Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Fixes the binding effect of a ruling: it binds only (a) the applicant who sought it, (b) in respect of the transaction for which it was sought, and (c) the Principal Commissioner/Commissioner and subordinate authorities, in respect of that applicant and transaction. The binding force continues unless there is a change in law or facts [s.245S(2)]. Sub-section (3) switches off the binding effect for rulings pronounced on or after a notified date (the Board-transition trigger).
Status: Settled. The binding-yet-inter-partes character has been authoritatively explained by the Supreme Court (Columbia Sportswear) and enforced by the High Courts against attempts to displace a ruling by s.263 revision or by reliance on a later contrary ruling.
A. SECTION COMMENTARY
1. A narrow but firm binding force
Section 245S makes the ruling binding in personam and in rem only as to the specific transaction: it binds the applicant, the named transaction, and the Revenue hierarchy qua that applicant and transaction. It does not bind other taxpayers, nor the same taxpayer in respect of a different transaction, nor does it operate as a precedent in the manner of a judgment of a court. The Supreme Court in Columbia Sportswear explained the dual character: binding on the parties for the transaction in question, and of persuasive value only for others on the principle of law involved.
2. Continuance “unless there is a change in law or facts”
Sub-section (2) makes the binding force durable but conditional: it lasts unless and until there is a change in the law or in the facts on the basis of which the ruling was given. A later, contrary ruling of the Authority in another case is neither a change in law nor a change in facts; it cannot be used to unsettle a ruling that binds the parties. The Bombay High Court so held in Prudential Assurance, quashing a s.263 notice that sought to override a ruling by invoking a subsequent decision of the Authority — the Commissioner had manifestly exceeded jurisdiction and acted contrary to s.245S.
3. The Revenue is bound — including on TDS
Because the ruling binds the Revenue qua the applicant and transaction, an assessing officer who follows it acts correctly, and a payer who relies on a ruling that no tax is deductible is not to be treated as in default. The Bombay High Court applied the binding effect in Dun & Bradstreet, holding the assessee not liable to deduct tax at source where the Authority had, on similar facts in the same subject-matter, ruled against taxability.
4. Transaction-specificity and the Board transition
The transaction-specific binding force dovetails with the s.245N requirement that a ruling be applicant- and transaction-specific (Nuclear Power Corporation). Sub-section (3) — switching off the binding effect for rulings pronounced on or after a notified date — is part of the machinery transferring the function to the Board for Advance Rulings, whose rulings are appealable to the High Court under s.245W rather than carrying the old unappealable-but-binding character.
B. STATUTORY POSITION (verbatim text)
The text of section 245S, as it stands in the Act (Finance Act, 2025 base text), is set out below.
245S. (1) The advance ruling pronounced by the Authority under section 245R shall be binding only— (a) on the applicant who had sought it; (b) in respect of the transaction in relation to which the ruling had been sought; and (c) on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction.
(2) The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.
(3) Nothing contained in this section shall apply to any advance ruling pronounced under section 245R on or after such date as the Central Government may, by notification in the Official Gazette, appoint.
Editorial note: sub-section (3) (binding effect not to apply to rulings on or after a notified date) is part of the Board-transition machinery introduced from the Finance Act, 2021 onwards.
C. AUTHORITIES
Authorities on the scope and enforcement of the binding effect. Columbia Sportswear (SC) supplies the conceptual frame; the Bombay High Court decisions enforce s.245S against attempts to displace a ruling.
Cluster 1 — Nature of the binding effect
Columbia Sportswear Company v. DIT (2012) 346 ITR 161 (SC)
Held: A ruling binds the parties in respect of the transaction for which it was sought; for others it has persuasive value on the principle of law involved.
Relevance: States the dual (binding/persuasive) character of a ruling under s.245S.
Nuclear Power Corporation of India Ltd, In Re (2012) 343 ITR 220 (AAR)
Held: A ruling is both applicant-specific and transaction-specific.
Relevance: Explains why the binding effect in s.245S is confined to the named applicant and transaction.
Cluster 2 — Enforcement against displacement of a ruling
Prudential Assurance Co Ltd v. DIT (International Taxation) (2010) 324 ITR 381 (Bombay HC)
Facts: After the assessing officer followed the ruling in the petitioner’s own case, the Commissioner issued a s.263 notice to set aside the order, relying on a later, contrary ruling of the Authority.
Held: The s.263 notice was contrary to s.245S and the Commissioner had manifestly exceeded his jurisdiction; a subsequent ruling could not be used to override the ruling that bound the parties, absent a change in law or facts.
Relevance: Enforces s.245S(2) — a later contrary ruling is neither a change in law nor in facts.
DIT (International Taxation) v. Dun & Bradstreet Information Services India (P) Ltd (2011) 338 ITR 95 (Bombay HC)
Held: Following the Authority’s ruling on similar facts in the same subject-matter, the assessee was held not liable to deduct tax at source.
Relevance: Shows the Revenue bound by, and the assessee entitled to rely on, a ruling under s.245S.
