A financial year has a double role to play: it is a previous year as well as an assessment year. Explain. Define Previous year as per section 3 of Income Tax Act, 1961. Enumerate the cases when income of previous year is not taxable in the immediately following assessment year. What will be the relevant previous year to the AY 2020-21, if the new business is established on 28.03.2018? What will be the answer if the new business is set up on 28.03.2019?
Answers
Answer:
Chaap lo
Explanation:
In Income-tax Act, 1961 is “Assessment Year” defined in Section 2(9) as: “Assessment Year” means the period of twelve months commencing on the 1st day of April every year.
“Previous Year” is defined in Section 3 of the Income-tax Act, 1961 to mean “for the purpose of this Act, “previous year” means the financial year immediately preceeding the assessment year.
There is no difference in the period of Assessment Year & Previous Year since both are financial year/Income Year for accounting purpose.
As a general rule, the income earned in the previous year is taxed only in the assessment year but in the following cases, the income earned is taxed in the same year in which it is earned or received. Such exceptions to the general rule are given in Sections 172 and 174 to 176.
Income of Non-Residents from Shipping Business (Sec. 172):
Where a ship is owned or chartered by a non-resident and is used for carrying passengers, livestock, mail, or goods shipped at a port in India, his income from such business shall be taxed in the year in which it is earned.
Income of Persons leaving India (Sec. 174):
When it appears to the assessing officer that an individual may leave India during the cur¬rent financial year or shortly after its expiry, and that he has no present intention of returning to India, he shall assess the total income of such an individual for the period from the expiry of the previous year relevant to the assessment year to probable date of Ins departure from India, in the same year.
Association or bodies formed for short duration (Sec. 174A):
When an association of persons or body of individuals or an artificial juridical person formed, established or incorporated for a particular event or purpose and it appears to the Assessing Officer that such association or body of individual or artificial juridical person is likely to be dissolved in the same assessment year or shortly after that, the total income of such association/body/juridical person for the period from the expiry
Person trying to alienate his assets with a view to avoid tax (Sec. 175):
If, in the opinion of the Assessing Officer, an assessee is likely to transfer, charge, sell, dispose off, or otherwise part with any of his assets with an intention to avoid his tax liability, the total income of such a person from the close of the relevant previous year to the date of initiating a proceeding under this section shall be chargeable to tax in the same assessment year.
The previous year of the business will be 2019-20. ( for both the cases)
ANSWER
Income-tax Act, 1961 is “AssessmentYear” defined in Section 2(9) as: “Assessment Year” means the period oftwelve months commencing on the 1st day of April every year.
“Previous Year” is defined inSection 3 of the Income-tax Act, 1961 to mean “for the purpose of this Act,“previous year” means the financial year immediately preceeding the assessmentyear.
There is no difference in theperiod of Assessment Year & Previous Year since both are financialyear/Income Year for accounting purpose.
As a general rule, the incomeearned in the previous year is taxed only in the assessment year but in thefollowing cases, the income earned is taxed in the same year in which it is earnedor received. Such exceptions to the general rule are given in Sections 172 and174 to 176.
Income of Non-Residents fromShipping Business (Sec. 172):
Where a ship is owned orchartered by a non-resident and is used for carrying passengers, livestock,mail, or goods shipped at a port in India, his income from such business shallbe taxed in the year in which it is earned.
Income of Persons leavingIndia (Sec. 174):
When it appears to theassessing officer that an individual may leave India during the cur�rentfinancial year or shortly after its expiry, and that he has no presentintention of returning to India, he shall assess the total income of such anindividual for the period from the expiry of the previous year relevant to theassessment year to probable date of Ins departure from India, in the same year.
Association or bodies formedfor short duration (Sec. 174A):
When an association ofpersons or body of individuals or an artificial juridical person formed,established or incorporated for a particular event or purpose and it appears tothe Assessing Officer that such association or body of individual or artificialjuridical person is likely to be dissolved in the same assessment year orshortly after that, the total income of such association/body/juridical personfor the period from the expiry
Person trying to alienate hisassets with a view to avoid tax (Sec. 175):
If, in the opinion of theAssessing Officer, an assessee is likely to transfer, charge, sell, disposeoff, or otherwise part with any of his assets with an intention to avoid histax liability, the total income of such a person from the close of the relevantprevious year to the date of initiating a proceeding under this section shallbe chargeable to tax in the same assessment year.
The previous year of thebusiness will be 2019-20.