Incomes which are charged to tax in the previous year itself viz:
o Income of a person leaving India [Section 174]
o Income of a person likely to transfer property to avoid tax [Section 175]
o Income of discontinued business or profession [Section 176]
o Income from shipping business of non-residents [Section 172]
o Income of bodies formed for short duration [Section 174A]
Generally, income of previous year is taxed (i.e., assessable) in the immediately following assessment year. However, in following cases, income of previous year is taxed in the previous year itself :
(1) Income of a person leaving India [Section 174]
If following conditions are satisfied, then income of a person leaving India is charged to tax in the previous year itself:
It appears to the Assessing Officer that any individual may leave India during the current assessment year or shortly after its expiry.
Such a person has no present intention of returning to India.
In above cases, the total income of such an individual upto the probable date of his departure from India shall be charged to tax in that assessment year.
Example
Mr. Francis is a foreign citizen. He has been residing in India since January, 2000. At the time of making his assessment for the assessment year 2012-13 (in January 2013), the Assessing Officer came to know that Mr. Francis is going to leave India on 8-4-2013. In this case, at the time of completing assessment for the previous year 2011-12 (i.e., assessment year 2012-13), the Assessing Officer will make following three assessments :
The assessment of the income of the previous year 2011-12.
The assessment of the income of the previous year 2012-13.
The assessment of the income of the period 1-4-2013 to 8-4-2013.
(2) Income of a person likely to transfer property to avoid tax [Section 175]
If following conditions are satisfied, then income of a person transferring his assets is charged to tax in previous year itself:
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.
The intention of such sale, transfer, etc, is with a view to avoid payment of any liability under the provisions of the Act.
In above cases, 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 section 175 shall be chargeable to tax in that assessment year.
Example
In November 2012, while making the assessment of income of Mr. Kumar for the assessment year 2012-13, i.e., previous year 2011-12, the Assessing Officer came to know that Mr. Kumar is transferring his building with an intention to avoid payment of Income-tax liability. Considering the intention of Mr. Kumar, the Assessing Officer issued notice (in November, 2012) to Mr. Kumar to furnish his return of income for the period April, 2012 to November, 2012.
In the above case, it can be observed that income of the period April, 2012 to November, 2012 is covered in the previous year 2012-13, i.e., assessment year 2013-14 and it can be charged to tax in assessment year 2013-14 only. However, by invoking the provisions of section 175, the Assessing Officer can assess the income for the period of April, 2012 to November, 2012 in the assessment year 2012-13 itself.
(3) Income of discontinued business or profession [Section 176]
In addition to above instances, income of a discontinued business or profession can be charged to tax in the previous year itself. In other words, if a business or profession is discontinued during a year, then the income from the first day of the assessment year till the date of discontinuation can be charged to tax by the Assessing Officer in the assessment year in which the business is discontinued or in the immediately following assessment year.
Example
Mr. Kumar was running a textile factory. He discontinued his business on 25-2-2013. In this case the Assessing Officer has two options :
To tax the income of the period 1-4-2012 to 25-2-2013 in assessment year 2012-13, i.e., the assessment year in which business is discontinued.
To tax the income of the period 1-4-2012 to 25-2-2013 in assessment year 2013-14.
(4) Income from shipping business of non-residents [Section 172]
If following conditions are satisfied, then income of a non-resident is charged to tax in previous year itself:
The assessee is a non-resident.
He owns a ship or a ship is chartered by him.
The ship carries passengers, livestock, mail or goods shipped at a port in India.
In the above cases, 7.5% of the amount paid or payable on account of such carriage to the non-resident shall be deemed to be income accruing in India to the non-resident and tax on such income is payable at the rates applicable to a foreign company.
(5) Income of bodies formed for short duration [Section 174A]
If the following conditions are satisfied, then income of bodies formed for short duration is charged to tax in previous year itself:
It appears to the Assessing Officer that any association of persons or a body of individuals or an artificial juridical person has been formed or established or incorporated for a particular event or purpose.
Above entity is likely to be dissolved in the assessment year in which such an entity was formed or established or incorporated or immediately after such assessment year.
In above case, the total income of such entity for the period from the expiry of the previous year for that assessment year up to the date of its dissolution shall be chargeable to tax in that assessment year.
(6) General comment
It should be noted that in cases given in (1), (2), (4) and (5) it is mandatory to tax the income in the previous year itself. However, in case (3), i.e., income of discontinued business/profession, income can be charged to tax in the previous year itself or in the assessment year (at the discretion of the Assessing Officer). |
