My client is remitting money to a company in a low-tax jurisdiction. Does section 94A apply, and is any country actually notified as a notified jurisdictional area at the moment?
Section 94A lets the Central Government notify a country or territory as a notified jurisdictional area having regard to the lack of effective exchange of information, and once notified the consequences are severe and automatic: all parties to a transaction with a person located there are deemed associated enterprises, the transaction is deemed an international transaction so the entire transfer-pricing machinery applies, deductions are barred unless prescribed authorisations and documents are furnished, unexplained receipts from such a person are deemed to be income, and withholding is at the highest of the rate in force, the rate in the relevant provision and thirty per cent. The only notification under section 94A(1) that could be located was Notification No. 86/2013 notifying Cyprus, and it was rescinded by Notification No. 114/2016 with retrospective effect from 1 November 2013. No subsisting notification was found and no departmental list of notified jurisdictional areas could be opened, so nothing here certifies that no jurisdiction is notified today — section 94A should be neither treated as live against a jurisdiction nor written off as a dead letter without checking the current list.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2011-06-01, reported as Income-tax Act, 1961, section 94A, inserted by the Finance Act, 2011. It bears on section 94A, section 94A(1), section 94A(2), section 94A(3), section 94A(4), section 94A(5), section 94A(6), section 92A, section 92B, section 92C, section 92CA, section 92D, section 92E, section 92F, section 195, section 90 of the Income Tax Act 1961, in TDS Defaults, Deductions & Disallowances, Cash Credits & Unexplained Money and How Tax Law Is Read matters.
Section 94A is written as a set of non obstante consequences and every one of them can be triggered by a single payment. Sub-section (2) deems the parties associated enterprises and the transaction international, which pulls in sections 92, 92A, 92B, 92C (except the second proviso to sub-section (2)), 92CA, 92CB, 92D, 92E and 92F — including documentation and the accountant's report, and the exclusion of the second proviso to section 92C(2) means the arm's-length tolerance band is not available. Sub-section (3)(a) makes any payment to a financial institution located in the area non-deductible unless the assessee furnishes a prescribed authorisation permitting the Board to seek information from that institution, and sub-section (3)(b) makes any other expenditure or allowance, including depreciation, non-deductible unless prescribed documents are maintained and information furnished. Sub-section (4) is a deeming provision of the cash-credit type but harsher: a sum received or credited from a person located in the area is deemed to be the assessee's income unless the source is explained in the hands of that person or the beneficial owner. Sub-section (5) fixes withholding at the highest of three rates with a thirty per cent floor and is drafted 'notwithstanding anything contained in any other provisions of this Act'. Sub-section (6) defines 'person located in a notified jurisdictional area' to include a resident of the area, a non-individual established there, and a permanent establishment there of anyone else. The practical point is the last one: none of this operates unless there is a subsisting notification, and the one notification this pass located was withdrawn. An adviser should never imply a jurisdiction is notified without checking, and should equally never assume the section is dead letter, because sub-section (1) can be exercised again at any time.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 94A(1) empowers the Central Government, having regard to the lack of effective exchange of information with any country or territory outside India, to specify by notification in the Official Gazette such country or territory as a notified jurisdictional area in relation to transactions entered into by any assessee. Sub-section (2), notwithstanding anything to the contrary in the Act, deems all parties to a transaction with a person located in such an area to be associated enterprises within section 92A and deems the transaction — purchase, sale or lease of tangible or intangible property, provision of service, lending or borrowing of money, or any other transaction having a bearing on profits, income, losses or assets, including a cost-contribution arrangement — to be an international transaction within section 92B, and applies sections 92, 92A, 92B, 92C (except the second proviso to sub-section (2)), 92CA, 92CB, 92D, 92E and 92F accordingly. Sub-section (3) bars any deduction for a payment made to a financial institution located in the area unless the assessee furnishes a prescribed authorisation permitting the Board or an income-tax authority to seek relevant information from that institution, and bars any deduction for any other expenditure or allowance, including depreciation, arising from a transaction with a person located in the area unless prescribed documents are maintained and prescribed information furnished. Sub-section (4) deems any sum received or credited from a person located in the area to be the assessee's income for that previous year where the assessee offers no explanation about the source of the sum in the hands of that person or of the beneficial owner, or where the explanation is in the Assessing Officer's opinion not satisfactory. Sub-section (5) requires tax to be deducted at the highest of the rate or rates in force, the rate specified in the relevant provisions of the Act, and thirty per cent, where a person located in the area is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVII-B. Sub-section (6) defines 'person located in a notified jurisdictional area' to include a resident of the area, a person not being an individual established in the area, and a permanent establishment in the area of a person not falling in either of those categories, and adopts the definitions of 'permanent establishment' in section 92F(iiia) and 'transaction' in section 92F(v).
