Year: 2025

At a time when dinner table debates revolve around Trump Tariffs 2.0 and WhatsApp forwards are more obsessed with global geopolitics than GST, the Union Budget 2025 feels like last season’s fashion—forgotten, folded away, and faintly nostalgic. But leave it to a tax consultant to bring the spotlight back. Through this article, we proudly wave the India-first (and Budget-first) flag, reviving what should still be the nation’s favourite fiscal performance.

And what a curious performance it was. No frantic tinkering. No budgetary plot twists. No midnight notifications capable of inducing mild heart attacks in CFOs. Instead, we got a whisper of a Budget – a minimalist, polite fiscal note that gives rather than grabs. A ₹1 lakh crore tax cut that, depending on whom you ask, is either a bold growth push or a national stimulus for iPhone sales and premium coffee chains.

What we’ve done, true to tradition, is dive deep into the fine print—dissecting every explanation memo and every comma like it was Shakespeare. Because, in taxation, what is left unsaid often carries the heaviest implications.

Beneath this seemingly serene surface lies a quiet shake-up: tweaks in transfer pricing, restrictions on carrying forward losses in business reorganisations and—you guessed it—our beloved TDS and TCS amendments.

So, pour yourself a tax-free chai (while it lasts) and join us on this annual pilgrimage. The Budget may not have roared, but we’re here to make sure its whispers are heard loud and clear.

THE NEW 3-YEAR BLOCK TRANSFER PRICING SCHEME: CERTAINTY WITH A TWIST

Transfer pricing feels like an endless cricket series — you pad up every year, play the same shots, the department appeals every ball, and the final verdict rests with the third umpire at the appellate stage. Enter the Finance Act 2025’s new Block Assessment Scheme for transfer pricing, a provision that promises to break this cycle. Think of it as an “APA-lite” for the masses: a chance to lock in your TP dealings for three years without the Advanced Pricing Agreement (APA) saga typically reserved for large multinationals. As the Finance Minister noted, this aligns with global best practices in easing TP compliance.

KEY FEATURES OF THE BLOCK TP ASSESSMENT SCHEME

•  Three-Year Block Option: Taxpayers can opt to have certain international transactions (and specified domestic transactions) assessed on a multi-year basis. If the Transfer Pricing Officer (TPO) determines an ALP for a particular year (the “lead year”), that same ALP can apply to the two subsequent years for similar transactions, as long as conditions are met. In effect, one TPO review can cover three assessment years in a row.
•  Optional and Taxpayer-Initiated: The scheme isn’t automatic; taxpayers must elect to use it. An application has to be made to the TPO in the prescribed form and within a prescribed time limit (to be specified by CBDT).
• Simultaneous ALP Determination: Once the taxpayer opts in and the TPO accepts the request (the TPO has a month to decide if the option is valid), the TPO will determine the ALP for the two subsequent years, together with the lead year’s assessment. Essentially, the TPO conducts a multi-year analysis: the same pricing methodology (and potentially the same comparables/ benchmark) is applied across the three-year span. This means the ALP for year 1 is “rolled forward” for years 2 and 3, providing continuity (but notably, there’s no backwards-looking benefit – it’s a roll-forward, not a rollback like in some APA cases).
•  Fast-Tracked Litigation and Certainty: Perhaps one of the biggest draws is the promise of certainty and quicker dispute resolution. If there’s a dispute over the ALP, it effectively covers all three years, which means any appeal can address the block in one go. For instance, the Income Tax Appellate Tribunal (ITAT) could hear multiple years together, consolidating proceedings.
•  Section References: The legal architecture for this scheme is set out via new provisions: Section 92CA(3B) (allowing the multi-year option and TPO’s validation of it); Section 92CA(4A) (requiring the TPO to determine ALPs for the subsequent years once the option is accepted); amendments to Section 92CA(1) (to prevent duplicate references to TPO); and Section 155(21) (enabling the AO to adjust/recompute income for the later years based on the block ALP). Additionally, the scheme is effective from Assessment Year 2026-27 (i.e., FY 2025-26) onwards as per the Finance Act 2025, and it won’t apply in search cases.

The block assessment scheme has been greeted as a positive development, almost a mini-revolution in Indian transfer pricing. Of course, as tax professionals, we know every silver lining may have a cloud – so next, we turn to the fine print and potential challenges lurking behind the optimism.

THE FINE PRINT: TECHNICAL ISSUES AND POTENTIAL CHALLENGES

As exciting as the new framework is, it comes with its share of technical complexities and unanswered questions. Seasoned practitioners will want to consider the following issues before jumping on the block assessment bandwagon:

1. Roll-Forward Only – No Retro Relief

The block scheme only works prospectively for future years. It’s explicitly a roll-forward, not a rollback. So, if you had disputes or open issues in prior years,  this scheme won’t magically resolve those – you’re  still on your own for past years. If issues are recurring, this mechanism is speed forward to consolidate litigation and get yourself heard together at the appellate level.

2. Timing of Exercising the Option

A critical practical question is when and how to opt in for the block assessment. The law says the assessee can exercise the option after the TPO has determined an ALP for an assessment year via an application in the prescribed form. But does this mean one must apply after the TPO’s order for year 1 or even earlier? Initial interpretations (and even a CBDT FAQ – Question 5) have caused confusion – suggesting the option might need to be exercised before the TPO determines the ALP for the first year. That would be counter-intuitive since taxpayers would be unlikely to commit to a three-year deal without knowing year one’s result. A fair position should be that the option should be available after the finalisation of the first year’s TP assessment. In such a case, the TPO will have to again start the proceeding for the next two years. The rules should clarify – when to pull the trigger. This clarification will, in turn, decide the success of the novel initiative.

3.Withdrawal and Flexibility (All-or-Nothing?)

Once you opt in, are you locked in for the full three-year block? The law, as written, doesn’t spell out any withdrawal mechanism or mid-course exit. It’s unclear if a taxpayer, having been elected for the block, can later change its mind (say, if year 2’s business circumstances change drastically). There is also an open question of whether the taxpayer must continue the option for both subsequent years or could selectively opt for just one additional year if conditions in the third year diverge. Until guidelines clarify this, opting in is a bit of a leap of faith – taxpayers should be confident that the next couple of years will broadly resemble the first. And if economic conditions or TP dynamics do shift, we may find ourselves testing uncharted waters (with possibly no easy way to unwind the block choice).

4. Defining “Similar Transactions”

The scheme hinges on the concept of “similar” transactions across the years. But how similar is similar enough? The Finance Act memorandum hints at criteria like the same associated enterprise (party), proportional volume, and geographic alignment (location of the AE) over the years. In essence, the transactions should be of the same nature with comparable functional profiles each year (think Rule 10B(2) comparability factors). For example, if you’re providing software development services to your US subsidiary at cost plus 10% in year 1, doing essentially the same in years 2 and 3 with the same subsidiary would qualify. However, this area is ripe for interpretation issues. What if, say, the volume doubles in year 2 – is that still “similar”, or does a scale change knock you out? What if the pricing model is the same, but the contract terms have minor tweaks? The law doesn’t define it, so we anticipate CBDT rules to lay down clear benchmarks for similarity. Ambiguities here could allow the TPO to reject the option if they believe transactions aren’t sufficiently alike. Bottom line: ensure your year 2 and 3 transactions truly mirror year 1 in nature – and watch for a formal definition of “similar” in the upcoming rules.

5. Impact on Comparables and TP Analysis Updates

A multi-year scheme raises the question of how to handle comparable data and analysis for the later years. One interpretation (and arguably the intent) is that the same ALP result or range determined for year 1 would simply carry over to years 2 and 3, giving the taxpayer certainty even if market benchmarks shift. For instance, if, in year 1, the TPO settles that an operating margin of 10-12% is arm’s length for your transaction, then as long as you’re in that range in years 2 and 3, you’d be fine – even if fresh comparables for those years might suggest a different range. This “lock-in” would indeed ease burdens. However, the TPO might choose to only lock in the methodology and comparable set, but still update the comparable companies’ financials for each year. In that case, year 2 and 3 ALPs could be adjusted if the comparables’ performance changes. The safer assumption is that the ALP (price or margin) is intended to be fixed for the block, because anything less wouldn’t truly reduce disputes. But consider practical hitches: databases get updated over time – what if one of your comparables from year 1 drops out in year 3 because it ceased operations or no longer qualifies? Or new comparables emerge? These scenarios could create confusion in applying the year-1 benchmark to later years. Similarly, financial metrics can fluctuate; for example, your working capital or receivables cycle might lengthen in year 2, affecting profitability. Would the TPO allow adjustments or stick to the original benchmark? All these issues underscore the importance of forthcoming guidance. Until then, taxpayers should do their own sanity check: if you are locked in year 1’s analysis for the next two years, would it still be reasonable? If your business is stable, likely yes. If not, tread carefully.

The real challenge lies not in the scheme, but in the very foundation of transfer pricing — a system built on constant external comparisons. As the Bhagavad Gita teaches, true measure lies not in competing with others, but in surpassing your own past self. Perhaps it’s time for transfer pricing too, to reflect inward rather than outward.

