Semester

Mod 1:

Definition of tax - definition under the constitution

1. The word "tax" denotes a burden paid for general good without any expectation of direct
benefit/definite return.
2. Adam Smith: tax is a compulsory acquisition of money by a public authority without
any quid pro quo.
3. Hugh Dalton: tax is a compulsory contribution imposed by a public authority
irrespective of the exact amount of the service rendered to the taxpayer in return and not
imposed as a penalty for any legal offence.
4. Prof. Seligman: tax is a compulsory contribution from the person to the government to
defray expenses in the common interest of all without reference to special benefits
conferred.
5. Constitution defines "taxation" under Article 366(28)
Article 366: In this Constitution, unless the context otherwise requires, the following
expressions have the meanings hereby respectively assigned to them, that is to say-
(28) “taxation” includes the imposition of any tax or impost, whether general or local
or special, and “tax” shall be construed accordingly;
6. Constitution also defines:
A. Article 366(12): “goods” includes all materials, commodities, and articles;
B. Article 366(12A):“goods and services tax” means any tax on supply of goods,
or services or both except taxes on the supply of the alcoholic liquor for human
consumption.
C. Article (26-A): "Services" means anything other than goods
D. Taxation: This includes the imposition of taxes, duties, cess and tolls.
7. DG Gose v. State of Kerala: tax in its widest sense includes all money raised by
taxation including taxes levied by the union and the state legislature and rates and other
charges levied under statutory powers.
8. Mathews v. Chicory Marketing Board: tax is a compulsory extraction of money by a
public authority for public services enforceable by law and not a payment for services
rendered.
9. .

Evolution of tax
1. The word tax comes from taxare or taxo which is Latin and means to determine or
identify the worth of something.
2. Ancient India:
A. Manusmriti – the King to collect taxes in such a manner that the taxpayer does
not feel the pinch of paying taxes - portion of their goods as tax
 B. “It was only for the good of his subjects that he collected taxes from them just as
the sun draws moisture from the Earth to give it back a thousand-fold” –
Kalidasa (Maximum Social Welfare theory)
C. Taxes to be related to the income and expenditure of the subject
D. No excessive taxes
E. Neither high rate of tax nor exemption for all from taxation
F. Manusmriti – the King to collect taxes in such a manner that the taxpayer does
not feel the pinch of paying taxes
- Traders and Artisans – 1/5th of taxes in silver or gold
- Agriculturalists – 1/6th or 1/8th or 1/10th of the produce
G. Kautilya’s treatise on statecraft called “Arthasastra” 322 BC
- The Mauryan empire had a remarkable administrative system- economic
governance being the most important part of it.
- Introduced salt tax in india.
- Chandragupta Maurya improvised a common currency system and
created a regiment for collecting revenue from the citizens.
- Peasants were freed of taxes and crop collections from regional rulers
- A common taxation system was formulated.
- Scheduled payment – time, manner and quantity predetermined
- War, emergency, Famine, Floods led to stringent raise in land tax to
1/4th
H. .

3. Medieval India:
A. Alauddin Khilji
- Imposed a direct Kharaj tax (land tax/ tax on cultivation) amounting to a
maximum of 50% of the agricultural produce (originally paid only by
non-muslims).
- Ushr was paid by the muslims.
- He further demanded four-fifths of war spoils from his soldiers.
- In order to maintain the highly structured revenue system designed by
him, Alauddin employed a large number of people as collectors and
accountants. They presented the budget before him.
B. Akbar
- Akbar adopted the taxation system introduced by Sher Shah Suri and
reformed it further.
- The system was reformed in 1580 and a system called the dahsala was
adopted.
- Tax revenue was calculated as one-third of the average produce of the
last ten years.
- The one tax reform that Akbar’s reign is most famed for is that of
abolishing the Jiziya tax on non-Muslims (introduced by Aibak), which
went on to bestow on him the repute of religious tolerance.
- Jiziya was again levied by Aurangzeb on Hindu subjects in 1679.
 C. Accordingly, taxes were based on the area and productivity of a piece of
agricultural land.
4. Income Tax Act, 1860: Income from
A. land and property
B. profession and traders
C. securities
D. salary and pensions
5. 1886 Act: Income from
A. salary, pensions and gratuity
B. net profits of company
C. interest on securities of Government of India
D. other
6. Morley-Minto reforms, 1909
A. The finance member had to present his estimates to the central legislature in
the first quarter of every year
B. This was followed by discussions on budget proposals
C. During the discussion, the members of the legislature can propose alterations
in tax provisions, loans and grants to local government
D. The finance member may accept/reject the proposals with justification
E. Some items of expenditure such as the army were treated as non-votable.
7. 1918 Act – federal structure
8. 1922 Act – nomenclature for the IT Authorities (full of complexities)
9. 1961 Act (repealed 1922 Act): Income from
A. salary
B. house property
C. PGBP
D. capital gains
E. other sources
10. .

Direct tax
1. Governments impose taxes to use the services provided by it.
2. It was in 1850 that James Willson formally introduced the tax in India.
A. He was the finance minister of the pre -Independent India.
B. He introduced the tax during the first union budget session under British rule.
C. The Indian Income Tax act of 1860 marks the watershed moment for taxation in
India. It is through this act that centrally organized taxation began in India.
D. The act was introduced to recover the losses the government suffered from the
1857 military mutiny
E. Under this act, the taxation was divided into four subgroups.
F. The incomes from
- land,
- professions or trade,
- securities, and
 - salaries/pensions
were taxed under this new act.

3. The Indian Income Tax act formed the basis of taxation laws in India. However, it was
revised and replaced over the course of decades. The law was revised in 1886 to
improvise on some categories for which tax can be levied. The new categories
included net salaries and profits from businesses.

4. The next revisions came in 1918 and 1922.

5. The act of 1918 repealed the 1886 act and formed many new important changes.
6. The act of 1922 is extremely important since it has since then that India started to have
an operational Income Tax Department.
A. This act distinguished various departments of the Income-tax authorities.
B. Over the years the act became more and more complicated over the years due
to the amendments made by various governments over the course of decades.
C. The act of 1922 remained in effect in India till 1961.
D. The act was brought by the British and later in 1956 Government of India
referred to a law commission to make it simpler.

7. The Indian Income Tax act of 1961 came into effect after consultation with the
Ministry of law.
A. It was brought into force in April 1962.
B. All citizens of India are bound by this act.
C. Since 1962 many amendments have been made to the act annually by the
Union Budget.
D. Currently, five categories of income are considered for tax:
- salary,
- property,
- capital gains,
- profits from businesses and
- other sources of income.
E. The Income Tax act of 1961 is long. It has 23 chapters, 298 sections and 14
schedules in it.
8. .

Indirect tax
1. Excise is one of the first indirect taxes levied
2. Post independence:
A. Central Sales Tax
B. Excise levied initially on luxury items, later all commodities
C. 1994 Service tax – based on recommendations of Raja Chelliah Committee
D. 101st Constitutional Amendment Act, 2016
3. Prior to the implementation of GST, the major taxes were:
A. VAT (State level tax)
 - VAT (Value Added Tax) is an indirect tax levied on goods and services
sold intra-state.
- Output VAT was charged on sales made by a dealer.
- Input VAT could be claimed as a tax credit for the VAT charged on
business purchases.
B. Excise Duty
- Products manufactured domestically (within the country) were subject
to excise duty levied by the Central Government.
- It was also known as CENVAT (Central Value Added Tax).
C. Customs Duty
- A tax levied on imports and exports (international transactions) was a
customs duty.
- The idea behind charging customs duty was to ensure that domestic
products are safeguarded from excess competition and also to be able
to regulate the movement of goods.
D. Central Sales Tax
- The sale or purchase of goods at an inter-state level was subject to the
levy of Central Sales Tax, an indirect tax imposed by the central
government.
E. Service Tax
- The tax levied on service providers for services they provided
(excluding the list of services that came under the negative list) was
termed a service tax.
- Technically, although the tax is levied on the service providers, the tax is
paid by the customer at the time of availing the service.
4. Write about GST, 2017.

Distinction between tax and fee, duty, surcharge, toll and cess

Tax and fee - differences

1. A government has several means of raising revenue for it to function.
2. Two of the most popular methods of raising revenue are to impose taxes and fees on
various activities.
3. Generally, taxes are applied to various transactions, often as a percentage, as a
means of raising revenue or in some cases, as a means of incentivizing behaviour.
4. Fees, unlike taxes, are directly linked to the cost of providing a service.
5. Tax is derived from the latin word ''taxo'' which means, a compulsory financial charge
or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a
governmental organization in order to fund various public expenditures.
6. A failure to pay, along with evasion of or resistance to taxation, is punishable by law.
7. Taxation serves the following purposes
A. To raise revenue for the government
B. To redistribute income and wealth from the rich to the poor people
 C. To protect domestic industries from foreign competition.
D. To promote social welfare.

8. Sreenivasa General Traders v. State of Andhra Pradesh

A. SC: the presence of quid pro quo distinguishes a fee from a tax.
B. The quantum of the fee imposed should ideally be commensurate with the
expenses incurred by the Government in rendering the service.
C. Over the years, it has been understood that the element of quid pro quo between
the levy and the services rendered needs to be reasonable but not of
“mathematical exactitude”.

9. Upaj Mandi Samiti v. Orient Paper and Industries Ltd. held

A. “A fee and a tax cannot be distinguished on the grounds that the latter is a
compulsory payment, while the former is not.
B. The element of coerciveness is present in all kinds of impositions though in
different degrees.
C. Compulsion lies in the fact that payment for both taxes and fees is
enforceable by law against an individual in spite of his unwillingness.
D. Further, the method prescribed by the legislature for recovering the levy in
question also cannot, by itself alter its character.
E. Thus while it is true as a matter of broad principle that a fee involves a quid pro
quo and a tax does not, each levy has to be seen on a case-by-case basis to
determine its true nature.”

10. Southern Pharmaceuticals & Chemicals v. State of Kerala

A. It is not essential for fees to be credited to a separate fund but can be
apportioned to the consolidated fund also.
B. BUT, for a levy to be fee, there must be separate apportionment and direct
return necessarily

11. Mahant Sri Jagannath Ramanuj Das v. State of Orissa

A. Contribution to the HR&CE as an increase of Rs. 250 for the rendering of the
same service is a fee.
B. Held: for a levy to be fee, there must be separate apportionment and direct
return necessarily

12. Delhi Cloth & General Mills v. Chief Commissioner

A. Amount payable by a factory owner for the purpose of inspection is a Fee.

13. Matthews v. Chicory Marketing Board: tax is a compulsory extraction of money by a

public authority for public services enforceable by law and not a payment for services
rendered.
14. .
 Tax Fee
Tax is the compulsory payment to the Fee is the voluntary payment for getting
government without getting any direct service.
benefits.
If the element of revenue for a general A fee is for payment of a specific benefit or
purpose of the state predominates, the levy privilege although the primary purpose is
becomes a tax. regulation of public interest.
There is not and must not always be a direct There is and must always be a correlation
correlation between the tax and the service between the fee collected and the service
intended to be rendered. intended to be rendered.
If tax is imposed, a person is bound to pay it. Fees are not paid if the person does not
Otherwise, he will be penalised. want to get the service.
Taxpayers do not expect any direct benefit. The fee payer can get direct benefit for
paying fee.
Tax is compulsory payment. Fee is voluntary.
No quid pro quo Quid pro quo - a favour or advantage
granted in return for something.
No tax shall be levied except by authority of Fee can be levied irrespective of existence
law of tax entries
Tax entries are present in the various Lists Has specific entries, namely,
of Schedule VII A. Entry 96 (List I)
B. Entry 66 (List II)
C. Entry 47 (List III)
For the common benefit of all For a specific benefit
Benefit is not directly proportional to the Benefit is directly proportional to the
amount paid amount paid
The objective is to raise revenue as held in Levied specifically for the performance of
Commissioner, HR&CE v. Lakshmendra that service for which it is imposed
Merged in the general revenue of the state - Not part of the general revenue
Consolidated Fund
Ex. Income tax, Gift tax, wealth tax, VAT, etc Ex. Stamp fee, Driving Licence fee, Govt.
Registration Fee, etc

Duty
1. Duty is an indirect tax.
2. The Central Government or the State Government imposes the duty to collect payment
for import, export, sale of goods, transfer of property, etc.
3. This is an on-border tax charged on goods (commodities, or things that you can
physically touch) either while coming into the country or going out of the country.
Generally, a percentage of the value of the good. i.e Custom duty, excise duty, stamp
duty etc.
4. Ex. Stamp duty, Customs duty, estate duty, etc.
5. .
Surcharge
1. Articles 270 & 271 - A surcharge is stated to be “an increase” in any of the duties and
taxes
2. Parliament can impose a surcharge for ‘the purposes of the Union’.
A. The Union can impose a surcharge only on its tax base.
3. Pursuant to Constitution (101st Amendment) Act, 2016, a surcharge cannot
ordinarily be imposed over and above the GST.
4. Unlike a cess, in the case of a surcharge, there is no need to stipulate the purpose at
the time of levy and it is the discretion of the Union to utilise the proceeds of the
surcharges for whichever purpose it deems fit.
5. Owing to an exception under Article 270, the proceeds from surcharges need not be
shared with State Governments.
A. Even prior to the carve-out in Article 270, the concept of surcharge and the
language for ‘purposes of the Union’ in Article 271 was interpreted to mean
that surcharge proceeds are separate from income tax proceeds for the
purposes of distribution.
6. Surcharges have primarily been imposed on the highest income tax slab on the
basis that relatively well-off taxpayers need to shoulder a greater share of the tax
burden.
7. Surcharges must be understood as a temporary levy.
A. They should be used sparingly and only for limited time periods.
B. Examples: Social Welfare surcharge, Special Additional Duty of excise on motor
spirit.
8. .

Toll
1. Toll fee charged to travel via a road, bridge, tunnel, canal, waterway or other
transportation facilities.
2. Toll fees are used as fees to pay for public bridge, road and tunnel projects.
3. Such toll fees are used to construct and maintain private transport links.
4. The toll fee is a fixed charge, varied depending on the vehicle type, or the distance
covered on long routes.

5. Distinguishing toll and tax

A. Toll fee is collected from the transport-users for the use of transport links like
roads, bridges, waterways etc., and the tolls so collected are used to construct
new transport links, maintain existing transport links etc., which are of direct use
to the transport users.
B. Tax collected, on the other hand, is used for overall national development and
there is no direct benefit to the taxpayer.
C. Toll fee is collected from the transport users forthe use of the transport links like
roads, bridges, waterway etc., and the toll so collected are used to constructnew
 transport links, maintenance existing transportlinks etc., which are of direct use to
the transport users.
D. Tax collected, on the other hand, is used for overall national development and
there is no direct benefit tothe tax payer.
6. Toll: is a charge payable to use a bridge or road and the collected money is used to
repair or maintain such bridge or road. Taxes in India are levied by the Central
Government and State Governments. Some minor taxes are also levied by the local
authorities such as Municipality.
7. .

Cess
1. Shinde Bros v. Dy Commissioner Raichur
2. Guruswamy & Co v. State of Mysore
Hidayatullah. J. explained the meaning of a cess involved a challenge to the
constitutional validity of a State legislation, the Mysore Health Cess Act 1962.
- “It (cess) means a tax and is generally used when the levy is for some special
administrative expense which the name (health cess, education cess, road
cess etc.) indicates.”
3. India Cement Ltd. v. State of Tamil Nadu
A. Even though Justice Hidayatullah’s exposition was part of dissenting
opinions, he has been quoted as an authority on this point.
4. Vijayalakshmi Rice Mills v. Commercial Tax Officers
A. A cess to be a special kind of tax, as proceeds have to be used for a specific
purpose.
B. By way of illustration, it explained that a health cess must be used for building
hospitals, giving medicines to the poor and other purposes related to health.
5. A cess must be
A. levied under the authority of law, meaning a constitutionally valid legislation
and not merely an executive order, and
B. must have a specific purpose.
6. V. Nagappa v. Iron Ore Mines Cess Commissioner
A. The legislation imposing a cess must spell out its earmarked purpose.
B. The purpose must not be vague or uncertain, as it could lead to a claim of
excessive delegation of power.

7. Ahmedabad Manufacturing & Calico Printing Co Ltd. v. State of Gujarat

A. Cess is typically imposed as an addition to an existing tax.
B. The Union Government should not levy cesses for purposes that are contained
in the State List.
C. For any cess to be constitutionally valid, the purpose for its imposition must
be clearly and specifically stated in the statute imposing the cess.
- The level of specificity that is necessary should ordinarily be met by
stating a scheme which is to be funded through such cess.
 D. Cesses must be periodically reviewed. A review will assess the amount
actually collected vis-à-vis the amount utilised and compare each of these with
the amount aimed to be collected.
8. Distinguishing cess and tax
A. Cess means "tax on tax". Tax is calculated as a per cent of income/transaction,
whereas Cess is calculated on tax.
B. E.g. For in India, to give a lift to primary education in the country, an education
cess of two per cent on Income tax, Corporation tax, Excise and Customs duties
and service tax is levied. The entire amount is allocated for education including
nutritious cooked mid-day meals. The education cess is a 2 per cent surcharge
on the total payable tax and not 2 per cent of total income.
C. The other small cesses collected are Cess on Bidis, iron ore, Limestone and
dolomite, Feature films, Coal and coke, Copra, Coffee, Oil and oil seeds,
Vegetable oil, Jute, Rubber, Salt, Sugar, tea, Cotton, Textiles, Handloom cess,
woollen fabrics, cotton fabrics, Manmade fabrics, Tobacco, Paper, Straw board,
Automobiles and Matches.
9. Examples: Health and Education Cess, GST Compensation cess, Road and
Infrastructure Cess.

Mutual relationship between income tax act and finance act

1. Finance Act is an Act through which the Central government gives effect to financial
proposals at the beginning of every year.

2. All the Governmental financial policies are included in the Finance Act
encompassing
A. existing policies,
B. new policies,
C. changes made to existing policies
3. Changes in Income Tax Act, Rules, slab etc is one of the elements in Finance Act.

4. Mutual relationship of both Acts

The Income Tax Act and Finance Act have a complementary relationship that works
as follows:
A. Foundation and Modification:
- The Income Tax Act provides the permanent legal foundation,
- The Finance Act makes periodic modifications to keep the tax system
responsive to economic needs.
B. Statutory Integration:
- Amendments made through the Finance Act are incorporated into the
Income Tax Act, making them part of the permanent tax code.
C. Legislative Efficiency:
 - This dual-statute approach allows for stability in the basic tax
structure while enabling flexible annual adjustments without
completely rewriting tax laws.
D. Budgetary Implementation:
- The Finance Act translates the government's annual budget proposals
into legal changes to the Income Tax Act.
E. Temporal Relationship:
- While the Income Tax Act has continuity over time, the Finance Act
represents the government's current fiscal priorities and economic
policies.
F. This relationship ensures that taxation remains both structurally stable and
adaptable to changing economic conditions and policy objectives.

5. Mathuram Agarwal v. State of UP: SC held that there are three key features for any
taxing statute
A. Subject matter of taxation
B. Person liable to pay tax
C. Rates of levy of tax
- The third component is not part of the Income tax Act rather is provided
by the Finance Act each year.
6. .

Income Tax Act, 1961 Finance Act

A permanent, standalone legislation An annual legislation
It provides the fundamental framework and It provides for the implementation the
structure for income taxation government's fiscal policies for that year
Passed once with amendments made thereto Passed with each budget
Establishes the basic charging provisions, Makes specific amendments to tax rates,
definitions, procedures, and administrative exemptions, deductions, and other
mechanisms for income tax provisions of the Income Tax Act
Remains in force until explicitly amended or Has a more temporary nature, typically
repealed by subsequent legislation focused on changes for the upcoming
financial year
Contains the enduring legal foundation for Serves as the vehicle for implementing
income tax collection budgetary tax proposals and revenue
measures

Difference between money bill and finance bill

1. While all money bills are finance bills, not all finance bills are money bills.
 Money Bill Finance Bill
A money bill deals with the imposition, A finance bill deals with the financial matters
abolition, remission, alteration or regulation of the government, including taxation, public
of taxes or duties on income or expenditure and public borrowing.
expenditure
It can be introduced only in the Lok Sabha It can be introduced in either the Lok Sabha
or the Rajya Sabha
It must be passed by the Lok Sabha before It can be passed by either the Lok Sabha or
it can be introduced in the Rajya Sabha the Rajya Sabha
The Rajya Sabha can only make The Rajya Sabha can make
recommendations on a money bill and the recommendations and the Lok Sabha can
Lok Sabha is not bound to accept them choose to accept or reject them
It deals with the revenue of the government It deals with the overall financial
management of the government
Ex. Income Tax Bill, GST Bill Ex. Union Budget, the Appropriation Bill
It can be introduced only by the Finance It can be introduced by any member of the
Minister of India or person authorised by government
the President of India
It has a time limit of 14 days for discussion It has no time limit for discussion in the
in the Rajya Sabha Rajya Sabha

Canons of Taxation (write all the 12 - 4+8, with flowchart in a

detailed manner)
1. Adam smith – Wealth of Nation book - 1776
Taxation is a highly controversial issue.
It is challenging to design a tax system that is considered fair by the general public.
That's why the economist Adam Smith presented four basic rules and principles of
proper tax policy in his famous book The Wealth of Nations.
His maxims are often referred to as the four canons of taxation.
A. Canon of equality or ability
- Adam Smith observes “the subjects of every state ought to contribute
towards the support of the government as nearly as possible, in
proportion to their respective abilities that is in proportion to the
revenue which they enjoy under the protection of the state”.
- Equal tax burden for all persons.
- The word equality here does not mean that everyone should pay the
exact, equal amount of tax.
- What equality really means here is that the rich people should pay more
taxes and the poor pay less.
- It is one of the fundamental concepts to bring social equality in the
country.
- The canon of equality states that there should be justice, in the form of
equality, when it comes to paying taxes.
- Not only does it bring social justice, it is also one of the primary means
for reaching the equal distribution of wealth in an economy
B. Canon of certainty
- “The tax which each individual is bound to pay ought to be certain and
not arbitrary.
- The time of payment, the manner of payment, the quantity to be paid
ought all to be clear and plain to the contributors and to every other
person”.
- The taxpayers should be well-aware of the purpose, amount and
manner of the tax payment.
- The canon of certainty is considered a very important guidance rule
when it comes to formulating the tax laws and procedures in a country.
- It should not be so complicated and cumbersome in their operation as
to cause needless inconvenience and hardship to the people.
- The canon of certainty ensures that the taxpayer should have full
knowledge about his tax payment, which includes the amount to be
paid, the mode in which it should be paid and the due-date.
- It is believed that if the canon of certainty is not present, it leads to tax
evasion.

C. Canon of convenience
- “Every tax ought to be levied at the time or in the manner in which it is
most likely to be convenient for the contributor to pay it.”
- It is an extension of the canon of certainty.
- It states that all this should be easy, convenient and taxpayer friendly.
- The time and manner of payment must be convenient for the taxpayer
so that he is able to pay his taxes in due time.
- If the time and manner of the payment is not convenient, then it may
lead to tax evasion and corruption.

D. Canon of economy
- “Every tax ought to be contrived as both to take out and to keep out of
pockets of the people as little as possible over and above what it
brings to the public treasury of the state”.
- The whole purpose of collecting taxes is to generate revenue for the
company.
- This revenue, in turn, is spent on public welfare projects.
- The canon of economy states that the cost of collecting taxes should be
as minimum as possible.
- There should not be any leakage in the way.
- In this way, a large amount of the collections will go directly to the
treasury, and therefore, will be spent in the government projects for the
welfare of the economy, country and the people.
 - On the other hand, if the canon of economy isn’t applied and the overall
cost of collecting taxes is unreasonably high, the collected amount will
not be sufficient in the end.

2. Equality/ Equity
A. In this context, equity means that the taxation of people or organizations should
be proportional to their income.
B. That means the more money a person earns, the higher their income taxes
should be, and vice versa.
C. This idea is commonly known as the ability-to-pay principle.
D. The principle behind this is that the people who can afford to pay more taxes
(i.e., carry the burden) should pay more than those who cannot afford to pay as
much.
E. To illustrate the canon of equity,
- imagine all Indian citizens had to pay INR 1,00,000 a year in taxes,
regardless of their income:
- In that case, a millionaire who earns INR 100,00,000 and a cashier who
only makes INR 2,00,000 a year would have to pay the same amount.
- In other words, taxes account for 1% of the millionaire's income, whereas
the cashier would have to spend 50% of his income to pay his tax bill.
- Most people wouldn't consider that fair and, therefore, not a good tax
system.
F. Therefore, in reality, virtually all tax systems are designed so that higher taxes
are levied on the rich, and they pay a larger share of their income than the
poor.

3. Certainty
A. Certainty refers to the idea that taxation should be clear and transparent.
B. That means everybody should know or quickly find out
- how much they have to pay,
- when they have to pay, and
- how they have to pay their taxes.
C. This is important because it allows taxpayers to consider their taxes when
drawing up a budget.
D. In addition to that, it has been shown that transparency increases public
acceptance.
E. For example,
- imagine what would happen if the Indian government didn't have any
official regulations on how taxes are determined and when they are
due.
- Instead, people would simply get their tax bills at different times
throughout the year, and the amounts would seem somewhat arbitrary
because some people would have to pay property taxes along with their
income taxes, whereas others would just have to pay direct taxes.
 - Again, most people wouldn't consider this an acceptable tax system and
refuse to pay taxes at all.
F. It is, therefore, essential for the government to lay down clear rules and tax
structures to ensure a transparent system.

4. Convenience
A. Convenience means that both the timing, as well as the method of payment
are convenient for the taxpayers.
B. That means the tax system should be designed in a way that allows people to
quickly file and pay their taxes when they're due.
C. In that sense, the canon of convenience is sometimes also considered an
extension of the canon of certainty that focuses more on the administrative
process (e.g., reporting, payment).
D. To give an example,
- assume the government decided that people had to pay their taxes in
cash. That means they would have to withdraw large sums of money
from their bank, show up to the IRS offices in person, and hand over
their money at a dedicated desk.
- This is extremely inconvenient for several reasons:
(a) It's much more complicated than simple wire transfers,
(b) it's a lot more time-consuming, and
(c) withdrawing large sums of cash exposes people to an
unnecessary risk of being robbed.
E. .

5. Economy
A. In this context, economy refers to the principle that the cost of collecting taxes
should be minimized.
B. That means the government has to ensure that the collection of taxes only
requires the least possible expenditure.
C. The reasoning behind this is that most of the money collected through taxes
should be used to fund projects that, in turn, benefit the taxpayers.
D. To illustrate this,
- imagine that the collection of income taxes (i.e., tax administration) was
costly and accounted for about 90% of all tax revenues.
- That means only 10% of the total revenue could be used for projects that
actually benefit the taxpayers, while most of the money would go
elsewhere.
- In that case, the population would most likely be dissatisfied with the tax
and demand a more efficient tax system.
E. .

6. Charles Bastable, an Irish economist in his book “ Public Finance”(1892) gave the
following additional canons of taxation :
A. Canon of Productivity
- Tax should be productive of large revenue.
- It is desirable to have a few taxes yielding large revenue rather than
having a large number of taxes yielding small revenue.
- It also implies that instead of imposing large number of unproductive
taxes, it is advisable to have a few productive taxes
- More taxes tend to create panic, chaos and confusion among the
taxpayers and it is also against the canon of certainty and convenience
B. Canon of Elasticity
- It means that taxation should be flexible or elastic.
- That is, it should be capable of increasing or decreasing the tax
revenue depending on the need of the government.
- In other words, the tax revenue may increase automatically whenever
needed by an upward revision of tax rates or by extension of its
coverage
C. Canon of Simplicity
- This canon implies that the tax should be simple to understand even to
a layman.
- It should be free from all ambiguities and provisions to avoid
differences in interpretation and legal disputes.
- The system of taxation should be made as simple as possible. The
entire process should be simple, non-technical and straightforward
D. Canon of Diversity
- This implies that there should be a number of different taxes in the
country.
- This will make every citizen of a country pay something to the national
exchequer.
- Canon of diversity refers to diversifying the tax sources in order to be
more prudent and flexible.
- Being heavily dependent on a single tax source can be detrimental for
the economy.
- Canon of diversity states that it is better to collect taxes from multiple
sources rather than concentrating on a single tax source.
- Otherwise, the economy is more likely to be confined, and hence, its
growth will be limited as well.

E. Canon of Expediency
- This canon states that a tax should be determined on the ground of its
economic, social and political expediency.
- There are some practical considerations which should be taken into
account.
- This ensures
(a) Public acceptance
(b) Taxes are not unjust and is not a burden
 - For instance, a tax on agricultural income lacks social, political or
administrative expediency in India and that is why the government of
India had to discontinue it.

7. Shirras and Hicks – Public Finance writers

A. Canon of Coordination
- There should be coordination among different layers of governments
in imposing taxes.
- Especially, in a federal country like India there should be coordination
among the central, state and local governments regarding taxes, since
each of these has the legal right to impose taxes.
B. Canon of Neutrality
- A tax system should not distort economic decisions by businesses,
workers, and consumers, ensuring that choices are made based on
economic merit rather than tax implications.
- Tax neutrality aims to minimize the impact of taxes on economic
behavior
- So that people and businesses make decisions based on the true
economic value of an activity, rather than being influenced by tax
considerations.
C. Canon of Flexibility
- The canon of flexibility asserts that the entire tax system should be
capable of adjusting to the economic conditions of the country.
- Taxes should not be rigid
- It should allow for adjustments in rates and rules as needed by
changing government expenditure or economic conditions.
- Flexibility ensures that the tax system can evolve with the needs of the
society and economy.
8. .

Types of Taxes
1. Based on collection: direct and indirect
2. Based on tax rate and tax base: proportional, progressive, regressive and digressive
(Make a flowchart if 12m)
- In the case of Indirect Taxes, the tax rate is the same for all, irrespective of the
income level. So, Indirect Taxes are considered regressive in nature.

3. Proportional Taxation or Flat Taxation

A. Rate of taxation is fixed. Irrespective of how high or low the income is.
B. Proportional taxation, also known as Flat Taxation, is a method of taxation
system in which the same percentage of income is levied on all taxpayers,
regardless of their income level.
 C. Proportional taxes require all taxpayers to pay the same fraction of their
income, regardless of how much money they earn.
D. That means the tax rate doesn't change as income increases (or decreases).
E. Therefore, this system is also commonly referred to as a flat tax.
F. In other words, tax is levied at the same rate for each individual, irrespective
of their level of income.
G. Here, it is to be noted that the tax rate remains the same, but the absolute
amount of tax increases with an increase in income level.
H. For example,

Income Level Tax Rate Tax Amount

10,000 10% 1000
1,00,000 10% 10,000

I. .

4. Progressive Taxation
A. Tax rate increases as income increases
B. Practiced in India
C. Progressive taxation is a method of taxation system in which the tax rate
increases as the taxable amount or the income level increases.
D. Progressive taxes require high-income taxpayers to pay a larger fraction of
their income than low-income taxpayers.
E. That means that as income rises, the tax rate increases as well.
F. This tax system is designed to affect higher earners more than people with a
low income.
G. Essentially, the idea behind this is that upper-class people can afford to pay
more because they are richer than middle- or lower-class people.
H. Nowadays, this is one of the most commonly used tax systems.
I. In other words, individuals with higher incomes pay a higher percentage of their
income in taxes compared to those with lower incomes.
J. Here, the tax rate as well as the absolute amount of tax increases with an
increase in income level.
K. For example,
Income Level Tax Rate Tax Amount
10,000 10% 1000
1,00,000 20% 20,000

L. .

5. Regressive Taxation
A. Tax rate decreases as the amount of taxable income increases
B. Regressive taxation is a method of taxation in which the tax rate decreases as
the taxable amount or the income level increases.
 C. Regressive taxes require high-income taxpayers to pay a smaller fraction of
their income than low-income taxpayers.
D. That means as income rises, the tax rate decreases.
E. Now, in reality, we hardly ever see this tax system when it comes to income or
wealth taxes.
F. Instead, we see regressive taxes whenever taxes are levied directly on
products or services that people buy (e.g., sales tax).
G. In other words, individuals with lower incomes pay a higher percentage of
their income in taxes compared to those with higher incomes.
H. Here, the tax rate decreases, but the absolute amount of tax increases with
an increase in income level.
I. However, the increase in the absolute amount of tax w.r.t. increase in income
level is lesser than that in the case of proportional and progressive taxation
methods.
J. For example,
Income Level Tax Rate Tax Amount
10,000 10% 1000
1,00,000 5% 5,000

K. .

6. Digressive Taxation
A. Tax payable increases only at a diminishing rate
B. Digressive taxation is a method of taxation where the tax rate initially increases
with income up to a certain point, after which it either remains constant or
decreases.
C. Thus, this system of taxation combines elements of both Progressive Taxation
and Regressive Taxation.

7. Taxes have been, broadly, classified into two types - Direct Taxes and Indirect Taxes.

8. Direct Tax
A. Direct Tax refers to the type of tax that is borne by a person/entity on whom it
is levied.
B. Thus, in this case, the Impact of Tax and the Incidence of Tax fall on the same
person or entity.
C. In other words, the burden of a Direct Tax cannot be shifted to another person
or entity.
D. Direct Taxes in India is administered by the Central Board of Direct Taxes
(CBDT), which is a part of the Department of Revenue (under the Ministry of
Finance).
E. Some prominent examples of Direct Tax include
- Income Tax,
- Corporate Tax,
 - Wealth tax,
- Capital gains tax,
- Minimum Alternate Tax,
- Securities Transaction Tax, etc.

9. Indirect Tax
A. Indirect Tax refers to the type of tax for which the Impact of Tax and Incidence
of Tax fall on different persons or entities.
B. Indirect Taxes are, generally, imposed on goods and services.
C. Indirect Taxes in India are administered by the Central Board of Indirect Taxes
and Customs (CBIC), which is a part of the Department of Revenue (under the
Ministry of Finance).
D. Some prominent examples of Indirect Tax include
- Sales tax,
- Service tax,
- Excise duty,
- Customs Duty,
- GST, etc.

10. Difference between Direct Tax and Indirect Tax

Basis Direct Tax Indirect Tax

Meaning Direct taxes are the taxes in Indirect taxes are where
which the incidence and incidence and impact fall on
impact falls on the same two different persons.
person or assessee.
Liability Liability (Impact of Tax) as Liability (Impact of Tax) to pay
well as the Burden (Incidence the tax lies on a person/entity
of Tax) to pay it resides on the who then shifts the ultimate
same individual/entity. Burden (Incidence of Tax) of
paying the tax to another
individual/entity.
Shift in burden The burden of paying the tax The burden of paying the tax
cannot be shifted. can be shifted.
Payment Paid entirely by a taxpayer Ultimately paid by the end-
directly to the government. consumer of goods and
services.
Costs of collection Higher administrative costs Lesser administrative costs of
of collection. collection.
Nature In the case of Direct Taxes, In the case of Indirect Taxes,
usually, the tax rate increases the tax rate is the same for
with increase in income all, irrespective of the income
level. So, Direct Taxes are level. So, Indirect Taxes are
considered progressive in considered regressive in
nature. nature.
 Taxable event Taxable income or taxable Purchase/Sale/Manufacture of
wealth of the assessee goods and/or rendering of
services
Levy and Levied and collected from the Levied and collected from the
collection assessee consumer but paid or
deposited to the Exchequer by
the Assessee/Dealer
Tax collection Tax is collected after the At the time of sale or
income for a year is earned or purchase or rendering of
valuation of assets is service
determined on the valuation
date
Tax evasion Comparatively more because Comparatively less because of
of the presence of the the presence of an organised
unorganised sector sector
Administered by Central board of Direct Taxes Central Board of Indirect Tax
(CBDT) and Customs (CBIC).
It was formerly known as
Central Board of Excise and
Customs (CBEC)
Examples Income Tax, Corporate Tax, GST, Entertainment Tax, etc.
etc.

11. Impact of Taх

A. "Impact of Tax" refers to the initial economic burden of the tax i.e. who is
directly responsible for paying it to the government.
B. Ex. in the case of Sales Tax, the seller bears the first responsibility of paying the
tax to the government.
C. Thus, in the case of Sales Tax, the seller is the Point of Impact.
12. Incidence of Tax
A. "Incidence of Tax" refers to the final economic burden of the tax i.e. who
ultimately bears the cost of the tax.
B. Ex. in the case of Sales Tax, although the seller bears the first responsibility of
paying the tax, the tax is ultimately paid by the consumer.
C. So, here, the seller is the Point of Impact and the consumer is the Point of
Incidence.
13. .

Method of taxation
1. There are two methods of levying tax on goods - Ad Valorem and Specific Tax

2. Ad Valorem
A. 'Ad Valorem' is a Latin word meaning 'According to Value'.
B. Thus, in the Ad Valorem method of taxation, tax is levied as a percentage of the
value of the goods, regardless of the number of units produced.
C. For example, 10% of the price of a car.
 D. In this case, the absolute amount of tax increases with an increase in the
price of the car.

3. Specific Tax
A. In the Specific Tax method of taxation, tax is levied as a flat rate per unit of
goods produced, regardless of the value.
B. For example, 10 lakhs per car.
C. Thus, in this case, the tax revenue increases only with the number of units
produced, not with the price.

4. Difference between Ad Valorem and Specific Tax

Ad Valorem Specific Tax

Based on the assessed value of the Fixed amount tax based on the quantity
product. of units sold.
The tax is usually expressed in The tax is usually expressed in specific
percentages. sums.
Example: GST in India has 5 tax rate Example: Excise Duty on Petrol.
slabs-0%, 5%, 12%, 18% and 28%.
Examples: GST, Property tax, sales tax Examples: Excise duty on petrol and
liquor products.
They are progressive in nature. They are regressive in nature.

5. .

Interpretation of taxing statutes - event theory and aspect theory

1. Synopsis:
A. Strict interpretation
B. Literal rule or plain meaning
C. Principle of equity and taxing: tax and equity are strangers

2. The first and most elementary rule of interpretation of tax is that it is to be assumed that
the words and phrases of the legislation are used in their technical meaning if they have
acquired one or otherwise in their ordinary meaning.
3. The second is that the phrases and sentences are to be construed according to the rules
of grammar.
A. This is based on the maxim: "A Verbis Legis Non Est Recedendum" translates
to "From the words of law, there must be no departure."
B. One must not vary the words of the statute while interpreting it.
C. It is a classical rule that taxing statutes should be strictly construed.
 D. The literal rule, aka, strict construction directs that the words of law must be
focussed on rather than the spirit of law.
E. Cape Brandy Syndicate v. IRC: nothing is to be read in or implied
F. Russell v. Scott: taxing laws must be strictly construed.
G. A.V. Fernandez v. State of Kerala:
- SC established that fiscal statutes, including tax laws, should be
interpreted strictly, meaning the courts should adhere to the literal
wording of the law.
- The court examined the relevant provisions of the Travancore-Cochin
General Sales Tax Act, 1125, specifically regarding the inclusion of inter-
state sales and deductions for purchases.
- The court upheld the Sales Tax Officer's calculation.
4. More on: file:///C:/Users/Snehaa%20Rajesh/Desktop/SOEL/SEMESTER%2010/Tax
%20law/Interpretation%20of%20statutes.pdf .

Event theory
1. Event theory suggests that a single transaction can be taxed by different levels of
government based on the event or occurrence that triggers the tax liability.
2. Ex. sale of goods might be taxed by the state while income generated from the sale
could be taxed by the Union.
3. Perplexity AI:
A. Event theory under taxation law refers to the principle that a specific "event" or
transaction triggers a taxable liability.
B. In other words, tax liability arises only when a particular taxable event occurs,
such as
- earning income,
- transferring property, or
- incurring a sale.
C. This theory helps determine the timing and occurrence of tax obligations by
identifying the exact moment or event that causes the tax to become due.
D. Tax laws often specify taxable events that create the legal obligation to pay
tax, such as
- receipt of income,
- realization of capital gains, or
- transfer of ownership
E. The event theory is fundamental for interpreting when and how taxes apply,
ensuring that taxation is linked to concrete economic activities or
transactions.
F. For example, in statutory reasoning about tax law, timing of events like marriage,
retirement, or income receipt is crucial to determining tax applicability, reflecting
the event theory's role in tax law interpretation.
G. Also, the concept that multiple taxable events may occur in a single
transaction but are treated distinctly under tax law aligns with the event theory
approach.
 4. .

Aspect theory
1. ‘Aspect theory’ although not named but was applied years before in India in Mithan Lal
v. The State of Delhi
A. Held: It would be competent to Parliament to impose tax on the supply of
materials in building contracts and to impose it under the name of sales tax,
as has been done by the Parliament of the Commonwealth of Australia or by
the Legislatures of the American States.
B. The court clearly stipulated that the aspect of supply of materials will only be
charged under Sales Tax, nothing more or less.
C. There was no confusion regarding the inclusion of service provided by the
contractor in the sales tax.
D. The law regarding the aspect which has to be charged under sales tax was
unambiguous.
2. Subjects which in one aspect and for one purpose fall within the power of a
particular legislature may in another aspect and for another purpose fall within
another legislative power.
3. There might be overlapping; but the overlapping must be in law.
4. The same transaction may involve two or more taxable events in its different
aspects. But the fact that there is an overlap does not detract (diminish the worth) from
the distinctiveness of the aspects.
5. Federation of Hotel & Restaurant Association of India v. Union of India
A. The levy considered was expenditure tax under Central law with reference to
the contention that the same was in substance tax on luxury under Entry 62 of
List II.
B. Stand of the Central Government was that the expenditure aspect was
different from the luxury aspect and expenditure aspect could be held to be
excluded from the luxury aspect.
C. The plea was upheld.
D. It was observed that- No one denies the legislative competence of States to
levy sales tax on sales provided that the necessary concomitants of a sale are
present in the transaction and the sale is distinctly discernible in the
transaction but that would not in any manner allow the State to entrench upon
the Union List and tax services by including the cost of such service in the value
of the goods.
6. There must be distinct aspects of taxable event
A. The crucial questions, while applying ‘aspect theory’ therefore, are whether the
economists' concept of such a tax qualifies and conditions the legislative power
and, more importantly, whether the impugned two taxable incidents can be
isolated and identified as a distinct aspect susceptible of recognition as a
distinct field of tax legislation.
7. Imagic Creative (P) Ltd. v. Commissioner of Commercial Taxes
A. SC: payment of service tax, as also VAT, are mutually exclusive.
 B. A transaction or activity may consist of different elements providing for attracting
different nature of levy.

8. Tata Sky Limited v. State Of Tamil Nadu

A. Countering the submissions made by the writ petitioner that DTH service being
already a subject matter of taxation under Entry 92C List I of VII Schedule to
the Constitution of India, the same could not be subjected to levy under the
Tamil Nadu Entertainments Tax Act
B. Held: the levy of service tax is essentially a subject matter falling under Entry
92C List I of the VII Schedule to the Constitution of India, but the mere
availability of Entry 92C List I of the VII Schedule to the Constitution of India to
tax the service provided through DTH, however, cannot obliterate or wipe
out the levy of tax on the entertainment provided.
C. Being two different fields, there could be no overlapping of this levy.
D. Hence, a harmonious construction consistent with the aspect theory must be
adopted.
9. State and centre both are eligible to impose tax if taxable aspect falls under their
respective lists.
10. Every taxable aspect must be paid heed to
11. .

Tax evasion v. Tax Avoidance

1. Every individual assessee wants to escape from paying taxes, which encourages them
to use various means to avoid such payment.
2. Tax Avoidance and Tax Evasion are two techniques which are used by many people to
reduce their tax liability.
3. They do so by taking expert advice.
4. Tax Avoidance is completely lawful while Tax Evasion is considered as a crime in the
whole world.
5. In spite of many differences in the two practices, people use them interchangeably
which is incorrect.
6. Tax avoidance and Tax Evasion both are meant to ultimately reduce the tax liability
but what makes the difference is that the former is justified in the eyes of the law as it
does not make any offense or breaks any law. However, it is biased as the honest tax
payers are not fools, but they can also make arrangements for postponing
unnecessary tax.
7. If we talk about the evasion, it is completely unjustified because it is a fraudulent
activity, because it involves the acts which are forbidden by the law and hence it is
punishable.
8. .
 Basis Tax Avoidance Tax Evasion
Meaning Minimisation of tax liability, by Reducing tax liability by using
taking such means which do not illegal ways.
violate the tax rules.
Concept Taking unfair advantage of the Deliberate manipulations in
shortcomings in the tax laws accounts resulting in fraud
Types of means Use of justified means Use of such means that are
used forbidden by law
Type of act Legal it identifies loopholes in the Criminal as it is from suppression
law to avoid paying taxes of facts/ non-disclosure
Criminal charges No criminal charges Criminal charges incurred
Consequences The result of tax avoidance is If the assessee is found guilty of
postponement of tax doing so, the penalty is
imprisonment/fine/both
Tax planning:
1. State of Andhra Pradesh v. Mcdowell: Tax planning is legitimate when done within the
framework of law
2. IRC v. Duke of Westminster: A person is entitled to make lawful arrangement of his
affairs as he sees fit to reduce tax liability.
3. W.T.Ramsay v. IRC, 198: capital gains set off in a scheme for tax avoidance –
substance over form
4. UOI v. Azadi Bachao Andolan: DTAA and Tax Residency Certificate issued by
contracting state is conclusive proof of residence.
5. .

Mod 2:

Constitutional provisions relating to taxation: Articles 246, 248,

265, 286
1. Article 246:
A. Subject matter laws made by parliament and state legislatures
B. The parliament can legislate for the whole or any part of the territory of India
C. The parliament also possesses the power of extra-judicial legislation, which
will cover Indian residents and their properties outside India
D. States can make laws for the whole of any part of the state

2. Article 246: Subject-matter of laws made by Parliament and by the Legislatures of

States.
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive
power to make laws with respect to any of the matters enumerated in List I in
the Seventh Schedule (in this Constitution referred to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1),
the Legislature of any State also, have power to make laws with respect to any
 of the matters enumerated in List III in the Seventh Schedule (in this Constitution
referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any State 1 has exclusive
power to make laws for such State or any part thereof with respect to any of the
matters enumerated in List II in the Seventh Schedule (in this Constitution
referred to as the “State List”).
(4) Parliament has power to make laws with respect to any matter for any part of
the territory of India not included in a State notwithstanding that such matter is
a matter enumerated in the State List.
- S246(4): The parliament holds the authority to make law for any part of
the territory of India, that is not governed by a state
- It can also make laws even if that area is covered by one of the entries on
the state list

3. Distribution of legislative powers:

A. The constitution uses a classification of powers similar to the one used in
Government of India Act, 1935
B. As per Article 246, the power is divided into 3 lists found in the 7th Schedule
C. Union list
- Currently contains 99 entries (originally 97)
- Parliament has exclusive powers
- Ex. Defence, foreign affairs, communication, currency, atomic energy
D. State list
- Currently contains 61 entries (originally 66)
- States have exclusive power
- Ex. police, public order, public health
E. Concurrent list
- Currently contains 52 entries (originally 47)
- Both parliament and the state can make laws
- If the central and state laws conflict, the central law will prevail
- Ex. criminal and civil law and procedure, marriage and divorce, labour
welfare, electricity.
F. The 42nd Amendment Act, 1942 transferred 5 state subjects to the Concurrent
list:
- Education
- Forest
- Conservation of forest and wild animals
- Weight and measures
- Constitution of all courts except High courts and SC
G. 101st Constitutional Amendment Act, 2016
- Further, the parliament has the authority to enact laws regarding the
GST where the supply of goods or services occurs during inter-state
trade or commerce
4. Article 248: Residuary powers of legislation
(1) Parliament has exclusive power to make any law with respect to any matter
not enumerated in the Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax not
mentioned in either of those Lists.

5. Article 265: Taxes not to be imposed save by authority of law

"No tax shall be levied or collected except by the authority of law."
A. All taxes must be imposed by a valid law
B. The law here means only a statute law or an act of the legislature
C. This article acts as an armour against arbitrary tax extraction
D. Article 265 imposes a limitation on the taxing power of the state.
E. No tax can be levied by order, circular, bye-laws, regulation, etc of the executive.
F. It can be levied only by an act of parliament or legislation and no
body/organisation less than that.
G. Elements of Article 265
- Authority of law
- Law to be a valid law
- Tax
- Levy and collection

6. Authority of law
A. Legislature
B. The expression "authority of law" denotes a statute
C. New Delhi Municipal Committee v. State of Punjab
D. Mathuram Agarwal v. State of Madhya Pradesh: the essential elements of a
tax law are
- Subject matter
- Person liable to pay tax
- Rates at which tax is payable
E. Maheshwari Prasad v. State of Uttar Pradesh
F. Avinder v. State of Punjab and Delhi Race Club Ltd v. UOI

7. Law to be a valid law

A. To be a valid law
B. The statute must satisfy the following requirements:
C. KT Moopil Nair v. State of Rajasthan: Not violate the fundamental rights
D. Sainik Motors v. State of Rajasthan: Not contravene special provisions of the
Constitution which impose limitation on legislative powers
E. Chhotabhai Jethabhai Patel v. UOI: validity of law should be determined with
reference to the competence of the legislature at the time of the enactment of
statute

8. Tax
 A. MafatLal Industries v. UOI: Includes both direct and indirect taxes
B. Indian Medical Association v. VP Shantha: characteristics of tax are
- Tax is imposed under a statutory power without the taxpayer's consent
- It is an imposition for public purposes without any reference being made
to any special benefits conferred on the taxpayer
- It is a part of common burden and the quantum will be determined
based on the capacity of the payer
C. .

9. Levy and collection

A. Imposing tax liability
B. Levy: casting a tax liability
C. Collection: taking the tax money out of the pocket of the taxpayer
D. Atlas Cycle Industries Ltd v. Haryana:
- notification imposing a tax cannot be deemed to extend to new areas
including municipality
- such an extension isn't possible without fresh notification under law
E. .

10. Tangkhul v. Simerei Shailei

A. SC: the practice of villagers paying Rs.50 a day to the headman in place of
custom to render free a day's labour was held to be a collection of law
B. No tax had authorised it and therefore, it violated Article 265

11. Lord Krishna Sugar Mills v. UOI

A. SC: the govt had no authority of law to collect additional excise duty on sugar
merchants who fell short of export targets in a promotion scheme started by
the govt
B. This is because the govt had not passed a law to authorise such a collection

12. Govid Saran Ganga Saran v. Commissioner of Sales Tax

A. SC: imposition of taxes without the authority of law is unconstitutional

13. Sainik motors v. State of Rajasthan

A. Not contravene special provisions of the Constitution which impose limitation on
legislative powers
B. Ex. Articles 27, 276, 301, 304

14. Moopil Nair v. State of Kerala

- Not to violate fundamental rights

15. Mathuram Agrawal v. State of MP: SC held that there are three key features for any
taxing statute:
A. Subject of tax
 B. The person liable to pay tax
C. The rate at which the tax is payable

16. Atlas Cycle Industries Ltd v. State of Haryana

A. SC: the notification imposing a tax cannot be deemed to be extended to new
areas included in the municipalities
B. Such an extension is not possible without fresh notification under law,
specifying the extended areas

17. Objectives of Article 265:

A. The citizens should not be saddled with the financial burden of tax by mere
rules, regulations, circulars, orders, etc
B. There should be a specific law enacted for the purpose of levy of tax
C. Such laws must be reasonable and obey the provisions of the constitution
D. Even in the levy of tax under a statute, there are strict rules and guidelines for
proper levy

18. Article 265 and levy of tax

A. Levy of tax must be within the legislative purview
B. Levy must only be with clear legislative intention
C. No presumption in levy of tex
D. For levy of tax, the fiscal statute must be read as a whole
E. Spirit of law long is not a basis for levy of tax
F. Strict and favourable construction of tax enactment

19. Article 286: Restrictions as to imposition of tax on the sale or purchase of goods.
(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale
or purchase of goods where such sale or purchase takes place
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out
of, the territory of India.
(2) Parliament may by law formulate principles for determining when a sale or
purchase of goods takes place in any of the ways mentioned in clause (1).
(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,
(a) a tax on the sale or purchase of goods declared by Parliament by law
to be of special importance in inter-State trade or commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature
referred to in Article 366(29A)(b), (c) or (d)
be subject to such restrictions and conditions in regard to the system
of levy, rates and other incidents of the tax as Parliament may by law
specify.
 A. It restricts the states from framing laws for imposing taxes on the sale or
purchase of goods where such sale or purchase takes place outside the
state or in course of import or export in/out of the territory of India
B. It has been amended to incorporate the changes arising out of GST by
substituting the
- words "Sale or purchase" with "supply" and
- "goods" with "goods or services or both"
C. Consequently, the states have no right to impose GST on interstate
supply
D. It will be levied by the Union under Article 269A
20. .

Doctrines with case laws

Taxation and Equity are Strangers

1. The principle of equity has no role to play in taxation law due to the presence of a lot
of deeming legal fiction in tax laws.
2. Thus, whatever is written must be strictly followed without considering its justness.
3. If the words of the tax laws are clear, the court has to give meaning to the words that
come from the words of such tax laws, irrespective of the consequences it resulted in.
4. In other words, even if such construction is unequitable, the court is bound due to
legal fiction.
5. The court can not meet the deficiency by extending the provisions of the statute.
6. It is the duty of the legislature to rectify it through amendments.
7. Kapil Mohan v. Commissioner of Income Tax, Delhi (1998)
A. SC: hardship or equity has no role to play in determining eligibility to pay tax.
B. It is the duty of the legislature to determine the eligibility criteria to pay tax.
8. CIT v. J. H. Gotla Yadgiri
A. Though equity and taxation are often strangers, attempts should be made that
they should not always remain so and if a construction results in equity rather
than injustice then such construction should be preferred to literal construction.
9. Motilal Padampat Sugar Mills Co Ltd v. State of UP
A. The Court must bind the government in its assurance of tax exemptions by
applying strict construction of its provisions.
10. Though equity and tax are strangers to each other but with time this principle is diluted
by the courts in a few cases applying the below doctrines.

Pick and Choose Rule

1. The rule signifies the relationship between Article 14 and taxation laws
2. It is accepted that, "the State is allowed to pick and choose objects for taxation if it
does reasonably."
3. While the above extract is from the laws of the USA, the principle has been reiterated
by the Indian courts in many decisions.
4. Amalgamated Tea Estates Co. Ltd. v. State of Kerala
A. SC: "As revenue is the first necessity of the State and as taxes are raised for
various purposes and by an adjustment of diverse elements, the Court grants to
the State greater choice of classification in the field of taxation than in other
spheres."
B. They went ahead and in view of the above reasoning declared that, "On a
challenge to a statute on the ground of Article 14, the Court would generally
raise a presumption in favour of its constitutionality.
5. S254(2-A), was introduced via amendment to the Finance Act, 1999.
A. It grants the Income Tax Appellate Tribunal (ITAT) power to pass orders in
respect to appeals before it and declares that the same will decide the appeal
within 4 years from end of financial year it was filed in.
B. The controversy lies in the third proviso to the same which states, that if the
appeal is not disposed within the above, order of stay shall stand vacated
even if "delay not attributable to taxpayer."
6. The genesis of this proviso may be traced to the decision of the Court in ITO v. M.K.
Mohammed Kunhi,
A. The respondent (assessee) was initially a US based company which merged
with PepsiCo India Holdings Pvt. Ltd. w.e.f. 1-4-2010, in view of a scheme of
arrangement duly approved by Punjab & Haryana HC.
B. In the Assessment Year 2008-2009, a return was filed declaring the total
income.
C. A final assessment award was made against the assessee on 19-10-2012.
D. The assessee filed an appeal before the Income Tax Appellate Tribunal on 29-
4-2013.
E. On 31-5-2013 a stay of the operation of the order of the assessing officer was
granted for six months by the Tribunal.
F. The stay extended for 6 months, and was subsequently extended till 28-5-2014.
G. Since, the statutory period for extension of stay was to expire as under
Section 254(2-A) was to end of 30-5-2014, the assessee filed a writ petition in
the Delhi High Court.
H. The Delhi HC struck down third proviso to Section 254(2-A) which did not
permit extension of stay beyond 365 days even if the assessee was not
responsible for delay in hearing of appeal.
I. SC held: power granted to the Tribunal under S254(2-A), implies that all
incidental and necessary powers as well can be exercised such as the power
to grant a stay. Power of stay may be exercised by the Tribunal, however, not
as routine and only when strong reasons support the grant of such a stay.
 J. The Tribunal must be convinced that the entire purpose of appeal will be
frustrated if stay is not granted and recovery proceedings are allowed to
continue.
7. .

Pith and Substance

1. "Pith and substance" refers to the true nature or essence of a law, rather than its
incidental effects or superficial appearance, used to determine its constitutionality and
which level of government has jurisdiction over it.
2. Within their respective sphere, the Union and State Legislature are made supreme
3. They must not encroach into the sphere reserved for the other
4. Sometimes, the law passed by the Union, though in pith and substance within its own
Union list, may incidentally cross on matters falling within the State list. This does
not make it unconstitutional.
5. Same applies to state legislatures too.
6. If a law passed by one encroaches upon the field assigned to the other, the Court will
apply this Doctrine, to determine whether the legislature concerned was competent to
make it.
7. If the pith and substance of law, ie, the true object of legislation, relates to a matter
within the competence of the legislature which executed it, it must be held intra-vires
even though it intentionally entrenches in matters not within its competence.
8. State of Bombay v. FN Balsara
A. SC upheld the Bombay Prohibition Act, focusing on the state's power to
regulate alcohol consumption, while also applying the doctrine of pith and
substance to determine the true intent of the legislation.
B. The case revolved around the Bombay Prohibition Act of 1949, which aimed to
regulate and prohibit the consumption of alcohol within the state.
C. The petitioner, F.N. Balsara, argued that the Act violated Article 19(1)(g) of
the Constitution, which guarantees the right to freedom of trade and occupation.
D. SC did not declare the entire Act void, but rather struck down specific
provisions that were deemed to be inconsistent with Article 19(1)(g).
E. The court applied the doctrine of pith and substance to determine the primary
purpose and nature of the legislation.
F. It found that the primary object of the Act was to regulate and prohibit alcohol
consumption, which fell within the state's legislative competence under Entry 8
of the State List.
9. Prafulla v. Bank of Commerce
A. SC: a State law dealing with money lending, even if it incidentally affected
promissory notes (a Central subject), was valid because its main purpose was
within the State's competence.
10. RD Joshi v. Ajit Mills
A. This case dealt with the validity of a state law allowing the forfeiture of sales
tax collected by dealers.
 B. The Supreme Court held that the law was valid because its primary purpose
was to ensure the proper enforcement of social policy.
11. UOI v. Shah Goverdhan L Kabra Teachers
A. SC used the doctrine to examine the true character of a provision in the National
Council for Teachers Education Act, 1993.
12. Association of Natural gas v. UOI
A. Emphasized the importance of considering the practical application of legislative
power when determining its scope, which is often done using the doctrine of pith
and substance.
13. .

Repugnancy and Inconsistency

1. Article 254 of the Indian Constitution establishes the doctrine of repugnancy in India.
2. Article 245
A. empowers the Parliament to make laws for the whole or any part of India and
the State legislature to make laws for the whole or any part of the State.
B. states that a law made by the Parliament shall not be deemed invalid due to its
extraterritorial application.
3. Further, Article 246 provides the subject-matter of laws that can be made by the
Parliament and Legislature of the States.
A. The Parliament has exclusive powers to make laws for all matters given in the
Union List or List I of the Schedule VII of the Indian Constitution
B. The Legislature of the State has powers to make laws for such State for all
matters given in the State List or List II of Schedule VII.
C. Both the Parliament and the State Legislature have powers to make laws for all
matters listed in the Concurrent List or List III of the Seventh Schedule.
4. The Parliament is empowered to make laws relating to any matter for any part of the
territory of India, not included in a State, even if it is enumerated in the State List
5. Repugnancy means a contradiction between two laws which when applied to the
same set of facts produce different results.
6. It is used to describe inconsistency and incompatibility between the Central laws and
State laws when applied in the concurrent field.
7. The situation of repugnancy arises when two laws are so inconsistent with each other
that the application of any one of them would imply the violation of another.
8. Conditions for repugnancy:
A. Clear and direct inconsistency between the central and state law
B. Inconsistency is irreconcilable
C. The inconsistency is of such nature that it is impossible to obey one law
without disobeying the other
9. If a state law is found to be "repugnant" (inconsistent or contradictory) to a central law,
the central law takes precedence.
10. The state law becomes void to the extent of the conflict.
11. M Karunanidhi v. UOI
SC defined repugnancy as
 A. Where the provisions of a Central Act and a State Act in the Concurrent List
are fully inconsistent and are absolutely irreconcilable, the Central Act will
prevail, and the State Act will become void in view of the repugnancy.
B. Where however a law passed by the State comes into collision with a law
passed by Parliament on an Entry in the Concurrent List, the State Act shall
prevail to the extent of the repugnancy and the provisions of the Central Act
would become void provided the State Act has been passed in accordance
with Article 254(2).
C. Where a law passed by the State Legislature while being substantially within
the scope of the entries in the State List entrenches upon any of the Entries in
the Central List, the constitutionality of the law may be upheld by invoking the
doctrine of pith and substance if on an analysis of the provisions of the Act it
appears that by and large the law falls within the four corners of the State List
and entrenchment, if any, is purely incidental or inconsequential.
D. Where, however, a law made by the State Legislature on a subject covered by
the Concurrent List is inconsistent with and repugnant to a previous law made
by Parliament, then such a law can be protected by obtaining the assent of the
President under Article 254(2) of the Constitution. The result of obtaining the
assent of the President would be that so far as the State Act is concerned, it will
prevail in the State and overrule the provisions of the Central Act in their
applicability to the State only.
12. Bharat Hydro Power Corporation. Ltd. v. State of Assam (2004):
A. SC: if the two enactments operate in different fields without encroaching upon
each other, then there will be no repugnancy.
13. Deep Chand v. State of U.P. (1959):
A. SC: both the Central and State laws occupied the same field, the State laws
were held to be void to the extent of repugnancy and the Central law would
prevail.
14. .

