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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Corporate Tax Planning

Under the Income-tax Act, 2025, if an arrangement is declared to be an impermissible avoidance arrangement, which of the following is a permitted consequence?

One permitted consequence is treating the impermissible avoidance arrangement as if it had not been entered into or carried out. Section 181 deals with tax consequences such as disregarding steps or reallocating amounts, not company deregistration, bans on future arrangements, or automatic prosecution.

  1. ATreating the arrangement as if it had not been entered into or carried outCorrect
  2. BCancelling the registration of the company under company law
  3. CRestricting the assessee from entering into any future arrangement
  4. DConverting the tax proceeding into a criminal prosecution automatically

Explanation

Section 181(2) lists consequences including disregarding, combining or recharacterising steps, and treating the arrangement as if it had not been entered into or carried out. The other options are not among the listed consequences, which concern the tax treatment of the arrangement.

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