance Act, 2021), with a statutory appeal to the High Court (s.245W) and the e-Advance Rulings Scheme, 2022. The Finance Act, 2026 makes NO amendment to any section of Chapter XIX-B. Rulings of the Authority for Advance Rulings are cited as the natural body of jurisprudence on this Chapter; Supreme Court and High Court decisions are flagged as such; there is virtually no Income-tax Appellate Tribunal authority on Chapter XIX-B (advance-ruling disputes travel to the High Court/Supreme Court, not the Tribunal), which is stated candidly rather than padded. Where a section has not been judicially construed, that is stated and the nearest governing authority is given. Citations are stated as reported and have been web-verified; the reader should consult the official report before filing. This material is for professional reference and is not legal advice.
CHAPTER XIX-B — ADVANCE RULINGS
Section 245R — Procedure on Receipt of Application
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: The procedural heart of the Chapter: forwarding the application to the Principal Commissioner/Commissioner; the admission stage (s.245R(2)) at which the application is allowed or rejected; the three statutory bars in the first proviso to s.245R(2) — (i) question already pending before an income-tax authority/Tribunal/court, (ii) determination of fair market value, (iii) transaction designed prima facie for avoidance of income-tax; mandatory hearing and reasons before rejection; pronouncement within six months (s.245R(6)); and the faceless-scheme enabling provisions (s.245R(9)–(11)).
Finance Act, 2024: Fourth proviso to s.245R(2) (Act No. 15 of 2024, w.e.f. 1 October 2024) lets the Board treat a transferred application as withdrawn by 31 December 2024 on the applicant’s s.245Q(4)-proviso request.
Finance Act, 2026: No amendment to section 245R.
Status: The most heavily litigated section of the Chapter. The admission bars — especially the “already pending” and “avoidance” provisos — have generated a large and partly conflicting body of Authority rulings, since settled at the apex level by the Supreme Court (Hyosung; SAGE Publications; and, on avoidance, Tiger Global, 2026).
A. SECTION COMMENTARY
1. Two-stage procedure: admission, then ruling
Section 245R erects a two-stage process. At the first stage (sub-section (2)) the Authority/Board examines the application and the records called for and, by order, either allows or rejects it; if allowed, the second stage (sub-section (4)) is the pronouncement of the ruling on the question after examining such further material as the applicant places or the forum obtains. The admission stage is jurisdictional: the first proviso to sub-section (2) commands that the application “shall not” be allowed where any of three bars applies.
2. The three statutory bars
Bar (i): the question is already pending before any income-tax authority, the Appellate Tribunal or any court — subject to the carve-out for a resident applicant under s.245N(b)(iii). Bar (ii): the question involves determination of the fair market value of any property. Bar (iii): the transaction or issue is designed prima facie for the avoidance of income-tax — subject to carve-outs for the notified resident applicants. The use of “prima facie” in bar (iii) is significant: the forum forms a first-impression view of avoidance, exercising a discretion that must be principled, not arbitrary.
3. Bar (i) — what makes a question “already pending”
The most litigated question was whether the mere filing of a return, or the issue of a notice under s.143(2), renders the question “already pending” so as to oust jurisdiction. Early rulings took conflicting views. The controversy is now settled by the Supreme Court: in CIT v. Hyosung Corporation (affirming the Delhi High Court) the Court held that issuance of a s.143(2) notice seeking information, before the filing of the application, does not by itself attract the bar — especially a standard pre-printed notice not addressed to the question raised; and in DCIT v. SAGE Publications the Court took the same view, so that neither the filing of the return nor the mere issue of a s.143(2) notice bars the application. The temporal test is pendency “at the date of the application” (Monte Harris). Pendency of a s.195/197 application or order, or even a s.263 revision, does not bar the application (SEPCO III).
4. Bar (ii) — fair market value / arm’s-length price
The fair-market-value bar has been read to cover transfer-pricing benchmarking: in Instrumentarium Corporation the Authority held that determining whether a transaction is at arm’s length is, in substance, a determination of fair market value and is therefore outside its remit at the admission stage. (A separate, later Instrumentarium ruling decided a TP question on the merits where the bar was not in play; the two should not be conflated.)
5. Bar (iii) — “designed prima facie for the avoidance of income-tax”
This bar has produced the Chapter’s most consequential jurisprudence. The discretion may be exercised both at admission and at the final hearing (ABC International). It is not to rest on mere suspicion: the Bombay High Court in Mahindra-BT Investment held the forum may decline a ruling only where fraud or illegality is ex facie evident or established in some proceeding. Legitimate tax planning is not avoidance — a taxpayer may arrange affairs to reduce tax by lawful means (Canoro Resources). But where the structure is a colourable device — a paper company with no substance interposed to escape tax — the bar bites: in Groupe Industrial Marcel Dassault the Authority declined a ruling, finding the Mauritius/French holding entity a substance-less front created only to deal with the Indian shares. The Supreme Court has now authoritatively settled the look-through power in Tiger Global (2026): a Tax Residency Certificate is not conclusive, and the avoidance enquiry under bar (iii) permits scrutiny of control, management and real ownership of the entire arrangement.