Territorial Nexus - Article 245

Article 245. Extent of laws made by Parliament and by the Legislatures of States
(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole
or any part of the territory of India, and the Legislature of a State may make laws for
the whole or any part of the State.
(2) No law made by Parliament shall be deemed to be invalid on the ground that it would
have extra-territorial operation.

1. Union, states, and concurrent lists

2. Parliament has exclusive power to make laws, as a whole or as a part.
3. When law is made beyond territorial aspect, it cannot be rejected per se (merely
because its extraterritorial)
4. There must be determination of nexus or connection, if any.
5. Article 246: Subject-matter of laws made by Parliament and by the Legislatures of
States.
(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power
to make laws with respect to any of the matters enumerated in List I in the
Seventh Schedule (in this Constitution referred to as the “Union List”).
(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the
Legislature of any State 1 *** also, have power to make laws with respect to any
of the matters enumerated in List III in the Seventh Schedule (in this Constitution
referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any State 1 *** has exclusive
power to make laws for such State or any part thereof with respect to any of the
matters enumerated in List II in the Seventh Schedule (in this Constitution
referred to as the “State List”).
(4) Parliament has power to make laws with respect to any matter for any part of the
territory of India not included in a State notwithstanding that such matter is a
matter enumerated in the State List.

6. Conditions for applicability:

A. Real and Substantial Connection:
- The law must establish a tangible, direct connection with the state,
- meaning the subject matter should be significantly linked to the state's
interests.
B. Genuine Nexus:
- The connection between the state and the subject of legislation must be
legitimate and not hypothetical.
C. Extra-Territorial Operation:
- While state laws generally apply within the state's boundaries, the
doctrine allows for extra-territorial effects if the required nexus exists.
D. Legislation shall be related to the territorial connection

7. The doctrine is often applied in cases of taxation, where a state can levy taxes on
extraterritorial operations if there is a sufficient connection between the object and
the state.

8. Kochunni v. State of Madras

A. The State legislature may not make laws on whole or any part of territory of
India
B. The exception to this general rule is when a state law of extraterritorial
operation will be valid if there is sufficient nexus between the object and the
state.

9. State of Bombay v. RMDC:

A. Tax levied by the state is valid because there is sufficient territorial nexus
between the states of Bombay and Bangalore
 10. Wallace v. Income Tax Commissioner, Bombay
A. The Privy Council established that a company's significant income derivation
from British India (now India) was sufficient to establish a territorial nexus,
justifying taxation of that income by the Indian Income Tax authorities, even
if the company's control and management were located elsewhere.

11. Tata Iron and Steel Co. Ltd v. State of Bihar

A. SC: a state legislature can impose a tax on transactions even if they occur
outside its territory, as long as a sufficient connection exists between the
state and the object of taxation.
B. The case specifically addressed the Bihar State Tax Act, which levied a sales
tax on goods manufactured in Bihar, regardless of where the sale took
place.
C. The Court ruled that the manufacturing activity within Bihar provided the
necessary nexus, validating the Act's application to inter-state sales.
12. .

Unjust Enrichment
1. When a person has been unfairly benefitted at the expense of another, it is called
unjust enrichment.
2. The Court directs the unfairly benefited person to give back all benefits which they
acquired unfairly or to give compensation.
3. The defendant is obliged by natural justice and equity, to pay back the money.
4. Moses v. Ferlon:
Essentials:
A. The defendant has been enriched by unjust benefit
B. This enrichment has taken place at the expense of the plaintiff
C. The enrichment acquired is unjust or unfair.
5. The doctrine is a legal remedy to prevent unfair benefits to a party at the expense of
another without providing compensation.
6. Associated Cement Company Ltd v. UOI
A. The railway authorities charged extra fare under the mistaken belief that the
goods would have to be carried by a longer route
B. They were ordered to return the extra fare.
7. Fibrosa v. Fairbairn:
A. Any civilized legal system should prevent someone from retaining money or a
benefit derived from another that is against conscience.
8. Nallaya Goundar v. Ramaswami Goundar:
A. This case illustrates the application of the doctrine in situations where one party
receives a benefit from another and is obligated to make restitution to avoid
unjust enrichment.
9. Woolwich Equitable B.S. v. I.R.C.:
 A. If a sum of money is paid that is not due, but the payer cannot establish
grounds for recovery, the money is not necessarily recoverable.
10. Foakes v. Beer:
A. Established principles related to promissory estoppel and the requirement of
consideration for discharging debts, which have influenced the development of
unjust enrichment principles.
11. .

Immunity of Instrumentality
1. Article 285: Exemption of property of the Union from State taxation.
(1) The property of the Union shall, save in so far as Parliament may by law
otherwise provide, be exempt from all taxes imposed by a State or by any
authority within a State.
(2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent
any authority within a State from levying any tax on any property of the Union
to which such property was immediately before the commencement of this
Constitution liable or treated as liable, so long as that tax continues to be
levied in that State.
A. The property of the Union shall be exempt from all taxes imposed by the
state
B. Exceptions:
- Immediately before the commencement of the constitution, the
party was liable to tax and the state continues to levy
- A law made by the parliament states otherwise

2. Article 287: Exemption from taxes on electricity

Save in so far as Parliament may by law otherwise provide, no law of a State shall
impose, or authorise the imposition of, a tax on the consumption or sale of electricity
(whether produced by a Government or other persons) which is
(a) consumed by the Government of India, or sold to the Government of India for
consumption by that Government; or
(b) consumed in the construction, maintenance or operation of any railway by the
Government of India or a railway company operating that railway, or sold to that
Government or any such railway company for consumption in the construction,
maintenance or operation of any railway,
and any such law imposing, or authorising the imposition of, a tax on the sale of
electricity shall secure that the price of electricity sold to the Government of India for
consumption by that Government, or to any such railway company as aforesaid for
consumption in the construction, maintenance or operation of any railway, shall be less
by the amount of the tax than the price charged to other consumers of a substantial
quantity of electricity.
3. Article 288: Exemption from taxation by States in respect of water or electricity in
certain cases.
(1) Save in so far as the President may by order otherwise provide, no law of a
State in force immediately before the commencement of this Constitution shall
impose, or authorise the imposition of, a tax in respect of any water or
electricity stored, generated, consumed, distributed or sold by any authority
established by any existing law or any law made by Parliament for regulating or
developing any inter-State river or river-valley.
- Explanation: The expression “law of a State in force” in this clause shall
include a law of a State passed or made before the commencement of
this Constitution and not previously repealed, notwithstanding that it or
parts of it may not be then in operation either at all or in particular areas.
(2) The Legislature of a State may by law impose, or authorise the imposition of,
any such tax as is mentioned in clause (1), but no such law shall have any
effect unless it has, after having been reserved for the consideration of the
President, received his assent; and if any such law provides for the fixation of
the rates and other incidents of such tax by means of rules or orders to be
made under the law by any authority, the law shall provide for the previous
consent of the President being obtained to the making of any such rule or
order.

4. Article 289: Exemption of property and income of a State from Union taxation.
(1) The property and income of a State shall be exempt from Union taxation.
(2) Nothing in clause (1) shall prevent the Union from imposing, or authorising the
imposition of, any tax to such extent, if any, as Parliament may by law provide in
respect of a trade or business of any kind carried on by, or on behalf of, the
Government of a State, or any operations connected therewith, or any
property used or occupied for the purposes of such trade or business, or any
income accruing or arising in connection therewith.
(3) Nothing in clause (2) shall apply to any trade or business, or to any class of
trade or business, which Parliament may by law declare to be incidental to the
ordinary functions of Government.

5. Article 285(1): Exemption of the property of the Union from State taxation
6. The Doctrine of Immunity of Instrumentalities, particularly relevant in federations like
India, prevents one sovereign entity (federal or state) from taxing or regulating the
instrumentalities of another sovereign entity, ensuring their autonomy and
preventing undue interference.

7. Governor General in Council v. Corporation of Calcutta:

A. The immunity from state taxation applies to the Central government and its
departments but not to incorporated companies in which the govt has
controlling interest in
8. Western Coalfields Ltd v. Special Area Development Authority
A. SC clarified the lack of immunity of a state-owned corporation from property
taxes.
B. The court held that even though Western Coalfields Ltd. (WCL) is a wholly-
owned government entity, it's not exempt from property taxes levied by the
Special Area Development Authority (SADA).
C. The court affirmed that WCL, as a separate legal entity, is subject to property
tax, upholding the SADA's authority to collect such taxes.
D. This decision emphasizes the separation of the state's role in taxation and the
separate legal personality of government-owned corporations, as highlighted in
the case.
9. Board of trustees for Visakhapatnam Port Trust v. State of Andhra Pradesh
A. SC: the Board of Trustees was not entitled to immunity from taxation under
Article 285 of the Constitution.
B. The Court reasoned that the Board, while associated with the state, had the
attributes of a company and was distinct from the state, thus not qualifying
for the specific exemption under Article 285.

10. Article 285: Property and Income

A. In a federation, the two tiers of the govt having autonomous functions operate
side by side
B. Their operations are bound to cross and intersect at several points
C. It often occurs that a govt in one level may exercise its powers in such a manner
as to interfere with the working of the govt at the other level
D. This doctrine known as intergovernmental immunities seeks to ensure that the
government at one level operates without restricting the operations of the
govt at another level

11. Article 285(2): Conditions:

A. "That Tax" which is being continues to be levied before commencement of the
Constitution of India
B. The tax is continued to be levied in the state

12. Article 287:

A. Electricity consumption and sale related
B. Exemption from taxes on consumption or sale of electricity which is consumed or
sold to the Govt of India or in the construction, maintenance or operation of any
railway.

13. Article 289:

Exemption of the property and income of a State from Union taxation
(1) Property and income of a state shall be exempted from Union taxation
 (2) Business operation of a state, state property used or occupied for
trade/business/income accruing may be taxed if the Parliament so provides
(New Delhi Municipal v. State of Punjab)
(3) Whenever the trade/business is declared to be incidental to ordinary functions
of the govt, it would cease to be governed by Article 289(2) and would then be
exempted from Union taxation.
14. R. D. Shetty v. International Airport Authority of India
A. It outlined a six-factor test (later reduced to 4 factors) to ascertain if an entity
qualified as an instrumentality or agency of the State, setting a precedent for
determining their status in constitutional matters
15. .

Res extra commercium

1. "Res Extra Commercium" is a Roman law doctrine that translates to "things outside
commerce".
2. State of Bombay v. R.M.D. Chamarbaugwala
A. Justice Das introduced this doctrine into the Indian jurisprudence.
B. The doctrine was introduced to constrict the scope of freedom of trade and
commerce, a fundamental right, guaranteed under Article 19(1)(g) of the Indian
Constitution.
C. It constricts the scope by excluding certain "immoral" or "noxious" trade
activities from the scope of Article 19(1)(g) and thereby, depriving them of
Constitutional protection.
3. It is often criticised that a wrong conception of "res extra commercium" was imported
by Das J. which ended up giving the backdoor entry to the American doctrine of "police
power" in India.
4. Some argue that the application of the doctrine can lead to an overreach of state
power and can infringe upon the fundamental rights of individuals.
5. State of Haryana v. Suman Enterprises:
A. This case differentiated between state-organized and state-authorized
lotteries, acknowledging that state involvement can affect the application of
the doctrine.
6. .

Occupied field
1. The "occupied field" doctrine, also known as the doctrine of repugnance, means that
2. If a subject matter is already covered by legislation at one level of government (e.g.,
Parliament), the other level (e.g., State Legislature) cannot legislate on the same
subject in a way that is inconsistent or obstructs the central law.
3. The doctrine aims to prevent conflicts and ensure clarity in the law-making process,
particularly in federal systems where multiple levels of government have legislative
powers.
4. Southern Pharmaceuticals And Chemicals, Trichur v. State Of Kerala
 A. SC addressed the issue of legislative competence regarding the state's power
to legislate on moneylending, specifically when gold loans were involved.
B. The court determined that the state's legislative powers were limited in this area
due to the involvement of gold loans, implying a potential "occupied field"
where the state legislature's power was curtailed.
5. Karunanidhi v. Union of India
A. SC: for the doctrine to apply, there must be direct inconsistency between
central and state laws.
B. If both laws can operate without conflict, the doctrine does not apply.
6. State of Kerala v. M/s Mar Appraem Kuri Co ltd
A. It was contended that the Kerala Chitties Act was repugnant to the un-notified
Central Act.
B. SC held that even an un-notified Central law attracts Article 254.
7. Prominently used in Concurrent list

Colourable legislation
1. What cannot be done directly, cannot be done indirectly.
2. AKA "Fraud on the Constitution"
3. If the constitution does not permit a particular provision of a legislation, any
provision that has the same effect in a different manner is also unconstitutional.
4. KT Moopil Nair v. State of Kerala
A. A legislation will be colourable, when it appears to be one thing but is actually
another underneath.
B. SC: the Act was violative of Articles 14 and 19(1)(g)
5. It aims to prevent legislatures from exceeding their constitutional powers by
disguising laws to achieve objectives outside their jurisdiction.
6. The doctrine is rooted in the Latin maxim "quando aliquid prohibetur ex directo,
prohibetur et per obliquum," which translates to "what cannot be done directly should
not be done indirectly".
7. State of Bihar v. Kameshwar Singh
A. Issue: The constitutional validity of three state enactments aimed at
abolishing Zamindari and proprietary estates was challenged.
B. The Acts in question were from Bihar, Madhya Pradesh and Uttar Pradesh,
with a common motive of eliminating intermediaries to establish direct relations
between the government and land occupants.
C. The HC had declared one Act unconstitutional, leading to an appeal to the
Supreme Court.
D. SC: affirmed the statutory legitimacy of the Bihar Land Reforms Act, 1950, but
found sections 4(b) and 23(f) discriminatory. The judgement emphasised that
while some provisions might be harsh towards Zamindars, it did not render the
Act as a whole a fraud on the Constitution.

8. KC Gajapati Narayan Deo v. State of Odisha

 A. Issue: The constitutional validity of the Orissa Agricultural Income Tax
(Amendment) Act, 1950, was challenged as a colourable piece of legislation
intended to reduce compensation to intermediaries drastically.
B. SC dismissed the appeals, stating that agricultural income falls under state
jurisdiction, thus the state had the authority to amend the law.
C. The attempt to reduce compensation was seen as separate from the legislative
competence.
D. Held:
- The doctrine of colourable legislation implies that whatever is
prohibited directly is prohibited indirectly also.
- This is intended to bar the legislature from doing something indirectly
or covertly that has been prohibited from doing directly

9. MR Balaji v. State of Mysore

A. Issue: The order by the Mysore Government reserving 62% of seats in state
medical and engineering colleges for socially and educationally backward
classes was challenged as a misuse of the powers conferred by Article 15(4) of
the Constitution.
B. SC: declared the reservation as a fraud on the constitutional power, indicating
that the extent of the reservation was excessive and thus unconstitutional.

10. Animal Welfare Board of India v. UOI

A. Issue: The constitutionality of laws allowing practices like Jallikattu and
Kambala in Tamil Nadu and Maharashtra was questioned under the guise of
whether these were instances of colourable legislation.
B. SC: the Amendment Acts allowing these practices were not colourable
legislation, affirming that the legislative actions were within the jurisdictions
defined by relevant constitutional entries.
11. .

Historical Development of Tax on Supply of Goods and Services

History of Taxation
1. Ancient India:
A. Manusmriti – the King to collect taxes in such a manner that the taxpayer does
not feel the pinch of paying taxes - portion of their goods as tax
2. Medieval India:
A. Akbar adopted the taxation system introduced by Sher Shah Suri and reformed it
further.
B. Accordingly, taxes were based on the area and productivity of a piece of
agricultural land.
3. Excise is one of the first indirect taxes levied
4. Post independence:
 A. Central Sales Tax
B. Excise levied initially on luxury items, later all commodities
C. 1994 Service tax – based on recommendations of Raja Chelliah Committee
D. 101st Constitutional Amendment Act, 2016
5. Prior to the implementation of GST, the major taxes were:
A. VAT (State level tax)
- VAT (Value Added Tax) is an indirect tax levied on goods and services
sold intra-state.
- Output VAT was charged on sales made by a dealer.
- Input VAT could be claimed as a tax credit for the VAT charged on
business purchases.
B. Excise Duty
- Products manufactured domestically (within the country) were subject
to excise duty levied by the Central Government.
- It was also known as CENVAT (Central Value Added Tax).
C. Customs Duty
- A tax levied on imports and exports (international transactions) was a
customs duty.
- The idea behind charging customs duty was to ensure that domestic
products are safeguarded from excess competition and also to be able
to regulate the movement of goods.
D. Central Sales Tax
- The sale or purchase of goods at an inter-state level was subject to the
levy of Central Sales Tax, an indirect tax imposed by the central
government.
E. Service Tax
- The tax levied on service providers for services they provided
(excluding the list of services that came under the negative list) was
termed a service tax.
- Technically, although the tax is levied on the service providers, the tax is
paid by the customer at the time of availing the service.
6. .

Brief history of GST

1. GST is focused on the “supply” of goods and services as opposed to the older taxes that
were also applicable to the manufacturing process. Since it is focused on supply, it is
regarded as a destination-based tax.
2. Since it follows the ”one nation, one tax” ideology, the cascading effect of taxes is now
mitigated.
3. In the year 2000, the then Prime Minister introduced the concept of GST and set up a
committee to design a GST model for the country. In 2003, the Central Government
formed a taskforce on Fiscal Responsibility and Budget Management, which in 2004
recommended GST to replace the existing tax regime by introducing a comprehensive
tax on all goods and services replacing Central level VAT and State level VATs. It
 recommended replacing all indirect taxes except the customs duty with value added tax
on all goods and services with complete set off in all stages of the value chain. The
movement towards GST was articulated by the then Union Finance Minister in his
Budget speech for 2006-07. Initially, it was proposed that GST would be introduced from
1st April 2010.The Empowered Committee of State Finance Ministers (EC) which had
formulated the design of State VAT was requested to come up with a roadmap and
structure for GST. Joint Working Groups of officials having representatives of the States
as well as the Centre were set up to examine various aspects of GST and draw up
reports specifically on exemptions and thresholds, taxation of services and taxation of
inter-State supplies. Based on discussions within and between it and the Central
Government, the EC released its First Discussion Paper (FDP) on the GST in
November, 2009. This spelt out features of the proposed GST and has formed the basis
for discussion between the Centre and the States so far. The Constitution (122nd
Amendment) Bill was introduced in the 16th Lok Sabha on 19.12.2014. The constitution
Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill with certain
amendments was finally passed in the Rajya Sabha and thereafter by the Lok Sabha in
August, 2016. Further, the Bill has been ratified by the required number of States and
has since received the assent of the President on 8th September,2016 and has been
enacted as the 101st Constitution Amendment Act, 2016. The GST Council has also
been notified w.e.f. 12th September, 2016. GST Council is being assisted by a
Secretariat.
4. In 2014, the then Finance Minister, Mr Arun Jaitley, introduced the Constitution
Amendment Bill in the parliament. In May 2015, the Constitution (122nd Amendment) Bill
was passed in the Lok Sabha. The Integrated GST Bill, 2017, the Union Territory GST
Bill, 2017, the Central GST Bill, 2017, and the GST (Compensation to States) Bill, 2017
were passed by the Lok Sabha and the Rajya Sabha by the 20th of April 2017. On the
1st of July, 2017, GST was officially rolled out.
5. he history of GST traces back more than 20 years ago to the year 2000 when the first
discussion with regard to India adopting GST was made at a time when the Atal Bihari
Vajpayee government was in reign. An empowered committee of state finance ministers
was chosen for this purpose since they had prior experience working with State VAT.
The Fiscal Responsibility and Budget Management Committee was formed in 2004, and
the Committee recommended the introduction of GST.
6.
7. During the 2006-07 Budget Speech, the then Union Finance Minister announced that
GST would be introduced by April 1, 2010. However, for various reasons, the
introduction of GST had to be pushed further. The Constitution (115th Amendment) Bill,
2011, was introduced in the parliament. This Bill was introduced to incorporate certain
provisions of GST and was examined in detail by a Standing Committee. With the
dissolution of the Lok Sabha in 2014, the Bill lapsed, thus warranting the need for a new
Constitutional Amendment Bill.
8. Timeline of evolution of GST:
A. 2000: An Empowered Committee consisting of State Finance Ministers is set up.
B. 2006: The then Finance Minister, P Chidambaram, announced the
implementation of GST on April 1, 2010.
C. 2009: The Empowered Committee of State Finance Ministers submitted the first
discussion paper on GST in India.
D. 2010: President Pranab Mukherjee announced the delay in introducing GST,
proposing to introduce it in April 2011.
E. 2011:
- The Constitution (115th Amendment) Bill focused on the introduction of
GST in India was introduced in the Lok Sabha.
- The Lok Sabha then refers the Bill to the Standing Committee on Finance
for a detailed examination.
F. 2013: The Standing Committee on Finance submits the report on the Constitution
(115th Amendment) Bill.
G. 2014
- The Lok Sabha dissolution leads to the lapse of the Bill.
- The Constitution (122nd Amendment) Bill introduced in the Lok Sabha
focused on introducing GST.
H. 2015:
- The Bill was passed by the Lok Sabha and referred to a Select
Committee in the Rajya Sabha.
- The Select Committee submits the report.
- Chief Economic Advisor-led Committee submits a report on the possible
GST rates.
I. 2016
- The Bill is passed by both the Lok Sabha and the Rajya Sabha and is
then notified as the Constitution (101st Amendment) Bill.
- The first state to ratify the Bill in Assam.
- President Pranab Mukherjee gives his assent to the Bill.
- The Union Cabinet approves the setting up of the GST Council, following
which the first GST Council meeting is held in New Delhi.
J. 2017
- The CGST Bill, IGST Bill, UTGST Bill, and GST (Compensation to States)
Bill is introduced in the Lok Sabha.
- The Bills are passed by the Lok Sabha and the Rajya Sabha, after which
the GST Acts are notified.
- The GST Council notifies GST rates and cess on goods and services.
- 1st July, the official rollout of GST.
K. 2018
- Introduction of TDS provisions along with the filing of GSTR-7
- Introduction of E-way bill system for inter-state movement of goods
L. 2019
- The reverse charge mechanism is made applicable
- Restrictions on availment of ITC for Section 36(4)
M. 2020
 - Introduction of e-invoicing voluntarily
- Quarterly return monthly payment scheme
- June – Relief to taxpayers in view of COVID-19
N. 2021
- Introduction of GSTR-8 and GST on service supplied by restaurants
through e-commerce operators
- GST on services supplied by State Govt. to their undertakings or PSUs by
way of guaranteeing loans taken by them
9. .

A comparative study of GST in India with Brazil, Canada, Singapore and

Malaysia
1. The history of GST goes back as early as the year 1954, when it was first adopted by
France, followed by over 160 countries worldwide. Malaysia was one of the most recent
countries to adopt a valued-based tax system, GST, back in 2015. GST was first
introduced in India in 2017 when they decided to introduce a dual tax structure system.
 Particulars India Canada Singapore
Name of GST in Goods and Federal goods and Goods and
the country services tax service tax and services tax
Harmonised sales
tax
Standard Rate 0% for staples GST 5% and HST: 7% reduced rates -
5,12,18,28% for 0-15% zero rated, exempt
luxury
Threshold Rs.40 lakhs or 30,000 Canadian 1 million Singapore
exemption limit Rs.20 lakhs, dollars dollars
depending on the
state and supply
Liability arises on Accrual basis: Accrual basis: Accrual basis:
Issue of invoice or Issue of invoice or Issue of invoice or
receipt of payment receipt of payment receipt of payment
- whichever is - whichever is - whichever is
earlier earlier earlier
Cash Basis:
payment
Returns and Monthly or Monthly or Usually quarterly
payments quarterly and 1 quarterly or Business option-
annual return, annually, based on Monthly Returns.
based on turnover turnover
Reverse charge Reverse charge Reverse charge Applies to supply of
mechanism applies on goods applies to the services
and services importation of
services and
intangible
properties
Exempt supplies Sale of land and Real estate, Real estate,
completed financial Financial services,
buildings, certain services,rent Residential rental
healthcare and (Residence),
educational charities, health,
services, essential education
food items, etc

2. Canada:
A. Lowest GST rate in the world
B. Introduced GST in 2001 at a rate of 5%
C. The Canadian model gives options to provinces to go for state or central GST
3. Brazil:
A. In Brazil, the VAT system is implemented through the ICMS (Imposto de
Circulação de Mercadorias e Serviços), which is a tax on the circulation of goods
and the provision of certain services.
B. Federal VAT in Brazil, or IPI, applies to national and imported goods. Imposed by
the federal government, IPI applies to taxable events that include customs
 clearance of goods and the dispatch of goods from a domestic industrial
establishment.
C. Brazil operates a multiple rate system with ICMS (Imposto de Circulação de
Mercadorias e Serviços) tax levied at a state level. The standard rate of ICMS is
17 percent (18 percent in São Paulo, Minas Gerais and Paraná and 19 percent in
Rio de Janeiro). Intrastate transactions are taxed between 17 and 19 percent,
interstate transactions are taxed at 7 percent or 12 percent, and most imported
goods are taxed at a rate between 18 percent and 25 percent. Some states offer
rate reductions or later payment dates as a fiscal incentive for the installation of
factories.
D.
4. Malaysia:
A. SST (sales and service tax) is a type of consumption tax. The government in
Malaysia applies it on the sale of goods and services.
B. SST isn’t paid by businesses — instead, it’s charged to consumers in the price of
goods, and collected by businesses, making it an indirect tax. Businesses are
then responsible for reporting it to the government.
C. The standard goods and services tax (GST) in Malaysia is sales and service tax
(SST) of 10%. It applies to most goods and services. The two reduced SST rates
are 6% and 5%.
D. The first reduced SST rate (6%) applies to restaurants, hotels and
accommodation, car hire, rental and repair, domestic flights, insurance, credit
cards, legal and accounting, business consulting, electricity, telecoms, pay-TV,
digital supplies.
E. The second reduced SST rate (5%) applies to basic foodstuffs, petroleum oils,
construction materials, IT, telecommunications and printing hardware and
materials and timepieces.
F. SST is collected at each point in the production of goods — every time value is
added and a sale is made. It’s designed to be paid by the consumer at the end.
G. When you’ve visited Malaysia, you’ll be able to get a SST refund on items bought
if: You live outside Malaysia and are going back home.
5. .

101st Constitutional Amendment, 2016 - Amendment of various

Articles in Indian Constitution - Amendment of Sixth and Seventh
Schedules.
1. The Constitution (122nd Amendment) Bill was introduced in the 16th Lok Sabha on
19.12.2014.
2. The Constitution Amendment Bill was passed by the Lok Sabha in May, 2015.
3. The Bill with certain amendments was finally passed in the Rajya Sabha and
thereafter by the Lok Sabha in August, 2016.
4. Further, the Bill has been ratified by the required number of States and has since
received the assent of the President on 8th September,2016 and has been enacted as
the 101st Constitution Amendment Act, 2016.
5. The GST Council has also been notified w.e.f. 12th September, 2016.
6. The GST Council is being assisted by a Secretariat.
7. The following Articles have been inserted by the 101st amendment:
A. Article 246A:
- State Legislatures now have power to make individual laws with
respect to GST imposed by the Centre
- State legislatures have the power to make necessary arrangements for
implementation of the same in intra-state trade,
- The Centre has exclusive power to make GST laws in case of inter-
state trade.
- Both the Union and States in India now have concurrent powers to
make law with respect to goods & services.
B. Article 269A:
- In case of inter-state trade, the amount collected by the Centre is to be
apportioned between the Centre and the States as per
recommendations of the GST Council.
- Under GST, where centre collects the tax, it assigns state’s share to
state
- Where the state collects tax, it assigns centre’s share to centre.
- Such proceeds shall not form a part of the Consolidated Fund of India
to avoid having to pass an Appropriation Bill every time a deposition
is made.
- Parliament will formulate the principles for determining the place of
supply, and when a supply takes place in the course of inter-State
trade or commerce.
- Supply in the course of import deemed to be supply in the course of
interstate trade or commerce.
C. Article 279A:
- This Article provides for the constitution of a GST Council along with its
powers and positions.
- The process of decision-making also has to be taken through voting.

8. Article 268A was repealed

A. It was inserted by S2 of the Constitution (Eighty Eighth Amendment) Act,
2003 relating to Service tax levied by Union and collected and appropriated
by the Union and the States.

9. Articles amended:
A. The residuary power of legislation of Parliament under Article 248 is now
subject to Article 246A.
 B. Article 249 has been changed so that if 2/3 rd majority resolution is passed
by Rajya Sabha, the Parliament will have powers to make necessary laws with
respect to GST in national interest.
C. Article 250 has been amended so that the Parliament will have powers to make
laws related to GST during the emergency period.
D. Article 268 has been amended so that excise duty on medicinal and toilet
preparation will be omitted from the state list and will be subsumed in GST.
E. Article 269 would empower the Parliament to make GST related laws for inter-
state trade / commerce.
F. Article 270 now provides for collection and distribution of tax to be done
according to Article 246A.
G. Currently under Article 271, GST has been exempted from being part of the
Consolidated Fund of India.
H. Article 286 has been amended to include supply of goods and/or services
under its ambit rather than just sale or purchase of goods.
I. Article 366 now includes the definitions of
- Goods and Service Tax,
- Services and
- State.
J. Article 279A has also been brought under the ambit of Article 368.

10. Sixth Schedule:

A. The Sixth Schedule has been amended to give power to the District Councils
to levy and collect taxes on entertainment and amusements.
B. The Sixth Schedule of the Indian Constitution outlines measures of autonomy
and self-governance to the Scheduled Tribes living in the hill regions of
Northeast India.
C. It also specifies the names of the states that are eligible for tax exemption.
D. It is important to remember that an individual of a scheduled tribe must be a
permanent resident of one of the Sixth Schedule Areas to be eligible for this
exemption.
E. S10(26) of the Income Tax Act, 1961 provides for tax exemption to members of
Scheduled Tribes.
F. S10(26), inter alia, applies to
- Part I (The North Cashar Hills District and The Karbi Anglang District) or
- Part II (The Chakma District, The Mara District, and The Lai District)
of the Sixth Schedule to the Constitution.
G. The Sixth Schedule has been amended to give power to the District Councils
to levy and collect taxes on entertainment and amusements.

11. The Seventh Schedule was amended as below:

A. In the Union List,
- petroleum crude,
- high speed diesel,
 - motor spirit (petrol),
- natural gas, and
- aviation turbine fuel,
- tobacco and tobacco products
have been removed from the ambit of GST and have been subjected to
Union jurisdiction.
B. Subjects like:
- Newspapers: Entry 84
- Advertisements: Entry 92
- Service Tax: Entry 92C
have been brought under GST.
C. In the State List,
- petroleum crude,
- high speed diesel,
- motor spirit (commonly known as petrol),
- natural gas,
- aviation turbine fuel and
- alcoholic liquor for human consumption have been included, except
where the sale is in the course of inter-State or International trade and
commerce.
D. Entry tax and Advertisement taxes have been removed.
E. Taxes on entertainment only to be included to the extent of that imposed by
local bodies.
F. The relevant entries to the state list are: Entries 52, 54, 55, 62
12. .

Gst council - Article 279A: Constitutional Limitations

(1) The President shall, within 60 days from the date of commencement of the
Constitution (101st Amendment) Act, 2016, by order, constitute a Council to be called
the Goods and Services Tax Council.
(2) The Goods and Services Tax Council shall consist of the following members, namely:
(a) the Union Finance Minister - Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance - Member;
(c) the Minister in charge of Finance or Taxation or any other Minister nominated
by each State Government - Members.
(3) The Members of the Goods and Services Tax Council referred to in Article 279A(2)(c)
shall, as soon as may be, choose one amongst themselves to be the Vice-
Chairperson of the Council for such period as they may decide.
(4) The Goods and Services Tax Council shall make recommendations to the Union and
the States on
(a) the taxes, cesses and surcharges levied by the Union, the States and the
local bodies which may be subsumed in the goods and services tax;
 (b) the goods and services that may be subjected to, or exempted from, the
goods and services tax;
(c) model Goods and Services Tax Laws, principles of levy, apportionment of
Goods and Services Tax levied on supplies in the course of inter-State trade or
commerce under article 269A and the principles that govern the place of
supply;
(d) the threshold limit of turnover below which goods and services may be
exempted from goods and services tax;
(e) the rates including floor rates with bands of goods and services tax ;
(f) any special rate or rates for a specified period, to raise additional resources
during any natural calamity or disaster;
(g) special provision with respect to the States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand; and
(h) any other matter relating to the goods and services tax, as the Council may
decide.
(5) The Goods and Services Tax Council shall recommend the date on which the goods
and services tax be levied on
A. petroleum crude,
B. high speed diesel,
C. motor spirit (commonly known as petrol),
D. natural gas and
E. aviation turbine fuel.
(6) While discharging the functions conferred by this article, the Goods and Services Tax
Council shall be guided by the need for a harmonised structure of goods and
services tax and for the development of a harmonised national market for goods and
services.
(7) One-half of the total number of Members of the Goods and Services Tax Council shall
constitute the quorum at its meetings.
(8) The Goods and Services Tax Council shall determine the procedure in the
performance of its functions.
(9) Every decision of the Goods and Services Tax Council shall be taken at a meeting, by
a majority of not less than three-fourths of the weighted votes of the members
present and voting, in accordance with the following principles, namely:
(a) the vote of the Central Government shall have a weightage of one-third of the
total votes cast, and
(b) the votes of all the State Governments taken together shall have a weightage of
two-thirds of the total votes cast, in that meeting.
(10) No act or proceedings of the Goods and Services Tax Council shall be invalid
merely by reason of
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the Council; or
(c) any procedural irregularity of the Council not affecting the merits of the case.
(11) The Goods and Services Tax Council shall establish a mechanism to
adjudicate any dispute
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on one side and one
or more other States on the other side; or
(c) between two or more States,
arising out of the recommendations of the Council or implementation thereof.

1. Article 279A provides for constituting a Council called the Goods and Services Tax
Council within 60 days from date of commencement of the 101st Constitution
Amendment Act, 2016.
2. Members are as follows:
A. the Union Finance Minister as Chairperson
B. the Union Minister of State in charge of Revenue or Finance;
C. the Minister in charge of Finance or Taxation or any other Minister nominated by
each State Government.
D. Vice Chairperson to be chosen among the members.

3. GST Council can make recommendations on the following:

A. The taxes, cesses, and surcharges that may be subsumed
B. The goods and services that may be subjected to or exempted from GST
C. Model Goods and Services Tax Laws, principles of levy, apportionment of Goods
and Services Tax levied under Article 269A and the principles that govern the
place of supply
D. The threshold limit of turnover below which goods and services may be
exempted
E. Rates, floor rates, band, special rates
F. Special provision with respect to the States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand
G. Date on which GST be levied on petroleum crude, HSD, Petrol, natural gas and
ATF,
H. Any other matter relating to the goods and services tax, as the Council may
decide.

4. GST Council meetings

A. Weightage of votes:
- Central Government – 1/3rd of the total votes cast, and
- State Governments – 2/3rd of the total votes cast.
B. Quorum: One-half of the total number of Members of the Goods and Services
Tax Council.
C. All decisions to be taken by a majority of not less than three-fourths of the
weighted votes of the members present and voting.
5. Other important roles of GST Council
A. The GST Council to be guided by the need for a harmonized structure of goods
and services tax and for the development of a harmonized national market for
goods and services.
B. GST Council to devise mechanisms to adjudicate disputes arising between the
Centre and States.

6. Constitutional Limitations
A. As per Article 279A (1) of the amended Constitution, the GST Council has to be
constituted by the President within 60 days of the commencement of Article
279A.
B. The notification for bringing into force Article 279A with effect from 12th
September, 2016 was issued on 10th September, 2016.
C. Write about the entire Article 279A

7. Role of GST Council

A. It oversees the implementation and regulation of the Goods and Services Tax.
B. It will make recommendations to the Union and the States on important issues
related to GST like
C. The goods and services that may be subjected or exempted from GST
D. Draft or lay down
- Model GST Laws
- The principles that govern Place of Supply
- Threshold limits
- GST rates including the floor rates with bands
- Special rates for raising additional resources during natural
calamities/disasters, special provisions for certain States, etc.
E. Recommendations are not binding: Union of India v. Mohit Minerals Private
Limited, 2022,
- SC stated that States and Centre can equally legislate on matters of
GST
- Therefore all recommendations of the GST council are not binding on
the State legislature.
- The court said Article 246A of the Constitution gives both Parliament and
state legislatures “simultaneous” power to legislate on GST and
recommendations of the Council “are the product of a collaborative
dialogue involving the Union and States.”
F. .

8. Exemptions:
A. Alcoholic liquor for human consumption:
- At the time of implementation of GST in India, the words inserted in
the Article 366(12A) of the constitution that "any tax on supply of goods
 or services or both except supply of alcoholic liquor for human
consumption".
- So, even after levy of GST in India Alcoholic liquor for human
consumption will not attract GST.
- Instead, it will attract VAT (Value added tax) on Intra-state supplies
and state excise on Inter-state supplies.
- So, all the tax revenue on Alcoholic Liquor will be in the hands of state
governments.
B. Non-GST Supplies:
At the time of implementation of GST in India, it was concluded that Central
Excise and VAT will continue to levy on the Manufacturing/production of the
following items
- Petroleum crude oil,
- Diesel & Petrol,
- Petroleum crude,
- Aviation turbine fuel (ATF) and
- Natural Gas
C. State Excise and VAT will continue to levy on the intra-state supply of following
items.
D. It was held that the GST Council will recommend the date from which GST will
be levied on these items.
E. And till date the GST Council has not specified the date.
F. Basically, Non-GST items are those Items which are kept outside the ambit of
GST even after they fall within the definition of Supply.

9. Exemptions to the Levy of Goods and Services Tax on Petroleum Products and
Alcoholic Liquor for Human Consumption
A. GST Applicability:
- Non-GST supplies are not subject to GST because they fall outside the
scope of GST altogether.
- These supplies do not involve the levy or collection of GST
- No input tax credit is available.
B. Some examples of non-GST items include:
- Alcohol for human consumption
- Petroleum products – Petrol, diesel, aviation turbine fuel (ATF), natural
gas, and crude oil
- Electricity
- Currency notes and coins
C. .

10. Power of the GST Council to Regulate these Goods by Notification: Article 279A(4)
A. As per Article 279A(4), the GST Council shall make recommendations to the
Union and the States on issues related to GST such as the goods and services
that may be subjected to or exempted from GST, model GST Laws, principles of
 levy, principles that govern place of supply, threshold limits, GST rates including
the floor rates with bands, special rates for raising additional resources during
natural calamities/disasters, special provisions for certain States, etc.
B. The GST council prescribes the GST rates for goods and services, as well as
the list of exempted goods and services under GST.
C. On the other hand, there are certain activities that are items and services not
covered as a supply under GST.
D. These fall beyond the scope of GST, i.e., GST will not apply to them as they are
neither a supply of goods nor services in the first instance.
E. These activities are similar to the negative list under the erstwhile Service
Tax regime.
F. Such transactions are classified under Schedule III of the GST Act as
“Neither goods nor services”.
G. S7 of the CGST Act that defines ‘Supply’ under GST has a sub-section (3)
where the Schedule III reference is given.
The excerpt is as follows:
S7(3) Notwithstanding anything contained in subsection (1),
(a) activities or transactions in Schedule III; or
(b) such activities or transactions by the Central Government, a State
Government or any local authority, engaged as public authorities, as
notified by the Government on GST Council’s recommendations,
will be treated neither as a supply of goods nor a supply of services.
H. .
11. KERALA HIGH COURT VS CENTRAL – INCLUSION OF PETROL AND DIESEL
UNDER GST
A. A petition has been filed in the Kerala High Court by Kerala Pradesh Gandhi
Darshanvedhi[14] about the different prices charged on petrol and diesel in
various states because of the different tax rates levied by the state government,
which affects the citizens as the price of goods also increases with the increase
in fuel prices. The Kerala High Court asked the GST council to present reasons
for not including petroleum under GST[15]. Later, the PIL was withdrawn after the
court found some fault. The PIL was opposed by both the union and state
governments. To include petroleum products under GST, the government should
make a proper framework for those that do not affect the Indian economy and
should follow a systematic and divisional method between both the state and
central government, which results in revenue loss for both governments.
12. .

Exemptions to the Levy of Goods and Services Tax on Petroleum Products

and Alcoholic Liquor for Human Consumption
1. Alcoholic liquor for human consumption: At the time of implementation of GST in India,
the words inserted in the Article 366(12A) of the constitution that “any tax on supply of
goods or services or both except supply of alcoholic liquor for human consumption”. So,
 even after leavy of GST in India Alcoholic liquor for human consumption will not attract
GST. Instead, it will attract VAT (Value added tax) on Intra-state supplies and state
excise on Inter-state supplies. So, all the tax revenue on Alcoholic Liquor will be in the
hands of state governments.
2. Non-GST Supplies:
A. At the time of implementation of GST in India, it was concluded that Central
Excise and VAT will continue to levy on the Manufacturing/production of the
following items
- Petroleum crude oil,
- Diesel & Petrol,
- Petroleum crude,
- Aviation turbine fuel (ATF) and
- Natural Gas
B. State Excise and VAT will continue to levy on the intra-state supply of above
items
C. It was held that the GST Council will recommend the date from which GST will be
levied on these items. And till date the GST Council has not specified the date.
Basically, Non-GST items are those items which are kept outside the ambit of
GST even after they fall within the definition of Supply.
3.

Power of the GST Council to Regulate these Goods by Notification.

Article 279A(4): The Goods and Services Tax Council shall make recommendations
to the Union and the States on
1. The taxes, cesses, and surcharges levied by the Union, the States, and the local bodies
which may be subsumed in the goods and services tax.
2. The goods and services that may be subjected to, or exempted from, the goods and
services tax.
3. Model Goods and Services Tax Laws, principles of levy, apportionment of Goods and
Services Tax levied on supplies in the course of inter-State trade or commerce under
article 269A, and the principles that govern the place of supply.
4. The threshold limit of turnover below which goods and services may be exempted from
goods and services tax.
5. The rates include floor rates with bands of goods and services tax.
6. Any special rate or rates for a specified period to raise additional resources during any
natural calamity or disaster.
7. Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh,
and Uttarakhand; and any other matter relating to the goods and services tax, as the
Council may decide.
Mod 3, Part I:

Concepts

Income: S2(24)
1. S 2(24) of the Income Tax Act defines income as including the following:
A. Salaries:
- Any salary, wages, annuity, pension, gratuity, or other payment received
by an individual from his employer is considered as income for taxation
purposes.
B. Income from House Property:
- Any rental income earned from a house property, or the deemed rental
income from a self-occupied property, is considered as income.
C. Profits and Gains of Business or Profession:
- Any profits or gains earned by an individual from a business or
profession is considered as income for taxation purposes.
D. Capital Gains:
- Any profits or gains earned from the sale of a capital asset, such as
property or shares, is considered as income.
E. Income from Other Sources:
- Any income earned from sources other than those mentioned above,
- Such as interest on bank deposits, lottery winnings, or gifts, is
considered as income.
F. Winnings from Lotteries, Crosswords, and Other Games:
- Any winnings from lotteries, crossword puzzles, races, card games, or
any other games or gambling activities are considered as income.
G. Contribution to Employees’ Provident Fund (EPF) Account:
- Any contribution made by an employer to an employee’s EPF account
is considered as income.
H. Voluntary Retirement Scheme (VRS) Compensation:
- Any compensation received by an employee under a VRS is considered
as income.
I. Foreign Income:
- Any income earned by an individual outside India is also considered as
income for taxation purposes.

2. Income may be:

A. In Cash or Kind
B. On Receipt or Accrual basis
C. Legal or Illegal
D. Temporary or Permanent
E. Lump sum or Installments
 F. Gifts
G. Revenue or Capital receipt
3. .

Agricultural income
1. Agricultural income:
A. S2(1A) defines agricultural income
B. The power to levy tax on agricultural income is vested only with the state
governments.
C. The central government cannot impose any tax on agricultural income.
D. As per S10(1) of the Income Tax Act, agricultural income is exempt from
taxation.
E. S10(1) exempts agricultural income from income tax
- In computing the total income of a PY (previous year) of any person, any
income falling within any of the following clauses shall not be included
- As under the Constitution, tax on agricultural income is a state matter
- Therefore, only the state govt is empowered to impose
- As the central govt is not empowered, it is exempted under this central
legislation
F. .

2. S2(1A): Agricultural income:

S2 (1A): agricultural income means
(a) any rent or revenue derived from land which is situated in India and is used for
agricultural purposes;
(b) any income derived from such land by
- (i) agriculture; or
- (ii) the performance by a cultivator or receiver of rent-in-kind of any
process ordinarily employed by a cultivator or receiver of rent-in-kind to
render the produce raised or received by him fit to be taken to market;
or
- (iii) the sale by a cultivator or receiver of rent-in-kind of the produce
raised or received by him, in respect of which no process has been
performed other than a process of the nature described in paragraph (ii)
of this sub-clause ;
(c) any income derived from any building owned and occupied by the receiver
of the rent or revenue of any such land, or occupied by the cultivator or the
receiver of rent-in-kind, of any land with respect to which, or the produce of
which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is
carried on:
Provided that
- (i) the building is on or in the immediate vicinity of the land, and is a
building which the receiver of the rent or revenue or the cultivator, or the
receiver of rent-in-kind, by reason of his connection with the land,
 requires as a dwelling house, or as a store-house, or other
outbuilding, and
- (ii) the land is either assessed to land revenue in India or is subject to a
local rate assessed and collected by officers of the Government as
such or where the land is not so assessed to land revenue or subject to a
local rate, it is not situated
(A) in any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee, town
committee or by any other name) or a cantonment board and
which has a population of not less than 10,000
(B) in any area within the distance, measured aerially,
(1) not being more than two kilometres, from the local limits
of any municipality or cantonment board referred to in item
(A) and which has a population of more than 10,000 but
not exceeding 1 lakh; or
(2) not being more than six kilometres, from the local limits of
any municipality or cantonment board referred to in item
(A) and which has a population of more than 1 lakh but not
exceeding 10 lakh; or
(3) not being more than eight kilometres, from the local limits
of any municipality or cantonment board referred to in item
(A) and which has a population of more than 10 lakh.

3. Explanations:
A. Explanation 1:
- For the removal of doubts, it is hereby declared that revenue derived
from land shall not include and shall be deemed never to have included
any income arising from the transfer of any land referred to in item (a) or
item (b) of sub-clause (iii) of clause (14) of this section.
B. Explanation 2:
- For the removal of doubts, it is hereby declared that income derived
from any building or land referred to in sub-clause (c) arising from the
use of such building or land for any purpose (including letting for
residential purpose or for the purpose of any business or profession)
other than agriculture falling under sub-clause (a) or sub-clause (b)
shall not be agricultural income.
C. Explanation 3:
- For the purposes of this clause, any income derived from saplings or
seedlings grown in a nursery shall be deemed to be agricultural
income.
D. Explanation 4:
- For the purposes of clause (ii) of the proviso to sub-clause (c),
“population” means the population according to the last preceding
 census of which the relevant figures have been published before the first
day of the previous year;

4. Agricultural income means:

A. S2(1A)(a): Any rent or revenue derived from the land which is situated in India
and is used for agricultural purposes
B. S2(1A)(b): Any income derived from such land by agricultural operations
including processing of agricultural produce so as to render it fit for the market
or sale of such produce.
C. Any revenue from the farm building is also exempt provided it fulfills the
following conditions
- Land is used for the purpose of storage or as a dwelling house
- Land should be occupied by the cultivator or the assessee should be in
ownership of it
- Farm building should be in the immediate vicinity of agricultural land
and should not be distant from agricultural land
- Farm building must be assessed to land revenue in India
D. Any income derived from saplings or seedlings grown in a nursery.

5. S2(1A)(a): Provisions relating to agricultural land:

The following shall be regarded as agricultural income:
A. Any rent or revenue derived from land in India and is used for agricultural
purposes
B. Any income derived from such land by carrying out
- Agriculture or
- The process employed to render the produce fit for the market or
- Sale of such produce by a cultivator or receiver of rent in kind
C. Income from such activities that are remotely related to land such as dairy
farming, livestock breeding, poultry farming shall not be considered as
agricultural income.

6. S2(1A)(a): Provisions relating to farm building:

Any income derived from farm building, subject to the following conditions, shall be
regarded as agricultural income:
A. The building is on or in the immediate vicinity of agricultural land
B. It is occupied by the cultivator or receiver of rent or revenue;
C. It is used as a dwelling house or storehouse or outhouse; and
D. The land is assessed to land revenue in India or is situated in a rural area.

7. Conditions for S2(1A)(a):

A. Income must be derived from land
- There must be proximate and sufficient connection between income
and land
 - If there is no such proximate and sufficient connection, it is not
agricultural income
B. Land is used for agricultural purposes: CIT v. Raja Benoy Kumar Sahas
Roy: Justice PN Bhagwati laid down the following principles to serve as a guide
in the determination of the scope of the terms "agriculture" and "agricultural
purpose".
2 operations constitute agricultural activity:
- Basic operations
(a) Performed on land before germination
(b) Ex. tilling of land, sowing of seeds, planting, irrigation, ploughing
(c) May be performed manually or mechanically
- Subsequent operations
(a) Performed after the produce (crop) sprouts from land till
harvesting
(b) Ex. weeding, digging the soil around the growth, removal of
undesirable undergrowths, cutting, rendering the produce fit for
the market, harvesting
C. Land is situated in India
- To qualify for exemption under S10(1), agricultural income must be
derived from land situated within the jurisdiction of India
- In case, it is derived from Agricultural land outside India or is from any
non-agricultural land, it would be taxable under income from other
sources under S56(1)
- Ex. a person owns land in America and gives it to Mr. A on rent for
agricultural purpose - Income from other sources and will be includes in
total income
D. .

8. Conditions for S2(1A)(b):

A. The process must be one which is ordinarily employed by a cultivator or
receiver of rent-in-kind
B. The process must be applied to render the produce "fit to be taken to market"
C. CIT v. Katragadda Madhusudhana Rao
- Tobacco leaves are ordinarily dried to make them suitable for sale.
- So, the income from the ordinary process (cleaning, drying, crushing,
boiling, etc) employed to dry the tobacco leaves to make them fit to be
taken to market, is agricultural income.
D. If a produce can be sold in its raw form but marketing process is performing on
it, then that process does not become agricultural process
E. Income arising from such a process is not an agricultural income
F. Brihan Maharashtra Sugar Syndicate Ltd. v. CIT
- The process of converting sugarcane into sugar is not an agricultural
process (applying the above principle)
G. CIT v. Gupta (Tea) Pvt Ltd
 - The compensation received by an agricultural company from an
insurance company for the loss of crops due to hail storms would be
agricultural income.
H. .

9. Conditions for S2(1A)(b):

A. Annual value of house property is taxable under S22
B. But when the income from the house property satisfies the following
conditions, it would be treated as agricultural income and exempt under
S10(1)
- Building should be occupied by the cultivator (as a landlord or as a
tenant) or receiver of rent in kind (as landlord)
- Should be on or in the immediate vicinity of land, situated in India and
used for agricultural purposes
- The cultivator or receiver of rent in kind should by reason of his
connection with the agricultural land requires the building as a
dwelling house or as a storehouse or other out building and
- The land is assessed to land revenue or local rate or alternatively, the
land is situated in rural area
C. Agricultural income also includes income from orchards or from horticulture.
D. Income from poultry and dairy farming, fisheries, mining, stone quarries, breeding
and rearing of livestock - all these incomes although remotely linked with land
but cannot be called agricultural income because of the absence of vital
characteristics of agricultural income, ie, cultivation of land.

10. Non agricultural income:

A. A farmer gives his building on rent for residential purposes
B. Sri Ranganatha Enterprises v. CIT
- The burden lies on the assessee to prove that the income derived by
him is the agricultural income for which he is claiming an exemption
under S10(1) of the Income Tax Act.
C. Bacha F Guzdar v. CIT
- A dividend paid by a company out of its agricultural income is not
revenue derived from land, as an effective and immediate source of
income is shareholding and not the land,
D. HH Maharaja Vibhuti Narain Singh v. State of UP
- The Allahabad HC held that income from a nursery is not agricultural
income unless maintained by a farmer as an aid or necessary adjunct to
the primary process of agriculture
- Ex. nursery of tomato plants
- Here, the assessee used the nursery for ornamental plants which
cannot be considered as adjunct to primary agricultural process.
E. .
11. "Rural agricultural land" means an agricultural land in India which is not situated in
A. Any area which is comprised within the jurisdiction of a municipality or a
cantonment board and which has a population less than 10,000 or
B. Any area within the the distance specified hereunder measured aerially from the
limits of such municipality or cantonment board

Population of municipality or Distance from the limits of

cantonment board municipality or cantonment board
10,000 to 1 lakh 2 kms
1 lakh to 10 lakhs 6 kms
More than 10 lakhs 8 kms

C. Income derived from any farm building or land for any purpose other than
agriculture is not agricultural income and shall be liable to tax.

12. Rural areas for the above purpose are given under S2(1A)(c)(ii) of the Act, any area not
situated
A. Within the jurisdiction of municipality or cantonment board and where the
population is not more than 10,000
B. Within 2km from the local limits of municipality or cantonment board, where the
population is 10,000 to 1 lakh
C. Within 6km from the local limits, where the population is 1 lakh to 10 lakhs
D. Within 8km from the local limits, where the population is more than 10 lakhs

13. Aggregation of agricultural income

A. Though agricultural income is exempt from tax, the same shall be included for
determining the rate at which non-agricultural income is chargeable to tax.
B. It is compiled as follows:

Particulars Amount
Agricultural income A
Non - agricultural income B
Aggregate of A and B (A+B) C
Tax payable on C D
Aggregation of agricultural income on E
BE (Basic Exemption) Limit
Tax payable on E F
Net tax payable on "D-F" G
4% less on G

C. If the non-agricultural income does not exceed the BE Limits, then the
agricultural income should not be aggregated.

14. Income which is partially agricultural and partially from business:

 A. In case of income, which is partially from agriculture and partially from
business, in determining the business income chargeable to income tax, the
market value of any agricultural produce cultivated which has been used as a
raw material in such business or the sale receipts of which have been
included in the accounts of the business shall be deducted.
B. Agricultural produce used as raw material is ordinarily sold in the market:
- The average price at which it has been sold during the relevant
previous year shall be deemed to be the market value
C. Agricultural produce not ordinarily sold in the market
- The aggregate of the
(a) cultivation expenses,
(b) land revenue or rent paid for the area in which it was grown and
(c) a reasonable amount of profit
shall be deemed to be the market value of such agricultural
produce.

15. Special provision for rubber, coffee and tea

A. On income from growing and manufacturing rubber, coffee or tea in India,
segregation shall be made on the following basis to determine the agricultural
income which shall be exempt and the non-agricultural income which shall be
liable to tax:

Rule Produce Agricultural Business

income income
7A Rubber 65% 35%
7B(1) Coffee grown and cured 75% 25%
7B(1A) Coffee grown, cured, 60% 40%
roasted and grounded, etc
8 Tea grown and 60% 40%
manufactured

B. Rules 7, 7A, 7B and 8 of Income Tax Rules, 1962 - Income which is partially
agricultural and partially non-agricultural is determined.

16. CIT v. Raja Benoy Kumar

Agriculture has 2 types of operations, namely,
A. Basic
B. Subsequent

17. CIT v. Soundarya Nursery

A. Income derived from sapling or seedlings grown in nursery is considered
agricultural income

18. Vinutha Reddy v. ITO

 A. If land is kept vacant or used for research and development without any
agricultural processes, the income derived from it is not exempt.

19. Illustrations
A. If a person X owns the land and give it to Mr. Y for rent for agricultural purpose
- Mr. Y uses that land for growing wheat - not taxable - income derived by a
cultivator and a rent receiver is as per condition
- Mr. Y use that building for non-agricultural purpose - taxable because
income derived here is other than agricultural purpose
B. A landowner receives rent-in-kind from a tenant on that land, now landowner
sells it in the market at Rs.20,000 - income is derived from agricultural operation
C. A landowner receives rent of 1/3rd of whole wheat grown in his land. He uses the
wheat in making biscuits and sells in market - not an agricultural operation
because income is business income
D. Mr. X owns the land and gives it to Mr. A for agricultural operation. Mr. A uses it
for dairy farming - not an agricultural activity - agricultural income will not be
exempt
20. .

Casual Income: S2(24)(ix)

1. S2(24): Income includes
(ix) any winnings from
- lotteries,
- crossword puzzles,
- races including horse races,
- card games and
- other games of any sort or
- from gambling or betting of any form or nature whatsoever.

2. S56(2)(ib): Casual Income

A. S56: Income from other sources
B. S56(2)(ib): Any winnings from lotteries, crossword puzzles, races including
horse races, card games and other games of any sort or from gambling or betting
of any form or nature shall be chargeable to tax under Income from other
sources

3. Casual income includes income by way of winnings from lotteries; crossword puzzles;
races including horse races; gambling and betting of any nature or form; card games,
game show or entertainment program on television or electronic mode and any
other game of any sort.
4. All these incomes are chargeable to tax under the head income from other sources.
5. However, following income are not chargeable under the head "income from other
sources":
A. Lottery held as stock in trade:
 - Winning from lottery to an agent or trader out of its unsold stock of
lottery tickets shall be treated as incidental to business and taxed
under the head "profit and gains of business or profession".
B. Income of jockey:
- Income of a jockey from such a profession is not treated as winning from
the horse races.
C. Winning from a motor car rally:
- Winning from a motor car rally is a return for skill and effort and
cannot be treated as casual income.
- These are taxable as normal income.

6. Other Points:
A. S58(4): No deduction or exemption is provided in respect of the casual
income.
B. No deduction can be claimed from such income even if such expenditure is
incurred exclusively and wholly for earning such income.
C. Further, deduction under Chapter VIA (section 80C to 80U) is also not
available against such income.
D. No loss can be adjusted against casual income.
7. Taxation of Casual Income:
A. The casual income is taxed at a flat rate of 30% plus surcharge (if any), plus
health and education cess @ 4%.
B. Health and education cess = 4%[30%(Income+surcharge)]
C. Tax value = [30%(Income+surcharge)] + cess amount

8. S115BB: Casual income

A. If an assessee, by chance or without any pre-expectation or accidentally
gets any income which is of non-recurring nature is regarded as casual
income.
B. The casual income includes winning from lotteries, crossword puzzles, races,
card games, gambling, betting, prize awarded for coin collection or stamp
collection or gardening, receipt of reward to a person for tracing out any lost
child, receipt of remuneration for acting as an arbitrator in, any dispute etc
9. The tax treatment of casual incomes is:
A. It is taxable under the head 'income from other sources.
B. Expense incurred to earn such income is not allowed as deduction. Mr X win the
Lottery ticket price amount is 10 lakh, he purchases ticket 2 lakh =10-2=8
C. The benefit of basic exemption limit i.e. RS. 2,50,000 is not allowed.
D. Tax on casual income is deducted at flat rate of 30% for all assesses u/s 115BB.
E. Losses cannot be set-off against casual income. Even casual losses cannot be
set-off against casual income.
F. No deduction is allowed under chapter VI-A against casual income. •
=10,00,000x30/100=3,00,000 • =3,00,000x4/100=12,000
=3,00,000+12000=3,12,000
 10. No loss can be adjusted against casual income.

Assessee: S2(7), Income Tax Act, 1961

1. S2(7): "Assessee" means a person by whom any tax or any other sum of money is
payable under this act and it includes:
A. Every person in respect of whom any proceeding has been initiated under the
Act for the assessment of
- his income or
- fringe benefits or
- the income of any other person in respect of which he is assessable
or
- the loss sustained by him or by such other person or
- the amount of refund due to him or to such other person.
B. A person who is deemed to be an Assessee under any provisions of the Act.
C. A person who is deemed to be an Assessee in default under any provisions of
the Act.
2. Every Assessee is a Person, but every Person need not be Assessee under Income
Tax.

Person: S2(31)
1. S2(31): “person” includes
A. an individual
B. a Hindu undivided family, ie, HUF
C. a company,
D. a firm,
E. an association of persons or a body of individuals, whether incorporated or
not,
F. a local authority, and
G. every artificial juridical person, not falling within any of the preceding sub-
clauses.
- Explanation: For the purposes of this clause, an association of persons
or a body of individuals or a local authority or an artificial juridical
person shall be deemed to be a person, whether or not such person or
body or authority or juridical person was formed or established or
incorporated with the object of deriving income, profits or gains
2. .

