Income Tax Act 1961 Assessment Year: The period of twelve months starting from April 1 of every year

and ending on March 31 of the next year. Previous Year: Income earned in a year (Previous year) is taxable in the next year (Assessment Year). Income earned during the previous year (PY) 2011-12 is taxable in the Assessment year (AY) 2012-13. From the AY 1989-90 onwards, all assesses are required to follow the financial year April 1 to March 31 as previous year for all sources of income. PY in case of Newly set-up Business/Profession: From the date of setting up/ new source of income comes into existence to March 31 which is 12 months or less. In the subsequent previous year it is April 1 to March 31. i.e.; 12 months. Exceptions: To ensure smooth collection of Income Tax from these tax payers who many not be traceable if the tax assessment procedure is postponed till the commencement of the normal assessment. Shipping Business of Non residents (Section 172): Condition 1 There is a non-resident Condition 2 He owns a ship or ship is chartered by the non-resident Condition 3 The ship carries passengers, livestock, mail or goods at a port in India. Condition 4 The non-resident may (or may not) have an agent/representative in India. If all the aforesaid conditions are satisfied, 7.5 percent of amount paid or payable on account of such carriage (including demurrage charge or handling charge or similar amount) to the non-resident shall be deemed to the income of the non-resident. The master of a ship shall submit a return of income before the departure of the ship. Return may be submitted within 30 days of the ship, if the Assessing officer is satisfied that submitting a return before departure and if the satisfactory arrangements for payment of tax has been made. Unless the tax has been paid (or satisfactory arrangements have been made for payment thereof), a port clearance shall not be granted by the collector of Customs. Tax is payable at the rate applicable to a foreign company in the same year it is collected. Persons leaving India (Section 174): It appears to the Assessing officer (AO) that an individual may leave India during the current AY or shortly thereafter. He has no present intention of returning to India. The total income of the individual up to the probable date of departure from India shall be chargeable to tax in the AY. Bodies formed for short duration (Section 174A): There is an association of persons (AOP) or a body of individuals (BOI) or an artificial judicial person (AJP), formed or established or incorporated for a particular event of purpose. It appears to the AO that the above mentioned association, body etc., is likely to be dissolved in the AY in which such AOP or BOI or AJP was formed or established or incorporated immediately after such AY.

The total income of such AOP or BOI or AJP for the period from the expiry of such PY for that AY up to the date of its dissolution shall be chargeable to tax in the AY. i.e., If a firm is formed on April 10, 2011 for the purpose of completing a contract and likely to be dissolved on September 10,2012, while processing the return for the AY 12-13 the AO comes to know about the probable date of dissolution, the AO will make two Assessments. 1. Regular Assessment for the PY 2011-12 and 2. Assessment for the income of the period April 1, 2012 to September 10, 2012. Person likely to transfer property to avoid tax (Section 175): It appears to AO during any current AY that a person is likely to charge, sell, transfer, dispose of (or otherwise part with) any of his asset. Such asset may be movable or immovable. The taxpayer is likely to part with the asset with a view to avoiding payment of any liability under the IT Act. The total income (TOI) of such person from the first day of the AY to the date when proceeding is started under section 175 is taxable in that AY. Discontinued Business (Section 176): A business or profession may be discontinued in the PY. Income of B/P from April 1 of AY to the date of discontinuation may be taxable in the AY in which B/P is discontinued. The above income is taxable at the discretion of the AO in the AY in which the business is discontinued or it may be taxed in the normal AY. If it is taxable in the AY in which B/P is discontinued, then it is chargeable to tax at the tax rate applicable to that AY. First four exceptions it is mandatory and in the fifth exception it is at the discretion of the AO.

Person [Section.2 (31)]: The term person includes: 1. An Individual: Under the present Act, the word Individual means only a natural person, i.e., a human being. Individual also includes a person of unsound mind or a minor. Trustees of a discretionary trust have to be assessed in the status of individual and not in the status of AOP 2. A Hindu Undivided Family: (HUF) A HUF consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. Profits made by a joint Hindu family are chargeable to tax as income of the HUF as distinct entity or unit of assessment. Once a family is assessed as a HUF, it will continue to be assessed as such till the finding of partition is given the AO u/s 171. 3. A Company [Section 2(17)]: The expression Company is defined to mean the following: Any Indian company or Any Body corporate incorporated under the laws of a foreign country; or Any institution, association or a body which is assessed or was assessable/assessed as a company for any AY commencing on or after April 1,1970; or Any institution, association or a body, whether incorporated or not and whether Indian or non Indian, which is declared by general or special order of the Central Board of Direct Taxes to be a company. Indian Company [Section 2(26)] :

An Indian company formed and registered under the Companies Act, 1956. Besides it includes the following: A company formed and registered under any law relating to companies formerly in force in any part of India other than in the state of Jammu and Kashmir and the Union territories specified in (e)infra: A corporation established by or under a Central, State or Provincial Act; Any institution, association or body which is declared by the Board to be a company U/s 2(17). A company formed and registered under any law in force in the state of Jammu & Kashmir; A company formed and registered under any law for the time being in force in the Union territories of Dadra and Nagar Haveli, Goa*, Daman and Die and Pondicherry. In the aforesaid cases, a company, corporation, institution, association or body will be treated as an Indian Company only if its registered office is in India. *Now State of Goa. Domestic Company: An Indian company or any other company which in respect of its income liable to income tax under the Act, has made prescribed arrangements for the declaration and payment of dividends with in India