6. Mandatory safeguards: hearing and reasons
An application may not be rejected under sub-section (2) without affording the applicant an opportunity of being heard, and the order of rejection must give reasons (second and third provisos). At the admission stage there is no corresponding requirement to hear the Commissioner or to record reasons for admission, unless the application is rejected (DIT v. AAR, AP HC). Before pronouncing the ruling, the forum must, on request, hear the applicant in person or through an authorised representative (s.245R(5)).
7. Amendment of the question; hypothetical questions
An applicant may, with leave, reframe or narrow the question, provided the complexion of the application is not changed (Fidelity Advisor Series VIII); but the forum will not entertain a ruling on a truncated or artificially severed transaction (ZD, In re). A ruling will not issue on a hypothetical question or where crucial facts/modus operandi are not on record (Royal Bank of Canada; Meenu Sahi Mamik).
8. The six-month timeline and the faceless scheme
Sub-section (6) requires the ruling to be pronounced in writing within six months of receipt of the application — a timeline more honoured in the breach before the Authority, and one of the spurs to the move to faceless Boards. Sub-sections (9)–(11) enable the faceless e-Advance Rulings Scheme, 2022, with elimination of interface, economies of scale and dynamic jurisdiction, subject to laying of notifications before Parliament.
9. Reviewability and the scope of writ/appeal
Because the forum is a Tribunal (Columbia Sportswear), its admission and final orders are reviewable. The High Court in writ examines the decision-making process — whether vital evidence was ignored or the law misconstrued — not the merits as an appellate court would (Anurag Jain). After the Finance Act, 2021, a ruling/order of the Board is appealable to the High Court under s.245W.
B. STATUTORY POSITION (verbatim text)
The text of section 245R, as it stands in the Act (Finance Act, 2025 base text), is set out below.
245R. (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Principal Commissioner or Commissioner and, if necessary, call upon him to furnish the relevant records :
Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the Principal Commissioner or Commissioner.
(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application :
Provided that the Authority shall not allow the application where the question raised in the application,— (i) is already pending before any income-tax authority or Appellate Tribunal [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or any court; (ii) involves determination of fair market value of any property; (iii) relates to a transaction or issue which is designed prima facie for the avoidance of income-tax [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of section 245N or in the case of an applicant falling in sub-clause (iiia) of clause (b) of section 245N:
Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:
Provided also that where the application is rejected, reasons for such rejection shall be given in the order:
Provided also that on receipt of an application under the proviso to sub-section (4) of section 245Q, the Board for Advance Rulings may, by an order, reject the application referred to in sub-section (1) thereof as withdrawn on or before the 31st day of December, 2024.
(3) A copy of every order made under sub-section (2) shall be sent to the applicant and to the Principal Commissioner or Commissioner.
(4) Where an application is allowed under sub-section (2), 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.
(5) On a request received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an opportunity to the applicant of being heard, either in person or through a duly authorised representative.
Explanation.—For the purposes of this sub-section, "authorised representative" shall have the meaning assigned to it in sub-section (2) of section 288, as if the applicant were an assessee.
(6) The Authority shall pronounce its advance ruling in writing within six months of the receipt of application.
(7) A copy of the advance ruling pronounced by the Authority, duly signed by the Members and certified in the prescribed manner shall be sent to the applicant and to the Principal Commissioner or Commissioner, as soon as may be, after such pronouncement.
(8) On and from such date as the Central Government may, by notification in the Official Gazette, appoint, the provisions of this section shall have effect as if for the word "Authority", the words "Board for Advance Rulings" had been substituted and the provisions of this section shall apply mutatis mutandis to the Board for Advance Rulings as they apply to the Authority.
(9) The Central Government may, by notification in the Official Gazette, make a scheme for the purposes of giving advance rulings under this Chapter by the Board for Advance Rulings, so as to impart greater efficiency, transparency and accountability by— (a) eliminating the interface between the Board for Advance Rulings and the applicant in the course of proceedings to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a system with dynamic jurisdiction.
(10) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (9), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification:
Provided that no such direction shall be issued after the 31st day of March, 2023:
Provided further that the Central Government may amend any direction, issued under this sub-section on or before the 31st day of March, 2023, by notification in the Official Gazette.
