Section 163 of the Income Tax Act
Income-tax Act, 2025: s.306
Section 163 of the Income-tax Act, 1961 corresponds to section 306 (Who may be regarded as agent) of the Income-tax Act, 2025.
Read section 306 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 163 is CIT v. P.V.A.L. Kulandagan Chettiar (267 ITR 654), cited in 85 of the 127 judgments on BharatTax that turn on this section.
Leading authorities on Section 163
This case established a principle regarding the application of Double Taxation Avoidance Agreements (DTAAs) versus domestic tax law, particularly concerning the use of more beneficial provisions for an assessee, though its specific impact has been nullified by subsequent legal amendments.
The phrase 'may be taxed' in a Double Taxation Avoidance Agreement (DTAA) signifies a prohibition, preventing Indian tax authorities from taxing income that a foreign country is permitted to tax under the DTAA. This interpretation means the Indian government loses its taxing power over such income.
Additions to income based on alleged foreign bank accounts during a section 153A assessment are invalid if no incriminating material was found during the search and prior assessments were already completed.
A Double Taxation Avoidance Agreement (DTAA) allocating taxation rights to one country for income from immovable property situated within its territory implicitly excludes the other country from taxing the same income, thereby upholding the object of avoiding double taxation.
Dividend income derived by an Indian resident from a foreign company is not liable to be taxed in India if the applicable Double Taxation Avoidance Agreement (DTAA) provides for such exemption.
A CBDT notification issued under section 90(3) of the Income-tax Act is clarificatory in nature and effective from April 1, 2004, the date section 90(3) was introduced.
A notification issued under section 90(3) may supersede a Double Taxation Avoidance Agreement (DTAA) between India and another country, depending on its effective date. The taxability of income from immovable property under a DTAA, read with a relevant notification, is a key issue.
Branches of a company in foreign countries such as UAE and Qatar do not attract tax liability in India when they form a Permanent Establishment (PE), provided that the relevant tax treaties are applied. This principle has been upheld by the Supreme Court.
No penalty under section 271(1)(c) can be levied if revised returns offering additional income after search and in response to a notice under section 148 are accepted by the Assessing Officer without variation.
