Make advance tax ruling system more comprehensive, SC recommends

The Supreme Court has recommended that the Centre make the current advance tax ruling system more effective and comprehensive as a tool for settlement of disputes.

The apex court’s suggestion comes during the hearing of a case of the National Cooperative Development Corporation (NCDC). The point of dispute between the Corporation and the income-tax (I-T) department was whether grants disbursed from the common pool fund, which consisted of capital receipts received from the Centre and interest income earned through the idle funds parked in fixed deposits, by the NCDC during 1976-77 was a deductible revenue expenditure or not. The court said: “Which pocket of the government should be enriched has taken 44 years to decide — a classic case of what ought not to be.” Noting that the petition rate of the tax department with the SC is 87 per cent, the court opined that “a vibrant system of advance ruling can go a long way in reducing taxation litigation”.

The SC said contrary to the expectation that a ruling would be given in six months (according to the Section 245R (6) of the I-T Act), the average time taken is stated to be around four years. This is primarily because of the large number of vacancies and delayed appointment of AAR members, the court said.