Statutory position — no holding is asserted; this entry reproduces statutory text. Section 94A operates only in relation to a country or territory that has been notified under sub-section (1); once notified, the deeming of associated-enterprise status and international-transaction status, the deduction bars, the deemed-income provision and the thirty per cent withholding floor all follow, each expressed to operate notwithstanding anything to the contrary in the Act.
The section is a set of defensive measures keyed to a single administrative act. Sub-section (1) is a bare enabling power with one stated criterion — lack of effective exchange of information — and it carries no non obstante clause, while sub-sections (2) to (5) each do. The structure means the consequences are not discretionary once the notification is in place: the Assessing Officer does not have to establish avoidance, only location. Sub-section (2) borrows the transfer-pricing code wholesale but excludes the second proviso to section 92C(2), removing the tolerance band. Sub-section (3) converts information access into a condition of deductibility, which is the mechanism by which the section addresses the information-exchange failure that justifies the notification in the first place. Sub-section (4) shifts the burden of explaining the source to the Indian assessee even though the source lies in the hands of a foreign person, and reaches through to the beneficial owner. Sub-section (5) is a floor, not a rate: it takes the highest of three figures, so a treaty rate or a lower domestic rate cannot bring the deduction below thirty per cent.
Notwithstanding anything contained in any other provisions of this Act, where any person located in a notified jurisdictional area is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVII-B, the tax shall be deducted at the highest of the following rates, namely:—
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Handle my notice → Ask a CA on WhatsAppSection 94A lets the Central Government notify a country or territory as a notified jurisdictional area having regard to the lack of effective exchange of information, and once notified the consequences are severe and automatic: all parties to a transaction with a person located there are deemed associated enterprises, the transaction is deemed an international transaction so the entire transfer-pricing machinery applies, deductions are barred unless prescribed authorisations and documents are furnished, unexplained receipts from such a person are deemed to be income, and withholding is at the highest of the rate in force, the rate in the relevant provision and thirty per cent. The only notification under section 94A(1) that could be located was Notification No. 86/2013 notifying Cyprus, and it was rescinded by Notification No. 114/2016 with retrospective effect from 1 November 2013. No subsisting notification was found and no departmental list of notified jurisdictional areas could be opened, so nothing here certifies that no jurisdiction is notified today — section 94A should be neither treated as live against a jurisdiction nor written off as a dead letter without checking the current list. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 94A, section 94A(1), section 94A(2), section 94A(3), section 94A(4), section 94A(5), section 94A(6), section 92A, section 92B, section 92C, section 92CA, section 92D, section 92E, section 92F, section 195, section 90 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, section 94A, inserted by the Finance Act, 2011. Section 94A is written as a set of non obstante consequences and every one of them can be triggered by a single payment. Sub-section (2) deems the parties associated enterprises and the transaction international, which pulls in sections 92, 92A, 92B, 92C (except the second proviso to sub-section (2)), 92CA, 92CB, 92D, 92E and 92F — including documentation and the accountant's report, and the exclusion of the second proviso to section 92C(2) means the arm's-length tolerance band is not available. Sub-section (3)(a) makes any payment to a financial institution located in the area non-deductible unless the assessee furnishes a prescribed authorisation permitting the Board to seek information from that institution, and sub-section (3)(b) makes any other expenditure or allowance, including depreciation, non-deductible unless prescribed documents are maintained and information furnished. Sub-section (4) is a deeming provision of the cash-credit type but harsher: a sum received or credited from a person located in the area is deemed to be the assessee's income unless the source is explained in the hands of that person or the beneficial owner. Sub-section (5) fixes withholding at the highest of three rates with a thirty per cent floor and is drafted 'notwithstanding anything contained in any other provisions of this Act'. Sub-section (6) defines 'person located in a notified jurisdictional area' to include a resident of the area, a non-individual established there, and a permanent establishment there of anyone else. The practical point is the last one: none of this operates unless there is a subsisting notification, and the one notification this pass located was withdrawn. An adviser should never imply a jurisdiction is notified without checking, and should equally never assume the section is dead letter, because sub-section (1) can be exercised again at any time. If it applies to you, the first step is this: Before anything else, check whether the country or territory is currently the subject of a subsisting notification under section 94A(1); on what this pass could read, Notification No. 86/2013 notifying Cyprus was rescinded by Notification No. SO 4033(E) [No. 114/2016] dated 14 December 2016, and no other notification was located.
