Chapter VI
General rules relating to computation
Provisions for avoiding double taxation or double deduction
6.1 In line with international best practices and the principles laid down by the courts, the following rules for avoiding double taxation or double deduction will be adopted :—
(a) An income which is included in the total income of any financial year shall not be included in the total income of any succeeding financial year.
(b) An income which is included in the total income of any person shall not be included in the total income of any other person, unless otherwise provided.
(c) Any amount which has been allowed as a deduction under any provision of the Code shall not be allowed as a deduction under any other provision of the Code.
(d) any amount which has been allowed as a deduction in any preceding financial year shall not be allowed as a deduction under any provision of this Code in the financial year.
Certain expenditure not to be allowed
6.2 Under the Code, the following expenditure will not be allowed as a deduction in the computation of total income :—
(a) any expenditure attributable to income which does not form part of the total income under this Code and determined in accordance with the method as may be prescribed ;
(b) any expenditure incurred for any purpose which is an offence or which is prohibited by law ;
(c) any provision made by a person for any liability if the liability remains unascertained by the end of the financial year ; and
(d) any expenditure where the source of funds for such expenditure is unexplained ;
(e) any expenditure incurred by a non-resident in respect of,—
(i) royalty ;
(ii) fees for technical services ; or
(iii) any income which is liable to tax at the special rate of income-tax specified in Part II of the First Schedule.
Disallowance of payments in respect of which tax has not been deducted at source
6.3 Under the Code, no deduction shall be allowed for any payment in respect of which the assessee has failed to deduct tax at source in accordance with the provisions of the Code or having deducted such taxes has failed to pay the same to the Government within the specified time. However, as a general rule, an assessee will be allowed deduction in the year in which the payment is made to the Government. This general rule is subject to the following exceptions :
(i) if the tax has been deducted during the last quarter of the financial year and paid before the due date of filing of tax return for that financial year, the deduction will be allowed in the financial year ; and
(ii) if the payment is made more than two years after the end of the financial year in which the tax was deductible at source, no deduction shall be allowed to the assessee.
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