Rule 96: Transactions covered by domestic safe harbour
Rule 96 identifies the specified domestic transactions that can enter this safe harbour: electricity supply, transmission or wheeling, and purchases of milk or milk products by a co-operative society from its members. The transaction must be undertaken by an eligible assessee.
Official notified Income-tax Rules, 2026Need advice on Rule 96?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
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Bare law
Rule 96 - Eligible specified domestic transaction for safe harbour
An "eligible specified domestic transaction" means a specified domestic transaction undertaken by an eligible assessee and which comprises of: — (a) supply of electricity; or (b) transmission of electricity; or (c) wheeling of electricity; or (d) purchase of milk or milk products by a co-operative society from its members.
Introduction
The rule defines the transaction category. It does not turn a transaction that is outside the Act’s specified-domestic-transaction provisions into one, or remove the separate eligibility and pricing conditions.
Rule breakdown
Electricity transactions
Classify the actual dealing as supply, transmission or wheeling. Rule 95’s description of an electricity business is broader than this transaction list; the business label alone does not establish that the dealing is an eligible transaction.
Milk purchases from members
Reconcile the purchase ledger with the member register and identify milk or milk-product purchases from members. Do not include purchases from non-members in this limb merely because the purchaser is an eligible co-operative.
Pricing and procedure remain separate
After identifying an eligible specified domestic transaction, apply Rule 97’s tariff or milk-price conditions and Rule 98’s option procedure. Record any other specified domestic transactions separately.
Practical classification example
A co-operative purchasing milk from both members and outside suppliers should separate the two streams. The member-purchase condition is a transaction-level restriction, not a description of the entire procurement business.
Key takeaways
Four transaction categories
The list contains three electricity activities and member purchases of milk or milk products.
Member relationship required
The milk purchase limb expressly requires the co-operative’s supplier to be its member.
Eligible assessee required
Apply Rule 95 before relying on Rule 96; the two tests address different facts.
Practical checklist
- Identify the actual transaction and applicable Act provision.
- Retain member status records for milk purchases.
- Separate eligible and other domestic transactions in the working papers.
Avoid
- Do not assume every transaction of an eligible assessee qualifies.
- Do not include non-member milk purchases under clause (d).
FAQs
Do purchases from non-members qualify under the milk limb?
No. Clause (d) specifies purchases by a co-operative society from its members.
Does this rule itself prescribe an accepted price?
No. Rule 97 supplies the pricing conditions and Rule 98 governs the safe harbour option.