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

Under the Income-tax Act, 2025, where an arrangement is declared an impermissible avoidance arrangement, which of the following is among the consequences the law expressly allows?

The Act allows the arrangement to be treated as if it had not been entered into or carried out. The consequences also include disregarding or recharacterising steps and reallocating income or deductions. Cancelling registration, winding up or automatic prosecution are not listed consequences.

  1. ATreating the arrangement as if it had not been entered into or carried outCorrect
  2. BCancelling the registration of the company under the Companies Act
  3. CCompulsory winding up of the accommodating party
  4. DAutomatic prosecution of every director for tax evasion

Explanation

Section 181(2)(b) lists treating the arrangement as if it had not been entered into or carried out among the consequences. The other options are not consequences listed in that section.

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