Residential Status: S6
1. S6: Residence in India
For the purposes of this Act,
(1) An individual is said to be resident in India in any previous year, if he
 (a) is in India in that year for a period or periods amounting in all to one 182
days or more; or
(b) Omitted
(c) having within the four years preceding that year been in India for a
period or periods amounting in all to 365 days or more, is in India for a
period or periods amounting in all to 60 days or more in that year.
- Explanation 1: In the case of an individual,
(a) being a citizen of India, who leaves India in any previous
year as a member of the crew of an Indian ship as for
the purposes of employment outside India, the
provisions of sub-clause (c) shall apply in relation to that
year as if for the words “60 days”, occurring therein, the
words “182 days” had been substituted;
(b) being a citizen of India, or a person of Indian origin who,
being outside India, comes on a visit to India in any
previous year, the provisions of sub-clause (c) shall apply
in relation to that year as if for the words “60 days”,
occurring therein, the words “182 days” had been
substituted.
- Explanation 2: For the purposes of this clause, in the case of an
individual, being a citizen of India and a member of the crew of
a foreign bound ship leaving India, the period or periods of
stay in India shall, in respect of such voyage, be determined in
the manner and subject to such conditions as may be prescribed.
(2) A Hindu undivided family, firm or other association of persons is said to be
resident in India in any previous year in every case except where during that
year the control and management of its affairs is situated wholly outside
India
(3) A company is said to be a resident in India in any previous year, if
- (i) it is an Indian company; or
- (ii) its place of effective management, in that year, is in India.
- Explanation: For the purposes of this clause “place of effective
management” means a place where key management and
commercial decisions that are necessary for the conduct of
business of an entity as a whole are, in substance, made.
(4) Every other person is said to be resident in India in any previous year in every
case, except where during that year the control and management of his affairs
is situated wholly outside India.
(5) If a person is resident in India in a previous year relevant to an assessment year
in respect of any source of income, he shall be deemed to be resident in India in
the previous year relevant to the assessment year in respect of each of his other
sources of income.
(6) A person is said to be “not ordinarily resident” in India in any previous year if
such person is
 (a) an individual who has been a non-resident in India in 9 out of the 10
previous years preceding that year, or has during the 7 previous years
preceding that year been in India for a period of, or periods amounting
in all to, 729 days or less; or
(b) a Hindu undivided family whose manager has been a non-resident in
India in 9 out of the 10 previous years preceding that year, or has during
the 7 previous years preceding that year been in India for a period of, or
periods amounting in all to, 729 days or less.

2. S6: Residential status

3. Individuals and HUFs
/ /
Resident Non-resident
/ /
Ordinary Non-ordinary - basic conditions
Resident
(basic +
additional conditions)

4. S6(1) and S6(6): Individual

5. S6(1): Basic conditions of residential status

A. They should have stayed in India for more than 182 days during the previous
year or
B. They must have stayed in India for 60 days or more during the previous year
and was in India for a period that sums up to 365 days or more during the 4
years preceding the PY.

6. S6(6): Additional conditions

A. They have stayed in India as a resident for atleast 9 out of 10 PYs preceding the
previous year and
B. They have been staying in India for more than 730 days during the past 7 years
preceding the PY
- If not, then they are non ordinary resident

7. The periods of stay must be continuous

8. The calculation of resident days include stay in territorial waters as well
9. The calculation is between the date of arrival and departure
10. S6(1)(i) will only be applicable to
A. Person who is part of a crew in a foreign bound ship
B. PIO (Person of Indian origin) or an OCI (Overseas citizen of India) who is
generally staying abroad but visiting India
C. PIO who is visiting India, if he is deriving an income from an India of an amount
exceeding Rs. 15 lakhs
 - If they stay for at least 120 days but less than 182 days - then they are
considered a non-ordinary resident

11. S6(2): HUF

Control and management of affairs of the HUF
A. If situated in India, wholly or partly - resident
B. If situated wholly outside India - non resident

12. S6(6): periods of stay of karta is assessed

13. S6(3): residential status of a company

A. Incorporated in India or
B. Place of effective management (POEM) must be situated in India - POEM is
where the key managerial and other commercial decisions are made

14. ABOI test: Active business outside India:

A. Positive: POEM is in India
B. Negative: POEM is outside India

15. S6(4): AOP/BOI - Same as HUF in S6(2)

A. Association of Persons (AOP) or a Body of Individuals
B. Treated as a person by the Income Tax Act irrespective of whether it is
incorporated or not

16. Problem: Ram, an Indian citizen left India for the 1st time on 25.8.2023 for meeting his
relatives outside India and did not visit India until 15.1.2025.
Determine the residential status for FY 2023-24 and assessment year 2024-25
- Ordinary resident

17. Mr. Maxwell, an Australian cricketer, comes to India for 100 days every year.
- Non ordinary resident
18. .

Previous Year: S3 and Assessment Year: S2(9)

1. Previous year under income tax law:
A. The term “Previous year” in the context of the Income Tax Act refers to the
financial year immediately preceding the assessment year.
B. In India, the assessment year is the year in which income tax is calculated and
paid for the previous year.
C. For example,
- let’s say we are currently in the assessment year 2023-2024.
- previous year for this assessment year would be the financial year 2022-
2023.
 D. During the previous year, an individual or entity earns income and engages in
financial transactions that are considered for income tax purposes in the
assessment year.

2. S3: "Previous Year" defined

For the purposes of this Act, “previous year” means the financial year immediately
preceding the assessment year
- Provided that, in the case of a business or profession newly set up, or a
source of income newly coming into existence, in the said financial year, the
previous year shall be the period beginning with the date of setting up of the
business or profession or, as the case may be, the date on which the source of
income newly comes into existence and ending with the said financial year
- All assesses are required to follow a uniform previous year i.e. The Financial
Year (1st April to 31st March) as their Previous year. Although the assessee may
maintain books of accounts on calendar year basis (1st January to 31st
December) but his previous year for income tax purposes shall be the Financial
year.

3. S2(9): “assessment year” means the period of twelve months commencing on the
1st day of April every year

4. Assessment year under income tax law:

A. The assessment year in the context of income tax law refers to the year
immediately following the financial year for which the income is assessed.
B. In many countries, including India, the income tax laws follow a system where the
assessment of income is done for a specific financial year and then the tax
liability is determined for that year.
C. The assessment year is the year in which the taxpayer’s income is assessed
and tax returns are filed based on the income earned during the preceding
financial year.
D. For example,
- if the financial year is from April 1, 2022, to March 31, 2023,
- assessment year would be the year following this period, which is April 1,
2023, to March 31, 2024.
E. During the assessment year, individuals and entities are required to file their
income tax returns for the previous financial year, declaring their income,
claiming deductions, and paying any taxes due.

5. Previous year is less than 12 months if:

A. Newly set up business or profession or a source of income newly coming into
existence in the middle of the previous year.
B. Discontinued business.
6. Assessment year can never be less than 12 months
7. .
General Charging Section and Specific Charging Sections
1. Chargeability means incomes taxable under this act.
2. There are two charging sections
A. S4: general charging section which is applicable to the entire act.
B. Specific charging Section: First section under each head of income is the
charging Section.

3. S4: Charge of income-tax

(1) Where any Central Act enacts that income-tax shall be charged for any
assessment year at any rate or rates, income-tax at that rate or those rates
shall be charged for that year in accordance with, and subject to the
provisions (including provisions for the levy of additional income-tax) of, this
Act in respect of the total income of the previous year of every person:
- Provided that where by virtue of any provision of this Act income-tax is
to be charged in respect of the income of a period other than the
previous year, income-tax shall be charged accordingly.
(2) In respect of income chargeable under sub-section (1), income-tax shall be
deducted at the source or paid in advance, where it is so deductible or
payable under any provision of this Act.

4. S4:
A. Tax shall be charged at the rates prescribed for the year by the Annual
Finance Act.
B. The charge is on every person specified under S2(31)
C. Tax is chargeable on the total income earned during the previous year and
not the assessment year.
- There are certain exceptions provided by sections 172, 174, 174A, 175
and 176
D. Tax shall be levied in accordance with and subject to the various provisions
contained in the Act.

5. As per S4, Total Income of a Person for the Previous Year is charged to tax in the
following Assessment Year.

Income: Received – Deemed to be Received – Arising – Accrual

– Deemed to Arise or Accrue in India
S5: Scope of total income
 Resident/Ordinary Resident and non- Non-resident
resident ordinarily resident
Income received in Taxable Taxable Taxable
India or deemed to
be received in India,
irrespective of where
it is earned
Income which Taxable Taxable Taxable
accrues or arises in
India or deemed to
accrue or arise in
India, irrespective of
where it is received
Income which Taxable Taxable Not taxable
accrues or arises
outside India during
the previous year if it
is derived from-
Business controlled
from India or
Profession set up in
India.
Income which Taxable Not taxable Not taxable
accrues or arises
outside India during
the previous year if it
is derived from-
Any other source

A. In case of Resident & Ordinarily Resident, global income is taxable i.e income earned
and received anywhere in the world.
B. In case of Non-Resident, only income earned or received in India is taxable.

1. S5: Explanation 2: For the removal of doubts, it is hereby declared that income which
has been included in the total income of a person on the basis that it has accrued or
arisen or is deemed to have accrued or arisen to him shall not again be so included
on the basis that it is received or deemed to be received by him in India.

2. Income is to be included in the total income of the assessee immediately on its

actual or deemed receipt.
3. The receipt of income refers to only the first occasion when the recipient gets the
money under his control.
4. Therefore, when once an amount is received as income, remittance or transmission of
that amount from one place or person to another does not constitute receipt of income
in the hands of the subsequent recipient or at the place of subsequent receipt.
5. Any past untaxed foreign income, if brought into India is not taxable in the hands of
any assessee.
6. Any exempt income will be excluded from the total income of every assessee.
7.
8. S7: Income deemed to be received:
The following incomes shall be deemed to be received in the previous year:
- (i) the annual accretion in the previous year to the balance at the credit of an
employee participating in a recognised provident fund, to the extent provided
in rule 6 of Part A of the Fourth Schedule;
- (ii) the transferred balance in a recognised provident fund, to the extent
provided in sub-rule (4) of rule 11 of Part A of the Fourth Schedule;
- (iii) the contribution made, by the Central Government or any other employer
in the previous year, to the account of an employee under a pension scheme
referred to in section 80CCD.

9. S7: Income deemed to be received in India

A. In addition to the income actually received by the assessee or on his behalf,
certain other incomes not actually received by the assessee and/or not
received during the relevant previous year, are also included in his total income
for income tax purposes.
B. Such incomes are known as income deemed to be received.
C. Some of the examples of such income are:
- All sums deducted by way of taxes at source: S198
- Incomes of other persons which are included in the income of the
assessee under Sections 60 to 64 (clubbing of income).
- The amount of unexplained or unrecorded investments: S69.
- The amount of unexplained or unrecorded moneys, etc. S69A.
- Annual accretion to Recognised Provident Fund (RPF) to the extent
taxable.
- Transferred balance from Unrecognised Provident Fund (URPF) to RPF
to the extent taxable
- Any dividend declared by a Company or distributed or paid by it within
the meaning of S2(22): S8(a).

10. S9: Income deemed to Accrue or Arise in India

A. Accrue refers to the right to receive income, whereas due refers to the right to
enforce payment of the same.
B. For e.g. salary for work done in December will accrue throughout the month, day
to day, but will become due on the salary bill being passed on 31st December or
1st January.
C. Similarly, on Government securities, interest payable on specified dates arise
during the period of holding, day to day, but will become due for payment on
the specified dates.
D. Certain types of income are deemed to accrue or arise in India even though
they may actually accrue or arise outside India.
 E. The following Income shall be deemed to accrue or arise in India
- S9(1)(i): Any income accruing or arising to an assessee in any place
outside India whether directly or indirectly
(a) through or from business connection in India
(b) through or from Property in India
(c) through or from any asset or source of Income in India
(d) through the transfer of Capital assets situated in India
- S9(1)(ii): Income, which falls under the head "Salaries", if it is earned in
India.
(a) Salary payable for service rendered in India would be treated as
earned in India.
(b) Further, any income under the head "Salaries" payable for rest
period or leave period which is preceded and succeeded by
services rendered in India, and forms part of the service
contract of employment, shall be regarded as income earned in
India
- S9(1)(iii):Income from Salaries which is payable by the Government to
a citizen of India for services rendered outside India
(a) However, allowances and perquisites paid outside India by the
Government is exempt
- S9(1)(iv):Dividend paid by Indian Company outside India
- S9(1)(v): Interest
- S9(1)(vi): Royalty
- S9(1)(vii): Fees for technical services
- S9(1)(viii): Any sum of money paid by a resident Indian to a non-
corporate non- resident or foreign company
(a) Income arising outside India, being any sum of money paid,
without consideration, by a Indian resident person to a non-
corporate non-resident or foreign company would be deemed to
accrue or arise in India if the same is chargeable to tax under
S56(2)(x) i.e., if the aggregate of such sums received by a non-
corporate non-resident or foreign company exceeds Rs.50,000.
- .
F. .

11. Interest, Royalty and Fees for Technical Services is payable by:
A. Person resident in India: Taxable at the hands of receiver except
- If the money borrowed and used or technical services or royalty services
are utilised for the purpose of business or profession carried on
outside India.
- If the money borrowed and used or technical services or royalty services
are utilised for making income from any source outside India.
B. Government: Always
C. Non resident: taxable in the hands of the recipient only
 - If the money borrowed and used or technical services or royalty services
are utilised for the purpose of business or profession carried on
outside India.
- If the money borrowed and used or technical services or royalty services
are utilised for making income from any source outside India.
D. Income deemed to accrue or arise in India to a non-resident by way of
interest, royalty and fees for technical services to be taxed irrespective of
territorial nexus.

12. Write about business connections if 12m.

Business connection: S9
1. Taxability of income depends on two factors:
A. Accrual and
B. Receipt.
2. Income is taxed by any country based on these two factors, i.e.,
A. either the income should be accrued in that country, or
B. it should be received in that country.
3. S9 of the Income Tax Act 1961 lists the incomes that should be deemed to accrue or
arise in India, which specifically applies to incomes that foreign entities or non-
residents earn in India or are deemed to be earning in India.

4. S9:
A. It establishes transparency in the taxation of income and avoids tax evasion.
B. The income arising or accruing in India may originate from different sources like
- property income,
- foreign income,
- salaries,
- capital gains,
- business income, and
- earnings from horse racing and lottery.
C. The government has amended this section to incorporate the categories of
income like royalty, interest, technical fees, etc.

5. Rules of S9
Under Section 9, the following three key provisions determine the tax implications of
the income foreign entities or non-residents earn in India.
A. Territorial Nexus Rule:
- Any income that arises or is deemed to arise in India is subject to tax.
- This rule applies to all kinds of income, including interest, capital gains,
business earnings, etc.
B. Specific Inclusions Rule:
- This rule applies to specific kinds of income, including royalties,
interest, or fees
 - This includes technical services obtained from India or services
provided in India.
- The rule states that the income is deemed to arise in India, so it is
subject to tax.
C. Residence Rule:
- As per this rule's provision, any income that arises or accrues outside
India shall not be taxable in India.
- The condition to fulfil this rule is that the recipient of such income must
not be a resident of India.
- This implies that if a non-resident earns income abroad, then that income
is not subject to tax in India.

6. Scope of S9
A. The scope of this section applies to different types of income that foreign
entities or non-residents earn in India.
B. It includes income obtained from
- Any salary earned in India
- Any profession or business conducted in India
- Any property located in India
- Any dividend distributed by an Indian firm
- Any source of income or asset that is located in India
- Any interest earned on securities supplied by an Indian company or
the Indian government
C. The scope also includes:
- Fees or royalties for technical services provided in India
- Capital gains resulting from the transfer of any asset located, in India
whether directly or indirectly
- Gift of sum of money to non-residents

7. Key implications of S9
A. Withholding tax
- As per S195 of the Income Tax Act, any individual accountable for
paying a non-resident must deduct tax at source.
- The corresponding tax rate depends on the type of income and the
provisions of the DTAA (Double Taxation Avoidance Agreement) (if
applicable).
B. Taxation of income
- An income that a foreign entity or a non-resident earns from an asset or
business is subject to tax in India.
- The corresponding tax rate depends on the income tax slab rates valid
for the particular financial year.

8. S9(1)(i): Income Arising from a Business Connection in India

A. S9(1)(i) outlines the income accruing/arising from a business connection in
India.
B. It also considers the income gained through transferring capital assets in
India.
C. This subsection applies to an intimate connection between a resident and a
non-resident.
D. This connection fosters profits, and the non-resident earns an income.
E. As per this subsection, the business connection is said to be established
between a non-resident and a person in India if that person:
- Have authority to conclude contracts in India or plays the principal role
in the conclusion of contract,
(a) that fulfil the purpose of ownership transfer of property being
owned by that non-resident or
(b) Where such agreements are being accomplished in the name of
the non-resident or
(c) For the purposes of rendering of services by the non-resident
- Holds a stock of goods and supplies it on behalf of the non-resident.
- Secures orders in India mainly for the non-resident.
F. This subsection stipulates that any income earned by a non-resident from a
business connection in India is considered to arise or accrue in India.
G. Further, no business connection shall be established if the person securing
the order is a broker or a general commission agent acting independently in
the normal course of business.
H. Significant Economic Presence(SEP):
- SEP of a non-resident in India shall be considered as business
connection in India,
- The income earned from SEP shall be deemed to be accrued or arise in
India.
I. SEP shall be constituted if:
- If the non-resident engages in a transaction with a person resident in
India in respect of any goods, services or property (including the
provision of download of data or software) - when the payments arising
from such transactions exceed Rs. 2 crores in a year.
- If the non-resident is engaged in soliciting business activities or
engaging with users in India when the number of users is at least 3
lakhs.

J. Not a business connection in India

The following shall not be considered as having a business connection in India:
- Purchase of goods in India for the purpose of export;
- Collection of news and views by news agencies or newspapers for
transmission outside India;
- Operations confined to shooting a cinematograph film in India, where if
such non-resident is:
 (a) An individual, but not a citizen of India
(b) A company not having any shareholder who is an Indian
citizen/resident
(c) A firm, not having any partner who is an Indian citizen/resident
- A foreign company engaged in the mining of diamonds, any income
arising from the display of uncut and unassorted diamonds in any special
zone.
K. .

9. S9(1)(ii) to S9(1)(vi): Other Incomes Deemed to Accrue or Arise in India

A. In addition to business connections, the following types of income are subject
to tax under S9(1):
B. S9(1)(ii): Salary obtained from services provided in India.
- It includes salary earnings from before and after delivering the services
that are part of service/employment contracts such as gratuity, pension,
etc.
C. S9(1)(iii): Salary paid by the Indian Government to citizens for services
rendered outside India.
D. S9(1)(iv): Dividend paid by Indian company outside India
E. S9(1)(v): Interest shall be deemed to be accrued or arise in India. If paid,
- By the government; or
- By the resident except where the monies borrowed are used for the
purpose of business or profession outside India or for earning income
from any source outside India or
- By the non-resident where monies are utilised for the purpose of
business or profession in India.
F. Any interest paid by the permanent establishment of a non-resident
(engaged in banking business) in India to such non-resident or any other PE or
head office shall be deemed to be accrued or arise in India.
G. S9(1)(vi)/(vii): Royalty or fees for technical services (FTS) shall be deemed to
be accrued or arise in India. If paid,
- By the government; or
- By the resident except where it is used for the purpose of business or
profession outside India or for earning income from any source outside
India or
- By the non-resident where monies are utilised for the purpose of business
or profession in India or for earning income from any source in India.
H. S9(1)(viii): Any sum of money paid by a person resident in India to,
- To a non-resident on or after july, 5th, 2019 or
- To a not ordinarily resident on or after April 1st, 2023
shall be deemed to be accrued or arise in India.
I. .

10. Indirect Transfer (As per Explanation 5 to Section 9(1)(i))

 A. As per Explanation 5 to S9(1)(i), any share or interest in a company or entity
registered outside India shall be deemed to have been situated in India if
such company or entity either directly or indirectly substantially derives its
value from the assets located in India.
B. A company or entity shall be considered as substantially deriving its value from
assets in India if on the specified date*:
- The value (Fair Market Value) of assets held in India exceeds Rs. 10
crores (without netting off the liabilities) and
- Such assets constitute at least 50% of the Value of all the assets
owned.
C. Specified date means an ending date of the preceding accounting year of the
transfer date.
D. However, if there is an increase in the book value of assets by 15% or more then
the date of transfer should be considered as the specified date.
E. The provision related to indirect transfer shall not be applicable if the transferor
does not hold more than 5% of the share capital in the company or entity during
the 12 months preceding the transfer date.
11. .

Income which does not form part of Total Income (Exemptions):

S10
1. For the determination of the total gross income of any person, the following
incomes mentioned in S10 shall not be included in the computation process.
2. S10(1): Agricultural income
A. Agricultural income shall not be considered for computation of asessee's total
income
B. S2(1A): Scope of agricultural income
- Any form of revenues or rents originating or derived from a land in
India which is being used for agricultural purposes fall under the ambit
of agricultural income.
- These revenues or rents may be received by the owner or sub-tenant
- Agricultural income from foreign lands is not exempt.
C. Basic operations or subsequent operations
- Any income from the basic or subsequent operations that are used to
make the agricultural produce fit for sale falls within the scope.
- These include tilling, sowing, cleaning, winnowing, drying, crushing, etc
D. Sale of the agricultural product
- Any income originating from the sale of the agricultural produce comes
under the ambit
- Whenever the agricultural produce is subject to operations or processes
that are not ordinarily employed to make the produce ready for sale,
such incomes will be treated as a combination of agricultural and
business income.
 E. Income from nursery
- Explanation 3 of S2(1A): Income from nurseries falls under agricultural
income
- It is immaterial whether saplings or seeds are grown on land or not
F. Income from farm buildings
- Write about it from Agricultural income
G. The Union does not impose tax on agricultural income while the state does. This
is known as partial integration of agricultural with non-agricultural income
to tax.
The conditions are:
- The income has to exceed Rs.5,000 in the previous year
- Non agricultural income has to exceed basic exemption limit
H. .

3. S10(2): Amount accepted from the income of the HUF by a member of the HUF
A. When a member of HUF receives his share of family income or his share from
the impartiable family estate, such income is fully exempt from tax.

4. S10(2A): Share of profit of a firm received by its partner

5. S10(4): Interest to non residents
6. S10(5): Leave travel concession
A. According to S10(5), any employee who has made an actual journey can claim
exemption in respect of leave travel concession for himself and his family.
B. These exceptions are available for a total of 2 journeys in a block of 4 years.
C. If the employee has unused exemption available under one block, he can
carry forward to the next block but for which he must claim the exemption in the
1st year of the block.
D. CIT v. M/s Larsen and Toubro Ltd
- SC: employer is under no obligation to gather evidence or verify claims
related to Leave travel concession

7. S10(6): Payments made to non-Indian citizens

A. Such as the diplomats, their staff
B. Remuneration of foreign employee or non-resident member of crew
C. Payment to foreign trainee.

8. S10(7): Any allowance or perquisite given to government employees working

outside India
9. S10(10): Gratuity
A. Gratuity received by government servants and local authorities are exempt
from tax
B. Thus, full exemption for state, central and defence employees
C. Exemption is also available to non-government employees if the payment under
the Gratuity Act, 1972 is applicable to them.
10. S10(10B): Retrenchment compensation
A. The compensation received by an employee at the time of retrenchment is
exempt to a certain limit

11. S10(10BB): Compensation for the Bhopal gas leak disaster

A. Compensation received under the Bhopal Gas Leak Disaster (Processing of
claims) Act, 1985 by victims of the tragedy is exempt

12. S10(10BC): Compensation on account of any disaster

A. Any amount received from the state as compensation for any disaster
B. By a person or his legal heirs is exempt
C. If such a person/heir has been allowed a deduction under the act because of
such losses from the disaster, no further exemption is allowed.

13. S10(10C): Remuneration received at the moment of voluntary retirement

14. S10(10D): Life insurance policy
A. When an individual receives any money under a life insurance policy including
bonus, then such amount is exempt

15. S10(11): Payment from provident fund

A. Any amount of money received from a public or statutory provident fund or
unrecognised PF, earns a tax exemption.

16. S10(11A): Payment made towards the Sukanya Samriddhi Yojana

17. S10(13A): House rent allowance

A. According to S10(13A) and Rule 2, IT Rules, an employee receiving HRA enjoys
exemption to the extent of the least of the following
- 50% of salary in Delhi, Mumbai, Chennai or Kolkata or 40% of salary in
other cities
- HRA actually received
- Rent paid minus 10% of the salary

18. S10(16): Educational scholarship

A. The assessee enjoys exemption of any amount that he has received as an
educational scholarship
B. CIT v. Balachandran: Scholarships are exempt from tax regardless of their
quantum

19. S10(17): Daily allowance to a member of Parliament

A. Daily allowance
B. Constituency allowance or
 C. Any other form of allowance given to an MP/member of state legislature is fully
exempt

20. S10(18): Pension given to Gallantry Award winner

A. Any central or state government employee who has been awarded
- Param Vir Chakra or
- Maha Vir Chakra or
- Vir Chakra or
- Any other notified gallantry award
B. Enjoys full exemption of his pension amount from IT
C. In the event of the death of such an employee, pension received by his family
is also exempt.

21. S10(19): Family pension given to the family members of armed forces
22. S10(20): Any income of local authority
A. The income of local authority which is chargeable under the heads of income
from
- House property
- Capital gains
- Other sources
- Trade or business carried on which it accrues or arises from the supply of
a commodity or service within its own jurisdictional area or from the
supply of water or electricity within or outside its own jurisdiction.
B. New Okhla Industrial development authority v. Chief, CIT
C. ITO v. Urban Improvement trust
- Housing boards and industrial township development bodies don't render
functions of municipalities
- Hence, not exempt from tax
D. .

23. S10(23C): Any income received by an individual from a

A. fund or
B. trust or
C. hospital or
D. other medical institution or
E. university or
F. other education institution
is exempt from income tax subject to IT Rules, 1962.
24. .

Income from salary: S15-17

1. Income from salary is the first head of income, and S15-S17 of the Income Tax Act,
1961 deals with salary income.
2. Income from salary
A. Salary is defined as the remuneration the employer pays to the employee for
the service rendered by the employee under a contract of employment.
B. It includes monetary value or non-monetary value of benefits and facilities
provided by an employer which are taxable
C. Any amount received other than from the employer cannot be termed as
salary.
D. Ex. a member of parliament or MLA is not treated as an employee of the govt
E. Therefore, salary and allowance received by him is not chargeable to tax
under the head income from salary.

3. Under S15, the following incomes are taxable on the head "Salaries":
A. The salary due from an employer or former employer to an assessee in the
previous year, whether paid or not
B. The salary paid or allowed to him in the previous year by or on behalf of an
employer or a former employer though not due or before it becomes due to
him
C. Any arrear of salary paid or allowed to him in the previous year by or on behalf
of an employer or a former employer, if not charged to income tax for any
earlier previous year
- Any salary, bonus, commission or remuneration, due to or received
by a partner of a firm from the firm shall not be regarded as salary for
the purposes of S15

4. Foreign salary and pension

A. Salary and pension received from foreign govt is taxable under the head
"Salaries"

5. Relationship of employer and employee

A. It is very essential for a payment to fall under the head "Salaries" that the
relationship of employer and employee must exist between the payer and
payee

6. Payment made after cessation of employment

A. Payment made after cessation of employment is also taxable under the head
"Salaries" because it represents remuneration for a service rendered in the
past

7. Pension
A. Pension received by an employee after his retirement is taxable as salary
B. Pension paid by a foreign govt to its employees serving in India is also
taxable
8. Salary of member of parliament/legislative assembly
A. This is not chargeable under the head "Salaries" as a MP is not an employee
of the govt
B. It is taxable under the head "Income from other sources"

9. S16: Deductions allowed from income under the head "Salaries"

A. Standard deduction under S16 of IT Act
- A flat deduction of Rs.50,000 for salaried individuals under the old tax
regime
- The standard deduction in the new tax regime is Rs.75,000 for FY 2024-
25
B. Entertainment allowance
- Deduction for govt employees only, up to a specified limit
C. Professional tax
- Deduction on any tax paid to the state on employment
- The state cannot charge more than Rs.2,500 per year as professional
tax
- The employment tax is described in this case by Article 276(2) of the
Constitution.
D. .

10. S17: Salary includes the following components

Monetary benefits Non-monetary benefits

Basic salary Free accommodation
Wages Free cab
Bonus Free food
Commission Free education
Gratuity Others
Pension
Leave encashment

11. Salary: Basic salary + Allowances + Perquisites + Profits in lieu of salary

12. Gross salary less: Deductions under S16:

Taxable salary = Salary - (Standard deduction + Entertainment allowance + Employment
Tax)

13. Different forms of salary:

A. Leave salary
B. Compensation for retrenchment
C. Fees and commission
D. Bonus
E. Commutation of pension
F. Annuity
 G. Salary and pension from UN
H. Other foreign pension
14. .

Allowances
1. Payment in cash made by an employer to his employees monthly other than salary,
is called allowance
2. For the purpose of Income Tax, allowances are divided into 3 categories, namely,
- Taxable allowances
- Allowances - exempt up to specified limit
- Fully exempted allowances

3. Taxable allowances
A. Servant allowance
- It is fully taxable even if it is given to a low paid employee, not being an
officer
B. Tiffin allowance
- It is given for lunch and refreshments to the employees
- It is called meal allowance and refreshment allowance
- It is fully taxable
C. Fixed medical allowance
- It is fully taxable
D. Overtime allowance
- When an employee works for extra hours over and above his normal
hours of duty he is given overtime allowance as extra wages
- Its fully taxable
E. Other allowances
- Project allowance
- Marriage allowance
- Rural allowance
- Health allowance
- Hill allowance
- Holiday allowance
- Special qualifications allowance

4. Allowances exempt up to specified limit:

A. House rent allowance
Rules 2A prescribed that the least of the following amounts shall be exempt:
- House rent allowance actually received by the assessee or
- Excess of rent paid by the assessee over 10% of salary due to him for
the relevant period or
- .
(a) If the accommodation is situated at Mumbai, Kolkata, Delhi or
Chennai - 50% of salary
 (b) If the accommodation is situated at any other place - 40% of
salary due to the assessee
B. Children education allowances
- It is exempt in the whole of India at Rs. 100 per month per child up to a
maximum of 2 children

5. Fully exempted allowances

A. Sumptuary allowance to HC or SC judges fully exempt
- Sumptuary Allowance is specifically intended to cover expenses related
to official entertainment and hospitality, helping officials maintain the
dignity of their office.
B. Allowance from UN - fully exempt

6. Perquisites: the term "perquisite" means any benefits, attached to an office or

position in addition to salary or wages
7. Perquisites taxable in case of all employees
A. The value of residential accommodation provided to the assessee by his
employer
B. Any sum paid by the employer in respect of any obligation which, but for such
payment, would have been payable by the assessee
For example,
- Payment by the employer of any loan due on this employee
- Payment by the employer of education expenses of the children of his
employees
- Legal expenses incurred by the employer to save or defend the
employee

8. Perquisites taxable in the case of specified employees only

A. The employees who fulfills any of the following 3 conditions as called specified
employees
- A director-employee
- Employee having substantial interest in the employer company
- Any other employee
B. The following are the taxable perquisites in hands of specified employees
- Facility of car
- Sweeper, watchman, gardener and personal attendant
- Gas, electric energy and water
- Transport facility
C. .

9. Tax free perquisites

The value of the following perquisites shall not be included in the salary income of an
employee:
A. Medical benefits
 B. Tea or snacks provided free in office or factory (work place)
C. Residential accommodation provided at site
D. Employer's contribution to staff group insurance scheme
10. .

Income from House Property (brief notes)

1. S22. Income from house property.
A. The annual value of property consisting of any buildings or lands appurtenant
thereto of which the assessee is the owner, other than such portions of such
property as he may occupy for the purposes of any business or profession
carried on by him the profits of which are chargeable to income-tax, shall be
chargeable to income-tax under the head “Income from house property”.
2. S23. Annual value how determined.
3. S24. Deductions from income from house property.
4. S25. Amounts not deductible from income from house property.
5. S25A. Special provision for arrears of rent and unrealised rent received subsequently.
6. S26. Property owned by co-owners.
7. S27. “Owner of house property”, “annual charge”, etc., defined.

8. The income from houses, buildings, bungalows, godowns, etc is to be computed and
assessed to tax under the head "Income from house property"
9. The income under this head is not based upon the actual income from the property but
upon notional income or the annual value of that building

10. House property income = annual value of building - deductions specified in S24

11. S22: Basis of charge

12. Income from house property shall be taxable under this head if the following
conditions are satisfied:
A. The property should consist of any
- building (residential, factory buildings, offices, shops, godwons and other
commercial premises) or
- land appurtenant (any improvements like garage, garden, swimming
pool) thereto
B. Asseessee must be the owner of the property
C. The property may be used for any purpose but it should not be used by the
owner for any business or profession carried on by him, the profit of which is
chargeable to tax

13. Exempted incomes from house property

A. Agricultural house property
B. House property held for charitable purpose
C. Self-occupied but vacant house
 D. House used for own business or profession
E. Property held by registered trade union
F. Income from house property held by a local authority, scientific research
institution, political party, educational institution, hospital and medical
institution
G. One house property owned by a formal ruler of Indian states
H. Two self occupied houses
I. House property held as stock in trade and not let out during the previous year

14. Annual value:

A. The term annual value is a very important calculation of income from house
property upon correctly calculated annual value.
B. It takes into consideration not only the received but also the expected rent a
house fetches under the given situation and not only once but from year to
year
C. The annual value is determine after taking 4 factors into consideration:
- Actual rent received or receivable
- Municipal rental value
- Fair rent
- Standard rent

15. Types of rent

A. Actual rent or real rental value
B. Municipal rental value
C. Fair rental value
D. Standard rent
E. Expected rental value

16. Actual rent/real rental value

A. It is the rent actually received by the owner of the house property from the
tenant
B. Real rental value = actual rent - expenses borne by the owner - unrealised
rent (the rent which the owner could not recover from the tenant)
C. Expenses borne by the owner, namely, life, pump maintenance, salary to
gardener, lighting, water and electricity bills

17. Municipal rental value

A. For collection of municipal taxes, local authorities make periodic survey of all
buildings in their jurisdiction
B. Such value determined by the municipal authorities in respect of a property, is
called as municipal value of the property

18. Fair rental value

A. It is the reasonable expected rent which the property can fetch
 B. It can be determined on the basis of rent fetched by a similar property in the
same or similar locality

19. Standard rent

A. It is the maximum rent which a person can legally recover from his tenant
under the Rent Control Act
B. Standard rent is applicable only in case of properties covered under Rent
Control Act

20. Expected rental value (ERV)

Expected rental value should be calculated as follows:
A. In case standard rent has not been fixed,
- Municipal rental value (MRV)
- Fair rental value (FRV)
- Actual rent received (AR)
Whoever is higher is treated as expected rental value
B. In case standard rent has been fixed,
- MRV and FRV whichever is higher is taken as expected rental value
- The amount calculated cannot exceed the amount of standard rent
- The actual rental value is compared with Annual Rental Value (ERV)
- Whichever is higher is calculated as the ERV
C. Expected rental value
- Municipal rental value
- Fair rental value
Whichever is higher

D. Expected rental value

- Expected rental value
- Standard rental value
Whichever is lower

E. Annual rental value

- Expected rental value
- Actual rent
Whichever is higher

F. If annual rent is lesser than expected rental value due to vacancy, the annual
rent value is taken as GAV
G. If annual rent is lesser than expected rental value due to any other reason other
than vacancy, take expected rent value as GAV

21. Format of income from house property

Table is for convenience, you can list them down untabulated too
 Particulars Amount
Annual rental value xx
Less: loss due to vacancy (xx)
Gross annual value xx
Less: municipal taxes (xx)
Net annual value xx
Less: standard deduction at 20% as per (xx)
S24(a)
Less: interest on borrowed loan as per (-)
S24(b)
Income from house property xx

22. Income from house property: Explanation and calculation

23. S22: Income chargeable to tax under the head "house property"
A. Rental income from a property owned (includes co-owner and deemed owner)
by the taxpayer
B. The property may be residential, commercial (shop, office) or land
C. Lease amount received from leasing the property
D. Income received from a leased property (as a lessee) for 12 years or more

24. Income not chargeable to tax under head "Income from house property"
A. Rental income received by any other entity other than individual is charged
under PGBP
B. Rental income earned by anyone other than the owner, co-owner or deemed
owner (S27), would be either charged as income from other sources or PGBP
C. Rental income from subletting is taxable under "Income from other sources"
or business/profession income
D. Income from selling the house/property is chargeable under capital gains
E. If other assets are rented out along with the property
- Ex. Furniture, generator, that are inseparable, the income is charged
under head "Profit under Head Business and Profession (PGBP) or
income from other sources"

25. Deemed owner

A. As per S27, income from house property is taxable in the hands of the deemed
owner as well.
B. A deemed owner is the individual who doesn't have the ownership or transfer
rights of the property but has control over the property
C. When a lessee is deemed to be the owner
- When an individual transfers their property to their spouse or minor
child without adequate consideration, the transferor is deemed as the
owner
- In cases of impartible estates, the holder is treated as the owner of the
estate's property
 - Member of the cooperative society, company or other association
getting a building under a housing scheme is deemed the owner
- If someone satisfies the conditions of S53A of the transfer of property
act, when acquiring property
- Leasing a property for 12 years or more makes the lessee the deemed
owner. Shorter lessees are exempt from this.
D. The Income Tax Act divides house properties into different types for tax purposes
E. Given below are the major categories of house properties

26. Major categories of house properties

A. Self occupied property
- A house property that is used for one's own residential purpose
- If an individual owns only one self-occupied property, it is treated as a
self occupied property for tax purposes
- In such cases, the national rental income is not taxable and
individuals can claim deductions on the home loan interest paid,
subject to certain limits
B. Let out property
- A let-out property is one that is rented out or leased to another party
- The rental income received from such a property is taxable under the
head "Income from house property"
- Individuals can claim deductions on the municipal taxes paid, standard
deduction (30% of the net annual value) and interest on home loans
C. Deemed to be let-out property
- Properties that are not actually rented out but are deemed to be let out
by the tax authorities
- After 2019, if two properties are self-occupied, then other properties
are said to be deemed to be let out property
- It typically includes properties that are not occupied by the owner due to
employment, business or other reasons
- In this case, the national rental income is considered taxable and
deductions for municipal taxes and interest in home loans can be
claimed.
D. Under construction property
- Properties that are under construction or not ready for occupation are
also considered for taxation purposes
- In such cases, individuals cannot claim rental income as the property is
not let out
- However, once the construction is complete, the applicable treatment
(self-occupied or let-out) will be determined based on their actual usage
or rental arrangement
E. .

27. Conditions for the taxability of income from house property:

 A. Assessee must be the owner of that property
B. Property consists of any buildings and/or land. The building can be a
residential house, factory building, shop, office, etc
C. The property is used for any purpose except by owner to run his business or
profession

28. The rent from the vacant land is considered income from other sources.

Steps to compute income from house property:

1. The calculation of income from house property involves various steps
2. These steps are common to both the categories of house property, ie, self occupied and
let out.
3. These are as follows:
Calculations of income from house property:

Particulars Amount
Gross annual value xx
Less: municipal taxes (xx)
Net annual value xx
Less: deductions under S24 (xx)
(xx)
A. Standard deduction of 30% (xx)
B. Interest paid on borrowed loan
Income from house property xxx

4. Step 1: Calculate Gross Annual value

A. Expected rent value: whichever is higher between
- Municipal rental value
- Fair rent value
B. Expected rent value: whichever is lower between
- Expected rent value
- Standard rent
C. Gross annual value: whichever is higher between
- Expected rent value
- Actual rent
D. If the actual rent is lesser than expected rent value, due to vacancy, take actual
rent as GAV
E. If any other reason than vacancy, take expected rent value as GAV
F. For self occupied property - the GAV is 0
G. For let out property, GAV for let out property is rent for a let out property
H. For deemed let out property - GAV is the market value of the rent received

5. Step 2: Reduce property tax

A. Property tax, when paid, is allowed as a deduction from GAV of the property
 B. The property taxes which the owner pays during the previous year are only to be
deducted to arrive at NAV
C. It is allowed even when the property is left vacant for the past year
D. If the property taxes are paid by the tenant, the deduction cannot be claimed by
the owner only the sum the owner paid can be claimed as deduction

6. Step 3: Determine Net Annual Value (NAV)

A. Net annual value= gross annual value - property tax

7. Step 4: Reduce 30% of the NAV towards standard deduction as per S24(a)
A. Not applicable to self occupied property
B. 30% on NAV is allowed as a standard deduction from the NAV under S25 of the
Income Tax act
C. Only for let out property

8. Step 5: Reduce home loan interest as per S24(b)

A. A deduction under S24 is also available for interest incurred on a housing loan
used to purchase or construct a property

9. Step 6: Determine income from house property

A. The resulting value is the income from house property

10. Step 7: Loss from house property:

A. When one owns a self occupied house, since the GAV is nil, claiming the
deduction on home loan interest will result in a loss from house property
11. .
Profits or Gains from Business or Profession
1. S2(13): Business:
A. Business means the purchase and sale or manufacture of a commodity with
a view to make profit.
B. It includes any trade, commerce or manufacture or any adventure (Doing
activity for the first time without knowing the outcome) or concern in the nature
of trade, commerce and manufacture.
C. To judge a transaction as a business transaction, the following factors should
be considered
- Nature of commodity
- Nature of transaction (Whether incidental to a business or not)
- Intention of the related party
- Duration of transaction
- Effort applied in transaction.
D. .

2. S2(36): Profession:
A. Profession means the activities for earning livelihood which require
intellectual skill or manual skill
B. Ex. The work of a lawyer, doctor, auditor, engineer and so on are in the nature of
profession.
C. Profession includes vocation.
D. Vocation : Vocation implies the natural ability of a person to do some
particular work e.g. singing, dancing, etc. Here, no training or no
qualification is required but having natural ability.

3. Profits : Excess income over expenditure.

4. Gains : Any incidental revenue from business.
5. As the rules for the assessment of business, profession or vocation are the same,
there is no importance of making any distinction between them for income tax purposes.

6. S28: Profits and gains of business or profession

S28: Basis of charge: the following incomes are chargeable under the head of PGBP
A. Revenue from profits from business or profession
- The profits and gains of any business or profession which was carried on
by the assessee at any time during the previous year;
- If a loss was incurred,
(a) In the revenue - in course of business - deduction under S28
(b) In the capital - transfer - chargeable under capital gain
(c) In the capital - no transfer - no deduction
B. Any compensation due to or received by an agent
- Any compensation or other payment due to or received by an agent,
managing the whole or substantially the whole of the affairs of any
 person, at the termination of his management or modification of the
terms and conditions relating thereto.
C. Income of trade association, etc
- Income derived by a trade, professional or similar association from
specific services performed for its members.
D. Receipts in connection with foreign trade
- Profit on sale of import license.
- Duty Drawback / Duty remission (decrease) scheme / Duty free
replenishment (refill) certificate.
- Cash Assistance.
- Profit on sale of Duty Entitlement Passbook.
- Repayment of any customs or excise duty to any person against exports.
E. Value of any benefit or Perquisite from business or profession :
- The value of any benefit or perquisite whether convertible into money
or not, arising from business or the exercise of profession.
F. Remuneration to partner from the firm :
- Any interest, salary, bonus, commission or remuneration due to or
received by a partner of a firm from the firm provided that it has been
allowed as deduction in computing the taxable profits of such firm.
G. Amount received or receivable for certain agreement :
- Not carrying out any activity in relation to any business or
- Not sharing any know-how, patent, copyright, trade mark, license,
franchise or any other business or commercial right of similar nature or
information or technique.
H. Keyman Insurance Policy:
- Any sum received under a keyman insurance policy including the sum
allocated by way of bonus on such policy.
I. Interest on securities:
- Interest on securities, if the business of the assessee is to invest in
securities
- Otherwise interest on securities shall be chargeable to income tax
under the head Income from other sources’.
J. Recovery against certain capital assets covered under S35AD :
- Any sum received on account of any capital asset (other than land or
goodwill or financial instrument) being demolished, destroyed,
discarded or transferred, if the whole of the expenditure on such
capital asset has been allowed as deduction under S35AD.
K. Income from speculative transactions.

7. S43(5): Speculative Transaction :

A. Speculative transaction means a transaction in which a contract for the
purchase or sale of any commodity, including stocks and shares, is
periodically or ultimately settled otherwise than by the actual delivery or
transfer of the commodity or scrip.
8. S29: Computation of Income from Business or Profession:
A. According to S29, the profits and gains of any business or profession are to be
computed in accordance with the provisions contained in S30 to 43D.
B. S29: Computation of income from PGBP
- S30-37: Admissible Deduction
- S40: Inadmissisable Deduction
- S40A: Expenses or payments not deductible in certain circumstances
- S41: Profit Chargeable to Tax
- Other Provisions
C. .

9. Rules for adjustment of Profit and Loss Account prepared by the Assessee:
The profit and Loss Account prepared by the assessee is not correct from the
income tax point
A. Several expenses are charged to it which are wholly or partly inadmissible
B. Some admissible expenses are omitted.
C. Some taxable income are not credited
D. Some such incomes are credited which are either not taxable under the head
PGBP or are not taxable at all.

10. Proforma for computation of Income under the head PGBP

A. Profit as per P & L A/c
B. Add :
- Expenses or losses disallowed but charged in P & L A/c
- Incomes taxable as business income but not credited to the P & L A/c
- Expenses in excess of the allowed amount charged to P & L A/c
- Under valuation of closing stock or over valuation of opening stock xxx
xxx
C. Deduct
- Expenses or losses allowed but not debited to P & L A/c
- Incomes not taxable as business income but credited to the P & L A/c
- Income exempt from tax but credited in P & L A/c
- Over valuation of closing stock and under valuation of opening stock
D. = Taxable income from Business

11. S30-S37: Deductions expressly allowed

12. S30 : Expenses in respect of business premises:
A. Revenue expenses for use of premises for business or profession is allowed.
B. Premises are occupied as tenants : Rent, Repair, Insurance and Tax.
C. Premises are occupied as owner : Repair, Insurance and Tax.
D. If the business premise belongs to the assessee no deduction in respect of
rent will be allowed.
 E. If the assessee is a partnership firm and the business premises belongs to a
partner of the firm, the rent payable to the partner will be an allowable
deduction.

13. S31 : Revenue Expenditure on Plant and Machinery / Furniture and Fixture:
A. Revenue expenditure incurred on current repairs and insurance premium
incurred on plant and machinery / furniture and fixtures is allowed.
B. Rent and taxes are allowed under S37
C. Capital expenditure shall not be included in repairs.

14. S32: Depreciation

Accounting system Taxation system

Charges against profit. Allowances in nature
WDV / SLM method is allowed. Only the WDV method is allowed.
(Electricity
Generation Unit can adopt SLM Method)
Depreciation is charged on Individual Depreciation is charged on the Block of
Asset asset.
On the basis of the number of days asset 50% of normal Depreciation (If asset is
used. used below 180 days) or Normal
Depreciation.
Only on Tangible Asset. Tangible and Intangible assets.
Life of the asset. Prescribed rate.

A. Categories of asset
- Building
- Furniture and Fittings.
- Machinery and Plant
- Ships
- Intangible Asset (Know-how, Patents, Copyrights, Trademarks, Licenses,
Franchises or Commercial rights).
B. Block of Assets
- Falls under the same category.
- On which same rate of depreciation is applied.
C. Conditions of Allowance of depreciation
- Assets should be owned, wholly or partly by the assessee.
- It should be used for the purpose of assessee’s business or profession.
D. 50% of normal Depreciation
- If any asset is acquired and put to use not to exceed 180 days during the
same previous year then the assessee can get the benefit of depreciation
only 50% of normal depreciation.
E. Format for computation of Depreciation :
- Opening WDV of block
- Add Actual Cost of asset acquired during P.Y.
 - Less Money payable in respect of assets sold / discarded / damaged, etc.
- = WDV for Depreciation
- Less Depreciation at prescribed rate
- = Closing WDV

F. Rates of depreciation prescribed under IT Act :

- Building
(a) Residential purpose: 5%
(b) Business purpose: 10%
(c) Installing plant and machinery/temporary building: 40%
- Furniture and Fittings: 10%
- Machinery and Plant
(a) General: 15%
(b) Motor Car used on hire: 15%
(c) Motor Car used for own business: 30%
(d) Remaining Assets: 40% [Books, Computers /etc]
- Ships: 20%
- Intangible Asset: 25%
G. .

15. S33AB : Tea, Coffee and Rubber Development Account

A. The assessee should deposit in a special account with the National Bank for
Agricultural and rural Development. (NABARD)
B. The deposit should be made within a period of six months from the end of the
PY or before furnishing the return of his income, whichever is earlier.
C. Limit : Sum equal to deposited or 40% of profits of such business (before
making deduction under this section and before setting off brought forward
business losses), whichever is less.
D. Utilization of funds: Must be used in the same previous year in which it is
withdrawn.

16. S33ABA: Site Restoration Fund:

A. Deduction will be allowed in respect of prospecting, extraction or production
of petroleum or natural gas in India.
B. It is necessary that, agreement with the central government.
C. The assessee should deposit in a special account with the State Bank of India
(SBI)
D. The deposit should be before the end of the previous year.
E. Limit : Sum equal to deposited or 20% of profits of such business (before
making deduction under this section and before setting off brought forward
business losses), whichever is less.

17. S37 : General Deduction (Residuary section):

A. Conditions
 - Expenses not covered under S30 to S36
- Revenue nature expenditure.
- Not of capital nature
- Not of personal nature
- Expenses incurred for running of a business / profession.
- Expenditure shall be made during the previous year.
B. Explanation 1:
- Expenditure incurred on protection money, hafta, bribes, etc. will not
be allowed.
C. Explanation 2 :
- Expenditure incurred on CSR activities will not be allowed.
D. Expenses allowed:
- Expenses incurred in the purchase, manufacture and sale of goods.
- Expenses incurred on day to day running of the business.
- Expenses incurred on breach of contract.
- Amount of Value Added Tax / GST, excise duty, professional tax.
- Compensation paid for retrenchment of undesirable employees.
- Contribution made to provident fund.
- Commission paid for securing orders.
- Compensation paid to employees due to an accident on duty.
- Royalties paid for mines.
- Insurance premium paid for policy of its employees for compensation
during work.
- Compulsory subscription to an association.
- Legal expenses for normal course of business, to avoid business liability,
defend for title of his assets, terminate a disadvantageous trading
relationship, and resist a winding-up petition by some shareholders.
- Annual listing fee paid to stock exchange.
- Expenditure on inauguration ceremony.
E. .

18. S34 : Conditions for depreciation allowance and development rebate [Omitted]

19. S35 : Expenditure on Scientific Research

A. Scientific Research means activities for the extension of knowledge in the
fields of natural or applied science including agriculture, animal husbandry or
fisheries.
B. Scientific Research Expenditure means expenditure incurred on scientific
research would include all expenditure incurred for the prosecution or the
provision of facilities for the prosecution of scientific research but does not
include any expenditure incurred in the acquisition of right in or arising out of
scientific research.
C. Weighted deduction under S35:
 - S35(1)(i): Revenue Exp. Incurred on scientific research related to the
assessee’s business - 100% (deduction as a % of contribution made)
- S35(1)(ii) Research Association for scientific research - 150%
- S35(1)(iia) Company for scientific research 100%
- S35(1)(iii) Research Association for research in social science or
statistical research 100%
- S35(1)(iv) Capital expenditure (Other than expenditure on land) 100%
- S35(2AB) Expenditure on in-house research (Except land and building)
150%
D. In-house Research: A deduction of an amount equal to 150% of expenditure
(excluding land or building) shall be allowed.

20. S35D: Amortization (paying off) of Preliminary Expenses

A. Preliminary expenses include
- Preparation of feasibility report,
- Preparation of project report
- Conducting market survey.
- Legal charges for drafting any agreement.
- Printing charges for the Memorandum and Articles of Association.
- Fees paid for registering the company.
- Expenses regarding issue of shares or debentures e.g. underwriting
commission, brokerage, typing, printing, advertisement of prospectus etc.
B. Deduction: Deduction allowed is 1/5 of such expenditure for each of the five
successive previous years beginning with the previous year in which the
business is commences.
C. Preleminary expenses (Max. Limit)
- Indian Company: 5% of 'Cost of Project' or 5% of the 'Capital employed'
at the option of the assessee
- Other than Indian Company: 5% of 'Cost of Project
D. .

21. S35DD : Expenditure for amalgamation or demerger of an undertaking

A. Allowed deduction of 20% of such expenditure for each of five successive
previous years beginning with the year in which amalgamation or demerger
takes place.

22. S35DDA: Expenditure on voluntary retirement

A. Allowed deduction of 20% of such expenditure for each of five successive
previous years beginning with the year in which the expenditure was
incurred.

23. S35AD: Expenditure on Specified Business

A. 100% expenditure of capital nature is allowed [Excluding land, goodwill,
financial instrument]
 B. Deduction is allowed in the year in which business is commenced
- Expenditure incurred prior to commencement of its operations.
- The amount is capitalised in the books of accounts on the date of
commencement of its operations.
C. Payment of Rs. 10,000 in a day should not be made in cash.
D. Businesses:
- Setting up and operating of cold chain facility (meat)
- Warehousing facility for storage of agricultural produce.
- Laying and operating of petroleum oil pipeline.
- At least 100 beds hospital.
- Building for slum redevelopment or rehabilitation framed by Central or
State Government
- Housing project under a scheme for affordable housing framed by
Central or State Government.
- Two-star or above category hotel.
- Production of fertilizer in India.
- Inland container depot / container freight station.
- Bee-keeping and production of honey and beeswax.
- Warehousing facility for storage of sugar.
- Infrastructure facility – toll road, bridge, water supply, water treatment,
irrigation project, sanitation, port, airport, etc.
- Semiconductor wafer fabrication manufacturing unit.
E. .

24. S36: Other deduction

A. Insurance premium paid for stock which is used for the purpose of business /
profession.
B. Insurance premium for cattle, paid by federal milk co-operative society.
C. Insurance premium paid (any mode other than cash) for the health of
employees.
D. Bonus or commission to employees: On actual payment basis
E. Interest paid on borrowed capital for the purpose of business / profession
- On actual payment basis
- No deduction of ‘interest paid’ for acquisition of asset from the date of
borrowing till the date of ‘put to use’ as it would be added to cost of asset.
F. Discount on Zero Coupon Bond allowed as deduction on pro-rata basis.
G. Bad debts incidental to the business.
H. Loss regarding animals
- Not for stock in trade
- Cost of animal – carcasses of animals
I. Employers contribution to provident Fund
- only Recognized provident fund or approved superannuation fund.
- Subject to S43B
J. Employees contribution to provident fund or superannuation fund etc.
 - Subject to S43B
K. Approved gratuity fund.
- Subject to S43B
L. Expenditure on family planning
- Only when assessee is company
- Capital expenditure = 5 equal installments
- Revenue expenditure – in the same previous year.
M. Entertainment expenses, advertisement expenses
- Except S37(2B): advertisement in political party
N. Security Transaction Tax (STT).

25. S40(a): Expenses not allowed in any circumstances

A. Expenditure on advertisement in any souvenir, etc. published by a political
party.
B. Payments outside India, in India to a non resident or a foreign company on
which TDS is not deducted and has not paid on or before the due date
specified.
C. Payment to residents on which TDS has not been deducted or before the due
date of filing the return of income – 30% of such sum shall not be allowed as
deduction.
D. Wealth tax
- Wealth tax chargeable under the Wealth Tax Act shall not be allowed as
deduction.
E. Tax on Profits and Gains: Any sum paid on account of any tax levied on the
profits and gains of any business or profession shall not be allowed as a
deduction.
F. Contribution to unrecognized provident fund.

26. S43B: Deductions allowable only on actual payment:

A. Any sum payable by the assessee by way of tax, duty, cess or fee.
B. Any sum payable by him as an employer by way of contribution to any
provident fund, superannuation fund or gratuity fund or any other fund for the
welfare of employees.
C. Certain Allowable Losses
Losses which are directly incidental to the business or profession of the
assessee are allowable.
- Robbery or Dacoity
(a) Loss caused by robbery or dacoity is not deductible.
(b) But, if it is incidental to business it will be allowed as a deduction
(c) This depends upon the specific circumstances and conditions.
For example, if cash is sent for disbursement at different centers
by a sugar factory in a rural area, it is incidental to business and
is, therefore, allowed.
 (d) Any loss due to robbery in a bank will be allowed as the bank is
under an obligation to maintain some cash outside the strong
room for payments.
- Embezzlement (Misappropriation), Theft, etc.:
(a) The loss of money due to embezzlement by an employee
handling the funds of the business while discharging his official
duties is allowed as deduction.
(b) When an employee goes to the bank to deposit the cash and he
takes away the money for his own use, even then, the loss is
allowable.
(c) Theft by a cashier, who is in charge of cash, is also an allowable
loss.
(d) A theft committed either by an employee or by someone else by
breaking open into the business premises after office hours, is
also allowable.
- Loss due to Non-recovery of Advances:
(a) If it is the practice in a business to give advance money to the
suppliers and if the supplier neither supplies the order nor
refunds the advance money, the loss sustained by the assessee
is incidental to business and is, therefore, allowable.
- Penalty paid for infraction of law is not allowed.
D. /
27. .

Income from Capital Gains: S45-55A, read with 111A, 112, 112A
1. Income from capital gains:
A. Profits or gains arising from the transfer of a capital asset made in a
previous year are taxable as capital gains under the head “Capital Gains”.
B. The important ingredients for capital gains are, therefore,
- existence of a capital asset,
- transfer of such capital asset
- profits or gains that arise from such transfer.
C. .

2. S45: Basis of charge

A. Any profits or gains arising from the transfer of a capital asset effected in the
previous year shall, save as otherwise provided in Sections 54, 54B, 54D,
54EC. 54ED, 54F & 54G be chargeable to income tax under the head “capital
gains”, and shall be deemed to be income of the previous year in which
transfer took place.
B. Capital gains tax liability arises only when the following conditions are satisfied
- There should be a capital asset.
- The capital asset is transferred by the assessee.
 - Such transfer takes place during the previous year.
- Any profits or gain arises as a result of transfer.
- Such profit or gains are not exempted from tax under S54, 54B, 54D,
54EC,54ED, 54f, 54G.
C. If the aforesaid conditions are satisfied, then capital gain is taxable in the
assessment year relevant to the previous year in which capital asset is
transferred.

3. Capital asset
A. Capital asset means property of any kind except
- Stock-in trade, consumable stores or raw-materials held for the purpose
of business or profession.
- Personal effects like wearing apparel,furniture,motor vehicles, etc.,held
for personal use of the taxpayer or any dependent member of his
family.
- Agricultural Land in India
B. However, jewellery, even if it is for personal use, is a capital asset.
C. The Finance Act, 2007 has modified the definition of Personal effects w.e.f.
1.4.2008.
D. ‘Personal effects’ now include movable property including wearing apparel
and furniture held for personal use by the assessee or any member of his family
dependent on him, but excludes:
- Jewellery
- Archaeological Collections
- Drawings
- Paintings
- Sculptures or
- Any work of art
E. Agricultural Land in India, not being a land situated
- Within jurisdiction of municipality, notified area committee, town area
committee, cantonment board and which has a population of not less
than 10,000; [As amended by Finance Act, 2019]
- Within range of following distance measured aerially from the local
limits of any municipality or cantonment board:
(a) not being more than 2 KMs, if population of such area is more
than 10,000 but not exceeding 1 lakh;
(b) not being more than 6 KMs , if population of such area is more
than 1 lakh but not exceeding 10 lakhs; or
(c) not being more than 8 KMs , if population of such area is more
than 10 lakhs.
- Population is to which relevant figures have been published before the
first day of the year. be considered according to the figures of last
preceding census
F. .
4. Transfer includes:
A. Sale, exchange or relinquishment of a capital asset
- A sale takes place when the tide in the property is transferred for a
price.
- The sale need not be voluntary.
- An involuntary sale of a property of a debtor by a court at the instance
of a decree holder is also transfer of a capital asset.
- An exchange of capital assets takes place when the title in one
property is passed in consideration of the title in another property.
- Relinquishment of a capital asset arises when the owner surrenders
his rights in property in favour of another person.
- For example, the transfer of rights to subscribe the shares in a company
under a ‘Rights Issue’ to a third person. .
B. Extinguishment of any rights in a capital asset
- This covers every possible transaction which results in destruction,
annihilation, extinction, termination, cessation or cancellation of all or
any bundle of rights in a capital asset.
- For example, termination of a lease or of a mortgagee interest in a
property.
C. Compulsory acquisition of a capital asset under any law
- Acquisition of immovable properties under the Land Acquisition Act,
acquisition of an industrial undertaking under the Industries
(Development and Regulation) Act etc., are some of the examples of
compulsory acquisition of a capital asset.
D. Conversion of a capital asset into stock-in-trade
- Normally, there can be no transfer if the ownership in an asset
remains with the same person.
- However, the Income tax Act provides an exception for the purpose of
capital gains. When a person converts any capital asset owned by him
into stock-in- trade of a business carried on by him, it is regarded as
a transfer
E. Part performance of a contract of sale
- Normally transfer of an immovable property worth Rs. 100/- or more is not
complete without execution and registration of a conveyance deed.
- However, S53A of the Transfer of Property Act envisages situations
where under a contract for transfer of an immovable property, the
purchaser has paid the price and has taken possession of the property,
but the conveyance is either not executed or if executed is not
registered.
- In such cases the transferor is debarred from agitating his title to the
property against the purchase.
F. Transfer by a person to a firm or other Association of Persons [AOP] or
Body of Individuals [BOI]
 - Firm/AOP/BOI is not considered a distinct legal entity from its partners
or members and so transfer of a capital asset from the partners to the
firm/AOP/BOI is not considered ‘Transfer’.
- However, under the Capital Gains, it is specifically provided that if any
capital asset is transferred by a partner to a firm/AOP/BOI by way of
capital contribution or otherwise, the same would be construed as
transfer.
G. Distribution of capital assets on Dissolution
- Distribution of capital assets on dissolution of a firm/AOP/BOI is also
not considered as transfer for the same reasons as mentioned above.
- However, under the capital gains, this is considered as transfer by the
firm /AOP/BOl and therefore gives rise to capital gains for the
firm/AOP/BOI.
H. Distribution of money or other assets by the Company on liquidation
- If a shareholder receives any money or other assets from a Company
in liquidation, the shareholder is liable to pay capital gains as the
same would have been received in lieu of the shares held by him in the
company.
- However, if the assets of a company are distributed to the
shareholders on its liquidation such distribution shall not be regarded
as transfer by the company.
I. The maturity or redemption of a zero coupon bond
- A zero coupon bond means a bond issued by any infrastructure
capital company or infrastructure firm or public sector company on or
after 1st June, 2005 in respect of which no payment or benefit is
received or receivable before maturity or redemption and which has
been specifically notified by the Central Govt.
J. .

