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CONTENTS

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About the authors I-5
A few words from the authors I-7

BOOK 1
INCOME-TAX LAW IN BRIEF

1 LAW OF INCOME-TAX IN BRIEF

n Basic Concepts 3
n Residential Status 5
n Income that is exempt from tax 8
n Salary 15
n Profits and gains of business or profession 22
n Capital Gains 34
n Set off and carry forward of losses 42
n Permissible deductions from gross total income and tax liability 44

BOOK 2
CORPORATE TAX PLANNING

UNIT I
TAX PLANNING, TAX MANAGEMENT, TAX AVOIDANCE, TAX EVASION

2 TAX PLANNING, TAX MANAGEMENT, TAX AVOIDANCE AND TAX

EVASION

1. Introduction 65
2. Tax planning/avoidance/evasion - Concept in brief 65
3. What is tax planning 66
4. What is tax avoidance 66
5. What is tax evasion 66
6. Tax avoidance v. Tax evasion 67
7. Tax planning v. Tax management 67

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UNIT II
CORPORATE TAX IN INDIA

3 DEFINITIONS

16. Company [Sec. 2(17)] 71

17. Indian company [Sec. 2(26)] 71
18. Domestic company 71
18.1 Arrangement for declaration and payment of dividend - Meaning of 72
19. Foreign company 72
20. Industrial company 72
20.1 Other points 72
21. Company in which the public are substantially interested [Sec. 2(18)] 72
21.1 Onus to prove 73
22. Investment company 73
23. Widely-held company 73
24. Closely-held company 73
25. Case study 73
MULTIPLE CHOICE QUESTIONS 74

4 RESIDENTIAL STATUS AND TAX INCIDENCE

28. Residential status of a company [Sec. 6(3)] 75

28.1 Control and management 75
29. Incidence of tax [Sec. 5] 76
29.1 Indian income and foreign income 76
29.2 Incidence of tax 77
29.3 Conclusions 77
30. Receipt of income 77
30.1 Receipt v. Remittance 77
30.2 Actual receipt v. Deemed receipt 77
30.3 Cash v. Kind 77
30.4 Receipt v. Accrual 77
31. Accrual of income 77
MULTIPLE CHOICE QUESTIONS 77

5 TAXATION OF COMPANIES

40. Carry forward and set-off of losses in the cases of certain companies [Sec. 79] 79
40.1 Exceptions 79
41. Taxable income - How computed 81
42. Tax liability - How computed 81
42.1 Income taxable at special rate 82
43. Minimum alternate tax [Sec. 115JB] 82
43.1 When applicable 82
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43.2 Book profit 83
43.3 Minimum income and tax 89
43.4 Report from a chartered accountant 89
43.5 Carry forward and set-off of tax credit 89
43.6 Hints for tax planning 91
44. Dividend tax 95
44.1 Basis of charge [Sec. 115-O(1)] 95
44.2 What is dividend 96
44.3 Nature of tax 96
44.4 Rate of dividend tax 96
44.5 Mitigating cascading effect of dividend distribution tax 96
44.6 When the additional tax should be paid 98
44.7 Dividend tax is the final levy 98
44.8 Dividend tax is not deductible 99
44.9 Interest for non-payment of tax [Sec. 115P] 99
44.10 When company is deemed to be in default [Sec. 115Q] 99
44.11 Penalty under section 271C 99
44.12 Prosecution 99
44.13 Judicial rulings 99
45. Tax on income distributed to unitholders [Secs. 115R, 115S and 115T] 99
46. Tax on income received from venture capital companies and venture capital funds [Sec. 115U] 100
47. Case studies 100
MULTIPLE CHOICE QUESTIONS 118

