

In this article, we will understand
why section 94A was introduced and what was the need of invoking such
provisions under the Income Tax Act,1961.
Section 94A was introduced by
Finance Act, 2011 by the Central Government in order to notify certain
jurisdictions from which India has no such agreements or arrangements of
Sharing/ Exchanging Tax information of the assessee. Central Government has
been trying since long to bring back the Black money deposited by Indians in
Foreign Bank Accounts. The main reason behind introducing this section is to
Curb the circulation of unaccounted money and various international
transactions which takes place between Tax Havens and other tax oriented
countries. And where Tax information exchange system does not exist.
This section Empowers the Central Government
to Blacklist the countries where such effective agreement of sharing tax
information does not exist.
This provision acts as counter
measure to discourage the transactions between India and Notified Jurisdicted
Areas. Till date only Cyprus has been
notifed as NJA by Central Government which was rescinded in the year 2016Vide Notification
No. 114 dated 14/12/2016 and Notification No. 119 dated 16/12/2016. Therefore
in the current regime there is no such NJA exists.
Let us better under this provision
in the form of example
There were two brothers named Pushp Kumar Sahu resident of India and
another one is Uday Kumar Sahu who
is a resident of Country X which is notified by Indian Government as Notified
Jurisdicted Area, Mr. Uday and Mr. Pushp has been entered into a transaction in
the nature of lending or borrowing of money , then after entering into such
transaction both the parties will be deemed to be an “Associated Enterprises”(
within the meaning of section 92A)by virtue of section 94A(2).
There would be a liability in the
hands of Mr. Pushp kumar sahu in respect of any sum received or credited from Mr. Uday in any previous year, then Mr.
Pushp has to offer the explanation about source of the said sum, if he fails to
explain the same, then such sum credited in his account would be deemed to be
his income and accordingly tax will charged on such income.
Under the same situation Mr. Pushp
has also made payment to Mr. Uday ( Resident of NJA) then there is a liability
of Mr. Pushp to deduct tax on such sum credited to the account of Mr. Uday at
the highest of the following rates, namely;
1). At the rate or rates in force;
2). At the rate specified in the
relevant provisions of this act;
3). At the rate of 30%.
Happy Readings
(Pushp Kumar Sahu)
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Wouldn't it be a good idea to create a course?