5. Types of capital gains

A. Gain arising on transfer of long-term capital asset is termed as long-term
capital gain
B. Gain arising on transfer of short-term capital assets is termed as short-term
capital gain.
C. However, there are a few exceptions to this rule, like
D. Gain on depreciable assets is always taxed as short term capital gain
E. Any capital asset held by a person for a period of more than 36 months
immediately preceding the date of its transfer will be treated as long-term
capital asset.
F. However, in respect of certain assets like shares (equity or preference) which
are listed in a recognised stock exchange in India, units of equity oriented
mutual funds, listed securities like debentures and Government securities,
Units of UTI and Zero Coupon Bonds, the period of holding to be considered
is 12 months instead of 36 months.
 G. In case of unlisted shares in a company, the period of holding to be
considered is 24 months instead of 36 months.
H. With effect from Assessment Year 2018-19, the period of holding of
immovable property (being land or building or both), shall be considered to be
24 months instead of 36 months.

6. CIT v. Gemini Pictures Circuit Private Ltd.

A. Capital gain arises on sale of land, apparently used for growing vegetables
but situated in urban areas.
B. Capital gains on transfer of land used for agriculture test used to determine
whether land is agricultural, totality of relevant facts must be taken into
consideration
C. The land in dispute was situated in most important business centre of the
city, land was entered into municipal record as urban land and urban land
tax was paid
D. Part of the land was used for constructing nonresidential building
E. Growing vegetables on such land is only a stop-gap activity, not conclusive
that land is agriculture
F. Profit on sale of such land will be taxable as capital gains.

7. Hemant Singh v. CIT

A. Silverware owned by a HUF and placed before the family deity at the time of
Pooja on special occasions is a capital asset of the HUF.
B. The ownership of these silverwares continues to be in the HUF and the family
has not parted with these silverwares as these are placed before the family
deity only at the time of Pooja on some special occasions.

8. Vadilal SodaIce Factory v. CIT

A. The compulsory acquisition of an asset by the Government also constitutes
'transfer'
B. Any gain arising from such a transaction will also be considered as 'Capital
Gains'.
C. The meaning of the word 'transfer' is not restricted only to transfers by act of
parties
D. Compulsory acquisition of the property also amounts to a transfer.

9. More on ArivuPro document on Direct Tax (CS Executive).

Income from Other Sources

1. S56: Conditions for a receipt to be an income from other sources

A. There is an income within the meaning of S2(24) of the Act.
 B. Such income is not exempted under any other provisions of the Income Tax
Act, ie, S10-S13 A
C. Such income cannot be charged as salary, income from house property,
profits and gains from business or profession, or capital gains.

2. S56(1): Basis of charge

A. This is the last & residual head of charge of income.
B. A source of income which does not specifically fall under any one of the other
four heads of income, is to be computed and brought to charge under S56
under the head, "Income from other sources".
C. S56(1): Income of every kind, which is excluded in the other four specific
heads of income, is charged to income tax under this head of income.

3. S56(2):
A. S56(2) is more specific and enlists various incomes which are taxable under
the head of 'Income from Other Source'.
B. There are certain incomes which are always taxed under this head. These
incomes are as follows:
C. Dividends
- S2(22)(e): dividends includes
(a) any payment by a company being a closely held company.
(b) of any sum by way of loan or advance
- This includes a foreign company dividend.
- However, dividends from domestic companies other than those
covered by S2(22)(e) are exempted from tax under section 10(34).
D. Winnings from lotteries, crossword puzzles, races including horse races, card
games and other games of any sort, gambling or betting of any form
whatsoever
E. Income by way of interest received on compensation or on enhanced
compensation
- Such income shall be deemed to be the income of the year in which it is
received, irrespective of the method of accounting followed by the
assessee.
- However, a deduction of a sum equal to 50% of such income shall be
allowed from such income.
- Apart from this, no other deduction shall be allowed from such an
income.
F. Gifts received by an individual or HUF which are chargeable to tax
G. S56(2)(ic): Any contribution to a fund for welfare of employees received by
the employer.
H. S56(2)(id): Income by way of interest on securities.
I. S56(2)(ii): Income from letting out or hiring of plants, machinery or furniture.
J. S56(2)(i):Income from letting out of plant, machinery or furniture along with
building; both the lettings are inseparable.
 K. S56(2)(iv): Any sum received under a Keyman Insurance Policy including
bonus.

4. S57: Deductions allowable

The following expenditure can be claimed as deductions from gross total income:
A. Collection Charges
B. Interest on Loan
C. Any other expenditure which is not of capital nature, but expended wholly and
exclusively for the purpose of earning of such income.

5. S58: Deductions not allowable

The following expenses are not allowable as expenditure while computing Income
from Other Sources.
A. Any personal expenses of the assessee;
B. Any interest paid outside India on which tax has not been paid or deducted at
source,
C. Salaries paid outside India on which tax has not been paid or deducted at
source.
D. Any expenditure incurred in cash above Rs.20,000/-
E. Any payments made to near relatives which are excessive or unreasonable,
according to the Assessing offer.
F. Income tax/Wealth tax payment.
G. Any expenditure incurred in connection with Winning of Lottery, crossword
puzzles etc.

6. S59: Deemed income chargeable to tax

A. S59 is similar to S41(1) of the Income Tax Act.
B. These provisions are related to the recovery against any deduction.
C. If any deduction is allowed in respect of loss, expenditure, etc. during any
previous year while computing the income from business/profession and in
subsequent years such amount of deduction is recovered
D. Then the amount recovered shall be treated as income under the head of
Income from Other Source 'Chargeable to tax'.

7. S115BB: Casual income

A. If an assessee, by chance or without any pre-expectation or accidentally
gets any income which is of non-recurring nature is regarded as casual
income.
B. The casual income includes winning from lotteries, crossword puzzles, races,
card games, gambling, betting, prize awarded for coin collection or stamp
collection or gardening, receipt of reward to a person for tracing out any lost
child, receipt of remuneration for acting as an arbitrator in, any dispute etc

8. Gift under income from other sources:

 A. Gift received by individual or HUF
B. Can be Money, cash, Cheque or draft
9.
10. .

Clubbing of Income: Income of other Persons to be included in

Calculating in Assessee’sTotal Income
1. Clubbing of income means including the income of any other person in the
assessee's total income.
2. S60-S65
3. Object of clubbing:
A. It is a general principle of every taxing statute that income of a person is
chargeable to tax only in the hands of that person.
B. In certain cases, with a view to reducing the tax burden, persons having huge
taxable income may shift a portion of their income to persons who do not have
taxable income or are taxable at a lower rate or fall under lower slab rates of
taxable income.
C. This may be achieved by transferring or gifting income-generating assets or
by augmenting the revenue-earning capacity of certain family members.
D. To curb this, S60-S65 have been enacted

4. S60: Clubbing where income is transferred

A. When income alone is transferred without transfer of the asset giving rise to
such income, it is deemed to be the income of the transferor.
B. It does not matter whether such transfer is revocable or irrevocable.
C. Requisites:
- The taxpayer owns the assets.
- The ownership of assets is not transferred by him.
- The income from the assets is transferred to any person under a
settlement, or agreement.
D. Dalmia Cement Ltd. v. CIT
- The assessee, owner of a factory entered into an agreement to sell the
same but the actual transfer took place after two years.
- The sale agreement carried a clause that the profits between the
period of date of sale agreement and actual sale would be for the
benefit of the transferee.
- The IT Department sought to invoke the clubbing provisions against the
transferor.
- The SC held that the very existence of the agreement to transfer
imposes an overriding title of the factory to the assessee.
- So, the clubbing provisions cannot be invoked against the transferor.

5. S61: Clubbing of income in case of revocable transfer of assets

 A. All income arising to any person by virtue of a revocable transfer of assets
shall be included in the total income of the transferor and taxed accordingly.
B. Revocable transfer means the transferor of assets assumes a right to re -
acquire assets or income from such an asset, either whole or in parts at any
time in future, during the lifetime of the transferee.
C. It also includes a transfer which gives a right to re-assume power of the
income from asset or asset during the lifetime of the transferee.
D. Requisites:
- An asset is transferred under a " Revocable Transfer".
- The Transfer for this purpose includes any settlement or agreement.

6. S62: Exceptions where clubbing does not operate even in case of revocable
transfer
A. If the transfer is by way of trust or otherwise and is not revocable during the
lifetime of the beneficiary or the transferee
B. If the transfer was made before 1/4/1961 and such transfer is not revocable for
a period exceeding 6 years.
C. Provided, in both cases, the transferor should not derive direct or indirect
benefit from such income

7. S63: Definition of transfer and revocable transfer

A. A transfer is deemed to be revocable if it contains any provision for the
retransfer directly or indirectly of the whole or any part of the income or assets
to the transferor or it gives the transferor a right to re-assume power directly
or indirectly over the whole or any part of the income or the asset
B. Transfer includes any settlement, trust, covenant, agreement or arrangement

8. S64: Income arising to spouse, son's wife, minor child and HUF to be clubbed
A. S64(1)(ii): Clubbing of income of spouse
B. Requisites:
- Concern
- The taxpayer has Substantial interest
- Remuneration: Spouse gets salary, commission, fees, etc
- The remuneration paid to the spouse is not due to technical or
professional knowledge of the spouse.
C. In computing the total income of any individual, there shall be included all
such income arising directly or indirectly to the spouse in the following
circumstances:
- Where salary, commission, fees or any other form of remuneration,
whether in cash or in kind, from a concern in which such an individual
has substantial interest.
- Where asset is transferred to the spouse by that individual without
adequate consideration or in connection with an agreement to live
apart, the income arising from such asset
 D. However, where the remuneration is solely attributable to the application of
technical or professional qualification, knowledge and experience of the
spouse, it cannot be clubbed
E. Where both spouses have substantial interest in a concern and both receive
income from it, it will be clubbed with the spouse whose total income,
excluding such income, is greater.
F. Once clubbed in the hands of either spouse, it cannot be changed in
subsequent years unless the Assessing Officer is satisfied, after giving that
spouse an opportunity to be heard, that it is necessary to do so.
G. An individual is deemed to have substantial interest in a concern:
- If it is a company, he by himself or along with his relatives, beneficially
holds equity shares carrying not less than 20% of voting power
- In any other case, is entitled (by himself or with his relatives) to 20% of
profits
- Relative means u/s 2(41) husband, wife, brother or sister or any lineal
ascendant or descendant of the individual.
H. In computing the total income of any individual, there shall include all such
income arising directly or indirectly to the son’s wife from assets transferred
by that individual otherwise than for adequate consideration.
I. Any income arising directly or indirectly to any person or association of persons
from assets transferred otherwise than for adequate consideration to the
extent to which income from such assets is for the immediate or deferred
benefit of the spouse or son’s wife – to be clubbed.
J. Where assets transferred to a spouse or son’s wife are invested by the
transferee,
- In any business, not being capital contribution in a firm, proportionate
income arising to the transferee attributable to such investment is
clubbed
- In the nature of capital contribution to a firm, any interest receivable
by the transferee attributable to such investment is clubbed.
K. Where the asset is converted into another form by the transferee, income from
the converted asset is clubbed
L. CIT v. Smt Pelleti Sridevamma
- Mr A gifts Mrs A 50 lakhs.
- She invests this in an FD with interest income Rs 25,000.
- This is clubbed in the hands of Mr A
M. Philip John Plasket Thomas v. CIT
- The marital relationship should exist both at the time of transfer of
asset and at the time of accrual of income in order to attract clubbing
provisions.
N. In case of transfer of house property, S27 – deemed owner shall apply, not
S64

9. S64(1)(iv): Income from asset transferred to spouse:

 A. Requisites:
- The taxpayer is an individual.
- S/hе has transferred (directly/indirectly) an asset (other than a house
property). The asset is transferred to his/ her spouse.
- The asset is transferred without adequate consideration.
- There is no agreement to live apart.
B. Exceptions for S64(1)(iv)
- If assets are transferred before marriage
- If assets are transferred for adequate consideration
- If on the date of accrual of income, the transferee is not the spouse of
the transferor.
- If assets are transferred in connection with an agreement to live apart.
- If property is acquired by the spouse out of pin money (i. e an
allowance given to the wife by her husband for her dress & usual
household expenses.)

10. S64(1)(vi): Clubbing of income from assets transferred to son's wife

A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset after May 31, 1973.
- The asset is transferred to the son's wife.
- The asset is transferred without adequate consideration.
B. .

11. S64(1)(vii): Clubbing of income from assets transferred to a person for the benefit
of spouse
A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset to a person or an association of
persons.
- Assets are transferred for the benefit of the spouse.
- The transfer of assets is without adequate consideration.

12. S64(1)(viii): Clubbing of income from asset transferred to a person for the benefit
of son's wife
A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset after May 31, 1973.
- S/he has transferred an asset to a person or an association of
persons.
- Asset is transferred for the benefit of the son's wife.
- The Transfer of asset is without adequate consideration

13. S64(1A): Income of a minor child

 A. In computing the total income of any individual, there shall be included all such
income as arises or accrues to his minor child
B. Not if the income accrues on account of any manual work done by him or
activity involving application of his skill, talent or specialised knowledge and
experience
C. If the minor child suffers a disability under S80U, no clubbing
D. Where clubbing fails, income is taxable in the hands of the minor child.
E. Parents or guardians can prepare the return and file it on behalf of the minor.
F. All deductions and exemptions available to an adult individual, including basic
exemption of Rs 2,50,000 apply.
G. While the parents’ marriage subsists, the income of the minor child is clubbed
with the parent whose total income (excluding this) is greater. Once clubbed, it
cannot be changed unless the Assessing officer is satisfied.
H. If the marriage does not subsist, it will be clubbed with the parent who
maintains the child in the previous year.
I. S10(32): In the hands of the clubbed parent, any income of the minor child to
the extent clubbed or Rs 1.500 per child is exempt, whichever is less
J. S2(15B): Child includes adopted child and step child
K. Clubbing does not happen when the child attains majority.
L. Exceptions to S64(1A)
- Income of minor child on account of any manual work.
- Income of minor child on account of any activity involving application of
his skills, talent or specialized knowledge & experience.
- Income of minor child suffering from any disability specified under
S80U.
M. .

14. S64(2): HUF

A. Where a member of an HUF has converted or transferred self -acquired
property for inadequate consideration into joint family property or thrown it
into the common stock of the family, the income arising therefrom is taxable
as the income of the transferor member
B. If such converted property is subsequently partitioned, the income from such
converted property as is received by the spouse of the transferor will be
taxable by clubbing
C. S64(2) as held in Shammi Kapoor v. ITO, is applicable only when the member
of an HUF converts his property into the property of the HUF or throws it into
the common stock of the HUF without any adequate consideration.
D. Clubbing provisions applies only to gifts, not loans
E. Tulsidas Kilachand v. CIT
- Natural love and affection are good considerations under contract law
but not enough under IT law.
F. For the purpose of clubbing, it is not necessary that the assessee’s own
income has to exceed the basic exemption limit.
 G. Losses can also be clubbed

15. S65:
A. The person in whose name it is clubbed is liable to pay the taxes.
B. When the assets are held jointly by more than one person, they are jointly and
severally liable to pay taxes.
16. .

Treatment of Losses - Set off and Carry Forward of Losses

1. S70-S80: Set off, or carry forward and set off
2. While one endeavors to derive income, the possibility of incurring losses cannot be
ruled out.
3. Based on the principles of natural justice, a set-off should be available for loss
incurred.
4. The income tax laws in India recognize this and provide for adjustment and utilization
of the losses.
5. For this purpose, the Income Tax Act, 1961 contains specific provisions (Sections 70 to
80) for the set-off and carry- forward of losses.

6. Provisions relating to Current year loss

A. S70: Set-off under the same head or Intra Head adjustment
The following are the exceptions for intra head adjustments in case of current
year losses
- Loss from Speculation business
- Loss from Specified Business under S35AD.
- Long term Capital Loss.
- Loss from the activity of owning and maintaining race horses.
- Any loss from a source which is exempt from tax shall not be eligible
for set off or carry forward.
B. S71: Set-off with other heads or Inter Head adjustment
The following are the exceptions for inter head adjustments in case of current
year loss
- Loss under the head Profits and Gains of Business or Profession‘
against salary income.
- Loss from Speculation business
- Loss from Specified Business under S35AD.
- Loss under Capital Gains.
- Loss from the activity of owning and maintaining race horses.
C. The maximum loss from house property which can be set-off against income
from any other head is Rs.2 Lakhs.
D. However if the assessee has opted for a new scheme under S115BAC, then he
cannot set-off house property loss against other heads of income.
7. Provisions relating to Carry forward loss:
A. S71B: Carry forward and set off loss from House Property
- It can be carried forward and set off only with income from house
property.
- It can be carried forward for the next 8 assessment years.
B. S72: Carry forward and set off of Business loss
- It can be carried forward and set off against the same head.
- It can be carried forward for 8 assessment years.
- Carry forward and set off is available to assessee who incurred loss.
- However, the exceptions being inheritance, amalgamation and
conversion etc. for which a fresh period of 8 years is available.
C. S73: Carry forward and set off of Speculation loss
- It can be carried forward and set off only against such income.
- It can be carried forward for the next 4 assessment years.
D. S73A: Carry forward and set off of loss from Specified business
- It can be carried forward and set off only against such income.
- It can be carried forward for indefinite period
E. S74: Carry forward and set off of loss from Capital gains
- It can be carried forward and set off against income under the head
capital gains.
- Short term Capital Loss can be set off against short term or long term
capital gains.
- Long term Capital Loss can be set off only against long term capital
gains.
- Both long term and short term loss can be carried forward for next 8
assessment years.
F. S74A: Carry forward and set off of loss from activity of owning and
maintaining of race horses
- It can be carried forward and set off only against such income.
- It can be carried forward for next 4 assessment years
G. .

8. S32(2): Unabsorbed depreciation

A. can be set off against any head, except income from salaries & casual
income
B. it can be carried forward for an indefinite period
9. Loss under the head Income from other sources cannot be carried forward for
further years except the loss from the activity of owning and maintaining race
horses.
10. No loss can be adjusted against casual income.
11. Loss from a source which is exempt cannot be set off with taxable income.
12. Loss returns shall be filed under S139(3) within the due date under S139(1) to claim
the benefit of carry forward of losses (S 80).
 - Exception for carry forward of loss from house property and unabsorbed
depreciation
13. Brought forward loss can be set off only against the same head (Intra Head) and not
under other head (Inter Head).
14. Current year loss must be first set-off against the income of the same head and if any
surplus must be adjusted against other heads subject to the above points.

15. S72(2): Order of set-off of losses

As per S72(2), brought forward business loss is to be set- off before setting off
unabsorbed depreciation.
Therefore, the order in which set- off will be effected is as follows
A. Current year depreciation / Current year capital expenditure on scientific
research and current year expenditure on family planning, to the extent
allowed.
B. S72(1): Brought forward loss from business/profession
C. S32(2): Unabsorbed depreciation
D. S35(4): Unabsorbed capital expenditure on scientific research
E. S36(1)(ix): Unabsorbed capital expenditure on family planning
16. .

Deductions: Chapter VI-A: S80-S80VVA

1. S80C
Amount paid or deposited towards
A. life insurance,
B. contribution to Provident Fund set up by the Government,
C. recognized Provident Fund,
D. contribution by the assessee to an approved superannuation fund,
E. subscription to National Savings Certificates,
F. tuition fees,
G. payment/ repayment for purposes of purchase or construction of a residential
house
H. many other investments.
I. The aggregate amount of deduction under section 80C, 80CCC and 80CCD(1)
shall not exceed Rs. 1,50,000/-

2. S80CCC
A. Deduction in respect of Payment of premium for annuity plan of LIC or any
other insurer.
B. Deduction is available upto a maximum of Rs. 150,000/-.
C. The premium must be deposited to keep in force a contract for an annuity
plan of the LIC or any other insurer for receiving pension from the fund.

3. S80CCD(1)
 A. Deduction for contribution in pension scheme notified by the Government to
the extent of 10% of salary in case of employees and 10% of total income in
case of others.

4. S80CCD(1B)
A. Maximum Deduction of Rs. 50,000/- for contribution in National Pension
Scheme.
B. The deduction is in addition to the maximum deduction of Rs. 1,50,000/-
available under 80C, 80CCC and 80CCD(1).

5. S80CCD(2)
A. Contribution by employer in pension scheme notified by the Government to
the extent of 10% of salary

6. S80CCG
A. Deduction is available upto 50% of the amount invested.
B. Maximum Deduction available Rs. 25,000/-

7. S80D
A. Deduction in respect of Medical Insurance Premium for Self and family
members.
- Maximum Deduction available Rs. 30,000/- for Senior Citizens and Rs.
25,000/- for others.
B. Deduction in respect of Medical Insurance Premium for Parents (Father or
mother or both)
- Maximum Deduction available Rs. 30,000/- for Senior Citizens parents
and Rs. 25,000/- in other cases. )

8. S80DD
A. Deduction in respect of maintenance including medical treatment of a
dependent who is a person with disability.
B. Maximum deduction Rs. 100,000 in case of severe disability (more than 80%)
and Rs. 50,000 in other cases. )

9. S80DDB
A. Deduction to the extent of Rs. 40,000 or the amount actually paid, whichever is
less for expenditure actually incurred on self or dependent relative for medical
treatment of specified disease or ailment

10. S80E
A. Deduction in respect of interest on loan taken for pursuing higher education.
B. The deduction is also available for the purpose of higher education of a relative

11. S80G
 A. Deduction in respect of donations to certain funds, charitable institutions,
etc.
B. The various donations specified in S80G are eligible for deduction upto either
100% or 50% with or without restriction as provided in S80G

12. S80GG
A. Deduction in respect of House Rent Paid.
B. Maximum Deduction Rs. 24000

13. S80GGA
A. Deduction in respect of certain donations for scientific research or rural
development

14. S80GGC
A. Deduction in respect of contributions given by any person to political parties

15. S80RRB
A. Deduction in respect of royalty on patents.
B. Maximum Deduction Rs. 3,00,000
16. S80QQB
A. Deduction in respect of royalty on Books
B. Maximum Deduction Rs. 3,00,000
17. S80TTA
A. Deduction in respect of interest on Saving accounts.
B. Maximum Deduction Rs. 10,000
18. S80U
A. Deduction in case of a person with disability.
B. Maximum Deduction: General disability - Rs. 50,000 and Severe disability - Rs.
1,00,000
19. S88
A. Rebate on life insurance premia, contribution to provident fund, etc.
B. Rebate:
- Tax rebate is a refund on taxes when the tax liability is less than the
taxes the individual has paid.
- Taxpayers usually get a refund on their income tax if they have paid more
than what they owe.
- The tax refund money is given back at the end of the financial year.
C. Maximum Deduction Rs. 150,000

20. S37: General

(1) Any expenditure (not being expenditure of the nature described in S30 to S36
and not being in the nature of capital expenditure or personal expenses of the
assessee), laid out or expended wholly and exclusively for the purposes of the
 business or profession shall be allowed in computing the income chargeable
under the head “Profits and gains of business or profession”.
- Explanation 1: For the removal of doubts, it is hereby declared that any
expenditure incurred by an assessee for any purpose which is an
offence or which is prohibited by law shall not be deemed to have been
incurred for the purpose of business or profession and no deduction or
allowance shall be made in respect of such expenditure.
- Explanation 2: For the removal of doubts, it is hereby declared that for the
purposes of subsection (1), any expenditure incurred by an assessee on
the activities relating to corporate social responsibility referred to in
S135 of the Companies Act, 2013 shall not be deemed to be an
expenditure incurred by the assessee for the purposes of the business
or profession.
(2B) Notwithstanding anything contained in sub-section (1), no allowance shall
be made in respect of expenditure incurred by an assessee on advertisement
in any souvenir, brochure, tract, pamphlet or the like published by a political
party.

21. Southern Technologies Ltd. v. Jt. CIT

A. S37 applies only to items which do not fall in S30 to S36
B. If a provision for doubtful debt is expressly excluded from S36(1)(vii), then
such provision can not be claimed as a deduction under S37 even on the basis
of „real income theory.‟

22. CIT v. Dhanrajgirji Raja

A. It is not open to the department to prescribe what expenditure assessee
should incur and in what circumstances he should incur that expenditure.
B. Every businessman knows his interest best.

23. Sassoon J. David & Co. (P.) Ltd. v. CIT

A. The expression "wholly and exclusively‟ used in S10(2)(xv) of the 1922 Act
[corresponding to S37(1) of the 1961 Act] does not mean necessarily.
B. The fact that somebody other than the assessee is also benefited by the
expenditure should not come in the way of an expenditure being allowed by
way of deduction if it satisfies otherwise the tests laid down by law.

24. CIT v. Woodward Governor India (P.) Ltd.

A. Whether expression "expenditure‟ as used in S37 may, in circumstances of a
particular case, cover an amount which is really a "loss‟, even though said
amount has not gone out from pocket of assessee
- Held, yes
B. Whether loss suffered by assesses on account of foreign exchange
difference as on date of balance sheet is an item of expenditure under section
37(1)
 - Held, yes
C. Whether an enterprise has to report outstanding liability relating to import of
raw material using closing rate of foreign exchange and any difference, loss or
gain, arising on conversion of said liability at closing rate should be
recognized in profit and loss account for reporting period
- Held, yes
D. Whether amendment to S43A by Finance Act, 2002 w.e.f 1-4-2003 is
amendatory and not clarificatory
- Held, yes
25. .

Mod 3: Part II: Procedural Aspects (Mod 3)

Double Taxation - Double Taxation Relief

1. Double taxation occurs when you are taxed on the same income in two different
countries
A. one where you earn the income (known as the source country)
B. other where you are a tax resident (known as the resident country).
2. Double taxation refers to the taxation of the same income in two different countries or
in the hands of two different persons.
3. In double taxation, there is a double levy of income tax.
4. The levy may be at the
A. investor level, and the payor level or
B. residence-based taxation in one country and at the source level in another
country.

5. Double taxation:
A. At an investor and corporate level, the common example of double taxation is
the taxation of dividend income. The company paying dividends first pays
tax on its total earnings. A portion of the after-tax earnings is then
distributed as dividends to shareholders of the company. Thus, the profits
distributed as dividend had already suffered tax.
B. The dividend income gets once again taxed in the hands of the shareholders
or investors. Thus, resulting in double taxation of dividends.
C. In case of income earned by a non-resident in India, there is a tax liability in
India unless exempted by the tax law.
D. The income is generally subject to a tax deduction at source or TDS. At the
same time, the income gets taxed as part of the global income in the country
of residence. The income suffers a tax twice in two different countries.
E. The effects of double taxation get nullified if the recipient of the income gets a
tax credit for the tax paid.
 F. The TDS is generally eligible for a tax credit in the hands of the income
earner.
G. In the case of non-residents, the tax treaties between India and the respective
foreign country allows for a tax credit in the country of residence.
H. However, in the case of dividends, there is a levy of TDS on dividends which is
eligible for a tax credit in the hands of the investors. The TDS levy is at the
distribution level and in addition to the tax on net taxable income of the
company.
I. The tax on dividends stands on a different footing in comparison to interest
paid to borrowers of a company. The interest is the income of the
borrowers, eligible for a tax credit for TDS and hence taxed only once.

6. India has signed comprehensive DTAAs with more than 94 countries to help Non-
Resident Indians (NRIs) avoid being doubly taxed.
7. This list includes countries such as
A. Australia,
B. Canada,
C. France,
D. Germany,
E. Hong Kong,
F. Portugal,
G. Singapore,
H. UAE,
I. USA,
J. UK and many others.
8. Under these agreements, your income and remittances are subject to tax and
benefits as per the DTAA with your resident country.
9. DTAA: Double Taxation Avoidance Agreement.

10. Chapter IX: Double Taxation Relief: S90, S90A, S91

A. India has implemented Double Taxation Avoidance Agreements (DTAA) with
over 94 countries, supported by the provisions of S90, S90A, and S91 of the
Income Tax Act of 1961.
B. These provisions are designed to prevent the same income from being taxed
twice and to provide taxpayers with the necessary relief, thereby fostering
smoother international business operations and financial transactions.

11. Income is typically earned in the country where services are rendered or income-
generating assets are located, known as the source country.
12. However, individuals and businesses often reside or are based in a different country,
referred to as the country of residence.
13. With a tax treaty like the India-Singapore DTAA in place, the company can avail of tax
relief under S90 of the Income Tax Act.
14. If no such treaty exists, the relief could instead be sought under S91.
15. Types of double taxation relief:
To prevent the problem of double taxation - where the same income is taxed by two
different jurisdictions - reliefs are provided under international tax law. These reliefs are
broadly categorized into two types:
A. Bilateral Relief
- Bilateral relief applies when a Double Taxation Avoidance Agreement
(DTAA) exists between India and another country.
Under this arrangement, there are two main methods to alleviate double
taxation:
- Exemption Method: This method allows income that has been taxed in
one country to be exempt from tax in the resident country, thus
preventing double taxation.
- Credit Method: Under this method, the tax paid in one country is
credited against the tax payable in the resident country on the same
income, effectively reducing the total tax liability to the higher of the
two rates.
B. Unilateral Relief
- Unilateral relief comes into play when there is no DTAA between the
resident country and the source country.
- In such cases, the resident country, on its own initiative, may offer
relief to its residents.
- S91 of the Income Tax Act of 1961 provides the framework for unilateral
relief, where the home country allows a credit for the tax paid in
another country on income derived from that country.

16. Benefits of Relief under Sections 90, 90A, and 91 of the Income Tax Act
A. Avoidance of Double Taxation
- The foremost advantage of sections 90, 90A, and 91 of the Income Tax
Act is the prevention of double taxation. This ensures that income
earned by individuals or entities in foreign countries is not taxed in the
source and country of residence. Such clarity in tax obligations upholds
fairness and reduces the financial burden on taxpayers, encouraging
them to engage in cross-border economic activities without the fear of
excessive taxation.
B. Promotion of Economic Cooperation
- Sections 90, 90A, and 91 significantly contribute to fostering international
economic cooperation by delineating clear tax rules and agreements.
These legal frameworks simplify cross-border transactions, making it
easier for businesses to operate internationally. As a result, they
encourage foreign investments and trade, which are pivotal to global
economic integration and growth.
C. Dispute Resolution Mechanism
 - One of the critical features of the Double Taxation Avoidance
Agreements (DTAA) referenced in these sections is the Mutual
Agreement Procedure (MAP). MAP provides a formal avenue for
resolving tax disputes between countries, offering a way to address
issues that may arise concerning the interpretation or application of a
DTAA.
- This mechanism ensures that disputes are settled in a fair and impartial
manner, thereby maintaining the integrity of international tax
agreements and preventing tax-related conflicts. Overall, the relief
provided under Sections 90, 90A, and 91 plays a vital role in international
finance and taxation.

17. S90:
A. S90 of the Income Tax Act pertains to cases involving the Double Taxation
Avoidance Agreement (DTAA).
B. This provision ensures that individuals working for foreign companies do not face
double taxation on their income.
C. Under DTAA, if an individual is employed in a foreign country or an
expatriate works in India, both governments agree not to tax the same
income simultaneously.
D. The agreement typically includes mechanisms like foreign tax credits or
exemptions to ensure taxation occurs only once.

18. S90A:
A. S90A extends the principles of S90 to scenarios where the DTAA involves
specific associations, rather than countries directly.
B. It applies when a particular organization or association in India has
established a DTAA with a counterpart in a foreign country.
C. This section allows tax relief through a similar process to S90 but is specifically
tailored for agreements between institutional bodies.
D. Relief Under Section 90A: For agreements under Section 90A, tax relief is
available as a credit for taxes paid abroad if these exceed the tax liability in
India. This provision ensures that entities involved in such DTAAs do not pay
more in taxes than they are obligated to under domestic laws.

19. S91: Unilateral relief:

A. S91 provides a solution for individuals who earn income from countries where
India does not have a DTAA.
B. This unilateral relief allows taxpayers to claim a credit for the lower two tax
rates paid in the respective countries, providing significant relief in cases of
double taxation.
This relief is available under specific conditions:
C. The income must have been earned in the previous financial year.
 D. The income should be subject to taxation in both India and the foreign
country.
E. The tax system of the foreign country must be comparable to that of India.
F. The taxpayer must have paid taxes on this income in the foreign country.
G. The amount of unilateral relief is calculated as the lesser of the tax rates
applied by India or the foreign country on the foreign income.
H. This amount is then deducted from the taxpayer's total tax liability in India.
I. To benefit from either bilateral relief under a DTAA or unilateral relief under
Section 91, taxpayers are required to
- file an Indian income tax return and
- provide a tax payment or deduction certificate from the relevant
foreign tax authority.

20. Key Requirements for Claiming Foreign Tax Credit

A. Residents of India who have paid taxes on foreign income are eligible.
B. The credit must be claimed in the year the income is assessed in India, and
can be adjusted over multiple years if the income is assessed progressively.
C. The credit can be applied against tax, surcharge, and cess as per Indian laws
but does not cover interest, penalties, or other fees.
D. Credits for taxes under dispute are not permitted until the dispute is
resolved. Taxpayers must submit evidence of the resolved dispute and
payment within six months thereafter.
E. Taxpayers must submit
- Form No. 67
- with a certificate or statement from the foreign tax authority detailing
the nature of the income and tax paid.
- This must be accompanied by proof of tax payment or deduction.
F. All required documents should be filed on or before the due date for filing the
income tax return as specified under S139(1) of the Income Tax Act.

21. Penalties for Non disclosure of foreign income

A. Default in Tax Payment:
- If taxes are not paid correctly, the tax authorities will determine the
penalty amount, which will not exceed the amount of tax payable.
- This serves as a deterrent to ensure that all tax liabilities are met on
time.
B. Under-reporting of Income:
- In cases where the income declared by the taxpayer is less than what is
determined by the tax authorities, a penalty of 50% of the tax payable
on the under-reported income is levied.
C. Failure to Maintain Documents and Books of Accounts:
- Generally, failing to maintain required documents and books of
accounts incurs a penalty of Rs. 25,000.
 - If foreign transactions are involved, the penalty increases to 2% of the
value of such international transactions.
D. Penalty for Fake Documents:
- If tax authorities discover fake invoices or any fraudulent
documentary evidence within the taxpayer's records—such as
invoices for non-existent goods, services, or transactions from non-
existent entities—the penalty will be equivalent to the sum of such false
or omitted entries.
22. Penalty for not filing an income tax return
A. Failing to file an income tax return incurs a penalty of Rs. 5,000.
23. .

Bare act and other notes: Chapter IX: Double taxation relief
1. How to Compute Double Taxation Relief Under Section 90 of Income Tax?
A. Compute Total Income: Start by calculating the aggregate of both Indian and
foreign income. This total will serve as the basis for further tax calculations.
B. Tax Calculation on Total Income: Compute the tax on this combined global
income as per the provisions of the Income Tax Act. This involves applying the
appropriate tax rates to the total income.
C. Average Tax Rate: Determine the average tax rate by dividing the total tax
amount by the total global income. This rate reflects the proportion of tax relative
to income, providing a baseline for assessing the tax impact on foreign income
specifically.
D. Calculate Tax on Foreign Income: Apply the average tax rate calculated in the
previous step to the foreign income. This calculation gives the hypothetical tax
amount that would be payable on the foreign income if it were subjected to Indian
tax rates.
E. Compute Tax Paid in a Foreign Country: Record the actual tax paid in the foreign
country on that foreign income. This step is crucial as it will be used to compare
against the computed tax on foreign income to determine the relief amount.
F. The relief for double taxation will be the lower of the tax computed on foreign
income (Step 4) and the actual tax paid abroad (Step 5). This ensures that
taxpayers do not end up paying more in taxes than they are required to, adhering
to fair taxation principles while acknowledging international income sources.
G. Example:
- Ms. B, residing in India, earned Rs. 1,50,000 in India and Rs. 2,50,000
from Germany. She paid Rs. 15,000 as tax in Germany. Her total tax
liability on global income in India is Rs. 10,000. The calculation is as
follows:
- Step 1:Total income is Rs. 4,00,000 (Rs. 1,50,000 + Rs. 2,50,000)
- Step 2:Tax on global income is Rs. 10,000.
- Step 3:Average tax rate is 2.5% (10,000 / 4,00,000 * 100).
- Step 4:Tax on foreign income as per Indian rates is Rs. 6,250 (2,50,000 *
2.5%).
 - Step 5:Tax paid in Germany is Rs. 15,000.
- The relief she can claim will be Rs. 6,250, the lesser of the tax computed
on foreign income as per Indian rates and the tax actually paid in
Germany.

2. Calculating Double Taxation Relief under Section 91 of the Income Tax Act
A. Calculate Tax Payable in India: Determine the tax liability on foreign income
according to Indian tax rates.
B. Compare Tax Rates: Identify the lower tax rate between India and the foreign
country.
C. Calculate Relief: Apply the lower tax rate to the doubly taxed income.
D. Example:
- Mr Y earned Rs. 3,00,000 from a country with no DTAA with India, with a
tax rate of 25% in that country and a 30% tax rate applicable in India. His
relief calculation would proceed as follows:
- Step 1:Indian tax payable on foreign income is Rs. 90,000 (3,00,000 *
30%).
- Step 2: The lower tax rate between the Indian rate (30%) and the foreign
rate (25%) is 25%.
- Step 3: The relief he can claim is Rs. 75,000 (3,00,000 * 25%).
- The relief Mr. Y can claim under Section 91 will be Rs. 75,000, calculated
using the lower foreign tax rate. To effectively claim a foreign tax credit
and navigate the intricacies of international tax laws, taxpayers must
adhere to the regulations set forth in Rule 128 of the Income Tax Rules,
1962. This rule outlines the necessary steps and documentation required
for claiming tax relief on income earned abroad, ensuring compliance with
both Indian tax laws and international agreements.
E. .

3. Steps to Calculate the Foreign Tax Credit

Segmentation of Income Sources: The Foreign Tax Credit must be computed
separately for each source of income. This segmentation ensures that the credit
is accurately applied to the tax liabilities associated with specific earnings.
- Comparison of Tax Liabilities: The amount of credit to be claimed is the
lower of:
(a) The tax payable on such income under the Indian Income Tax Act,
or
(b) The taxes actually paid in the foreign country.
- Currency Conversion for Tax Payments:
(a) To determine the amount of taxes paid in a foreign country, the
foreign currency amount must be converted to Indian Rupees.
This conversion should use the Telegraphic Transfer Buying Rate
(TTBR) as of the last day of the month immediately preceding the
month in which the foreign tax was paid or deducted. This rate
 provides a standardized approach to handling currency
fluctuations and ensures that the tax credit calculation reflects a
fair conversion rate.
4. .

5. S90. Agreement with foreign countries or specified territories

(1) The Central Government may enter into an agreement with the Government of
any country outside India or specified territory outside India,
(a) for the granting of relief in respect of
- (i) income on which have been paid both income-tax under this
Act and income-tax in that country or specified territory, as the
case may be, or
- (ii) income-tax chargeable under this Act and under the
corresponding law in force in that country or specified territory, as
the case may be, to promote mutual economic relations, trade and
investment, or
(b) for the avoidance of double taxation of income under this Act and under
the corresponding law in force in that country or specified territory, as the
case may be, or
(c) for exchange of information for the prevention of evasion or avoidance of
income-tax chargeable under this Act or under the corresponding law in
force in that country or specified territory, as the case may be, or
investigation of cases of such evasion or avoidance, or
(d) for recovery of income-tax under this Act and under the corresponding
law in force in that country or specified territory, as the case may be,
and may, by notification in the Official Gazette, make such provisions as may be
necessary for implementing the agreement.
(2) Where the Central Government has entered into an agreement with the
Government of any country outside India or specified territory outside India, as
the case may be, under sub-section (1) for granting relief of tax, or as the case
may be, avoidance of double taxation, then, in relation to the assessee to whom
such agreement applies, the provisions of this Act shall apply to the extent they
are more beneficial to that assessee.
(2A) Notwithstanding anything contained in sub-section (2), the provisions of
Chapter X A of the Act shall apply to the assessee even if such provisions are
not beneficial to him.
(3) Any term used but not defined in this Act or in the agreement referred to in sub-
section (1) shall, unless the context otherwise requires, and is not inconsistent
with the provisions of this Act or the agreement, have the same meaning as
assigned to it in the notification issued by the Central Government in the Official
Gazette in this behalf.
(4) An assessee, not being a resident, to whom an agreement referred to in sub-
section (1) applies, shall not be entitled to claim any relief under such agreement
unless 2 [a certificate of his being a resident] in any country outside India or
 specified territory outside India, as the case may be, is obtained by him from the
Government of that country or specified territory.
(5) The assessee referred to in sub-section (4) shall also provide such other
documents and information, as may be prescribed.
- Explanation 1.—For the removal of doubts, it is hereby declared that the
charge of tax in respect of a foreign company at a rate higher than the
rate at which a domestic company is chargeable, shall not be regarded as
a less favourable charge or levy of tax in respect of such foreign
company.
- Explanation 2.—For the purposes of this section, “specified territory”
means any area outside India which may be notified as such by the
Central Government.
- Explanation 3.—For the removal of doubts, it is hereby declared that
where any term is used in any agreement entered into under sub-section
(1) and not defined under the said agreement or the Act, but is assigned a
meaning to it in the notification issued under sub-section (3) and the
notification issued thereunder being in force, then, the meaning assigned
to such term shall be deemed to have effect from the date on which the
said agreement came into force.
- Explanation 4.—For the removal of doubts, it is hereby declared that
where any term used in an agreement entered into under sub-section (1)
is defined under the said agreement, the said term shall have the same
meaning as assigned to it in the agreement; and where the term is not
defined in the said agreement, but defined in the Act, it shall have the
same meaning as assigned to it in the Act and explanation, if any, given
to it by the Central Government

6. S90A. Adoption by Central Government of agreement between specified

associations for double taxation relief
(1) Any specified association in India may enter into an agreement with any specified
association in the specified territory outside India and the Central Government
may, by notification in the Official Gazette, make such provisions as may be
necessary for adopting and implementing such agreement
(a) for the granting of relief in respect of
- (i) income on which have been paid both income-tax under this
Act and income-tax in any specified territory outside India; or
- (ii) income-tax chargeable under this Act and under the
corresponding law in force in that specified territory outside India
to promote mutual economic relations, trade and investment, or
(b) for the avoidance of double taxation of income under this Act and under
the corresponding law in force in that specified territory outside India, or
(c) for exchange of information for the prevention of evasion or avoidance of
income-tax chargeable under this Act or under the corresponding law in
 force in that specified territory outside India, or investigation of cases of
such evasion or avoidance, or
(d) for recovery of income-tax under this Act and under the corresponding
law in force in that specified territory outside India.
(2) Where a specified association in India has entered into an agreement with a
specified association of any specified territory outside India under sub-section (1)
and such agreement has been notified under that sub-section, for granting relief
of tax, or as the case may be, avoidance of double taxation, then, in relation to
the assessee to whom such agreement applies, the provisions of this Act shall
apply to the extent they are more beneficial to that assessee.
(2A) Notwithstanding anything contained in sub-section (2), the provisions of
Chapter XA of the Act shall apply to the assessee even if such provisions are not
beneficial to him.
(3) Any term used but not defined in this Act or in the agreement referred to in sub-
section (1) shall, unless the context otherwise requires, and is not inconsistent
with the provisions of this Act or the agreement, have the same meaning as
assigned to it in the notification issued by the Central Government in the Official
Gazette in this behalf.
(4) An assessee, not being a resident, to whom the agreement referred to in sub-
section (1) applies, shall not be entitled to claim any relief under such agreement
unless a certificate of his being a resident] in any specified territory outside India,
is obtained by him from the Government of that specified territory.
(5) The assessee referred to in sub-section (4) shall also provide such other
documents and information, as may be prescribed
- Explanation 1.—For the removal of doubts, it is hereby declared that the
charge of tax in respect of a company incorporated in the specified
territory outside India at a rate higher than the rate at which a domestic
company is chargeable, shall not be regarded as less favourable charge
or levy of tax in respect of such company.
- Explanation 2.—For the purposes of this section, the expressions
(a) “specified association” means any institution, association or body,
whether incorporated or not, functioning under any law for the time
being in force in India or the laws of the specified territory outside
India and which may be notified as such by the Central
Government for the purposes of this section;
(b) “specified territory” means any area outside India which may be
notified as such by the Central Government for the purposes of
this section.
- Explanation 3.—For the removal of doubts, it is hereby declared that
where any term is used in any agreement entered into under sub-section
(1) and not defined under the said agreement or the Act, but is assigned a
meaning to it in the notification issued under sub-section (3) and the
notification issued thereunder being in force, then, the meaning assigned
 to such term shall be deemed to have effect from the date on which the
said agreement came into force.
- Explanation 4.—For the removal of doubts, it is hereby declared that
where any term used in an agreement entered into under sub-section (1)
is defined under the said agreement, the said term shall have the same
meaning as assigned to it in the agreement; and where the term is not
defined in the said agreement, but defined in the Act, it shall have the
same meaning as assigned to it in the Act and explanation, if any, given
to it by the Central Government.

7. S91: Countries with which no agreement exists.

(1) If any person who is resident in India in any previous year proves that, in respect
of his income which accrued or arose during that previous year outside India
(and which is not deemed to accrue or arise in India), he has paid in any country
with which there is no agreement under section 90 for the relief or avoidance of
double taxation, income-tax, by deduction or otherwise, under the law in force in
that country, he shall be entitled to the deduction from the Indian income-tax
payable by him of a sum calculated on such doubly taxed income at the Indian
rate of tax or the rate of tax of the said country, whichever is the lower, or at the
Indian rate of tax if both the rates are equal.
(2) If any person who is resident in India in any previous year proves that in respect
of his income which accrued or arose to him during that previous year in Pakistan
he has paid in that country, by deduction or otherwise, tax payable to the
Government under any law for the time being in force in that country relating to
taxation of agricultural income, he shall be entitled to a deduction from the Indian
income-tax payable by him
(a) of the amount of the tax paid in Pakistan under any law aforesaid on such
income which is liable to tax under this Act also; or
(b) of a sum calculated on that income at the Indian rate of tax; whichever is
less.
(3) If any non-resident person is assessed on his share in the income of a registered
firm assessed as resident in India in any previous year and such share includes
any income accruing or arising outside India during that previous year (and which
is not deemed to accrue or arise in India) in a country with which there is no
agreement under section 90 for the relief or avoidance of double taxation and he
proves that he has paid income-tax by deduction or otherwise under the law in
force in that country in respect of the income so included he shall be entitled to a
deduction from the Indian income-tax payable by him of a sum calculated on
such doubly taxed income so included at the Indian rate of tax or the rate of tax
of the said country, whichever is the lower, or at the Indian rate of tax if both the
rates are equal.
Explanation: In this section,
- (i) the expression “Indian income-tax” means income-tax charged in accordance
with the provisions of this Act;
 - (ii) the expression “Indian rate of tax” means the rate determined by dividing the
amount of Indian income-tax after deduction of any relief due under the
provisions of this Act but before deduction of 3 [any relief due under this
Chapter], by the total income;
- (iii) the expression “rate of tax of the said country” means income-tax and super-
tax actually paid in the said country in accordance with the corresponding laws in
force in the said country after deduction of all relief due, but before deduction of
any relief due in the said country in respect of double taxation, divided by the
whole amount of the income as assessed in the said country;
- (iv) the expression “income-tax” in relation to any country includes any excess
profits tax or business profits tax charged on the profits by the Government of
any part of that country or a local authority in that country.
8. .

Procedure for Assessment of Tax

1. Income Tax Assessment
A. The income tax returns filed by individuals are scrutinized and reviewed by
the income tax authorities at the end of every financial year; this is called
income tax assessment.
B. In India, the income tax provisions have a structural flow of tax assessment,
which must be adhered to by the individuals and the income tax department.
C. The flow of assessments laid down by the Income Tax Act are,
- S140A: Self-assessment
- S143(1): Summary-assessment
- S143(3): Scrutiny-assessment
- Regular assessment
- S144: Best judgment-assessment
- S147: Income escaping assessment, S177 in some websites
D. .

2. S140A: Self-assessment:
A. The taxpayer consolidates their total income from different sources and
self-assesses their tax liability.
B. In self-assessment, the assessee must compute income tax returns on his
own, calculating the income earned against loss incurred and other
deductions.
C. If the amount computed exceeds the tax deducted at source (TDS) or the
advance tax, he must pay the outstanding amount before filing the income
tax returns, which is known as self-assessment tax.
D. Self-assessment tax is the remaining amount the assessee must pay to the
income tax department when the tax arrived exceeds the tax deducted at
source TDS and advance tax.
 E. The excess amount can occur when the taxpayer acquires capital gains or
any other income on which TDS is deducted at a lower rate but the taxpayer
is coming under higher slabs.
F. If the assessee files income tax returns without self-assessment tax, such
filing will be considered void and subject to interest on account of
nonadherence to provisions of the law.

3. S143(1): Summary assessment:

A. Summary assessment is the first stage of tax assessment, where overview
scrutiny will be conducted
B. The information submitted by the assessee in his income tax return is cross-
checked against the information that the Income Tax Department has access
to.
C. The reasonableness and the correctness of the return is checked by the
Income Tax Department.
D. The following are looked into:
- Mathematical miscalculations or arithmetical errors in the return.
- Incorrect claim
- Incorrect disallowance
- Errors occurring from form16, 16A, or 26AS.
- Disallowance of expenses u/s 10AA, 80 IA to 80 IE if the return is
furnished beyond the due date specified under S139(1).

E. No such adjustment shall be made unless an intimation is given to the

assessee of such adjustment in writing or electronic mode.

4. S143(3): Scrutiny assessment:

A. An officer will be assigned to review the filings carefully and ensure that the
computed tax liability is not under or overstated by the assessee.
B. The objective of this assessment is to confirm that the taxpayer has
- not understated the income,
- not computed excessive loss, or
- not underpaid the tax in any manner.
C. Detailed scrutiny will be conducted.
D. In case a mismatch is found in the submitted statement, the assessee could
agree with the claim, or if he has some dissatisfaction, he could appeal to
- the commissioner of income tax appeals (CITA)
- further to the income tax appellate tribunal (ITAT),
- high court or
- supreme court respectively by filing a rectification request under
S154.
E. .

5. Regular assessment
 A. The Income Tax Department authorizes the assessing officers, generally the
income tax officers or above ranks, to conduct an assessment.
B. This assessment is to be conducted to ensure that the taxpayers haven’t
understated and overstated their income and filed their ITR within the tax
compliances.
C. The Central Board of Direct Taxes (CBDT) has set some parameters for
identifying cases for scrutiny assessments.
D. When a taxpayer’s case is flagged for scrutiny, they receive advance notice.
E. However, this notice must be sent to the taxpayer within six months from the
end of the financial year in which the return was filed.
F. During the assessment process, taxpayers are required to provide their books
of accounts and supporting documentation to verify their income claims.
G. The Assessing Officer then evaluates the book of accounts and documents to
come to a conclusion that the declared income is accurate or requires
adjustment.
H. If differences are found, additional tax liabilities may be imposed.

6. S144: Best judgment-assessment:

A. Best judgment assessment refers to a situation where the officer computes the
tax payable as the assessee does not comply to provide or maintain
necessary source documents or book of accounts to support the claim when
requested to submit.
B. In the best judgment assessment the assessing officer bases the assessment
on his best judgment i.e. he must not act dishonestly or capriciously.
C. In this scenario, the officer computes the tax liability based on his best
judgment.
D. The Income Tax Act specifies certain situations under which the income tax
officer can compute tax liability based on best judgment,
- When the assessee does not file an income tax return
- When the assessee does not respond to the notice requesting the
submission of documents
- The response of the assessee has crossed the limit permitted by the
Central Board of Direct Taxes (CBDT)
- The assessee fails to comply with the terms as contained in the notice
issued under summary assessment after providing an opportunity to to
listen to the assessee’s arguments, the assessing officer passes an order
based on all the relevant material available to him.
- When the officer is not satisfied with the documents provided.
E. .

7. S147: Income escaping-assessment:

A. When the assessing officer has reasons to believe that any income
chargeable to tax has escaped assessment for a financial year, an income
escaping-assessment will be conducted.
 B. In such cases, the income tax department holds full authority to revisit and
review 6 years’ tax filing, if the alleged amount is Rs. 1,00,000 or more.
C. As per budget 2021, the time limit for opening the case has been reduced
from 6 years to 3 years.
D. However, for cases where concealment of income exceeds Rs.50L (Serious
Tax evasion cases), cases can be opened for 10 years.
E. Circumstances under which income is deemed to have escaped assessment
are,
- When the assessee is found to have taxable income but has not filed
income tax returns for the financial year.
- The submitted income tax return is under or overstated
- Failure to furnish information relating to international income
- Unaccounted overseas assets
- When the income of the assessee exceeds the tax exemption limit but
has not filed income tax returns.
- Has claimed incorrect deductions or exemptions in their filed ITR.
F. .
8. .

Assessment of Special Class of Assesses.

1. Special assessee are those categories of natural and legal persons who are either
conferred with some privileges or imposed with a special burden by the Income Tax
Act, 1961.
2. Chapter XV of the Income-tax Act, 1961 deals with the chapter called ‘Liabilities of
Special Class of Assessee’.
3. S159 to S181 of The Income-tax Act, 1961 in total amounting to 29 Sections deals with
various types of Special Assesses.
4. The Income Tax Act, 1961 provides for 15 categories of assessee under Chapter XV.

Special assessees:
1. S159: Legal representatives
A. S159 provides the special procedure for the Assessment of legal
representatives.
B. In case of assessment of Deceased Person, after the death of the person his
legal representatives are liable to the same extent as the deceased.
C. All legal proceedings initiated against the deceased before his death may be
continued against the legal representatives.
D. Any new proceedings can also be initiated against the legal representatives
for the liability of the deceased.
E. The legal representatives are personally liable for the undischarged debts of
the assets of the deceased.

2. S160-S167: Representative Assessees (General)

 A. S160-S167 provides the special procedure for the Assessment of
Representative Assessee.
B. S160 defines Representative Assessee as
- In respect of the income of a non-resident – his agent
- In respect of the income of a minor, lunatic or idiot – the guardian or
manager
- In respect of income which court of wards, Administrator general, trustee
or receiver or manager appointed by the court - court of wards,
Administrator general, trustee or receiver or manager.
- In respect of income of declared Trust, Wakf – trustee(s),
- In respect of income of oral trust - trustee(s).
C. S161 provides the Liability of Representative Assessee.
- representative assessee is deemed to be the original assessee in case
of absence of the original assessee.
- Representative Assessee is subject to the same duties,
responsibilities and liabilities of the original assessee.
D. S162: Rights of Representative Assessee
- every Representative Assessee, who pays any sum under the Act, is
entitled to recover the sum so paid from the person on whose behalf it
was paid.
- Representative Assessee can retain any money in his possession
equal to the sum so paid.
E. .

3. S163: Agents
A. Agent is defined under S163 to mean the persons:
- Who is employed by or on behalf of the non-resident;
- who has any business connection with the non-resident, from or
through whom the non- resident is in receipt of any income, whether
directly or indirectly; or
- who is the trustee of the non-resident and includes also any other
person who, whether a resident or non-resident, has acquired by means
of a transfer, a capital asset in India.
B. No person shall be treated as the agent of a non-resident unless he has had
an opportunity of being heard by the Assessing Officer as to his liability.

4. S164: Unknown beneficiaries

A. S164 provides that, court of wards, Administrator general, trustee or
receiver or manager are liable as representative assessees, on behalf or for
the benefit of any person or where the individual shares of the persons on
whose behalf or for whose benefit such income or such part thereof is
receivable are indeterminate or unknown.
 B. Such income, such part of the income and such persons being hereafter in this
section referred to as “relevant income”, “part of relevant income” and
“beneficiaries”, respectively

5. S164A: Oral trust

A. S164A remarks that if trustee receives or is entitled to receive any income on
behalf or for the benefit of any person under an oral trust, tax shall be
charged on such income at the maximum marginal rate

6. S167A, S167B: Firms, association of persons and body of individuals

A. S167A states that for firms, tax shall be charged on its total income at the rate
as specified in the Finance Act of the relevant year, ie, 30% according to
Finance Year, 2015.
B. S167B remarks that for the members of AOP and BOI, individual Shares of
members of AOP or BOI, whole or any part of the income is indeterminate or
unknown on the total income of AOP or BOI has to be taxed at maximum
marginal rate.

7. S169: Executors
A. Income of the estate of a deceased person shall be chargeable to tax in the
hands of the executor.
B. If there is only one executor, then, as if the executor were an individual; or if
there are more executors than one, then, as if the executors were an
association of persons.
C. S169 states that executor can recover the tax in accordance with S162 of the
Act, from the income of the estate

8. S170: Succession of business or profession

A. S170 deals with the succession to business otherwise than on death (i.e.)
person carrying on any business or profession (predecessor) succeeded therein
by any other person (successor), the predecessor shall be assessed in respect
of the income of the previous year in which the succession took place up to
the date of succession and the successor shall be assessed in respect of the
income of the previous year after the date of succession.
B. When the predecessor cannot be found, the liability shall be imposed on the
successor in like manner.
C. Assessed on the predecessor, cannot be recovered from him
D. Assessing Officer shall make it payable by and recoverable from the
successor. And the successor shall be entitled to recover the same from the
predecessor.

9. S171: Partition
A. Assessment after partition of a Hindu undivided family (HUF) is dealt under
S171.
 B. At the time of making an assessment if it is claimed by any member of a
Hindu family, to the Assessing Officer that, a partition, whether total or partial,
has taken place among the members of such Family.
C. The total income of the joint family for the period up to the date of partition
shall be assessed as if no partition had taken place; and each members shall,
in addition to any tax for which he or it may be separately liable, be jointly
and severally liable for the tax on the income so assessed.

10. Profits of non-residents from occasional shipping business

A. Profits from ship belonging to or chartered by a non-resident, which carries
passengers, livestock, mail or goods shipped at a port in India, if seven and a
half percent of the amount paid or payable on account of such carriage to the
owner or the charterer or to any person on his Behalf, whether that amount is
paid or payable in or out of India shall be deemed to be income accruing in
India to such persons.
B. A return of the full amount paid or payable should be furnished before the
departure from any port in India or within 30 days of the departure of the
ship.

11. S173: Non-residents

A. S2(30) defines “non-resident” as a person who is not a “resident” and for the
purposes of sections 92, 93 and 168, includes a person who is not ordinarily
resident within the meaning of S6(6).
B. Recovery of tax in respect of non-resident from his assets is enshrined under
S173 of the Income Tax Act, 1961.
C. The person entitled to the income referred to in S9(1)(i) is a non-resident, the
tax chargeable thereon, whether in his name or in the name of his agent who is
liable as a representative assessee may be recovered by deduction under
any of the provisions of Chapter XVII-B and any arrears of tax may be
recovered from any assets of the non-resident which are or may at any time
come, within India.

12. S174: Person leaving India

A. S174 grants power to Assessing Officer that if it appears to him that any
individual may leave India during the current assessment year or shortly
after its expiry and that he has no present intention of returning to India, the
total income of such individual for the period from the expiry of the previous
year for that assessment year up to the probable date of his departure from
India shall be chargeable to tax in that assessment year.

13. S174A: AOP/BOI/AJP (Artificial juridical person) formed for a particular

event/purpose
A. S174A, for the assessment of association of persons or body of individuals or
artificial juridical person formed or established or incorporated for a
 particular event or purpose is likely to be dissolved in the assessment year,
the total income of such AOP or BOI or AJP, up to the date of its dissolution
shall be chargeable to tax in that assessment year based on the discretion of
the AO

14. S175: Person trying to alienate their assets

A. If it appears to the Assessing Officer during any current assessment year
that any person is likely to charge, sell, transfer, dispose of or otherwise
part with any of his assets with a view to avoiding payment of any liability
under the provisions of this Act, then according to the application of S175, the
total income of such person for the period from the expiry of the previous
year for that assessment year to the date when the Assessing Officer
commences proceedings under this section shall be chargeable to tax in that
assessment year

15. S176, S177: Discontinuance or dissolution of business

A. S176 and S177 of the Income Tax Act, 1961 provides that any business or
profession is discontinued in any assessment year, the income of the period
from the expiry of the previous year for that assessment year up to the date
of such discontinuance may, at the discretion of the Assessing Officer, be
charged to tax in that assessment year.
B. Any person discontinuing any business or profession shall give to the
Assessing Officer notice of such discontinuance within 15 days.

16. S178, S179: Private companies in liquidation

A. S178 embodies that Liquidator of any company which is being wound up shall,
within 30 days after he has become such liquidator, give notice of his
appointment as such to the Assessing Officer who is entitled to assess the
income of the company.
B. S179 states that where any tax due from a private company in respect of any
income of any previous year, every person who was a director of the private
company at any time during the relevant previous year shall be jointly and
severally liable for the payment of such tax, unless he proves that the non-
recovery cannot be attributed to any gross neglect, misfeasance or breach
of duty on his part.

