CA Final · Direct Tax Laws & International Taxation · Provisions to Counteract Unethical Tax Practices
Kaveri Industries Ltd is the designated Indian concern for its group, which has three Indian constituent entities. The group conveyed the designation in writing to the Assessing Officer. Kaveri fails to furnish Form No. 163 in accordance with Rule 235 for a covered transfer. What is the effect under Rule 235(4) and (5)?
If the designated Indian concern fails to furnish the information as the rule requires, the rule's allowance for one concern to furnish on behalf of the group does not operate. The group cannot rely on the designation, so the other Indian concerns are not treated as having complied.
- AThe other two Indian concerns are treated as having complied since the group designated one entity
- BThe designation has no effect, so the provision allowing one concern to furnish information for the group does not operateCorrect
- COnly Kaveri is liable, and the other concerns are entirely released from any obligation
- DThe information can then be furnished by the Director General of Income-tax (Systems) on behalf of the group
Explanation
Rule 235(4) lets one designated Indian concern furnish information for all group concerns if the group designated it and conveyed this in writing to the Assessing Officer. Rule 235(5) says that nothing in the rule has effect if the designated concern fails to furnish the information properly. So the designation relief fails, and the other concerns cannot rely on Kaveri's filing. Option one wrongly assumes designation alone is enough.
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