(11) Every notification issued under sub-section (9) and sub-section (10) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Editorial note: the fourth proviso to sub-section (2) and the second proviso to sub-section (10) reflect Finance Act, 2024 and Finance Act, 2023 insertions respectively; sub-sections (8)–(11) carry the section to the Board for Advance Rulings and the faceless scheme. No statutory word is altered.
C. AUTHORITIES
The richest cluster in the Chapter. Authorities are grouped by the bar or procedural issue construed; the apex decisions (Supreme Court) are placed at the head of the relevant cluster. Rulings of the Authority dominate because admission/avoidance questions are decided by the forum and reviewed by the High Court/Supreme Court, not the Tribunal.
Cluster 1 — Bar (iii): avoidance / look-through (the leading line)
Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings, 2026 INSC 60 (SC, 15 January 2026; Civil Appeals 262–264 of 2026)
Facts: Mauritius entities sold shares of a Singapore company (Flipkart) deriving substantial value from Indian assets (c. USD 1.6 billion on the 2018 Walmart–Flipkart exit) and sought rulings claiming India–Mauritius treaty exemption; the Authority had rejected the applications under s.245R(2)(iii); the Delhi High Court (28 August 2024) had set that aside, treating the TRC as “sacrosanct.”
Held: Allowing the Revenue’s appeals and setting aside the High Court, the Supreme Court held that s.245R(2)(iii) expressly empowers the forum to decline a ruling where a transaction is prima facie designed to avoid income-tax; a Tax Residency Certificate is not by itself conclusive of beneficial ownership/substance; and the avoidance enquiry permits scrutiny of the entire arrangement — its control, management and real ownership. The Authority’s rejection was restored.
Relevance: The governing modern authority on bar (iii) and the look-through power; harmonises the AAR admission enquiry with GAAR (Chapter X-A) and treaty-abuse principles.
Groupe Industrial Marcel Dassault, In re (2012) 340 ITR 353 (AAR); AAR Nos. 846 & 847 of 2009, dated 28 November 2011
Facts: French holding companies proposed to sell shares of a French SPV (ShanH), which held shares of an Indian company (Shantha), to another French company (Sanofi); the Revenue contended the real subject was the controlling interest in the Indian company.
Held: The Authority declined to rule, finding the transaction prima facie a scheme for avoidance: the interposed entity had no office, employees, business or asset except the Indian shares and was a substance-less front created only to deal with those shares; a legally valid form used as a smokescreen to avoid tax attracts bar (iii).
Relevance: Pre-GAAR landmark on the avoidance bar and substance-over-form at the AAR; foreshadows Tiger Global.
Mahindra-BT Investment Co (Mauritius) Ltd v. DIT (2013) 359 ITR 485 (Bombay HC)
Held: The Authority may exercise the discretion to refuse a ruling on the avoidance ground only where fraud and/or illegality is ex facie evident or has been established in some proceeding; such discretion is not to be exercised on mere suspicion.
Relevance: Sets the evidentiary threshold for bar (iii); read with Tiger Global, the look-through must be principled, not speculative.
ABC International Inc, USA, In re (2011) 241 CTR 289 (AAR)
Held: The Authority has power to determine whether a transaction is designed for avoidance not only at the admission stage but also at the final hearing.
Relevance: Locates the avoidance enquiry at both stages of s.245R.
Canoro Resources Ltd, In re (2009) 313 ITR 2 (AAR)
Held: A convincing commercial explanation for restructuring having been given, the Revenue cannot complain when a taxpayer adopts a lawful method of tax planning beneficial to itself; the avoidance bar was not attracted (noted as possibly requiring reconsideration after the GAAR gateway, s.245N(a)(iv)).
Relevance: Marks the legitimate-planning boundary of bar (iii).
Cluster 2 — Bar (i): question “already pending” (apex-settled)
CIT v. Hyosung Corporation (2016) 244 Taxman 286 (SC), affirming Hyosung Corporation v. AAR (2016) 382 ITR 371 (Delhi HC)
Held: The issue of a s.143(2) notice asking for information before the filing of the application does not attract the pendency bar — especially where the notice is a standard pre-printed form and the questions before the AAR are not its subject-matter; neither the filing of the return nor the mere issue of a s.143(2) notice bars the application.
Relevance: Settles bar (i) at the apex level in the applicant’s favour on the return/143(2) point.
DCIT v. SAGE Publications India (P) Ltd (2016) 246 Taxman 57 (SC)
Held: Following the same reasoning, the Supreme Court confirmed that the mere filing of a return / issue of a s.143(2) notice does not render the question “already pending.”
Relevance: Reinforces Hyosung; the two together are the controlling authority on bar (i).
