Assessment of AOP, BOI or Artificial Juridical Person for an Event and Persons Likely to Transfer Property to Avoid Tax
The Income-tax Act, 2025 retains special accelerated assessment rules for short-lived entities formed for a particular event or purpose and for persons who appear likely to transfer assets to avoid payment of tax liabilities. The current provisions are Sections 318 and 319.
Section 318 - AOP, BOI or artificial juridical person formed for a particular event or purpose
Section 318 applies where an association of persons, body of individuals or artificial juridical person is formed, established or incorporated for a particular event or purpose in a tax year and it appears to the Assessing Officer that the entity is likely to be dissolved in that same tax year or immediately after it.
Accelerated charge to tax
The total income of the association, body or juridical person for the period beginning on the first day of the relevant tax year and ending on the date of dissolution is chargeable to tax in that tax year. The provision operates irrespective of the general charging provision in Section 4.
Essential conditions
- The taxpayer must be an association of persons, body of individuals or artificial juridical person.
- It must have been formed, established or incorporated for a particular event or purpose in a tax year.
- It must appear to the Assessing Officer that the entity is likely to be dissolved in that tax year or immediately after that year.
- The special assessment covers income from the first day of the tax year up to the date of dissolution.
Procedure under Section 317
Section 318(2) applies Section 317(2) to (6), so far as may be, to proceedings against the AOP, BOI or artificial juridical person. These provisions provide the machinery for separate assessment of relevant periods, estimation where income cannot readily be determined, issue of notice requiring a return and related accelerated assessment procedures.
Section 319 - Assessment of persons likely to transfer property to avoid tax
Section 319 is an accelerated assessment provision designed for a situation where, during a current tax year, it appears to the Assessing Officer that a person is likely to charge, sell, transfer, dispose of or otherwise part with assets with a view to avoiding payment of a liability under the Income-tax Act, 2025.
Period brought to tax
Where the statutory condition is satisfied, the person's total income for the period beginning on the first day of the current tax year and ending on the date when the Assessing Officer commences proceedings under Section 319 is chargeable to tax in that current tax year.
What triggers Section 319?
The provision is not framed merely around an ordinary sale or transfer of property. The statutory trigger is that it appears to the Assessing Officer that the person is likely to deal with assets with a view to avoiding payment of a liability under the Act. That tax-avoidance purpose is therefore a central condition of the special assessment provision.
Assessment procedure
Section 319(2) applies Section 317(2) to (6), so far as may be, to proceedings under Section 319 in the same manner as those provisions apply to assessment of persons leaving India. This supplies the procedural machinery for accelerated assessment.
Former Section 174A of the Income-tax Act, 1961
Former Section 174A applied where an AOP, BOI or artificial juridical person formed or established for a particular event or purpose appeared likely to be dissolved in the assessment year in which it was formed or immediately thereafter. Its income for the relevant period up to dissolution was brought to tax in that assessment year, and the procedural provisions of former Section 174(2) to (6) applied so far as possible.
Former Section 175 of the Income-tax Act, 1961
Former Section 175 applied where it appeared to the Assessing Officer during a current assessment year that a person was likely to charge, sell, transfer, dispose of or otherwise part with assets with a view to avoiding payment of a liability under the Act. Income up to the commencement of proceedings was brought to tax in that assessment year, with the machinery of former Section 174(2) to (6) applying so far as possible.
1961 Act and 2025 Act correspondence
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| AOP, BOI or artificial juridical person formed for a particular event or purpose | Section 174A | Section 318 |
| Person likely to transfer property to avoid tax | Section 175 | Section 319 |
| Assessment machinery for persons leaving India | Section 174(2) to (6) | Section 317(2) to (6) |
Practical points
- For Section 318, first determine whether the entity is legally an AOP, BOI or artificial juridical person and whether it was created for a particular event or purpose.
- The Assessing Officer's view that the entity is likely to dissolve in the same tax year or immediately thereafter is part of the statutory trigger.
- For Section 319, an ordinary asset transfer is not enough; the provision addresses a likely disposition of assets with a view to avoiding payment of a liability under the Act.
- The relevant income period under Section 319 ends when the Assessing Officer commences proceedings under that section.
- Both provisions incorporate Section 317(2) to (6), so the accelerated assessment procedure should be considered together with the substantive trigger provision.
This article provides a general explanation of the statutory framework. Actual tax consequences depend on the relevant tax year, legal status and purpose of the entity, facts concerning dissolution or asset transfers, proceedings initiated by the Assessing Officer and applicable transition provisions.