UNIT III
TAX PLANNING WITH REFERENCE TO SPECIFIC BUSINESS DECISIONS

6 TAX PLANNING WITH REFERENCE TO NEW BUSINESS - LOCATION OF

A BUSINESS

57. Location of new business 123

MULTIPLE CHOICE QUESTIONS 123

7 TAX PLANNING WITH REFERENCE TO NEW BUSINESS - NATURE OF

BUSINESS

68. Nature of new business 125

69. Investment allowance for acquisition and installation of new plant and machinery [Sec. 32AC] 125
69.1 Amount of investment allowance under section 32AC(1) 126
69.2 Amount of investment allowance under section 32AC(1A) 126
69.3 Withdrawal of investment allowance 126
70. Investment allowance in backward area in Andhra Pradesh, Bihar, Telangana or
West Bengal [Sec. 32AD] 127
70.1 Conditions for claiming deduction under section 32AD 127
70.2 Quantum of investment allowance 127
70.3 Withdrawal of investment allowance 127
71. Tea/coffee/rubber development account [Sec. 33AB] 127
71.1 Conditions 128
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71.2 Amount of deduction 128
71.3 Amount can be withdrawn for the purpose of the scheme 128
71.4 Consequences in the case of closure of business 129
71.5 Withdrawal from the special account cannot be utilised for certain purposes 129
71.6 Consequences if the new asset is transferred within 8 years 129
71.7 Double deduction not permissible 130
72. Telecom licence fees [Sec. 35ABB] 130
72.1 Conditions 130
72.2 Amount of deduction 131
72.3 Profit or loss on sale of telecom licence 131
72.4 Consequences in the case of amalgamation or demerger 131
72.5 Depreciation under section 32 not available 131
73. Expenditure on specified business [Sec. 35AD] 133
73.1 Conditions 133
73.2 Amount of deduction 135
73.3 Consequences of claiming deduction under section 35AD 135
74. Computing business profits on presumptive basis [Sec. 44AD] 137
74.1 Consequences if the above conditions are satisfied 138
74.2 Is it possible to declare lower income (upto assessment year 2016-17) 138
74.3 Is it possible to declare lower income (from the assessment year 2017-18) [Sec. 44AD(4)] 138
74A. Computation of professional income of estimated basis under section 44ADA 139
75. Transport operators [Sec. 44AE] 140
75.1 Who is covered by the scheme of section 44AE 140
75.2 Consequences if section 44AE is applicable 140
75.3 Other points 140
76. Employment of new workmen [Sec. 80JJAA] 141
76.1 Conditions 141
76.2 Amount of deduction 141
77. Tonnage Tax Scheme [Secs. 115V to 115VZC] 143
77.1 Salient features 144
MULTIPLE CHOICE QUESTIONS 145

8 TAX PLANNING WITH REFERENCE TO NEW BUSINESS - FORM OF

ORGANISATION

86. Form of organisation 147

87. Whether sole proprietorship is a better alternative 147
88. Firm v. Company 148
88.1 How to reduce tax incidence on companies 149
89. Limited liability partnership (LLP) 151
89.1 LLP is taxed like traditional partnership firm 151
89.2 Firm, LLP and company - A comparison of tax benefits 151
89.3 LLP v. Company 153
MULTIPLE CHOICE QUESTIONS 153

9 TAX PLANNING WITH REFERENCE TO FINANCIAL MANAGEMENT

DECISIONS

90. Capital structure decision 155

91. Dividend policy 158
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92. Meaning of dividend [Sec. 2(22)] 158
92.1 Accumulated profits 159
92.2 Distribution of accumulated profits entailing release of companys assets
[Sec. 2(22)(a)] 159
92.3 Distribution of accumulated profits in the form of debentures, debenture stock
[Sec. 2(22)(b)] 159
92.4 Distribution of accumulated profits at the time of liquidation [Sec. 2(22)(c)] 159
92.5 Distribution of accumulated profits on the reduction of its capital [Sec. 2(22)(d)] 160
92.6 Distribution of accumulated profits by way of advance or loan [Sec. 2(22)(e)] 160
92.7 Tax treatment in the hands of shareholders 160
93. Bonus shares 161
93.1 Bonus shares to equity shareholders 161
93.2 Bonus shares to preference shareholders 162
MULTIPLE CHOICE QUESTIONS 162

10 TAX PLANNING WITH REFERENCE TO MANAGERIAL DECISIONS

100. Purchase of asset 164

101. Lease v. Purchase 165
102. Purchase by instalment v. Hire 167
103. Sale of assets used for scientific research 168
104. Make or buy 168
105. Repairs, replace, renewal or renovation 170
MULTIPLE CHOICE QUESTIONS 172

11 TAX PLANNING IN RESPECT OF EMPLOYEES REMUNERATION

109. Factors which require consideration 173

110. Deduction of remuneration in the hand of employer 173
111. Tax incidence in the hands of employees 173
112. Fringe benefit tax 173
113. Remuneration planning 173
113.1 Broad hints 173
113.2 Other points 174
114. Case studies 175
MULTIPLE CHOICE QUESTIONS 179

12 TAX PLANNING WITH REFERENCE TO SALE OF SCIENTIFIC RESEARCH

ASSETS

116. Sale of scientific research assets 182

MULTIPLE CHOICE QUESTIONS 183
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13 TAX PLANNING WITH REFERENCE TO RECEIPT OF INSURANCE

COMPENSATION

118. Insurance claim 184

119. When section 45(1A) is attracted 184
119.1 Consequences where section 45(1A) is applicable 184
120. When section 45(1A) is not applicable 184
120.1 When insurance compensation is a capital receipt 184
120.2 When insurance compensation is a revenue receipt 185
121. Case studies 185
MULTIPLE CHOICE QUESTIONS 188

14 TAX PLANNING WITH REFERENCE TO DISTRIBUTION OF ASSETS BY

COMPANIES IN LIQUIDATION

125. Liquidation of a company 189

125.1 Tax treatment in the hands of the company [Sec. 46(1)] 189
126. Tax treatment in the hands of shareholders [Sec. 46(2)] 189
127. Case study 189
MULTIPLE CHOICE QUESTIONS 190

