Government may set up a common body to adjudicate direct and indirect tax cases relating to the foreign firms as suggested by the Parliamentary entary Panel, an official report said.

The Standing committee on Finance which recently tabled its report in the Parliament has suggested the government to form a common Authority for Advance Ruling (AAR) on Central Taxes instead of two departments.

"According to the Ministry of Finance, while reviewing the performance of the two authorities for Advance Rulings..., it was noticed that these Authorities do not have adequate work, to justify separate bodies with separate establishments", the report by the Standing committee said.

The committee has submitted a report on the Authority in the Central Taxes Bill to both the Lok Sabha and the Rajya Sabha.

According to the suggestions made by the panel, the common AAR would be bind by the guidelines under which they were performing their duties.

The figures also point at the Customs and Excise division receiving fewer applications than the Income Tax division.

To explain it further, the report said that the AAR (C&CE) received no applications since 1993 till 2001, while the AAR
(IT) had started receiving applications since the first year. Infact, by 2007-08 AAR (IT) received 571 applications but AAR (C&CE) received only 112, it added.

The Authority for Advance Ruling was formed to help foreign firms and individuals to ascertain their tax liabilities in India even before they undertake the business activity.

A ruling by the AAR is binding on the applicant and also sets a persuasive precedence for other companies which intend to undertake similar activities.