Direct Tax Laws and International Taxation · Assessment Procedure including Dispute Resolution Process

Advance Rulings and Settlement of Cases under Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

An advance ruling is a written decision from the Board for Advance Rulings on a tax question about a transaction, given before or while it is undertaken. A settlement route, under Section 379, lets a Dispute Resolution Committee resolve small disputes. To solve questions, check eligibility, rejection grounds, timelines and the effect of the order.

Understand Advance Rulings and Settlement of Cases

Tax disputes are costly and slow. The Act gives two different routes to cut that cost. One looks forward and gives certainty. The other looks back and closes an existing dispute.

Advance ruling is the forward-looking route. An applicant asks the Board for Advance Rulings how the Act applies to a transaction. The Board examines the application and the records of the Principal Commissioner or Commissioner, then either allows or rejects it by an order. If allowed, it pronounces its ruling in writing on the question raised.

Dispute resolution under Section 379 is the backward-looking route. The Central Government constitutes one or more Dispute Resolution Committees. A person who is specified by the Board and meets the prescribed conditions can opt to resolve a dispute arising from a variation in a specified order. The Committee can modify the variations, reduce or waive a penalty imposed or imposable, and grant immunity from prosecution.

Students often call the settlement route the Settlement Commission. For the June 2027 term, answer from the Income-tax Act, 2025 text: the Dispute Resolution Committee under Section 379 is the mechanism to describe for small disputes. Check your study material for how the syllabus treats the Interim Board and Settlement Commission, and do not mix their rules with Section 379.

The key difference: an advance ruling answers a question about a transaction, often before any dispute exists. A Dispute Resolution Committee deals with an existing order, subject to money and case-type limits.

Key rules to remember

Procedure on an advance ruling application: Application → copy to PCIT/CIT and records called → order allowing or rejecting → ruling in writing within 6 months of receipt; Section 384(1), (2) and (6). The six months run from receipt of the application.
Mandatory rejection grounds: Reject if the question (a) is already pending before an income-tax authority, Appellate Tribunal or court, (b) involves determination of fair market value of any property, or (c) relates to a transaction designed prima facie for avoidance of income-tax; Section 384(3). Exceptions: pending and avoidance grounds do not apply to a resident applicant under section 380(b)(iii); the avoidance ground also does not apply to an applicant under section 380(b)(iv).
Hearing before rejection: No rejection unless the applicant is heard and reasons are recorded in the order; Section 384(4). On request, a hearing is also given before the ruling is pronounced (384(7)), in person or through an authorised representative.
Specified order conditions for the Dispute Resolution Committee: (i) aggregate variations ≤ ₹10,00,000; (ii) not based on search (section 247), requisition (section 248), survey (section 253) or information under an agreement under section 159(1) or (2); (iii) if a return was filed, total income per return ≤ ₹50,00,000; Section 379(4). All conditions apply together, and the order must also be one the Board has specified.
Powers of the Dispute Resolution Committee: Modify variations; reduce or waive penalty imposed or imposable; grant immunity from prosecution; Section 379(2). Subject to prescribed conditions, for a person whose dispute is resolved.
Time for the Assessing Officer to act on the Committee order: Within one month from the end of the month in which the order is received; Section 379(3). For a draft order, pass the assessment, reassessment or recomputation; otherwise modify the existing order, in conformity with the Committee's directions.

How to solve Advance Rulings and Settlement of Cases questions

Most questions give a fact pattern and ask whether a route is available and what follows. Work through the same checks each time.

1Identify the route asked for: advance ruling by the Board for Advance Rulings, or dispute resolution by the Committee under Section 379.
2For an advance ruling, check the applicant category against section 380(b), as the exceptions to rejection depend on it.
3Test each rejection ground in Section 384(3): pending before an authority, Tribunal or court; fair market value determination; prima facie tax avoidance. Apply the stated exceptions.
4If rejection is likely, state that the applicant must be heard and reasons must be recorded in the order.
5For the Committee route, test every limit in Section 379(4): variations up to ₹10,00,000, no search, requisition, survey or treaty-information basis, and return income up to ₹50,00,000.
6State the outcome and the time limit: ruling within six months of receipt, or the Assessing Officer acting within one month from the end of the month of receiving the Committee order.
7Conclude with a clear yes or no and the reason in one line.

Quickest way: Three-gate check

When to use it: For MCQs and short case questions where you must decide eligibility fast.

Gate 1: Which route? A question about a transaction points to advance ruling. An existing order with variations points to the Dispute Resolution Committee.
Gate 2: Look for a disqualifier. For rulings: pending matter, fair market value, avoidance. For the Committee: search, requisition, survey, treaty information, variations above ₹10,00,000, or return income above ₹50,00,000.
Gate 3: Pick the consequence: ruling in writing within six months, or Committee order that the Assessing Officer must follow within one month from the end of the month of receipt.