6. Handling Multi-Year Transactions (Loans, Guarantees, etc.)

Some related-party dealings naturally span multiple years – inter-company loans, credit lines, intellectual property licenses, long-term service contracts, and corporate guarantees for debt, to name a few. The block scheme seems tailor-made for such continuous transactions, but there are quirks. Take an inter-company loan: you may draw additional amounts in year 2 under the same loan agreement (increasing the outstanding principal). Or a corporate guarantee originally given for a $5 million loan might be upsized to $10 million next year. Are these considered the “same” transactions? Intuitively, yes (same loan or guarantee, just higher quantum), so they should fall under the block’s umbrella of similar transactions. The ALP principle (interest rate or guarantee fee) would remain the same even though the absolute interest or exposure grows. The key point is that such variations in volume under an ongoing arrangement shouldn’t invalidate the option, provided the nature of the service/asset (loan, guarantee) is unchanged. However, taxpayers should be ready to demonstrate that these are continuations of the original deal, not new transactions altogether. If conditions like credit rating or market interest rates shift materially, the TPO might scrutinise whether the pricing still holds arm’s length for later years. Again, clear guidance from CBDT would help confirm that normal ups and downs in volume don’t derail the block agreement for these financing transactions.

7. New or Additional Transactions in the Block Period

A practical challenge arises if a new type of related-party transaction crops up in year 2 or 3 that was not present in year 1. The law allows the block option to be exercised for “all or any” of the transactions in those years, implying you could cover some and exclude others. So, if you introduce, say, a brand new transaction (e.g., start selling machinery to your foreign affiliate in year 2 while year 1 only had service fees), that new transaction is obviously not “similar” to the ones covered by the block. In such cases, that new transaction would fall outside the block scheme and be subject to regular TP assessment for that year. But this bifurcation can get messy. Normally, if any international transaction exists, the AO can refer the case to TPO. Under the block scheme, the AO is barred from referring matters covered by a valid block option. Does the AO then refer only the new transaction to the TPO for that year? The legislation isn’t crystal clear, but presumably, yes – the AO could still trigger a limited scope TPO audit for the uncovered transaction. Moreover, what if the taxpayer simply didn’t report a transaction in year 1, but it comes to light in year 2? The TPO’s block order might have omitted it, and the AO, due to the block, might be handcuffed from referring it. These are procedural grey areas.

8. Adjustment of Income via Section 155(21)

Once a block option is approved and the TPO determines the ALPs for the subsequent two years, how exactly do those later-year assessments get finalised? The answer lies in Section 155(21) (newly inserted), which allows the AO to amend the assessment orders of the subsequent years to align with the TPO’s multi-year order. In practice, the TPO might issue a consolidated TP order covering years 1, 2, and 3 (or separate orders simultaneously). The AO will then recompute the total income for the years 2 and 3 on the basis of that order by passing amendment orders for those years. This mechanism is akin to how APAs are given effect (though APAs use section 92CD). It ensures the block ALP is implemented without needing fresh scrutiny in those years. However, this process raises a few sub-questions: Will the recomputation under 155(21) account for all consequential impacts like interest on shortfall (Sections 234B/C) or MAT calculations for each year? It should, as the law mandates the AO to consider all aspects while recomputing. Also, if those years were originally assessed and closed (say, in case the block option is exercised after assessments are done), the 155(21) route will reopen and amend them – one hopes in a timely manner to avoid any statute limitations issues.

9. Appeal Process and DRP vs Block Adjustments

The introduction of Section 155(21) brings an interesting twist to the appeals procedure. Normally, when a TPO proposes an adjustment, the AO issues a draft assessment order under Section 144C, and the taxpayer can go to the DRP for a quicker resolution before finalising the assessment. But an order under Section 155(21) – which is essentially a rectification/amendment order for the block years – does not have a draft stage; it’s a final order when issued. So, if the taxpayer disagrees with the ALP applied for the year 2 or 3, do they get to approach the DRP for those years? It appears not, since DRP is only for variations proposed in a draft order. The likely scenario is that any dispute on the block ALP will be funnelled through the year 1 draft order’s appeal. In other words, you contest year one’s draft order at the DRP (covering the proposed TP adjustment that will also govern years 2 and 3). The DRP’s directions would then have to be applied to all three years when the AO passes final orders. If one goes to the ITAT, the appeals for all three years could be clubbed (as noted earlier). What if the taxpayer misses the DRP route and goes to the Commissioner (Appeals) for year 1? Then, years 2 and 3, which were amended without draft orders, might each need separate appeals (likely directly to the Commissioner (Appeals) since there is no draft/DRP there). This is somewhat uncharted territory – procedural gaps exist. Additionally, if a TPO rejects the block option (says the transactions aren’t similar or conditions are not met), there’s no immediate way to appeal that decision alone– it would presumably become part of challenging the eventual assessment order.

10. Other Procedural and Administrative Gaps

Beyond the major points above, there are some miscellaneous uncertainties. For one, the law doesn’t specify the timeframe for the TPO to complete the assessments for the two subsequent years once an option is validated – will it be within the same timeline as the lead year’s assessment or some extension? Clarification on this is needed to ensure the benefit isn’t lost to delays. Another subtle point: the block scheme streamlines TP assessments, but regular corporate tax assessments for each year will still occur separately. There’s no mechanism to sync those up, meaning a company could still face scrutiny on other tax issues on an annual basis. So, it’s not a full consolidation of all tax matters, only the TP piece. This could lead to parallel proceedings in a given year – one dealing with block TP adjustment via amendment and another dealing with, say, domestic tax disallowances – which the tax authorities should coordinate to avoid confusion. Finally, consider the strategic angle: how the appeal mechanism will work as each year may have corporate and TP issues. Forms have a special place in appeal proceedings – which form to file, especially when an appeal is governed by a statutory limitation period.

Given the many moving parts in this scheme, the role of the Central Board of Direct Taxes (CBDT) in issuing detailed rules and guidelines cannot be overstated. Guidelines will determine the fate of the scheme.

SECTION 72A – LOSSES AREN’T IMMORTAL

A cat might boast nine lives, but under the new Finance Act 2025 amendment, tax losses barely get eight. Under the Income-tax Act, Section 72A traditionally lets a successor company “inherit” the accumulated losses and unabsorbed depreciation of a predecessor (in amalgamations, demergers, etc.) as if they were its own. In practice, this meant that when two companies merged, the merged (amalgamated) company treated the past losses as losses of the year of amalgamation – essentially giving the business a fresh eight-year run to utilise those losses.

Old Law: “Fresh” Eight-Year Clock

Before the Finance Act 2025, Section 72A worked in tandem with Section 72: no business loss could be carried forward for more than eight years from the year it arose. But an amalgamation effectively reset that eight-year clock. All accumulated losses of the merging entities became losses of the amalgamated entity in the year of amalgamation, allowing the merged company a brand-new eight-year window to set them off. In other words, legacy losses got a second lease of life every time there was a qualifying reorganisation.

Finance Act 2025 – New Section 72A(6B)

The Finance Act 2025 inserts a new sub-section 72A(6B), drastically curtailing this evergreen carry forward. From April 1, 2025 (effectively AY 2026 27) onward, losses must be carried only within the original eight-year span from the year they first arose. The provision states that for any amalgamation or other reorganisation on/after 1-Apr-2025, a loss that is carried to the successor company can only be used in the remaining assessment years of the original eight-year period. Put simply, amalgamation no longer resets the loss-clock: it merely transfers the remaining life of the loss to the new entity. The Finance Bill even introduces the concept of the “original predecessor entity” – the very first company in the chain of amalgamations – to anchor the clock. This prevents successive mergers from indefinitely extending the loss of life (“evergreening” of losses).

Scope and Effective Date

The new rule applies prospectively. By law, the amendment applies only to any amalgamation or reorganisation effected on or after 1^st April, 2025. (In turn, the amendment itself takes effect from 1^st April, 2026.) Thus, any merger where the appointed date is before 1-Apr-2025 is governed by the old Section 72A. For deals on/after that date, however, the loss must be traced back to its original computation year.

ILLUSTRATIVE EXAMPLES

To crystallise the change, consider:

1. Example 1 – Pre-Amendment Amalgamation: If Company X had losses and merged into Y on 1-Mar-2025 (before the 1-Apr-2025 cutoff), the pre-amendment rules apply. The losses (say, incurred in AY 2018-19) would be deemed Y’s losses in AY 2024-25, and Y would then have a fresh eight-year window (through AY 2031-32) to set them off. In effect, the merger “rebooted” the clock.

2. Example 2 – Post-Amendment Amalgamation: Suppose Company A incurred a loss in FY 2018-19 (AY 2019-20), and it amalgamates into B on 1-Apr-2026. Under the new rule, B treats that loss as its own, but can carry it forward only within eight years from AY 2019-20. That means the loss must be absorbed by AY 2027-28 (eight years after AY 2019-20). No new eight-year term is granted by the 2026 merger. B can only use whatever remaining years were left on A’s original timeline.

3. Example 3 – Chain Amalgamations: Consider a chain: A Ltd (with losses incurred in 2019-20) merges into B Ltd on 1-Apr-2026, and then B merges into C Ltd on 1-Apr-2028. Under 72A(6B), the “original predecessor entity” for C’s losses is still A Ltd. All of A’s losses must be set off within eight years of 2019-20 (i.e. by AY 2027-28). Neither merger (2026 or 2028) extends beyond that horizon. In practice, C inherits only the residual carry forward years from A’s original loss – the clock keeps ticking from the date of the first loss.

