Page 413 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes 2. Write down the case facts.
3. What do you infer from it?
Source: Adapted from http://en.wikipedia.org/wiki/Commissioner_v._Indianapolis_Power_%26_
Light_Co.
14.5 Summary

Advance Payment of tax is another method of collection of tax by the Central Government
in the Form of ‘Prepaid Taxes’.

Advance Tax can be deposited through Challan No. 280 in the Government Treasury (RBI)
or any of the authorised branches of nationalised banks.
Advance Tax is liable to be paid by all assesses like Salaried, Self Employed, Businessman
etc. before the filing of Income Tax Return.
Double taxation refers to a situation where the same income becomes taxable in the hands
of the same company or individual (tax-payer) in more than one country.

Double taxation arises from the two basic rules that enable the country of residence as
well as the country where the source of income exists to impose tax namely, the source
rule and the residence rule.
DTAAs lay down the rules for taxation of the income by the source country and the
residence country.

In India, the liability under the Income tax Act arises on the basis of the residential status
of the assessee during the previous year.

Relief from double taxation is provided by abatement on the basis of mutual agreement
between two states concerned whereby the assessee is given relief by credit/refund in a
particular manner even though he is taxed in both countries.

In order to determine the taxability of business income of foreign enterprises operating in
India, it is important to determine the existence of a Permanent Establishment (‘PE’).
Sections 90 and 91 of the Income tax Act, 1961 provide for double taxation relief in India.

14.6 Keywords

Advance Tax: Advance tax is the income tax payable if the person’s tax liability exceeds ` 10,000
in a financial year. Advance tax should be pa
Assessee: As per Section 2(7) of Income Tax Act 1961 ‘assessee’ is a person by whom any tax or any
other sum of money is payable under the Act.
Bilateral Relief: In this the Governments of two countries can enter into an agreement to provide
relief against double taxation by mutually working out the basis on which the relief is to be
granted.
Business Process Outsourcing: The contracting out of a particular business function to an outside
company in order to reduce costs.
Deferred Tax Liability: An account on a company’s balance sheet is a result of temporary
differences between the company’s accounting and tax carrying values, the anticipated and
enacted income tax rate, and estimated taxes payable for the current year.

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