17. Certain types of Income

A. S180: Royalty
- S180 enshrines that where the time taken by the author of a literary or
artistic work in the making thereof is more than twelve months, the
amount received or receivable by him during any previous year on
account of any lump sum consideration, for the assignment or grant
of any of his interests in the copyright of that work or of royalties or
 copyright fees, if he claims so, may be prescribed by the Assessing
officer.
B. S180A: Know how
- S180A provides that time taken by an individual, who is resident in
India, for developing any know-how is more than twelve months, he
may elect that the gross amount of any lump sum consideration
received or receivable by him during the previous year, if he so elects,
will be regarded as an income from that year and two immediately
preceding previous year.
- S32, Explanation 4 defines “know-how” as any industrial information or
technique likely to assist in the manufacture or processing of goods or in
the working of a mine, oil-well or other sources of mineral deposits
(including searching for discovery or testing of deposits for the winning of
access thereto).
C. .
18. .

Search, Seizure and Adjudication.

1. S132 of the Income Tax Act empowers designated authorities to conduct search and
seizure operations based on credible information.
2. S132(1): Authorisation for search
A designated income-tax authority is authorised for a search, such as
A. Principal Director General of Income Tax/Director General of Income Tax, or
B. Principal Director of Income Tax/Director of Income Tax,
C. Principal Chief Commissioner of Income Tax/Chief Commissioner of Income
Tax,
D. Principal Commissioner of Income Tax/Commissioner of Income Tax
E. Additional Director or Additional Commissioner
F. Joint Director or Joint Commissioner of Income-tax.

3. Grounds for belief

A. A person has omitted or failed to produce requested books of account or
documents
B. A person will not produce relevant books of account or documents
C. A person is in possession of undisclosed income or property represented by
money, bullion, jewellery, or valuable articles.

4. Power granted to authorised officers

A. Enter and search any building, place, vessel, vehicle, or aircraft where
suspected items are kept.
B. Break open locks if keys are not available.
C. Search individuals if there is a suspicion of concealing items.
D. Inspect electronic records maintained as books of account or documents.
 E. Seize books of accounts, documents, money, bullion, jewellery, or valuable
articles found during the search.
F. Make marks of identification on seized items.
G. Create extracts or copies of books of account or documents.
H. Make a note or inventory of seized money, bullion, jewellery, or valuable
articles.

5. Jurisdiction:
A. In cases where the search location falls under the jurisdiction of a different
authority, the initiating authority can still exercise search powers if the delay
in obtaining authorisation from the jurisdictional authority is deemed
detrimental to revenue interests.

6. Ramesh Chandar v. CIT

A. P&H HC: “Seizure is an expression which implies a forcible exaction or
taking possession from either the owner or one who has the possession and
who is unwilling to part with possession”.
7. .

Fines and Penalties: Skipping

Demands & Recovery.

1. S201 – S281B of the Income Tax Act deals with the Recovery of tax and stay
demand.

2. S220: When tax payable assessee in default

A. S220(1): any amount (otherwise than advance tax) specified as payable as
per notice of demand issued under S156 of the Act shall be paid within 30
days from the service of said notice
B. S220(2): if the amount specified in notice of demand is not paid within 30
days, the assessee shall be liable to pay interest at the rate of 1% for every
month or part of the month till the demand is paid.
C. S2A provides that the CCIT or CIT may reduce or waive the amount of interest
paid or payable if he is satisfied that:
- payment of interest has caused or would cause genuine hardship
- default in payment of amount on which interest has been paid or payable
was due to circumstances beyond the control of the assessee
- the assessee has co-operated in assessment and recovery
proceedings
D. S220(4): If the amount is not paid within the time provided under S220(1) or
S220(3), the person mentioned in the demand notice shall be deemed to be in
default.
 E. Service of valid notice of demand is mandatory
F. Mohan Wahi v. CIT: In case of failure to serve the notice, recovery
proceedings are not valid.
G. Saraswati Moulding Works v. CIT:
- Notice of demand not served.
- Recovery proceedings are invalid.
H. .

3. S222: Certificate to recovery officer

A. When an assessee is in default or is deemed to be in default in making
payment of tax, the Tax Recovery Officer (TRO) may proceed to recover from
such assessee the amount specified in such certification by one or more of
the following modes:
- Attachment and sale of movable property
- Attachment and sale of immovable property
- Arrest of the assessee and his detention in prison
- Appointing a receiver for the management of the Assessee’s movable
and immovable properties

B. Duncan Stratton & Co. Ltd v. UOI

- Not mentioning assessment years on the recovery certificate
- Despite request by petitioner, no information was furnished as to
year or years to which recovery certificates pertained
- Hence, the recovery proceedings are bad in law.
C. .

4. The notice of demand, must be served in writing, clearly mentioning the reasons,
and providing the party an opportunity of being heard.
5. Generally, the Show Cause Notice should be served within 1 year from the date of
assessment / payment of duty.
6. However, in specific cases, where the duty or interest is not paid, or short paid, by
reason of
- collusion,
- wilful suppression of facts, or
- Misstatement
then the notice could be served within a period of 5 years.
7. The demand of duty provisions also calls for attachment of property for upto 6
months, for protection of interest of revenue and that could be extended for another
period of 6 months, but the attachment period cannot exceed 2 years.
8. Post which the duty must be collected, in the name of customs duty and paid to the
credit of the Government.

9. S221. Penalty payable when tax in default

10. S222. Certificate to Tax Recovery Officer.
 11. S223. Tax Recovery Officer by whom recovery is to be effected.
12. S224. Validity of certificate and cancellation or amendment thereof.
13. S225. Stay of proceedings in pursuance of certificate and amendment or cancellation
thereof.
14. S226. Other modes of recovery.
15. S227. Recovery through the State Government.
16. S228A. Recovery of tax in pursuance of agreements with foreign countries.
17. S229. Recovery of penalties, fine, interest and other sums.
18. S230. Tax clearance certificate.
19. S232. Recovery by suit or under other law not affected

Appeals & Revision

Appeals
Appeals: Below is the summary given in ICSI notes for appeals. More detailed notes are
available in ICSI Notes before page 638 (in the doc) and 596 (in the pdf)

1. Appeal to CIT (Appeals): S246A to S251

A. Appeal can be made by Assessee only (First Appeal: S246A)
B. Within 30 days of payment of TDS or service of notice of demand or order.
C. Delay may be condoned on sufficient cause been shown.
D. Appeal is to be made in duplicate in Form No. 35.
E. Appeal should be disposed within 1 year from the end of the financial year in
which appeal was made.

2. Appeal to ITAT: S252-255

A. Appeal can be made by assessee or Department. (Second appeal: S253)
B. Appeal can also be made under following situations:
(a) Appeal against revision order under S263
(b) Against the order passed with previous approval or CCIT under
S115VZC(1) or on the direction of the Dispute Resolution Panel.
(c) Appeal against the order passed by CIT refusing to grant registration
under S12AA or refusing to grant approval under S80G.
C. Appeal should be made within 60 days of communication of order to
Assessee or CIT.
D. Delay may be condoned on sufficient cause being shown.
E. Appeal shall be made in Triplicate in Form No. 36.
F. Disposal of appeal to be made within 4 years from the end of the financial
year in which such appeal was made.

3. Appeal to High Court: S260A-260B

A. Appeal may be made by Assessee or Department.
B. Appeal should be made within 120 days of receipt of order of ITAT.
 C. Delay may be condoned on sufficient cause being shown by appellant.
D. Form of appeal and time limit for disposal of appeal shall be as per Code of
Civil Procedure, 1908.

4. Appeal to Supreme Court: S261-262

A. Appeal may be made by the Assessee or Department.
B. Appeal is to be made within 90 days from the date of receipt of order of High
Court. (As per Code of Civil Procedure, 1908).
C. Delay may be condoned as per Code of Civil Procedure, 1908.
D. Form of appeal and time limit for disposal of appeal shall be as per Code of
Civil Procedure, 1908.

5. Ena Chaudhuri v. CIT

A. Court held that the appellant had failed to produce any evidence to support
that her income was exempt from tax and that the burden of proving such
exemption lies upon the appellant only.

Revision
Revision: Below is the summary given in ICSI notes for appeals. More detailed notes are
available in ICSI Notes starting page 638 (in the doc) and 596 (in the pdf)

1. The right to file such appeals against the orders of the Assessing Officer is not
available to the Department.
2. It is for this reason that the Commissioner has been vested with revisional powers
under S263, where the order of the Assessing Officer is erroneous in so far as it is
prejudicial to the interests of the revenue.
3. But such revisional power can be exercised only in respect of orders which are not the
subject matter of appeals.
4. The reason is that once an assessment order is appealed against, the
Commissioner (Appeals) has got the powers to enhance the assessment under
S263 and a right of appeal upto the Tribunal is provided to the assessee against the
orders of the Assessing Officer.
5. In the following cases Commissioner of Income-tax can revise an order passed by the
Assessing Officer

6. Revision by the Commissioner of Income Tax:

A. S263: Revision of orders prejudicial to the interest of Revenue
- S263(1): Revision can be only of the order of Assessing Officer
- S263(1): Order erroneous and prejudicial to the interest of revenue
- S263(1): Assessee to be given an opportunity of being heard

B. S264: Revision of order in the interest of Assessee

- S264(1) and Explanation 2: Revision of order of subordinate authority
only.
 - S264(1) and (2): Suo motu revision
- Section 264(1),(3),(5): Revision on application of the assessee

C. S264(4): Circumstances in which no revision can be made

- If the order is appealable to the Commissioner (Appeals), such order
cannot be revised until the time within which such appeal may be made
expires
- The order is appealable to the Commissioner or the Appellate
Tribunal, revisional power cannot be exercised until the time within
which such appeal may be made expires.

7. S264 empowers the CIT with a wide range of revisionary authority to revise
assessment orders, acting as a quasi-judicial function.
8. Rashtriya Vikas Ltd. v. Commissioner of Income-Tax
A. The scope of S264 was highlighted
B. The Revisional Court’s verdict was quashed for not considering the merits
of the assessee’s claim.
C. The matter was returned for reconsideration, emphasising the necessity of
evaluating the merits in revision petitions.
9. .

Mod 4:

Central Goods and services Tax Act, 2017

Definitions
1. S2(52): Goods: means every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before supply or under a contract of
supply;
2. S2(102): Services: anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any other mode,
from one form, currency or denomination, to another form, currency or denomination for
which a separate consideration is charged;
- Explanation.––For the removal of doubts, it is hereby clarified that the expression
“services” includes facilitating or arranging transactions in securities;
3. S2(74): Mixed supply: two or more individual supplies of goods or services, or any
combination thereof, made in conjunction with each other by a taxable person for a
single price where such supply does not constitute a composite supply.
4. S2(90): Principal supply: the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply forming part
of that composite supply is ancillary;
 5. S2(30): Composite supply: a supply made by a taxable person to a recipient consisting
of two or more taxable supplies of goods or services or both, or any combination thereof,
which are naturally bundled and supplied in conjunction with each other in the ordinary
course of business, one of which is a principal supply;
6. S2(63): Input tax credit: the credit of input tax;

Scope of Supply: S7, Kinds of Supply: S8

1. S7: Scope of supply
(1) For the purposes of this Act, the expression “supply” includes
(a) all forms of supply of goods or services or both such as sale,
transfer, barter, exchange, licence, rental, lease or disposal made or
agreed to be made for a consideration by a person in the course or
furtherance of business;
(aa) the activities or transactions, by a person, other than an
individual, to its members or constituents or vice-versa, for cash,
deferred payment or other valuable consideration.
- Explanation: For the purposes of this clause, it is hereby clarified
that, notwithstanding anything contained in any other law for the
time being in force or any judgment, decree or order of any
Court, tribunal or authority, the person and its members or
constituents shall be deemed to be two separate persons and
the supply of activities or transactions inter se shall be deemed
to take place from one such person to another;
(b) import of services for a consideration whether or not in the course or
furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made
without a consideration.
(1A) Where certain activities or transactions constitute a supply in accordance
with the provisions of sub-section (1), they shall be treated either as supply of
goods or supply of services as referred to in Schedule II
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of subsections (1), (1A) and (2), the Government may,
on the recommendations of the Council, specify, by notification, the
transactions that are to be treated as
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.

2. S8: Tax liability on composite and mixed supplies

 The tax liability on a composite or a mixed supply shall be determined in the following
manner, namely:
(a) a composite supply comprising two or more supplies, one of which is a
principal supply, shall be treated as a supply of such principal supply; and
(b) a mixed supply comprising two or more supplies shall be treated as a supply of
that particular supply which attracts the highest rate of tax.
3. TD/:
file:///C:/Users/Snehaa%20Rajesh/Desktop/SOEL/SEMESTER%2010/Tax%20law/
Scope,%20Time%20and%20value%20of%20supply.pdf
4. .

Levy and collection of Tax: S9

1. S9: Levy and collection
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the
central goods and services tax on all intra-State supplies of goods or
services or both, except on the supply of alcoholic liquor for human
consumption, on the value determined under S15 and at such rates, not
exceeding 20%, as may be notified by the Government on the
recommendations of the Council and collected in such manner as may be
prescribed and shall be paid by the taxable person.
(2) The central tax on the supply of
- petroleum crude,
- high speed diesel,
- motor spirit (commonly known as petrol),
- natural gas and
- aviation turbine fuel
shall be levied with effect from such date as may be notified by the
Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by
notification, specify categories of supply of goods or services or both, the tax
on which shall be paid on reverse charge basis by the recipient of such goods
or services or both and all the provisions of this Act shall apply to such recipient
as if he is the person liable for paying the tax in relation to the supply of such
goods or services or both.
(4) The Government may, on the recommendations of the Council, by
notification, specify a class of registered persons who shall, in respect of
supply of specified categories of goods or services or both received from an
unregistered supplier, pay the tax on reverse charge basis as the recipient
of such supply of goods or services or both, and all the provisions of this Act
shall apply to such recipient as if he is the person liable for paying the tax in
relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council, by
notification, specify categories of services the tax on intra-State supplies of
which shall be paid by the electronic commerce operator if such services are
 supplied through it, and all the provisions of this Act shall apply to such
electronic commerce operator as if he is the supplier liable for paying the tax in
relation to the supply of such services:
- Provided that where an electronic commerce operator does not have a
physical presence in the taxable territory, any person representing
such electronic commerce operator for any purpose in the taxable
territory shall be liable to pay tax:
- Provided further that where an electronic commerce operator does not
have a physical presence in the taxable territory and also he does not
have a representative in the said territory, such electronic commerce
operator shall appoint a person in the taxable territory for the purpose
of paying tax and such person shall be liable to pay tax.
2. .

Composition Levy: S10

1. S10: Composition levy
2. S10 provides for the option of a composition levy.
3. It is an alternative scheme, designed to cater to small taxpayers.
4. For a small scale business, compliances under the GST may be cumbersome and
complicated, defeating the objective of GST to simplify taxes.
5. Hence, a business with an aggregate turnover of less than 1 crore 50 lakhs in the
previous financial year can opt for the composition scheme
6. For special category states, namely, the 7 sisters and Uttarakhand, the aggregate
turnover is considered to be 75 lakhs.

7. The rate of tax prescribed for persons under this scheme are:
A. 2%: manufacturers
B. 5%: supplier of food or drinks other than alcohol
C. 1%: traders or any other supplier eligible for the composition levy

8. Conditions to opt for the scheme:

A. They can't raise any tax invoices
B. They are not eligible to collect tax on any supply of goods or services
C. The recipients of supply made by the composite dealers cannot claim input tax
credit
D. Such entities must clearly state on invoices that they have opted for the
composition levy
E. Such entities must mention "composition taxable person" at their place of
business

9. Categories of entities that are not eligible for the scheme:

A. Casual taxable person or non-resident taxable person
B. Person making inter-state outward supply of goods/services
C. Persons making supply of goods not covered under the GST law
 D. Supplier of services other than restaurant services
E. Manufacturers of ice cream, pan masala, tobacco or aerated water
F. Supplier whose aggregate turnover exceeds the stipulated limit
G. Suppliers making any supply of goods through any e-commerce operator
covered under S52
10. .

Time, Place and Value of supply: S12-15

1. S12: Time of supply of goods
(1) The liability to pay tax on goods shall arise at the time of supply, as
determined in accordance with the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following dates, namely:
(a) the date of issue of invoice by the supplier or the last date on which he
is required, under S31, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the
supply:
- Provided that where the supplier of taxable goods receives an
amount up to Rs.1,000 in excess of the amount indicated in the
tax invoice, the time of supply to the extent of such excess
amount shall, at the option of the said supplier, be the date of
issue of invoice in respect of such excess amount.
- Explanation 1: For the purposes of clauses (a) and (b),
“supply” shall be deemed to have been made to the
extent it is covered by the invoice or, as the case may
be, the payment.
- Explanation 2: For the purposes of clause (b), “the date on
which the supplier receives the payment” shall be the
date on which the payment is entered in his books of
account or the date on which the payment is credited to
his bank account, whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid on
reverse charge basis, the time of supply shall be the earliest of the following
dates, namely:
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the books of account of the
recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
(c) the date immediately following 30 days from the date of issue of
invoice or any other document, by whatever name called, in lieu thereof
by the supplier:
- Provided that where it is not possible to determine the time of
supply under clause (a) or clause (b) or clause (c), the time of
supply shall be the date of entry in the books of account of the
recipient of supply
 (4) In case of supply of vouchers by a supplier, the time of supply shall be
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the provisions
of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall
(a) in a case where a periodical return has to be filed, be the date on which
such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of supply
by way of interest, late fee or penalty for delayed payment of any consideration
shall be the date on which the supplier receives such addition in value.

2. S13: Time of supply of services

(1) The liability to pay tax on services shall arise at the time of supply, as
determined in accordance with the provisions of this section.
(2) The time of supply of services shall be the earliest of the following dates,
namely:
(a) the date of issue of invoice by the supplier, if the invoice is issued
within the period prescribed under S31 or the date of receipt of
payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the
period prescribed under S31 or the date of receipt of payment,
whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in his
books of account, in a case where the provisions of clause (a) or clause
(b) do not apply:
- Provided that where the supplier of taxable service receives an
amount up to Rs.1000 in excess of the amount indicated in the
tax invoice, the time of supply to the extent of such excess
amount shall, at the option of the said supplier, be the date of
issue of invoice relating to such excess amount.
- Explanation: For the purposes of clauses (a) and (b)
- (i) the supply shall be deemed to have been made to the
extent it is covered by the invoice or, as the case may
be, the payment;
- (ii) “the date of receipt of payment” shall be the date on
which the payment is entered in the books of account of
the supplier or the date on which the payment is credited
to his bank account, whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid on
reverse charge basis, the time of supply shall be the earlier of the following
dates, namely:
 (a) the date of payment as entered in the books of account of the
recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
(b) the date immediately following 60 days from the date of issue of
invoice or any other document, by whatever name called, in lieu thereof
by the supplier:
- Provided that where it is not possible to determine the time of
supply under clause (a) or clause (b), the time of supply shall be
the date of entry in the books of account of the recipient of
supply:
- Provided further that in case of supply by associated
enterprises, where the supplier of service is located outside
India, the time of supply shall be the date of entry in the books
of account of the recipient of supply or the date of payment,
whichever is earlier.
(4) In case of supply of vouchers by a supplier, the time of supply shall be
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the provisions of
sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall
(a) in a case where a periodical return has to be filed, be the date on
which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of supply
by way of interest, late fee or penalty for delayed payment of any consideration
shall be the date on which the supplier receives such addition in value.

3. S15: Value of taxable supply

(1) The value of a supply of goods or services or both shall be the transaction
value, which is the price actually paid or payable for the said supply of goods
or services or both where the supplier and the recipient of the supply are not
related and the price is the sole consideration for the supply.
(2) The value of supply shall include
(a) any taxes, duties, cesses, fees and charges levied under any law for
the time being in force other than this Act, the State Goods and Services
Tax Act, the Union Territory Goods and Services Tax Act and the Goods
and Services Tax (Compensation to States) Act, if charged separately
by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply
but which has been incurred by the recipient of the supply and not
included in the price actually paid or payable for the goods or services
or both;
(c) incidental expenses, including commission and packing, charged by
the supplier to the recipient of a supply and any amount charged for
 anything done by the supplier in respect of the supply of goods or
services or both at the time of, or before delivery of goods or supply of
services;
(d) interest or late fee or penalty for delayed payment of any
consideration for any supply; and
(e) subsidies directly linked to the price excluding subsidies provided by
the Central Government and the State Governments.
- Explanation: For the purposes of this subsection, the amount of
subsidy shall be included in the value of supply of the supplier
who receives the subsidy.
(3) The value of the supply shall not include any discount which is given
(a) before or at the time of the supply if such discount has been duly
recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, if
- (i) such discount is established in terms of an agreement
entered into at or before the time of such supply and specifically
linked to relevant invoices; and
- (ii) input tax credit as is attributable to the discount on the
basis of a document issued by the supplier has been reversed by
the recipient of the supply.
(4) Where the value of the supply of goods or services or both cannot be
determined under sub-section (1), the same shall be determined in such
manner as may be prescribed.
(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the
value of such supplies as may be notified by the Government on the
recommendations of the Council shall be determined in such manner as may
be prescribed.
- Explanation.—For the purposes of this Act,
(a) persons shall be deemed to be “related persons” if
- (i) such persons are officers or directors of one another’s
businesses;
- (ii) such persons are legally recognised partners in
business;
- (iii) such persons are employer and employee;
- (iv) any person directly or indirectly owns, controls or
holds 25% or more of the outstanding voting stock or
shares of both of them;
- (v) one of them directly or indirectly controls the other;
- (vi) both of them are directly or indirectly controlled by a
third person;
- (vii) together they directly or indirectly control a third
person; or
- (viii) they are members of the same family;
(b) the term “person” also includes legal persons;
 (c) persons who are associated in the business of one another in
that one is the sole agent or sole distributor or sole
concessionaire, howsoever described, of the other, shall be
deemed to be related.

4. Rule 27: Value of supply when the consideration is not wholly in money
5. Rule 28: value of supply between distinct or related person other than through an agent
6. Rule 29: Value of supply made or received through …
7. Rule 30: Value of supply on GST
8. Rule 31: Residual method for determination of value of suppy
9. Rule 32: Determination of value in respect of certain supplies
10. Rule 33: Value of supply of services in case of pure agent
11. Rule 34: Rate of exchange of currency other than Indian rupees, for determination of
value
12. Rule 35: value of supply inclusive of IGST, CGST, SGST, UTGSTfile:///C:/Users/Snehaa
%20Rajesh/Desktop/SOEL/SEMESTER%2010/Tax%20law/Scope,%20Time%20and
%20value%20of%20supply.pd

Input Tax Credit (ITC): S16-21

1. S16, S17: Input tax credit

2. S16: ITC
A. S16 provides the concept of ITC.
B. GST was aimed at removing the cascading effects of taxes
C. This was fulfilled through ITC
D. A taxpayer receives credit of the amount of the inward supplies which can be
adjusted against the amount of the outward supplies
E. This ensures that the burden of tax charged at multiple levels of the supply
chain is not entirely on the end customer.

3. S16(1): Eligibility for ITC

A. A registered person shall be eligible for ITC for all the goods or services that are
used in the course or furtherance of their business
B. Hence, it is imperative that goods or services used for personal consumption
cannot be taken into account

4. S16(2): Conditions for ITC

A. The recipient possesses tax invoice, debit note or any other tax-paying document
issued by the supplier
B. Details of the invoice/debit note have been furnished by the supplier in its
outward supplies in GSTRR-2B
C. The recipient has received the goods/services
D. Tax has actually been paid to the government in respect to the goods/services
E. Returns have been furnished by the recipient under S39 f the Act
5. S16(4): Condition for eligibility
In respect of any tax invoice/debit note for the supply of goods/services/both, credit must
be claimed
A. Prior to 30th November the following the end of the financial year to which such
invoice or debit note pertains to or
B. Furnishing of the relevant annual return,
Whichever is earlier

6. S17: Apportionment of credit and blocked credit

A. S17: Conditions by virtue of which credit cannot be obtained
B. Where the goods or services or both are used partly for business and partly
for other purposes, the amount of credit shall be restricted to input tax as is
attributable to the purposes of business.
C. Where the goods or services or both are used partly for effecting taxable
supplies including zero rated supplies and partly for effecting exempt
supplies, the amount of credit shall be restricted to input tax as is
attributable to the taxable supplies including zero-rated supplies.
D. The value of exempt supply under sub-section (2) shall include
- Supplies on which the recipient is liable to pay tax on reverse charge
basis,
- Transactions in securities,
- Sale of land and sale of constructed buildings.
E. Not Covered
F. Input Tax Credit is available only on those goods and services used for
business.
G. Exports and supplies to SEZ fall under the category of Zero-rated supplies.
H. ITC is available on Zero rated supplies and taxable supplies but not on
exempt supplies.

7. S17(5): Blocked Credits

S17(5):
Notwithstanding anything contained in S16(1) and S18(1), input tax credit shall not be
available in respect of the following, namely:—
(a) motor vehicles for transportation of persons having approved seating
capacity of not more than 13 persons (including the driver), except when they
are used for making the following taxable supplies, namely:
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used
- (i) for making the following taxable supplies, namely:
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
 (C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
- (ii) for transportation of goods;
(ab) services of general insurance, servicing, repair and maintenance in so
far as they relate to motor vehicles, vessels or aircraft referred to in clause (a)
or clause (aa):
- Provided that the input tax credit in respect of such services shall be
available
- (i) where the motor vehicles, vessels or aircraft referred to in clause (a)
or clause (aa) are used for the purposes specified therein;
- (ii) where received by a taxable person engaged
(a) in the manufacture of such motor vehicles, vessels or aircraft; or
(b) in the supply of general insurance services in respect of such
motor vehicles, vessels or aircraft insured by him;
(b) the following supply of goods or services or both
- (i) food and beverages, outdoor catering, beauty treatment, health
services, cosmetic and plastic surgery, leasing, renting or hiring of
motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa)
except when used for the purposes specified therein, life insurance
and health insurance:
- Provided that the input tax credit in respect of such goods or
services or both shall be available where an inward supply of
such goods or services or both is used by a registered person
for making an outward taxable supply of the same category of
goods or services or both or as an element of a taxable composite
or mixed supply;
- (ii) membership of a club, health and fitness centre; and
- (iii) travel benefits extended to employees on vacation such as leave or
home travel concession:
- Provided that the input tax credit in respect of such goods or
services or both shall be available, where it is obligatory for an
employer to provide the same to its employees under any law
for the time being in force.
(c) works contract services when supplied for construction of an immovable
property (other than plant and machinery) except where it is an input service
for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an
immovable property (other than plant or machinery) on his own account
including when such goods or services or both are used in the course or
furtherance of business.
- Explanation.––For the purposes of clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalisation, to the said
immovable property;
 (e) goods or services or both on which tax has been paid under S10;
(f) goods or services or both received by a non-resident taxable person except
on goods imported by him;
(fa) goods or services or both received by a taxable person, which are used or
intended to be used for activities relating to his obligations under corporate
social responsibility referred to in section 135 of the Companies Act, 2013
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free
samples; and
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

8. S21: Manner of recovery of credit distributed in excess:

Where the Input Service Distributor distributes the credit in contravention to S20
resulting in excess distribution of credit to one or more recipients of credit, the excess
credit so distributed shall be recovered from such recipients along with interest, and
the provisions of S73 or S74, as the case may be, shall, mutatis mutandis, apply for
determination of amount to be recovered.
9. .

Registration: S22-30
1. Registration:
A. Registration of the business identity plays a vital role in collecting the tax on
behalf of the government and to avail the input tax credit
B. If any business entity cannot register themselves then they can neither collect the
tax from the customer and take benefit of the input tax credit
C. A person with aggregate turnover of more than 40 lakhs in the FY, he is liable to
registered under the act
D. For special category states, the aggregate turnover of more than 20 lakhs in the
FY
E. After registration, the tax authority provides the business with an identification
number known as GSTIN which has 15 digits.

2. Benefits of registration
A. Scrapping of cascading effect
- Cascading effect has been eliminated as it used to cause double taxation
- After scrapping, the tax liability is reduced on the business identity
B. Lesser compliance
- Before GST, many indirect taxes such as VAT, service tax, etc
- GST has compiled them all into a single tax regime with the number of
filings decreased
C. Easy application procedure
- A person can register himself online
- He can file the GST through the GST portal
D. Recognition
 - Post registration, a person becomes legally recognised as a supplier of
goods and services
E. Regulation of input tax credit
- A person can claim ITC and use it on taxes, after registration

3. Documents required for registration

A. Permanent account number
B. Copy of aadhar card
C. Address proof of place of business
D. Bank account statement
E. Digital signature
F. Letter of authorisation
G. Incorporation certificate
H. Identity and address proof of the directors

4. S22: Person liable for registration

(1) Every supplier shall be liable to be registered under this Act in the State or
Union territory, other than special category States, from where he makes a
taxable supply of goods or services or both, if his aggregate turnover in a
financial year exceeds twenty lakh rupees:
- Provided that where such person makes taxable supplies of goods or
services or both from any of the special category States, he shall be
liable to be registered if his aggregate turnover in a financial year
exceeds ten lakh rupees.
(2) Every person who, on the day immediately preceding the appointed day, is
registered or holds a licence under an existing law, shall be liable to be
registered under this Act with effect from the appointed day.
(3) Where a business carried on by a taxable person registered under this Act is
transferred, whether on account of succession or otherwise, to another
person as a going concern, the transferee or the successor, as the case may
be, shall be liable to be registered with effect from the date of such transfer or
succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of
transfer pursuant to sanction of a scheme or an arrangement for
amalgamation or, as the case may be, demerger of two or more companies
pursuant to an order of a High Court, Tribunal or otherwise, the transferee
shall be liable to be registered, with effect from the date on which the
Registrar of Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.

5. S23: Person not liable for registration

(1) The following persons shall not be liable to registration, namely:
 (a) any person engaged exclusively in the business of supplying goods
or services or both that are not liable to tax or wholly exempt from tax
under this Act or under the Integrated Goods and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of
land.
(2) Notwithstanding anything to the contrary contained in S22(1) or S24, the
Government may, on the recommendations of the Council, by notification,
subject to such conditions and restrictions as may be specified therein,
specify the category of persons who may be exempted from obtaining
registration under this Act

6. S24: Compulsory registration in certain cases

Notwithstanding anything contained in S22(1), the following categories of persons shall
be required to be registered under this Act,--
- (i) persons making any inter-State taxable supply;
- (ii) casual taxable persons making taxable supply;
- (iii) persons who are required to pay tax under reverse charge;
- (iv) person who are required to pay tax under S9(5): e-commerce operator for
intra-state supply
- (v) non-resident taxable persons making taxable supply;
- (vi) persons who are required to deduct tax under S51, whether or not
separately registered under this Act;
- (vii) persons who make taxable supply of goods or services or both on behalf
of other taxable persons whether as an agent or otherwise;
- (viii) Input Service Distributor, whether or not separately registered under this
Act;
- (ix) persons who supply goods or services or both, other than supplies specified
under S(5) through such electronic commerce operator who is required to
collect tax at source under S52;
- (x) every electronic commerce operator who is required to collect tax at source
under section 52
- (xi) every person supplying online information and database access or
retrieval services from a place outside India to a person in India, other than a
registered person;
- (xiA) every person supplying online money gaming from a place outside India
to a person in India; and
- (xii) such other person or class of persons as may be notified by the
Government on the recommendations of the Council.

7. S25: Procedure for registration

(1) Every person who is liable to be registered under S22 or S24 shall apply for
registration in every such State or Union territory in which he is so liable
within 30 days from the date on which he becomes liable to registration, in
such manner and subject to such conditions as may be prescribed
(2) A person seeking registration under this Act shall be granted a single
registration in a State or Union territory:
- Provided that a person having multiple places of business in a State or
Union territory may be granted a separate registration for each such
place of business, subject to such conditions as may be prescribed.
(3) A person, though not liable to be registered under S22 or S24 may get
himself registered voluntarily, and all provisions of this Act, as are applicable
to a registered person, shall apply to such person.
(4) A person who has obtained or is required to obtain more than one
registration, whether in one State or Union territory or more than one State or
Union territory shall, in respect of each such registration, be treated as distinct
persons for the purposes of this Act.
(5) Where a person who has obtained or is required to obtain registration in a
State or Union territory in respect of an establishment, has an establishment in
another State or Union territory, then such establishments shall be treated
as establishments of distinct persons for the purposes of this Act.
(6) Every person shall have a Permanent Account Number issued under the
Income-tax Act, 1961 in order to be eligible for grant of registration
- Provided that a person required to deduct tax under S51 may have, in
lieu of a Permanent Account Number, a Tax Deduction and
Collection Account Number issued under the said Act in order to be
eligible for grant of registration.
(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable
person may be granted registration under sub-section (1) on the basis of such
other documents as may be prescribed.
(8) Where a person who is liable to be registered under this Act fails to obtain
registration, the proper officer may, without prejudice to any action which may
be taken under this Act or under any other law for the time being in force,
proceed to register such person in such manner as may be prescribed.
(9) Notwithstanding anything contained in sub-section (1),
(a) any specialised agency of the United Nations Organisation or any
Multilateral Financial Institution and Organisation notified under the
United Nations (Privileges and Immunities) Act, 1947, Consulate or
Embassy of foreign countries; and
(b) any other person or class of persons, as may be notified by the
Commissioner, shall be granted a Unique Identity Number in such
manner and for such purposes, including refund of taxes on the
notified supplies of goods or services or both received by them, as may
be prescribed.
(10) The registration or the Unique Identity Number shall be granted or
rejected after due verification in such manner and within such period as may
be prescribed.
(11) A certificate of registration shall be issued in such form and with effect
from such date as may be prescribed.
 (12) A registration or a Unique Identity Number shall be deemed to have
been granted after the expiry of the period prescribed under sub-section (10),
if no deficiency has been communicated to the applicant within that period.

8. S28: Amendment of GST Registration

A. After the allotment of the Unique Identification Number, if a registered person
wants to change the information given at the time of registration, then he shall
have to inform the proper officer within 15 days of receiving the UIN.
B. After the submission of changes required, it is the discretion of proper officer
that they approve/reject it
C. But the office cannot reject without giving opportunity of being heard

9. S29: Cancellation or suspension of registration

(1) The proper officer may, either on his own motion or on an application filed by
the registered person or by his legal heirs, in case of death of such person,
cancel the registration, in such manner and within such period as may be
prescribed, having regard to the circumstances where,
(a) the business has been discontinued, transferred fully for any reason
including death of the proprietor, amalgamated with other legal entity,
demerged or otherwise disposed of; or
(b) there is any change in the constitution of the business; or
(c) the taxable person, other than the person registered under S25(3) is no
longer liable to be registered under S22 or S24.
- Provided that during pendency of the proceedings relating to
cancellation of registration filed by the registered person, the
registration may be suspended for such period and in such
manner as may be prescribed.
(2) The proper officer may cancel the registration of a person from such date,
including any retrospective date, as he may deem fit, where,
(a) a registered person has contravened such provisions of the Act or the
rules made thereunder as may be prescribed; or
(b) a person paying tax under S10 has not furnished returns for three
consecutive tax periods; or
(c) any registered person, other than a person specified in clause (b), has
not furnished returns for a continuous period of six months; or
(d) any person who has taken voluntary registration under S25(3) has not
commenced business within six months from the date of
registration; or
(e) registration has been obtained by means of fraud, wilful misstatement
or suppression of facts
(3) The cancellation of registration under this section shall not affect the liability of
the person to pay tax and other dues under this Act or to discharge any
obligation under this Act or the rules made thereunder for any period prior to
 the date of cancellation whether or not such tax and other dues are determined
before or after the date of cancellation.
(4) The cancellation of registration under the State Goods and Services Tax Act or
the Union Territory Goods and Services Tax Act, as the case may be, shall be
deemed to be a cancellation of registration under this Act.
(5) Every registered person whose registration is cancelled shall pay an
amount, by way of debit in the electronic credit ledger or electronic cash
ledger, equivalent to the credit of input tax in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock or
capital goods or plant and machinery on the day immediately preceding the
date of such cancellation or the output tax payable on such goods,
whichever is higher, calculated in such manner as may be prescribed.
(6) The amount payable under sub-section (5) shall be calculated in such manner as
may be prescribed.

10. S30: Revocation of cancellation of registration.

A. Any registered person, whose registration is cancelled by the proper officer
on his own motion, may apply to such officer for revocation of the
cancellation of the registration in the prescribed manner within thirty days from
the date of service of the cancellation order.
B. The proper officer may, in such manner and within such period as may be
prescribed, by order, either revoke cancellation of the registration or reject the
application.
11. .

Tax Invoice: S31

1. S31: Tax invoice
(1) A registered person supplying taxable goods shall, before or at the time of,
(a) removal of goods for supply to the recipient, where the supply
involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient, in any
other case,
issue a tax invoice showing the description, quantity and value of goods,
the tax charged thereon and such other particulars as may be prescribed:
- Provided that the Government may, on the recommendations of
the Council, by notification, specify the categories of goods or
supplies in respect of which a tax invoice shall be issued, within
such time and in such manner as may be prescribed.
(2) A registered person supplying taxable services shall, before or after the
provision of service but within a prescribed period, issue a tax invoice,
showing the description, value, tax charged thereon and such other particulars
as may be prescribed:
- Provided that the Government may, on the recommendations of the
Council, by notification,
 (a) specify the categories of services or supplies in respect of which
a tax invoice shall be issued, within such time and in such
manner as may be prescribed;
(b) subject to the conditions mentioned therein, specify the
categories of services in respect of which
- (i) any other document issue in relation to the supply
shall be deemed to be a tax invoice; or
- (ii) tax invoice may not be issued.
(3) Notwithstanding anything contained in sub-sections (1) and (2)–
(a) a registered person may, within one month from the date of issuance
of certificate of registration and in such manner as may be prescribed,
issue a revised invoice against the invoice already issued during the
period beginning with the effective date of registration till the date of
issuance of certificate of registration to him;
(b) a registered person may not issue a tax invoice if the value of the
goods or services or both supplied is less than Rs.200 subject to such
conditions and in such manner as may be prescribed;
(c) a registered person supplying exempted goods or services or both or
paying tax under the provisions of S10 shall issue, instead of a tax
invoice, a bill of supply containing such particulars and in such manner
as may be prescribed:
- Provided that the registered person may not issue a bill of
supply if the value of the goods or services or both supplied is
less than Rs.200 subject to such conditions and in such manner
as may be prescribed;
(d) a registered person shall, on receipt of advance payment with
respect to any supply of goods or services or both, issue a receipt
voucher or any other document, containing such particulars as may be
prescribed, evidencing receipt of such payment;
(e) where, on receipt of advance payment with respect to any supply of
goods or services or both the registered person issues a receipt
voucher, but subsequently no supply is made and no tax invoice is
issued in pursuance thereof, the said registered person may issue to
the person who had made the payment, a refund voucher against such
payment;
(f) a registered person who is liable to pay tax under S9(3) or S9(4) shall
issue an invoice in respect of goods or services or both received by
him from the supplier who is not registered on the date of receipt of
goods or services or both;
(g) a registered person who is liable to pay tax under S9(3) or S9(4) shall
issue a payment voucher at the time of making payment to the
supplier.
 (4) In case of continuous supply of goods, where successive statements of
accounts or successive payments are involved, the invoice shall be issued
before or at the time each such statement is issued or, as the case may be,
each such payment is received.
(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous
supply of services,
(a) where the due date of payment is ascertainable from the contract, the
invoice shall be issued on or before the due date of payment;
(b) where the due date of payment is not ascertainable from the contract,
the invoice shall be issued before or at the time when the supplier of
service receives the payment;
(c) where the payment is linked to the completion of an event, the invoice
shall be issued on or before the date of completion of that event.
(6) In a case where the supply of services ceases under a contract before the
completion of the supply, the invoice shall be issued at the time when the
supply ceases and such invoice shall be issued to the extent of the supply
made before such cessation.
(7) Notwithstanding anything contained in sub-section (1), where the goods being
sent or taken on approval for sale or return are removed before the supply
takes place, the invoice shall be issued before or at the time of supply or six
months from the date of removal, whichever is earlier.
- Explanation.––For the purposes of this section, the expression “tax
invoice” shall include any revised invoice issued by the supplier in respect
of a supply made earlier.
2. .

Credit and Debit Notes: S34

1. S34: Credit and debit notes
(1) Where one or more tax invoices have been issued for supply of any goods or
services or both and the taxable value or tax charged in that tax invoice is
found to exceed the taxable value or tax payable in respect of such supply, or
where the goods supplied are returned by the recipient, or where goods or
services or both supplied are found to be deficient, the registered person, who
has supplied such goods or services or both, may issue to the recipient one or
more credit notes for supplies made in a financial year containing such
particulars as may be prescribed.
(2) Any registered person who issues a credit note in relation to a supply of
goods or services or both shall declare the details of such credit note in the
return for the month during which such credit note has been issued but not
later than the 30th day of November following the end of the financial year in
which such supply was made, or the date of furnishing of the relevant annual
return, whichever is earlier, and the tax liability shall be adjusted in such
manner as may be prescribed:
 - Provided that no reduction in output tax liability of the supplier shall be
permitted, if the incidence of tax and interest on such supply has been
passed on to any other person.
(3) Where one or more tax invoices have been issued for supply of any goods or
services or both and the taxable value or tax charged in that tax invoice is found
to be less than the taxable value or tax payable in respect of such supply, the
registered person, who has supplied such goods or services or both, shall
issue to the recipient one or more debit notes for supplies made in a financial
year containing such particulars as may be prescribed.
(4) Any registered person who issues a debit note in relation to a supply of goods or
services or both shall declare the details of such debit note in the return for the
month during which such debit note has been issued and the tax liability shall
be adjusted in such manner as may be prescribed.
- Explanation.––For the purposes of this Act, the expression “debit note”
shall include a supplementary invoice
2. .

Returns: S37-48
1. GST return is a document that will contain all the details of
A. sales,
B. purchases,
C. tax collected on sales (output tax),
D. tax paid on purchases (input tax).
2. Upon the filing of GST returns, one will need to pay the resulting tax liability.
3. All business owners and dealers who have registered under the GST system must
file GST returns according to the nature of their business or transactions.

4. GST Returns - Purpose (due date)

A. GSTR1 Tax return for outward supplies made.(10th of the next Month)
B. GSTR2 Monthly return for inward supplies received.(15th of the next month)
C. GSTR 3 Consolidated monthly tax return (20th of the next month)
D. GSTR3B Temporary consolidated summary return of inward and outward
supplies that the Government of India has introduced as a relaxation for
businesses that have recently transitioned to GST. (20th of the next month)
E. GSTR9 Annual consolidated tax return (31st December of next Financial
Year)
F. GSTR9C Audit form that needs to be filed by every taxpayer who is liable to get
their annual reports audited when their aggregate turnover exceeds Rs. 2
crores in a financial year.
G. SAHAJ A quarterly tax return where taxpayers can declare details of their B2C
supplies. (from October 2019)
H. SUGAM A quarterly tax return where taxpayers can declare details of their B2C
and B2B supplies.(from October 2019)
 I. NORMAL RETURN A tax return where taxpayers can declare all of their
outward and inward supplies and acquire credit for their missing invoices.
(from October 2019)

5. Businesses registered under the Composition Scheme

A. GSTR4: Quarterly return for compounding vendors (18th of the month next to
quarter)
B. GSTR9A: Annual composition return form that has to be filed by every
taxpayer who is enrolled in the composition scheme

6. Other types of business owners and dealers

A. GSTR5 Variable return for Non-resident foreign taxpayers
B. GSTR6 Monthly return for Input Service Distributors. (13th of the next month)
GSTR7 Monthly return for TDS transactions. (10th of the next month)
C. GSTR8 Monthly return for ecommerce operators (10th of the next month)
D. GSTR9B Annual return form that has to be filed by ecommerce operators who
collect tax at the source.
E. GSTR10 Final GST return before cancelling GST registration.
F. GSTR11 Variable tax return for taxpayers with UIN.
7. .

Payment: S49-S53A
1. On the common portal, each registered taxpayer will have one electronic register
called the Electronic liability register and two electronic ledgers namely Electronic
Cash Ledger and Electronic Credit Ledger.
2. These registers and ledgers will reflect the amount of tax payable, the amount
available to settle the tax liability online, and input credit balance.
3. This is a handy tool provided in the GST system wherein the registered taxpayer can
have information about his liabilities and credits at a single location which can be
viewed from any place by simply logging into the common portal.
4. Electronic liability register, electronic cash ledger and electronic credit ledger of
taxpayers will be updated on generation of GSTR-3 by the taxpayer.
5. A unique identification number shall be generated at the common portal for each
debit or credit to the electronic cash or credit ledger.
6. The unique identification number relating to discharge of any liability shall be
indicated in the corresponding entry in the electronic liability register.

7. Electronic Cash Ledger

A. This is like an e-wallet.
B. Any GST Payment made in cash or through bank reflects in Electronic Cash
Ledger.
C. After deduction of Input Tax Credit (ITC) any balance tax liability has to be
paid using balance in Electronic Cash Ledger.
 D. Every deposit made by a person by internet banking or by using credit or debit
cards or National Electronic Fund Transfer (NEFT) or Real Time Gross
Settlement (RTGS) or by over the counter deposit will be credited to the
electronic cash ledger.
E. The amount available in the electronic cash ledger may be used for making
any payment towards tax, interest, penalty, fees or any other amount
payable.
F. The deposit can be made through any of the following modes:
- Internet Banking through authorised banks
- Credit card or Debit card through the authorised bank
- NEFT or RTGS from any bank
- Over the Counter payment through authorised banks for deposits up to
Rs 10,000 per challan per tax period, by cash, cheque or demand draft.
G. On successful credit of the amount to the concerned government account
maintained in the authorised bank, a Challan Identification Number (CIN) shall
be generated by the collecting bank and the same shall be indicated in the
challan.
H. On receipt of the CIN from the collecting bank, the said amount shall be
credited to the electronic cash ledger of the person on whose behalf the deposit
has been made and the common portal shall make available a receipt to this
effect.

8. Electronic Credit Ledger

A. In the Electronic Credit Ledger, all credits accrued on account of inward
supplies made by a taxpayer within a tax period are accumulated.
B. Taxpayers can view their Electronic Credit Ledger by logging on to the GST
Portal.
C. Basically the input tax credit is added to the electronic credit ledger.
D. Rules for availing the input tax credit:
- ITC of IGST will first be utilised for payment of IGST output tax liability
and then the balance can be utilized for payment of CGST and SGST in
that order.
- ITC of CGST will first be utilised for payment of CGST output tax liability
and then the balance can be utilized for payment of IGST.
- ITC of SGST will first be utilised for payment of SGST output tax liability
and then balance can be utilized for payment of IGST.
- ITC of CESS can be utilized only against CESS tax liability. CESS
credit is not available for cross utilization with other tax liabilities.
E. Credit of SGST cannot be utilised for payment of CGST and vice versa.
F. The amount would continue to remain in the Electronic Credit Ledger and can
be utilised for any future liability.
G. Refund can only be claimed if ITC has been accumulated due to
- export of goods and/or services and/or
- rate of tax on outward supplies being lower than inward supplies.
 H. .

9. Electronic liability Register

The electronic liability register of the person shall indicate the following:
A. The amount payable towards tax, interest, late fee or any other amount
payable as per the return furnished by the said person
B. The amount of tax, interest, penalty or any other amount payable as
determined by a proper officer in pursuance of any proceedings under the Act
or as ascertained by the said person
C. The amount of tax and interest payable as a result of mismatch of input tax
credit or any amount of interest that may accrue from time to time
D. The amount deducted by the Government authorities from the payment made
or credited to the supplier of taxable goods or services or both, where the total
value of such supply, under a contract, exceeds Rs.2,50,000
E. The amount required to be collected by every electronic commerce operator
on the net value of taxable supplies made through it by other suppliers
where the consideration with respect to such supplies is to be collected by the
operator;
F. The amount payable on reverse charge basis
G. The amount payable under the Composition levy scheme
H. Amount payable towards interest, penalty, fee
I. Any other amount under the GST Act.
10. .

Refunds: S54-58
1. When the GST paid is more than the GST liability a situation of claiming GST refund
arises.
2. Under GST the process of claiming a refund is standardized to avoid confusion.
3. The process is online and time limits have also been set for the same.

4. Cases where refund can be claimed:

A. Dealer Exports (including deemed export) goods/services under claim of
rebate or Refund
B. ITC accumulation due to output being tax exempt or nil-rated
C. Refund of tax paid on purchases made by Embassies or UN bodies
D. Tax Refund for International Tourists
E. Finalization of provisional assessment

5. The relevant dates for claiming refund are different in different cases:
A. Excess payment of GST: Date of payment
B. Export or deemed export of goods or services: Date of
despatch/loading/passing the frontier
C. ITC accumulates as output is tax exempt or nil-rated: Last date of financial
year to which the credit belongs
 D. Finalisation of provisional assessment: Date on which tax is adjusted
- Two years would be counted from the date given above.
- The refund application has to be made in Form RFD 01 within 2 years
from the relevant date.
- The form should also be certified by a Chartered Accountant
6. .

Assessment: S59-64
1. Assessment under GST is a process by which the tax authorities examine the
returns filed by taxpayers to verify the correctness of their tax liability.
2. The purpose of assessment is to ensure that taxpayers have accurately calculated
and paid their taxes.
3. Assessment is an important tool to detect any errors or discrepancies in the returns
filed by taxpayers.

4. S59: Self-assessment
A. This is the first level of assessment, which is done by the taxpayers
themselves.
B. In self-assessment, the taxpayer calculates and pays their own tax liability,
and files the returns accordingly.
C. This is done on a monthly, quarterly or annual basis, depending on the
turnover of the taxpayer

5. S60: Provisional assessment

A. Provision assessment can be resorted to only when the registered person is
unable to determine
- the value of supply
- the rate of tax.
B. Apart from the above two scenarios, provisional assessment cannot be applied
by the taxable person for any other purpose.
C. Within the 90 days from the receipt of such request the proper officer shall
pass an order, allowing payment of tax on a provisional basis at such rate or
on such value as may be specified by him.
D. The final assessment order should be passed within six months from the
date of communication of the provisional assessment order.

6. S61: Scrutiny assessment

A. Scrutiny assessment is done by the tax authorities to verify the correctness of
the returns filed by taxpayers.
B. This is applicable for only registered persons and not to unregistered
persons.
C. Notice under S61 can be issued only if return has been filed by the
registered persons.
 D. The tax authorities can issue a notice to the taxpayer, asking them to provide
additional information or documents to support their returns.
E. The tax authorities can also conduct an audit of the taxpayer’s records.
F. Based on the information obtained, the tax authorities can issue an
assessment order, which specifies the final amount of tax to be paid by the
taxpayer.

7. S62: Best judgement assessment

A. Best judgment assessment is done when the taxpayer fails to furnish the
return under S39 or S45, even after the service of a notice under S46
B. The proper officer may assess the tax liability of the said person to the best
of his judgement taking into account all the material which is available or he
has gathered and issue an assessment order within a period of five years
from the date specified under S44 for furnishing of the annual return for the
financial year to which the tax not paid relates.

8. S63: Assessment of unregistered persons

A. When a taxable person fails to obtain registration even though liable to do
so or whose registration has been cancelled under S29(2) but who was liable
to pay tax, the proper officer may proceed to assess the tax liability of such a
taxable person to the best of his judgement for the relevant tax periods.
B. He will issue an assessment order within a period of five years from the date
specified under S44 for furnishing of the annual return for the financial year
to which the tax not paid relates.
C. No such assessment order shall be passed without giving the person an
opportunity of being heard

9. S64: Summary assessment

A. Summary assessment is done in certain special cases, such as when the tax
authorities believe that the taxpayer is trying to evade tax or when there is a
threat to revenue.
B. There should be evidence available with the proper officer that tax is payable
and remains unpaid.
C. Prior permission is required from the Additional Commissioner and Joint
Commissioner.
D. It is believed that any delay in assessment would harm the revenue’s
interest.
E. If the taxpayer to whom the liability pertains is not ascertainable, then such
liability is fastened to the person in charge of such goods.
F. Generally summary assessment is resorted to in cases of absconding and
defaulting taxpayers.
G. There is no time limit prescribed for passing of order.
H. The section does not mention that the said person should be given an
opportunity of being heard.
 I.
10. Procedure for Assessment under GST
A. Issue of Notice:
- The tax authorities can issue a notice to the taxpayer, asking them to
provide additional information or documents to support their returns.
- The notice must specify the reason for the assessment, the period
under assessment, and the nature of the information or documents
required.
B. Conduct of Audit:
- The tax authorities can conduct an audit of the taxpayer’s records to
verify the correctness of their returns.
- The audit can be done on-site or off-site, and the taxpayer must
provide all necessary information and documents to the auditors.
C. Issue of Assessment Order:
- Based on the information obtained through the notice and audit, the tax
authorities can issue an assessment order.
- The assessment order specifies the final amount of tax to be paid by
the taxpayer.
- The assessment order can also include interest, penalties, and fines,
if applicable.
D. Rectification of Errors:
- If the taxpayer disagrees with the assessment order, they can request
rectification of errors. The request must be made within 30 days of the
receipt of the assessment order.
- The tax authorities will then review the request and issue a revised
assessment order if necessary.
E. Appeal:
- If the taxpayer is still dissatisfied with the assessment order after
rectification, they can file an appeal with the appropriate appellate
authority. The appeal must be filed within three months of the receipt of
the assessment order.
- The appellate authority will then review the case and issue a final
order.
11. .

Audit: S65-66
1. There are three kinds of audits in GST:
A. S35: Done by Chartered Accountant or Cost Accountant
B. S65: Done by Tax authorities
C. S66: Special Audit

2. S2(13): 'audit’ implies

A. Detailed examination of records, returns and other documents
B. Maintained/furnished by a taxable person
 - under GST law/any other law or rules;
- Verification of correctness of
- turnover declared
- taxes paid
- refund claimed
- input tax credit availed
- Assessment of compliances with provisions of GST law and rules.
C. A GST audit is not only reconciliation of tax liability & payment; it also
signifies compliance of the provisions of the GST act, law and provisions etc.

3. S35(5)
A. Every registered person whose turnover during a financial year exceeds the
prescribed limit shall get his accounts audited by a chartered accountant or
a cost accountant and shall submit a copy of the audited annual accounts,
the reconciliation statement under S44(2) and such other documents in such
form and manner as may be prescribed.

4. S80(3)
A. Every registered person whose aggregate turnover during a financial year
exceeds two crore rupees shall get his accounts audited as specified under
S35(5) and he shall furnish a copy of audited annual accounts and a
reconciliation statement, duly certified, in FORM GSTR-9C, electronically
through the common portal either directly or through a Facilitation Centre
notified by the Commissioner.

5. S65: Audit by tax authorities

A. S65(1): The Commissioner or any officer authorized by him, by way of a
general or a specific order, may undertake an audit of any registered person
for the Tax Research Department, such period, at such frequency and in such
manner as may be prescribed.

6. S66: Special audit

A. S66(1): If at any stage of scrutiny, inquiry, investigation or any other
proceedings before him, any officer not below the rank of Assistant
Commissioner, having regard to the nature and complexity of the case and
the interest of revenue, is of the opinion that the value has not been correctly
declared or the credit availed is not within the normal limits, he may, with the
prior approval of the Commissioner, direct such registered person by a
communication in writing to get his records including books of accounts
examined and audited by a chartered accountant or a cost accountant as may
be nominated by the Commissioner.

7. Procedure for special audit:

 A. During the scrutiny, inquiry, investigation or any other proceedings of a registered
person, the Assistant Commissioner or any officer senior to him, having
regard to the nature and complexity of the case and the interest of revenue,
might be of the opinion that the value has not been correctly declared or the
credit availed is not within the normal limits.
B. A Chartered Accountant/Cost Accountant shall be appointed to do the audit.
C. The chartered accountant or cost accountant so nominated has to submit a
report of such audit within the period of 90 days, duly signed and certified
by him to the Assistant Commissioner.
D. On an application made by the registered person or the chartered accountant
or cost accountant or for any material and sufficient reason, the Assistant
Commissioner can extend the said period by a further period of 90 days.
E. The provisions of special audit shall have effect even if the accounts of the
registered person have been audited under any other provisions of the GST
Act or any other law for the time being in force.
F. The registered person shall be given an opportunity of being heard in respect
of any material gathered on the basis of special audit and which is proposed
to be used in any proceedings against him under this Act or the rules made
thereunder.
G. On conclusion of the special audit, the registered person shall be informed of
the findings of the special audit in FORM GST ADT-04.
H. Where the special audit results in detection of tax not paid or short paid or
erroneously refunded, or input tax credit wrongly availed or utilised, the
process of demand and recovery will be initiated against the registered person.
8. .

TD/: Notes: Inspection, Search, Seizure and Arrest: Chapter 14: S67-72
1. .

TD/: Notes: Demand and Recovery

TD/: Notes: Liability to Pay in Special Cases: Chapter 15: S73-84

TD/: Notes: Advance Ruling: S95-106

TD/: Notes: Appeals and Revision: S107-S121

TD/: Notes: Offences and Penalties: Chapter 19

Transitional Provisions: Chap 20: S139-142

1. S139: Migration of Existing taxpayers to GST
 A. Every person registered under any of the existing laws and having a valid PAN
shall be issued a certificate of registration on a provisional basis.
B. Final certificate of registration shall be issued after the applicant furnishes
certain information in FORM REG-24, within a period of 3 months.
C. If the particular/information has not been furnished by the applicant or the
same is found to be incorrect or incomplete, the proper officer shall cancel the
provisional certificate and issue an order in FORM GST REG-26.

2. S140: Transitional arrangements for Input Tax Credit

A. A registered person, other than the one opting composition scheme (S10),
shall be entitled to take, in his electronic credit ledger, Credit of the amount
of VAT if any carried forward in the return proceeding the appointed day.
B. A registered person other than a person opting composition scheme, shall
be entitled to take in his electronic ledger, credit of the unavailed input tax
credit in respect of capital goods, not carried forward in a return, furnished
under existing Law by him, for the period preceding the appointed day.
C. The registered person shall not be allowed ITC unless the said credit was
admissible as ITC under the existing law and is also admissible as ITC under
SGST Law.
D. Every registered person entitled to take credit of input tax shall, within 90
days or more as extended by the Commissioner of the appointed day, submit a
declaration electronically in FORM GST TRAN-1, duly signed, on the
Common Portal specifying therein, separately, the amount of input tax credit
to which he is entitled.
E. The amount of credit specified in the application in FORM GST TRAN-1 shall
be credited to the electronic credit ledger of the applicant maintained in
FORM GST PMT-2 on the Common Portal.
F. Such credit shall be allowed at the rate of
- 60% on such goods which attract State tax at the rate of 9% or more
and
- 40% for other goods of the State tax applicable on supply of such
goods after the appointed date and shall be credited after the State
tax payable on such supply has been paid:
- Provided that where integrated tax is paid on such goods, the
amount of credit shall be allowed at the rate of 30% and 20%
respectively of the said tax.
G. The scheme shall be available for six tax periods from the appointed date.
H. Recovery of credit wrongly availed
- The amount credited under Rule 1(3) may be verified and proceedings
under S73 or, as the case may be, S74 shall be initiated in respect of
any credit wrongly availed, whether wholly or partly
I. .
3. .
GST Compliance Rating: S149
1. S149: GST Compliance rating
(1) Every registered person may be assigned a goods and services tax
compliance rating score by the Government based on his record of
compliance with the provisions of this Act.
(2) The goods and services tax compliance rating score may be determined on the
basis of such parameters as may be prescribed.
(3) The goods and services tax compliance rating score may be updated at
periodic intervals and intimated to the registered person and also placed in the
public domain in such manner as may be prescribed.

2. Compliance Rating in GST seeks to bring transparency to the entire GST

compliances and administration by way of assigning compliance ratings.
3. All registered taxpayers will be publically rated according to how they comply with
GST regulations.
4. A prospective client will be able to see the compliance ratings of suppliers and make
a decision as to whether to deal with a particular supplier or not. This will create
healthy competition amongst taxable persons.
5. The idea behind this concept of tax administration is to compel people to be fully GST
compliant and on time with uploading invoices in relation to with or without ITC and
other necessary documents.
6. The compliance rating score in GST shall be updated periodically.
7. The parameters, criteria and methodology have not been notified yet.
The following may be the parameters of rating:
A. timely payment of taxes,
B. timely e-filing of monthly/quarterly returns,
C. matching of transactions,
D. adherence to various time limits,
E. cooperation in dealing with tax Department etc.
F. filing of regular and annual returns timely and correctly
G. correct utilization of input tax credit and its disclosure
H. correct deduction of TDS/TCS, wherever applicable
I. findings in scrutiny of returns/audit findings
J. refund claims etc.
8. .

