The Demise Of Advance Rulings

In 1991, when the Indian economy opened up, it was applauded as a new dawn. A breakaway from the infamous license-raj, it promised a liberalised, transparent and investor-friendly India. Amongst the slew of measures taken by the government to boost investor confidence, a remarkable one was notifying the Authority for Advance Ruling (AAR) under income-tax law in 1993: a quasi-judicial forum through which prospective investors could obtain a tax ruling on future transactions.

The AAR was conceived as a body which would provide binding decrees – preventing inadvertent defaults of tax and thereby years of litigation. Inherent to the AAR was its impartiality, signified best by the fact that it was presided by a retired Supreme Court judge. The AAR was, suffice to say, successful in serving its intended purpose. Non-resident investors actively approached the Authority with difficult questions of fact and law, reassured that their submissions would be heard and