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Directs Affidavit on Pending Advance Ruling Cases Under Income Tax Act
The has taken a decisive step to address the growing backlog of cases before the Boards for Advance Rulings under the . In a significant development, the Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta directed the Union Government to file a comprehensive affidavit disclosing the exact number of pending cases and the status of appointments to the Board, including whether Chief Commissioners nominated by the serve permanently or can be repatriated. The order came while hearing a batch of petitions, including those filed by Mitsubishi Electric and the Regents of the University of Michigan, highlighting the plaguing the .
Background: The Under Scrutiny
, provides for an , enabling taxpayers to obtain a from the on the tax consequences of proposed transactions. This mechanism is intended to reduce litigation and provide certainty, especially for foreign investors and multinational corporations. However, over the years, delays in the constitution of the Board and the disposal of applications have undermined its utility.
The Union Government had previously amended Section 245N with the stated objective of ensuring timely rulings. Despite this, the petitioners argued that the situation has not improved, with a large pendency of cases continuing to pile up. , representing the petitioners, forcefully submitted that the purpose of the Board had “practically been defeated” due to the persistent delays.
Court's Directive: Seeking Concrete Data
During the hearing, the Union Government, represented by , acknowledged the difficulties in finding suitable candidates for the posts of Chairman and Vice-Chairman of the Board. However, the bench was not satisfied with general explanations. The court directed the respondents to file an affidavit that specifically discloses:
- The total number of pending cases before the Board(s) and their benches.
- The status of Chief Commissioners nominated by the CBDT as members of the Board—whether they are permanently appointed until superannuation or can be sent back to the field.
The court’s order reflects a growing judicial concern over in tax governance. By demanding hard data, the bench aims to hold the government accountable and ascertain whether the advance ruling system is being effectively operationalised.
Arguments Highlight Systemic Failure
, appearing with Advocates , , , , and , argued that the amendment to Section 245N had not brought about any meaningful change. He contended that the continuing pendency effectively nullifies the very purpose of the , which was meant to provide certainty and expedite dispute resolution.
The Union Government, through Siddhartha Sinha, submitted that the amendment was introduced precisely to address delays, but the government was facing practical challenges in filling top positions. The bench, however, appeared unconvinced that recruitment difficulties alone explained the .
This case is part of a broader trend where Indian courts are scrutinising the functioning of and demanding transparency in administrative appointments and case management.
Legal Implications for Taxpayers
The outcome of this case could have far-reaching implications for taxpayers, especially foreign investors who rely on advance rulings for structuring cross-border transactions. A functional is critical for India’s ease of doing business and tax certainty. If the court finds that the government has not taken adequate steps, it could issue further directions to streamline the appointment process and set timelines for disposal.
The petitioners—including multinational corporations and academic institutions—represent a diverse group of stakeholders who depend on timely rulings. The delay not only causes financial uncertainty but also leads to increased litigation, as taxpayers are forced to seek other remedies.
Moreover, the issue of whether Chief Commissioners nominated to the Board serve on a permanent or temporary basis raises questions about the independence and expertise of the Board. If members can be rotated back to field duties, it may affect continuity and institutional memory.
Looking Ahead
The matter has been listed for , giving the Union Government considerable time to compile and file the required affidavit. Legal experts expect the court to take a strict view if the data reveals a significant backlog without commensurate administrative action.
In the interim, the case serves as a reminder of the judiciary’s role in ensuring that do not become due to . The ’s proactive stance may prompt the CBDT to expedite appointments and adopt case management best practices.
For legal professionals, this case underscores the importance of monitoring compliance with statutory obligations and the potential for judicial intervention when administrative delays impede the . The advance ruling system, if revitalised, could substantially reduce tax litigation and enhance the predictability of India’s tax regime.
