ABC Ltd., an Indian company has entered into an agreement for providing technical knowhow with PQR Inc., a company registered in Country A. PQR Inc.…
CA Final · Direct Tax Laws and International Taxation · PYQS · May 2025
ABC Ltd., an Indian company has entered into an agreement for providing technical knowhow with PQR Inc., a company registered in Country A. PQR Inc. has a sister concern, XYZ LLC., in Country A, which has obtained Advance Ruling on an identical technical know-how agreement with another Indian company, MNC Ltd. The agreement is expected to be of 500 crores and expected tax liability would be 150 crores. ABC Ltd. wants to make use of this advance ruling for its assessment proceedings. So, it applied to Board for Advance Rulings to issue same ruling for ABC Limited, being identical ruling. To verify the transaction between ABC Ltd and PQR Inc., the Board for Advance Rulings compel the production of books of accounts. Can ABC Ltd make an application for advance ruling with Board for Advance Rulings as per the Act. Also Examine whether the Board can ask for production of books of accounts when ruling on similar issue has already been given. Examine in the context of the provisions of the Income-tax Act, 1961?
Suggested Answer and Working Notes:
A resident can make an application for advance ruling in relation to his tax liability arising out of one or more transactions valuing 100crore or more in total which has been undertaken or is proposed to be undertaken. Since the value of transactions between M/s ABC Ltd and M/s PQR Inc for providing technical knowhow exceeds 100crores, ABC Ltd. can make an application for advance ruling with the Board for Advance Rulings. As per section 245U, the Board for Advance Rulings shall have all the powers of the Civil Court in respect of discovery and inspection, enforcing the attendance of any person, including any officer of a banking company and examining on oath, issuing commissions and compelling the production of books of accounts and other documents. Accordingly, the Board can ask for the production of books of accounts before passing advance ruling for ABC Ltd.
Topics: Advance Rulings
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