Monte Harris v. CIT (1996) 218 ITR 413 (AAR)
Held: “Already pending” is to be tested as at the date of the application; maintainability cannot be made to depend on the pendency of the issue before the authorities on some later date.
Relevance: Fixes the temporal point for bar (i).
SEPCO III Electric Power Construction Corpn, In re (2011) 340 ITR 225 (AAR)
Held: Mere pendency of an application under s.195 or 197, or an order under s.197, or even the pendency of a s.263 revision on the date of the AAR application, does not bar the Authority’s jurisdiction.
Relevance: Defines what does not count as “already pending” for bar (i).
Cluster 3 — Bar (ii): fair market value / arm’s-length price
Instrumentarium Corporation Ltd, In re (2005) 272 ITR 499 (AAR)
Held: Benchmarking a transaction at arm’s-length price is, in substance, a determination of fair market value and falls within the bar in s.245R(2)(ii).
Relevance: Brings transfer-pricing valuation within bar (ii) at the admission stage.
Cluster 4 — Admission procedure: hearing, reasons, Commissioner’s role
DIT (International Taxation) v. Authority for Advance Ruling (2013) 352 ITR 185 (Andhra Pradesh HC)
Held: At the admission stage there is no requirement for the Commissioner or his representative to be heard, or for reasons to be recorded for admission, unless the application is rejected (in which case the applicant must be heard and reasons given).
Relevance: Construes the second/third provisos to s.245R(2) and the asymmetry between admission and rejection.
Cluster 5 — Hypothetical questions and amendment of the question
Royal Bank of Canada, In re (2010) 323 ITR 380 (AAR)
Held: Though a ruling can be on a proposed transaction, it would be inappropriate to rule on a hypothetical basis where crucial facts — the actual pattern of dealings or modus operandi — are not known; application dismissed.
Relevance: No ruling on hypothetical/under-developed facts under s.245R(4).
Ms Meenu Sahi Mamik, In re (2007) 287 ITR 514 (AAR)
Held: Where neither the nature of the business nor the agreement was on record, the application was premature and not maintainable; the question could not be answered hypothetically.
Relevance: Completeness of facts is a condition of a ruling.
Fidelity Advisor Series VIII, In re (2004) 271 ITR 1 (AAR)
Held: The applicant may amend/narrow the question (e.g., confine it to some items or give up parts), but not so as to change the very complexion of the application.
Relevance: Defines the permissible scope of reframing a s.245Q question at the s.245R stage.
ZD, In re (2012) 348 ITR 351 (AAR)
Held: Seeking a ruling on only part of, or a truncated, transaction is not a practice to be encouraged; the Authority must rule on the question as raised, and interlinked aspects cannot be artificially severed.
Relevance: Limits selective/severed questions at the ruling stage.
Cluster 6 — Reviewability and scope of writ
Anurag Jain v. Authority for Advance Ruling (2008) 308 ITR 302 (Madras HC)
Held: The writ remedy lies against the decision-making process, not the decision on merits; where the Authority considered the factual issues in the best possible way, there was no ground to interfere, and the writ court would not sit in appeal over the correctness of the ruling.
Relevance: Defines the supervisory (not appellate) scope of review of a s.245R order — the pre-2021 counterpart to the s.245W appeal.
Onmobile Global Ltd v. Chairman, Authority for Advance Ruling (2015) 279 CTR 518 (Karnataka HC)
Held: Rule 17 of the AAR (Procedure) Rules allows dismissal of an application ex parte only on merits for non-appearance; an application could not be rejected where the notice of hearing was never within the applicant’s knowledge.
Relevance: Natural-justice limit on ex parte disposal at the s.245R stage.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; no statutory word is altered. Chapter XIX-B (Advance Rulings, ss.245N–245W) was inserted by the Finance Act, 1993; the Authority for Advance Rulings was replaced, for fresh income-tax applications, by the Board for Advance Rulings (s.245-OB, Finance Act, 2021), with a statutory appeal to the High Court (s.245W) and the e-Advance Rulings Scheme, 2022. The Finance Act, 2026 makes NO amendment to any section of Chapter XIX-B. Rulings of the Authority for Advance Rulings are cited as the natural body of jurisprudence on this Chapter; Supreme Court and High Court decisions are flagged as such; there is virtually no Income-tax Appellate Tribunal authority on Chapter XIX-B (advance-ruling disputes travel to the High Court/Supreme Court, not the Tribunal), which is stated candidly rather than padded. Where a section has not been judicially construed, that is stated and the nearest governing authority is given. Citations are stated as reported and have been web-verified; the reader should consult the official report before filing. This material is for professional reference and is not legal advice.