Rule 111 — Roll back of Agreement. Made under s.263 of the Income-tax Act, 2025.
Rule 111 gives effect to Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) allows an agreement to contain a rollback provision, that is, to determine the arm's length price in relation to an international transaction, or to specify the manner in which it is to be determined, for a rollback year.
Sub-rule (2) makes the rollback provision subject to five conditions: the international transaction is the same as the one to which the agreement, other than the rollback provision, applies; the return of income for the relevant rollback year has been or is furnished by the applicant within the time specified in section 263(1)(c); the report in respect of the international transaction had been furnished within that same time; the applicant has requested rollback for that international transaction for all the rollback years in which it was undertaken; and the application seeking rollback in Form No. 51 has been made in accordance with sub-rule (5).
Sub-rule (3) bars the rollback provision, irrespective of sub-rule (2), in two situations: where the determination of the arm's length price of that international transaction for that year has been the subject matter of an appeal before the Appellate Tribunal and the Tribunal has passed an order disposing of the appeal at any time before signing of the agreement; or where applying the rollback provision would have the effect of reducing the total income or increasing the loss of the applicant as declared in the return of income of that year.
Sub-rule (4) requires that where the rollback provision specifies the manner of determining the arm's length price for a rollback year, that manner must be the same as the manner agreed for determining the arm's length price of the same international transaction for a year to which the agreement applies that is not a rollback year. Sub-rule (5) requires an applicant who wants an agreement with a rollback provision to furnish, along with the application, the request in Form No. 51 with proof of payment of an additional fee of Rs. 500000.
An agreement settles the price for future years, but the same transaction in the years already gone is often in dispute on identical facts. The rollback provision lets the agreed answer be carried back, and this rule fixes the price of admission: timely returns and reports for those years, a request covering all of them, a prescribed form and a fee. The two bars in sub-rule (3) keep the mechanism from being used to reopen what the Appellate Tribunal has already decided, or to convert an agreement into a refund claim.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Additional fee for a request for a rollback provision | Rs. 500000 | Paid with the request in Form No. 51 furnished along with the application; proof of payment required | Rule 111(5) |
| Time within which the return of income for a rollback year must have been furnished | Within the time specified in section 263(1)(c) | Applies to the return for the relevant rollback year | Rule 111(2)(b) |
| Time within which the report on the international transaction must have been furnished | Within the time specified in section 263(1)(c) | The report in respect of the international transaction for the rollback year | Rule 111(2)(c) |
Rollback is all or nothing across years. Sub-rule (2)(d) requires the request to cover all the rollback years in which the international transaction was undertaken, so an applicant cannot pick the years where the agreed price helps. The bar in sub-rule (3)(b) means rollback can never reduce declared income or increase a declared loss, so where the agreed price would produce a downward adjustment for a past year, the rollback simply is not provided for that year. A Tribunal order disposing of the appeal on the arm's length price of that transaction, passed at any time before the agreement is signed, also shuts the door under clause (a), which makes the timing of the signing relevant. The fee of Rs. 500000 is additional, over and above whatever the application itself carries, and proof of its payment goes in with Form No. 51.
A company applying for an agreement wants the same manner of determining the price applied to three earlier years in which it undertook the identical international transaction. It must request rollback for all three, not two, under sub-rule (2)(d), and file Form No. 51 with proof of payment of the additional fee of Rs. 500000. If for one of those years the agreed manner would reduce the total income the company had declared, sub-rule (3)(b) prevents the rollback provision being given for that year.
You meet it as Form No. 51 filed with the application, and later in the terms of the signed agreement, which either carries a rollback provision for the years requested or does not.
the applicability of rollback provision, in respect of an international transaction, has been requested by the applicant for all the rollback years in which the said international transaction has been undertaken by the applicant
the application of rollback provision has the effect of reducing the total income or increasing the loss, as the case may be, of the applicant as declared in the return of income of the said year
