Section 98 - Consequences of impermissible avoidance arrangement. - Income-tax Act, 1961

1 [****] 3 [****] 4 [ 98. Consequences of impermissible avoidance arrangement. (1) If an arrangement is declared to be an impermissible avoidance arrangement, then, the consequences, in relation to tax, of the arrangement, including denial of tax benefit or a benefit under a tax treaty, shall be determined, in such manner as is deemed appropriate, in the circumstances of the case, including by way of but not limited to the following, namely: (a) disregarding, combining or recharacterising any step in, or a part or whole of, the impermissible avoidance arrangement; (b) treating the impermissible avoidance arrangement as if it had not been entered into or carried out; (c) disregarding any accommodating party or treating any accommodating party and any other party as one and the same person; (d) deeming persons who are connected persons in relation to each other to be one and the same person for the purposes of determining tax treatment of any amount; (e) reallocating amongst the parties to the arrangement (i) any accrual, or receipt, of a capital nature or revenue nature; or (ii) any expenditure, deduction, relief or rebate; (f) treating (i) the place of residence of any party to the arrangement; or (ii) the situs of an asset or of a transaction, at a place other than the place of residence, location of the asset or location of the transaction as provided under the arrangement; or (g) considering or looking through any arrangement by disregarding any corporate structure. (2) For the purposes of sub-section (1), (i) any equity may be treated as debt or vice versa; (ii) any accrual, or receipt, of a capital nature may be treated as of revenue nature or vice versa; or (iii) any expenditure, deduction, relief or rebate may be recharacterised. ] *************** NOTES:- 1. Omitted vide Section 29 of the Finance Act 1965 w.e.f. 01-04-1965 before it was read as, Avoidance of super-tax 98. Without prejudice to the generality of the provisions of section 96, the Explanation to sub-section (1) of section 94, sub-sections (2), (3) and (6) of that section and section 270 shall apply in relation to super-tax as they apply in relation to income-tax, with the modification that references therein to income-tax shall be construed as references to super-tax. 2. Inserted vide Section 41 of the Finance Act 2012 w.e.f. 01-04-2014 3. Omitted vide Section 25 of the Finance Act, 2013 w.e.f. 01-04-2014 before it was read as, 2 [98. Consequence of impermissible avoidance arrangement. (1) If an arrangement is declared to be an impermissible avoidance arrangement, then the consequences, in relation to tax, of the arrangement, including denial of tax benefit or a benefit under a tax treaty, shall be determined, in such manner as is deemed appropriate, in the circumstances of the case, including by way of but not limited to the following, namely: (a) disregarding, combining or recharacterising any step in, or a part or whole of, the impermissible avoidance arrangement; (b) treating the impermissible avoidance arrangement as if it had not been entered into or carried out; (c) disregarding any accommodating party or treating any accommodating party and any other party as one and the same person; (d) deeming persons who are connected persons in relation to each other to be one and the same person for the purposes of determining tax treatment of any amount; (e) reallocating amongst the parties to the arrangement (i) any accrual, or receipt, of a capital or revenue nature; or (ii) any expenditure, deduction, relief or rebate; (f) treating (i) the place of residence of any party to the arrangement; or (ii) the situs of an asset or of a transaction, at a place other than the place of residence, location of the asset or location of the transaction as provided under the arrangement; or (g) considering or looking through any arrangement by disregarding any corporate structure. (2) For the purposes of sub-section (1), (i) any equity may be treated as debt or vice versa; (ii) any accrual, or receipt, of a capital nature may be treated as of revenue nature or vice versa; or (iii) any expenditure, deduction, relief or rebate may be recharacterised. ] 4. Inserted vide Section 26 of the Finance Act, 2013 w.e.f. 01-04-2016