Common mistakes in Advance Rulings and Settlement of Cases

Treating the ₹10,00,000 and ₹50,00,000 limits as alternatives.
Students see two figures and assume either one is enough.
Fix: Section 379(4) lists them as separate conditions. The ₹50,00,000 test applies where a return was filed for the relevant tax year, and the variations test applies in every case.
Saying an advance ruling application can never be rejected for avoidance or pending matters.
Students memorise the exception and forget the rule.
Fix: Rejection is the rule under Section 384(3). Exceptions apply only to the resident applicants referred to in section 380(b)(iii) and, for avoidance, section 380(b)(iv).
Rejecting an application without a hearing in the answer.
Students focus on the grounds and skip procedure.
Fix: Add that under Section 384(4) the applicant must be given an opportunity of being heard and reasons must be given in the order.
Confusing the two routes.
Both are called dispute avoidance tools.
Fix: An advance ruling answers a legal question on a transaction. The Committee resolves a dispute on a specified order and can reduce or waive penalty and give immunity from prosecution.
Allowing the Committee route for a case built on a survey or search.
Students remember only search.
Fix: Section 379(4)(ii) excludes orders based on search under section 247, requisition under section 248, survey under section 253, or information received under an agreement under section 159(1) or (2).
Stating the wrong clock for the ruling.
Mixing it with the Assessing Officer's one-month period.
Fix: Ruling: within six months of receipt of the application (Section 384(6)). Assessing Officer: one month from the end of the month in which the Committee order is received.

Worked examples

Example 1

Mehta Pharma Ltd, an Indian company, applies to the Board for Advance Rulings asking it to determine the fair market value of a plot of land it plans to transfer. Can the Board allow the application? Also state the procedure if it decides to reject.

Show the solution

The question asks the Board to determine the fair market value of property.
Section 384(3)(b) requires rejection of an application where the question involves determination of fair market value of any property. No exception is given for this ground.
So the Board cannot allow the application on this question.
Before rejecting, Section 384(4) requires that Mehta Pharma be given an opportunity of being heard and the reasons be stated in the order.
A copy of the order must be sent to the applicant and to the Principal Commissioner or Commissioner under Section 384(5).

Answer: No. The application must be rejected under Section 384(3)(b), after a hearing, with reasons recorded in the order and a copy sent to the applicant and the Commissioner.

Example 2

Ravi, a resident individual, filed a return showing total income of ₹42,00,000. An assessment order proposes variations aggregating ₹8,50,000. It is not based on search, requisition, survey or treaty information. Assuming the Board has specified the order, is it eligible for the Dispute Resolution Committee? If a second case has variations of ₹12,00,000, what is the result?

Show the solution

Check Section 379(4)(i): variations ₹8,50,000 do not exceed ₹10,00,000. Satisfied.
Check (ii): no search, requisition, survey or treaty-information basis. Satisfied.
Check (iii): a return was filed and the income per return of ₹42,00,000 does not exceed ₹50,00,000. Satisfied.
All conditions are met, so the order is a specified order, subject to the other prescribed conditions.
Second case: variations of ₹12,00,000 exceed ₹10,00,000, so condition (i) fails and the order is not a specified order.

Answer: Ravi's order qualifies as a specified order. The second case does not, because the variations exceed ₹10,00,000.

Exam tips

Memorise the three rejection grounds in Section 384(3) and the hearing rule in 384(4). MCQs often test one of them.
For the Committee, write the three conditions of Section 379(4) as a checklist in the answer.
Keep the two time limits apart: six months for a ruling, one month from the end of the month for the Assessing Officer.
Always end case answers with a clear conclusion and the section reference.
Describe Committee powers precisely: modify variations, reduce or waive penalty, grant immunity from prosecution.

Practice questions from Assessment Procedure including Dispute Resolution Process

Advance Rulings and Settlement of Cases in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Advance Rulings and Settlement of Cases: frequently asked questions

What is the difference between an advance ruling and a Dispute Resolution Committee?

An advance ruling is the Board for Advance Rulings' written answer on a question about a transaction. A Dispute Resolution Committee resolves a dispute arising from a variation in a specified order and can modify variations, waive penalty and grant immunity from prosecution.

When must an advance ruling application be rejected?

Under Section 384(3), it must be rejected if the question is pending before an income-tax authority, Appellate Tribunal or court, involves determining fair market value of property, or relates to a transaction designed prima facie to avoid income-tax. Stated exceptions apply to certain resident applicants under section 380(b). A hearing and reasons are required before rejection.

How long does the Board take to give a ruling?

After allowing the application, the Board pronounces its ruling in writing within six months of receipt of the application. A copy goes to the applicant and the Principal Commissioner or Commissioner.

What are the monetary limits for the Dispute Resolution Committee?

Aggregate variations in the specified order must not exceed ten lakh rupees. Where a return was filed for the relevant tax year, total income per the return must not exceed fifty lakh rupees. The order must also not rest on search, requisition, survey or treaty information.