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 245S — Applicability of Advance Ruling
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Fixes the binding effect of a ruling: it binds only (a) the applicant who sought it, (b) in respect of the transaction for which it was sought, and (c) the Principal Commissioner/Commissioner and subordinate authorities, in respect of that applicant and transaction. The binding force continues unless there is a change in law or facts [s.245S(2)]. Sub-section (3) switches off the binding effect for rulings pronounced on or after a notified date (the Board-transition trigger).
Finance Act, 2026: No amendment to section 245S.
Status: Settled. The binding-yet-inter-partes character has been authoritatively explained by the Supreme Court (Columbia Sportswear) and enforced by the High Courts against attempts to displace a ruling by s.263 revision or by reliance on a later contrary ruling.
A. SECTION COMMENTARY
1. A narrow but firm binding force
Section 245S makes the ruling binding in personam and in rem only as to the specific transaction: it binds the applicant, the named transaction, and the Revenue hierarchy qua that applicant and transaction. It does not bind other taxpayers, nor the same taxpayer in respect of a different transaction, nor does it operate as a precedent in the manner of a judgment of a court. The Supreme Court in Columbia Sportswear explained the dual character: binding on the parties for the transaction in question, and of persuasive value only for others on the principle of law involved.
2. Continuance “unless there is a change in law or facts”
Sub-section (2) makes the binding force durable but conditional: it lasts unless and until there is a change in the law or in the facts on the basis of which the ruling was given. A later, contrary ruling of the Authority in another case is neither a change in law nor a change in facts; it cannot be used to unsettle a ruling that binds the parties. The Bombay High Court so held in Prudential Assurance, quashing a s.263 notice that sought to override a ruling by invoking a subsequent decision of the Authority — the Commissioner had manifestly exceeded jurisdiction and acted contrary to s.245S.
3. The Revenue is bound — including on TDS
Because the ruling binds the Revenue qua the applicant and transaction, an assessing officer who follows it acts correctly, and a payer who relies on a ruling that no tax is deductible is not to be treated as in default. The Bombay High Court applied the binding effect in Dun & Bradstreet, holding the assessee not liable to deduct tax at source where the Authority had, on similar facts in the same subject-matter, ruled against taxability.
4. Transaction-specificity and the Board transition
The transaction-specific binding force dovetails with the s.245N requirement that a ruling be applicant- and transaction-specific (Nuclear Power Corporation). Sub-section (3) — switching off the binding effect for rulings pronounced on or after a notified date — is part of the machinery transferring the function to the Board for Advance Rulings, whose rulings are appealable to the High Court under s.245W rather than carrying the old unappealable-but-binding character.
B. STATUTORY POSITION (verbatim text)
The text of section 245S, as it stands in the Act (Finance Act, 2025 base text), is set out below.
245S. (1) The advance ruling pronounced by the Authority under section 245R shall be binding only— (a) on the applicant who had sought it; (b) in respect of the transaction in relation to which the ruling had been sought; and (c) on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction.
(2) The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced.
(3) Nothing contained in this section shall apply to any advance ruling pronounced under section 245R on or after such date as the Central Government may, by notification in the Official Gazette, appoint.
Editorial note: sub-section (3) (binding effect not to apply to rulings on or after a notified date) is part of the Board-transition machinery introduced from the Finance Act, 2021 onwards.
C. AUTHORITIES
Authorities on the scope and enforcement of the binding effect. Columbia Sportswear (SC) supplies the conceptual frame; the Bombay High Court decisions enforce s.245S against attempts to displace a ruling.
Cluster 1 — Nature of the binding effect
Columbia Sportswear Company v. DIT (2012) 346 ITR 161 (SC)
Held: A ruling binds the parties in respect of the transaction for which it was sought; for others it has persuasive value on the principle of law involved.
Relevance: States the dual (binding/persuasive) character of a ruling under s.245S.
Nuclear Power Corporation of India Ltd, In Re (2012) 343 ITR 220 (AAR)
Held: A ruling is both applicant-specific and transaction-specific.
Relevance: Explains why the binding effect in s.245S is confined to the named applicant and transaction.
Cluster 2 — Enforcement against displacement of a ruling
Prudential Assurance Co Ltd v. DIT (International Taxation) (2010) 324 ITR 381 (Bombay HC)
Facts: After the assessing officer followed the ruling in the petitioner’s own case, the Commissioner issued a s.263 notice to set aside the order, relying on a later, contrary ruling of the Authority.
Held: The s.263 notice was contrary to s.245S and the Commissioner had manifestly exceeded his jurisdiction; a subsequent ruling could not be used to override the ruling that bound the parties, absent a change in law or facts.
Relevance: Enforces s.245S(2) — a later contrary ruling is neither a change in law nor in facts.
DIT (International Taxation) v. Dun & Bradstreet Information Services India (P) Ltd (2011) 338 ITR 95 (Bombay HC)
Held: Following the Authority’s ruling on similar facts in the same subject-matter, the assessee was held not liable to deduct tax at source.
Relevance: Shows the Revenue bound by, and the assessee entitled to rely on, a ruling under s.245S.
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.