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The Authority for Advance Ruling (AAR) was launched in 1993, and except for the period when it was helmed by its first chairman, retired Supreme Court judge S Ranganathan, the institution has been at best patchy and at worst moribund. The 1992 Budget announced the setting up of the institution as part of an attempt to open the economy to FDI and to inspire confidence in foreign investors that an insurance was available to counter the vicissitudes of the tax administration in India.
Budget 2021’s move to replace the AAR didn’t come as a surprise, though the intended structure is quite self-defeating. Advance ruling is sought only on virgin legal issues that lack binding precedents and where the stakes are high. To expect two commissioners of the tax department to preside over the institution is like having a cat watch over a cup of milk.
The advance ruling system in the GST has been a failed example of having departmental officers man it. Similarly, the dispute resolution panel has been unable to dispense justice; it merely acts as an endorser of the lower authorities’ orders. The flaw is inherent in our governance and has little to do with individuals who come to man it.
Even top courts in the country apparently come under pressure to accommodate the Executive’s actions. How can commissioners who are directly under the control of the CBDT be expected to take decisions that favour taxpayers? The situation can at best be likened to using the existing dispensation to approach a commissioner under Section 264 or the CBDT under Section 119 to seek relief. This is set for failure ab intio .
However, there seems to have been some design in doing this. The arrangement provides for a direct appeal to the High Court by either of the aggrieved parties.
To that extent, the construct needs to be appreciated. Imagine, if the order of the new AAR was appealable to the CBDT instead. The consolation is that any taxpayer eligible for advance ruling seeking to use the forum is guaranteed a quick darshan to reach the High Court as compared to the tortuous process of assessments, demand management and appeals. In this regard this will be better than not having such a facility.
The writer is a chartered accountant
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