Rule 117 — Procedure for giving effect to rollback provision of an Agreement. Made under s.169 of the Income-tax Act, 2025.
Rule 117 gives effect to Section 169 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) states that effect to the rollback provisions of an agreement is to be given in accordance with this rule.
Sub-rule (2) requires the applicant to furnish a modified return of income referred to in section 169 for a rollback year to which the agreement applies, along with proof of payment of any additional tax arising as a consequence of and computed in accordance with the rollback provision. Sub-rule (3) requires that modified return to be furnished along with the modified return to be furnished for the first of the tax years for which the agreement has been requested in the application.
Sub-rules (4) and (5) clear the pending litigation on the rollback issue. Where an appeal filed by the applicant is pending before the Commissioner (Appeals), the Appellate Tribunal or the High Court for a rollback year on the issue that is the subject matter of the rollback provision for that year, the applicant must withdraw that appeal to the extent of the subject covered under the agreement before furnishing the modified return for that year. Where an appeal filed by the Assessing Officer or the Commissioner is pending before the Appellate Tribunal or the High Court for a rollback year on such an issue, it must be withdrawn to the extent of the subject covered under the agreement within three months of the filing of the modified return by the applicant.
Sub-rule (6) requires the applicant, the Assessing Officer or the Commissioner to inform the Dispute Resolution Panel, the Commissioner (Appeals), the Appellate Tribunal or the High Court, as the case may be, of the fact that an agreement containing a rollback provision has been entered into, along with a copy of it, as soon as it is practicable to do so.
Sub-rule (7) provides that where effect cannot be given to the rollback provision for any rollback year to which it applies, on account of failure on the part of the applicant, the agreement shall be cancelled.
A rollback provision applies the agreed transfer pricing position to years that are already assessed or in appeal, and the Act does not say how those closed or contested years are to be reopened and settled. The rule supplies the mechanism: a modified return under section 169 with the additional tax paid, filed together with the return for the first agreement year, and a clean-up of appeals on both sides so that the same issue is not decided twice. Sub-rule (7) supplies the sanction, because a rollback that can be given effect for some years and not others would leave the agreement incoherent.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time for the Assessing Officer or the Commissioner to withdraw a departmental appeal on the rollback issue | Three months | From the filing of the modified return by the applicant; withdrawal is to the extent of the subject covered under the agreement | Sub-rule (5) |
| Time for the applicant to withdraw his own appeal on the rollback issue | Before furnishing the modified return for the said year | Appeal pending before the Commissioner (Appeals), the Appellate Tribunal or the High Court on the issue that is the subject matter of the rollback provision; withdrawal to the extent of the subject covered under the agreement | Sub-rule (4) |
The two withdrawals are on different clocks and in different order. The applicant's appeal must go before he files the modified return for that year; the Department's appeal goes within three months after he files it. Both are limited to the extent of the subject covered under the agreement, so an appeal that also raises unrelated grounds is not withdrawn wholesale. The rollback returns do not stand alone either — sub-rule (3) ties them to the modified return for the first tax year for which the agreement was requested, so the rollback years and the agreement years are filed as one package, with proof of payment of the additional tax. The consequence in sub-rule (7) is directed at the applicant's own failure: it is his default, not an obstacle on the Department's side, that cancels the agreement.
A company enters into an agreement covering five tax years with rollback for two earlier years. For each rollback year it must file a modified return under section 169 with proof of payment of the additional tax, filed together with the modified return for the first covered year. Its appeal before the Appellate Tribunal on the same transfer pricing issue for a rollback year must be withdrawn, to the extent covered by the agreement, before that modified return goes in; a departmental appeal for the other rollback year must be withdrawn within three months of the filing.
A reader meets it immediately after an advance pricing agreement with a rollback provision is signed — in the modified returns under section 169, in the applications for withdrawal filed before the appellate forum, and in the intimation of the agreement to that forum under sub-rule (6).
the said appeal to the extent of the subject covered under the agreement shall be withdrawn by the applicant before furnishing the modified return for the said year
In case effect cannot be given to the rollback provision of an agreement in accordance with this rule, for any rollback year to which it applies, on account of failure on the part of applicant, the agreement shall be cancelled.