UNIT IV
NON-RESIDENT

15 TAX PLANNING IN RESPECT OF NON-RESIDENT

142. Residential status 193

143. Income taxable in the hands of non-resident in India 193
144. Income deemed to accrue or arise in India [Sec. 9] 193
144.1 Income from business connection [Sec. 9(1)(i)] 193
144.2 Income through or from any property, asset or source of income in India
[Sec. 9(1)(i)] 195
144.3 Transfer of capital asset situated in India [Sec. 9(1)(i)] 195
144.4 Income under the head Salaries [Sec. 9(1)(ii)] 196
144.5 Salary payable abroad [Sec. 9(1)(iii)] 196
144.6 Dividend paid by an Indian company [Sec. 9(1)(iv)] 197
144.7 Income by way of interest [Sec. 9(1)(v)] 197
144.8 Income by way of royalty [Sec. 9(1)(vi)] 197
144.9 Income by way of fees for technical services [Sec. 9(1)(vii)] 198
145. Hints for tax planning in respect of residential status 198
146. Interest to non-residents [Sec. 10(4), (4B)] 199
147. Salaries of foreign citizens 199
147.1 Salary of diplomatic personnel [Sec. 10(6)(ii)] 199
147.2 Salary of foreign employees [Sec. 10(6)(vi)] 199
147.3 Salary received by a ships crew [Sec. 10(6)(viii)] 199
147.4 Remuneration of a foreign trainee [Sec. 10(6)(xi)] 199
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148. Exemption from tax paid on behalf of foreign companies in respect of certain income
[Sec. 10(6A)] 200
149. Tax paid on behalf of non-resident [Sec. 10(6B)] 200
150. Technical fees received by a notified foreign company [Sec. 10(6C)] 200
151. Foreign Government employee under co-operative programmes [Sec. 10(8)] 201
152. Non-resident consultants 201
152.1 Under section 10(8A) 201
152.2 Under section 10(8B) 201
153. Income of family members [Sec. 10(9)] 201
154. Aircraft lease rent payable to foreign Government [Sec. 10(15A)] 201
155. Shipping [Sec. 44B] 202
155.1 Conditions 202
155.2 Consequences if the above conditions are satisfied 202
156. Exploration of mineral oils [Sec. 44BB] 204
156.1 Conditions 204
156.2 Consequences if the above conditions are satisfied 204
156.3 Is it possible to declare lower income 204
157. Computation of income in respect of foreign airlines [Sec. 44BBA] 205
158. Computation of profits and gains of foreign companies engaged in the business of civil
construction [Sec. 44BBB] 205
158.1 Is it possible to declare lower income 205
159. Head office expenditure in the case of non-resident [Sec. 44C] 206
159.1 Meaning of adjusted total income 206
159.2 Average adjusted total income 206
159.3 Head office expenditure 206
159.4 Section 44C - When not applicable 206
160. Royalties and technical fees in the case of foreign companies [Sec. 44D] 207
160.1 Agreement made before April 1, 1976 207
160.2 Agreement made on or after April 1, 1976 not being covered by section 44DA
[Sec. 115A] 207
160.3 Section 44DA 208
160.4 Conclusions 208
161. Computation of income and tax 210
162. Computation of capital gain in the case of non-resident [First proviso to Sec. 48] 212
162.1 Special provisions in the case of a non-resident Indian [Sec. 115F] 214
163. Special provisions 215
163.1 Who can claim the benefit of special provisions 215
163.2 Incomes which are qualified for special treatment 215
163.3 Special rate of tax 216
163.4 Return of income not to be filed in certain cases 216
163.5 Benefit available even after the assessee becomes resident 216
163.6 Special provisions not to apply if the assessee so chooses [Sec. 115-I] 216
164. Case studies 217
MULTIPLE CHOICE QUESTIONS 219
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16 DOUBLE TAXATION RELIEF

170. Relief for double taxation [Secs. 90, 90A and 91] 221
171. ADT agreements [Sec. 90] 221
171.1 Modes of granting relief under ADT agreements 221
172. Unilateral relief [Sec. 91] 221
173. Double taxation relief in case of specified associations [Sec. 90A] 222
174. Case studies 222
MULTIPLE CHOICE QUESTIONS 226

17 TRANSFER PRICING

177. International transaction [Secs. 92 to 92F] 228

177.1 Conditions for applicability of arms length price in the international transaction 228
178. Computation of the arms length price (ALP) 229
179. Computation of ALP [Sec. 92C] 230
179.1 Method of computing arms length price 230
179.2 Comparability of transaction 231
179.3 Most appropriate method 232
179.4 Determination of arms length price by Assessing Officer in certain cases
[Sec. 92C(3)] 232
179A. Computation of arms length price in cases where more than one price is determined under most
appropriate method 232
180. Reference to Transfer Pricing Officer [Sec. 92CA] 238
180.1 Computation of income by Assessing Officer 238
180.2 Mistakes apparent from record 238
180.3 Powers under section 131 or 133 238
181. Maintenance of books of account [Sec. 92D] 238
181.1 Support by authentic documentation 238
181.2 Continuity for more than a year 238
181.3 Period 238
181.4 Furnishing information about international transaction 239
182. Report from accountant [Sec. 92E] 239
183. Specified domestic transactions 239
184. Advance pricing agreement (APA) [Sections 92CC and 92CCD] 239
MULTIPLE CHOICE QUESTIONS 241

