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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Under section 168 of the Income-tax Act, 2025, which statement about an advance pricing agreement is correct?

An advance pricing agreement is binding on the person and transaction covered and on the Principal Commissioner or Commissioner and subordinate authorities under section 168(5). It is not binding on a change in law or facts, needs Central Government approval, and may be rolled back up to four years.

  1. AIt is binding on the person and the transaction covered and on the Principal Commissioner or Commissioner and subordinate authoritiesCorrect
  2. BIt remains binding even when there is a change in law or facts having bearing on the agreement
  3. CIt can be entered into by the Board without the approval of the Central Government
  4. DIt can never cover any period before the first tax year of the agreement

Explanation

Section 168(5) makes the agreement binding on the person and transaction concerned and on the Principal Commissioner or Commissioner and subordinate income-tax authorities. Section 168(6) says it is not binding on a change in law or facts, section 168(1) requires Central Government approval, and section 168(9) allows roll-back for up to four preceding tax years.

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