c








  









i Advance ruling, agricultural income

Advance rulings [ section 245N to 245V]

à



  
 



[(O ³advance ruling´ means²

(
 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
(

 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 a resident applicant with[such] non-resident,
and such determination shall include the determination of any question of law or
of fact specified in the application;
(


 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 or
the Appellate Tribunal and such determination or decision shall include the
determination or decision of any question of law or of fact relating to such
computation of total income specified in the application :
[Ê
 that where an advance ruling has been pronounced, before the date on
which the Finance Act, 2003 receives the assent of the President, by the Authority in
respect of an application by a resident applicant referred to in sub-clause (

 of this
clause as it stood immediately before such date, such ruling shall be binding on the
persons specified in section 245S;]
( ³applicant´ means any person who²
(
 is a non-resident referred to in sub-clause (
 of clause (O; or
(

 is a resident referred to in sub-clause (

 of clause (O; or
(


 is 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;]
( ³application´ means an application made to the Authority under sub-section (1 of
section 245Q;
( ³Authority´ means the Authority for Advance Rulings constituted under section
245-O;
( ³Chairman´ means the Chairman of the Authority;
( ³Member´ means a Member of the Authority and includes the Chairman.





  


   

(1 The Central Government shall constitute an Authority for giving advance rulings, to be
known as ³Authority for Advance Rulings´.

(2 The Authority shall consist of the following Members appointed by the Central Government,
namely :²

(O a Chairman, who is a retired Judge of the Supreme Court;

( an officer of the Indian Revenue Service who is qualified to be a member of the Central Board
of Direct Taxes;

( an officer of the Indian Legal Service who is, or is qualified to be, an Additional Secretary to
the Government of India.

(3 The salaries and allowances payable to, and the terms and conditions of service of, the
Members shall be such as may be prescribed.

(4 The Central Government shall provide the Authority with such officers and staff as may be
necessary for the efficient exercise of the powers of the Authority under this Act.

(5 The office of the Authority shall be located in Delhi.

_

  


   Ê

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 applicant desirous of obtaining an advance ruling under this Chapter may make an
application in such form and in such manner as may be prescribed, stating the question on which
the advance ruling is sought.

(2 The application shall be made in quadruplicate and be accompanied by a fee of two thousand
five hundred rupees.

(3 An applicant may withdraw an application within thirty days from the date of the application.


Ê    

 

(1 On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the
Commissioner and, if necessary, call upon him to furnish the relevant records :

Ê
 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 Commissioner.

(2 The Authority may, after examining the application and the records called for, by order,
either allow or reject the application :

[Ê
 that the Authority shall not allow the application where the question raised in the
application,²
(
 is already pending before any income-tax authority or Appellate Tribunal [except in
the case of a resident applicant falling in sub-clause (


 of clause ( of section 245N]
or any court;
(

 involves determination of fair market value of any property;
(


 relates to a transaction or issue which is designed 

O O
 for the avoidance of
income-tax [except in the case of a resident applicant falling in sub-clause (


 of
clause ( of section 245N]:]

Ê
    that no application shall be rejected under this sub-section unless an
opportunity has been given to the applicant of being heard:

Ê
 
 that where the application is rejected, reasons for such rejection shall be given in
the order.

(3 A copy of every order made under sub-section (2 shall be sent to the applicant and to the
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.

Y OO
.²For the purposes of this sub-section, ³authorised 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 manne shall be sent to the applicant and to the Commissioner, as soon
as may be, after such pronouncement.





   !

(1 The advance ruling pronounced by the Authority under section 245R shall be binding only²
(O on the applicant who had sought it;
( in respect of the transaction in relation to which the ruling had been sought; and
( on the 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.



   
  
 "
  #

(1 Where the Authority finds, on a representation made to it by the Commissioner or otherwise,
that an advance ruling pronounced by it under sub-section (6 of section 245R has been obtained
by the applicant by fraud or misrepresentation of facts, it may, by order, declare such ruling to be
void O


 and thereupon all the provisions of this Act shall apply (after excluding the period
beginning with the date of such advance ruling and ending with the date of order under this sub-
section to the applicant as if such advance ruling had never been made.

(2 A copy of the order made under sub-section(l shall be sent to the applicant and the
Commissioner."

Ê$ 
 %

The authority has all the powers of a civil court in respect of

ap Discovery and inspection

bp nforcing the attendance of any person including an officer of a banking company and
examining him on oath:
cp Issuing commissions and compelling the production of books of accounts and other
records.

Ê  
 _

The authority , subject to the provisions given above, has the power to regulate its own procedure
in all matters arising out of the exercise of its powers under this act.