Only Losses (Not Depreciation) Affected

It is crucial to note that Section 72A(6B) speaks only of “loss forming part of the accumulated loss”. Unabsorbed depreciation allowances (also carried under Section 72A) are not curtailed by the new sub-section. It can be continued for an infinite period.

Other Conditions still apply.

All the existing safeguards in Section 72A(2)–(6A) remain intact. In particular, the successor company must still meet continuity conditions (e.g. carrying on the business, achieving the threshold of installed manufacturing capacity. maintaining requisite shareholding by the transferors, etc.) for the inherited losses to be allowable. The amendment simply shortens how long a loss can live; it does not relax the usual reorganisation conditions.

TDS/TCS PROVISIONS

The latest finance proposals have modestly raised a bunch of TDS/TCS thresholds, aiming to reduce compliance pain for small payments. For example, the annual rent threshold under Section 194-I jumps from ₹2.4 lakh annually to ₹50,000 per month (i.e. ₹6 lakh annually), and other sections saw smaller increment (e.g. commission and professional-fee limits rose from ₹15K–30K to ₹20K–50K). Threshold increase should be seen in the light of the overall increase in slab rates, and no tax till you earn ₹12 lakh. It puts more money in the hands of people.

FAREWELL TO SECTION 206AB (NON-FILER SURCHARGE)

Starting 1 April 2025, Section 206AB – which forced higher TDS on “non-filers” – will be repealed. In plain English, if the recipient didn’t file a tax return, payers no longer have to immediately apply a higher TDS rate on payments to him. This change was explicitly made to cut compliance headaches: under the old law, deductors had to check their filing status on the spot and withhold tax. Instances were seen where demands were raised on deductors for non-withholding at 20%. This, in effect, penalised payers for the fault of the recipient. The law has omitted this provision with effect from 1 April 2025. This is significant as the legal effect of the omission is that the provision never existed in law. Thus, the entire demand cannot be enforced. Consider the following observations of the Supreme Court in Kolhapur Cane Sugar Works Ltd. vs. Union of India AIR 2000 SC 811

“The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute –book as completely as if it had never been passed, and the statute must be considered as a law that never existed.”

194Q VS 206C(1H): ENDING DOUBLE TAXING OF LARGE PURCHASES

There’s often confusion when buying and selling large value of goods: should the buyer deduct TDS under Section 194Q, or should the seller collect TCS under Section 206C(1H)? Under prior rules, 206C(1H) already said no TCS if the buyer had to do some TDS. But in practice, sellers found it hard to know if buyers had actually done their TDS, so sometimes both got applied. To clear this up, the budget proposes that from 1^st April, 2025, Section 206C(1H) simply “will no longer be applicable”. In effect, the onus shifts entirely to buyers (via 194Q), and sellers can drop the TCS on those ₹50 lakh+ transactions. This should end the TDS-versus-TCS tug-of-war and make compliance far simpler.

UPDATED RETURNS: MORE TIME, BUT WATCH THE CLOCK

The window to file an updated return (ITR-U) is being doubled. Under the old law, you had 24 months (2 years) from the end of the assessment year to fix omissions; now, it’s 48 months (4 years). That means, for example, an ITR for FY 2023–24 (AY 2024–25) can be updated up until March 31, 2029. This extension is meant to “nudge” voluntary compliance – essentially giving taxpayers more time to spot and report missed income.

However, the law also tacks on strict conditions. You cannot file an updated return after 36 months if reassessment has kicked in. In practice, if an officer has already issued a notice under Section 148A (essentially the show-cause for reassessment) after 36 months, your window closes unless that notice is later quashed. (If a 148A(3) order explicitly finds “no fit case to reopen,” then the 48-month door reopens.) In short, you get extra time only if the tax department hasn’t already started formal reassessment proceedings late in the game.

PENALTIES ON LATE ITR-U

Filing late just got pricier. Section 140B of the Act imposes an additional tax (a bit like a penalty) on updated returns, calculated as a percentage of the extra tax and interest due. Originally, it was 25% of the tax plus interest if you filed within 12 months of year-end and 50% if filed within 24 months. The amendments introduce two new tiers: now it’s 60% if you file after 24 up to 36 months, and a whopping 70% if you wait out to 36–48 months. In plain terms, the longer you stall, the stiffer the surcharge – so procrastinators face heavier hits.

CONCLUSION: A BUDGET THAT UNDERSTOOD THE BEAUTY OF RESTRAINT

If there’s a timeless lesson in tax policy, it is this: sometimes, the best amendment is no amendment at all. This year’s Budget seems to have embraced that wisdom — preferring fine-tuning over frenzy and choosing to strengthen the framework rather than constantly reshaping it. A “less is fair” philosophy quietly runs through the Finance Act 2025: thoughtful corrections, calibrated expansions, and a deliberate effort to simplify rather than complicate.

In that sense, this Budget has stood the test of time. Amidst the noise of global uncertainty, Trump Tariff and economic recalibrations, the Indian tax system was offered something rare — stability.

And as we write this, perhaps there’s a quiet sense of history too. This Budget series in the BCAJ may well become a nostalgic bookmark — the last commentary on the Income-tax Act, 1961. With the new Income-tax Act, 2025 on the horizon, we stand at the threshold of a new chapter — one that promises modernisation, new hope for a new India and, more importantly, admission of the ultimate truth – even law is not permanent.

For now, we raise a modest toast to a Budget that whispered instead of shouted — and to a law that, for one final time, chose elegance over excess.

BCAJ Admin

Just as partners were settling into their cozy routines of profit-sharing (and occasional stationery disputes), Section 194T stormed into their lives like an uninvited relative at a family dinner—bringing along uncomfortable questions on mismatched Form 26AS entries, accidental GST invitations and sleepless nights for accountants. So, before your accountant contemplates early retirement, dive into this article and decode how to stay friends with the taxman (without losing your partners).

Budget Day in a Chartered Accountant’s life is no less dramatic than the final episode of a Netflix thriller—filled with suspense, sudden twists, and characters (read: taxpayers) you genuinely root for. WhatsApp groups explode faster than popcorn in the microwave, Excel sheets open quicker than umbrellas in Mumbai rains, and suddenly, everyone becomes a tax guru on LinkedIn. Gone are the nostalgic days when earnest CAs gathered in packed study circles, scribbling meticulous budget notes—today, they’re all busy crafting witty LinkedIn posts that get more likes than actual attendance at study circles! Tax professionals, lawyers, and CAs sharpen their keyboards (farewell, pencils!) to dissect, decode, and divine the implications—hoping, praying, and often failing to figure out: who gets hit this year?

This time, it was the humble partnership firm and its partners who found themselves at the receiving end of a legislative surprise—Section 194T, introduced via the Finance Act (No. 2) of 2024. It came in like an uninvited guest at a birthday party: no warning, no cake, just impact. As memes were made and coffee mugs cracked, tax teams scrambled to understand how this provision would affect the sacred bond between a firm and its partners. Many firms (including ours) realised—perhaps for the first time—that the best way to understand the law is to feel its full weight… personally.

However, before we cry over spilt revenue, let’s take a step back and admire the beauty of partnerships. A partnership is a living, breathing embodiment of the phrase Vasudhaiva Kutumbakam—the world is one family—except here, the family files a return, divides profits, and sometimes fights over stationery expenses. While firms operate with collective force, the moment profit-sharing discussions begin, the kumbaya turns into a Game of Thrones episode. Seniority, goodwill, rain-making ability, negotiation prowess (and sometimes just how loud one can argue in partner meetings) all go into deciding who gets how much of the pie.

In this article, we set out to explore how one provision will trigger far reaching impact. The conventional story of a pound of flesh holds good – there will be pain, there will be scar, but no drop of blood. Moreover, of course, all this against the backdrop of traditional issues faced by firms: the perennial people crunch (more humans, fewer hands), client fee pressure, and the age-old CA paradox—“Why is my own assignment never billable?”

So, brace yourself as we untangle the interwoven threads of tax, teamwork, and turf wars. After all, when the firm is the stage, and profits are the script, Section 194T might just rewrite the title to: “To be or not to be a partner.” If you are the managing partner or heading compliance, expect your phone to buzz soon—your partners, after reading this, are likely typing a WhatsApp message right now: “Have you read this? We need to discuss!” You might as well stay ahead—block out 15 minutes to finish this article before their queries land in your inbox.

PARTNERSHIP TAX BASICS

Before diving into case studies, it’s important to understand how partnerships are taxed and how partners are compensated under the Income-tax Act. Here is a quick refresher:

•  Meaning of Partnership firm, partner – firm

“Partnership” is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.

Partner and partnership stems from legal agreement. The scheme of taxation will accordingly apply to partners who are partners in the agreement. People who are designated as partners to external stakeholders but who are not parties to the partnership deed will not be governed by the scheme.

•  Firm as a Separate Entity

A partnership firm (including an LLP) is a separate person for tax purposes (per Section 2(31)). The firm files its own return and pays tax on its income like any other assessee, with a flat tax rate for firms of approximately 34.944%. It is possible that partners may be taxed at 39% or upwards. Given that the share of profit is exempt, this tax rate arbitrage is significant.

•  Share of Profit – Tax-Free for Partners

After the firm pays tax on its profits, those profits can be distributed to partners as their share of the profit, which is exempt in the partners’ hands under Section 10(2A). This avoids double taxation of the same profit. Notably, this exemption holds true even in unusual scenarios – for instance, if the firm’s taxable income is nil due to brought-forward losses, a partner’s share of profit is still exempt. The same applies if the partner is not an individual, but another firm – a partnership firm receiving profit from another firm also enjoys a Section 10(2A) exemption¹.

