Income Tax Act

Official PDF pages 236–240

SOURCE PDF PAGE 236
ations, shall be deemed to be the income of such first mentioned person for all the
purposes of this Act, whether or not it would have been chargeable to income-tax
under any other provisions of this Act.
(4) Where any person has been charged to income-tax on any income deemed to be
his under the provisions of this section and that income is subsequently received by
him, whether as income or in any other form, it shall not again be deemed to form
part of his income for the purposes of this Act.
(5) The provisions of this section shall not apply if the first mentioned person in
sub-section (2) or (3) shows to the satisfaction of the Assessing Officer that—
( a )   neither the transfer nor any associated operation had for its purpose or
for one of its purposes the avoidance of liability to taxation; or
( b )   the transfer and all associated operations were   bona fide   commercial
transactions and were not designed for the purpose of avoiding liability
to taxation.
(6) In this section,—
( a )   references to assets representing any assets, income or accumulations
of income include references to shares in or obligation of any company
to which, or obligation of any other person to whom, those assets, that
income or those accumulations are or have been transferred;
( b )   any body corporate incorporated outside India shall be treated as if it
were a non-resident;
( c )   a person shall be deemed to have power to enjoy the income of a non-res -
ident if—
( i )   the income is in fact so dealt with by any person as to be calculated
at some point of time and, whether in the form of income or not, to
enure for the benefit of the first mentioned person in sub-section
(2) or (3); or
( ii )   the receipt or accrual of the income operates to increase the value
to such first mentioned person of any assets held by him or for his
benefit; or
( iii )   such first mentioned person receives or is entitled to receive at any
time any benefit provided or to be provided out of that income or
out of moneys which are or shall be available for the purpose by
reason of the effect or successive effects of the associated operations
on that income and assets which represent that income; or
( iv )   such first mentioned person has power by means of the exercise
of any power of appointment or power of revocation or otherwise
to obtain for himself, whether with or without the consent of any
other person, the beneficial enjoyment of the income; or
( v )   such first mentioned person is able, in any manner whatsoever
and whether directly or indirectly, to control the application of the
income;

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( d )   in determining whether a person has power to enjoy income, regard
shall be had to the substantial result and effect of the transfer and any
associated operations, and all benefits which may at any time accrue to
such person as a result of the transfer and any associated operations shall
be taken into account irrespective of the nature or form of the benefits.
(7) For the purposes of this section,—
( a )   “assets” includes property or rights of any kind and “transfer” in relation
to rights includes the creation of those rights;
( b )   “associated operation” in relation to any transfer, means an operation of
any kind effected by any person in relation to—
( i )   any of the assets transferred; or
( ii )   any assets representing, whether directly or indirectly, any of the
assets transferred; or
( iii )   the income arising from any such assets; or
( iv )   any assets representing, whether directly or indirectly, the accumu -
lations of income arising from any such assets;
( c )   “benefit” includes a payment of any kind;
( d )   “capital sum” means—
( i )   any sum paid or payable by way of a loan or repayment of a loan;
and
( ii )   any other sum paid or payable otherwise than as income, being a
sum, which is not paid or payable for full consideration in money
or money’s worth.
Avoidance of tax by certain transactions in securities.
175.   (1) Where the owner of any securities (herein referred to as “the owner”)
sells or transfers such securities and buys back or reacquires them or buys
or acquires any similar securities, any interest that becomes payable in respect of
such securities,—
( a )   is receivable by a person other than the owner, shall be deemed, for all
purposes of this Act, to be the income of the owner; and
( b )   shall not be the income of the other person,
irrespective of whether it would have been chargeable to income-tax under any
other provision of this Act.
(2) Where similar securities as referred to in sub-section (1) are bought or acquired,
the owner shall not be under greater liability to income-tax than he would if the
original securities had been bought back or reacquired.
(3) If any person has had a beneficial interest in any securities at any time during a
tax year, and the result of any transaction relating to such securities or the income
from it is that, in respect of such securities within such year,—
( a )   either no income is received by him; or

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( b )   the income received by him is less than what would have been if the
income from such securities had accrued from day to day and been
apportioned accordingly,
the income from such securities for such year shall be deemed to be the income of
such person.
(4) The provisions of sub-sections (1), (2) and (3) shall not apply if the owner, or the
person who has had a beneficial interest in the securities, proves to the satisfaction
of the Assessing Officer that—
( a )   there has been no avoidance of income-tax; or
( b )   the avoidance of income-tax was exceptional and not systematic and also
that in any of the three preceding years any avoidance of income-tax by
a transaction of the nature referred to in sub-section (1), (2) or (3) was
not there in his case.
(5) If a person carrying on a business which consists wholly or partly in dealing in
securities, buys or acquires any securities and sells back or retransfers the securities,
then, if the result of the transaction is that interest in respect of the securities receiv -
able by him is not deemed to be his income by reason of the provisions contained in
sub-section (1), no account shall be taken of the transaction in computing the profits
arising from or loss sustained in the business for any of the purposes of this Act.
(6) The provisions of sub-section (5) shall have effect, subject to any necessary
modifications, as if references to selling back or retransferring the securities included
references to selling or transferring similar securities.
(7) The Assessing Officer may, by notice in writing, require any person to provide
within specified time, which shall not be less than twenty-eight days, details in
respect of all securities of which such person was the owner or in which he had
a beneficial interest at any time during the period specified in the notice, for the
purposes of this section and for the purpose of discovering whether income-tax has
been borne in respect of the interest on all those securities.
(8) If—
( a )   any person buys or acquires any securities or unit within three months
before the record date;
( b )   such person sells or transfers—
( i )   such securities within three months after such date; or
( ii )   such unit within nine months after such date;
( c )   the dividend or income on such securities or unit received or receivable
by such person is exempt,
then, the loss, if any, arising to him on account of such purchase and sale of securities
or unit, to the extent such loss does not exceed the dividend or income received or
receivable on such securities or unit, shall be ignored for the purposes of computing
his income chargeable to tax.

