Section 96 of income tax act

• • Short title and commencement • Definitions • Tax to be levied • Computation and rate of tax • Taxable income and classification of income headings • Assessable income • Computation of income from business • Computation of income earned from employment • Computation of income earned from investment • Exemptible amounts • Professional exemptions and facilities: • Donation, gift given to organizations entitled to tax exemption: • General deduction: • Interest deduction: • Allowances for cost of stock-in-trade: • Repair and maintenance expenses: • Pollution control expenses: • Research and development expenses: • Depreciation deduction expenses: • Loss from business or investment: • Expenses that may not be deducted: • Method of tax accounting: • Cash basis accounting: • Accrual basis accounting: • Reverse of the amounts including bad debts: • Method of deriving the average of the amounts includible and deductible under a long-term contract: • Quantification of amounts: • Conversion in money: • Indirect payments: • Investment under joint ownership: • Characterization of payment for compensation: • Characterization of payment under annuities, installment sale and financial lease: • Price transferring and other arrangements between associated persons: • Division of income: • General rule against tax avoidance: • Net profits from property and liability: • Profit and loss made from property and liability: • Expenses and net expenses for property and liability: • Income and net...

Introduction: The Partnership Act (Ontario) and Private Law Rules Under section 2 of the Partnership Act (Ontario), a partnership is defined as the relationship that coexists "between persons carrying on a business in common with a view to profit". Section 3 of the Partnership Act (Ontario) sets out the rules for determining whether (or not) a partnership exists: • The existence of "joint tenancy, tenancy in common, joint property, common property, or part ownership" does not create a partnership, regardless of whether (or not) the tenants or owners of the relevant property, share (or do not share) profit made by the use of that property; • The "sharing of gross returns" does not in itself create a partnership regardless of whether (or not) the persons sharing such returns have (or have not) a joint or common right or interest in any property from which or from the use of which the returns are derived; • In the absence of evidence to the contrary, a person's receipt of a share of the profits of a business is proof that the person is a partner in the business. However, the receipt of such profit, share or payment, does not of itself make the person a partner in the business. In particular: • • A person's receipt of debt or instalment payments out of profit accruing from a business does not make the person a partner of the business, nor does it make the person liable as such; • A contract for renumeration of a servant, agent or a person engaged in a business by way of shared...

Amended and updated notes on section 96 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to impermissible avoidance arrangement. Recently, we have discussed in detail In this article, you will learn detail of the provisions of section 96 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India. Table of Contents • • • Section-96: Impermissible avoidance arrangement Section 96(1) of Income Tax Act An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it— • (a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm’s length; • (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; • (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or • (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. Section 96(2) of Income Tax Act An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrange...

CA Ahmad Faraz* General Anti Avoidance Rules (GAAR) Subordination of legality to transactional reality 1. Introduction: Tax payers want to reduce their tax liability through various means available to them. It may take the form of tax planning, aggressive tax planning or tax avoidance. There has always been a tussle between taxing authorities and tax payers when there is aggressive tax planning or tax avoidance. Over the years, the legislature has introduced several Specific Anti Avoidance Rules (SAAR) to plug known tax avoidance techniques. • Section 40A(2) was introduced to stop claim of inflated expenditures by means of payment to relatives. • Section 2(22)(e) was introduced to tax payments disguised in the form of loans or advances by a specified company to related entities. • Chapter of Transfer Pricing was introduced to prevent shifting of taxable profits between associated entities from one tax jurisdiction to another. • Section 94B was introduced in line with BEPS Action Plan 4 to limit interest deduction between associated enterprises. • Section 56(2)(x) was introduced to tax transfer of specified assets between unrelated entities without adequate consideration. • Section 94(8) was introduced to curb the technique of bonus stripping for reducing capital gains. However, tax payers are proficient enough in planning their financial affair by devising new techniques to reduce tax liability, which are though legal, but hard to accept for the tax department. Thus, where...