1. Jalaram Transport vs. ACIT [2025] 170 taxmann.com 303 (Raipur - Trib.); 
Radha Krishna Jalan vs. CIT [2007] 294 ITR 28 (Gauhati High Court)

In short, once the income has suffered tax at the firm level, it is not taxed again when passed through as a profit share.

One ongoing controversy is the meaning of share of profit, i.e. what is exempt. Is profit credited in books of account exempt, or is profit computed in accordance with profit and gains of the business or profession exempt, or is profit computed based on firm total income exempt? The difference between book profit and taxable profit is for a variety of reasons: depreciation charge, computation of capital gain (say due to 31^st March 2018 grandfathering), tax exemption for GIFT City unit, disallowance under Act, etc. This issue has been the subject matter of controversy in under-noted decisions² Share of profit would also include income not taxable in the hands of the firm.³ The conclusion of this controversy will be important as the amount paid in excess of the share of profit will be remuneration, which will be subject to TDS under section 194T.

2. Circular No. 8/2014 dated 31-3-2014; S. Seethalakshmi vs. ITO [2021] 128
taxmann.com 175 (Chennai - Trib.); Explanation to section 10(2A);
3. Vidya Investment & Trading Co. (P.) Ltd vs. UOI [2014] 43 taxmann.com 1
(Karnataka).

•  Remuneration & Interest – Taxable for Partners

In addition to profit share, many partners receive remuneration from the firm – this can be called salary, bonus, commission, monthly drawings, etc. – as well as interest on capital if they’ve invested capital in the firm. These payments are taxable in the hands of the partners (not as “Salaries”, though, but as business income). Section 28(v) specifically treats any salary, bonus, commission or interest from the firm as a partner’s business profit. For the firm, such payments are deductible expenses, but only if they meet the conditions of Section 40(b). Section 40(b) imposes an upper cap on how much partner’s remuneration can be deducted by the firm, linked to the “book profit” of the firm. For example, for a firm with low profits, there is a ceiling (e.g. ₹3 lakh or 90% of book profit or 60% of book profit, etc., as per 40(b)) on deductible remuneration. Amounts beyond the 40(b) limit, if paid, will be disallowed – meaning the firm can’t deduct them (and will pay firm-level tax on those). This excess is not taxable as remuneration in the hands of the partner as per Explanation to section 28(v)

•  Reconstitution of Firm – Special Rules

When a firm is reconstituted (say, a partner retires, a new partner joins, or profit-sharing ratios change), there can be additional tax implications under Sections 9B and 45(4). In essence, these provisions tax certain capital assets or money distributions that happen upon reconstitution or dissolution. Section 9B deems the firm to have sold any assets or inventory distributed to a partner (triggering capital gains or business income at the firm level). Section 45(4) then may tax the firm on any money or asset given to a partner in excess of that partner’s capital account balance (a formula essentially taxing the firm for paying out accumulated reserves or goodwill). The key point is that these provisions tax the firm, not the partner. The partner’s receipt in such cases (be it cash or assets during retirement or reconstitution) is typically not taxed in the partner’s hands (it is treated as a realisation of their capital interest). Thus, if a partner gets paid during a reconstitution event, that payment might trigger tax for the firm under 45(4)/9B, but the partner doesn’t separately pay income tax on it. As we’ll see, Section 194T specifically carves these situations out of its scope, recognising that those payouts are not in the nature of taxable remuneration to the partner.

With this groundwork laid, let’s introduce the protagonist of our story: Section 194T – the new TDS provision that has sent partnership firms back to the drawing board.

SECTION 194T – THE TAXMAN JOINS THE PARTNERSHIP

Effective from 1^st April, 2025, any partnership firm or LLP making payments to its partners now faces a tax withholding duty. In plain language, the firm must deduct tax at source (TDS) at 10% on most forms of partner payouts. Here are the key features of Section 194T:

•  Scope of Payments

“Any amount in the nature of salary, remuneration, commission, bonus or interest” paid or credited to a partner is covered. The law uses broad terms (“by whatever name called”), ensuring that whether you label it monthly salary, annual bonus, commission for bringing in clients, or interest on capital, it’s all under Section 194T’s umbrella.

•  Exclusions:

Notably, genuine profit distributions are not mentioned in that list – so the taxman isn’t taking a bite out of the exempt share of profit. Similarly, withdrawals of capital (like when a partner takes out some of their capital or upon retirement) are outside Section 194T. In other words, Section 194T targets what we might call “partner compensation” but not the return of capital or after-tax profit share. The Memorandum to the Finance Bill and subsequent analysis clarify that payments on dissolution or reconstitution (governed by 45(4)/9B as discussed) are not subject to TDS under 194T. The firm doesn’t have to withhold tax when merely giving a partner his own capital or post-tax accumulated profit – those are more like balance sheet transactions, not income payments.

•  Threshold – A Whopping ₹20,000

Yes, twenty thousand rupees per year, aggregated per partner. If the total of covered payments to a partner is ₹20,000 or less in the financial year, no TDS is required. However, if it likely exceeds ₹20,000, then TDS applies from rupee one. Practically, ₹20k is a very low bar – even a small firm paying token interest on capital will breach it.

•  Timing of Deduction

Like most TDS provisions, it’s whichever is earlier – the moment of credit to the partner’s account (including credit to their capital account) or actual payment. This prevents clever timing tricks. For example, if a firm accrues a bonus to the partner’s capital account at year-end instead of paying it out, that credit is enough to trigger TDS in that year.

Practically, some elements of remuneration, like bonuses or commissions, are linked with firm performance. Typically, books are finalised towards September, i.e. near to tax audit due date. Now, the law requires a deduction of TDS on the said amount which is determined later. The TDS for March needs to be deposited by April 30, and the TDS return needs to be filed by May. Practically, the firm will have to deduct tax on a provisional basis and thereafter amend the TDS return to reflect accurate figures.

• Residents, Non-Residents, Working, Non-Working – All Partners

Unlike some sections that distinguish non-residents (section 195) or require the payee to be a “specified person,” Section 194T casts a wide net. There’s no exception for non-resident partners (so resident firm paying, say, interest to an NRI partner must deduct 10% plus applicable surcharge/cess, subject to treaty relief later). If a partner is non-resident, it may be better view to treat such partner as having business connection in India and deduct tax at 30% plus cess and surcharge under section 195.

Even minor partners or partner’s representatives are covered. Also, it doesn’t matter whether the partner is a “working partner” taking an active part or a sleeping partner – interest paid to a dormant partner is equally subject to TDS. Essentially, if you have a “partner” label, any taxable payment from the firm triggers the tax withholding – period!

• No Escape via Lower TDS Certificate

Interestingly, Section 194T was drafted without a provision to allow lower or NIL deduction certificates under Section 197. Tax professionals noted that you cannot approach the Assessing Officer to reduce the 10% rate, even if the partner’s final tax liability may be lower. Perhaps the logic was simplicity (10% is reasonably moderate). In any case, each partner will have to claim a refund or adjustment when filing returns if 10% TDS overshoots his actual tax liability (for example, if a partner’s income falls below the basic exemption or he has sizeable deductible expenditure against his partnership income).

•  Compliance Burden & Consequences

Firms now have to obtain TAN, deduct 10% every time a partner’s pay is credited/paid, deposit the TDS by the due date, file TDS returns, and issue TDS certificates to partners. Non-compliance has teeth: the usual disallowance under Section 40(a) (ia) will apply. That means if a firm fails to deduct or pay the TDS, 30% of the corresponding partner payment will be disallowed as an expense, adding to the firm’s own taxable income, plus interest and penalties on the TDS default itself. In short, the cost of ignoring 194T is far heavier than the pain of compliance.

KEY CHALLENGES IN IMPLEMENTATION OF SECTION 194T

Section 194T (introduced w.e.f. April 1, 2025) brings partnership firms into the TDS net for payments to partners. While the intent is to improve reporting, it has thrown up some quirky tax compliance and reporting challenges. Below, we unpack the major issues.

MISMATCH BETWEEN FORM 26AS AND PARTNERS’ INCOME (SECTION 28(V) VS 10(2A))

One immediate challenge is the mismatch between the income shown in Form 26AS and the income the partner actually offers to tax under Section 28(v). Section 28(v) taxes a partner’s remuneration, interest, bonus or commission from the firm as business income, while Section 10(2A) exempts the partner’s share of profit from the firm. Trouble arises when a firm, in an abundance of caution, deducts TDS on conservative estimates – including amounts that might eventually be just the partner’s profit share. For instance, firms often allow partners to take profit draws (interim withdrawals of anticipated profits) during the year. If the firm treats these draws as potentially taxable payments and deducts 10% TDS on them, the partner’s Form 26AS will reflect a higher “income” (under Section 194T) than what the partner actually needs to declare as taxable income in return.

Such a scenario is not just theoretical – it is expected in practice. Consider an example: A partner withdraws ₹30 lakh over the year from the firm against upcoming profits. By year-end, the firm’s books decide that out of this, ₹20 lakh is salary (allowable under the deed and taxable for the partner), and the remaining ₹10 lakh is adjusted against the partner’s share of profit. Under Section 194T, the firm, being conservative, might have deducted TDS on the full ₹30 lakh during the year. Consequently, Form 26AS for the partner shows ₹30 lakh credited (with TDS of ₹3 lakh). However, in the partner’s return, only ₹20 lakh is offered as income under Section 28(v) (the ₹10 lakh profit share is not taxable, thanks to Section 10(2A)). This “26AS vs. ITR” mismatch can set off alarm bells in the tax processing system.