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(9) If—
( a )   any person buys or acquires any securities or unit within three months
before the record date;
( b )   such person is allotted additional securities or unit without any payment
on the basis of holding of such securities or unit on such date;
( c )   such person sells or transfers all or any of the securities or unit referred
to in clause ( a ) within nine months after such date, while continuing to
hold all or any of the additional securities or unit referred to in clause
( b ),
then, the loss, if any, arising to him on account of such purchase and sale of all or
any of such securities or unit shall be ignored for the purposes of computing his
income chargeable to tax.
(10) Irrespective of any other provision of this Act, loss ignored as per sub-section
(9) shall be deemed to be the cost of purchase or acquisition of such additional
securities or unit referred to in sub-section (9)( b ) as are held by him on the date of
such sale or transfer.
(11) For the purposes of this section,—
( a )   “interest” includes a dividend;
( b )   “record date” means such date as may be fixed by—
( i )   a company;
( ii )   a Mutual Fund or the Administrator of the specified undertaking
or the specified company, where—
( A )   “Administrator” means the Administrator as referred to in
clause ( a ) of section 2 of the Unit Trust of India (Transfer of
Undertaking and Repeal) Act, 2002 (58 of 2002);
( B )   “specified company” means a company as referred to in
clause ( h ) of section 2 of the Unit Trust of India (Transfer of
Undertaking and Repeal) Act, 2002 (58 of 2002); or
( iii )   a business trust defined in section 2( 21 ); or
( iv )   an Alternative Investment Fund defined in regulation 2(1)( b ) of the
Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012, made under the Securities and Exchange
Board of India Act, 1992 (15 of 1992),
for the purposes of entitlement of the holder of the securities or units to
receive dividend, income, or additional securities or units without any
consideration;
( c )   “securities” includes stocks and shares;
( d )   securities shall be deemed to be similar if they entitle their holders to the
same rights against the same persons as to capital and interest and the
same remedies for the enforcement of those rights, irrespective of any
difference in the total nominal amounts of the respective securities or

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in the form in which they are held or in the manner in which they can
be transferred;
( e )   “unit” shall mean,—
( i )   a unit of a business trust defined in section 2( 21 );
( ii )   a unit defined in section 208(3)( c ); or
( iii )   beneficial interest of an investor in an Alternative Investment
Fund, referred to in clause ( b )( iv ), and shall include shares or
partnership interests.
Special measures in respect of transactions with persons located in notified
jurisdictional area.
176.   (1) The Central Government may, by notification specify any country or
territory outside India, as a notified jurisdictional area in relation to
transactions entered into by any assessee, having regard to the lack of effective
exchange of information with such jurisdiction.
(2) Irrespective of anything contrary in this Act, if an assessee enters into a trans -
action where one of the parties to the transaction is a person located in a notified
jurisdictional area, then,—
( a )   all the parties to the transaction shall be deemed to be associated enter -
prises within the meaning of section 162;
( b )   any transaction of the nature described in section 163(1) and (2)
7  
shall
be deemed to be an international transaction within the meaning of
section 163,
and the provisions of sections 161, 162, 163, 165 [except the benefit of variation
specified in sections 165(3)( a )( ii )], 166, 167, 171, 172 and 173 shall apply accordingly.
(3) Irrespective of anything to the contrary in this Act, no deduction shall be allowed—
( a )   for any payment made to any financial institution located in a notified
jurisdictional area, unless the assessee furnishes an authorisation in the
prescribed form authorising the Board or any other income-tax authority
acting on its behalf to seek relevant information from the said financial
institution on behalf of such assessee; and
( b )   for any other expenditure or allowance (including depreciation) arising
from the transaction with a person located in a notified jurisdictional
area, unless the assessee maintains such other documents and furnishes
such information as may be prescribed, in this behalf.
(4) Irrespective of anything to the contrary in this Act, if, in any tax year, the assessee
has received or credited any sum from any person located in a notified jurisdictional
area and—
( a )   the assessee does not provide any explanation about the source of the
said sum in the hands of such person or in the hands of the beneficial
owner (if such person is not the beneficial owner of the said sum); or
( b )   the explanation provided by the assessee, in the opinion of the Assessing
Officer, is not satisfactory,