Income is Taxed in the same Year in which it is Earned-

As a normal rule, the income earned during any previous year is assessed or charged to tax in the immediately succeeding assessment year. However, in the following circumstances the income is taxed in the same year in which it is earned. Therefore, the assessment year and the previous year in these exceptional circumstances will be the same. These exceptions have been provided to safeguard the collection of taxes so that assessees, who may not be traceable later on, are not allowed to escape the payment of the taxes. The exceptions are as follows:

1. Shipping business of non-residents [Section 172]
2. Assessment of persons leaving India [Section 174]
3. Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose [Section 174A]
4. Assessment of persons likely to transfer property to avoid tax [Section 175]
5. Discontinued business [Section 176]

1. Non-Resident Shipping Business ( Section 172)

Section 172 is a self-contained code for the levy and recovery of the tax, ship-wise, and journey-wise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship.

The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172.

Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to (j) of subsection (1) to any “resident” (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any “resident”. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections.

There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterer for carriage of passengers, etc., shipped at a port in India. Since, the agent acts on behalf of the nonresident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply.

2. In cases of persons leaving India [Section-174]

In case I.T.O. has the reasons to believe that an individual will leave India with no intention to return during the current assessment year, the total income of such individual for the period between the expiry of last previous year and till the date of his departure, will be taxable in the current assessment year.

3. Assessment of any association of persons, body of individuals or Artificial Juridical person formed or established only for a limited period [Section-174A]

In case an Assessing Officer finds that any association of persons, body of individuals or Artificial Juridical person has been formed or established only for a limited period or for a particular event and it is likely to be dissolved or discontinued in the same year after the accomplishment of such event or purpose, the assessment of such person can be made in same year.

4. In case of persons who are likely to transfer their assets to avoid tax [Section-175]

If it appears to the I.T.O. that any person is likely to sell, transfer, dispose of or to part with any of his assets with the intention to avoid payment of any tax liability, he may commence proceeding to assess the income for the period between the expiry of last previous year and the date of commencement of such proceedings.

5. In case of discontinued business [Section-176]