Why does this mismatch happen? Section 194T requires TDS at the time of credit or payment, whichever is earlier. If the firm hasn’t definitively credited any salary/interest until year-end, any mid-year withdrawal is technically a “payment” and attracts TDS by law. In our example, every withdrawal got hit with TDS in real time. However, at year-end, when the dust settled, part of those withdrawals were not taxable income at all. The result: Form 26AS shows more income than the partner’s taxable business income. TDS ends up being “deducted where it is not actually deductible,” leading to tax being collected on amounts that never became taxable income. In short, the partner cannot make “income” from himself/herself, yet the TDS mechanism temporarily pretends that they did.

TDS CREDIT WOES UNDER SECTION 143(1)(A) AND RECTIFICATION NEEDS

The mismatch above isn’t just academic – it has real cash flow implications for partners. The Income Tax Department’s CPC (Centralized Processing Center) loves matching figures. When the partner’s return is processed under Section 143(1)(a), the system may notice that the income reported under Profits and Gains from Business/Profession is lower than the amounts on which TDS was deducted per Form 26AS. A straight-laced algorithm does not automatically grasp that the “missing” amount was exempt under Section 10(2A). Instead, it may treat it as under-reported income or disallowance. The immediate effect could be a denial of a portion of the TDS credit – the tax on the “mismatched” amount – in the intimation. In our example, the CPC might allow credit of TDS only proportional to the ₹20 lakh income acknowledged and hold back credit for the ₹10 lakh portion unless that income is brought into the computation. This leaves the partner with a tax-due notice or reduced refund, quite an unwelcome surprise.

Such partial credit denials have been observed whenever income–TDS mismatches occur. It often falls under the umbrella of a “mistake apparent from the record” that requires fixing. The partner then must file a rectification application under Section 154 to resolve the issue. In the rectification, one would cite that the seeming income shortfall was actually exempt profit income (backed by Section 10(2A) and the partnership firm’s audited accounts). Only after this hoop is jumped can the full TDS credit be restored. This procedure is about as enjoyable as watching paint dry – an additional compliance burden that eats up time for both the taxpayer and the department.

The irony is not lost on anyone: the department issues speedy refunds nowadays, yet much of that could be avoidable if the tax were not over-collected in the first place. So, partners finding only partial TDS credit in their 143(1) intimations should not be shocked; instead, gear up to file for rectification, citing the exempt income rationale. It is an extra step in implementing 194T, almost built-in by design.

THE GST ANGLE: WHEN TDS DATA TRIGGERS INDIRECT TAX TROUBLE

Section 194T’s fallout isn’t limited to direct tax. It has an indirect tax twist, thanks to data sharing between departments. Generally, a partner’s remuneration is not considered a “service” and thus not subject to GST – the logic being that a partner isn’t an employee but also isn’t exactly an outside service provider to their firm. In fact, the CBIC has clarified that the salary paid by a partnership firm to its partners “will notbe liable for GST.”. So far, so good on paper – the partner’s income from the firm should be outside GST’s scope.

However, practical reality can differ, especially when compliance data is picked up blindly. GST authorities have started leveraging Form 26AS and income-tax data to smoke out cases where they believe someone exceeded the GST registration threshold without registering. A partner’s receipts under Section 194T could inadvertently light such a beacon. Here’s how: Form 26AS might show substantial “payments to Mr X (Partner) from ABC Firm”, say ₹25 lakh in a year, with TDS under Section 194T. To a GST officer scanning data, that looks like Mr X provided services worth ₹25 lakh (crossing the ₹20 lakh threshold for services) without GST registration. The risk is higher if the nomenclature in the TDS records or books hints at something like “commission” or “professional fees” rather than just “partner’s salary.” Descriptions matter – a label like “partner’s commission” could be misread as if the partner acted as an outside agent to the firm rather than in the capacity of the partner. And crossing ₹20 lakh in any “service” receipts is like waving a big red flag in front of GST authorities.

In short, Section 194T can unintentionally invite the GST inspector to the party. The partner and the firm then have to prove a negative – that these receipts were not for any independent service. It is an added challenge to ensure that tax compliance in one law (TDS) doesn’t create confusion in another. One might quip that a partner now needs not only a good CA but also a good GST consultant on speed dial, just in case the left hand (direct tax) doesn’t tell the right hand (indirect tax) what it’s actually up to.

ACCOUNTANT – THE UNSUNG HERO (OR VILLAIN?) OF SECTION 194T COMPLIANCE

In the whirlwind of partner withdrawals, the accountant emerges not just as someone who balances books, but as the narrator who clearly categorises each payment. Indeed, an accountant capable of distinguishing between withdrawals from previous capital, share of profit, bonus, remuneration, interest, reimbursements, loans from the firm, or simply advances against future payments is nothing short of a rare gem. If your firm happens to have such a precious resource, my advice: keep it secret and keep it safe!

The sheer variety of payment nomenclatures is enough to confuse even the most diligent AO—leading to scenarios where the Taxman may meticulously scrutinise partner capital accounts, placing the horse firmly before the cart and demanding justification for TDS compliance decisions. Accurate accounting thus becomes the saving grace, the ultimate shield against unwarranted scrutiny.

Of course, this is far easier said than done. For most CA firms, self-accounting typically resembles a frantic race against the year-end – where many (or the majority) of the firms finalise the books and file tax returns almost on the eve of the compliance due date. Perhaps, if technology ever advances sufficiently, BCAJ could even host a live poll among readers—if only to humorously reaffirm the author’s suspicion that accountants who excel in accurate partner payment narratives are as common as multi-bagger sightings in Dalal Street!

PRACTICAL TIPS TO MITIGATE THE CHAOS

Implementing Section 194T need not be a nightmare scenario. Firms and partners can take practical steps to mitigate these issues and smooth out the rough edges:

•  Align Income Reporting in the ITR

To pre-empt mismatches, partners may consider reporting the gross amount of firm-related receipts in their income tax return and then separately deducting/exempting the share of profit. In practice, this means if Form 26AS shows ₹30 lakh under Section 194T, the partner can report ₹30 lakh as gross receipts under business/profession in the ITR computation, then claim the ₹10 lakh (in our example) as exempt under Section 10(2A). This way, the income reported matches Form 26AS, and the exempt portion is clearly disclosed as such. It’s a bit of a workaround – effectively telling CPC, “Yes, I got ₹30 lakhs, but ₹10 lakh is tax-free” – but it can save you from the CPC’s automated mismatch adjustments.

Bottom line: mirror the Form 26AS in your ITR to the extent possible, and then claim your lawful exemptions within the return.

•  Smart TDS Strategy for Firms

Firms can reduce mismatches by timing and characterising partner payments carefully. One approach is to credit partner remuneration and interest only at year-end (when profits are ascertained) and treat all interim withdrawals as drawings against capital or anticipated profits. If no specific portion of a draw is designated as “salary/interest” during the year, arguably, no TDS is required on mere drawings. The TDS can be deducted when the remuneration is actually credited (i.e. when it becomes income in the sense of Section 28(v)). Of course, firms must be cautious – this works best when the deed or mutual agreement supports it, and there is confidence that by year-end, some remuneration will indeed be authorised. If the firm ends up not crediting any salary due to losses or low profits, then no TDS on drawings was needed at all – avoiding the scenario of “tax paid without corresponding income”. In essence, don’t let the TDS tail wag the dog: deduct tax when income is crystallised, not simply whenever a partner taps the firm’s ATM. This requires discipline and documentation but can save everyone from unnecessary refund / reconciliation workouts.

•  Partnership Deed Clauses – Clarity is King

It all starts with the deed – A sacred document which, before this amendment, was in some drawer which is today difficult to locate. To prevent misunderstandings, the partnership deed should explicitly define the nature of partner withdrawals and payments. For instance, include a clause that “any drawing by a partner during the year shall be treated as an advance against that partner’s share of profit unless specifically characterised as salary or interest by a resolution/entry.” This makes it clear that until the year-end decision, a withdrawal is not a salary payment, thereby strengthening the case for not deducting TDS on it (since it isn’t “income” yet in Section 28(v) sense). Similarly, for retiring partners, the deed (or retirement agreement) should spell out that any lump sum paid is in settlement of the retiring partner’s capital, share of accumulated profits, and goodwill. Use terms like “share of profit till the date of retirement” rather than calling it a “fee” for departure. This not only helps direct tax (by clarifying that Section 10(2A) covers the profit portion) but is also a shield against GST misinterpretation. If a GST officer inquires, a well-drafted deed allows the response: “This amount was a capital/share settlement as per deed clause X, not a consideration for any service.” In short, paperwork can prevent peril – document the intent so that no one later can recharacterise the nature of the payment.

•  Communication and Consistency

Partners and finance teams should maintain clear communication regarding these payments. Internally, everyone should know what the firm’s policy is on drawings and TDS, so that a lower-than-expected credit or a surprise GST query does not catch a partner off guard. Externally, if a notice does arrive (be it a 143(1)(a) intimation or a GST notice), respond promptly and factually. For a tax credit mismatch, a brief Section 154 rectification application with a note referencing “TDS on the exempt share of profit (Section 10(2A) not included in total income)” usually suffices to set things right. For a GST notice, a well-reasoned reply citing the CBIC clarification that partner remuneration isn’t taxable, along with a copy of the partnership deed and Form 26AS, should clarify the situation.