Anti-Profiteering Measures: S171

1. S171: Anti profiteering measures.
(1) Any reduction in rate of tax on any supply of goods or services or the benefit
of input tax credit shall be passed on to the recipient by way of
commensurate reduction in prices.
(2) The Central Government may, on recommendations of the Council, by
notification, constitute an Authority, or empower an existing Authority
 constituted under any law for the time being in force, to examine whether input
tax credits availed by any registered person or the reduction in the tax rate
have actually resulted in a commensurate reduction in the price of the goods
or services or both supplied by him.
(3) The Authority referred to in sub-section (2) shall exercise such powers and
discharge such functions as may be prescribed.
(3A) Where the Authority referred to in sub-section (2), after holding
examination as required under the said sub-section comes to the conclusion
that any registered person has profiteered under sub-section (1), such person
shall be liable to pay penalty equivalent to 10% of the amount so profiteered:
- Provided that no penalty shall be leviable if the profiteered amount is
deposited within 30 days of the date of passing of the order by the
Authority.
- Explanation: For the purposes of this section, the expression
"profiteered" shall mean the amount determined on account of not
passing the benefit of reduction in rate of tax on supply of goods or
services or both or the benefit of input tax credit to the recipient by way
of commensurate reduction in the price of the goods or services or
both.

2. Profiteering means making or seeking to make an excessive or unfair profit illegally.

Therefore, anti profiteering means measures taken to combat profiteering.
3. Objective of anti-profiteering measures in GST is that the benefits given by the
Government should be passed down to the consumers. The suppliers should not
make illegal profits on it.
4. Any reduction in rate of tax on any supply of goods or services or the benefit of input
tax credit shall be passed on to the recipient by way of commensurate reduction in
prices.
5. An authority, namely, the Anti-Profiteering Authority has been constituted to
perform the work of Anti Profiteering measures.
6. .
TD/ Tamil Nadu Goods and Services Tax Act, 2017

TD: Poo's comparison chart and TNGST imp

sections notes
Definitions b) Levy and Collection of Taxes - CompositionLevy c)
ScopeofSupply - TaxLiabilityonCompositeandMixedSupplies - Time,
Placeandvalueofsupply d) Powerto Grant ExemptionfromTax e)
InputTaxCredit f) Registration g) Tax Invoice - Credit and Debit Notes –
Returns – Payment – Refunds – Assessment – Audit h) Inspection, Search,
Seizure and Arrest, Demand and Recovery - Liability to Pay in Special
Cases 356 i) Advance Ruling, Appeals and Revision j) Offences and
Penalties k) Transitional Provisions l) Anti-Profiteering Measures m) GST
Compliance Rating.

Integrated Goods and Services Tax Act, 2017

Levy and Collection of Integrated Goods and Services Tax: S5, S6

1. S5: Levy and collection
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the
integrated goods and services tax on all inter-State supplies of goods or
services or both, except on the supply of alcoholic liquor for human
consumption, on the value determined under S15 of the Central Goods and
Services Tax Act and at such rates, not exceeding 40%., as may be notified by
the Government on the recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable person:
- Provided that the integrated tax on goods other than the goods as
may be notified by the Government on the recommendations of the
Council imported into India shall be levied and collected in accordance
with the provisions of S3 of the Customs Tariff Act, 1975 on the value
as determined under the said Act at the point when duties of customs
are levied on the said goods under section 12 of the Customs Act, 1962
(2) The integrated tax on the supply of
- petroleum crude,
- high speed diesel,
- motor spirit (commonly known as petrol),
- natural gas and
- aviation turbine fuel
 shall be levied with effect from such date as may be notified by the
Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by
notification, specify categories of supply of goods or services or both, the tax
on which shall be paid on reverse charge basis by the recipient of such goods
or services or both and all the provisions of this Act shall apply to such
recipient as if he is the person liable for paying the tax in relation to the supply
of such goods or services or both.
(4) The Government may, on the recommendations of the Council, by notification,
specify a class of registered persons who shall, in respect of supply of
specified categories of goods or services or both received from an
unregistered supplier, pay the tax on reverse charge basis as the recipient
of such supply of goods or services or both, and all the provisions of this Act
shall apply to such recipient as if he is the person liable for paying the tax in
relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification,
specify categories of services, the tax on inter-State supplies of which shall
be paid by the electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to such electronic
commerce operator as if he is the supplier liable for paying the tax in relation
to the supply of such services:
- Provided that where an electronic commerce operator does not have a
physical presence in the taxable territory, any person representing
such electronic commerce operator for any purpose in the taxable
territory shall be liable to pay tax:
- Provided further that where an electronic commerce operator does not
have a physical presence in the taxable territory and also does not
have a representative in the said territory, such electronic commerce
operator shall appoint a person in the taxable territory for the purpose
of paying tax and such person shall be liable to pay tax.

2. S6: Power to grant exemption from tax

(1) Where the Government is satisfied that it is necessary in the public interest
so to do, it may, on the recommendations of the Council, by notification,
exempt generally, either absolutely or subject to such conditions as may be
specified therein, goods or services or both of any specified description from
the whole or any part of the tax leviable thereon with effect from such date as
may be specified in such notification.
(2) Where the Government is satisfied that it is necessary in the public interest
so to do, it may, on the recommendations of the Council, by special order in
each case, under circumstances of an exceptional nature to be stated in such
order, exempt from payment of tax any goods or services or both on which tax
is leviable.
 (3) The Government may, if it considers necessary or expedient so to do for the
purpose of clarifying the scope or applicability of any notification issued
under sub-section (1) or order issued under sub-section (2), insert an
Explanation in such notification or order, as the case may be, by notification at
any time within one year of issue of the notification under sub-section (1) or
order under sub-section (2), and every such Explanation shall have effect as if it
had always been the part of the first such notification or order, as the case
may be.
- Explanation: For the purposes of this section, where an exemption in
respect of any goods or services or both from the whole or part of the tax
leviable thereon has been granted absolutely, the registered person
supplying such goods or services or both shall not collect the tax, in
excess of the effective rate, on such supply of goods or services or both.
3. .

Determination of Nature of Supply: S7-S9, Chap 4

1. S7: Inter-state Supply
(1) Subject to the provisions of S10, supply of goods, where the location of the
supplier and the place of supply are in
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory, shall be treated as a supply of goods in the
course of inter-State trade or commerce
(2) Supply of goods imported into the territory of India, till they cross the customs
frontiers of India, shall be treated to be a supply of goods in the course of
inter-State trade or commerce.
(3) Subject to S12, supply of services, where the location of the supplier and the
place of supply are in
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade
or commerce.
(4) Supply of services imported into the territory of India shall be treated to be a
supply of services in the course of inter-State trade or commerce.
(5) Supply of goods or services or both,
(a) when the supplier is located in India and the place of supply is outside
India;
(b) to or by a Special Economic Zone developer or a Special Economic
Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not
covered elsewhere in this section, shall be treated to be a supply of
goods or services or both in the course of inter-State trade or commerce.
 2. S8: Intra-state Supply
(1) Subject to S10, supply of goods where the location of the supplier and the
place of supply of goods are in the same State or same Union territory shall
be treated as intra-State supply:
- Provided that the following supply of goods shall not be treated as
intra-State supply, namely:
- (i) supply of goods to or by a Special Economic Zone developer
or a Special Economic Zone unit;
- (ii) goods imported into the territory of India till they cross the
customs frontiers of India; or
- (iii) supplies made to a tourist referred to in section 15.
(2) Subject to S12, supply of services where the location of the supplier and the
place of supply of services are in the same State or same Union territory shall
be treated as intra-State supply:
- Provided that the intra-State supply of services shall not include supply
of services to or by a Special Economic Zone developer or a Special
Economic Zone unit.

- Explanation 1: For the purposes of this Act, where a person has,

- (i) an establishment in India and any other establishment
outside India;
- (ii) an establishment in a State or Union territory and any other
establishment outside that State or Union territory; or
- (iii) an establishment in a State or Union territory and any other
establishment registered within that State or Union territory,
then such establishments shall be treated as establishments of
distinct persons.
- Explanation 2: A person carrying on a business through a branch or an
agency or a representational office in any territory shall be treated as
having an establishment in that territory.

3. S9: Supplies in territorial waters.

Notwithstanding anything contained in this Act,
(a) where the location of the supplier is in the territorial waters, the location of
such supplier; or
(b) where the place of supply is in the territorial waters, the place of supply, shall,
for the purposes of this Act, be deemed to be in the coastal State or Union
territory where the nearest point of the appropriate baseline is located.
4. .

Place of Supply of Goods and Services or both: Chap 5: S10-14A

1. "Place of supply" is crucial in the GST regime as it divides supply into
A. Inter state supply
 B. Intra state/local supply

2. Subject to S10, supply where the "location of the supplier" and the "place of supply"
are in
A. Two different states
B. Two different union territories
C. A state and a union territory
Shall be treated as a supply in the course of inter-state trade or commerce.

3. S10: Determination of place of supply of goods

A. S10(1): The place of supply of goods, other than supply of goods imported into or
exported from India, shall be as under
(a) Where the supply involves movement of goods, whether the
supplier/recipient or by any other person, the place of supply of such
goods shall be the location of the goods at the time at which the
movement of goods terminates for delivery to the recipient.
(b) Where the goods are delivered by the supplier to a recipient or any other
person on the direction of a third person, whether acting as an agent or
otherwise before or during movement of goods, either by way of transfer
of documents of title to the goods or otherwise, it shall be deemed that
the said third person has received the goods and the place of supply of
such goods shall be the principal piece of business of such person.
(c) Where the supply does not involve movement of goods, whether by the
supplier or recipient, the place of supply shall be the location of such
goods at the time of the delivery to the recipient
(d) Where the goods are assembled or installed at site, the place of supply
shall be the place of such installation or assembly
(e) Where the goods are supplied on board a conveyance, including a
vessel, aircraft, train or motor vehicle, the place of supply shall be the
location at which such goods are taken on board.
B.
Case Place of supply of goods shall be
Supply involves movement of goods Location of goods at the time the
movement stops
Goods are delivered to any person on Principal place of business of the third
the direction of a third person person
(whether acting as agent/otherwise)
Supply does not involve movement of Location of goods at the time of
goods delivery
Goods are assembled or installed at Place of installation
site
Goods are supplied on board (vehicle, Location at which the goods are taken
vessel, aircraft, train) on board

C. .
 4. S11: Place of supply of goods imported into, or exported from India:
The place of supply of goods,
(a) imported into India shall be the location of the importer;
(b) exported from India shall be the location outside India
5. .

Refund of Integrated Tax to International Tourist: S15

1. S15: Refund of integrated tax paid on supply of goods to tourist leaving India.
The integrated tax paid by tourist leaving India on any supply of goods taken out of
India by him shall be refunded in such manner and subject to such conditions and
safeguards as may be prescribed.
- Explanation: For the purposes of this section, the term “tourist” means a person
not normally resident in India, who enters India for a stay of not more than 6
months for legitimate non-immigrant purposes.
2. .

Zero Rated Supply: S16

1. S16: Zero rated supply:
(1) “Zero rated supply” means any of the following supplies of goods or services or
both, namely:
(a) export of goods or services or both; or
(b) supply of goods or services or both for authorised operations to a
Special Economic Zone developer or a Special Economic Zone unit.
(2) Subject to the provisions of S17(5) of the Central Goods and Services Tax Act,
credit of input tax may be availed for making zero-rated supplies,
notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim
refund of unutilised input tax credit on supply of goods or services or both,
without payment of integrated tax, under bond or Letter of Undertaking, in
accordance with the provisions of S54 of the Central Goods and Services Tax
Act or the rules made thereunder, subject to such conditions, safeguards and
procedure as may be prescribed:
- Provided that the registered person making zero rated supply of goods
shall, in case of non-realisation of sale proceeds, be liable to deposit
the refund so received under this subsection along with the applicable
interest under S50 of the Central Goods and Services Tax Act within 30
days after the expiry of the time limit prescribed under the Foreign
Exchange Management Act, (FEMA)1999 for receipt of foreign
exchange remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the Council, and subject to
such conditions, safeguards and procedures, by notification, specify
 - (i) a class of persons who may make zero rated supply on payment of
integrated tax and claim refund of the tax so paid;
- (ii) a class of goods or services which may be exported on payment of
integrated tax and the supplier of such goods or services may claim the
refund of tax so paid
2. .

Apportionment of Tax Revenue: S17

1. S17: Apportionment of tax and settlement of funds
(1) Out of the integrated tax paid to the Central Government,
(a) in respect of inter-State supply of goods or services or both to an
unregistered person or to a registered person paying tax under S10 of
the Central Goods and Services Tax Act;
(b) in respect of inter-State supply of goods or services or both where the
registered person is not eligible for input tax credit;
(c) in respect of inter-State supply of goods or services or both made in a
financial year to a registered person, where he does not avail of the
input tax credit within the specified period and thus remains in the
integrated tax account after expiry of the due date for furnishing of
annual return for such year in which the supply was made;
(d) in respect of import of goods or services or both by an unregistered
person or by a registered person paying tax under S10 of the Central
Goods and Services Tax Act;
(e) in respect of import of goods or services or both where the registered
person is not eligible for input tax credit;
(f) in respect of import of goods or services or both made in a financial year
by a registered person, where he does not avail of the said credit within
the specified period and thus remains in the integrated tax account
after expiry of the due date for furnishing of annual return for such
year in which the supply was received,
the amount of tax calculated at the rate equivalent to the central tax
on similar intra-State supply shall be apportioned to the Central
Government.

(2) The balance amount of integrated tax remaining in the integrated tax
account in respect of the supply for which an apportionment to the Central
Government has been done under sub-section (1) shall be apportioned to the,–
(a) State where such supply takes place; and
(b) Central Government where such supply takes place in a Union
territory:
- Provided that where the place of such supply made by any
taxable person cannot be determined separately, the said
balance amount shall be apportioned to,
(a) each of the States; and
 (b) Central Government in relation to Union territories, in
proportion to the total supplies made by such taxable
person to each of such States or Union territories, as the
case may be, in a financial year:
- Provided further that where the taxable person making such
supplies is not identifiable, the said balance amount shall be
apportioned to all States and the Central Government in
proportion to the amount collected as State tax or, as the case
may be, Union territory tax, by the respective State or, as the
case may be, by the Central Government during the immediately
preceding financial year.

(2A) The amount not apportioned under sub-section (1) and sub-section (2)
may, for the time being, on the recommendations of the Council, be apportioned
at the rate of 50% to the Central Government and 50% to the State
Governments or the Union territories, as the case may be, on ad hoc basis
and shall be adjusted against the amount apportioned under the said sub-
sections.
(3) The provisions of subsections (1) and (2) relating to apportionment of integrated
tax shall, mutatis mutandis, apply to the apportionment of interest, penalty
and compounding amount realised in connection with the tax so apportioned.
(4) Where an amount has been apportioned to the Central Government or a State
Government under sub-section (1) or sub-section (2) or sub-section (3), the
amount collected as integrated tax shall stand reduced by an amount equal
to the amount so apportioned and the Central Government shall transfer to the
central tax account or Union territory tax account, an amount equal to the
respective amounts apportioned to the Central Government and shall transfer
to the State tax account of the respective States an amount equal to the
amount apportioned to that State, in such manner and within such time as may
be prescribed.
(5) Any integrated tax apportioned to a State or, as the case may be, to the
Central Government on account of a Union territory, if subsequently found to
be refundable to any person and refunded to such person, shall be reduced
from the amount to be apportioned under this section, to such State, or
Central Government on account of such Union territory, in such manner and
within such time as may be prescribed.
2. .

Utilization, Cross Utilization of Credit: S18

1. GST allows cross-utilization of credits between taxes.
2. This means that a credit component of CGST/SGST can be utilized for IGST, and
vice versa.
3. However, credits of CGST and SGST cannot be used interchangeably.
 4. Due to cross-utilization of credits, there is much background accounting that needs to be
done by the government.
5. This is done to maintain proper accounts of the taxes and equate the transferred
funds in right accounts, according to the credits utilized.

6. Order of Credit Utilization:

A. Under the IGST Act, Input Tax Credit (ITC) amount is to be used in different
orders of priority for each component of GST.
B. For IGST, the cross utilization of ITC under GST is allowed
- first for IGST,
- CGST, and
- SGST.
C. .

7. S18: Transfer of input tax credit.

On utilisation of credit of integrated tax availed under this Act for payment of,
(a) central tax in accordance with the provisions of S49(5) of the Central Goods
and Services Tax Act, the amount collected as integrated tax shall stand
reduced by an amount equal to the credit so utilised and the Central
Government shall transfer an amount equal to the amount so reduced from
the integrated tax account to the central tax account in such manner and
within such time as may be prescribed;
(b) Union territory tax in accordance with the provisions of section 9 of the Union
Territory Goods and Services Tax Act, the amount collected as integrated tax
shall stand reduced by an amount equal to the credit so utilised and the
Central Government shall transfer an amount equal to the amount so reduced
from the integrated tax account to the Union territory tax account in such
manner and within such time as may be prescribed;
(c) State tax in accordance with the provisions of the respective State Goods and
Services Tax Act, the amount collected as integrated tax shall stand reduced by
an amount equal to the credit so utilised and shall be apportioned to the
appropriate State Government and the Central Government shall transfer the
amount so apportioned to the account of the appropriate State Government in
such manner and within such time as may be prescribed
8. .

Significance of Union Territory Goods and Services Tax Act, 2017

1. UTGST is the GST applicable on the goods and services supply that take place in any
of the Union Territories of India.
2. The reason behind UTGST is that the SGSTs cannot be applied in a UT without
legislature
3. To address this issue, the GST Council recommended UTGST which would be on par
with SGST
4. The President of India appoints an administrator on his behalf, who in turn, appoints
commissioners and officers to administer the UTGST Rules.
5. UTGST applicability:
A. Andaman and Nicobar
B. Lakshadweep
C. Dadra and Nagar Haveli
D. Daman and Diu
E. Chandigarh
F. Ladakh
- It does not apply elsewhere
- It does not apply to Delhi, Jammu and Kashmir and Puducherry as
they follow SGST rules
- When Ladakh separated from J&K, it became a UT without a
legislature and is thus eligible for UTGST Rules
- However, J&K has a separate legislation governing the UT, hence
UTGST is not applicable.
- Jammu and Kashmir GST Act was passed which lays down rules for
J&K

6. UTGST Act, 2017 has provisions similar to SGST in levy, collection, exemption,
transfer of ITC, recovery of pending tax, payment of tax, etc
7. UTGST is similar to SGST with the only difference being it is meant for territories
without legislatures while states have their own.

8. People living and consuming goods/services or are involved in purchasing and

supplies in these regions need to pay UTGST in addition to CGST to the respective
government.

9. UTGST Rates
A. UTGST Rate is not fixed and might vary depending on the Council's
recommendations
B. The rates are determined by the central government on the recommendations
of the GST Council
C. They are notified through notifications issued under S7 of the UTGST Act
D. The UTGST tax has the same rates as SGST, namely,
- 0%,5%,12%,18% and 28%
E. Detailed rates available in UTGST Handwritten notes

10. UTGST is charged on a forward charge basis

A. For intra-UT supply of goods except alcohol for human consumption, UTGST
is charged
B. It is levied under S16 of the CGST Act
C. The business that supplies goods or services is responsible for collection
UTGST from the recipients of the goods or services
 D. The business then deposits the collected UTGST to the government
E. This process of charging in the hands of the supplier is called charging tax on
a forward charge basis

11. UTGST charged on a reverse charge basis

A. Under the reverse charge mechanism, the supplier is not liable to pay UTGST
on the supplies
B. Instead, the recipient of the goods or services is required to pay the applicable
UTGST

12. UTGST charged for e-commerce operators

A. In case of e-commerce operators, the UTGST rules may vary if the supply of
the goods is intra-UT and and e-commerce operator is making the supply
B. In such cases, the operator is liable to pay the tax

13. Legal rules and regulations for UTGST

A. Article 246(4) of the Constitution: the parliament has the right to frame all
official laws on any matter for any part of the Indian territories, not covered
under any state
B. The parliament can make laws on all matters that are enumerated in the State
list
C. By verification of the laws of the Constitution and rules, the Central government
has the right to forward UTGST in the parliament to receive further approval

14. Benefits:
A. A single tax system helps taxpayers expand their businesses to other union
territories
B. It generates revenue for both the union and the UT government which helps pay
for building projects and social aid programmes
C. It reduces the chances of tax fraud

15. Exemption from UTGST

A. Basic necessities: food, healthcare and education services
B. Goods or services exported outside India
C. Goods or service provided to the central or state government or local
authorities
D. Categories like renewable energy equipment or public welfare service

16. S8, UTGST Act: the central government can exempt certain goods or services in
public interest, entirely or with conditions.

17. Calculating UTGST:

A. Find the taxable value
B. Check the UTGST rate
 - Usually splits the total GST rate equally between CGST and UTGST
C. UTGST = (Value of goods) x (UTGST Rate/100)
18. .

Significance of the Goods and Services Tax (Compensation to

States) Act, 2017
1. The Goods and Services Tax (Compensation to States) Bill, 2017 was introduced in Lok
Sabha on March 27, 2017.
2. The Bill provides for compensation to states for any loss in revenue due to the
implementation of GST.
3. Period of compensation:
A. S2(r): "transition period" means a period of five years from the transition date
B. Compensation will be provided to a state for a period of five years from the date
on which the state brings its State GST Act into force
4. S3: Projected growth rate ; S4:Base year:
A. For the purpose of calculating the compensation amount in any financial year,
the year 2015-16 will be assumed to be the base year, from which revenue will
be projected.
B. The growth rate of revenue for a state during the five-year period is assumed
to be 14% per annum.
5. S5: Base year revenue:
The base year tax revenue consists of the states’ tax revenues from:
A. state Value Added Tax (VAT),
B. central sales tax,
C. entry tax, octroi, local body tax,
D. taxes on luxuries,
E. taxes on advertisements, etc.
F. However, any revenue among these taxes arising related to supply of (i) alcohol
for human consumption, and (ii) certain petroleum products, will not be
accounted as part of the base year revenue.

6. S7: Calculation and release of compensation:

A. The compensation payable to a state has to be provisionally calculated and
released at the end of every two months.
B. Further, an annual calculation of the total revenue will be undertaken, which
will be audited by the Comptroller and Auditor General of India.

7. S8(2) and Schedule II: Levy and compensation of GST compensation cess:
A. A GST Compensation Cess may be levied on the supply of certain goods and
services, as recommended by the GST Council.
B. The receipts from the cess will be deposited to a GST Compensation Fund.
C. The receipts will be used for compensating states for any loss due to the
implementation of GST.
 D. The cess will be capped at:
- (i) 135% for pan masala,
- (ii) Rs 400 per tonne for coal,
- (iii) Rs 4,170 + 290% per 1,000 sticks of tobacco, and
- (iv) 15% for all other goods and services including motor cars and aerated
water.
E. Any unutilised money in the Compensation Fund at the end of the
compensation period will be distributed in the following manner:
- (i) 50% of the fund to be shared between the states in proportion to
revenues of the states, and
- (ii) the remaining 50% will be part of the centre’s divisible pool of taxes.

8. Significance:
A. The Goods and Services Tax (GST) introduced in India on July 1, 2017, marked
a significant shift in the country’s indirect tax regime.
B. To address the concerns of states about potential revenue losses due to the
transition to GST, the Goods and Services Tax (Compensation to States) Act
of 2017 was enacted.
C. This Act ensured that states would be compensated for any shortfall in their
revenue arising from the implementation of GST, based on an assumed
annual revenue growth of 14%.
D. Unification of Taxes:
- Before GST, states had the autonomy to levy indirect taxes such as
VAT, sales tax, and excise duties, which were major sources of
revenue.
- With the introduction of GST, these taxes were subsumed under a
single, unified tax system that both the central and state governments
share.
E. Revenue Concerns:
- States were concerned that the shift to GST might lead to a decline in
their revenue collections, particularly in the initial years, as the new tax
system stabilized.
- To address these concerns, the GST Compensation to States Act was
enacted, ensuring that states would be compensated for any shortfall in
revenue below a projected growth rate of 14% per annum over the base
year (2015-16).
- Revenue Protection: The compensation mechanism was designed to
protect states from any potential revenue loss due to the implementation
of GST, thereby ensuring their financial stability. The compensation was
to be paid from a GST compensation fund, which was financed by a
levy of a compensation cess on certain luxury and demerit goods,
such as tobacco, coal, and automobiles.
F. Fixed revenue growth:
 - The centre assured a 14% year to year growth on GST revenues for a
period of five years.
- The centre assured states to compensate states for any loss on tax
revenue due to GST.
- If such assurance was not available, the states would have been
hesitant to come along in implementing GST.
G. Compensation for manufacturing states:
- The states like Maharashtra, Gujarat, and Tamil Nadu lost a portion of
their revenue as GST is a consumption tax
- The tax amount goes to the state of consumption rather than
manufacturing state as earlier.
H. Alternative revenue source:
- State governments lost their power to raise revenue from alternative
indirect sources after GST.
- Under the GST regime, states are required to subsume several indirect
taxes into a single tax, which could potentially result in a reduction in the
revenue of states.
- This deficiency was fulfilled by the union government by compensating
them with a fixed amount regardless of the situation.
I. Create constitutional liability:
- The Act created a constitutionally binding agreement between centre
and state regarding GST compensation.
- This gives States an assurance as well as a mechanism to enforce
their claim as a right.

9. Covid-19's impact on the GST compensation fund and federal tensions:

A. Lower tax collection for states
B. Non uniform impact
C. Uncertainty about future
D. Backlog
E. Some states demanded compensation on all of the tax revenue lost and not just
GST.
F. Issue of borrowing: Centre was asked to borrow funds to meet the shortfall in the
compensation fund
10. .

Mod 5: Authorities under various Taxing Statutes

The Income Tax Act, 1961 – Income Tax Authorities, Powers and
Functions: Chapter XIII

1. Chapter 13:Income Tax Authorities: S116 to S138

2. S116: Income-tax authorities
This section lists all the classes of income-tax authorities under the Act:
A. Central Board of Direct Taxes (constituted under the Central Boards of Revenue
Act, 1963)
B. Principal Directors General of Income-tax or Principal Chief Commissioners of
Income-tax
C. Directors-General of Income-tax or Chief Commissioners of Income-tax
D. Principal Directors of Income-tax or Principal Commissioners of Income-tax
E. Directors of Income-tax or Commissioners of Income-tax or Commissioners of
Income-tax (Appeals)
F. Additional Directors of Income-tax or Additional Commissioners of Income-tax or
Additional Commissioners of Income-tax (Appeals)
G. Joint Directors of Income-tax or Joint Commissioners of Income-tax
H. Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or
Deputy Commissioners of Income-tax (Appeals)
I. Assistant Directors of Income-tax or Assistant Commissioners of Income-tax
J. Income-tax Officers
K. Tax Recovery Officers
L. Inspectors of Income-tax

3. S117: Appointment of income-tax authorities

This section details the appointment process:
A. The Central Government may appoint persons as income-tax authorities
B. The Central Government may authorize the Board, Principal Director
General/Director-General, Principal Chief Commissioner/Chief Commissioner,
Principal Director/Director, or Principal Commissioner/Commissioner to appoint
income-tax authorities below the rank of Assistant Commissioner/Deputy
Commissioner
C. An income-tax authority authorized by the Board may appoint executive or
ministerial staff to assist in the execution of functions

4. S118: Control of income-tax authorities

A. The Board may, by notification in the Official Gazette, direct that any income-
tax authority or authorities shall be subordinate to other income-tax authorities
as specified in the notification.

5. S119: Instructions to subordinate authorities

A. The Board may issue orders, instructions, and directions to other income-tax
authorities for proper administration of the Act, which they must follow.
B. Restrictions on issuing instructions:
- Cannot require any income-tax authority to make a particular
assessment or dispose of a case in a particular manner
 -Cannot interfere with the discretion of Commissioner (Appeals) in
appellate functions
C. Powers of the Board:
- May issue general or special orders for proper management of
assessment and revenue collection
- May authorize any income-tax authority (except Commissioner
(Appeals)) to admit applications or claims after expiry of specified
period
- May relax requirements in Chapter IV or Chapter VI-A to avoid genuine
hardship, subject to conditions:
(a) Default in compliance was due to circumstances beyond the
assessee's control
(b) Assessee complied before completion of assessment

6. S120: Jurisdiction of income-tax authorities

A. Income-tax authorities shall exercise powers and perform functions as directed
by the Board
B. The Board's directions may authorize income-tax authorities to issue orders
for exercise of powers by subordinate authorities
C. Criteria for issuing directions:
- Territorial area
- Persons or classes of persons
- Incomes or classes of income
- Cases or classes of cases
D. Powers of the Board:
- May authorize Principal Director General/Director General or Principal
Director/Director to perform functions of other income-tax authorities
- May empower higher authorities to issue orders that powers of
Assessing Officer shall be exercised by Additional Commissioner,
Additional Director, Joint Commissioner, or Joint Director
- May require two or more Assessing Officers to exercise powers
concurrently
- May direct which authority shall be the income-tax authority for
furnishing return of income

7. S124: Jurisdiction of Assessing Officers

A. An Assessing Officer has jurisdiction:
- Over any person carrying on business or profession within his area
- Over any other person residing within his area
B. Jurisdiction questions:
- Shall be determined by Principal Director General/Director General or
Principal Chief Commissioner/Chief Commissioner or Principal
Commissioner/Commissioner
 - If question relates to areas under different authorities, it shall be
determined by the authorities concerned or the Board
C. Limitations on questioning jurisdiction:
- Where return has been filed, within one month from service of notice or
after completion of assessment
- Where no return has been filed, after expiry of time allowed to make
return or show cause
- Where action has been taken under S132 or S132A, within one month
from service of notice or after completion of assessment
D. Every Assessing Officer shall have all powers conferred by the Act in respect
of income within his jurisdiction.

8. S127: Power to transfer cases

A. Principal Director General/Director General or Principal Chief
Commissioner/Chief Commissioner or Principal Commissioner/Commissioner
may transfer any case to other Assessing Officers after:
- Giving assessee reasonable opportunity to be heard
- Recording reasons for transfer
B. For transfers between authorities not subordinate to the same higher
authority:
- If higher authorities agree, the order may be passed by the authority
from whose jurisdiction the case is being transferred
- If higher authorities disagree, the order may be passed by the Board or
authorized authority
C. No opportunity needs to be given if transfer is between offices in the same city,
locality, or place
D. Transfer may be made at any stage of proceedings and does not require re-
issue of notices
E. "Case" means all proceedings for any year pending, completed, or to be
commenced

9. S129: Change of incumbent of an office

A. When an income-tax authority ceases to exercise jurisdiction and is succeeded
by another, the successor may continue proceedings from the stage left by
the predecessor.
B. The assessee may demand that:
- Previous proceedings be reopened
- Before any assessment order is passed, the assessee be reheard

10. S131: Power regarding discovery, production of evidence, etc.

A. Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals),
Principal Chief Commissioner/Chief Commissioner, Principal
Commissioner/Commissioner, and Dispute Resolution Panel have the same
powers as a civil court regarding:
 - Discovery and inspection
- Enforcing attendance and examining on oath
- Compelling production of books and documents
- Issuing commissions
B. Higher authorities may exercise these powers for investigation of concealed
income
C. For inquiries related to international agreements, Assistant Commissioner or
higher authority has similar powers
D. Authorities may impound documents with restrictions:
- Must record reasons for impounding
- Cannot retain beyond 15 days without approval of higher authority

11. S132: Powers of Search and Seizure

A. S132
- Authorization for search and seizure when there is reason to believe:
(a) Non-compliance with summons
(b) Documents will not be produced voluntarily
(c) Possession of undisclosed income or property
- Powers of authorized officer:
(a) Enter and search premises
(b) Break open locks
(c) Search persons
(d) Require access to electronic records
(e) Seize books, documents, money, bullion, jewelry (except business
stock-in-trade)
(f) Place identification marks on documents
(g) Make inventory of seized items
B. S132(1A)
- The Principal Chief Commissioner, Chief Commissioner, Principal
Commissioner, or Commissioner can authorize an officer to take action
under sub-section (1)(i) to (v) for buildings, places, vessels, vehicles, or
aircraft not mentioned in the original authorization.
- An Explanation clarifies that reasons to suspect, as recorded by the
income-tax authority, shall not be disclosed to any person, authority, or
the Appellate Tribunal.
C. S132(2)
- The authorized officer may requisition services of police officers or
Central Government officers to assist with purposes specified in sub-
section (1) or (1A).
- It is the duty of every such officer to comply with such requisition.
D. S132(3)
- When it's not practicable to seize books of account, documents, money,
bullion, jewelry, or other valuable items (for reasons other than those in
second proviso to subsection (1)), the authorized officer may:
 (a) Serve an order on the owner/possessor prohibiting removal or
dealing with the items without permission
(b) Take steps to ensure compliance with this subsection
E. S132(4)
- The authorized officer may examine on oath any person found in
possession of books, documents, money, etc. during search or seizure.
- Statements made may be used as evidence in proceedings under the
Income Tax Acts.
- An Explanation clarifies that examination may cover matters relevant
for investigation, not just regarding items found during search.
F. S132(4A)
- Presumptions applicable when items found during search:
(a) Items belong to the person in whose possession they are found
(b) Contents of books/documents are true
(c) Signatures and handwritten portions are by the persons
purported to have written them
(d) Stamped/executed/attested documents were duly processed
by persons purported to have done so
G. S132(8)
- Seized books/documents cannot be retained beyond 30 days from
assessment order under S153A or S158BC(c) without:
(a) Written reasons for retention
(b) Approval from Principal Chief Commissioner, Chief
Commissioner, Principal Commissioner, Commissioner, Principal
Director General, Director General, Principal Director, or Director
- Even with approval, retention cannot exceed 30 days after completion
of all relevant proceedings
H. S132(8A)
- An order under S132(3) shall not be in force for more than 60 days
from the order date.
I. S132(9)
- Person from whose custody books or documents are seized may make
copies or extracts in the presence of the authorized officer or
designated person at a place and time appointed by the authorized
officer.
J. S132(9A)
- If the authorized officer lacks jurisdiction over the person, seized items
must be handed over to the Assessing Officer with jurisdiction within
60 days.
- Powers under S132(8) and (9) then transfer to that Assessing Officer.
K. S132(9B) to (9D)
- During search or within 60 days thereafter, the authorized officer may:
(a) Provisionally attach property of the assessee with approval
from higher authorities to protect revenue interests [9B]
 (b) Such provisional attachment ceases after 6 months [9C]
(c) Refer to a Valuation Officer to estimate fair market value of
property [9D]
L. S132(10)
- Person legally entitled to seized items may object to approval given
under S132(8) by applying to the Board with reasons
- The Board may pass orders after giving the applicant a hearing
M. S132(13)
- Provisions of the Code of Criminal Procedure, 1973 relating to searches
and seizure apply to searches under subsections (1) or (1A).
N. S132(14)
- The Board may make rules regarding searches or seizures, particularly
for:
(a) Obtaining ingress where free access is unavailable
(b) Ensuring safe custody of seized items
- Explanation 1: For subsections (9A), (9B) and (9D), provisions of
subsection (2) of section 153B apply regarding execution of search
authorization.
- Explanation 2: "Proceeding" means any proceeding for any year under
Income Tax Acts that is pending, completed, or may commence after the
search date.
O. .

12. S132A: Powers to Requisition Books of Account, etc.

A. S132A(1)
- Authorities who can authorize requisition:
(a) Principal Director General or Director General
(b) Principal Director or Director
(c) Principal Chief Commissioner or Chief Commissioner
(d) Principal Commissioner or Commissioner
- Circumstances when requisition can be authorized:
(a) When a person has failed to produce books/documents as
required by summons/notice, and these are in custody of other
authorities
(b) When books/documents would be useful for proceedings but
might not be produced when returned by other authorities
(c) When assets represent undisclosed income and are in custody
of other authorities
(d) An Explanation states that reasons to believe shall not be
disclosed to any person, authority, or Appellate Tribunal.
B. S132A(2)
- Upon requisition, the officer/authority must deliver books, documents,
or assets either immediately or when no longer necessary to retain.
C. S132A(3)
 - Provisions of subsections (4A) to (14) of section 132 and section 132B
apply to items delivered to the requisitioning officer as if seized directly
from the person.
- "Authorized officer" is replaced with "requisitioning officer" in those
provisions.

13. S132B: Application of Seized or Requisitioned Assets

A. S132B(1)
- Seized/requisitioned assets may be used to recover:
(a) Existing liabilities under specified tax acts
(b) Liabilities determined upon completion of assessment
(c) Liabilities arising from Settlement Commission applications
- Provisos:
(a) If the person explains the source of assets satisfactorily within
30 days, only the existing liability can be recovered, and
remaining portion should be released
(b) Such release must occur within 120 days from the last
authorization date
B. S132B(2)
- Recovery by other modes under the Act is not precluded.
C. S132B(3)
- Assets/proceeds remaining after discharge of liabilities must be
returned to the person from whom they were seized.
D. S132B(4)
- The government must pay simple interest at 0.5% per month on
excess seized amounts
- Interest runs from 120 days after the last authorization date until
assessment completion
- Explanations clarify:
(a) Definition of "block period" and "execution of authorization"
(b) "Existing liability" does not include advance tax

14. S133: Power to Call for Information

A. Authorities empowered: Assessing Officer, Deputy Commissioner (Appeals),
Joint Commissioner, Commissioner (Appeals)
B. Powers to require:
- Firms to provide partner details and shares
- Hindu undivided families to provide manager and member details
- Trustees, guardians, agents to provide details of persons they
represent
- Assessees to furnish statements of persons paid rent, interest,
commission, royalty, brokerage, or annuity exceeding Rs. 1,000 or
prescribed amount
 - Dealers, brokers, agents to provide details of persons involved in asset
transfers
- Any person (including banking companies) to furnish information or
verified statements useful for proceedings
C. Additional powers under clause (6):
(a) Can also be exercised by Principal Director General, Director General,
Principal Chief Commissioner, Chief Commissioner, Principal Director,
Director, Principal Commissioner, Commissioner, Joint Director, Deputy
Director, or Assistant Director
(b) For inquiries where no proceeding is pending, approval is required
from higher authorities for officers below certain ranks
D. For international agreements under S90 or S90A, notified income-tax
authorities can exercise these powers even without pending proceedings.

15. S133A: Power of Survey

A. S133A(1)
- Income-tax authority may enter:
(a) Any place within assigned area
(b) Any place occupied by person under their jurisdiction
(c) Any place authorized by appropriate authority
(d) At a place where business, profession, or charitable activity is
carried on
- to:
(a) Inspect books of account/documents
(b) Check/verify cash, stock, or valuable items
(c) Obtain information relevant to proceedings
- Explanation clarifies this includes any place where the person states their
books/documents/cash/stock are kept.
B. S133A(2)
- Entry allowed only during business hours or between sunrise and
sunset.
C. S133A(2A)
- For verifying tax deduction or collection at source, authorities may enter
offices or business places to:
(a) Inspect books/documents
(b) Obtain relevant information
D. S133A(3)
- Powers of the authority include:
(a) Placing identification marks on documents
(b) Making extracts or copies
(c) Impounding and retaining books/documents (with recorded
reasons, for max 15 days without higher approval)
(d) Inventorying cash, stock, valuables
(e) Recording statements
 - Proviso restricts impounding and inventory actions for authorities acting
under subsection (2A).

E. S133A(4)
- Authority shall not remove cash, stock, or valuables from the premises.
F. S133A(5)
- For expenditure on functions/ceremonies/events, authorities may
require information from the assessee or others about expenditure
incurred
- Recorded statements may be used as evidence in proceedings.
G. S133A(6)
- If a person refuses/evades compliance, the authority has powers under
S131(1) to enforce compliance
- Proviso requires approval from the Joint Director/Commissioner for
certain officers.
- Explanation
(a) "Income-tax authority" defined with different ranks for different
purposes
(b) "Proceeding" defined broadly to include pending, completed, or
future proceedings.

16. S133B: Power to Collect Certain Information

A. S133B(1)
- Income-tax authority may enter business/profession premises to
collect prescribed information.
B. S133B(2)
- Entry allowed only during business hours.
C. S133B(3)
- Authority cannot remove books, documents, cash, stock, or
valuables.
D. Explanation
- "Income-tax authority" defined, including authorized Inspectors.

17. S133C: Power to Call for Information by Prescribed Income-tax Authority

A. S133C(1)
- Prescribed authority may issue notices requiring
information/documents for verification.
B. S133C(2)
- Information received may be processed and outcomes made available
to the Assessing Officer.
C. S133C(3)
- Board may make schemes for centralized notice issuance and
information processing.
D. Explanation
 - "Proceeding" has same meaning as in section 133A.

18. S134: Power to Inspect Registers of Companies

A. Authorities (including authorized subordinates) may inspect and take copies of
company registers of members, debenture holders, or mortgagees.

19. S135: Powers of Higher Authorities

A. Principal Director General, Director General, Principal Director, Director,
Principal Chief Commissioner, Chief Commissioner, Principal Commissioner,
Commissioner, and Joint Commissioner:
- Competent to make any inquiry under the Act
- Have all powers of an Assessing Officer for inquiries

20. S136: Proceedings Before Income-tax Authorities to be Judicial Proceedings

A. Proceedings deemed judicial within meanings of sections 193, 228, and 196 of
Indian Penal Code
B. Every income-tax authority deemed a Civil Court for section 195, but not for
Chapter XXVI of Criminal Procedure Code

21. S138: Disclosure of Information Respecting Assessees

A. S138(1)
- The Board or specified authority may furnish information to:
(a) Officers/authorities performing functions under laws related to
taxes, duties, or foreign exchange
(b) Officers/authorities under other laws as specified by Central
Government in public interest
- Person may apply to Principal Chief Commissioner, Chief
Commissioner, Principal Commissioner, or Commissioner for
information about an assessee
- Information may be provided if deemed in public interest, and this
decision is final
B. S138(2)
- The Central Government may direct that no information be furnished
by public servants regarding specified matters or to specified
authorities.
22. .

The Central Goods and Services Tax Act, 2017 – Officers under
the Act, Powers and Functions
1. Chapter II, CGST Act, 2017: S3-S6

2. S3: Officers under this Act.

 The Government shall, by notification, appoint the following classes of officers for
the purposes of this Act, namely:
(a) Principal Chief Commissioners of Central Tax or Principal Directors General
of Central Tax,
(b) Chief Commissioners of Central Tax or Directors General of Central Tax,
(c) Principal Commissioners of Central Tax or Principal Additional Directors
General of Central Tax,
(d) Commissioners of Central Tax or Additional Directors General of Central Tax,
(e) Additional Commissioners of Central Tax or Additional Directors of Central
Tax,
(f) Joint Commissioners of Central Tax or Joint Directors of Central Tax,
(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,
(h) Assistant Commissioners of Central Tax or Assistant Directors of Central
Tax, and
(i) any other class of officers as it may deem fit:
- Provided that the officers appointed under the Central Excise Act, 1944
shall be deemed to be the officers appointed under the provisions of this
Act.

3. S4: Appointment of officers.

(1) The Board may, in addition to the officers as may be notified by the
Government under S3, appoint such persons as it may think fit to be the
officers under this Act.
(2) Without prejudice to the provisions of sub-section (1), the Board may, by
order, authorise any officer referred to in S3(a) to (h) to appoint officers of
central tax below the rank of Assistant Commissioner of central tax for the
administration of this Act.

4. S5: Powers of officers.

(1) Subject to such conditions and limitations as the Board may impose, an
officer of central tax may exercise the powers and discharge the duties
conferred or imposed on him under this Act.
(2) An officer of central tax may exercise the powers and discharge the duties
conferred or imposed under this Act on any other officer of central tax who is
subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be
specified on his behalf by him, delegate his powers to any other officer who is
subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall
not exercise the powers and discharge the duties conferred or imposed on
any other officer of central tax.

5. S6: Authorisation of officers of State tax or Union territory tax as proper officer in
certain circumstances
 (1) Without prejudice to the provisions of this Act, the officers appointed under the
State Goods and Services Tax Act or the Union Territory Goods and
Services Tax Act are authorised to be the proper officers for the purposes of
this Act, subject to such conditions as the Government shall, on the
recommendations of the Council, by notification, specify.
(2) Subject to the conditions specified in the notification issued under sub-section
(1),
(a) where any proper officer issues an order under this Act, he shall also
issue an order under the State Goods and Services Tax Act or the
Union Territory Goods and Services Tax Act, as authorised by the
State Goods and Services Tax Act or the Union Territory Goods and
Services Tax Act, as the case may be, under intimation to the
jurisdictional officer of State tax or Union territory tax;
(b) where a proper officer under the State Goods and Services Tax Act or
the Union Territory Goods and Services Tax Act has initiated any
proceedings on a subject matter, no proceedings shall be initiated by
the proper officer under this Act on the same subject matter.
(3) Any proceedings for rectification, appeal and revision, wherever applicable,
of any order passed by an officer appointed under this Act shall not lie before
an officer appointed under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act.
6. .

The Tamil Nadu Goods and Services Tax Act, 2017 – Officers
under the Act, Powers and Functions.
1. Chapter II: Administration: S3 - S6

2. S3: Officers under this Act

The Government shall, by notification, appoint the following classes of officers for the
purposes of this Act, namely:
(a) Commissioner of State tax,
(b) Additional Commissioners of State tax,
(c) Joint Commissioners of State tax,
(d) Deputy Commissioners of State tax,
(e) Assistant Commissioners of State tax, and
(f) any other class of officers as it may deem fit:
- Provided that, the officers appointed under the Tamil Nadu Value
Added Tax Act, 2006 shall be deemed to be the officers appointed
under the provisions of this Act

3. S4: Appointment of officers

(1) The Government may, in addition to the officers as may be notified under S3,
appoint such persons as it may think fit to be the officers under this Act
 (2) The Commissioner shall have jurisdiction over the whole of the State, the
Additional Commissioner, in respect of all or any of the functions assigned to
them, shall have jurisdiction over the whole of the State or where the State
Government so directs, over any local area thereof, and all other officers
shall, subject to such conditions as may be specified, have jurisdiction over the
whole of the State or over such local areas as the Commissioner may, by
order, specify.

4. S5: Power of officers

(1) Subject to such conditions and limitations as the Commissioner may impose,
an officer of State tax may exercise the powers and discharge the duties
conferred or imposed on him under this Act.
(2) An officer of State tax may exercise the powers and discharge the duties
conferred or imposed under this Act on any other officer of State tax who is
subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be
specified on this behalf by him, delegate his powers to any other officer who is
subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall
not exercise the powers and discharge the duties conferred or imposed on any
other officer of State tax.

5. S6: Authorisation of officers of Central tax as proper officer in certain

circumstances
(1) Without prejudice to the provisions of this Act, the officers appointed under the
Central Goods and Services Tax Act are authorised to be the proper officers
for the purposes of this Act, subject to such conditions as the Government
shall, on the recommendations of the Council, by notification, specify
(2) Subject to the conditions specified in the notification issued under sub-section
(1),
(a) where any proper officer issues an order under this Act, he shall also
issue an order under the Central Goods and Services Tax Act, as
authorised by the said Act under intimation to the jurisdictional officer
of Central tax;
(b) where a proper officer under the Central Goods and Services Tax Act
has initiated any proceedings on a subject matter, no proceedings
shall be initiated by the proper officer under this Act on the same
subject matter.
(3) Any proceedings for rectification, appeal and revision, wherever applicable, of
any order passed by an officer appointed under this Act, shall not lie before an
officer appointed under the Central Goods and Services Tax Act
6. .
The Integrated Goods and Services Tax Act, 2017 – Appointment
of Officers under the Act, Authorisation of Officers under SGST
and UTGST as proper officers.
1. Chapter II: Administration: S3, S4

2. S3: Appointment of officers.

The Board may appoint such central tax officers as it thinks fit for exercising the
powers under this Act.

3. S4: Authorisation of officers of State tax or Union territory tax as proper officers in
certain circumstances.
Without prejudice to the provisions of this Act, the officers appointed under the State
Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are
authorised to be the proper officers for the purposes of this Act, subject to such
exceptions and conditions as the Government shall, on the recommendations of the
Council, by notification, specify.
4. .

The Black Money (Undisclosed Foreign Income and Assets) and

Imposition of Tax Act, 2015 – Tax Authorities, Powers and
Functions.
1. S6: Tax authorities
(1) The income-tax authorities specified in S116 of the Income-tax Act shall be
the tax authorities for the purposes of this Act.
(2) Every such authority shall exercise the powers and perform the functions of a
tax authority under this Act in respect of any person within his jurisdiction.
(3) Subject to the provisions of sub-section (4), the jurisdiction of a tax authority
under this Act shall be the same as he has under the Income-tax Act by virtue
of orders or directions issued under S120 of that Act (including orders or
directions assigning the concurrent jurisdiction) or under any other provision of
that Act.
(4) The tax authority having jurisdiction in relation to an assessee who has no
income assessable to income-tax under the Income-tax Act shall be the tax
authority having jurisdiction in respect of the area in which the assessee
- resides or
- carries on its business or
- has its principal place of business.
(5) S118 of the Income-tax Act and any notification issued thereunder shall apply
in relation to the control of tax authorities as they apply in relation to the
control of the corresponding income-tax authorities, except to the extent to
 which the Board may, by notification in the Official Gazette, otherwise direct
in respect of any tax authority

2. S7: Change of incumbent:

(1) The tax authority who succeeds another authority as a result of change in
jurisdiction or for any other reason, shall continue the proceedings from the
stage at which it was left by his predecessor.
(2) The assessee in such a case may be given an opportunity of being heard, if
he so requests in writing, before passing any order in his case.

3. S8: Powers regarding discovery and production of evidence

(1) The prescribed tax authorities shall, for the purposes of this Act, have the same
powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of
1908), while trying a suit in respect of the following matters, namely:
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking
company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
(2) For the purposes of making any inquiry or investigation, the prescribed tax
authority shall be vested with the powers referred to in sub-section (1), whether
or not any proceedings are pending before it.
(3) Any tax authority prescribed for the purposes of sub-section (1) or sub-section (2)
may, subject to the rules made in this behalf, impound any books of account or
other documents produced before it and retain them in its custody for such period
as it thinks fit.
(4) Any tax authority below the rank of Commissioner shall not
(a) impound any books of account or other documents without recording his
reasons for doing so; or
(b) retain in his custody any such books or documents for a period exceeding
thirty days without obtaining the approval of the Principal Chief
Commissioner or the Chief Commissioner or the Principal Commissioner
or the Commissioner.

4. S9: Proceedings before tax authorities to be judicial proceedings.

(1) Any proceeding under this Act before a tax authority shall be deemed to be a
judicial proceeding within the meaning of S193 and S228 and for the purposes
of S196 of the Indian Penal Code.
(2) Every tax authority shall be deemed to be a civil court for the purposes of
S195, but not for the purposes of Chapter XXVI of the Code of Criminal
Procedure, 1973.
5. .
Case laws
1. Indian Medical Association v. V.P. Shantha & Ors 1996 AIR 550, 1995 SCC (6) 651.
Characteristics of tax are
A. Tax is imposed under a statutory power without the taxpayer's consent
B. It is an imposition for public purposes without any reference being made to any
special benefits conferred on the taxpayer
C. It is a part of common burden and the quantum will be determined based on the
capacity of the payer

2. Mathuram Agrawal v. State of Madhya Pradesh Appeal (civil) 1990 of 1995.

SC held that there are three key features for any taxing statute:
A. Subject of tax
B. The person liable to pay tax
C. The rate at which the tax is payable

3. UOI v. Azadi Bachao Andolan & Anr, (2004) 10 SCC 1.

A. The Supreme Court case involved the issue of tax residency determination
under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).
B. The Court ruled that a residency certificate issued by the Mauritian authorities
should be considered sufficient evidence of residency for the purposes of the
DTAA.
C. However, the Court also emphasized that the assessing officer's primary duty
is to determine tax liability, and this duty should not be unduly restricted by a
mere certificate.
D. The case arose from a dispute regarding the tax residency status of
companies incorporated in Mauritius, which had been used by some
taxpayers to avoid Indian taxes.
E. Issue:
- Whether a certificate issued by the Mauritian authorities could be relied
upon to determine the residency status of these companies under the
India-Mauritius DTAA?
F. SC: The Mauritian certificate is valid proof of residency, but it also stated that
the Assessing Officer (AO) cannot blindly accept such certificates and must still
exercise their independent judgment in determining tax liability.

4. A.V. Fernandez v. State of Kerala, [AIR 1957 SC 657]

A. SC: when construing fiscal statutes, one must adhere to the strict letter of the
law and not just the spirit or substance.
B. The court clarified that the calculation of net turnover for sales tax purposes
should include sales both inside and outside the state
C. SC: a non-obstante provision in the act did not allow for deducting sales outside
the state.
 5. State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory 1953 AIR 333
A. Shanmugha Vilas Cashew Nut Factory (respondent) was engaged in the
business of processing raw cashew nuts.
B. The factory purchased raw cashew nuts from abroad, processed them within
the State of Travancore-Cochin, and then exported the processed nuts to other
Indian states and foreign countries.
C. The State Government sought to levy sales tax on these transactions under the
Travancore-Cochin General Sales Tax Act.
D. The respondent contended that the sales were in the course of import/export
trade and therefore exempt from state taxation under Article 286 of the
Constitution of India.
E. Issue: Whether the sales of cashew kernels by the respondent to buyers
outside the state were exempt from sales tax under Article 286(1)(b) of the
Constitution as being sales in the course of import or export?
F. SC: The sales of processed cashew kernels to buyers outside the state were not
exempt from sales tax under Article 286(1)(b) as they were not sales in the
course of import or export.
G. The Court distinguished between the original import of raw cashew nuts and
the subsequent sale of processed kernels.
H. The Court determined that the processing of raw nuts into kernels created a
new commercial commodity, breaking the continuity of the import/export
transaction.
I. The sale of processed kernels was considered a separate transaction from the
original import of raw nuts.
J. For a transaction to be considered "in the course of" import or export:
- There must be an actual export or import
- The sale and export/import must be connected parts of a single
transaction
- The connection must be integral, not merely incidental
K. In this case, the Court found that the processing of the nuts created a break in
the chain of the import/export transaction, making the subsequent sales subject
to state taxation.

6. .

IT Act
1. Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613.
A. The Indian revenue authorities could not tax a transaction where the transfer
of controlling interest in an Indian company occurred offshore between non-
resident companies.
B. The government argued that the transaction was a tax evasion scheme, but
the court found it was not a "sham" or colorable device.
 C. SC determined that the acquisition of shares in an Indian company by a
foreign entity did not constitute a transfer within India, and thus was not
subject to Indian tax laws.
D. This decision led to the retrospective amendment of the Income-tax Act, 1961
to clarify that such offshore transactions could be taxed.
E. In response to the Supreme Court's ruling, the Indian government enacted the
Finance Act, 2012, which retroactively amended the Income-tax Act, 1961 to
clarify that even offshore transactions could be taxed if they related to Indian
assets.
F. More on: https://blog.ipleaders.in/vodafone-international-holdings-bv-v-union-of-
india-case-analysis/#Facts_of_the_case

2. Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015]

373 ITR 673 (SC).
A. Where Memorandum of Association provides for carrying on the business of
letting out is in the nature of business income and chargeable accordingly
and not under the head “Income from house property”.
B. Chennai Properties and Investments Ltd. (appellant) was incorporated with the
main objective of acquiring and letting out properties as mentioned in its
Memorandum of Association.
C. The company's income was derived entirely from leasing/renting its
properties.
D. In its income tax returns, the company declared this rental income under the
head "Income from House Property."
E. The Assessing Officer reclassified this income as "Profits and Gains of
Business or Profession" since letting out properties was the main business of
the company.
F. This reclassification was confirmed by the Commissioner of Income Tax
(Appeals), the Income Tax Appellate Tribunal, and subsequently by the High
Court.
G. Whether rental income earned by a company whose main objective is to
acquire and lease properties should be taxed under the head "Income from
House Property" (Section 22) or "Profits and Gains of Business or Profession"
(Section 28) of the Income Tax Act, 1961?
H. SC: The rental income earned by Chennai Properties and Investments Ltd. was
correctly classified as "Profits and Gains of Business or Profession" rather than
"Income from House Property."
I. The Court emphasized that the classification of income for tax purposes
depends on the primary object and nature of the business of the assessee.
J. Looking at the Memorandum of Association of the company, the Court noted
that the main objective of the company was to acquire and let out properties,
and its entire income was derived from this activity.
K. The Court referred to previous judgments, particularly
- East India Housing and Land Development Trust Ltd. v. CIT and
 - Karanpura Development Co. Ltd. v. CIT,
which established that when a company is incorporated with the
specific objective of letting out properties, such income is business
income.
L. The Court distinguished this case from situations where a property was let out
by an assessee as an investment activity (which would be "Income from House
Property").
M. The Court applied the "primary purpose test" - since letting out properties was
the main business of the company, the rental income was the income of that
business and therefore taxable as business income.
N. The Court held that Section 22 of the Income Tax Act (Income from House
Property) would not apply when rental income is earned as part of a commercial
enterprise or business activity.

3. CIT v. Smt. Pellet Sri devamma 1976 105 ITR 887 AP.
A. The assessee, Smt. Pelleti Sridevamma, made a cash gift to her minor son.
B. Subsequently, the son sold a house property, and the Income Tax Department
sought to attribute the income from this sale to the mother.
C. Issue: Could the income from the son's property sale be attributed to the
mother, given the time lag between the cash gift and the sale?
D. HC: The long time lag (8 years) between the cash gift and the subsequent sale
of the house property prevented the court from establishing a direct or
proximate relationship between the two events.
E. The court emphasized that the definition of "proximate" in this context does not
necessarily imply time proximity, but rather a connection between the gift and
the income.
F. It highlights that while a direct relationship between the gift and the income is
required, it doesn't always have to be immediate in terms of time, as it has
been interpreted in CIT v. Prem Bhai Parekh

4. Jagannath Hanumanbux v. ITO [1957] 31 ITR 603 (Cal) (HC)

A. The Hon'ble Calcutta High Court upheld the validity of a protective
assessment.
B. HC: a protective assessment can be made but not a protective recovery.
C. Interestingly, a protective recovery was allowed to be made and if made the
money would be deposited in a suspense account.
D. The argument raised by the Petitioner that the assessee was fictitious was
overruled by stating that if the ITO was not sure if the assessee is fictitious or
not, there is no bar in making a protective assessment on such an assessee.

5. Vinod Kumar Jain v. CIT 344 ITR 501 (P & H).

A. Vinod Kumar Jain (assessee) was a partner in M/s Vinod Kumar Jain &
Company, which was engaged in the business of share trading.
 B. For the assessment year 2002-03, the assessee filed his income tax return
declaring certain income under the head "business income."
C. During the assessment proceedings, the Assessing Officer noticed that the
assessee had claimed a loss of Rs. 67,757 on account of trading in shares.
D. The Assessing Officer reclassified this transaction from "business income" to
"capital gains," treating the shares as investments rather than stock-in-trade.
E. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate
Tribunal both upheld the Assessing Officer's decision.
F. The assessee then filed an appeal to the Punjab and Haryana High Court.
G. Issue: Whether the income/loss arising from the share transactions should be
classified as "business income" or "capital gains" for income tax purposes?
H. The Punjab and Haryana High Court held that the share transactions should be
treated as giving rise to "business income" rather than "capital gains,"
deciding in favor of the assessee.
I. The Court emphasized that the distinction between shares held as stock-in-
trade versus investment depends on the intention of the assessee at the
time of purchase and the nature of the activity.
J. The Court noted that the assessee was a partner in a firm engaged in share
trading, and the very nature of his business was dealing in shares.
K. The Court referred to CBDT Circular No. 4 of 2007, which provided guidelines
for distinguishing between shares held as stock-in-trade and shares held as
investments, noting that:
- The frequency, volume, and continuity of transactions were indicative
of trading activity
- The assessee maintained separate books of accounts for these
transactions as business activity
L. The Court observed that the tax authorities had not provided adequate
reasoning to support the reclassification of the transactions from business
income to capital gains.
M. The Court highlighted that the tax treatment of share transactions should be
consistent from year to year, and a change in classification should be based
on substantial changes in the nature of the activity.
N. The Court applied the principle that in matters of business, the assessee's own
method of accounting and classification should be given weight unless there
are compelling reasons to disregard it.

6. Cape Brandy Syndicate v. I.R.C. (1 KB 64, 71)

A. The Cape Brandy Syndicate, a group of businessmen, purchased a large
quantity of brandy from the Cape government and resold it for profit.
B. The court ruled that the profits were taxable as profits from a trade, even
though the transaction was a one-off event.
C. Held: The profits from a one-time purchase and resale of brandy were taxable
as profits from a trade, not capital gains, despite the fact it was a one-off
transaction.
 D. This case established the principle that even a single transaction can
constitute a trade if it
- is intended to make a profit and
- involves a degree of organization and activity beyond a simple capital
transaction.
E. The court emphasized the difference between a trade, which involves an
ongoing business activity, and a capital transaction, which is a one-time
investment.
F. The case highlighted that "business" in a tax context can encompass various
activities, including a one-off transaction if it's conducted in a businesslike
manner.
G. The court considered the syndicate's intention to make a profit as a key factor
in determining whether the transaction was a trade.
7. .

CGST
1. Jay Bee Industries v. UOI, (CWP No.2169 of 2018 order dt. 16.11.2019).
A. Jay Bee Industries (petitioner) was a manufacturer operating in the state of
Himachal Pradesh.
B. The case relates to the transition from the pre-GST tax regime to the Goods
and Services Tax (GST) regime which was implemented on July 1, 2017.
C. The petitioner had accumulated CENVAT credit (Central Value Added Tax
credit) under the previous tax regime.
D. When GST was implemented, there were provisions for transitioning these
credits to the new regime under Section 140 of the CGST Act, 2017.
E. The petitioner faced issues with carrying forward their accumulated CENVAT
credit into the GST regime through the TRAN-1 form due to technical
glitches in the GST portal.
F. Despite multiple attempts, the petitioner was unable to successfully file the
TRAN-1 form by the prescribed deadline.
G. Issue: Whether the petitioner should be allowed to carry forward their
accumulated CENVAT credit into the GST regime despite being unable to file
the TRAN-1 form within the prescribed deadline due to technical glitches in the
GST portal?
H. HC held in favor of the petitioner and directed the tax authorities to allow the
petitioner to file/revise their TRAN-1 form and claim the transitional credit they
were legitimately entitled to.
I. The Court recognized that the right to carry forward tax credits was a vested
right that could not be denied on mere technical grounds.
J. The Court acknowledged that there were widespread technical glitches in the
GST portal during the transition period that prevented many taxpayers from
successfully filing their TRAN-1 forms.
 K. The Court applied the principle that substantive rights cannot be defeated by
procedural limitations, especially when the failure to comply with procedures
was due to circumstances beyond the petitioner's control.
L. The Court noted that denying the transitional credit would lead to double
taxation, which goes against the fundamental principles of taxation.
M. The Court directed the respondents (tax authorities) to either open the portal or
provide an alternative mechanism to enable the petitioner to claim their
legitimate transitional credit.

