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CA Final · Direct Tax Laws & International Taxation · Provisions to Counteract Unethical Tax Practices

An Indian concern kept the Rule 235(3) documents relating to an indirect transfer that occurred in the tax year 2026-27. It asks until when it must keep and maintain them, and also what happens if a designated Indian concern of the group fails to furnish the information per Rule 235. Which statement is correct under the Income-tax Rules, 2026?

Records must be maintained for eight years from the end of the relevant tax year. If the designated Indian concern fails to furnish the information in accordance with Rule 235, the designation provision has no effect, so the group-level relief is lost.

  1. ADocuments are kept for eight years from the end of the relevant tax year; if the designated concern fails to furnish properly, the group-designation relief has no effectCorrect
  2. BDocuments are kept for six years; failure by the designated concern has no consequence for other concerns
  3. CDocuments are kept for eight years; failure by the designated concern is automatically cured by the Director General (Systems)
  4. DDocuments are kept for ten years from the date of transfer; designation is irrelevant

Explanation

Rule 235(7) fixes eight years from the end of the relevant tax year. Rule 235(5) says that nothing in the rule has effect if the designated Indian concern fails to furnish in accordance with the rule, so the designation benefit fails. Other options misstate the period or the consequence.

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