18 ADVANCE RULING FOR NON-RESIDENTS

186. Advance ruling 243

186.1 Authority for advance ruling [Sec. 245-O] 243
186.2 Meaning of applicant and advance ruling [Sec. 245N(a) and (b)] 243
186.3 Non-resident in which year 244
187. Procedure for filing application 244
187.1 Application form number 244
187.2 Fees 244
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187.3 Who should sign the application 244
187.4 Withdrawal of application 244
188. Procedure on receipt of application [Sec. 245R] 244
188.1 When the application can be rejected 244
188.2 Pronouncement of advance ruling 245
188.3 Continuation of proceedings after the death, etc., of the applicant 245
188.4 Hearing of application ex parte 245
188.5 Modification of order 245
188.6 Rectification 245
188.7 Appellate authority not to proceed in certain cases 245
189. Applicability of advance ruling [Sec. 245S] 245
190. Advance ruling to be void in certain circumstances [Sec. 245T] 246
191. Powers of authority [Sec. 245U] 246
MULTIPLE CHOICE QUESTIONS 246

UNIT V
BUSINESS RESTRUCTURING

19 RESTRUCTURING BUSINESS

195. Restructuring business 249

20 AMALGAMATION

196. Amalgamation 250

197. Meaning of amalgamation under the Income-tax Act [Sec. 2(1B)] 250
197.1 Conditions 250
197.2 Transactions not treated as amalgamation 251
198. Actual cost and written down value when assets are transferred in a scheme of
amalgamation 251
198.1 When a capital asset (other a block of assets) is transferred 251
198.2 When a block of asset is transferred 251
199. Assets in amalgamation not treated as transfer 252
199.1 Transfer of capital assets to amalgamated Indian company [Sec. 47(vi)] 252
199.2 Transfer of shares in an Indian company held by a foreign company to
another foreign company [Sec. 47(via)] 253
199.3 Allotment of shares in amalgamated company to the shareholders of
amalgamating company [Secs. 47(vii) and 49(2)] 253
200. Carry forward and set-off of loss and depreciation - When permissible in the hands of
amalgamated company [Sec. 72A] 253
201. Set-off of losses of a banking company against the profit of a banking institution under
a scheme of amalgamation [Sec. 72AA] 254
202. Case studies 255
203. Expenditure on amalgamation/demerger [Sec. 35DD] 257
204. Consequences of amalgamation 258
204.1 Date of amalgamation 258
MULTIPLE CHOICE QUESTIONS 258
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21 DEMERGER

205. Meaning of demerger [Sec. 2(19AA)] 261

205.1 Condition one - Entities involved should be companies 261
205.2 Condition two - Sections 391 to 394 261
205.3 Condition three - It involves transfer of an undertaking 261
205.4 Condition four - All property of the undertaking should be transferred to the
resulting company 261
205.5 Condition five - The resulting company should take over all liabilities of the
undertaking 262
205.6 Condition six - Liabilities/properties are to be transferred at book value 262
205.7 Condition seven - Shares in resulting company to shareholders of demerged
company 262
205.8 Condition eight - Person holding 75 per cent shares in the demerged company
to become shareholders in the resulting company 262
205.9 Condition nine - Transfer as ongoing concern 263
205.10 Condition ten - Section 72A(5) conditions 263
205.11 Other points 263
206. Actual cost and WDV 264
206.1 When a capital asset (other than forming part of a block of asset) is transferred 264
206.2 When an asset forming part of block of assets is transferred [Explns. 2A and
2B to sec. 43(6)] 264
206.3 Computation of depreciation 264
207. Demerger and capital gains 265
207.1 When it is not treated as transfer 265
207.2 Cost of acquisition of shares in resulting company and demerged company
[Sec. 49(2C)/(2D)] 266
208. Expenditure on demerger 266
209. Carry forward and set-off of losses/depreciation - When permissible in the hands of
resulting company [Sec. 72A] 266
210. Case study 266
211. Consequences of demerger 270
212. Amalgamation vis-a-vis Demerger 270
213. Amalgamation or demerger of co-operative banks 270
213.1 When not treated as transfer 270
213.2 Carry forward and set-off of loss and depreciation - When permissible in the
hands of amalgamated/resulting co-operative bank [Sec. 72AB] 270
213.3 Special provision for computing deductions 271
MULTIPLE CHOICE QUESTIONS 272

22 CONVERSION OF SOLE PROPRIETARY BUSINESS OR FIRM INTO

COMPANY

215. Conversion of sole proprietary concern 274

215.1 Taking back the exemption 274
215.2 Set-off and carry forward loss of sole proprietary by company 274
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216. Conversion of firm into company 274
216.1 Exemption under section 47(xiii) 274
216.2 Exemption under section 47(xi) 276
216.3 Is it possible to set-off and carry forward loss of firm by company [Sec. 72A(6)] 276
MULTIPLE CHOICE QUESTIONS 276

23 SLUMP SALE

220. Definition of slump sale [Section 2(42C)] 278

220.1 Taxpayer owns an undertaking 278
220.2 Transfer by way of sale 278
220.3 Transfer takes place for a lump sum consideration 278
221. How to find out written down value in the hands of transferor in the case of slump
sale [Sec. 43(6)] 279
222. Capital gains in the case of slump sale [Sec. 50B] 279
223. Other points 280
224. Case studies 280
225. Amalgamation/Demerger vis-a-vis slump sale 283
MULTIPLE CHOICE QUESTIONS 283

