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CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Return of Companies

A registered non-profit organisation is dissolved and fails to transfer all its assets to another registered non-profit organisation within twelve months from the end of the month of dissolution. Assets were transferred to a person X, who holds them. Which statement is correct under section 352 of the Income-tax Act, 2025?

The transferee is deemed an assessee in default for tax on accreted income in the dissolution case, but his liability is capped at what the asset he received can meet. He is not exempt, and he is not liable without limit.

  1. AX is deemed an assessee in default, with liability limited to the extent the asset received can meet the liabilityCorrect
  2. BX is wholly exempt because only the trustee is liable
  3. CX is liable for the entire tax regardless of the value of the asset received
  4. DX is liable only if the trust has also preferred an appeal

Explanation

For Sl. No. 9, section 352(7)(b) deems the transferee of an asset forming part of the accreted income computation to be an assessee in default. Section 352(8) limits the transferee's liability to the extent the asset received is capable of meeting the liability. So the unlimited-liability and exemption options are wrong.

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