By taking these steps, firms and partners can turn Section 194T from a head-scratcher into a manageable routine. As the saying goes (with a 194T twist): “Deduct your tax and credit it too – but keep the paperwork straight to avoid a boo-boo!” And that, in essence, captures the balancing act now required in the post-194T era of partnership taxation.

CONCLUSION

The broader message for firms is clear: adapt and move on. Review your partnership agreements. Educate your partners – especially those accustomed to tax-free profit shares – that henceforth, their bank alerts will show slightly lighter credits (but not to worry, it’s their own tax being prepaid).

Ultimately, Section 194T doesn’t change how profits are split in theory – rainmakers will still rain, team players will still team – but it adds a new layer of accountability and cash-flow management to the mix.

One can end on a lighter note: if you thought partner meetings were intense when debating billable hours or client receivables, wait until someone brings up who’s contributing what to the firm’s TDS deposit each month! The silver lining is that this provision has united every kind of partner – from the golf afternoon equal sharer to the midnight oil grinder – in a single cause: figuring out how to comply. The takeaway for practitioners is to embrace Section 194T as just another business reality, as our clients did when it came to section 194Q and section 194R.

Keep calm, deduct on, and let’s get back to doing what we do best – serving clients – while the TDS Challan gets its regular date with the bank.

BCAJ Admin

Introduction

The procedure of block assessment to be made in cases where a search has been conducted under Section 132 or a requisition has been made under Section 132A was earlier introduced in 1995. Under this erstwhile scheme of block assessment, in addition to the assessments which were to be conducted in a regular manner, a special assessment was required to be made assessing only the ‘undisclosed income’ relating to the ‘block period’ in a case where the search has been conducted.

In 2003, these provisions dealing with block assessment in search cases were made inapplicable for the reasons as stated in the Memorandum explaining the provisions of the Finance Bill, 2003 which are reproduced below –

The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed. The main objectives for the introduction of the Chapter XIV-B were avoidance of disputes, early finalization of search assessments and reduction in multiplicity of proceedings. The idea was to have a cost-effective, efficient and meaningful search assessment procedure.

However, the experience on implementation of the special procedure for search assessments (block assessment) contained in Chapter XIV-B has shown that the new scheme has failed in its objective of early resolution of search assessments. The new procedure postulates two parallel streams of assessment, i.e., one of regular assessment and the other for block assessment during the same period, i.e., during the block period. Controversies have sprung up, questioning the treatment of a particular income as ‘undisclosed’ and whether it is relatable to the material found during the course of a search etc. Even where the facts are clear, litigation on procedural matters continues to persist. The new procedure has thus spawned a fresh stream of litigation.

Thus, the experience was that providing for two parallel assessments; one for undisclosed income and the other for regular income, had resulted in a lot of litigation. As a result, the new Sections 153A, 153B and 153C were introduced wherein it was provided that the assessments pending as on the date of initiation of search would abate and only one assessment would be made wherein the total income of the assessee, including undisclosed income, was required to be assessed. Further, separate assessment was required to be made for every year involved unlike the single assessment for the entire block period as provided under Chapter XIV-B. In 2021, these provisions for making the assessment in the cases of the search were merged with the provisions dealing with reassessments in general, as provided in Sections 147 to 151 with the appropriate amendments.

Thereafter, in the last year, the Finance Act (No.2), 2024, had once again restored the scheme of ‘block assessment’ as provided in Chapter XIV-B but in a revised form. This was made effective from 1-9-2024, i.e. when the search was initiated on or after 1^st September, 2024. Unlike the erstwhile scheme of block assessment, which had provided for making parallel assessments of the undisclosed income of the block period and of the regular income, the revised scheme of block assessment provided for making only one assessment of the block period wherein the total income was required to be assessed including the undisclosed income as well as the other regular incomes.

However, the Finance Act, 2025 has made further amendments to the provisions of Chapter XIV-B having retrospective effect from 1^st September, 2024, i.e. the date from which these provisions were reintroduced by the Finance Act (No. 2) 2024. One of the major amendments which have been made by the Finance Act 2025 is that the scope of the block assessment has been restricted to the assessment of only the ‘undisclosed income’ instead of the ‘total income’. Although the amended provisions do not provide expressly that the assessment of the undisclosed income and of the regular income would be made separately, it implies that there would be two parallel assessments once again as were being made under the erstwhile scheme of the block assessment, which was in force till 2003. Therefore, the provisions which were considered to be highly litigation prone in 2003 have been reintroduced in the Act by the Finance Act, 2025, with effect from 1^st September, 2024. Further, it is worth noting that this amendment was made at the time of passing of the Finance Bill, and, therefore, there is no mention of the reasons for making such an amendment in the Memorandum explaining the provisions of the Finance Bill 2025.

In this article, the important amendments to Chapter XIV-B made by the Finance Act 2025 have been discussed and analysed.

Restricting the scope of assessment to the undisclosed income

Section 158BA provides that the Assessing Officer shall make the assessment of the block period in accordance with the provisions of Chapter XIV-B in a case where the search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132A on or after 1^st September, 2024. Under this provision, the Assessing Officer was required to make the assessment of the ‘total income’. Now, this section has been amended to provide that the Assessing Officer shall make the assessment of the ‘total undisclosed income’ of the block period. The marginal heading of this section has also been changed appropriately by replacing the words ‘assessment of total income’ with the words ‘assessment of total undisclosed income’.

The consequential changes have also been made to the other provisions of Chapter XIV-B by replacing the reference to the assessment of total income with the assessment of total undisclosed income.

Thus, as mentioned earlier, the basic principle of the scheme of block assessment itself has been changed with retrospective effect from 1^st September, 2024 restricting it now to the assessment of only undisclosed income.

It is worth noting that surprisingly no changes have been made to the provisions dealing with the abatement of the assessments under the other provisions of the Act pending as of the date of initiation of the search. Section 158BA(2) has remained unamended which provides that the assessment or reassessment under the other provisions of the Act pertaining to any assessment year falling in the block period on the date of initiation of search or making of requisition shall abate and shall be deemed to have abated on the date of initiation of search or making of requisition. Although these pending assessments are considered to have been abated, the Assessing Officer is going to make the assessment of only the undisclosed income while making block assessment under the amended provisions. There is no clarity as to whether and how the Assessing Officer would be assessing the income other than the undisclosed income in respect of those assessment years in respect of which the assessments were in progress but have abated as a result of the search being conducted. Therefore, it appears that this particular aspect has remained to be considered while making the amendments to the provisions dealing with the block assessment.

Further, under the erstwhile provisions dealing with the block assessment (as it was in existence prior to 2003), in which assessment was required to be made of only the undisclosed income in the manner same as which is provided now, there was an Explanation to Section 158BA(2) by which the position of the block assessment vis-à-vis the assessment under the other provisions was being clarified as under –

Explanation.—For the removal of doubts, it is hereby declared that—

(a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period;

(b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period;

(c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.

Under the current provisions as amended by the Finance Act 2025, no such clarity has been provided expressly as to whether the block assessment would be in addition to the regular assessment to be made under the regular provisions or there would be only one assessment, i.e. the block assessment. The very fact that the block assessment only deals with the undisclosed income implies that it is intended that the regular assessment can be made in addition to the block assessment for the purpose of making the assessment of the income other than the undisclosed income. However, if that is the case, then the question arises as to why such regular assessments, which were pending as of the date of initiation of the search are considered to have been abated.

Computation of the total undisclosed income of the block period

Section 158BB provides the manner of computing the income which needs to be assessed by the Assessing Officer under Section 158BA. Since this section was providing for the computation of the total income, it has also been amended consequentially to provide for the computation of only undisclosed income.

The amended provisions of Section 158BB provide that the total undisclosed income of the block period which is required to be assessed shall be the aggregate of the following –

(a).Undisclosed income declared by the assessee in the return furnished under Section 158BC;

(b).Undisclosed income determined by the Assessing Officer under Section 158BB(2).

The ‘undisclosed income’ has been defined in Section 158B(b), and there has been no change in this definition except for the inclusion of the virtual digital asset in the list of several assets like money, bullion, etc., which can be regarded as the undisclosed income if they are representing the income or property which has not been or would not have been disclosed for the purposes of the Income-tax Act.

Further, the provisions of Section 158BB have also been amended to specifically provide that the following income shall not be included in the total undisclosed income of the block period –

(a).The total income determined under the applicable provisions of the Act (like Section 143(1), 143(3), 144, 147, 153A, 153C, 158BC(1) etc.) prior to the date of initiation of the search or the date of the requisition, in respect of any previous year falling within the block period. Therefore, the income already assessed will not be included in the total undisclosed income.

(b).The total income declared in the return of income filed under Section 139 or in response to a notice under Section 142(1) prior to the date of initiation of the search or the date of requisition in respect of any previous year falling within the block period, if it is not covered by (a) above.

(c).The income as computed by the assessee in respect of the period as specified below and subject to the condition as mentioned below –

However, if the Assessing Officer is of the opinion that any part of such income referred to in the above table as computed by the assessee is undisclosed, then he may recompute such income accordingly.