Description (1) An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it- (a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm's length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. (2) An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole arrangement is not to obtain a tax benefit. Click here to read more from the

Introduction: The Partnership Act (Ontario) and Private Law Rules Under section 2 of the Partnership Act (Ontario), a partnership is defined as the relationship that coexists "between persons carrying on a business in common with a view to profit". Section 3 of the Partnership Act (Ontario) sets out the rules for determining whether (or not) a partnership exists: • The existence of "joint tenancy, tenancy in common, joint property, common property, or part ownership" does not create a partnership, regardless of whether (or not) the tenants or owners of the relevant property, share (or do not share) profit made by the use of that property; • The "sharing of gross returns" does not in itself create a partnership regardless of whether (or not) the persons sharing such returns have (or have not) a joint or common right or interest in any property from which or from the use of which the returns are derived; • In the absence of evidence to the contrary, a person's receipt of a share of the profits of a business is proof that the person is a partner in the business. However, the receipt of such profit, share or payment, does not of itself make the person a partner in the business. In particular: • • A person's receipt of debt or instalment payments out of profit accruing from a business does not make the person a partner of the business, nor does it make the person liable as such; • A contract for renumeration of a servant, agent or a person engaged in a business by way of shared...

• • Short title and commencement • Definitions • Tax to be levied • Computation and rate of tax • Taxable income and classification of income headings • Assessable income • Computation of income from business • Computation of income earned from employment • Computation of income earned from investment • Exemptible amounts • Professional exemptions and facilities: • Donation, gift given to organizations entitled to tax exemption: • General deduction: • Interest deduction: • Allowances for cost of stock-in-trade: • Repair and maintenance expenses: • Pollution control expenses: • Research and development expenses: • Depreciation deduction expenses: • Loss from business or investment: • Expenses that may not be deducted: • Method of tax accounting: • Cash basis accounting: • Accrual basis accounting: • Reverse of the amounts including bad debts: • Method of deriving the average of the amounts includible and deductible under a long-term contract: • Quantification of amounts: • Conversion in money: • Indirect payments: • Investment under joint ownership: • Characterization of payment for compensation: • Characterization of payment under annuities, installment sale and financial lease: • Price transferring and other arrangements between associated persons: • Division of income: • General rule against tax avoidance: • Net profits from property and liability: • Profit and loss made from property and liability: • Expenses and net expenses for property and liability: • Income and net...

Description (1) An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it- (a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm's length; (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. (2) An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole arrangement is not to obtain a tax benefit. Click here to read more from the

Amended and updated notes on section 96 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to impermissible avoidance arrangement. Recently, we have discussed in detail In this article, you will learn detail of the provisions of section 96 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India. Table of Contents • • • Section-96: Impermissible avoidance arrangement Section 96(1) of Income Tax Act An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it— • (a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm’s length; • (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act; • (c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or • (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. Section 96(2) of Income Tax Act An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrange...

CA Ahmad Faraz* General Anti Avoidance Rules (GAAR) Subordination of legality to transactional reality 1. Introduction: Tax payers want to reduce their tax liability through various means available to them. It may take the form of tax planning, aggressive tax planning or tax avoidance. There has always been a tussle between taxing authorities and tax payers when there is aggressive tax planning or tax avoidance. Over the years, the legislature has introduced several Specific Anti Avoidance Rules (SAAR) to plug known tax avoidance techniques. • Section 40A(2) was introduced to stop claim of inflated expenditures by means of payment to relatives. • Section 2(22)(e) was introduced to tax payments disguised in the form of loans or advances by a specified company to related entities. • Chapter of Transfer Pricing was introduced to prevent shifting of taxable profits between associated entities from one tax jurisdiction to another. • Section 94B was introduced in line with BEPS Action Plan 4 to limit interest deduction between associated enterprises. • Section 56(2)(x) was introduced to tax transfer of specified assets between unrelated entities without adequate consideration. • Section 94(8) was introduced to curb the technique of bonus stripping for reducing capital gains. However, tax payers are proficient enough in planning their financial affair by devising new techniques to reduce tax liability, which are though legal, but hard to accept for the tax department. Thus, where...