Section 94A(1) empowers the Central Government, having regard to the lack of effective exchange of information with any country or territory outside India, to specify by notification in the Official Gazette such country or territory as a notified jurisdictional area in relation to transactions entered into by any assessee. Sub-section (2), notwithstanding anything to the contrary in the Act, deems all parties to a transaction with a person located in such an area to be associated enterprises within section 92A and deems the transaction — purchase, sale or lease of tangible or intangible property, provision of service, lending or borrowing of money, or any other transaction having a bearing on profits, income, losses or assets, including a cost-contribution arrangement — to be an international transaction within section 92B, and applies sections 92, 92A, 92B, 92C (except the second proviso to sub-section (2)), 92CA, 92CB, 92D, 92E and 92F accordingly. Sub-section (3) bars any deduction for a payment made to a financial institution located in the area unless the assessee furnishes a prescribed authorisation permitting the Board or an income-tax authority to seek relevant information from that institution, and bars any deduction for any other expenditure or allowance, including depreciation, arising from a transaction with a person located in the area unless prescribed documents are maintained and prescribed information furnished. Sub-section (4) deems any sum received or credited from a person located in the area to be the assessee's income for that previous year where the assessee offers no explanation about the source of the sum in the hands of that person or of the beneficial owner, or where the explanation is in the Assessing Officer's opinion not satisfactory. Sub-section (5) requires tax to be deducted at the highest of the rate or rates in force, the rate specified in the relevant provisions of the Act, and thirty per cent, where a person located in the area is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVII-B. Sub-section (6) defines 'person located in a notified jurisdictional area' to include a resident of the area, a person not being an individual established in the area, and a permanent establishment in the area of a person not falling in either of those categories, and adopts the definitions of 'permanent establishment' in section 92F(iiia) and 'transaction' in section 92F(v). The matter was decided on 2011-06-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position — no holding is asserted; this entry reproduces statutory text. Section 94A operates only in relation to a country or territory that has been notified under sub-section (1); once notified, the deeming of associated-enterprise status and international-transaction status, the deduction bars, the deemed-income provision and the thirty per cent withholding floor all follow, each expressed to operate notwithstanding anything to the contrary in the Act.
The section is a set of defensive measures keyed to a single administrative act. Sub-section (1) is a bare enabling power with one stated criterion — lack of effective exchange of information — and it carries no non obstante clause, while sub-sections (2) to (5) each do. The structure means the consequences are not discretionary once the notification is in place: the Assessing Officer does not have to establish avoidance, only location. Sub-section (2) borrows the transfer-pricing code wholesale but excludes the second proviso to section 92C(2), removing the tolerance band. Sub-section (3) converts information access into a condition of deductibility, which is the mechanism by which the section addresses the information-exchange failure that justifies the notification in the first place. Sub-section (4) shifts the burden of explaining the source to the Indian assessee even though the source lies in the hands of a foreign person, and reaches through to the beneficial owner. Sub-section (5) is a floor, not a rate: it takes the highest of three figures, so a treaty rate or a lower domestic rate cannot bring the deduction below thirty per cent. In the words reproduced by the source cited on this page: "Notwithstanding anything contained in any other provisions of this Act, where any person located in a notified jurisdictional area is entitled to receive any sum or income or amount on which tax is deductible under Chapter XVII-B, the tax shall be deducted at the highest of the following rates, namely:—"
