Section 176: special measures for transactions with notified jurisdictional areas

Notifying a jurisdictional area

The Central Government may, by notification, specify any country or territory outside India as a notified jurisdictional area for transactions with any assessee, having regard to the lack of effective exchange of information with that jurisdiction.

Deemed associated enterprise and international transaction

Where an assessee enters into a transaction in which one party is located in a notified jurisdictional area, irrespective of anything else in the Act:

• all parties to the transaction are deemed to be associated enterprises within the meaning of Section 162;
• any transaction of the nature described in Section 163(1) and (2) is deemed to be an international transaction within the meaning of Section 163, and the transfer pricing provisions of Sections 161, 162, 163, 165 (except the benefit of variation under Section 165(3)(a)(ii)), 166, 167, 171, 172 and 173 apply accordingly.

Disallowance of deductions

No deduction is allowed for a payment to a financial institution located in a notified jurisdictional area, unless the assessee furnishes a prescribed-form authorisation letting the Board (or an income-tax authority on its behalf) seek relevant information from that financial institution.

No deduction is allowed for any other expenditure or allowance (including depreciation) arising from a transaction with a person located in a notified jurisdictional area, unless the assessee maintains the prescribed documents and furnishes the prescribed information.

Unexplained sums received from a notified jurisdictional area

If, in a tax year, the assessee has received or credited any sum from a person located in a notified jurisdictional area, and either does not explain the source of that sum in the hands of that person (or the beneficial owner, if different), or the Assessing Officer is not satisfied with the explanation given, the sum is deemed to be the assessee's income for that year.

Higher TDS rate

Where a person located in a notified jurisdictional area is entitled to receive any sum, income or amount on which tax is deductible under Chapter XIX-B, tax must be deducted at the highest of: the rate or rates in force; the rate specified in the relevant provisions of the Act; or 30%.

Key definitions

"Person located in a notified jurisdictional area" includes a resident of that area, a non-individual person established there, and a permanent establishment there of any other person. "Permanent establishment" has the meaning assigned in Section 173(c), and "transaction" has the meaning assigned in Section 173(e).

Frequently asked questions