Undisclosed income of any other person

Section 158BD provides for the assessment of the undisclosed income of any other person, i.e. the person other than a person in whose case the search was initiated under Section 132 or requisition was made under Section 132A. Such other person is required to be assessed when the Assessing Officer is satisfied that any undisclosed income emanating from the search belongs to or pertains to or relates to that person.

It was provided that the block period for the purpose of making the assessment of such other person would be the same period which has been considered to be the block period in the case of the person in whose case the search was conducted. However, it is quite possible that multiple persons are covered by the same search which has been conducted. In such case, the last of the authorisations for the search in the case of such different persons might be executed on different dates. As a result, the block period would not be the same and it would differ from person to person who has been searched. Therefore, in such a case, difficulty will arise in determining the block period for the purpose of making the assessment of the other person who was not covered by the search but the undisclosed income belonging to him has been found.

Therefore, the provisions of Section 158BD have now been amended to provide that where more than one person was covered by the search, then the block period for such another person would be the period which has been considered to be the block period in the case of such person amongst all the persons in whose case the search was conducted which is ending on a later date.

Extension of the time limit for furnishing the return of income in response to the notice issued under Section 158BC

As per Section 158BC, the concerned person is required to submit the return of income in response to the notice issued by the Assessing Officer in this regard. Consequent to the shift in the scheme of the block assessment from the assessment of the total income to the assessment of only undisclosed income, the amendment has also been made in this Section to provide that the return of income shall be filed declaring only the undisclosed income and not the total income.

Further, this return of income is required to be submitted within a period, not exceeding sixty days, as may be specified in the notice issued in this regard. The amendment has been made to provide that the time allowed for furnishing the return of income may be extended by a further period of thirty days if the following conditions are satisfied –

i. In respect of the previous year immediately preceding the previous year of search, the due date for furnishing the return has not expired prior to the date of initiation of such search;

ii. The assessee was liable for audit under Section 44AB for such previous year;

iii. The accounts of such previous year have not been audited on the date of issuance of such notice; and

iv. The assessee requests in writing for an extension of time for furnishing such return to get such accounts audited.

Other amendments

A few other amendments have also been made in Chapter XIV-B, which are summarised as under –

•  The ‘undisclosed income’ as defined in section 158B shall now even include ‘virtual digital asset’ in addition to any money, bullion, jewellery or other valuable article or thing, etc.
•  Section 158BA(4) provides that any block assessment which is pending in a case where a subsequent search has been initiated, or requisition has been made shall be duly completed, and thereafter, the block assessment in respect of such subsequent search or requisition shall be made. This provision has been amended to refer to the assessment ‘required to be made’ instead of the assessment which was ‘pending’. Therefore, not only the block assessment which was commenced and pending but also the block assessment required to be made consequent to the search already conducted earlier shall be completed first before making the block assessment in respect of the subsequent search.
• Section 158BA(2) provides for the abatement of the assessment or reassessment or recomputation which is being conducted under any other provisions of the Act other than the block assessment and which is pending on the date of initiation of the search or making of the requisition. Also, section 158BA(3) provides for the abatement of reference made to the Transfer Pricing Officer under section 92CA(1) or the order passed by the Transfer Pricing Officer under section 92CA(3) during the course of such pending proceeding for assessment or reassessment or recomputation.

Further, section 158BA(5) provides for the revival of such pending proceeding under any other provisions if the proceeding initiated for the block assessment under Chapter XIV-B or the order of assessment passed under section 158BC(1) has been annulled in appeal or any other legal proceeding. However, this provision providing for revival was referring only to the ‘assessment’ or ‘reassessment’ which had been abated under sections 158BA(2) or 158BA(3). Now, this provision has been amended to refer not only to the ‘assessment’ or ‘reassessment’ but also to ‘recomputation’ or ‘reference’ or ‘order’.

•  Section 158BE provides that the assessment order in respect of the block period shall be passed within twelve months from the end of the month in which the last of the authorisations for the search was executed or requisition was made. This provision has been amended to provide the period of twelve months shall be reckoned from the end of the quarter in which such last authorisation was executed or requisition was made.
• Section 158BI provided that the provisions of Chapter XIV-B shall not apply where the search was initiated, or the requisition was made before 1^st September, 2024, and proceedings in relation to such search or requisition shall be governed by the other provisions of the Act. This section has been completed and omitted with retrospective effect from 1^st September, 2024.

BCAJ Admin

Important Amendments by the Finance Act, 2025 are covered in three different Articles. It is not possible to cover all amendments at length, and hence, the focus is only on important amendments with a detailed analysis of their impacts. This in-depth analysis will serve as a future guide to know the existing provisions, current amendments, their rationale and impact. We hope that the detailed analysis will enrich the readers. – Editor

The Finance Act, 2025 carried out four amendments in the provisions relating to the exemption of charitable or religious trusts. All these amendments have somewhat relaxed the harshness of the provisions providing partial relief to charitable and religious trusts.

PERIOD OF REGISTRATION FOR SMALL TRUSTS

Every charitable or religious trust seeking exemption under sections 11 and 12 of the Income-tax Act, 1961, is required to be registered under section 12A. The procedure for this is laid down in section 12AB. There are 7 types of applications laid down under section 12A(1)(ac). One of these is a case where an application is made by a trust which was not registered so far under section 12A and which has not yet commenced its activities at the time of making the application [clause (vi)(A) of section 12A(1)(ac)]. Such a trust is granted a provisional registration for a period of 3 years. In all other cases [clauses (i) to (v) and (vi)(B)], registration is currently granted for a period of 5 years by the Commissioner of Income Tax (CIT) or Principal CIT.

By insertion of a proviso to section 12AB(1) with effect from 1st April, 2025, the Finance Act 2025 now grants a longer period of registration of 10 years to certain types of small trusts in all these cases where the period of registration was earlier 5 years, except for one category – clause (vi)(B), i.e. trusts which have commenced their activities and which have never been allowed exemption under clause (iv), (v), (vi) or (via) of section 10(23C) or under section 11 or section 12 before the date of the application since commencement of their activities. These trusts [clause (vi)(B)], even if they are small trusts, will continue to be granted registration only for a period of 5 years. Similarly, the period of registration of trusts covered by clause (vi)(A) remains unchanged at 3 years. There is also no change in the period of section 80G approval, even for eligible small trusts, which remains the same at 5 years.

The small trusts which are eligible to be granted the benefit of the longer period of exemption of 10 years are those trusts whose total income (before considering the exemption under sections 11 and 12) during each of the two previous years preceding the date of application does not exceed ₹5 crore. If income in any of the two years exceeds this limit, the benefit of such a longer period of registration would not be available.

The Finance Minister, in her Budget Speech, has stated:

“I propose to reduce the compliance burden for small charitable trusts / institutions by increasing their period of registration from 5 years to 10 years”.

The Explanatory Memorandum explains the rationale behind this amendment as under:

“2. It has been noted that applying for registration after every 5 years increases the compliance burden for trusts or institutions, especially for the smaller trusts or institutions.

3. To reduce the compliance burden for the smaller trusts or institutions, it is proposed to increase the period of validity of registration of trust or institution from 5 years to 10 years, in cases where the trust or institution made an application under sub-clause (i) to (v) of the clause (ac) of sub-section (1) of section 12A, and the total income of such trust or institution, without giving effect to the provisions of sections 11 and 12, does not exceed ₹5 crores during each of the two previous years, preceding to the previous year in which such application is made.”

In the FAQs issued, the amendments have been explained as under:

Q.2. What amendment has been carried out in respect of registration of trusts?

Ans. The period of validity of registration of a trust or institution with income below ₹5 Crore has been increased from 5 years to 10 years in certain cases.

Q.3. Which cases shall benefit from the above amendment?

Ans. The amended provisions shall be applicable to certain small trusts or institutions whose total income does not exceed ₹5 crores in each of the two previous years, preceding the previous year in which application is made.

In computing income for this limit of ₹5 crore:

i.  The income of the trust has to be considered on a commercial income basis based on the method of accounting followed by the trust;

ii. all incomes of the trust, including donations, have to be considered;

iii.  in case the trust is carrying on a business, the net business income of the trust is to be considered;

iv. Corpus donations are also to be considered, adopting a conservative view, as the tax authorities are of the view that such donations are income which may be exempt under section 11(1)(d);

v.  Administrative expenses are not to be deducted, unless such expenses are incurred to earn the income;

vi. Only profit on the sale of assets as per books of account is to be considered as income, and not the entire sales proceeds nor the capital gains as computed under the head “Capital Gains”.

Since the amendment is with effect from 1^st April, 2025, and is a procedural amendment, it applies to all cases where registration is granted on or after 1^st April, 2025. There is a doubt as to whether it would apply to extend existing registrations automatically, since it also applies to cases covered by clause (i) of section 12A(1)(ac). From the manner in which the proviso is drafted, the amendment will not extend to cases of existing registrations – it will apply only to approvals granted after that date. All those cases where the registration was granted for a period of 5 years from 1^st April, 2021 to 31^st March, 2026, including such small trusts, would now need to apply for renewal of their registration on or before 30^th September, 2025. The renewed registration, when granted, would then be for a period of 10 years if the trust qualifies for such a longer period of registration.