It was decided by the CBDT Circulars & Instructions on 2011-06-01 and is reported as Income-tax Act, 1961, section 94A, inserted by the Finance Act, 2011. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 94A, section 94A(1), section 94A(2), section 94A(3), section 94A(4), section 94A(5), section 94A(6), section 92A, section 92B, section 92C, section 92CA, section 92D, section 92E, section 92F, section 195, section 90, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position — no holding is asserted; this entry reproduces statutory text. Section 94A operates only in relation to a country or territory that has been notified under sub-section (1); once notified, the deeming of associated-enterprise status and international-transaction status, the deduction bars, the deemed-income provision and the thirty per cent withholding floor all follow, each expressed to operate notwithstanding anything to the contrary in the Act. It arises in TDS Defaults, Deductions & Disallowances, Cash Credits & Unexplained Money and How Tax Law Is Read matters, on section 94A, section 94A(1), section 94A(2), section 94A(3), section 94A(4), section 94A(5), section 94A(6), section 92A, section 92B, section 92C, section 92CA, section 92D, section 92E, section 92F, section 195, section 90 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If a notification is in force for the relevant year, treat every counterparty in that area as an associated enterprise and the transaction as an international transaction, and file the section 92E accountant's report and maintain section 92D documentation — and note that the second proviso to section 92C(2), the tolerance band, is expressly excluded. For any payment to a financial institution in the area, obtain and file the prescribed authorisation permitting the Board or an income-tax authority to seek information from that institution; without it, section 94A(3)(a) denies the deduction outright. For any other expenditure or allowance from a transaction with a person located in the area, including depreciation, maintain the prescribed documents and furnish the prescribed information, or the deduction is denied under section 94A(3)(b). On any receipt or credit from a person located in the area, be ready to explain the source in the hands of that person, or of the beneficial owner if that person is not the beneficial owner; an unexplained or unsatisfactorily explained sum is deemed income under section 94A(4). Deduct tax at the highest of the rate in force, the rate in the relevant provision and thirty per cent under section 94A(5), and do not net it against a treaty rate — the sub-section opens with a non obstante clause. Check the location tests in section 94A(6)(i) — residence in the area, establishment there for a non-individual, or a permanent establishment there — because a counterparty incorporated elsewhere can still be 'located' in the area through a permanent establishment.
Still good law. This is the statutory text, not a decision about it. Section 94A was read in full on a departmental page stamped 'Year: 2025' and its sub-sections (1) and (2) cross-read on the 2011-stamped original page, which prints the same words. The constitutional validity of section 94A(1) was upheld by the Madras High Court in W.P.Nos.17241 to 17243 and 17407 to 17412 of 2015 on 12 April 2016; the appeals against that judgment, Civil Appeals Nos. 5159-5167 of 2016, were disposed of by the Supreme Court on 6 January 2017 without any opinion on the merits. On the notification position, the only notification located was Notification No. 86/2013 (Cyprus), rescinded by Notification No. 114/2016 and clarified by Circular No. 15 of 2017 to operate retrospectively from 1 November 2013. No departmental list of currently notified jurisdictional areas could be opened on this pass, so the absence of any subsisting notification is NOT certified. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two cautions. (1) On the current notification position this entry states only what it could read: the text of Notification No. SO 3307(E) [No. 86/2013] dated 1 November 2013 notifying Cyprus, and of Notification No. SO 4033(E) [No. 114/2016] dated 14 December 2016 rescinding it, together with Notification No. SO 4082(E) [No. 119/2016] dated 16 December 2016 and CBDT Circular No. 15 of 2017 dated 21 April 2017 clarifying that the rescission operates retrospectively from 1 November 2013 — all read as reproduced in the Chennai Tribunal's order in I.T.A. Nos. 1021 and 1022/Mds/2017 and independently confirmed through a second retrieval route on the same order. This pass could NOT open a departmental list of notified jurisdictional areas and does not assert that no jurisdiction is notified today; it asserts only that none was located. The reader must verify before advising. (2) The departmental section pages for section 94A run through many archived versions — /w/section-94a is stamped Year 2011, -1 is 2012, -2 is 2013, -3 is 2014, -4 is 2015, -15 is 2018, and /w/section-94a-17 is section 94A of the repealed Companies Act 1956, not of the Income-tax Act at all. The text here is from /w/section-94a-14, stamped Year 2025, which prints no amendment footnotes; the commencement date of 1 June 2011 is taken from the Explanatory Notes to the Finance Act 2011 as reproduced inside the Madras High Court's judgment in W.P.Nos.17241 to 17243 and 17407 to 17412 of 2015, which is a document quoted in that judgment and not the Court's own words. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position — no holding is asserted; this entry reproduces statutory text. Section 94A operates only in relation to a country or territory that has been notified under sub-section (1); once notified, the deeming of associated-enterprise status and international-transaction status, the deduction bars, the deemed-income provision and the thirty per cent withholding floor all follow, each expressed to operate notwithstanding anything to the contrary in the Act.
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