Section 184 — Interpretation. Successor to s.102 of the 1961 Act.
Section 184 is in Chapter XI — General Anti-Avoidance Rule, which runs from section 178 to section 184.
The definition clause for the general anti-avoidance rule Chapter, drafted wide at every point.
Clause (1) makes an "accommodating party" a party whose main purpose in participating, directly or indirectly and in whole or in part, is to obtain a tax benefit for the assessee — expressly whether or not that party is a connected person in relation to any party to the arrangement. Clause (2) makes an "arrangement" any step in, or part or whole of, any transaction, operation, scheme, agreement or understanding, enforceable or not, including the alienation of property in it. Clause (3) makes "asset" include property or right of any kind, clause (4) makes "benefit" include a payment of any kind, tangible or intangible.
Clause (5) defines "connected person" through eight sub-clauses: relatives of an individual; directors of a company and their relatives; partners or members of a firm, association of persons or body of individuals and their relatives; members of a Hindu undivided family and their relatives; an individual with a substantial interest in the person's business and his relatives; an entity or family having a substantial interest in the person's business, and its directors, partners, members and their relatives; an entity or family whose director, partner or member has such an interest; and any other person carrying on a business in which the person, or its director, partner, member or a relative, has a substantial interest.
Clause (6) makes "fund" include cash, cash equivalents and rights or obligations to receive or pay them; clause (7) makes "party" include a person or a permanent establishment participating in an arrangement; clause (8) takes "relative" from section 92(5)(g). Clause (9) sets the substantial interest test at beneficial ownership of equity shares carrying at least 20% of the voting power where the business is carried on by a company, or beneficial entitlement to at least 20% of the profits in any other case, in each case at any time during the financial year. Clause (10) defines "step"; clause (11) makes "tax benefit" include a reduction, avoidance or deferral of tax or other amount payable, an increase in a refund, either of those arising as a result of a tax treaty, a reduction in total income and an increase in loss, in the relevant tax year or any other tax year; clause (12) defines "tax treaty" as an agreement referred to in section 159(1) or (2).
An anti-avoidance rule is only as wide as the words it is built on, and each definition closes a route of escape: an unenforceable understanding is still an arrangement, a single step is still an arrangement, a helper who is a stranger to the group is still an accommodating party, and a benefit obtained through a treaty or realised in another tax year is still a tax benefit. Fixing a 20% test gives the connected person web a hard edge rather than leaving relationship to judgment.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Substantial interest where the business is carried on by a company | At least 20% of the voting power | Beneficial ownership of equity shares carrying that voting power at any time during the financial year | Clause (9)(a) |
| Substantial interest in any other case | At least 20% of the profits of the business | Beneficial entitlement to that share at any time during the financial year | Clause (9)(b) |
Nothing here decides a case by itself, but it decides how far the Chapter reaches. Three definitions do most of the work: an arrangement can be a single step in an unenforceable understanding, an accommodating party need not be connected to anyone, and a tax benefit exists even where no tax was saved in the year — deferral, a reduced total income, an increased loss, or an advantage arising through a tax treaty all count, in the relevant tax year or any other. The 20% substantial interest test is applied at any time during the financial year, so a holding since sold down still makes the parties connected persons.
A company beneficially owns equity shares carrying 22% of the voting power in another company at one point during the financial year and sells down to 5% before the year ends. The clause (9)(a) test is satisfied, because it asks only whether the holding existed at any time during the year, so the two are connected persons. A third entity brought into an arrangement solely so that a loss increases for one of them is an accommodating party under clause (1), and the increased loss is itself a tax benefit under clause (11)(f), even though no tax was saved that year.
Not met on its own. You meet it inside a notice, reference or order invoking the general anti-avoidance rule, where "arrangement", "tax benefit", "connected person" and "accommodating party" each carry the meaning fixed here rather than their ordinary commercial sense.
"accommodating party" means a party to an arrangement, if the main purpose of the direct or indirect participation of that party in the arrangement, in whole or in part, is to obtain, directly or indirectly, a tax benefit (but for the provisions of this Chapter) for the assessee whether or not the party is a connected person in relation to any party to the arrangement
"arrangement" means any step in, or a part or whole of, any transaction, operation, scheme, agreement or understanding, whether enforceable or not
such person is, at any time during the financial year, the beneficial owner of equity shares carrying at least 20% of the voting power
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.