A large number of trusts (approximately 2,50,000 trusts) with existing registration as of 31^st March, 2021, would have been granted registration for a period of 5 years till 31^st March, 2026. The applications of all these trusts would have to be processed within a period of 6 months by 31^st March 2026, a mammoth task indeed, if all documents and activities of each such trust have to be scrutinised. Not only that, during the same period, section 80G renewal applications of the vast majority of trusts having such approval would also have to be processed. Since a large number of such trusts are small trusts with a total income of less than ₹5 crore, it would have been better had the amendment extended the existing 5-year registration automatically to a period of 10 years, in the case of all such trusts whose total income is less than ₹5 crore for the 2 years ending 31^st March 2024 and 31^st March 2025. This would have ensured that the focus of the renewal process would then be on the larger trusts.

One aspect which needs to be kept in mind by such small trusts is that after the next renewal period of 10 years, at the time of subsequent renewal, details would have to be provided of activities, etc., over the longer time period of the last 10 years. It would, therefore, be essential for such trusts to maintain a year-wise record of such activities on an ongoing basis to avoid a situation where the trust is unable to provide details of activities carried out from the date of the last renewal till the date of a subsequent application for renewal. Similarly, the records of the trust would have to be maintained for such a longer period, so as to facilitate reply to any query that may be raised during the process of scrutiny of the renewal application.

SUBSTANTIAL CONTRIBUTOR – SECTION 13(3)

Under section 13(1)(c), if any part of the income or property of the trust is utilised for the benefit of a person specified in section 13(3), such income is subjected to tax at the rate of 30% under section 115BBI, besides attracting a penalty at 100% of such amount under section 271AAE for the first offence, and at 200% of such amount for subsequent offences.

The persons specified in section 13(3) include a person who has made donations exceeding ₹50,000 in aggregate to the trust since its inception till the end of the relevant year (a substantial contributor). This limit was ₹5,000 from 1976 to 1984, ₹25,000 from 1985 to 1994 and ₹50,000 thereafter till 2025. Effectively therefore, this limit, which was earlier being modified every 10 years, had remained unchanged for 30 years. The absurdity of such a low limit resulted in a situation where most large trusts were unable to keep a list of such donors (which is one of the documents required to be kept by a charitable trust), and therefore, in cases of the audit reports (Form 10B or 10BB) in most of the trusts, there was a qualification to the effect that the trust had been unable to identify and maintain a list of such substantial contributors.

This limit of ₹50,000 in aggregate has now been increased with effect from 1^st April 2025 (i.e. AY 2025-26) to a more reasonable aggregate limit of ₹10,00,000, with an additional alternative limit of donations exceeding ₹1,00,000 for the year. Therefore, a person would be regarded as a substantial contributor either if he has made aggregate donations exceeding ₹10,00,000 over the years or has made a donation exceeding ₹1,00,000 during the relevant year. Hitherto, since there was only an aggregate limit, a person who became a substantial contributor in one year would always remain a substantial contributor for future years, since he had already crossed the aggregate limit of ₹ 50,000. Now, given the two alternative limits, it is possible that a person who is a substantial contributor in one year on account of donations exceeding ₹1,00,000 in that year may not be a substantial contributor in a subsequent year due to the fact that he may not have contributed more than ₹ 10,00,000 in aggregate over the years.

Unfortunately, many trusts, particularly large trusts which have been in existence for many decades, would continue to face difficulty in compiling a list of such substantial contributors with accuracy, since the list has to take into account the aggregate donations received over the past many decades, an impossible task. It would perhaps have been better if the limit of aggregate donations had been made applicable only to donations made in the last few years – maybe 5 years or 10 years, which would have ensured proper compliance by all trusts.

RELATIVE AND CONCERN OF SUBSTANTIAL CONTRIBUTORS – SECTION 13(3)

The list of specified persons in section 13(3) also included:

♦ any relative of persons referred to in clauses (a) – author or founder, (b) – substantial contributor, (c) – any member of the HUF if a HUF was an author, founder, or substantial contributor, and

♦any concerns in which any of the above (including trustees and relatives of such persons) has a substantial interest.

The definition of “relative”, contained in Explanation 1 to section 13, was fairly vast, as under:

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) any lineal ascendant or descendant of the individual;

(v) any lineal ascendant or descendant of the spouse of the individual;

(vi) spouse of a person referred to in any of the above clauses;

(vii) any lineal ascendant or descendant of a brother or sister of either the individual or of the spouse of the individual.

Here also, obtaining such details of relatives, particularly from substantial contributors, was an impossible task for the trust, as no donor would want to give so many personal details to an organisation to which he was doing a favour by donating. Similarly, obtaining details of concerns in which donors or their relatives have a substantial interest was again almost impossible.

The Finance Act 2025 has amended the definition of specified persons in section 13(3) by excluding relatives of substantial contributors and concerns in which substantial contributors or their relatives have substantial interest from this definition.

The Explanatory Memorandum has also recognised the practical difficulty as under:

“Suggestions have been received that there are difficulties in furnishing certain details of persons other than author, founder, trustees or manager etc. who have made a ‘substantial contribution to the trust or institution’, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees. These details are about their relatives and the concerns, in which they are substantially interested.”

However, relatives of the author or founder, trustees or manager, and concerns in which the author or founder, trustees or manager or their relatives have a substantial interest would continue to be regarded as specified persons. The FAQs clarify this as under:

“Q.7. Whether the relaxation provided to specified person also covers author, founder of trust, trustees, member or manager of the trusts?

Ans. It is clarified that the relaxation shall not apply to author, founder of trust, trustees, member or manager of the trusts”.

Unfortunately, there has been no amendment to the definition of “relative”, which is fairly wide and ropes in even a person not closely related; to illustrate, a brother-in-law’s or sister-in-law’s granddaughter would also be covered. Fortunately, her husband would not be covered! Even for a trustee, to provide such a detailed list of relatives and concerns in which they are substantially interested is indeed a tall task. Getting new trustees today is, as it is, a difficult proposition for most trusts – such detailed compliance adds to the reluctance of persons to take on what is often an honorary and thankless post. One wishes and hopes that the definition of relative is aligned with that under the Companies Act 2013, which only extends to first-degree relatives – spouse, member of HUF, father, mother, son, son’s wife, daughter, daughter’s husband, brother and sister. Unfortunately, even in the draft Income Tax Bill 2025, the same definition of “relative” is continued.

CANCELLATION OF REGISTRATION – SECTION 12AB

Section 12AB(4) provides for cancellation of registration of a trust, if it has committed specified violations. The list of specified violations is contained in the explanation to s.12AB(4). Clause (g) of the explanation refers to a situation where the application referred to in s.12A(1)(ac) (i.e. application for registration or renewal of registration under s.12A) is not complete or contains false or incorrect information.

This clause has been amended by the Finance Act 2025, to remove the reference to application not being complete with effect from 1^st April 2025. The amended specified violation would now cover only a situation where the application contains false or incorrect information and would apply to situations where the cancellation order is being passed after 1^st April 2025.

The Explanatory Memorandum states that:

“ It is noted that even minor default, where the application referred to in clause (ac) of sub-section (1) of section 12A is not complete, may lead to cancellation of registration of trust or institution, and such trust or institution becomes liable to tax on accreted income as per provisions of Chapter XII-EB of the Act.

It is, therefore, proposed to amend the Explanation to sub-section (4) of section 12AB so as to provide that the situations where the application for registration of trust or institution is not complete, shall not be treated as specified violation for the purpose of the said sub-section.”

In the FAQs, it is clarified as under:

“Q.4. What amendment has been carried out in provisions relating to ‘specified violation’ in the case of trusts or institution?

Ans Under current provision an ‘incomplete’ application for registration is treated as specified violation. This may result in cancellation of registration and consequently, fair market value of the assets becomes chargeable to tax under the Act.

In order to prevent harsh consequences for default of filing incomplete application, the above amendment has been carried out. The trust or institution shall be able to complete the application and the same shall be considered for the purposes of registration.”

This amendment really rectifies a drafting mistake made when the provision was introduced, as if an application was incomplete, under rule 17A(6), the Commissioner has the power to reject the application and cancel the registration. While processing the application, the fact that it is incomplete would be obvious, resulting in a rejection, which may not always be the case with respect to incorrect or false information provided in the form, which may come to light later. Hence, the provision for cancellation was perhaps justified for false or incorrect information, but not for incomplete application.

Post amendment, an issue that may arise is whether an omission to provide certain information may amount to giving false or incorrect information. To illustrate, a practical situation often faced is when the Commissioner has cancelled the registration of a trust, and the Appellate Tribunal has set aside such an order of cancellation. One of the questions to be answered in Form 10AB is whether any application for registration made by the applicant in the past has been rejected. This question has to be answered only with a “yes” or “no”. If the trust states “no”, would this amount to giving false or incorrect information? This should not amount to giving incorrect or false information, as when the Tribunal sets aside the order of rejection of the Commissioner, that rejection order ceases to exist. At best, it can be said to be a provision of incomplete information, though that too may not hold good, as the form itself merely requires ticking of the appropriate box without any further details.

CONCLUSION

These amendments, though providing some relief to charitable trusts, do not really address all the issues and problems being faced in these areas by charitable trusts, as discussed above. These amendments have also been incorporated in the draft of the Income Tax Bill 2025, which has been introduced in Parliament, and therefore, one may have to wait for some time for any further amendments in this regard unless the Income Tax Bill 2025 is appropriately amended before being enacted.

BCAJ Admin