2. Royal Care Speciality Hospital Ltd. (AAR Tamil Nadu).

A. Royal Care Speciality Hospital Ltd. (applicant) is a multi-specialty hospital
providing healthcare services.
B. The hospital provides food to in-patients as part of their healthcare services.
C. The food is supplied to patients as per doctors' advice and is considered part of
the treatment protocol.
D. The hospital charges patients for this food either as part of a package or
separately.
E. The applicant sought an advance ruling on the GST implications of food
supplied to in-patients.
F. Issue: Whether the supply of food to in-patients by the hospital is exempt from
GST as part of healthcare services, or whether it should be treated as a
separate taxable supply under the GST Act?
G. The Tamil Nadu Authority for Advance Ruling held that the supply of food to in-
patients is a composite supply where healthcare service is the principal
supply, and therefore the entire supply (including food) is exempt from GST.
H. The AAR referred to S2(30) of the CGST Act, 2017, which defines "composite
supply" as two or more supplies naturally bundled together and supplied in
conjunction with each other, with one being a principal supply.
I. The AAR determined that healthcare services were the principal supply in this
case, as patients primarily come to the hospital for medical treatment, not for
food.
J. The AAR noted that food provided to in-patients is based on medical advice
and forms part of the treatment protocol prescribed by doctors.
K. Under GST, when there is a composite supply, the tax rate applicable to the
principal supply applies to the entire composite supply.
L. Since healthcare services provided by a clinical establishment are exempt from
GST under Notification No. 12/2017-Central Tax (Rate), the entire composite
supply including food is exempt.
M. The AAR distinguished this from a case where a hospital might operate a
separate cafeteria or canteen for visitors or staff, which would be a separate
taxable supply.

3. Skill Lotto Solutions Pvt Ltd v. UOI: 2020 (12) TMI 140 (SC)
 A. Skill Lotto Solutions Pvt. Ltd. (petitioner) was engaged in the business of lottery
distribution and marketing.
B. Under the GST regime, lottery tickets were classified as "actionable claims"
and made subject to GST.
C. The Central Goods and Services Tax Act, 2017 (CGST Act) defined "goods"
under Section 2(52) to include actionable claims.
D. The CGST Act carved out an exception for actionable claims other than
lottery, betting, and gambling.
E. GST was imposed on lottery tickets at 28% of the face value of lottery tickets.
F. The petitioner challenged the constitutional validity of the inclusion of
lottery, betting, and gambling as actionable claims under the definition of
"goods" in Section 2(52) of the CGST Act.
G. Issues:
- Whether lottery tickets are "goods" under the GST Act and Constitution
of India?
- Whether the levy of GST on lottery tickets is constitutionally valid?
- Whether imposing GST on the face value of lottery tickets rather than
just the profit margin is discriminatory and violative of Articles 14, 19(1)
(g), and 301 of the Constitution?
H. SC upheld the constitutional validity of levying GST on lottery tickets and
dismissed the petition.
I. The Court examined the legal definition of "actionable claims" under the
Transfer of Property Act, 1882, and held that lottery tickets fall within the
definition of actionable claims.
J. The Court referred to previous judgments, particularly Sunrise Associates v.
Government of NCT of Delhi, where it was established that lotteries are
actionable claims.
K. The Court held that Parliament has the power to make laws with respect to
goods and services tax under Article 246A of the Constitution, which gives
broad powers to include actionable claims within the ambit of "goods" for taxation
purposes.
L. The Court rejected the petitioner's argument that taxing the face value of lottery
tickets was discriminatory, noting that the taxation scheme fell within the
legislative competence of Parliament. It was a policy decision within the domain
of the legislature and did not violate constitutional provisions.
M. The Court also emphasized that the State has a legitimate interest in
controlling gambling activities, and taxation is one of the methods to do so.
N. The Court concluded that the inclusion of actionable claims in the form of
lottery, betting, and gambling in the definition of goods under S2(52) of the
CGST Act was neither arbitrary nor discriminatory.

4. Re: M/s Caltech Polymers Pvt Ltd: 2018(10)TMI1313 (AAAR Kerala)

A. Caltech Polymers Pvt. Ltd. (appellant) was a company providing food to its
employees within the company premises.
 B. The company did not operate any canteen facility itself but arranged for the
supply of food through an external caterer.
C. The company was charging a nominal amount from the employees for the
food provided.
D. The company had approached the Kerala Authority for Advance Ruling (AAR)
seeking clarification on whether GST was applicable on the nominal amount
recovered from employees.
E. The AAR had ruled that such supply was subject to GST.
F. Aggrieved by this ruling, the company filed an appeal before the Appellate
Authority for Advance Ruling (AAAR).
G. Issue: Whether the supply of food by an employer to its employees for a
nominal consideration is subject to GST, even when the employer is not in the
business of providing food services?
H. The Kerala Appellate Authority for Advance Ruling upheld the original AAR
decision and ruled that the nominal recovery made by the employer from
employees for the supply of food is subject to GST.
I. The AAAR examined S7 of the CGST Act, 2017, which defines "supply" to
include all forms of supply of goods or services made for a consideration in
the course of or furtherance of business.
J. The AAAR noted that the definition of "business" under S2(17) of the CGST Act
is very wide and includes any provision of facilities or benefits to employees.
K. The AAAR held that even though providing food to employees is not the
company's main business, it falls under the definition of "business" as it is a
facility provided to employees in the course of employment.
L. The AAAR emphasized that the existence of consideration, however nominal,
brings the transaction within the purview of "supply" under GST law.
M. The AAAR rejected the appellant's argument that such supplies should be
treated as services to employees by employers and therefore outside the GST
net.
N. The AAAR clarified that the employer-employee relationship exists only for the
services provided by employees to employers in the course of employment,
not for supplies made by employers to employees.
O. The AAAR also determined that such supply does not qualify for exemption
under any existing notification.

5. Sonka Publication (India) Pvt Ltd v. UOI: (2019) 5 TMI 643

A. Sonka Publication (India) Pvt. Ltd. (petitioner) is engaged in the business of
publishing and selling books.
B. Under the GST regime, printed books are exempt from GST, but inputs and
input services used in the production of books are taxable.
C. Pre-GST, publishers enjoyed exemption on inputs under the erstwhile VAT
regime.
D. The petitioner challenged the constitutional validity of S17(2) of the CGST Act,
2017, which restricts input tax credit for exempt supplies.
 E. The petitioner argued that the denial of input tax credit on inputs and input
services used for publishing exempt books resulted in tax cascading, contrary
to the basic objective of GST.
F. Issues:
- Whether the restriction on availing input tax credit for exempt supplies
under S17(2) of the CGST Act is constitutionally valid?
- Whether denial of input tax credit on inputs and input services used for
publishing exempt books (zero-rated supplies) violates Article 14 of the
Constitution?
G. The Delhi High Court dismissed the petition and upheld the constitutional
validity of S17(2) of the CGST Act, 2017, which restricts input tax credit for
exempt supplies.
H. The Court held that exempting a product from tax is a policy decision taken
by the government, and such exemption does not create a right to claim input
tax credit.
I. The Court emphasized that when a supply is exempt from tax, the legislature
can legitimately deny the benefit of input tax credit as there is no output tax
against which such credit can be utilized.
J. The Court distinguished between "zero-rated supply" and "exempt supply," noting
that in zero-rated supplies (like exports), input tax credit is allowed because the
intention is to make the product competitive by relieving it of the tax burden,
whereas exempt supplies are part of a social or economic policy.
K. The Court referred to the principle that input tax credit is not a vested right
and can be restricted by the legislature through appropriate provisions.
L. The Court rejected the argument of tax cascading, stating that when the final
product is exempt, the burden of tax on inputs is expected to be factored into
the pricing of the product.
M. The Court noted that the petitioner had not demonstrated how the restriction on
input tax credit was arbitrary, irrational, or violative of Article 14 of the
Constitution.
N. The Court emphasized that the legislature has wide latitude in matters of taxation
policy, and judicial intervention is warranted only when there is clear
violation of constitutional provisions.

6. .

TNGST
1. State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory 1953 AIR
333.
A. Shanmugha Vilas Cashew Nut Factory (respondent) was engaged in the
business of processing raw cashew nuts.
 B. The factory purchased raw cashew nuts from abroad, processed them within
the State of Travancore-Cochin, and then exported the processed nuts to other
Indian states and foreign countries.
C. The State Government sought to levy sales tax on these transactions under the
Travancore-Cochin General Sales Tax Act.
D. The respondent contended that the sales were in the course of import/export
trade and therefore exempt from state taxation under Article 286 of the
Constitution of India.
E. Issue: Whether the sales of cashew kernels by the respondent to buyers
outside the state were exempt from sales tax under Article 286(1)(b) of the
Constitution as being sales in the course of import or export?
F. SC: The sales of processed cashew kernels to buyers outside the state were not
exempt from sales tax under Article 286(1)(b) as they were not sales in the
course of import or export.
G. The Court distinguished between the original import of raw cashew nuts and
the subsequent sale of processed kernels.
H. The Court determined that the processing of raw nuts into kernels created a
new commercial commodity, breaking the continuity of the import/export
transaction.
I. The sale of processed kernels was considered a separate transaction from the
original import of raw nuts.
J. For a transaction to be considered "in the course of" import or export:
- There must be an actual export or import
- The sale and export/import must be connected parts of a single
transaction
- The connection must be integral, not merely incidental
K. In this case, the Court found that the processing of the nuts created a break in
the chain of the import/export transaction, making the subsequent sales subject
to state taxation.

2. Gen Engineering Works v. Assistant Commissioner

A. The Madras HC quashed an order passed under Tamil Nadu Goods and
Services Tax Act, 2017 (TNGST Act) noting that the said order was passed
without considering the additional reply and hearing request made by the
petitioner, which is violative of principles of natural justice.
B. While the respondent had issued a show-cause notice and the petitioner had
filed a reply on 07.02.2024, the additional reply submitted on 24.04.2024 was
not considered when the impugned order was passed.
C. More importantly, the petitioner’s request for a personal hearing, made
explicitly in the additional reply, was also ignored.
D. The Court noted that these oversights violated the principles of natural justice,
which require that all relevant submissions and requests from the parties be
considered before an order is passed. In this case, the failure to take into
 account the additional reply and the request for a personal hearing amounted to
a procedural lapse.

3. State of Tamil Nadu v. Maliavcerchand Contractor

A. A. Maliavcerchand Contractor (respondent) was engaged in civil construction
contracts for the government.
B. The contractor used to purchase materials for executing these contracts.
C. The TNGST Act imposed tax on the transfer of property in goods involved in
the execution of works contracts.
D. The State sought to levy sales tax on the value of goods incorporated in the
works contracts executed by the contractor.
E. The contractor contended that the contract was indivisible and could not be
split to tax only the goods component.
F. Whether the State had the authority to levy sales tax on the goods component
of an indivisible works contract under the TNGST Act?
G. The court held that the State had the legislative competence to impose sales
tax on the value of goods incorporated in the execution of works contracts,
even if the contract was indivisible in nature.
H. Reasoning:
- The court examined the constitutional provisions, particularly Article
366(29A)(b) of the Constitution of India, which was introduced by the 46th
Amendment. This provision specifically included "the transfer of
property in goods (whether as goods or in some other form) involved in
the execution of a works contract" within the definition of "sale" for
tax purposes.
- The court determined that this constitutional amendment was
specifically designed to overcome the previous judicial decisions that
had held works contracts to be indivisible and not subject to sales tax.
- The court recognized that a works contract involves both service and
supply of goods elements, and the constitutional amendment permitted
the state to levy tax on the goods portion despite the contract being
composite in nature.
- The court emphasized that the tax could only be levied on the value of
goods component and not on the service component of the works
contract, maintaining the distinction between the two.

4. Sodexo Foods Solutions India Pvt Ltd. v. State of Tamil Nadu

A. Sodexo, a catering service provider, was challenging a decision by the Tamil
Nadu Sales Tax Appellate Tribunal regarding the classification of certain
transactions as either goods or services for tax purposes.
B. This distinction is crucial as it determines the applicable tax rate and
obligations.
C. The assessee therein prepared raw puffs in its kitchen and sold it to a
supermarket.
 D. The assessee contended that the puffs were sold in a retail outlet to
consumers and whenever there was a demand, the raw puff was fried by the
staff of the assessee in the outlet and the customer is given ready to eat
E. Thus the contention of the assessee was the sale in the outlet would be a
sale in the eating house which was rejected by the Division Bench as it was an
admitted fact that the price for the puff is collected only from the supermarket
and not from the assessee.

5. Revenue Bar Association v. UOI

A. The Madras HC ruled against the Central Government's regulations regarding
the composition and functioning of the Goods and Services Tax Appellate
Tribunal (GSTAT).
B. The primary argument was that the composition of the tribunal, particularly the
inclusion of administrative members, undermined its independence and
violated Article 50 of the Indian Constitution
C. The argument that Sections 109 & 110 of the CGST Act, 2017 and TNGST Act,
2017 are ultra vires, in so far as exclusion of lawyers from the scope and view
for consideration as members of the tribunal, was rejected.
D. S109: Appellate Tribunal and Benches thereof.
- GST Tribunal shall be constituted and in accordance with S109 of CGST
E. S110: President and Members of Appellate Tribunal, their qualification,
appointment, conditions of service, etc.
- The qualifications, appointment, salary and allowances, terms of office,
resignation and removal of the President and Members of the State
Bench and Area Benches shall be in accordance with S110 of CGST
F. The Court recommended that the Parliament must consider to amend the
section for including lawyers to be eligible to be appointed as Judicial Members
to the Appellate Tribunal in view of the issues which are likely to arise for
adjudication under the CGST Act and in order to maintain uniformity in various
statutes.

6. .

IGST
1. Amit Cotton Industries v. Principal Commissioner of Customs (Gujarat HC).
A. Guj HC: an exporter cannot be denied an Integrated Goods and Services Tax
(IGST) refund simply because they have also claimed a higher rate of duty
drawback.
B.
C. Issue: Can an IGST refund be denied if the exporter also claims a higher rate
of duty drawback?
D. Guj HC: the IGST refund cannot be denied, even if a higher rate of drawback is
claimed.
 E. The court found that the Circular 37/2018-Customs, which suggested such a
denial, is not legally binding and contradicts Rule 96 of the Central Goods
and Services Tax (CGST) Rules.
F. Rule 96 specifies the circumstances under which a refund can be withheld,
and the circumstances in this case did not warrant withholding the IGST
refund.
G. This case established that the claim for IGST refund is separate from the claim
for duty drawback, and the former cannot be denied based on the latter.

2. Jenefa India v. UOI

A. The exemption provided by the Central Government by exercising its powers
either under section 11(1) of the CGST Act or under S6(1) of the IGST Act are
substantive rights provided to the stakeholders by giving such exemption.
B. Therefore, such kind of exemptions cannot be taken away or done away by
issuing clarificatory Circulars by the Board, in exercise of its powers under
section 168 of the CGST Act.

3. Numinous Impex (I) Pvt Ltd v. Commissioner of Customs

A. Madras HC clarified the eligibility for refund of input tax credit (ITC) under the
IGST Act, 2017, even when duty drawback is claimed.
B. The court determined that the exporter was entitled to a refund of unutilized
ITC, even though they had exported goods without paying IGST under a
bond and claimed duty drawback.
C. The key issue was whether exports made under bond, claiming duty drawback,
would entitle the exporter to the benefit of refund of input tax credit under S16(3)
of the IGST Act, 2017?
D. The court held that the term "CENVAT Facility" in the duty drawback
notification should be interpreted as "Input Tax Facility," clarifying that the
exporter could claim both duty drawback and a refund of unutilized ITC.

4. M/s ATC Tires Pvt Ltd v. Joint Commissioner of GST and Central Excise (Appeals)
A. The assessee’s head office in Mumbai received invoices issued by vendors
registered under GST and distributed the proportionate credit as an input
service distributor to assessee’s SEZ unit.
B. This credit was claimed as refund by the assessee under S16(3)(i) of the IGST
Act.
C. An SEZ unit or developer is eligible to claim refund of ITC on account of
taxable goods or services distributed to it by its head office through ISD
registration obtained by the head office.

5. Dharmendra
A. The Petitioner is an Indian entity providing marketing and promotion services
to overseas customers to facilitate the sale of goods in India or elsewhere.
 B. They receive a commission from their foreign principal when an Indian
purchaser directly places an order on the foreign principal for the supply of
goods, which are then shipped directly to the Indian purchaser.
C. The Petitioner had already deposited GST (CGST & MGST) on such
transactions, and no demand was made by the authorities for payment of GST.
D. According to S13(8)(b) read with S8(2) of the IGST Act, the place of supply for
such services would be the location of the supplier, and thus, CGST and
SGST would be levied as applicable to an intra-state supply.
E. The Petitioner challenged the constitutional validity of these provisions in a
Writ petition before the High Court.
F. One of the Hon’ble Judges of the Division Bench struck down S13(8)(b) of the
IGST Act as ultra vires (besides being unconstitutional).However, the
companion Hon’ble Judge upheld the validity of the said provisions on all
counts.
G. In view of such a difference in opinion, the matters were placed before Hon’ble
the Chief Justice for doing the needful.
H. The transactions in question of the petitioners are in fact a transaction of export
of service, as the recipient of service is the foreign principal.
I. The destination/consumption of the services as provided by the petitioners
takes place in a foreign land. This completely satisfies the test of “export of
service” as defined under S2(6) of the IGST Act, also as there is no contra
indication that “factually” it can be regarded as either inter-State or intra-
State sale of services.
J. The provisions of Section 13(8)(b) and Section 8(2) of the IGST Act are legal,
valid and constitutional, provided that the provisions of Section 13(8)(b) and
Section 8(2) are confined in their operation to the provisions of IGST Act only.
K. The same cannot be made applicable for levy of tax on services under the CGST
and MGST Acts.

6. .

UTGST
1. .

Problems - 6m

Residential status - S6,basic and additional conditions, everything

should be mentioned
1. S6: Residential status
2. Individuals and HUFs
 / /
Resident Non-resident
/ /
Ordinary Non-ordinary - basic conditions
Resident
(basic +
additional conditions)

3. S6(1) and S6(6): Individual

4. S6(1): Basic conditions of residential status

C. They should have stayed in India for more than 182 days during the previous
year or
D. They must have stayed in India for 60 days or more during the previous year and
was in India for a period that sums up to 365 days or more during the 4 years
preceding the PY.

5. S6(6): Additional conditions

C. They have stayed in India as a resident for atleast 9 out of 10 PYs preceding the
previous year and
D. They have been staying in India for more than 730 days during the past 7 years
preceding the PY
- If not, then they are non ordinary resident

6. The periods of stay must be continuous

7. The calculation of resident days include stay in territorial waters as well
8. The calculation is between the date of arrival and departure
9. S6(1)(i) will only be applicable to
D. Person who is part of a crew in a foreign bound ship
E. PIO (Person of Indian origin) or an OCI (Overseas citizen of India) who is
generally staying abroad but visiting India
F. PIO who is visiting India, if he is deriving an income from an India of an amount
exceeding Rs. 15 lakhs
- If they stay for at least 120 days but less than 182 days - then they are
considered a non-ordinary resident

10. S6(2): HUF

Control and management of affairs of the HUF
C. If situated in India, wholly or partly - resident
D. If situated wholly outside India - non resident

11. S6(6): periods of stay of karta is assessed

12. S6(3): residential status of a company

 C. Incorporated in India or
D. Place of effective management (POEM) must be situated in India - POEM is
where the key managerial and other commercial decisions are made

13. ABOI test: Active business outside India:

C. Positive: POEM is in India
D. Negative: POEM is outside India

14. S6(4): AOP/BOI - Same as HUF in S6(2)

C. Association of Persons (AOP) or a Body of Individuals
D. Treated as a person by the Income Tax Act irrespective of whether it is
incorporated or not

15. Problem: Ram, an Indian citizen left India for the 1st time on 25.8.2023 for meeting his
relatives outside India and did not visit India until 15.1.2025.
Determine the residential status for FY 2023-24 and assessment year 2024-25
- Ordinary resident

16. Mr. Maxwell, an Australian cricketer, comes to India for 100 days every year.
- Non ordinary resident
17. .

HRA Conditions - S10(13A) of IT act , IT rule 2A

1. House Rent Allowance (HRA) is the allowance you receive from your employer
towards the rent of your house.
2. It forms a part of the salary paid to you by your employer.
3. HRA depends on multiple factors:
A. salary,
B. city of residence,
C. company's salary structure, and more.

4. S10. Incomes not included in total income.

In computing the total income of a previous year of any person, any income falling
within any of the following clauses shall not be included
(13A) any special allowance specifically granted to an assessee by his employer to
meet expenditure actually incurred on payment of rent (by whatever name called) in
respect of residential accommodation occupied by the assessee, to such extent as
may be prescribed having regard to the area or place in which such accommodation is
situate and other relevant considerations.
- Explanation: For the removal of doubts, it is hereby declared that nothing
contained in this clause shall apply in a case where
(a) the residential accommodation occupied by the assessee is owned by
him ; or
 (b) the assessee has not actually incurred expenditure on payment of rent
(by whatever name called) in respect of the residential accommodation
occupied by him;

5. Rule 2A, Income Tax Rules, 1962:

Rule 2A: Limits for the purpose of S10(13A)
The amount which is not to be included in the total income of an assessee in respect
of the special allowance referred to in S10(13A) shall be
(a) the actual amount of such allowance received by the assessee in respect of
the relevant period; or
(b) the amount by which the expenditure actually incurred by the assessee in
payment of rent in respect of residential accommodation occupied by him
exceeds one-tenth of the amount of salary due to the assessee in respect of
the relevant period; or
(c) an amount equal to
- (i) where such accommodation is situate at Bombay, Calcutta, Delhi or
Madras, one-half of the amount of salary due to the assessee in respect
of the relevant period; and
- (ii) where such accommodation is situate at any other place, two-fifth of
the amount of salary due to the assessee in respect of the relevant
period,
(d) [Omitted]
whichever is the least.

Explanation. - In this rule

- (i) "salary" shall have the meaning assigned to it in Rule 2(h) of Part A of the
Fourth Schedule;
- (ii) "relevant period" means the period during which the said accommodation was
occupied by the assessee during the previous year.
6. .

Capital gains up to what ma'am taught (no need

pbpg)
1. Profits or gains arising from the transfer of a capital asset made in a previous year are
taxable as capital gains under the head “Capital Gains”. The important ingredients for
capital gains are, therefore, existence of a capital asset, transfer of such capital asset
and profits or gains that arise from such transfer.
2. S45: Basis of charge:
A. Any profits or gains arising from the transfer of a capital asset effected in the
previous year shall, save as otherwise provided in Section 54, 54B, 54D, 54EC.
54ED, 54F & 54G be chargeable to income tax under the head “capital gains”,
 and shall be deemed to be income of the previous year in which transfer took
place.
B. Capital gains tax liability arises only when the following conditions are satisfied;
- There should be a capital asset.
- The capital asset is transferred by the assessee.
- Such transfer takes place during the previous year.
- Any profits or gain arises as a result of transfer.
- Such profit or gains is not exempted from tax u/s54, 54B, 54D,
54EC,54ED, 54f, 54G.
C. If the aforesaid condition are satisfied them capital gain is taxable in the
assessment year relevant to the previous year in which capital asset is
transferred.

3. Capital asset:
Capital asset means property of any kind except the following:
A. Stock-in trade,consumables toresorraw - materials hold for the purpose of
business or profession
B. Personaleffectslikewearingapparel,furniture,motor vehicles etc.,held for personal
use of the taxpayer or any depended member of his family
However, jewellery, even if it is for personal use, is a capital asset. The Finance
Act, 2007 has modified the definition of Personal effects w.e.f. 1.4.2008.
‘Personal effects’ now include movable property including wearing apparel and
furniture held for personal use by the assessee or any member of his family
dependent on him, but excludes:
- Jewellery
- Archaeological Collections
- Drawings
- Paintings
- Sculptures or
- Any work of art
C. Agricultural Land in India, not being a land situated:
- Within jurisdiction of municipality, notified area committee, town area
committee, cantonment board and which has a population of not less than
10,000; [As amended by Finance (No.2) Act, 2019]
- Within range of following distance measured aerially from the local limits
of any municipality or cantonment board:
(a) not being more than 2 KMs, if population of such area is more
than 10,000 but not exceeding 1 lakh;
(b) not being more than 6 KMs , if population of such area is more
than 1 lakh but not exceeding 10 lakhs; or
(c) not being more than 8 KMs , if the population of such an area is
more than 10 lakhs.
 - Population is to which relevant figures have been published before the
first day of the year be considered according to the figures of last
preceding census of
D. .

4. Transfer includes:
A. Sale, exchange or relinquishment of a capital asset: A sale takes place when tide
in the property is transferred for a price. The sale need not be voluntary. An
involuntary sale of a property of a debtor by a court at the instance of a decree
holder is also transfer of a capital asset. An exchange of capital asset takes
place when the title in one property is passed in consideration of the title in
another property. Relinquishment of a capital asset arises when the owner
surrenders his rights in property in favour of another person. For example, the
transfer of rights to subscribe the shares in a company under a ‘Rights Issue’ to a
third person.
B. Extinguishment of any rights in a capital asset: This covers every possible
transaction which results in destruction, annihilation, extinction, termination,
cessation or cancellation of all or any bundle of rights in a capital asset. For
example, termination of a lease or of a mortgagee interest in a property.
C. Compulsory acquisition of a capital asset under any law: Acquisition of
immovable properties under the Land Acquisition Act, acquisition of an industrial
undertaking under the Industries (Development and Regulation) Act etc., is some
of the examples of compulsory acquisition of a capital asset.
D. Conversion of a capital asset into stock-in-trade: Normally, there can be no
transfer if the ownership in an asset remains with the same person. However, the
Income tax Act provides an exception for the purpose of capital gains. When a
person converts any capital asset owned by him into stock-in- trade of a business
carried on by him, it is regarded as a transfer
E. Part performance of a contract of sale: Normally transfer of an immovable
property worth Rs. 100/- or more is not complete without execution and
registration of a conveyance deed.
- However, section 53A of the Transfer of Property Act envisages situations
where under a contract for transfer of an immovable property, the
purchaser has paid the price and has taken possession of the property,
but the conveyance is either not executed or if executed is not registered.
In such cases the transferor is debarred from agitating his title to the
property against the purchase.
F. Transfer by a person to a firm or other Association of Persons [AOP] or Body of
Individuals [BOI]: Firm/AOP/BOI is not considered a distinct legal entity from its
partners or members and so transfer of a capital asset from the partners to the
firm/AOP/BOI is not considered ‘Transfer’. However, under the Capital Gains, it is
specifically provided that if any capital asset is transferred by a partner to a
firm/AOP/BOI by way of capital contribution or otherwise, the same would be
construed as transfer.
 G. Distribution of capital assets on Dissolution: Distribution of capital assets on
dissolution of a firm/AOP/BOI is also not considered as transfer for the same
reasons as mentioned in (vi) above. However, under the capital gains, this is
considered as transfer by the firm /AOP/BOl and therefore gives rise to capital
gains for the firm/AOP/BOI.
H. Distribution of money or other assets by the Company on liquidation: If a
shareholder receives any money or other assets from a Company in liquidation,
the shareholder is liable to pay capital gains as the same would have been
received in lieu of the shares held by him in the company. However, if the assets
of a company are distributed to the shareholders on its liquidation such
distribution shall not be regarded as transfer by the company.
I. The maturity or redemption of a zero coupon bond: Here, a zero coupon bond
means a bond issued by any infrastructure capital company or infrastructure firm
or public sector company on or after 1st June, 2005 in respect of which no
payment or benefit is received or receivable before maturity or redemption and
which has been specifically notified by the Central Govt.
J. .

5. Types of capital gains:

A. Long term and short term capital gains
B. Gain arising on transfer of long-term capital asset is termed as long-term capital
gain and gain arising on transfer of short-term capital asset is termed as short-
term capital gain. However, there are a few exceptions to this rule, like gain on
depreciable assets is always taxed as short term capital gain.
C. Any capital asset held by a person for a period of more than 36 months
immediately preceding the date of its transfer will be treated as long-term capital
asset. However, in respect of certain assets like shares (equity or preference)
which are listed in a recognised stock exchange in India, units of equity oriented
mutual funds, listed securities like debentures and Government securities, Units
of UTI and Zero Coupon Bonds, the period of holding to be considered is 12
months instead of 36 months.
D. In case of unlisted shares in a company, the period of holding to be considered is
24 months instead of 36 months. With effect from Assessment Year 2018-19, the
period of holding of immovable property (being land or building or both), shall be
considered to be 24 months instead of 36 months.
E. .

6. CIT v. Gemini Pictures Circuit Private Ltd

A. Capital gain arises on sale of land, apparently used for growing vegetables but
situated in urban areas. Capital gains on transfer of land used for agriculture test
used to determine whether land is agriculture-totality of relevant facts must be
taken into consideration, the land in dispute was situated in most important
business centre of the city, land was entered into municipal record as urban land
and urban land tax was paid-part of the land was used for constructing
 nonresidential building-growing vegetable on such land is only a stop-gap
activity, not conclusive that land is agriculture profit on sale of such land will be
taxable as capital gains.
B. .
7. Hemant Singh v. CIT
A. SilverwareownedbyaHUFandplaced before the family deity at the time of Pooja
on/special occasions is a capital asset of the HUF. The ownership of these
silverwares continues to be in the HUF and the family has not parted with these
silverwares as these are placed before the family deity only at the time of Pooja
on some special occasions.
B. .
8. Vadilal Solace Factory v. CIT
A. The compulsory acquisition of an asset by the Government also constitutes
'transfer' and any gain arising from such a transaction will also be considered as
'Capital Gains'. The meaning of the word 'transfer' is not restricted only to
transfers by act of parties: Compulsory acquisition of the property also amounts
to a transfer.
B. .
9. .

12m
1. Canons of Taxation
2. Agricultural income
3. Capital gains
4. Constitutional Provisions - art 265 concentrate

The end
Imp Points
Canons of taxation
1. Adam Smith: "Wealth of Nations" - ECCE
A. Equality
- Equity - equal distribution of income and tax burden - social equality and
justice
- Ability to pay principle: rich should pay a larger share
B. Certainty
- Clear time, manner and amount of pay - not arbitrary
- Guiding rule when formulate laws - transparency - if not, tax evasion
- Helps taxpayers consider taxes in their budget
C. Convenience
- Levied in a convenient time and manner - extension of certainty that
focuses on the administrative provess
- Taxpayer friendly manner - avoids evasion and corruption
D. Economy
- Purpose of tax is to generate revenue - to be spent on public welfare
projects
- No leakage - minimise administration costs

2. Charles Bastable: "Public Finance" - PESDE

A. Productivity
- Few taxes yielding larger revenue> many taxes yielding small revenue
- More taxes - confusion - against certainty and convenience
B. Elasticity
- Flexible - capable of changing revenue depending on govt needs
- Revenue must automatically increase on upward revision of tax rates
C. Simplicity
- Simple to understand, unambiguous and avoid differences in
interpretation
- Non technical and straightforward
D. Diversity
- Number of taxes - every citizen must pay to the exchequer
- Diversifying sources - flexible - dependence on one source confines
economy and growth
E. Expediency
- Practical considerations should be taken for public acceptance
- Tax should be determined on the ground of ec, soc, pol expediency
- Ex. agricultural income is not taxable
3. Shirras and Hicks: Public Finance writers - FNC
A. Flexibility
- Tax system must adjust to the economic conditions of the country
 - SC: power of ITAT to grant a stay should be exercised only with strong
reasons and not a reason - purpose of appeal will be frustrated if stay is
not granted

3. Pith and substance

A. True nature or essence of law - to determine constitutionality
B. If Union/state legislature's law encroaches another's sphere - doctrine applied
C. If the true object relates to a matter within the competence - intra vires
D. State of Bombay v. FN Balsara: Bombay Prohibition Act - state's power to
regulate alcohol - struck down only the part inconsistent with Article 19(1)(g)
4. Repugnancy
A. Article 254
B. When contradiction of two laws on the same facts provide different results -
inconsistency and incompatibility: central law takes precedence
C. Conditions: clear inconsistency, irreconcilable, impossible to obey one without
disobeying the other
5. Territorial nexus
A. Article 245: Law made by parliament cannot be rejected merely because extra-
territorial - if nexus is established
B. Conditions:
- Real and substantial connection
- Genuine nexus
- Extra-territorial operation
C. States can levy taxes on extraterritorial operations if there is sufficient
connection: Bombay v. RMDC
D. Kochunni v. Madras: state cannot make laws for India unless there is sufficient
nexus between the object and the state
6. Unjust enrichment
A. If unfairly benefited - give back all benefits or compensate; natural justice and
equity
B. Moses v. Ferlon: Essentials: enrichment, expense of plaintiff, unjustness
7. Immunity of instrumentalities
A. Article 285: Exemption of property of the Union from State taxation (unless since
before commencement of constitution)
B. Article 287: Exemption from taxes on electricity if consumed by govt/railway
C. Article 288: Exemption from taxation by States in respect of water or electricity if
consumed for regulating/developing inter-state river/river valley - need
president's assent to do so
D. Article 289: Exemption of property and income of a State from Union taxation,
except trade or business
E. The Doctrine of Immunity of Instrumentalities, particularly relevant in federations
like India, prevents one sovereign entity (federal or state) from taxing or
regulating the instrumentalities of another sovereign entity, ensuring their
autonomy and preventing undue interference.
 F. Governor General in Council v. Corporation of Calcutta: immunity applies to
govt depts and not incorporated companies where govt has controlling interest
8. Res extra commercium
A. Roman: Things outside commerce
B. Bombay v. RMD Chamarbaugwala: "immoral" or "noxious" trade is outside the
scope of Article 19(1)(g) and has no constitutional protection
C. Criticised for backdoor entry of police power
9. Occupied field
A. If the subject matter is already covered by a legislation, the other govt cannot
legislate in a way inconsistent to central law
B. Southern Pharmaceuticals And Chemicals, Trichur v. State Of Kerala:
prominently used in concurrent list
10. Colourable legislation
A. What cannot be done directly cannot be done indirectly
B. A provision not allowed by Constitution cannot have the same effect in a different
manner
C. KT Moopil Nair v. Kerala: colourable if appears to be one but is another
underneath
D. Prevents excess of constitutional powers by disguising laws
11. .

GST Council - Article 279A

(1) President shall constitute Goods and Services Tax Council within 60 days from
commencement of 101st Amendment Act, 2016
(2) Shall consist of
A. Union finance minister - chairperson
B. Union minister in charge of finance/revenue - member
C. State nominees of their finance/taxation/other minister - members
(3) Members shall choose vice-chairperson among themselves
(4) Shall make recommendations on
A. Taxes, cesses, surcharges levied by Union, states or local bodies which may be
subsumed in GST
B. Goods or services subject to or exempt from GST
C. Model GST laws, principles of levies, apportionment of tax levied in interstate
trade and principles for place of supply
D. Threshold limit of turnover of goods or services which are exempt
E. Rates including floor rates
F. Special rates for specific period to raise additional resources
G. Special provisions for 7 sisters, J&K, HP, Uttarakhand
H. Other matters
(5) Recommend the date on which the GST to be levied on
A. Petroleum crude
B. High speed diesel
 C. Petroleum (motor spirit)
D. Natural gas
E. Aviation turbine fuel
(6) Shall take into account need for harmonised structure and national market
(7) Half the total members - quorum
(8) Shall determine the procedure for performance of its functions
(9) Every decision - majority of 3/4ths of members present and voting
A. Central votes have weightage of 1/3rd of total votes case
B. State votes have weightage of 2/3rd of total votes case
(10) No act or proceedings of the Council be invalid merely be reason of
A. Vacancy or defect in composition
B. Defect in appointment
C. Procedural irregularity
(11) Shall establish a mechanism to adjudicate disputes between govt and states

1. UOI v. Mohit Minerals Pvt Ltd: Recommendations are not binding

2. Exemptions:
A. Alcoholic liquor for human consumption
- Article 366(12A): "any tax on supply of goods or services or both except
supply of alcoholic liquor for human consumption".
- It will attract VAT on intra-state and state excise on inter-state supplies
and not GST
- Tax revenue in the hands of state govt
B. Petroleum and more
- State excise and VAT on intra-state supplies
- Central excise and VAT on interstate supply
- GST Council will recommend the date from which GST will be levied on
these items - not yet done
C. These fall beyond scope of GST and don't have input tax credit
D. Classified as "Neither foods nor services" under Schedule III of the GST Act
E. S7, CGST Act - Schedule III transactions will be treated as neither goods nor
supplies.
3. .

Agricultural income
1. S2(1A) defines agricultural income to mean
(a) Rent or revenue from land situated in India and used for agricultural purposes
(b) Income derived from such land by
- Agriculture
- Rendering the produce fit for market by cultivator/receiver of rent-in-kind
- Sale by cultivator/receiver of rent-in-kind with no other process performed
(c) Income derived from building owned and occupied by receiver/cultivator/receiver
of rent-in-kind provided
 - Building is on/immediate vicinity of land and is used as dwelling, store or
outhouse
- land is assessed to land revenue in India or is subject to local rate and if
not, it it is not situated
A. In a municipality/cantonment board with less than 10,000
population
B. 2 kms away from 10,000-1L
C. 6 kms away from 1L-10L
D. 8 kms away from more than 10L

2. The power to levy taxes resides ONLY with states

3. S10(1): exempts agricultural income from central taxation
4. Explanations:
A. Explanation 1: revenue from land does not include income from transfer of
land
B. Explanation 2: income from land/building used for other than agricultural
purpose shall not be agricultural income
C. Explanation 3: saplings/seedlings from nursery - agricultural income
D. Explanation 4: "population" - last preceding census

5. S2(1A)(a): Agricultural land

A. Rent or revenue from land used for agricultural purposes
B. Income from land by carrying out agriculture, process for fit for market, sale
C. Income remotely linked to agri - poultry, dairy farming - not agricultural income
D. Income from orchards and horticulture - agricultural as cultivation

6. S2(1A)(a): Conditions for Farm building

A. On or immediate vicinity of agricultural land
B. Occupied by cultivator/receiver of rent-in-kind
C. Used as dwelling, store or outhouse
D. Assessed to land revenue or subject to local rate or situated in rural area

7. Conditions for S2(1A)(a)

A. Income must have proximate and sufficient connection to the land
B. Land must be used for agricultural purposes: CIT v. Raja Benoy Kumar
Sahas Roy: agricultural activity has 2 operations:
- Basic - performed on land before germination
- Subsequent - after sprouts till harvesting
C. Land is situated in India

8. Conditions for S2(1A)(b):

A. Process must be ordinarily employed by cultivator/receiver of rent-in-kind
B. Must render the produce fit for market
C. CIT v. K Madhusudhana Rao: tobacco drying is agricultural income
 D. If it can be sold raw, marketing process is not agricultural
E. Brihan maharashtra sugar syndicate ltd v. CIT: sugarcane to sugar is not
agricultural
F. CIT v. Gupta (Tea) Pvt Ltd: insurance for loss of crops due to hail storms is
agricultural

9. Sri Ranganatha Enterprises v. CIT: burden of proof on assessee claiming exemption

under S10(1)
10. Bacha F Guzdar v. CIT: dividend paid by a company out of its agricultural income not
agricultural as immediate source is shareholding
11. HH Maharaja Vibhuti Narain Singh v. UP: ornamental nursery is not agricultural - must
be adjunct to primary process of agri

12. Rural agricultural land: not situated in

A. Municipality or cantonment board with less than 10k
B. 2 kms - 10k to 1L
C. 6 kms - 1L to 10L
D. 8 kms - 10L and above

13. Aggregation of agricultural income

A. Shall be included to determine rate of tax on non-agricultural income
- Agricultural income: A
- Non-agricultural income: B
- Aggregate of A+B: C
- Tax payable on C: D
- Agricultural income + Basic Exemption limit: E
- Tax payable on E: F
- Net tax payable = D-F: G
- 4% less on G
B. If the non-agricultural income does not exceed the BE Limits, then the
agricultural income should not be aggregated.

14. Income partially from agri and business

A. Market value of agricultural produce used as raw material for business or sale
receipts on the accounts shall be deducted
B. Agricultural produce used as a raw material ordinarily sold in market
- Average price at which it was sold in PY - deemed to be market value
C. If not ordinarily sold in market, the aggregate of
- Cultivation expenses
- Land revenue/rent
- Reasonable amount of profit
D. Rules 7, 7A, 7B, 8: Special provisions
- 7A: Rubber: 65% agricultural income
- 7B(1): Coffee grown and cured: 75% agricultural income
 - 7B(1A): coffee grown, cured, roasted, ground: 60% agricultural income
- 8: tea: 60% agricultural income

15. CIT v. Soundarya Nursery: Nursery is agricultural income

16. Vinutha Reddy v. ITO: land used for R&D without agri - not exempt
17. .

Previous year and assessment year

1. PY:
A. FY immediately preceding the AY
B. For which the tax is calculated and paid next year
C. If earns income and engages in financial transactions, considered for AY for IT
purposes
2. AY:
A. for FY 23-24, AY is 24-25.
B. Year immediately following the FY for which income is assessed
C. Assessment is done for a specific year to determine tax liability
D. Year in which the income is assessed and tax returns are filed based on the
income earned in PY
E. Duties in AY:
- File ITR for PY
- Declare income
- Claim deductions
- Pay taxes

Income definition: S2(24): SIP CIW CVF

Income includes
1. Salaries - received from employer
2. Income from house property - rental income or deemed rental income from self-occupied
3. Profits and gains of business or profession - earned by individual
4. Capital gains - sale of capital asset
5. Income from other sources
6. Winnings from lotteries, crosswords and other games
7. Contribution to employee's provident fund account - by employer
8. Voluntary retirement scheme compensation
9. Foreign income

Income from salary: S15-17

1. Salary:
 A. The remuneration the employer pays to the employee for the service rendered
under a contract of employment
B. Includes monetary benefits and non-monetary benefits and facilities provided by
employer
C. Amount received from someone not the employer is not salary. Ex. MP/MLA

2. S15: Incomes taxable on the head "Salaries"

A. Salary due from an employer or former employer in the PY, paid or not
B. Salary paid in the PY by employer though not due
C. Arrear of salary paid in the PY if not charged to income tax for an earlier PY
D. Salary, bonus, commission of partner - not a salary

3. What constitutes salary

A. Salary and pension received from foreign govt
B. Payment after cessation of employment - service of past
C. Pension
D. Pension by foreign govt to Indian employees
4. Relationship of employer employee must exist

5. S16: Deductions allowed from "Salaries"

A. Standard deduction of Rs.50,000 in old and Rs.75,000 in new tax regime
B. Entertainment allowance for govt employees
C. Professional tax - tax paid to state on employment- Article 276(2): not more than
Rs.2500 a year

6. S17: Salary includes:

A. Monetary benefits
- Salary
- Wages
- Bonus
- Commission
- Gratuity
- Pension
- Leave encashment
B. Non-monetary benefits: Free
- Accommodation
- Cab
- Food
- Education

7. Salary: Basic salary + Allowances + Perquisites + Profits in lieu of salary

8. Payment in cash made by an employer to his employees monthly other than salary,
is called allowance
9. For the purpose of Income Tax, allowances are divided into 3 categories, namely,
 - Taxable allowances
- Allowances - exempt up to specified limit: House rent and children education
- Fully exempted allowances: sumptuary allowance to HC/SC judges and UN

10. Perquisites: the term "perquisite" means any benefits, attached to an office or
position in addition to salary or wages
11. .

Income from house property: S22-27

1. S22: Income from house property
A. The annual value of property consisting of buildings or land appurtenant
thereto of which the assessee is the owner, other than such portions he may
occupy for business/profession carried on him, shall be chargeable to income
tax under the head "Income from house property"
2. The income under this head is not based upon the actual income from the property but
upon notional income or the annual value of that building
3. House property income = annual value of building - deductions specified in S24

4. Conditions for taxation:

A. Property should consist of building or land appurtenant
B. Assessee must be the owner
C. Used for purposes not business or profession

5. Exempted incomes from house property:

A. Agricultural house property
B. Charitable
C. Self occupied but vacant house
D. Business/profession
E. Registered trade union
F. Local authority
G. Scientific research institution
H. Political party
I. Medical institution
J. 1 house of former rules
K. 2 self occupied houses
L. Held as stock in trade

6. Annual value: expected rent a house fetches year to year considering

A. Actual rent received
- Actually received by owner
- Real rental value = actual rent - expenses borne - unrealised rent
B. Municipal rent
- Local authorities determine after periodic survey
 C. Standard rent
- Maximum rent recoverable according to Rent Control Act
D. Fair rent
- Reasonable expected rent
- Based on rent on similar property in same/similar locality

7. S22: Income chargeable to tax under the head "house property"

A. Rental income from a property owned (includes co-owner and deemed owner)
by the taxpayer
B. The property may be residential, commercial (shop, office) or land
C. Lease amount received from leasing the property
D. Income received from a leased property (as a lessee) for 12 years or more

8. S27: Deemed owner - taxable on those who have control but no ownership
9. Types of house properties
A. Self occupied
B. Let out
C. Deemed to be let out: more than 2 self occupied properties
D. Under construction
10. .

Constitutional provisions - focus on Article 265

1. Article 246:
(1) Union list
(2) Concurrent list
(3) State list
(4) Parliament has the power to make laws for any territory of India not included in a
state even if State list matter

2. Distribution of Legislative powers: VIIth Schedule

A. 1: 99/97
B. 2: 61/66
C. 3: 52/47
D. 42nd Amendment: 5 subjects
E. 101st Amendment: Parliament may enact laws regarding GST for inter-state
trade or commerce

3. Article 248: Residuary powers of legislation

(1) Parliament can make laws not included in lists
(2) Includes power to impose tax not mentioned in the lists

4. Article 265: Taxes not to be imposed save by authority of law

"No tax shall be levied or collected except by the authority of law"
5. Elements of Article 265:
A. Authority of law: statute - Madhuva Agarwal v. MP: features of taxing statute
- Subject of tax
- Person liable to pay tax
- Rate at which tax is payable
B. Law: should be valid
- KT Moopil Nair v. Kerala: not violate FR
- Sainik Motors v. Rajasthan Not violate spl provisions
- Jethabhai Patel v. UOI: leg must be competent
C. Tax
- Mafatlal Industries v UOI: direct and indirect
- IMA v. VP Shantha: tax imposed under statutory payer without consent
or special benefits
D. Levy and collection
- Levy: imposing liability
- Collection: taking the money out of taxpayer's pocket

6. Tangkhul v. Simerei Shalei: villagers paying 50 to headman - not tax

7. Lord Krishna Sugar Mills v. UOI: additional excise duty on failure to meet exports -
violates Article 265
8. Govid Saran Ganga Saran v. Commissioner of Sales Tax: imposition of taxes without
authority of law - unconstitutional

9. Objectives of Article 265:

A. Not saddled with financial burden
B. Specific law to levy tax
C. Reasonable laws that obey constitution
D. Strict rules and guidelines for proper levy

10. Levy of tax and Article 265:

A. Within legislative purview
B. Clear intention
C. No presumption in levy
D. Statute must be read as whole
E. Spirit of law - not a basis
F. Strict and favourable construction

11. Article 286: Restrictions as to imposition of tax on the sale or purchase of goods
(1) No state law shall tax sale/purchase of goods where it happens
- Outside the state
- Course of import/export
(2) Parliament may formulate principles for determining tax in (1)
(3) Any law of state imposing
 - Tax on goods declared special importance in inter-state trade by
parliament
- Tax referred to in Article 366
Is subject to the restrictions and conditions made by parliament by law
A. Amended by GST to replace "Sale or purchase" with "supply" and goods
with "goods or services or both"
B. Consequently, the states have no right to impose GST on interstate
supply
12. .

S9 - Business connection
1. Income is taxed on the basis of
A. Accrued in that country
B. Received in that country

2. S9 lists incomes deemed to accrue or arise in India, which specifically applies to

incomes that foreign entities or non-residents are deemed to earn in India

3. Rules to determine tax implications under S9:

A. Territorial nexus rule: income deemed to arise in India is taxed
B. Specific inclusions rule: specifically includes royalties, interest or fees for
technical services
C. Residence rule: the recipient should be in India

4. S9 includes income from:

A. Salary earned in India
B. Profession/business in India
C. Property in India
D. Dividend by Indian firm
E. Source of income located in India
F. Interest on securities by Indian company/govt
G. Fees or royalties
H. Capital gains from transfer of asset in India
I. Gift to non-residents

5. Key implications of S9:

A. S195: individual paying non-resident must deduct tax at source
B. An income of foreign entity or non-resident is subject to tax rate depending on
IT slab rates

6. S9(1)(i): Income arising from a business connection in India

A. Establishes connection between resident and non-resident
B. Business connection if the resident
 - Has authority to conclude contracts in India that
(a) Fulfil ownership transfer
(b) Agreements in the name of the non-resident
(c) Has services rendered by the non-resident
- Holds a stock of G&S on behalf of non-resident
- Secures orders in India for the non-resident
C. No business connection if broker/agent
D. SEP: Significant Economic Presence
- Shall be considered business connection if SEP
- Income earned from SEP - accrued in India
E. SEP if:
- Non resident transacts with resident in payments exceeding Rs.2 crores
a year
- Non resident engages with more than 3 lakh Indian users

7. Not a business connection if

A. Purchase for exports
B. News for transmission outside India
C. Shooting a film if non resident is not a citizen, shareholder or partner
D. Mining of diamonds
8. .

Taxable income
1. Slab rates for AY 2025-26: Old regime
A. 5 lakh to 10 lakhs: 20% of excess of 5 lakhs + 12,500
2. Slab rates for AY 2025-26: Old regime
A. 7 lakh to 10 lakh: 20,000 + 10% of excess of 7 lakhs
3. Taxable income: 10 lakhs
4. Old regime: Falls under above slab (3rd slab)
12,500 + 20/100 x 5,00,000
= 1,12,500
Health and education cess (4%): 4/100 x 1,12,500 = 4,400
Total tax liability: 1,12,500 + 4,400 = 1,16,900

5. New regime:
= 20,000 + 10/100 x 3,00,000
= 20,000 + 30,000
= 50,000
Health and education cess = 4% = 2,000
Total tax liability= 50,000 + 2,000 =Rs.52,000
6. .
Residential status: S6

Content
1. S6: Residential status
2. Individuals and HUFs
A. Resident
- Ordinary resident: basic + additional conditions
- Non ordinary resident: basic conditions
B. Non-resident
3. S6(1): Basic conditions for residential status:
A. 182 days in PY
B. 60 days in PY and 365 days in 4 years immediately preceding PY
4. S6(6): Additional conditions for ordinary resident:
A. Resident for 9 out of 10 PYs and
B. Stay 730 days in past 7 years of PY

5. Period must be continuous, includes stay in territorial waters, date of arrival and
departure

6. S6(2): HUF: wholly or partly situated in India - resident

7. S6(6): stay of Karta is assessed

8. S6(3): Residential status of company:

A. Incorporated in India
B. POEM in India: key managerial and commercial decisions
C. ABOI test: active business outside India

9. S6(4): AOP/BOI - Same as HUF in S6(2): treated as person irrespective of incorporated

10. .

Problem
1. 2020-21: 215 days
2. 2021-22: 105 days
3. 2022-23: 55 days
4. 2023-24: 71 days
5. 2024-25: 66 days

6. S6(1):
A. 182 days or more in PY or
B. 60 days in PY and 365 days in immediately preceding 4 PYs
 7. Relevant PY: 66 days - not satisfy 1st condition
8. 2nd condition
A. 71+55+105+215 = 446
B. Above 365 - satisfies
C. Thus, resident
9. S6(6): additional conditions
A. In 9 of 10 immediately preceding PYs - non resident
- Check for resident status for other PYs
B. In 730 days in past 7 PYs
- Not ordinary resident
10. .

HRA Conditions: S10(13A), Rule 2A

Content
1. House Rent Allowance (HRA) is the allowance you receive from your employer
towards the rent of your house.
2. Forms part of salary
3. S10: Incomes not included in total income
(13A): special allowance specifically granted to assessee by employer to meet
expenditure incurred on rent wrt residential accommodation of assessee
Explanation: Except when owned/not actually incurred

4. Rule 2A, IT Rules, 1962: Limits for S10(13A)

Amount not included in total income as per S10(13A) shall be
(a) Actual amount received or
(b) Amount of expenditure actually incurred exceeding 1/10th of his salary or
(c) Amount equal to
- 50% of salary if Delhi , Bombay,Calcutta ,Madras
- 40% of salary if other place
Whichever is least
5. .

How to calculate salary

1. Make basic pa, DA, HRA annual by x12
2. Gross salary = BP+DA+HRA+any commission if mentioned
Amount not included in total income as per S10(13A) shall be
(a) Actual amount received= HRA x 12
(b) Amount of expenditure actually incurred exceeding 1/10th of his salary = Rent -
[10% of (BP+DA+commission)]
(c) Amount equal to
 - 50% of salary (BP+DA+commission) if Delhi, Bombay,Calcutta, Madras
- 40% of salary (BP+DA+commission) if other place
Whichever is least
3. Hence, after HRA exemption is
Gross salary = aforementioned Gross Salary (BP+DA+HRA+commission) - HRA
exemption
4. If giving effect to HRA, then it is automatically old regime
5. Deductions under S16:
- Standard deduction: 50,000
- Entertainment allowance: if given - applicable only to govt employees
(a) 20% of BP
(b) Flat value 5,000 Rs.
(c) Actual entertainment allowance received
Least will be taken as entertainment allowance
- Professional tax: if paid by the employer - capped at 2,500
(a) Professional tax paid by employer
(b) Flat value 2,500 Rs.
Least will be taken as professional tax
6. Thus, income is the final gross salary - deductions
7. .

Problem
1. Basic pay: 25,000 x 12: 3,00,000
2. DA: 1,000 x 12: 12,000
3. HRA: 10,000 x 12: 1,20,000
4. Rent paid: 12,000 x 12: 1,44,000
5. Gross salary: BP + DA + HRA = 4,32,000
6. S10(13A):
Least of the following shall be exempted:
A. Actual HRA: 1,44,000-31200 = 1,12,800
B. Rent paid: 10% of salary = 1,56,000 or 1,12,800
C. 50% of salary (Chennai): BP + DA: 3,120,00 = 1,56,000

7. Hence, HRA exemption is

Gross Salary - HRA exemption: 4,32,000-1,12,800 = 3,19,200

8. Deductions under S16:

A. Standard deduction: 50,000
B. Entertainment allowance: 0
C. Professional tax: 0

Thus, income = 3,19,200-50,000 = 2,69,200

9. .
The end
Midsems Q&A
Problems to solve before Viva
Presentation: Clubbing of Income
1. Clubbing of income means including the income of any other person in the
assessee's total income.
2. S60-S65
3. Object of clubbing:
A. It is a general principle of every taxing statute that income of a person is
chargeable to tax only in the hands of that person.
B. In certain cases, with a view to reducing the tax burden, persons having huge
taxable income may shift a portion of their income to persons who do not have
taxable income or are taxable at a lower rate or fall under lower slab rates of
taxable income.
C. This may be achieved by transferring or gifting income-generating assets or
by augmenting the revenue-earning capacity of certain family members.
D. To curb this, S60-S65 have been enacted

4. S60: Clubbing where income is transferred

A. When income alone is transferred without transfer of the asset giving rise to
such income, it is deemed to be the income of the transferor.
B. It does not matter whether such transfer is revocable or irrevocable.
C. Requisites:
- The taxpayer owns the assets.
- The ownership of assets is not transferred by him.
- The income from the assets is transferred to any person under a
settlement, or agreement.
D. Dalmia Cement Ltd. v. CIT
- The assessee, owner of a factory entered into an agreement to sell the
same but the actual transfer took place after two years.
- The sale agreement carried a clause that the profits between the
period of date of sale agreement and actual sale would be for the
benefit of the transferee.
- The IT Department sought to invoke the clubbing provisions against the
transferor.
- The SC held that the very existence of the agreement to transfer
imposes an overriding title of the factory to the assessee.
- So, the clubbing provisions cannot be invoked against the transferor.

5. S61: Clubbing of income in case of revocable transfer of assets

A. All income arising to any person by virtue of a revocable transfer of assets
shall be included in the total income of the transferor and taxed accordingly.
B. Revocable transfer means the transferor of assets assumes a right to re -
acquire assets or income from such an asset, either whole or in parts at any
time in future, during the lifetime of the transferee.
 E. Where both spouses have substantial interest in a concern and both receive
income from it, it will be clubbed with the spouse whose total income,
excluding such income, is greater.
F. Once clubbed in the hands of either spouse, it cannot be changed in
subsequent years unless the Assessing Officer is satisfied, after giving that
spouse an opportunity to be heard, that it is necessary to do so.
G. An individual is deemed to have substantial interest in a concern:
- If it is a company, he by himself or along with his relatives, beneficially
holds equity shares carrying not less than 20% of voting power
- In any other case, is entitled (by himself or with his relatives) to 20% of
profits
- Relative means u/s 2(41) husband, wife, brother or sister or any lineal
ascendant or descendant of the individual.
H. In computing the total income of any individual, there shall include all such
income arising directly or indirectly to the son’s wife from assets transferred
by that individual otherwise than for adequate consideration.
I. Any income arising directly or indirectly to any person or association of persons
from assets transferred otherwise than for adequate consideration to the
extent to which income from such assets is for the immediate or deferred
benefit of the spouse or son’s wife – to be clubbed.
J. Where assets transferred to a spouse or son’s wife are invested by the
transferee,
- In any business, not being capital contribution in a firm, proportionate
income arising to the transferee attributable to such investment is
clubbed
- In the nature of capital contribution to a firm, any interest receivable
by the transferee attributable to such investment is clubbed.
K. Where the asset is converted into another form by the transferee, income from
the converted asset is clubbed
L. CIT v. Smt Pelleti Sridevamma
- Mr A gifts Mrs A 50 lakhs.
- She invests this in an FD with interest income Rs 25,000.
- This is clubbed in the hands of Mr A
M. Philip John Plasket Thomas v. CIT
- The marital relationship should exist both at the time of transfer of
asset and at the time of accrual of income in order to attract clubbing
provisions.
N. In case of transfer of house property, S27 – deemed owner shall apply, not
S64

9. S64(1)(iv): Income from asset transferred to spouse:

A. Requisites:
- The taxpayer is an individual.
 - S/hе has transferred (directly/indirectly) an asset (other than a house
property). The asset is transferred to his/ her spouse.
- The asset is transferred without adequate consideration.
- There is no agreement to live apart.
B. Exceptions for S64(1)(iv)
- If assets are transferred before marriage
- If assets are transferred for adequate consideration
- If on the date of accrual of income, the transferee is not the spouse of
the transferor.
- If assets are transferred in connection with an agreement to live apart.
- If property is acquired by the spouse out of pin money (i. e an
allowance given to the wife by her husband for her dress & usual
household expenses.)

10. S64(1)(vi): Clubbing of income from assets transferred to son's wife

A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset after May 31, 1973.
- The asset is transferred to the son's wife.
- The asset is transferred without adequate consideration.
B. .

11. S64(1)(vii): Clubbing of income from assets transferred to a person for the benefit
of spouse
A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset to a person or an association of
persons.
- Assets are transferred for the benefit of the spouse.
- The transfer of assets is without adequate consideration.

12. S64(1)(viii): Clubbing of income from asset transferred to a person for the benefit
of son's wife
A. Requisites
- The taxpayer is an individual.
- S/he has transferred an asset after May 31, 1973.
- S/he has transferred an asset to a person or an association of
persons.
- Asset is transferred for the benefit of the son's wife.
- The Transfer of asset is without adequate consideration

13. S64(1A): Income of a minor child

A. In computing the total income of any individual, there shall be included all such
income as arises or accrues to his minor child
 B. Not if the income accrues on account of any manual work done by him or
activity involving application of his skill, talent or specialised knowledge and
experience
C. If the minor child suffers a disability under S80U, no clubbing
D. Where clubbing fails, income is taxable in the hands of the minor child.
E. Parents or guardians can prepare the return and file it on behalf of the minor.
F. All deductions and exemptions available to an adult individual, including basic
exemption of Rs 2,50,000 apply.
G. While the parents’ marriage subsists, the income of the minor child is clubbed
with the parent whose total income (excluding this) is greater. Once clubbed, it
cannot be changed unless the Assessing officer is satisfied.
H. If the marriage does not subsist, it will be clubbed with the parent who
maintains the child in the previous year.
I. S10(32): In the hands of the clubbed parent, any income of the minor child to
the extent clubbed or Rs 1.500 per child is exempt, whichever is less
J. S2(15B): Child includes adopted child and step child
K. Clubbing does not happen when the child attains majority.
L. Exceptions to S64(1A)
- Income of minor child on account of any manual work.
- Income of minor child on account of any activity involving application of
his skills, talent or specialized knowledge & experience.
- Income of minor child suffering from any disability specified under
S80U.
M. .