24 TRANSFER OF ASSETS BETWEEN HOLDING AND SUBSIDIARY

COMPANIES

230. When a capital asset (other than block of asset) is transferred 284
231. When a block of asset is transferred [Expln. 2 to sec. 43(6)] 284
232. Exemption under section 47 284
233. Withdrawal of exemption 284
233.1 Cases when exemption is taken back 284
233.2 Consequences 285
234. Case study 286
MULTIPLE CHOICE QUESTIONS 288

25 CONVERSION OF COMPANY INTO LIMITED LIABILITY PARTNERSHIP

238. Conversion 289

239. Capital gain exemption in 289
239.1 Conditions for claiming exemption 289
239.2 When exemption will be taken back 290
240. Carry forward of loss/depreciation [Sec. 72A(6A)] 290
240.1 Other points 290
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BOOK 3
BUSINESS TAX PROCEDURE AND MANAGEMENT

UNIT I
ADVANCE TAX, TDS AND INTEREST

26 ADVANCE PAYMENT OF TAX

251. Income liable for advance tax 297

251.1 Liability to advance tax - When arises 297
251.2 Due dates of payment of advance tax 297
252. Different situations 298
252.1 Payment of advance tax by the assessee of his own account [Sec. 210] 298
252.2 Payment of advance tax in pursuance of order of Assessing Officer [Sec. 210] 298
252.3 Payment of advance tax in pursuance of revised order of Assessing Officer 299
253. Interest 299
254. Case study 299
MULTIPLE CHOICE QUESTIONS 301

27 DEDUCTION/COLLECTION OF TAX AT SOURCE AND e-TDS RETURN

269. What is the scheme of tax deduction at source 302

269.1 Tax credit 302
269.2 Payments covered by TDS scheme 303
269.3 TDS rates during the financial year 2015-16 303
270. When and how tax is to be deducted at source from salary [Sec. 192] 304
270.1 How to compute taxable salary and tax thereon 304
270.2 Special cases 305
270.3 Particulars of perquisite and profit in lieu of salary 308
270.4 Salary with lower TDS 308
270.5 Salary paid in Foreign Currency 308
270A. When and how tax is to be deducted at source from withdrawal from employees
provident fund scheme [Sec. 192A] 308
271. When and how tax is to be deducted at source from interest on securities [Sec. 193] 309
271.1 Securities interest which is not subject to tax deduction 309
271.2 Time of tax deduction 310
271.3 When tax is not deductible at regular rates 310
272. When and how tax is to be deducted at source from dividends [Sec. 194] 310
272.1 When tax is not deductible at regular rates 310
273. When and how tax is to be deducted at source from interest other than interest on
securities [Sec. 194A] 311
273.1 When interest is not subject to tax deduction or subject to lower tax deduction 311
273.2 Adjustment in the case of short deduction 312
273.3 Payment under a hire purchase agreement 312
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274. When and how tax is to be deducted at source from winnings from lotteries or
crossword puzzles [Sec. 194B] 312
274.1 Prize given partly in cash and partly in kind 313
275. When and how tax is to be deducted at source from winnings from horse races [Sec. 194BB] 313
276. Tax deductible from payments to contractors or sub-contractors [Sec. 194C] 313
276.1 Who is deductor 313
276.2 Who is recipient 314
276.3 Payments subject to tax deduction under section 194C 314
276.4 When tax has to be deducted at source 315
276.5 Rate of TDS 315
276.6 When tax is not deductible 315
277. When and how tax is to be deducted at source from insurance commission [Sec. 194D] 316
277.1 Adjustment not possible 316
277.2 When tax is not deductible or deductible at lower rate 316
277.3 Reinsurance not covered by section 194D 316
277A. When and how tax is to be deducted at source from payment of life insurance policy
[Sec. 194DA] 316
278. When and how tax is deductible at source from payment to non-resident sportsmen
or sports associations [Sec. 194E] 317
279. When and how tax is deductible from payments in respect of National Savings Scheme
[Sec. 194EE] 318
279.1 When tax is not deductible 318
280. When and how tax is deductible on payments on account of repurchase of units of
Mutual Funds or UTI [Sec. 194F] 318
281. When tax is deductible from commission, etc., on sale of lottery tickets [Sec. 194G] 318
282. When and how to deduct tax at source from commission or brokerage [Sec. 194H] 319
282.1 When tax has to be deducted 319
282.2 Meaning of commission or brokerage 319
282.3 No TDS in the case of amount payable by BSNL/MTNL to PCOs 319
283. When and how tax is deductible from rent [Sec. 194-I] 320
283.1 TDS rates 320
283.2 When tax has to be deducted 320
283.3 No tax deduction if payee is Government/local authorities 320
283.4 No tax deduction when rent is paid/credited to real estate investment trust 320
283.5 When tax is deducted at lower rate 321
283.6 Payment to cold store 321
283A. When and how tax is deductible on purchase of immovable property [Sec. 194-IA] 321
284. When tax is deductible at source on fees for professional or technical services [Sec. 194J] 321
284.1 When tax is deductible at lower rate 322
284.2 Meaning of professional/technical services 322
284A. When and how to deduct tax at source from payment of compensation on acquisition
of certain immovable property [Sec. 194LA] 322
284B. When and how tax is to be deducted at source from Interest payable on Infrastructure
debt fund [Sec. 194LB] 323
284BB. When and how tax is deductible from income from units of business trust [Sec. 194LBA] 323
284BC. When and how tax is deductible from income in respect of units of investment
fund [Sec. 194LBB] 323
284BCA. When and how tax is to be deductible from income in respect of investment in securitization
fund [Sec. 194LBC] 323
284C. When and how tax is to be deducted by an Indian Company from Interest to a non-resident/
foreign citizen [Sec. 194LC] 324
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284D. When and how tax is deductible on interest on bonds/Government securities [Sec. 194LD] 324
285. When and how tax is to be deducted at source from other sums [Sec. 195] 325
286. TDS from units or long-term capital gain under section 196B 326
287. TDS from income or long-term capital gain from foreign currency bonds/Global
Depository Receipts [Sec. 196C] 326
288. When tax is deductible at source from income of Foreign Institutional Investors from
securities [Sec. 196D] 326
289. What are other points for consideration 326
289.1 Amount payable to Government/RBI/certain corporations not subject to tax deduction 326
289.2 Tax deducted - To be treated as income of deductee and available for tax credit
[Secs. 198 and 199] 327
289.3 Time of deposit of tax deducted at source (TDS) or collected at source (TCS) 327
289.4 Quarterly statement of tax deduction/collection 328
289.5 Certificate of tax deduction/collection at source 328
289.6 Tax deduction and collection account number [Sec. 203A] 329
289.7 Obtaining a certificate of lower rate from the Assessing Officer [Sec. 197] 330
289.8 Provisions of section 197A 330
289.9 Furnishing of quarterly returns regarding the details of non-deduction of tax by
certain persons [Sec. 206A] 331
289.10 Processing of statements of tax deducted at source [Sec. 200A] 331
290. Tax collection at source [Sec. 206C] 332
290.1 In which case tax has to be collected at source 332
290.2 Tax collection at lower rate 334
290.3 Deposit of tax 334
290.4 Issue of certificate 334
290.5 Quarterly returns to Government 334
290.6 Tax collection account number 334
MULTIPLE CHOICE QUESTIONS 334

