Rule 106 — Application for advance pricing agreement.
Sub-rule (1) allows an eligible person to furnish an application in Form No. 51, along with the requisite fee of twenty lakh rupees, for entering into an advance pricing agreement.
Sub-rule (2) fixes where it goes: to the Principal Chief Commissioner of Income-tax (International Taxation) in the case of a unilateral agreement, and to the competent authority of India in the case of a bilateral or multilateral agreement.
Sub-rule (3) fixes when it may be filed. For transactions of a continuing nature from dealings that are already occurring, the application may be filed at any time before the first day of the first tax year for which it is made; for the remaining transactions, before undertaking the transaction. Sub-rule (4) requires the application to be accompanied by proof of payment of the fee of twenty lakh rupees.
An advance pricing agreement fixes the arm's length price before the transaction is tested, so the application has to be lodged before the period it is meant to cover, and with the authority that can negotiate it. The rule settles the form, the fee, the addressee and the outer date, and separates a continuing transaction — which can be applied for up to the day before the first tax year begins — from a new one, which must be applied for before it is undertaken at all.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Fee accompanying the application | Twenty lakh rupees | Requisite fee for entering into an agreement; proof of payment must accompany the application | Sub-rule (1) and sub-rule (4) |
| Last date to apply for a continuing transaction | Before the first day of the first tax year for which the application is made | Transactions which are of a continuing nature from dealings that are already occurring | Sub-rule (3)(a) |
| Last date to apply for other transactions | Before undertaking the transaction | Transactions other than those of a continuing nature already occurring | Sub-rule (3)(b) |
The timing rule is the one that bites. A continuing transaction can be brought in for a tax year that has not yet started, but a transaction not yet undertaken must be applied for before it happens — once it is undertaken, that limb of sub-rule (3) is closed. The addressee differs with the kind of agreement sought, and an application for a bilateral or multilateral agreement filed with the Principal Chief Commissioner rather than the competent authority of India is filed in the wrong place. The fee is a single figure of twenty lakh rupees stated twice in the rule, once as the amount payable and once as the proof to be attached; the rule does not scale it by the number of transactions or years.
A company with an existing intra-group services arrangement wants an advance pricing agreement covering the tax year beginning 1 April 2027. Because the arrangement is a continuing one from dealings already occurring, sub-rule (3)(a) lets it file Form No. 51 at any time before 1 April 2027, with the twenty lakh rupee fee and proof of its payment. A wholly new transaction the company plans to start in June 2027 must instead be applied for before it is undertaken.
In Form No. 51 and the fee challan lodged with the Principal Chief Commissioner of Income-tax (International Taxation) or the competent authority of India, ahead of the advance pricing agreement process itself.
An eligible person may furnish an application in Form No. 51 along with requisite fee of twenty lakh rupees for entering into an agreement.
before the first day of the first tax year for which the application is made, in respect of transactions which are of a continuing nature from dealings that are already occurring