†

  
" &

Section 10(1 exempts agricultural income from income tax. By virtue of section 2(1a the
expression ³agricultural income´ means

1.p Any rent or revenue derived from land which is situated in india & is used for agricultural
purposes [ sec 2(1Aa]
2.p Any income derived from such land by agricultural operations including processing of
the agricultural produce, raised or received as rent in kind so as to render it fit for the
market or sale of such produce [sec. 2(1Ab]
3.p Income attributable to a farm house subject to certain conditions [sec. 2 (1A(c]

 
  
"
  '( '


According to this section , if the following three conditions are satisfied, income derived from
land can be termed as ³agricultural income´

1.p Rent or revenue should be derived from land(may be in cash or kind

2.p The land is one which is situated in india(if the land is situated in a foreign country, this
condition is not satisfied and ;
3.p The land is used for agricultural purposes.

m"  
"
  

  
  
 
 '( ' 

The following three instances of agricultural income given under this section are:

1.p Any income derived by agriculture from land situated in india and used for agricultural
purposes;
2.p Any income derived by a cultivator or receiver of rent-in-kind of any process ordinarialy
employed to render the produce raised or received by him to make it fit to be taken to
market; or
3.p Any income derived by such land by the sale by a cultivator or receiver of rent ±in-kind
of the produce raised or received by him in respect of which no process has been
performed other than a process of the nature described in (b.

The aforesaid income are agricultural income, if such income are derived from land which is
situated in india and is used for agricultural purposes.

Any surplus arising on sale or transfer of agricultural land is not treated as rent or revenue
derived from land.


m" "
"   '( ' 

Bona fide annual value of house property is taxable under section 22. However, income from a
house property which satisfies the following cumulative conditions would be treated as
agricultural income and, consequently, it would be exempt from tax by virtue of section 10(1:

1.p The building should be occupied by the cultivator (as a landlord or as a tenant or
receiver of rent-in-kind ( as a landlord
2.p It should be on or in the immediate vicinity of land , situated in india and used for
agricultural purposes :
3.p The cultivator or receiver of rent in kind should by reason of his connection with the
agricultural land requires the building as a dwelling or as a store house or other out
building : and
4.p The land is assessed to land revenue or local rate, or alternative , the land (though not
assessed to land revenue or local rate is situated outside ³urban areas´ ie any area which
is comprised within the jurisdiction of any municipality/cantonment board having a
population of not less than 10,000 persons or within notified distance from the limits of
any such municipality or contooonment board.

†

 
 "    
  
)
  
" 

In the following cases , income is held as agricultural income:

1.p If denuded parts of the forest are replanted and subsequent operations in forestry are
carried out, the income arising from the sale of replllanted trees
2.p Profit on sale of standing crop or the produce after harvest by a cultivating owner or
tenant of land
3.p Rent for agricultural land received from sub-tennants by mortgage in possession
4.p Compensation received from an insurance company for damage caused by hail storm to
the green leaf forming part of assessee¶s tea garden
5.p Income from growing flowers and creepers
6.p Salary received by a partner for rendering services to a firm which is engaged in
agricultural operations is agricultural income as payment of salary is only a mode of
adjustment of the firm¶s income.
7.p Interest on capital received by a partner from the firm engaged in agricultural operations
8.p If nursery is maintained by carrying out basic operations and subsequent operations are
carried out in pots in continuation of basic operations , then income from such nursery
would be agricultural income
Instances of non-agricultural income:

1.p Annaual annuity received by a person in consideration of transfer of agricultural land

even if it is charged on land, as source of annuity is covenant and not land
2.p Interest accrued on promissory notes obtained by a zamindar from defaulting tenants
3.p Interest on arrears of rent in respect of agricultural land as it is neither rent nor revenue
derived from land
4.p Income from sale of wild grass and reeds of spontaneous growth
5.p Income of salt produced by flooding the land with sea water as it is not derived from
land used for agricultural income
6.p Interest received by a money-lender in the form of agricultural produce
7.p Income derived from land let out storing crops
8.p Income from fisheries
9.p Commission earned by the landlord for selling agricultural produce of its tenant.
10.pMaintainence allowance charged on agricultural land
11.pRoyalty income of mines
12.pIncome from butter and cheese making
13.pIncome from poultry farming
14.pReceipts from TV serial shooting in farm house

†
 
" " $


  

 

"  
%*+,,,-.

INCOM Non Agricultural Income ±

agricultural income Tax rate
income
Growing and manufacturing tea in india 40% 60% Rule 8
Sale of certrifuged latex or cenex or latex based 35% 65% Rule 7A
crepes or brown crepes or technically specified
block rubbers manufactured or processed from
field latex or coagulum obtained from rubber
plants grown by the seller in india
Sale of coffee grown and cured by seller 25% 75% Rule 7b

Sale of coffee grown , cured, roasted and grounded 40% 60% Rule
by seller in india with or without mixing chicory or 7B(1A
other fllavouring ingrediants
†
  " 

 

  
" $
  

" 

Condition 1 The taxpayer is an individual , a Hindu undivided family, a body of individual, an

association of persons or an artificial juridical person.
Condition 2 The taxpayer has non-agricultural income exceeding the amount of exemption
limit[ Rs 1,35,000 (in the case a resident women below 65 yrs, Rs 1,85,000 (in the
case of a resident senior citizen 65 yrs or more and Rs. 1,00,000 (in case of any
other individual or every HUF for the assessment year]
Condition 3 The agricultural income of the taxpayer exceeds Rs 5000.