28 INTEREST PAYABLE BY ASSESSEE/GOVERNMENT

296. When interest becomes payable by assessee 337

296.1 For defaults in furnishing return of income [Sec. 234A] 337
296.2 For failure to deduct or collect and pay tax at source [Sec. 201(1A) or 206C(7)] 339
296.3 For default in payment of advance tax [Sec. 234B] 340
296.4 For deferment of advance tax 341
296.5 Interest on excess refund [Sec. 234D] 347
296.6 For making late payment of income-tax [Sec. 220(2)] 349
296.7 Fees for defaults in furnishing quarterly returns [Sec. 234E] 349
297. Interest payable to assessee [Sec. 244A] 349
297.1 How to compute interest upto May 31, 2016 349
297.2 Provisions applicable from June 1, 2016 349
297.3 Other points 350
298. Procedure to be followed in calculation of interest [Rule 119A] 350
299. Is it possible to reduce/waive interest 350
299.1 Conditions 350
299.2 Period 350
299.3 Extent of interest to be reduced or waived 350
299.4 Discretion should be exercised in judicial manner 351
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300. Is it possible for Chief Commissioner/Director General (Investigation) to reduce penal

interest in certain cases 351
300.1 Other points 351
301. Can Central Board of Direct Taxes make relaxation 351
302. Writ petition - Is it maintainable against levy of interest 351
MULTIPLE CHOICE QUESTIONS 351

29 REFUND OF EXCESS PAYMENTS

305. Right to claim refund - When arises [Sec. 237] 353

306. Who can claim refund [Sec. 238] 353
307. How to claim refund 353
307.1 Claim after the statutory time limit 353
308. Other points 354
308.1 Refund on appeal [Sec. 240] 354
308.2 Power to withhold refund 354
308.3 Interest on delayed refunds 354
308.4 Set-off of refunds against tax remaining payable [Sec. 245] 354

