What is advance pricing agreement? State the validity period of the agreement. Also, specify the binding force of the agreement.

Advance Pricing Agreement (APA) is an agreement between a taxpayer and a taxing authority (Board) on an appropriate transfer pricing methodology for fixing the arm's length price for a set of transactions over a fixed period of time in future. As per Section 92CC(1) of Income Tax Act, 1961, w.e.f. 1st July, 2012, the Central Board of Direct Taxes (Board), with the approval of the Central Government, may enter into an Advance Price Agreement with any person, determining the arm's length price or specifying the manner in which arm's length price is to be determined, in relation to an international transaction to be entered into by that person. Validity of Advance Pricing Agreement The advance pricing agreement shall be valid for such period not exceeding five consecutive previous years as may be specified in the agreement. Bindingness of Advance Pricing Agreement Advance Pricing Agreement shall be binding on: the person in whose case, and in respect of the transaction in relation to which, the agreement has been entered into; and on the Principal Commissioner or Commissioner, and the income-tax authorities subordinate to him, in respect of the said person and the said transaction. However the advance pricing agreement shall not be binding if there is a change in law or facts having bearing on the agreement so entered.