The Central Board of Direct Taxes (CBDT) had introduced the APA programme in India in July 2012.APA refers to an agreement between a taxpayer and the tax authorities on the pricing of an existing or proposed transaction between related parties. If the taxpayer and the revenue authorities agree to a particular price, they may enter into an agreement that would then be valid for a period of five years. During the past two years, around 378 APA applications have been filed and we un derstand that this year as well, the APA programme has received a positive response.

Rollback of APA terms was to be allowed from October 1, 2014, as announced by the finance minister in his interim Budget in July 2014.Since then the notification of the APA rollback rules was eagerly awaited by the applicants to obtain certainty on the pricing of international transactions for prior four years (rollback years) preceding the first year from which APA was to be applicable. However, the detailed rules to give effect to the rollback provisions were announced on March 14, after a long wait. Further, pre-filing consultation, which was mandatory earlier, has been made optional. Therefore, going forward an applicant may directly file the main APA application without following the pre-filing consultation process.

A very positive aspect of the rollback provisions is that it gives an option to roll back APA terms to all taxpayers, even those who have already filed for APAs prior to October 1, 2014. The provisions are to be applied for all the rollback years (four prior years) in which the rele vant international transaction has been undertaken, ruling out the option to pick and choose any particular year(s) by the taxpayer.

The rollback rules do not specify whether the applicant can withdraw from the rollback provision on a standalone basis without impacting the main APA. This ambiguity needs to be cleared as tax payers may want to take a decision on rolling back the APA terms only based on the outcome of APA.

As per the rollback rules, the existing applicants wanting to opt for a rollback will have a very short time span to do so, i.e., before March 31, 2015. The CBDT should reconsider this timeline and extend the time limit for filing such application to at least June 30.

The condition imposed in the rules that for rollback provisions to apply, the international transaction should be same as the international transaction to which the agreement applies is very stringent and, thus, even a slight changevariation in the international transaction (irrespective of the fact that the functional analysis remains the same) for the earlier years would result in the transaction not qualifying for rollback purposes.

With the rollback rules announced, taxpayers can not only avail the benefit of tax liability certainty for future years, but can also rely on the same principle for past years, which would help resolve their litigation disputes. Thus, the APA rollback provisions will now potentially provide tax certainty to applicants for a period of nine years altogether. Having said that, the effective applicability of APA rollback rules requires certain clarifications and the rules itself may require some tweaking. It is suggested that CBDT ought to consider on priority to extend the deadline to at least June 30 and consider publishing frequently asked questions (FAQ) document. This will go a long way in taxpayer taking an informed decision of considering the option of APA rollback.