UNIT II
RETURN, ASSESSMENT, PENALTIES, SETTLEMENT
COMMISSION AND SEARCH

30 RETURN/ASSESSMENT OF INCOME

314. When return is to be filed as statutory obligation [Sec. 139(1), (4A), (4B), (4C), (4D)] 357
314.1 Exemption provided by the Government when taxable income of an individual is
up to Rs. 5,00,000 358
314.2 Return Form 358
314.3 Time for filing return of income [Sec. 139(1)] 360
315. When return of loss should be filed [Sec. 139(3)] 360
316. Belated return [Sec. 139(4)] 360
316.1 Other points 360
317. Revised return [Sec. 139(5)] 361
317.1 Conditions 361
317.2 Other points 361
318. What is a defective or incomplete return [Sec. 139(9)] 362
318.1 When a return is defective 362
318.2 Clarification from the Board 363
319. What is Permanent Account Number (PAN) [Sec. 139A] 363
319.1 Where the PAN should be quoted or to whom PAN should be intimated 364
319.2 Other points 364
320. Scheme to facilitate submission of returns through Tax Return Preparers [Sec. 139B] 364
320A. Power of Board to dispense with Furnishing of document 365
320B. Filing of return in electronic form [Sec. 139D] 365
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321. Return by whom to be verified [Sec. 140] 365
322. What is self-assessment [Sec. 140A] 365
322.1 Other points 366
323. What is inquiry before assessment under section 142 or 142A 367
323.1 Giving notice to the assessee [Sec. 142(1)] 367
323.2 Making inquiry [Sec. 142(2), (3)] 367
323.3 Giving direction for audit [Sec. 142(2A) to (2D)] 367
323.4 Estimate by Valuation Officer in certain cases [Sec. 142A] 369
324. Summary assessment 369
324.1 Intimation 369
324.2 Summary assessment not necessary in some cases 370
324.3 Time-limit for intimation under section 143(1)(i) 370
325. Scrutiny assessment 371
325.1 Scrutiny under section 143(3)(ii) 371
325.2 Special procedure for assessment in the case of scientific research association,
news agency, notified trust, etc. [Proviso to sec. 143(3)] 372
326. What is best judgment assessment [Sec. 144] 372
326.1 Time limit completion 373
326A. Reference to Dispute Resolution Panel [Sec. 144C] 373
327. What is income escaping assessment [Sec. 147] 374
327.1 Two conditions 374
327.2 Cases of income escaping assessment 374
328. Notice for reassessment 375
328.1 Time-limit and other conditions for issue of notice [Secs. 149 and 151] 375
329. When can mistakes be rectified 376
329.1 Which order can be rectified [Sec. 154(1)] 376
330. What is the time-limit for completion of assessments/reassessments [Sec. 153] 376
330.1 Assessment under section 143 or 144 [Sec. 153(1)] 376
330.2 Assessment or reassessment under section 147 [Sec. 153(2)] 376
330.3 Fresh assessment [Sec. 153(2A)] 377
330.4 Assessment/reassessment to give effect to a direction [Sec. 153(3)] 377
330.5 When reference is made Transfer Pricing Officer (TPO) 377
330.6 Computation of period of limitation [Explanation 1 to sec. 153] 377
330.7 Time-limit applies to passing of order and not on its communication to the
assessee 378
331. Case study 378
332. What is Annual information return 379
332.1 Transactions covered 379
332.2 Report by a reporting financial institution in respect of reportable account 380
333. What is the requirement of submission of statement by a non-resident having liaison
office in India [Sec. 285] 381
334. What is the requirement of information or document by an Indian concern [Sec. 285A] 381
MULTIPLE CHOICE QUESTIONS 381
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31 APPEALS, REVISIONS, REFERENCES

342. What is appeal 383

343. Who are appellate authorities 383
344. When and against what orders appeal lies to Commissioner (Appeals) [Sec. 246A] 384
344.1 Appeal by a person denying liability to deduct tax [Sec. 248] 385
344.2 Procedure for filing appeal 385
344.3 Payment of tax before filing appeal [Sec. 249(4)] 385
344.4 Power of Commissioner (Appeals) under section 251 386
345. Revision by Commissioner 386
345.1 Revision of orders prejudicial to revenue [Sec. 263] 386
345.2 Revision in favour of assessee [Sec. 264] 387
346. Appeal to Tribunal 388
346.1 Appealable orders 388
346.2 Procedure for filing appeal 389
346.3 Order of the Tribunal 390
347. Appeal to High Court 390
347.1 What is a substantial question of law 390
347.2 Memorandum of appeal 390
347.3 Fees 390
347.4 Time-limit 390
347.5 Formulation of question of law 390
347.6 Issue which may be determined by High Court 390
347.7 Case to be heard by not less than two Judges 391
347.8 Stay of recovery proceeding where appeal is pending in High Court 391
347.9 Decision of High Court 391
348. When appeal lies to Supreme Court 391
349. What are the provisions for avoiding repetitive appeals [Sec. 158A] 391
350. When an identical question of law is pending before Supreme Court - Procedure for appeal
by revenue [Sec. 158AA] 392
MULTIPLE CHOICE QUESTIONS 392

32 PENALTIES AND PROSECUTIONS

373. Penalties for defaults in brief 393

373.1 Penalty cannot be imposed if there was a reasonable cause 396
373.2 Penalty under section 271(1)(c) 396
373.3 Penalty under section 271B for failure to get books of account audited 396
373.4 Penalty for failure to deduct tax at source under section 271C 396
373.5 Penalty for violation of provisions of sections 269SS and 269T 396
373.6 Penalty for failure to answer questions, submit TDS returns under section 272A 396
373.7 Penalty for failure to furnish quarterly TDS/TCS return [Sec. 271H] 396
374. Penalty for concealment/under reporting of income 397
374.1 Concealment penalty upto the assessment year 2016-17 397
374.2 Penalty on the basis of misreporting of income applicable from the assessment
year 2017-18 [Sec. 270A] 402
374.3 Concealment penalty in search cases 405
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375. Power of the Commissioner 408
375.1 Power to reduce or waive penalty under section 271(1)(c) [Sec. 273A(1)] 408
375.2 Power to reduce or waive any penalty [Sec. 273A(4)] 409
375.3 Conditions 409
375.4 Power of Commissioner to grant immunity from penalty [Sec. 273AA] 409
376. Procedure 410
376.1 Opportunity of being heard 410
376.2 Previous approval of Joint Commissioner 410
376.3 Copy of order 410
377. Time-limit for completion of penalty proceedings 410
377.1 Time-limit for passing penalty order under sec. 275(1A) 411
377.2 Exclusion of certain period 411
378. Offences and prosecutions 412
378.1 Amendment made by the Finance Act, 2012 to expedite prosecution proceedings
under the Act 413
378.2 Other points 414
378.3 Immunity 414
379. Onus of proof 415
379.1 Sections 273B and 278AA 415
379.2 Section 278E 415
MULTIPLE CHOICE QUESTIONS 416