14. S64(2): HUF

A. Where a member of an HUF has converted or transferred self -acquired
property for inadequate consideration into joint family property or thrown it
into the common stock of the family, the income arising therefrom is taxable
as the income of the transferor member
B. If such converted property is subsequently partitioned, the income from such
converted property as is received by the spouse of the transferor will be
taxable by clubbing
C. S64(2) as held in Shammi Kapoor v. ITO, is applicable only when the member
of an HUF converts his property into the property of the HUF or throws it into
the common stock of the HUF without any adequate consideration.
D. Clubbing provisions applies only to gifts, not loans
E. Tulsidas Kilachand v. CIT
- Natural love and affection are good considerations under contract law
but not enough under IT law.
F. For the purpose of clubbing, it is not necessary that the assessee’s own
income has to exceed the basic exemption limit.
G. Losses can also be clubbed
 15. S65:
A. The person in whose name it is clubbed is liable to pay the taxes.
B. When the assets are held jointly by more than one person, they are jointly and
severally liable to pay taxes.

16. .

1. Residential status: Sure

Mr. Trent, a cricketer, visits India for 100 days in every financial year for playing in the
Indian Premier League. He has been doing the same for the past 10 Financial years.
Determine if he is a resident of India for the AY 2025-2026.

Period of stay during PY 2024-25 = 100 days

Calculation of period of stay during 4 preceding PYs = 100 x 4 = 400 days

Mr. Trent has been in India for a period more than 60 days during previous year 2024-25 and for
a period of more than 365 days (combined) during the 4 immediately preceding previous years.
Therefore, since he satisfies one of the basic conditions under S6(1), he is a resident for the
assessment year 2025-26.

Computation of period of stay during 7 preceding previous years = 100 x 7 =700 days
Since his period of stay in India during the past 7 previous years is less than 730 days, he is a
not-ordinarily resident during the assessment year 2025-26.
Therefore, Mr. Trent is a resident but not ordinarily resident during the previous year 2024-25
relevant to the assessment year 2025-26.

An individual, not being an Indian citizen, would be not-ordinarily resident person if he satisfies
any one of the conditions specified under S6(6), i.e.,
A. If such individual has been non-resident in India in any 9 out of the 10 previous years
preceding the relevant previous year, or
B. If such an individual has during the 7 previous years preceding the relevant previous
year been in India for a period of 729 days or less.
In this case, since Mr. Trent satisfies condition (ii), he is a not-ordinarily resident for the A.Y.
2025-26.

2. Residential status: Unsure

Mr. Ajay visited India for the first time on the 11th of August, 2023 to the 20th of
December, 2023 to attend his family ceremony. He then leaves for the UK. He comes back
to India for a short stay on the 21st of January, 2024 and leaves back on the 30th of
January, 2023. He again comes to India on a business trip on the 20th of February, 2024
and stays here till the 30th of March, 2024. Determine if he is a resident of India for the PY
-2023-24.
Will your answer differ if he left India on the 29th of March, 2024 instead of the 30th of
March,2024?

Calculation of days in preceding PYs:

2019-22 0 days
2022-23 0 days
2023-24 21+30+31+30+21
+ 10
+ 9+30

If the PY is 2023-24, the AY is 2024-25.

Amount of days stayed in 2023-24 = 182
S6(1):
A. 182 days or more in PY or
B. 60 days in PY and 365 days in immediately preceding 4 PYs
Hence, he satisfied the 1st condition.
Therefore, he is a resident.

Will your answer differ if he left India on the 29th of March, 2024 instead of the 30th of
March,2024?: Yes, as he would have stayed 181 days and not been a resident.

Slab rates
Old Regime Slab Rates
A. Up to 2.5 lakhs: Nil
B. 2.5 lakhs-5 lakhs: 5% in excess of 2.5 lakhs
C. 5 lakhs-10 lakhs: 20% in excess of 5 lakhs
D. Above 10 lakhs: 30% in excess of 10 lakhs
E. Health and education cess: 4% of the tax value
F. Total tax liability = total tax value + cess

New Regime Slab Rates

A. Up to 3 lakhs: nil
B. 3 lakhs - 7 lakhs: 5% in excess of 3 lakhs (20,000)
C. 7 lakhs - 10 lakhs: 10% in excess of 7 lakhs
D. 10 lakhs - 12 lakhs: 15% in excess of 10 lakhs
E. 12 lakhs - 15 lakhs: 20% in excess of 12 lakhs (1,40,000)
F. Above 15 lakhs: 30% in excess of 15 lakhs
G. Health and education cess: 4% of the tax value
H. Total tax liability = total tax value + cess
3. Taxable Income: Konjame sure
Mr. Ajay, a resident of India aged about 30 years has a total taxable income of Rs.
20,00,000. Calculate his tax liability under the old regime and the new regime and find
which is beneficial for him.
1. Old regime
A. Falls under 30% slab rate
B. Up to 2.5 lakhs = 0
C. 2.5 lakhs-5 lakhs: 5% in excess of 2.5 lakhs = 12,500
D. 5 lakhs-10 lakhs: 20% in excess of 5 lakhs = 20% of 5 lakhs = 1,00,000
E. Above 10 lakhs: 30% in excess of 10 lakhs = 30% of 10 lakhs = 3,00,000
F. Need to add health and education cess of 4% of 4,12,500 = 16,500
G. Total tax liability = total tax value + cess = 4,29,000
2. New regime:
A. 12 lakhs - 15 lakhs: 20% in excess of 12 lakhs (1,40,000)
B. Above 15 lakhs: 30% in excess of 15 lakhs: 1,40,000+ 30% of 5,00,000 =
1,40,00 + 1,50,000 = 2,90,000
C. Need to add health and education cess of 4% of 2,90,000 = 11,600
D. Total tax liability = total tax value + cess = 3,01,600
3. New regime is more beneficial.

4. Taxable Income: Konjam sure

Ms. Anu, a resident of India aged 55 years has a total taxable income of Rs. 15,00,000.
She seeks your advice on which tax regime to opt for. Advise her.
1. Old regime
H. Falls under 30% slab rate
I. Up to 2.5 lakhs = 0
J. 2.5 lakhs-5 lakhs: 5% in excess of 2.5 lakhs = 12,500
K. 5 lakhs-10 lakhs: 20% in excess of 5 = 20% of 5 lakhs = 1,00,000
L. Above 10 lakhs: 30% in excess of 10 = 30% of 5 lakhs = 1,50,000
M. Need to add health and education cess of 4% of 2,62,500 = 10,500
N. Total tax liability = total tax value + cess = 2,73,500
2. New Regime Slab Rates
A. Up to 3 lakhs: nil
B. 3 lakhs - 7 lakhs: 5% in excess of 3 lakhs = 20,000
C. 7 lakhs - 10 lakhs: 10% in excess of 7 lakhs = 20,000+30,000=50,000
D. 10 lakhs - 12 lakhs: 15% in excess of 10 lakhs = 50,000+30,000 = 80,000
E. 12 lakhs - 15 lakhs: 20% in excess of 12 lakhs = 80,000 + 60,000 = 1,40,000
F. Health and education cess: 4% of 1,40,000 = 5,600
G. Total tax liability = total tax value + cess = 1,40,000 + 5,600 = 1,45,600
3. New regime is better.
5. Residential Status: Konjam sure
Determine the residential status of Mr. Akbar for the PY 2024-2025 with the following
information about his stay in India:
A. 2024-2025 – 145 days
B. 2023-2024 – 115 days
C. 2022-2023 – 160 days
D. 2021-2022 – 80 days
E. 2020-2021 – 10 days
F. 2019-2020 – 100 days
G. 2018-2019 – 12 days
H. 2016-2017 – 62 days
I. 2015-2016 – 48 says
J. 2014-2015 – 10 days
K. 2013-2012 – 4 days

S6(1):
A. 182 days or more in PY or
B. 60 days in PY and 365 days in immediately preceding 4 PYs
As 2024-25 is 145 days and not 182, doesn't satisfy 1st condition.
Preceding 4 PYs: 115+160+80+10 = 365 days - Satisfied 2nd condition.
Thus, a resident.

S6(6): additional conditions

A. In 9 of 10 immediately preceding PYs - resident
- Not satisfied according to S6(1)
B. Stays 730 days in past 7 PYs
- 115+160+80+10+100+12+62= 539
- Not satisfied for ordinary resident, hence no ordinary resident

6. Residential status: Konjam sure

Mr. Y is determined as a resident of India for the relevant PY 2023-24 as he stayed in the
Indian territory for 220 days during the said relevant PY. Based on the information
provided below decide if he is as ROR or RNOR as per Section 6(6) of the Income Tax
Act, 1961.Additional Information provides Mr.Y’s stay in during various times.
1st June, 2013 – 30th November, 2013
15th August, 2016 – 31st December, 2016
1st April, 2017 – 31st December, 2017
1st May, 2019 – 31st October, 2019
21st June, 2020 – 31st December, 2021.

2023-24 220 days

 2022-23
2021-22 30+31+30+31+31+30+31+30+31+1= 276
2020-21 10+31+31+30+31+30+31+
31+28+31= 284
2019-20 31+30+31+31+30+31+1= 185
2018-19
2017-18 30+31+30+31+31+30+31+30+31+1= 275
2016-17 17+30+31+30+31= 139
2015-16
2014-15
2013-14 30+31+31+30+31+30+1= 184
Past 7 PYs: 276+284+185+275+139 = 1159
Therefore, ordinary resident

7. Income from House property: Adichu viturken

Mr. Arun, lets-out his house property for Rs.25,000/- per month. The Municipal valuation
is Rs. 2,80,000/- and the standard rent is not fixed. The rent that similar property fetches
in the same locality is Rs.24,000/- per month. He paid a sum of Rs.6,000/- towards house
tax under the TN Village Panchayat Act.
Note: He took a loan of Rs.20,00,000/- to buy the property and pays a monthly interest of
Rs.7,500/- per month towards the same. Determine the income or loss from the House
Property.

Particulars Amount
Annual rental value xx
Less: loss due to vacancy (xx)
Gross annual value 3,00,000
Less: municipal taxes -6,000
Net annual value 2,94,000
Less: standard deduction at 30% as per -97,200
S24(a)
Less: interest on borrowed loan as per -90,000
S24(b)
Income from house property 1,06,800

8. Income from House property: Adichu viturken

Ms. Anu, owns a house property and lets it out for a monthly rent of Rs.30,000/-. The
Municipal valuation is Rs. 3,56,000/- and the standard rent is Rs.28,000/- per month. The
rent that similar property fetches in the same locality is Rs.34,000/- per month. She had
to pay a sum of Rs.9,500/- towards house tax under the TN Village Panchayat Act which
she failed to pay.
Note: He took a loan of Rs.35,00,000/- to buy the property and pays a monthly interest of
Rs.25,000/- per month towards the same. Determine the income or loss from the House
Property.
A. Expected rent value: whichever is higher between
- Municipal rental value: 3,56,000
- Fair rent value: 3,60,000
B. Expected rent value: whichever is lower between
- Expected rent value: 4,08,000
- Standard rent: 3,36,000
C. Gross annual value: whichever is higher between
- Expected rent value: 4,08,000
- Actual rent: 3,60,000
D. If the actual rent is lesser than expected rent value, due to vacancy, take actual rent as
GAV

Particulars Amount
Annual rental value xx
Less: loss due to vacancy (xx)
Gross annual value 4,08,000
Less: municipal taxes -1,14,000
Net annual value 2,94,000
Less: standard deduction at 30% as per -88,200
S24(a)
Less: interest on borrowed loan as per - 3,00,000
S24(b)
Loss from house property -94,200

9. Taxable perquisite: Adichu viturken

Salary = Rs. 1,40,000 p.m. (Basic Pay = Rs. 90,000 p.m., Bonus= Rs. 25,000 p.m., DA =
Rs.25,000 p.m.).
Employees are provided accommodation in a guest house owned by the employer.
The place of accommodation is Tambaram, where the total population according to the
Census is 12 lakhs.
Employee is also provided with furnishing:
OWNED BY THE EMPOYER
AC Rs.30,000 & Refrigerator Rs.20,000
LEASED BY THE EMPLOYER
Sofa Rs.20,000 for two years & Cot Rs. 30,000 for two years
The employee stays there for a period of two years.
Determine the value of taxable perquisite.
 A. For non-government employees, the perquisite value is 10% for a population above 10
lakh but less than 25 lakh. The value of the perquisite will be rent paid by the
organization or 10% of the salary, whichever is less: 3,36,000
B. The value is the same as the value of the furnished, increased by 10% of the cost of
furniture: 55,000
C. If the furniture is rented, the rates will be hiked by the amount paid by the organization
for renting the furniture: 50,000
D. Total perquisite: 4,41,000

10. Income from salary: Konjam sure

Ms. Anjali, a resident of India works in the Public Works Department, State of Tamil Nadu
has the following income and expenditure.
Compute the income chargeable to tax under the head salaries for the AY 2025-2026
under the old regime.
Basic Pay – Rs. 60,000 per month
DA – Rs. 25,000 per month
Commission as a percentage of turnover received during PY 2024-2025 – Rs. 5,000
Entertainment Allowance received during PY 2024-2025 – Rs. 22,000
Professional Tax Paid during PY 2024-2025 – Rs. 5,000– Rs. 1,500
HRA Received – Rs.10,000 per month
Rent paid (Chennai) – Rs. 20,000 per month

A. Basic pay= 60,000 x 12= 7,20,000

B. DA= 25,000 x 12 = 3,00,000
C. HRA= 10,000 x 12= 1,20,000
D. Commission=5,000
E. Rent paid= 20,000 x 12 = 2,40,000
F. Gross salary = BP+DA+HRA+Commission= 11,45,000
G. S10(13A):
Least of the following shall be exempted:
- Actual HRA: 1,20,000
- Rent paid - 10% of salary = 2,40,000 - 1,02,000= 1,38,000
- 50% of salary (Chennai): BP + DA+commission= 50% of 10,25,000 = 5,10,000
H. Hence, HRA exemption is
Gross Salary - HRA exemption: 10,20,000
I. Deductions under S16:
- Standard deduction: 50,000
- Entertainment allowance: 14,40,000/5,000/22,000 = 5,000
- Professional tax: 2,500
J. Deductions = 50,000+5,000+2,500
K. Thus, income = 10,20,000-57,500 =9,62,500.
11. Time of supply of goods: Konjam sure
Mr. X supplies 10 mobile phones and 5 ipads to Mr. Y for Rs. 20,00,000 at his showroom
in Pondicherry. Determine the time of supply of the goods using the following
information:
Date of making payment by Mr. Y – 10th January, 2025
Date of issuance of invoice by Mr. X – 12th of February, 2025
Date of delivery of goods to Mr. Y – 12th of January, 2025

The time of supply of goods shall be the earlier of the following dates:
(a) The date of issuing of invoice (or the last day by which invoice should have been issued*)
OR
(b) The date of receipt of payment

The date of receipt of payment shall be earlier of-

1. The date on which he entered the payment in his books
OR
2. The date on which the payment is credited to his bank account
Thus,
Date of invoice: 12.2.25
Date of receipt of payment: 10.1.25
Thus, supply of goods is 10.1.25

12. Time of supply: Konjam sure

Determine the time of supply of internet and telecommunication services based on the
following information provided:
Date of Issuance of invoice – 22nd March, 2025
Date of receipt of payment – 10th march, 2025
Date of provision of services – 18th of March, 2025

The time of supply of goods shall be the earlier of the following dates:
(a) The date of issuing of invoice (or the last day by which invoice should have been issued*)
OR
(b) The date of receipt of payment
Thus, 10.3.2025

13. Nature of supply: Konjam sure

Determine the nature of supply as mixed or composite with cogent reasons:
a. Sale of air conditioner with stabilizer: composite as AC can't work without stabilizer
b. Sale of a bike with warranty: composite as a warranty is useless without the bike
attached to it
c. Sale of mobile phone with warranty: composite as a warranty is useless without the
mobile phone attached to it
d. Sale of gift hamper containing chocolates, sweets and cool drinks: mixed as they
can be sold individually but are bundled in the hamper
e. Flight ticket with meals: composite as meals are required on air
A composite supply involves goods or services that are naturally bundled together, whereas a
mixed supply includes items that are sold individually. For composite supplies, the tax rate of
the main item applies, while for mixed supplies, the highest tax rate among the items is used.

14. Value of supply: Aduchu vitutu irukken

Determine the value of supply based on the information provided:
a. Pearl (P) Ltd. sells certain goods at a listed cost of Rs. 60,000
b. The Municipal Authority gives levies tax on such goods at Rs. 3,000
c. Packing charges imposed – Rs. 2,000
d. Subsidy given by a non-government body (NGO) – Rs. 4,000
e. Discount @ 3% on the listed cost which is recorded in the invoice.

Value of Supply = Consideration - GST on Consideration

Value of Supply = Original Value - Discount
Consideration = (listed cost - discount) + packing charges - subsidy
= 58,200+2,000-4,000 =56,200
Value of Supply = Consideration - GST on Consideration
= 56,200 - 3,000 = 53,200Rs.

15. Requirement of Registration under CGST:

Unsure
Determine whether registration is required, under CGST Act, in the following cases with
reasons:
a. XYZ Private Ltd.,, exclusively trading in garments, supplies its taxable goods in
various States of India from its outlet in Tamil Nadu. Aggregate turnover of XYZ Private
Ltd. is ₹ 35 lakh.
b. Mr. X provides house cleaning services through his online platform and the
aggregate turnover is ₹15 lakh.
c. Ms. Y runs a garment shop in Nagaland and the aggregate turnover is ₹12 lakh.
d. Ms. Y supplies within the state of Tamil Nadu furniture and has an aggregate
turnover of ₹18.5 lakh.

Who must compulsorily register for GST?

A. Casual taxable persons.
B. Non-resident casual taxable persons.
 C. Persons making any inter-state taxable supplies.
D. Agents acting on behalf of a registered taxpayer.
E. E-commerce operators.
F. TDS/TCS deductors.
G. Persons conducting business in a state other than the one they are located in.
H. Persons who sell products on e-commerce sites such as Amazon and Flipkart.
I. Individuals working in the import-export industry.
J. Persons subject to reverse charge taxation.
K. Businesses registered under previous taxes such as VAT, excise, and service tax.
L. Individuals running an aggregator company.
M. Input Service Distributors.
N. OIDAR (Online Information Database Access and Retrieval) service providers in
GST Registration Threshold limit
A. Registration under GST is mandatory for all businesses whose annual turnover exceeds
Rs 40 lakhs in a financial year.
B. This threshold is Rs 20 lakhs for special category states such as Arunachal Pradesh,
Assam, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh
and Uttarakhand.
C. Jammu and Kashmir and Assam are two particular category states that chose to have a
threshold limit of Rs.40 lakh for commodities.
D. Puducherry, a regular category state, opted for a threshold limit of Rs. 20 lakh for goods.
Answers:
A. Not mandatory as its mandatory only if Rs.40 lakhs for Tamil Nadu even though Persons
conducting business in a state other than the one they are located in should be
registered
B. Not mandatory as its mandatory only if Rs.40 lakhs even though Persons who sell
products on e-commerce sites such as Amazon and Flipkart should be registered
C. Not mandatory as intra state transaction
D. Not mandatory as intra state transaction
Bare Acts - Useless
Search and seizure IT
1. S132. Search and seizure.
(1) Where the Principal Director General or Director General or Principal Director or
Director or the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner or Additional Director or Additional
Commissioner or Joint Director or Joint Commissioner in consequence of
information in his possession, has reason to believe that
(a) any person to whom a summons under S37(1) of the Indian Income-tax
Act, 1922, or under S131(1) of this Act, or a notice under S22(4) of the
Indian Income-tax Act, 1922, or under S142(1) of this Act was issued to
produce, or cause to be produced, any books of account or other
documents has omitted or failed to produce, or cause to be produced,
such books of account or other documents as required by such summons
or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might
be issued will not, or would not, produce or cause to be produced, any
books of account or other documents which will be useful for, or relevant
to, any proceeding under the Indian Income-tax Act, 1922, or under this
Act, or
(c) any person is in possession of any money, bullion, jewellery or other
valuable article or thing and such money, bullion, jewellery or other
valuable article or thing represents either wholly or partly income or
property 11[which has not been, or would not be, disclosed] for the
purposes of the Indian Income-tax Act, 1922, or this Act (hereinafter in
this section referred to as the undisclosed income or property),
Then -
(A) the Principal Director General or Director General Principal
Director or Director or the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, as the
case may be, may authorise any Additional Director or Additional
Commissioner or Joint Director, Joint Commissioner, Assistant
Director or Deputy Director, Assistant Commissioner or Deputy
Commissioner or Income-tax Officer, or
(B) such 5 [Additional Director or Additional Commissioner or] 1 [Joint
Director], or 2 [Joint Commissioner], as the case may be, may
authorise any 3 [Assistant Director or Deputy Director], 4
[Assistant Commissioner or Deputy Commissioner ]or Income-tax
Officer, (the officer so authorised in all cases being hereinafter
referred to as the authorised officer) to—]
(d) .
(2)
(3) .
 fifty lakh rupees or more in the relevant assessment year
or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has
escaped assessment for such year or years; and
(c) the search under section 132 is initiated or requisition
under section 132A is made on or after the 1st day of April,
2017.
- Explanation 1: For the purposes of this sub-section, the
expression “relevant assessment year” shall mean an assessment
year preceding the assessment year relevant to the previous year
in which search is conducted or requisition is made which falls
beyond six assessment years but not later than ten assessment
years from the end of the assessment year relevant to the
previous year in which search is conducted or requisition is made.
- Explanation 2.—For the purposes of the fourth proviso, “asset”
shall include immovable property being land or building or both,
shares and securities, loans and advances, deposits in bank
account.
(2) If any proceeding initiated or any order of assessment or reassessment made
under sub-section (1) has been annulled in appeal or any other legal proceeding,
then, notwithstanding anything contained in sub-section (1) or section 153, the
assessment or reassessment relating to any assessment year which has abated
under the second proviso to sub-section (1), shall stand revived with effect from
the date of receipt of the order of such annulment by the 5 [Principal
Commissioner or Commissioner
- Provided that such revival shall cease to have effect, if such order of
annulment is set aside.
- Explanation.—For the removal of doubts, it is hereby declared that,
- (i) save as otherwise provided in this section, section 153B and
section 153C, all other provisions of this Act shall apply to the
assessment made under this section;
- (ii) in an assessment or reassessment made in respect of an
assessment year under this section, the tax shall be chargeable at
the rate or rates as applicable to such assessment year.
(3) .
3. S153D. Prior approval necessary for assessment in cases of search or requisition.
No order of assessment or reassessment shall be passed by an Assessing Officer below
the rank of Joint Commissioner in respect of each assessment year referred to in clause
(b) of 7 [sub-section (1) of section 153A] or the assessment year referred to in clause (b)
of sub-section (1) of section 153B, except with the prior approval of the Joint
Commissioner:
- Provided that nothing contained in this section shall apply where the assessment
or reassessment order, as the case may be, is required to be passed by the
 Assessing Officer with the prior approval of the 9 [Principal Commissioner or
Commissioner] under sub-section (12)of section 144BA

4. CHAPTER XIV-B SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES

158B. Definitions. 158BA. Assessment of undisclosed income as a result of search.
158BB. Computation of undisclosed income of the block period. 158BC. Procedure for
block assessment. 158BD. Undisclosed income of any other person. 158BE. Time limit
for completion of block assessment. 158BF. Certain interests and penalties not to be
levied or imposed. 158BFA. Levy of interest and penalty in certain cases. 158BG.
Authority competent to make the block assessment. 158BH. Application of other
provisions of this Act. 158BI. Chapter not to apply after certain date.
5.
6. .

Revision IT Act
1. S263: Revision of orders prejudicial to revenue
(1) The Principal Commissioner or Commissioner may call for and examine the
record of any proceeding under this Act, and if he considers that any order
passed therein by the Assessing Officer is erroneous in so far as it is prejudicial
to the interests of the revenue, he may, after giving the assessee an opportunity
of being heard and after making or causing to be made such inquiry as he deems
necessary, pass such order thereon as the circumstances of the case justify,
including an order enhancing or modifying the assessment, or cancelling the
assessment and directing a fresh assessment.
- Explanation 1.—For the removal of doubts, it is hereby declared that, for
the purposes of this subsection,
(a) an order passed 5 [on or before or after the 1st day of June, 1988]
by the Assessing Officer shall include
- (i) an order of assessment made by the Assistant
Commissioner or Deputy Commissioner or the Income-tax
Officer on the basis of the directions issued by the Joint
Commissioner under S144A;
- (ii) an order made by the Joint Commissioner in exercise of
the powers or in the performance of the functions of an
Assessing Officer conferred on, or assigned to, him under
the orders or directions issued by the Board or by the
Principal Chief Commissioner or Chief Commissioner or
Principal Director General or Director General or Principal
Commissioner or Commissioner authorised by the Board in
this behalf under S120;
(b) “record”shall include and shall be deemed always to have
included all records relating to any proceeding under this Act
 available at the time of examination by the Principal
Commissioner or Commissioner
(c) where any order referred to in this subsection and passed by the
Assessing Officer had been the subject matter of any appeal filed
on or before or after the 1st day of June, 1988, the powers of the
Principal Commissioner or Commissioner under this subsection
shall extend and shall be deemed always to have extended to
such matters as had not been considered and decided in such
appeal
- Explanation 2: For the purposes of this section, it is hereby declared that
an order passed by the Assessing Officer shall be deemed to be
erroneous in so far as it is prejudicial to the interests of the revenue, if, in
the opinion of the Principal Commissioner or Commissioner,
(a) the order is passed without making inquiries or verification which
should have been made;
(b) the order is passed allowing any relief without inquiring into the
claim;
(c) the order has not been made in accordance with any order,
direction or instruction issued by the Board under S119; or
(d) the order has not been passed in accordance with any decision
which is prejudicial to the assessee, rendered by the jurisdictional
High Court or Supreme Court in the case of the assessee or any
other person.
(2) No order shall be made under sub-section (1) after the expiry of two years from
the end of the financial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under
this section may be passed at any time in the case of an order which has been
passed in consequence of, or to give effect to, any finding or direction contained
in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the
Supreme Court.
- Explanation.—In computing the period of limitation for the purposes of
sub-section (2), the time taken in giving an opportunity to the assessee to
be reheard under the proviso to section 129 and any period during which
any proceeding under this section is stayed by an order or injunction of
any court shall be excluded.

2. S264: Revision of other orders

(1) In the case of any order other than an order to which S263 applies passed by an
authority subordinate to him, the Principal Commissioner or Commissioner may,
either of his own motion or on an application by the assessee for revision, call for
the record of any proceeding under this Act in which any such order has been
passed and may make such inquiry or cause such inquiry to be made and,
subject to the provisions of this Act, may pass such order thereon, not being an
order prejudicial to the assessee, as he thinks fit.
(2) The Principal Commissioner or Commissioner shall not of his own motion revise
any order under this section if the order has been made more than one year
previously.
(3) In the case of an application for revision under this section by the assessee, the
application must be made within one year from the date on which the order in
question was communicated to him or the date on which he otherwise came to
know of it, whichever is earlier:
- Provided that the Principal Commissioner or Commissioner may, if he is
satisfied that the assessee was prevented by sufficient cause from
making the application within that period, admit an application made after
the expiry of that period.
(4) The Principal Commissioner or Commissioner shall not revise any order under
this section in the following cases
(a) where an appeal against the order lies to the Deputy Commissioner
(Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal
but has not been made and the time within which such appeal may be
made has not expired, or, in the case of an appeal to the Commissioner
(Appeals) or to the Appellate Tribunal, the assessee has not waived his
right of appeal; or
(b) where the order is pending on an appeal before the Deputy
Commissioner(Appeals); or (c) where the order has been made the
subject of an appeal to the Commissioner (Appeals) or to the Appellate
Tribunal.
(5) Every application by an assessee for revision under this section shall be
accompanied by a fee of five hundred rupees
(6) On every application by an assessee for revision under this subsection, made on
or after the 1st day of October, 1998, an order shall be passed within one year
from the end of the financial year in which such application is made by the
assessee for revision.
- Explanation.—In computing the period of limitation for the purposes of
this subsection, the time taken in giving an opportunity to the assessee to
be re-heard under the proviso to S129 and any period during which any
proceeding under this section is stayed by an order or injunction of any
court shall be excluded.
(7) Notwithstanding anything contained in sub-section (6), an order in revision under
sub-section (6) may be passed at any time in consequence of or to give effect to
any finding or direction contained in an order of the Appellate Tribunal, National
Tax Tribunal, the High Court or the Supreme Court
- Explanation 1.—An order by the Principal Commissioner or
Commissioner declining to interfere shall, for the purposes of this section,
be deemed not to be an order prejudicial to the assessee.
- Explanation 2.—For the purposes of this section, the Deputy
Commissioner (Appeals) shall be deemed to be an authority subordinate
to the Principal Commissioner or Commissioner.
 3. .

S28, IT Act
1. .
The following income shall be chargeable to income-tax under the head “Profits and
gains of business or profession”,
- (i) the profits and gains of any business or profession which was carried on by
the assessee at any time during the previous year;
- (ii) any compensation or other payment due to or received by,
(a) any person, by whatever name called, managing the whole or
substantially the whole of the affairs of an Indian company, at or in
connection with the termination of his management or the modification of
the terms and conditions relating thereto;
(b) any person, by whatever name called, managing the whole or
substantially the whole of the affairs in India of any other company, at or
in connection with the termination of his office or the modification of the
terms and conditions relating thereto;
(c) any person, by whatever name called, holding an agency in India for any
part of the activities relating to the business of any other person, at or in
connection with the termination of the agency or the modification of the
terms and conditions relating thereto ;
(d) any person, for or in connection with the vesting in the Government, or in
any corporation owned or controlled by the Government, under any law
for the time being in force, of the management of any property or
business;
(e) any person, by whatever name called, at or in connection with the
termination or the modification of the terms and conditions, of any
contract relating to his business;
- income derived by a trade, professional or similar association from specific
services performed for its members
- (iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955,
made under the Imports and Exports (Control) Act, 1947
- (iiib) cash assistance (by whatever name called) received or receivable by any
person against exports under any scheme of the Government of India;
- (iiic) any duty of customs or excise re-paid or re-payable as drawback to any
person against exports under the Customs and Central Excise Duties Drawback
Rules, 1971
- (iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being
the Duty Remission Scheme under the export and import policy formulated and
announced under section 5 of the Foreign Trade (Development and Regulation)
Act, 1992
- (iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being
the Duty Remission Scheme under the export and import policy formulated and
 announced under section 5 of the Foreign Trade (Development and Regulation)
Act, 1992
- (iv) the value of any benefit or perquisite, whether convertible into money or not,
arising from business or the exercise of a profession
- (v) any interest, salary, bonus, commission or remuneration, by whatever name
called, due to, or received by, a partner of a firm from such firm: Provided that
where any interest, salary, bonus, commission or remuneration, by whatever
name called, or any part thereof has not been allowed to be deducted under
clause (b) of section 40, the income under this clause shall be adjusted to the
extent of the amount not so allowed to be deducted;
- (va) any sum, whether received or receivable, in cash or kind, under an
agreement for
(a) not carrying out any activity in relation to any business 11[or profession];
or
(b) not sharing any know-how, patent, copyright, trade-mark, licence,
franchise or any other business or commercial right of similar nature or
information or technique likely to assist in the manufacture or processing
of goods or provision for services:
- Provided that sub-clause (a) shall not apply to—
- (i) any sum, whether received or receivable, in cash or
kind, on account of transfer of the right to manufacture,
produce or process any article or thing or right to carry on
any business 1 [or profession], which is chargeable under
the head “Capital gains”;
- (ii) any sum received as compensation, from the multi-
lateral fund of the Montreal Protocol on Substances that
Deplete the Ozone layer under the United Nations
Environment Programme, in accordance with the terms of
agreement entered into with the Government of India.
- Explanation.—For the purposes of this clause,—
- (i) “agreement” includes any arrangement or
understanding or action in concert,
(A) whether or not such arrangement, understanding or
action is formal or in writing; or
(B) whether or not such arrangement, understanding or
action is intended to be enforceable by legal
proceedings;
- (ii) “service” means service of any description which is
made available to potential users and includes the
provision of services in connection with business of any
industrial or commercial nature such as accounting,
banking, communication, conveying of news or
information, advertising, entertainment, amusement,
education, financing, insurance, chit funds, real estate,
 construction, transport, storage, processing, supply of
electrical or other energy, boarding and lodging;]
- (vi) any sum received under a Keyman insurance policy including the sum
allocated by way of bonus on such policy.
- (via) the fair market value of inventory as on the date on which it is converted
into, or treated as, a capital asset determined in the prescribed manner;
- Explanation.—For the purposes of this clause, the expression “Keyman
insurance policy” shall have the meaning assigned to it in clause (10D) of
section 10;
- (vii) any sum, whether received or receivable, in cash or kind, on account of any
capital asset (other than land or goodwill or financial instrument) being
demolished, destroyed, discarded or transferred, if the whole of the expenditure
on such capital asset has been allowed as a deduction under section 35AD
2. .

Chap 13, IT Act

1. Chapter 13, IT Act: Income Tax authorities: S116 - S138
2. S116. Income-tax authorities.
There shall be the following classes of income-tax authorities for the purposes of this
Act, namely:
(a) the Central Board of Direct Taxes constituted under the Central Boards of
Revenue Act, 1963
(aa) Principal Directors General of Income-tax or Principal Chief Commissioners
of Income-tax,
(b) Directors-General of Income-tax or Chief Commissioners of Income-tax,
(ba) Principal Directors of Income-tax or Principal Commissioners of Income-tax
(c) Directors of Income-tax or Commissioners of Income-tax or Commissioners of
Income-tax (Appeals),
(cc) Additional Directors of Income-tax or Additional Commissioners of Income-
tax or Additional Commissioners of Income-tax (Appeals),
(cca) Joint Directors of Income-tax or Joint Commissioners of Income-tax,
(d) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or
Deputy Commissioners of Income-tax (Appeals),
(e) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
(f) Income-tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors of Income-tax

3. S117. Appointment of income-tax authorities.

(1) The Central Government may appoint such persons as it thinks fit to be income-
tax authorities.
(2) Without prejudice to the provisions of sub-section (1), and subject to the rules
and orders of the Central Government regulating the conditions of service of
 persons in public services and posts, the Central Government may authorise the
Board, or a 3 [Principal Director General or Director-General], a 4 [Principal Chief
Commissioner or Chief Commissioner] or a 5 [Principal Director or Director] or a
6 [Principal Commissioner or Commissioner] to appoint income-tax authorities
below the rank of an 7 [Assistant Commissioner or Deputy Commissioner
(3) Subject to the rules and orders of the Central Government regulating the
conditions of service of persons in public services and posts, an income-tax
authority authorised in this behalf by the Board may appoint such executive or
ministerial staff as may be necessary to assist it in the execution of its functions.

4. S118. Control of income-tax authorities

The Board may, by notification in the Official Gazette, direct that any income-tax
authority or authorities specified in the notification shall be subordinate to such other
income-tax authority or authorities as may be specified in such notification.

5. S119. Instructions to subordinate authorities.

(1) The Board may, from time to time, issue such orders, instructions and directions
to other income-tax authorities as it may deem fit for the proper administration of
this Act, and such authorities and all other persons employed in the execution of
this Act shall observe and follow such orders, instructions and directions of the
Board:
Provided that no such orders, instructions or directions shall be issued
(a) so as to require any income-tax authority to make a particular
assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the Commissioner (Appeals)] in
the exercise of his appellate functions.
(2) Without prejudice to the generality of the foregoing power,
(a) the Board may, if it considers it necessary or expedient so to do, for the
purpose of proper and efficient management of the work of assessment
and collection of revenue, issue, from time to time (whether by way of
relaxation of any of the provisions of sections 3 [115P, 115S, 115WD,
115WE, 115WF, 115WG, 115WH, 115WJ, 115WK,] 4 [139,] 143, 144,
147, 148, 154, 155 5 [, 158BFA], 6 [sub-section (1A) of section 201,
sections 210, 211, 234A, 234B, 234C 7 [, 234E]], 8 [270A,] 271 9 [, 271C,
271CA] and 273 or otherwise), general or special orders in respect of
10[any class of incomes or fringe benefits] or class of cases, setting forth
directions or instructions (not being prejudicial to assessees) as to the
guidelines, principles or procedures to be followed by other incometax
authorities in the work relating to assessment or collection of revenue or
the initiation of proceedings for the imposition of penalties and any such
order may, if the Board is of opinion that it is necessary in the public
interest so to do, be published and circulated in the prescribed manner for
general information;
 (b) the Board may, if it considers it desirable or expedient so to do for
avoiding genuine hardship in any case or class of cases, by general or
special order, authorise 11[any income-tax authority, not being a 12***
Commissioner (Appeals)] to admit an application or claim for any
exemption, deduction, refund or any other relief under this Act after the
expiry of the period specified by or under this Act for making such
application or claim and deal with the same on merits in accordance with
law;
(c) the Board may, if it considers it desirable or expedient so to do for
avoiding genuine hardship in any case or class of cases, by general or
special order for reasons to be specified therein, relax any requirement
contained in any of the provisions of Chapter IV or Chapter VI-A, where
the assessee has failed to comply with any requirement specified in such
provision for claiming deduction thereunder, subject to the following
conditions, namely:
- (i) the default in complying with such requirement was due to
circumstances beyond the control of the assessee; and
- (ii) the assessee has complied with such requirement before the
completion of assessment in relation to the previous year in which
such deduction is claimed:
Provided that the Central Government shall cause every order
issued under this clause to be laid before each House of
Parliamen
(3) .

6. S120. Jurisdiction of income-tax authorities.

(1) Income-tax authorities shall exercise all or any of the powers and perform all or
any of the functions conferred on, or, as the case may be, assigned to such
authorities by or under this Act in accordance with such directions as the Board
may issue for the exercise of the powers and performance of the functions by all
or any of those authorities. 2 [Explanation.—For the removal of doubts, it is
hereby declared that any income-tax authority, being an authority higher in rank,
may, if so directed by the Board, exercise the powers and perform the functions
of the income-tax authority lower in rank and any such direction issued by the
Board shall be deemed to be a direction issued under sub-section (1).
(2) The directions of the Board under sub-section (1) may authorise any other
income-tax authority to issue orders in writing for the exercise of the powers and
performance of the functions by all or any of the other income-tax authorities who
are subordinate to it.
(3) In issuing the directions or orders referred to in sub-sections (1) and (2), the
Board or other income-tax authority authorised by it may have regard to any one
or more of the following criteria, namely :
(a) territorial area;
(b) persons or classes of persons;
 (c) incomes or classes of income; and
(d) cases or classes of cases.
(4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by
general or special order, and subject to such conditions, restrictions or limitations
as may be specified therein,
(a) authorise any 3 [Principal Director General or Director General] or 4
[Principal Director or Director] to perform such functions of any other
income-tax authority as may be assigned to him by the Board;
(b) empower the 3 [Principal Director General or Director General] or 5
[Principal Chief Commissioner or Chief Commissioner] or 6 [Principal
Commissioner or Commissioner] to issue orders in writing that the powers
and functions conferred on, or as the case may be, assigned to, the
Assessing Officer by or under this Act in respect of any specified area or
persons or classes of persons or incomes or classes of income or cases
or classes of cases, shall be exercised or performed by 7 [an Additional
Commissioner or] 8 [an Additional Director or] a 9 [Joint Commissioner] or
a 10[Joint Director]] and, where any order is made under this clause,
references in any other provision of this Act, or in any rule made
thereunder to the Assessing Officer shall be deemed to be references to
such 11[an Additional Commissioner or] 12[Additional Director or] a 9
[Joint Commissioner] or 10[Joint Director] by whom the powers and
functions are to be exercised or performed under such order, and any
provision of this Act requiring approval or sanction of the 9 [Joint
Commissioner] shall not apply.
(5) The directions and orders referred to in sub-sections (1) and (2) may, wherever
considered necessary or appropriate for the proper management of the work,
require two or more Assessing Officers (whether or not of the same class) to
exercise and perform, concurrently, the powers and functions in respect of any
area or persons or classes of persons or incomes or classes of income or cases
or classes of cases; and, where such powers and functions are exercised and
performed concurrently by the Assessing Officers of different classes, any
authority lower in rank amongst them shall exercise the powers and perform the
functions as any higher authority amongst them may direct, and, further,
references in any other provision of this Act or in any rule made thereunder to the
Assessing Officer shall be deemed to be references to such higher authority and
any provision of this Act requiring approval or sanction of any such authority shall
not apply.
(6) Notwithstanding anything contained in any direction or order issued under this
section, or in section 124, the Board may, by notification in the Official Gazette,
direct that for the purpose of furnishing of the return of income or the doing of any
other act or thing under this Act or any rule made thereunder by any person or
class of persons, the income-tax authority exercising and performing the powers
and functions in relation to the said person or class of persons shall be such
authority as may be specified in the notification
7. S124. Jurisdiction of Assessing Officers.
(1) Where by virtue of any direction or order issued under sub-section (1) or sub-
section (2) of section 120, the Assessing Officer has been vested with jurisdiction
over any area, within the limits of such area, he shall have jurisdiction
(a) in respect of any person carrying on a business or profession, if the place
at which he carries on his business or profession is situate within the
area, or where his business or profession is carried on in more places
than one, if the principal place of his business or profession is situate
within the area, and
(b) in respect of any other person residing within the area.
(2) Where a question arises under this section as to whether an Assessing Officer
has jurisdiction to assess any person, the question shall be determined by the 2
[Principal Director General or Director General] or the 3 [Principal Chief
Commissioner or Chief Commissioner] or the 4 [Principal Commissioner or
Commissioner]; or where the question is one relating to areas within the
jurisdiction of different 2 [Principal Director General or Director General] or 3
[Principal Chief Commissioner or Chief Commissioner] or 4 [Principal
Commissioner or Commissioner], by the 2 [Principal Director General or Director
General] or 3 [Principal Chief Commissioners or Chief Commissioners] or 4
[Principal Commissioner or Commissioner] concerned or, if they are not in
agreement, by the Board or by such 2 [Principal Director General or Director
General] or 3 [Principal Chief Commissioner or Chief Commissioner] or 4
[Principal Commissioner or Commissioner] as the Board may, by notification in
the Official Gazette, specify.
(3) No person shall be entitled to call in question the jurisdiction of an Assessing
Officer
(a) where he has made a return 1 [under sub-section (1) of section 115WD or
under sub-section (1) of section 139], after the expiry of one month from
the date on which he was served with a notice under sub-section (1) of
section 142 or 2 [sub-section (2) of section 115WE or sub-section (2) of
section 143] or after the completion of the assessment, whichever is
earlier;
(b) where he has made no such return, after the expiry of the time allowed by
the notice under 3 [sub-section (2) of section 115WD or sub-section (1) of
section 142 or under sub-section (1) of section 115WH or under section
148 for the making of the return or by the notice under the first proviso to
section 115WF or under the first proviso to section 144] to show cause
why the assessment should not be completed to the best of the judgment
of the Assessing Officer, whichever is earlier;
(c) where an action has been taken under section 132 or section 132A, after
the expiry of one month from the date on which he was served with a
notice under sub-section (1) of section 153A or sub-section (2) of section
153C or after the completion of the assessment, whichever is earlier.
 (4) Subject to the provisions of sub-section (3), where an assessee calls in question
the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not
satisfied with the correctness of the claim, refer the matter for determination
under sub-section (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order
issued under section 120, every Assessing Officer shall have all the powers
conferred by or under this Act on an Assessing Officer in respect of the income
accruing or arising or received within the area, if any, over which he has been
vested with jurisdiction by virtue of the directions or orders issued under sub-
section (1) or sub-section (2) of section 120.

8. S127.Power to transfer cases.

(1) The 5 [Principal Director General or Director General] or 6 [Principal Chief
Commissioner or Chief Commissioner] or 7 [Principal Commissioner or
Commissioner] may, after giving the assessee a reasonable opportunity of being
heard in the matter, wherever it is possible to do so, and after recording his
reasons for doing so, transfer any case from one or more Assessing Officers
subordinate to him (whether with or without concurrent jurisdiction) to any other
Assessing Officer or Assessing Officers (whether with or without concurrent
jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be
transferred and the Assessing Officer or Assessing Officers to whom the case is
to be transferred are not subordinate to the same 5 [Principal Director General or
Director General] or 6 [Principal Chief Commissioner or Chief Commissioner] or
7 [Principal Commissioner or Commissioner],
(a) where the 5 [Principal Director General or Director General] or 6 [Principal
Chief Commissioner or Chief Commissioner] or 7 [Principal
Commissioner or Commissioner] to whom such Assessing Officers are
subordinate are in agreement, then the 1 [Principal Director General or
Director General] or 2 [Principal Chief Commissioner or Chief
Commissioner] or 3 [Principal Commissioner or Commissioner] from
whose jurisdiction the case is to be transferred may, after giving the
assessee a reasonable opportunity of being heard in the matter, wherever
it is possible to do so, and after recording his reasons for doing so, pass
the order;
(b) where the 1 [Principal Directors General or Directors General] or 2
[Principal Chief Commissioner or Chief Commissioner] or 3 [Principal
Commissioner or Commissioner] aforesaid are not in agreement, the
order transferring the case may, similarly, be passed by the Board or any
such 1 [Principal Director General or Director General] or 2 [Principal
Chief Commissioner or Chief Commissioner] or 3 [Principal
Commissioner or Commissioner] as the Board may, by notification in the
Official Gazette, authorise in this behalf.
 (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any
such opportunity to be given where the transfer is from any Assessing Officer or
Assessing Officers (whether with or without concurrent jurisdiction) to any other
Assessing Officer or Assessing Officers (whether with or without concurrent
jurisdiction) and the offices of all such officers are situated in the same city,
locality or place.
(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at
any stage of the proceedings, and shall not render necessary the re-issue of any
notice already issued by the Assessing Officer or Assessing Officers from whom
the case is transferred.
- Explanation.—In section 120 and this section, the word “case”, in relation
to any person whose name is specified in any order or direction issued
thereunder, means all proceedings under this Act in respect of any year
which may be pending on the date of such order or direction or which
may have been completed on or before such date, and includes also all
proceedings under this Act which may be commenced after the date of
such order or direction in respect of any year.

9. S129. Change of incumbent of an office.

A. Whenever in respect of any proceeding under this Act an income-tax authority
ceases to exercise jurisdiction and is succeeded by another who has and
exercises jurisdiction, the income-tax authority so succeeding may continue the
proceeding from the stage at which the proceeding was left by his predecessor:
Provided that the assessee concerned may demand that before the proceeding
is so continued the previous proceeding or any part thereof be reopened or that
before any order of assessment is passed against him, he be reheard.
B. .

10. S131. Power regarding discovery, production of evidence, etc.

(1) The 1 [Assessing Officer], 2 [Deputy Commissioner (Appeals)], 3
[,Commissioner (Appeals) 4 [, 5 [Principal Chief Commissioner or Chief
Commissioner or 6 [Principal Commissioner or Commissioner] and Dispute
Resolution Panel referred to in clause (a) of sub-section (15) of section 144C]]
shall, for the purposes of this Act, have the same powers as are vested in a court
under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect
of the following matters, namely:
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking
company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
(1A) If the 9 [Principal Director General or Director General] or 10[Principal
Director or Director] or 11[Joint Director] or 12[Assistant Director or Deputy
Director], or the authorised officer referred to in sub-section (1) of section 132
 before he takes action under clauses (i) to (v) of that sub-section,] has reason to
suspect that any income has been concealed, or is likely to be concealed, by any
person or class of persons, within his jurisdiction, then, for the purposes of
making any enquiry or investigation relating thereto, it shall be competent for him
to exercise the powers conferred under sub-section (1) on the income-tax
authorities referred to in that sub-section, notwithstanding that no proceedings
with respect to such person or class of persons are pending before him or any
other income-tax authority.
(2) (2) For the purpose of making an inquiry or investigation in respect of any person
or class of persons in relation to an agreement referred to in section 90 or section
90A, it shall be competent for any income-tax authority not below the rank of
Assistant Commissioner of Income-tax, as may be notified by the Board in this
behalf, to exercise the powers conferred under sub-section (1) on the income-tax
authorities referred to in that sub-section, notwithstanding that no proceedings
with respect to such person or class of persons are pending before it or any other
income-tax authority.
(3) Subject to any rules made in this behalf, any authority referred to in sub-section
(1) 7 [or sub-section (1A)] 13[or sub-section (2)] may impound and retain in its
custody for such period as it thinks fit any books of account or other documents
produced before it in any proceeding under this Act:
Provided that 14[an 15[Assessing Officer] or an 16[Assistant Director or Deputy
Director]] shall not
(a) impound any books of account or other documents without recording his
reasons for so doing, or
(b) retain in his custody any such books or documents for a period exceeding
fifteen days (exclusive of holidays) without obtaining the approval of 1
[ the 2 [Principal Chief Commissioner or Chief Commissioner] or 3
[Principal Director General or Director General] or 4 [Principal
Commissioner or Commissioner ]or 5 [Principal Director or Director]
therefor, as the case may be.

11. S132. Search and seizure.

(1) Where the 7 [ 3 [Principal Director General or Director General] or 5 [Principal
Director or Director]] or the 8 [ 2 [Principal Chief Commissioner or Chief
Commissioner] or 4 [Principal Commissioner or Commissioner]] 9 [or Additional
Director or Additional Commissioner] 10[or Joint Director or Joint Commissioner]
in consequence of information in his possession, has reason to believe that— (a)
any person to whom a summons under sub-section (1) of section 37 of the Indian
Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this
Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act,
1922, or under sub-section (1) of section 142 of this Act was issued to produce,
or cause to be produced, any books of account or other documents has omitted
or failed to produce, or cause to be produced, such books of account or other
documents as required by such summons or notice, or (b) any person to whom a
summons or notice as aforesaid has been or might be issued will not, or would
not, produce or cause to be produced, any books of account or other documents
which will be useful for, or relevant to, any proceeding under the Indian Income-
tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of
any money, bullion, jewellery or other valuable article or thing and such money,
bullion, jewellery or other valuable article or thing represents either wholly or
partly income or property 11[which has not been, or would not be, disclosed] for
the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act
(hereinafter in this section referred to as the undisclosed income or property),
12[then,— (A) the 7 [ 3 [Principal Director General or Director General] or 5
[Principal Director or Director] or the 8 [ 2 [Principal Chief Commissioner or Chief
Commissioner] or 4 [Principal Commissioner or Commissioner], as the case may
be, may authorise any 13[Additional Director or Additional Commissioner or] 1
[Joint Director], 2 [Joint Commissioner], 3 [Assistant Director or Deputy Director],
4 [Assistant Commissioner or Deputy Commissioner] or Income-tax Officer, or
(B) such 5 [Additional Director or Additional Commissioner or] 1 [Joint Director],
or 2 [Joint Commissioner], as the case may be, may authorise any 3 [Assistant
Director or Deputy Director], 4 [Assistant Commissioner or Deputy Commissioner
]or Income-tax Officer, (the officer so authorised in all cases being hereinafter
referred to as the authorised officer) to—] (i) enter and search any 6 [building,
place, vessel, vehicle or aircraft] where he has reason to suspect that such books
of account, other documents, money, bullion, jewellery or other valuable article or
thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or
other receptacle for exercising the powers conferred by clause (i) where the keys
thereof are not available; 7 [(iia) search any person who has got out of, or is
about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the
authorised officer has reason to suspect that such person has secreted about his
person any such books of account, other documents, money, bullion, jewellery or
other valuable article or thing;] 8 [(iib) require any person who is found to be in
possession or control of any books of account or other documents maintained in
the form of electronic record as defined in clause (t) of sub-section (1) of section
2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised
officer the necessary facility to inspect such books of account or other
documents;] (iii) seize any such books of account, other documents, money,
bullion, jewellery or other valuable article or thing found as a result of such
search: 9 [Provided that bullion, jewellery or other valuable article or thing, being
stock-in-trade of the business, found as a result of such search shall not be
seized but the authorised officer shall make a note or inventory of such stock-in-
trade of the business;] (iv) place marks of identification on any books of account
or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other
valuable article or thing:
[Provided that where any building, place, vessel, vehicle or aircraft referred to in
clause (i) is within the area of jurisdiction of any 2 [Principal Chief Commissioner
or Chief Commissioner] or 3 [Principal Commissioner or Commissioner], but such
2 [Principal Chief Commissioner or Chief Commissioner] or 3 [Principal
Commissioner or Commissioner] has no jurisdiction over the person referred to in
clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in
4 [section 120], it shall be competent for him to exercise the powers under this
sub-section in all cases where he has reason to believe that any delay in getting
the authorisation from the 5 [Principal Chief Commissioner or Chief
Commissioner] or 6 [Principal Commissioner or Commissioner] having
jurisdiction over such person may be prejudicial to the interests of the revenue:] 7
[Provided further that where it is not possible or practicable to take physical
possession of any valuable article or thing and remove it to a safe place due to
its volume, weight or other physical characteristics or due to its being of a
dangerous nature, the authorised officer may serve an order on the owner or the
person who is in immediate possession or control thereof that he shall not
remove, part with or otherwise deal with it, except with the previous permission of
such authorised officer and such action of the authorised officer shall be deemed
to be seizure of such valuable article or thing under clause (iii):] 8 [Provided also
that nothing contained in the second proviso shall apply in case of any valuable
article or thing, being stock-in-trade of the business:] 9 [Provided also that no
authorisation shall be issued by the Additional Director or Additional
Commissioner or Joint Director or Joint Commissioner on or after the 1st day of
October, 2009 unless he has been empowered by the Board to do so.]
10[Explanation.—For the removal of doubts, it is hereby declared that the reason
to believe, as recorded by the income-tax authority under this sub-section, shall
not be disclosed to any person or any authority or the Appellate Tribunal.]
(1A) Where any 5 [Principal Chief Commissioner or Chief Commissioner] or 6
[Principal Commissioner or Commissioner], in consequence of information in his
possession, has reason to suspect that any books of account, other documents,
money, bullion, jewellery or other valuable article or thing in respect of which an
officer has been authorised by the 12[Principal Director General or Director
General] or 13[Principal Director or Director] or any other 5 [Principal Chief
Commissioner or Chief Commissioner] or 6 [Principal Commissioner or
Commissioner] or 14[Additional Director or Additional Commissioner] or Joint
Director or Joint Commissioner] to take action under clauses (i) to (v) of sub-
section (1) are or is kept in any building, place, vessel, vehicle or aircraft not
mentioned in the authorisation under sub-section (1), such 2 [Principal Chief
Commissioner or Chief Commissioner] or 3 [Principal Commissioner or
Commissioner] may, notwithstanding anything contained in 4 [section 120],
authorise the said officer to take action under any of the clauses aforesaid in
respect of such building, place, vessel, vehicle or aircraft.] 5 [Explanation.—For
the removal of doubts, it is hereby declared that the reason to suspect, as
recorded by the income-tax authority under this sub-section, shall not be
disclosed to any person or any authority or the Appellate Tribunal.
(2) The authorised officer may requisition the services of any police officer or of any
officer of the Central Government, or of both, to assist him for all or any of the
purposes specified in sub-section (1) 6 [or sub-section (1A)] and it shall be the
duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such books of
account, other documents, money, bullion, jewellery or other valuable article or
thing, 7 [for reasons other than those mentioned in the second proviso to sub-
section (1),] serve an order on the owner or the person who is in immediate
possession or control thereof that he shall not remove, part with or otherwise
deal with it except with the previous permission of such officer and such officer
may take such steps as may be necessary for ensuring compliance with this sub-
section.
- Explanation.—For the removal of doubts, it is hereby declared that
serving of an order as aforesaid under this sub-section shall not be
deemed to be seizure of such books of account, other documents,
money, bullion, jewellery or other valuable article or thing under clause
(iii) of sub-section (1).
(4) The authorised officer may, during the course of the search or seizure, examine
on oath any person who is found to be in possession or control of any books of
account, documents, money, bullion, jewellery or other valuable article or thing
and any statement made by such person during such examination may thereafter
be used in evidence in any proceeding under the Indian Income-tax Act, 1922
(11 of 1922), or under this Act.
- Explanation.—For the removal of doubts, it is hereby declared that the
examination of any person under this sub-section may be not merely in
respect of any books of account, other documents or assets found as a
result of the search, but also in respect of all matters relevant for the
purposes of any investigation connected with any proceeding under the
Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
(4A) Where any books of account, other documents, money, bullion, jewellery or
other valuable article or thing are or is found in the possession or control of any
person in the course of a search, it may be presumed
- (i) that such books of account, other documents, money, bullion, jewellery
or other valuable article or thing belong or belongs to such person;
- (ii) that the contents of such books of account and other documents are
true; and
- (iii) that the signature and every other part of such books of account and
other documents which purport to be in the handwriting of any particular
person or which may reasonably be assumed to have been signed by, or
to be in the handwriting of, any particular person, are in that person's
handwriting, and in the case of a document stamped, executed or
attested, that it was duly stamped and executed or attested by the person
by whom it purports to have been so executed or attested.]
(5) *
(6) *
(7) *
(8) The books of account or other documents seized under sub-section (1) 2 [or sub-
section (1A)] shall not be retained by the authorised officer for a period
exceeding 3 [thirty days from the date of the order of assessment under 4
[section 153A or clause (c) of section 158BC]] unless the reasons for retaining
the same are recorded by him in writing and the approval of the 5 [ 6 [Principal
Chief Commissioner or Chief Commissioner], 7 [Principal Commissioner or
Commissioner], 8 [Principal Director General or Director General] or 9 [Principal
Director or Director]] for such retention is obtained: Provided that the 5 [ 6
[Principal Chief Commissioner or Chief Commissioner], 7 [Principal
Commissioner or Commissioner], 8 [Principal Director General or Director
General] or 9 [Principal Director or Director]] shall not authorise the retention of
the books of account and other documents for a period exceeding thirty days
after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or
this Act in respect of the years for which the books of account or other
documents are relevant are completed.
(8A) An order under sub-section (3) shall not be in force for a period exceeding
sixty days from the date of the order.
(9) The person from whose custody any books of account or other documents are
seized under sub-section (1) 2 [or sub-section (1A)] may make copies thereof, or
take extracts therefrom, in the presence of the authorised officer or any other
person empowered by him in this behalf, at such place and time as the
authorised officer may appoint in this behalf.
(9A) Where the authorised officer has no jurisdiction over the person referred to
in clause (a) or clause (b) or clause (c) of sub-section (1), the books of account
or other documents, or any money, bullion, jewellery or other valuable article or
thing (hereafter in this section and in sections 132A and 132B referred to as the
assets) seized under that sub-section shall be handed over by the authorised
officer to the Assessing Officer having jurisdiction over such person within a
period of sixty days from the date on which the last of the authorisations for
search was executed and thereupon the powers exercisable by the authorised
officer under sub-section (8) or sub-section (9) shall be exercisable by such
Assessing Officer.
(9B) Where, during the course of the search or seizure or within a period of sixty
days from the date on which the last of the authorisations for search was
executed, the authorised officer, for reasons to be recorded in writing, is satisfied
that for the purpose of protecting the interest of revenue, it is necessary so to do,
he may with the previous approval of the Principal Director General or Director
General or the Principal Director or Director, by order in writing, attach
provisionally any property belonging to the assessee, and for the said purpose,
the provisions of the Second Schedule shall, mutatis mutandis, apply.
 (9C) Every provisional attachment made under sub-section (9B) shall cease to
have effect after the expiry of a period of six months from the date of the order
referred to in sub-section (9B).
(9D) The authorised officer may, during the course of the search or seizure or
within a period of sixty days from the date on which the last of the authorisations
for search was executed, make a reference to a Valuation Officer referred to in
section 142A, who shall estimate the fair market value of the property in the
manner provided under that section and submit a report of the estimate to the
said officer within a period of sixty days from the date of receipt of such reference
(10) If a person legally entitled to the books of account or other documents
seized under sub-section (1) 1 [or sub-section (1A)] objects for any reason to the
approval given by the 2 [ 3 [Principal Chief Commissioner or Chief
Commissioner], 4 [Principal Commissioner or Commissioner], 5 [Principal
Director General or Director General] or 6 [Principal Director or Director]] under
sub-section (8), he may make an application to the Board stating therein the
reasons for such objection and requesting for the return of the books of account
or other documents 7 [and the Board may, after giving the applicant an
opportunity of being heard, pass such orders as it thinks fit].
(11) *
(12) *
(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974),
relating to searches and seizure shall apply, so far as may be, to searches and
seizure under sub-section (1) or sub-section (1A).
(14) The Board may make rules in relation to any search or seizure under this
section; in particular, and without prejudice to the generality of the foregoing
power, such rules may provide for the procedure to be followed by the authorised
officer— (i) for obtaining ingress into 10[any building, place, vessel, vehicle or
aircraft] to be searched where free ingress thereto is not available; (ii) for
ensuring safe custody of any books of account or other documents or assets
seized.
- Explanation 1.—For the purposes of subsections (9A), (9B) and (9D), with
respect to “execution of an authorisation for search”, the provisions of
sub-section (2) of section 153B shall apply
- Explanation 2.—In this section, the word “proceeding” means any
proceeding in respect of any year, whether under the Indian Income-tax
Act, 1922 (11 of 1922), or this Act, which may be pending on the date on
which a search is authorised under this section or which may have been
completed on or before such date and includes also all proceedings
under this Act which may be commenced after such date in respect of
any year.
12. I genuinely can't do this anymore. What even is this subject 😭😭😭😭😭