Section 245Q of ITA, 1961 : Section 245Q: Application For Advance Ruling

Explanation using Example

Imagine a company named 'Tech Solutions Ltd.' is planning to enter into a transaction with an overseas client, which involves complex tax implications under Indian tax laws. The company's management is uncertain about the tax liability that will arise from the transaction and wishes to avoid any potential disputes with the Indian tax authorities in the future.

To get clarity on the tax treatment, 'Tech Solutions Ltd.' decides to seek an advance ruling from the Authority for Advance Rulings (AAR). They prepare an application stating the specific tax question they need guidance on. They ensure the application is made in the prescribed form and manner, and they submit four copies of the application along with the prescribed fee of ten thousand rupees, as required by Section 245Q of the Income-tax Act, 1961.

After submitting the application, the company's management reevaluates their position and decides to modify the transaction structure. Within thirty days of submitting the original application, they choose to withdraw it, as they no longer need the advance ruling for the initial query.