33 SETTLEMENT OF CASES

388. Introduction 418

389. Meaning of case [Sec. 245A(b)] 418
389.1 A pending proceeding is a case 418
390. Settlement Commission [Sec. 245B] 419
391. Application for settlement of cases [Sec. 245C] 419
391.1 Additional tax - How computed 420
391.2 Meaning of related for the purpose of case 2 mentioned in para 391 420
392. Procedure on receipt of application 421
392.1 Application 421
392.2 Notice to the applicant 421
392.3 Settlement Commission can allow the application to proceed or outrightly
reject it [Sec. 245D(1)] 422
392.4 Report from the Commissioner of Income-tax [Sec. 245D(2B)/(2C)] 422
392.5 A second report from the Commissioner of Income-tax [Sec. 245D(3)] 422
392.6 Order of Settlement Commission 422
392.7 Consequences if settlement order is obtained by fraud or misrepresentation 423
392.8 Section 153 time-limit not to apply 423
392.9 Power of the Settlement Commission to rectify its orders [Sec. 245D(6B)] 423
393. Power to order provisional attachment to protect revenue [Sec. 245DD] 424
394. Power to reopen completed proceedings [Sec. 245E] 424
394.1 Power can be exercised only with the concurrence of applicant 424
394.2 Time-limit of 9 years 424
394.3 Power to reopen is limited for which concurrence is given by applicant 424
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395. Powers and procedure of Settlement Commission [Sec. 245F] 424
396. Inspection, etc., of reports [Sec. 245G] 425
397. Powers of Settlement Commission to grant immunity from prosecution, etc. [Sec. 245H] 425
398. Abatement of proceeding before Settlement Commission [Sec. 245HA] 426
398.1 Consequence of abatement of proceedings before Settlement Commission 426
399. Order of settlement to be conclusive [Sec. 245-I] 426
400. Other points 427
400.1 Recovery of sums due under order of Settlement Commission [Sec. 245J] 427
400.2 Bar on subsequent application for settlement in certain cases [Sec. 245K] 427
MULTIPLE CHOICE QUESTIONS 427

34 SEARCH, SEIZURE AND ASSESSMENT

412. Powers regarding discovery, production of evidence, etc. [Sec. 131] 429
412.1 Powers of Civil Court [Sec. 131(1)] 429
412.2 When power can be exercised in respect of concluded proceedings [Sec. 131(1A)] 429
412.3 Impounding of books [Sec. 131(3)] 429
412.4 Collection of information on requests received from tax authorities outside India 429
413. Search and seizure 430
413.1 Circumstances in which search and seizure can be conducted [Sec. 132(1)] 430
413.2 Who is the authorised officer 430
413.3 Powers of authorised officer in respect of search and seizure 430
413.4 If books of account, etc. are kept in building not specified in the search
warrant [Sec. 132(1A)] 432
413.5 Police assistance [Sec. 132(2)] 432
413.6 Where it is not practicable to seize books of account etc. [Sec. 132(3)] 432
413.7 Examination on oath [Sec. 132(4)] 432
413.8 Presumptions [Sec. 132(4A)] 433
413.9 Time-limit for retention of seized books of account, etc. [Sec. 132(8)] 433
413.10 Taking copies of seized documents [Sec. 132(9)] 433
413.11 Authorised Officer having no jurisdiction [Sec. 132(9A)] 433
414. Requisitioning of books of account, etc. 433
414.1 Who can exercise powers 433
414.2 Requisitioning officers 433
414.3 Situations in which powers under section 132A can be invoked 434
414.4 Requisition procedure 434
415. Application of assets seized or requisitioned [Sec. 132B] 434
415.1 Release of sum remaining after recovery 434
415.2 Recovery through any other modes 435
415.3 Payment of interest by the Central Government 435
416. Power to call for information [Sec. 133] 435
417. Power of survey 436
417.1 Places where an income-tax authority can enter 436
417.2 Powers of survey 436
417.3 If a person refuses to obey orders 437
417.4 Meaning of proceeding 437
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417A. TDS survey [Sec. 133A(2A)] 437
418. Power to collect certain information [Sec. 133B] 437
418.1 Other points 437
419. Scheme of assessment 437
419.1 Notice for submission of return of six assessment years 437
419.2 Pending assessment 438
419.3 Provisions for re-assessment vis--vis section 153A 438
419.4 Regular tax rate will be applicable 438
419.5 Time-limit for completion of assessment under section 153A [Sec. 153B] 438
419.6 Assessment of income of any other person [Sec. 153C] 440
420. Prior approval in the case of search [Sec. 153D] 442
ANNEX 1 : Tax Rates 443
ANNEX 2 : Present value tables 463