Four key reasons why the AAR is losing its relevance in direct taxes

Set up in 1993 to provide clarity to MNCs about taxability of certain transactions, and later to domestic companies for deals above Rs 100 cr, it has become dysfunctional due to vacancies at the top

The Supreme Court recently recommended to the Centre to make the advance ruling system in direct taxes more effective and comprehensive.

The Authority for Advance Rulings (AAR) was set up in 1993 with the aim of providing clarity to multinational firms about the taxability of certain transactions in advance, so that they are sure about the country's tax policies. AAR's mandate was later expanded to even domestic residents for transactions above Rs 100 crore.

Over time, AAR has lost its sheen and companies avoid approaching it. Of late, the institution has become dysfunctional due to vacancies at the top. 

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