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NEW DELHI: The Central Board of Direct Taxes has set up three Boards for Advance Rulings (BAR) to offer clarity on tax implications of transactions and to help avoid income tax disputes.

An order from CBDT showed that provisions for replacing the Authority for Advance Rulings (AAR), set up in 1993, with BAR is effective 1 September. A separate order from CBDT said of the three Boards set up, two will be in Delhi and one in Mumbai.

The idea of replacing AAR with BAR is to quicken disposal of cases. Appeals against orders of BAR can be filed in high courts.

Advance ruling is a method of securing opinions on tax consequences of transactions or proposed transactions which offers clarity to tax payers and helps in lowering disputes.

BAR has set up as per the announcement made in the Union budget, and is aimed at enhancing the effectiveness of advance rulings.

Each of these boards will consist of two members, not below the rank of chief Commissioner. The government also aims to eliminate the interface between these Boards and the applicants to the extent technologically feasible.

Curtailing litigation and resolving past disputes has been a priority for CBDT. In the past, the government had raised the monetary threshold for filing appeals by tax department in higher courts and a dispute resolution scheme called ‘Vivad se Vishwas’ was introduced. In this year’s budget, the government had also announced a new scheme for settlement of small tax disputes by an interim board, replacing the erstwhile Settlement Commission.

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