Clarification on Rollback Provisions of Advance Pricing Agreement Scheme

Advance Pricing Agreement provisions were introduced by Finance Act 2012 through insertion of Section 92CC & 92CD in the Income-tax Act, 1961 (‘Act’) and the scheme was notified vide S.O. 2005(E), dated 30.08.2012 by way of insertion of Rule 10F to 10 T and Rule 44GA in the Income Tax Rules, 1962 (‘Rules’)

Roll-back provisions were introduced by insertion of sub-section (9A) in Section 92CC by Finance (No.2) Act, 2014 and the scheme was notified vide S.O. 758 (E) date 14.03.2015 by way of insertion of Rules 10MA and 10RA in the Rules.

APA - Rollback Provisions

In view of various queries raised by the professional, CBDT decided to clarify those issues vide Circular No. 10/2015 (F.No. 500/7/2015-APA-II) by way of question answer form. The clarifications provided are tabulated hereunder:

Sr. No. Question Extracts from Clarification
1. Rule 10MA(2)(ii) – Whether Applicants who have filed their return under sec. 139(4) or 139(5) of the Act would be eligible for roll-back provisions Sec 139(5) – If there is a return which is filed under sec. 139(5) of the Act to revise the original return before the due date specified in Explanation 2 to Sec. 139(1), the applicant would be eligible / entitled for roll-back provisions on this revised return.

Sec 139(4) – Applicant filing belated return under sec. 139(4) are not eligible / entitled for roll-back provisions as a return is not filed before the due date of filing return of income

2 Rule 10MA(2)(i) mandates that the roll-back provisions shall apply in respect of Intl. Transactions that is same as Intl. Transactions to which the agreement applies. Clarification is required for the words ‘Same” and whether the restriction also applies to FAR Analysis The term same Intl. Transaction implies that the transaction in the roll-back years has to be of the same nature and undertaken with the same AE, as proposed to be undertaken for future years.

Restriction with reference to FAR analysis shall operate to ensure that roll-back provisions would apply only if FAR analysis of roll-back years don’t differ materially from the FAR validated in respect of Intl. Transactions to be undertaken for future years.

3 Rule 10MA(2)(iv) – Clarification is required as to whether roll-back provisions has to be requested for all four years or applicant can choose the years out of block of four years The applicant does not have the option to choose the years for which it wants to apply for roll-back. Applicant has to apply for all the four years or not apply at all.

If covered transactions did not exist or there was some dis-qualification in roll-back years, the applicant can apply for rollback provisions for remaining years.

If applicant fails the test of rollback conditions contained in various provisions in a particular year, he shall be denied benefit of roll-back provisions for that year, however, applicant can still apply for rollback for remaining years

4 Rule 10(MA)(3) & Rule 10MA(4) – Clarification required for the phrase “Tribunal has passed an order disposing of such appeal” and on mismatch, if any, between Rule 10MA(3) & 10MA(4) Where tribunal has passed an order disposing the appeal, finality has already reached in that year. However, where tribunal has set aside the order for fresh consideration, roll-back provisions can be given.

Further there is no mismatch between Rule 10MA(3) & 10MA(4)

5 Rule 10MA(3)(iii) – Whether roll-back provisions can be applied if it has the effect of reducing the total income or increasing the loss of the applicant as declared in the return of income. Clarification is required so as to ensure that the returned income is accepted as final income or loss after applying the roll-back provisions The ALP would get modified to the extent that it does not result in reducing the total income or increasing the loss, as the case may be, the returned income. Accordingly, roll-back provisions could be applied


Particulars Amount (rs.)
Returned Income 100
Adjusted Income 120
Roll-back ALP 90
Adjusted ALP 100
6 Rule 10RA(7) In case of failure on the part of the applicant to comply with the provisions of roll-back, whether the entire agreement gets cancelled or only that year in which roll-back fails The entire agreement shall stand cancelled. Roll-back provisions are introduced for the benefit of the applicant and is applicable at its option.
7 If there is a Mutual Agreement Procedure (MAP) application pending for the roll-back year, what would be the stand of the APA authorities? Further, what would be the view of the APA Authorities if MAP has already been concluded for roll-back year?
Situations Solution
Concluded MAP for particular year APA not available. But available for other years, subject to conditions prescribed
MAP application pending Option can be exercised by the applicant either to proceed for MAP or APA for such year.
8 Rule 10MA(1) & Rule 10MA(4): As per Rule 10MA(1), agreement shall provide the manner for determination of ALP & as per Rule 10MA(4) specifies that manner of determination of ALP shall be same as in the APA term. Does that mean that ALP could be different Yes, ALP could be different for different year. However, manner for determination of ALP (including Method, comparability analysis, tested party) would be same
9 Will there be compliance audit for roll-back? Would critical assumptions have to be validated during compliance audit ALP would be agreed after dull examination of facts, including validation of critical assumptions. Hence compliance audit would be necessary to check if the agreed price or methodology has been applied in modified return
10 Whether applicant has the option to withdraw its roll-back application? Can the applicant accepting the APA for the future years? Yes. Applicant may withdraw the application even while maintaining the application for future years. However fees for application of rollback application shall not be refunded upon withdrawal.
11 For already concluded APA, will new APAs be signed for rollback or earlier APAs could be revised APAs already concluded to include rollback provisions as per second proviso to Rule 10MA(5)
12 For already concluded APA, where the modified return has already been filed for first year of the APA term, how will the time-limit for filing modified return for roll-back years be determined? The time to file the modified return for roll-back years will start from the date of signing of the revised APA incorporating the roll back provisions
13 In case of merger of companies, where one or more of those companies are APA applicants, how would the roll back provisions be allowed and to which company or companies it would be allowed The principle to be followed is that the person who makes the APA application would only be entitled to enter into the agreement and be entitled for roll back provision. Other companies who have merged with this person would not be eligible for roll-back provisions
14 In case of demerger of an APA applicant or signatory into two or more companies, who would be eligible for the roll-back provisions The person who makes the APA application would only be entitled to enter into the agreement

The Clarificatory Circular can be downloaded by clicking here –> circular_no_10_2015