Rule 115 — Revision of an agreement.
Sub-rule (1) lists the three grounds on which an agreement already entered into may be revised by the Board: a change in critical assumptions or failure to meet a condition subject to which the agreement was entered into; a change in law that modifies a matter covered by the agreement but is not of a nature that renders the agreement non-binding; or a request from the competent authority of the other country, in the case of a bilateral or multilateral agreement.
Sub-rule (2) says who may set a revision in motion: the Board suo motu, or on the request of the assessee, the competent authority of India, or the Principal Chief Commissioner of Income-tax (International Taxation).
Sub-rule (3) protects the assessee. Except where the revision is proposed on the assessee's own request, the agreement shall not be revised unless an opportunity of being heard has been provided to the assessee and the assessee is in agreement with the proposed revision. Sub-rule (4) provides that where the assessee is not in agreement with the proposed revision, the agreement may be cancelled in accordance with rule 116. Sub-rule (5) requires the Board, where it does not agree with an assessee's request for revision, to reject the request in writing giving reasons.
Sub-rule (6) allows the procedure in rule 109 to be followed, so far as it applies, for arriving at the agreement on the proposed revision. Sub-rule (7) requires the revised agreement to include the date till which the original agreement is to apply and the date from which the revised agreement is to apply.
An advance pricing agreement is written against assumptions that may not hold for its whole term, and the alternative to revision is cancellation. The rule identifies the events that justify reopening the bargain, and then makes the revision consensual: outside the assessee's own request, the Board cannot revise unless the assessee has been heard and agrees. Sub-rule (7) exists because a revised agreement has to leave no gap or overlap in the period covered.
The assessee's consent is the pivot. Under sub-rule (3) a revision that the assessee did not ask for cannot be made unless the assessee has been heard and agrees to it — but refusing agreement is not a safe answer, because sub-rule (4) then opens the door to cancellation under rule 116. The three grounds in sub-rule (1) are exhaustive of when a revision may be made, and clause (b) is carefully limited: a change in law that modifies a covered matter supports revision, but a change of a nature that renders the agreement non-binding is outside it. Where the assessee asks and the Board disagrees, sub-rule (5) entitles the assessee to a written rejection with reasons, not silence. Sub-rule (7) means a revised agreement must be read with its own dates, since the original continues to apply up to the date stated in it.
A critical assumption in an agreement — a stated volume of intra-group sales — fails in the third year. The Board proposes a revision. Because the proposal is not on the assessee's request, sub-rule (3) requires the assessee to be heard and to agree before the revision is made. If the assessee will not agree, sub-rule (4) allows the agreement to be cancelled under rule 116, and the revised agreement, if made, must state the date till which the original applies and the date from which the revision does.
You meet it in correspondence with the Board over an existing advance pricing agreement — a notice proposing revision, a request for revision made by the assessee, or the written rejection of such a request.
the agreement shall not be revised unless an opportunity of being heard has been provided to the assessee and the assessee is in agreement with the proposed revision
The revised agreement shall include the date till which the original agreement is to apply and the date from which the revised agreement is to apply.