The Assessing Officer has written that he proposes to invoke Chapter X-A. Which provision actually gives him that power, from which assessment year does it bite, and can he pick on a single step of a transaction that as a whole was done for real commercial reasons?
Section 95(1) is the gateway, and it does two things: it opens with "Notwithstanding anything contained in the Act", so Chapter X-A overrides the rest of the Act, and it allows an arrangement to be "declared to be an impermissible avoidance arrangement" with the tax consequences then determined under the Chapter. Section 95(2) confines the whole Chapter to "any assessment year beginning on or after the 1st day of April, 2018" — that is AY 2018-19 onwards, and nothing earlier. The Explanation is the sting: the Chapter "may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement", so the officer does not have to condemn your whole transaction; he can isolate one step inside it.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2018-04-01, reported as Section 95 of the Income-tax Act, 1961; sub-section (1) reproduced by the ITAT Pune at para 6 of ITA Nos. 2111 and 1980/PUN/2017 (8 December 2020). It bears on section 95, section 95(1), section 95(2), section 96, section 96(2), section 97, section 98, section 100, section 102, section 144BA, section Rule 10U of the Income Tax Act 1961, in How Tax Law Is Read and Assessment & Scrutiny matters.
Three things follow, and each of them decides real cases. First, the non-obstante clause means it is no answer that a specific provision of the Act permits what you did; the Chapter is expressly given priority over the rest of the Act, and s.100 goes further by allowing it to be applied "in addition to, or in lieu of, any other basis" for determining tax. Second, s.95(2) is a hard date. An arrangement entered into in 2012 is not immune — Rule 10U(2) applies the Chapter to any arrangement irrespective of when it was entered into, in respect of the tax benefit obtained on or after 1 April 2017 — but the assessment year in which the officer is working must be AY 2018-19 or later. A GAAR-flavoured addition in an assessment for AY 2017-18 or earlier is not a Chapter X-A addition at all, whatever the order calls it; it has to stand or fall on ordinary law. Third, the Explanation defeats the most natural line of defence. A taxpayer who says "look at the transaction as a whole, it was a genuine business reorganisation" has to meet the point that Parliament has expressly authorised the Chapter to be trained on a single step, and s.96(2) then presumes that a step whose main purpose is a tax benefit taints the whole arrangement unless the assessee proves the contrary. The counter-argument lives in s.97(1)(a), which asks whether the substance of the arrangement AS A WHOLE differs from the form of its individual steps — and in s.102(1), which defines "arrangement" so as to include "any step in" a transaction.
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 95, confirmed word for word on two separately published versions of the section, reads: "CHAPTER X-A GENERAL ANTI-AVOIDANCE RULE. Applicability of General Anti-Avoidance Rule. 95. (1) Notwithstanding anything contained in the Act, an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter. (2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of April, 2018. Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement."
Not a judgment. The statutory position is that Chapter X-A is opened by s.95(1), which overrides the rest of the Act by an express non-obstante clause and permits an arrangement to be declared an impermissible avoidance arrangement with the tax consequences then determined under the Chapter; that by s.95(2) the Chapter applies only to an assessment year beginning on or after 1 April 2018, so AY 2018-19 is the earliest year in which it can operate; and that by the Explanation the Chapter may be applied to any step in, or a part of, an arrangement exactly as it applies to the whole arrangement.
Not a judgment; no judicial reasoning is stated for the section itself. On its operation the ITAT Pune recorded at paragraph 6 of its order of 8 December 2020 that "Chapter X-A of the Act containing GAAR has also been made applicable from the 1st day of April, 2018" and that "Starting with a non-obstante clause, section 95(1) provides that an arrangement entered into by an assessee may be declared an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter."
Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement.
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Handle my notice → Ask a CA on WhatsAppSection 95(1) is the gateway, and it does two things: it opens with "Notwithstanding anything contained in the Act", so Chapter X-A overrides the rest of the Act, and it allows an arrangement to be "declared to be an impermissible avoidance arrangement" with the tax consequences then determined under the Chapter. Section 95(2) confines the whole Chapter to "any assessment year beginning on or after the 1st day of April, 2018" — that is AY 2018-19 onwards, and nothing earlier. The Explanation is the sting: the Chapter "may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement", so the officer does not have to condemn your whole transaction; he can isolate one step inside it. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 95, section 95(1), section 95(2), section 96, section 96(2), section 97, section 98, section 100, section 102, section 144BA, section Rule 10U of the Income Tax Act 1961. It is reported as Section 95 of the Income-tax Act, 1961; sub-section (1) reproduced by the ITAT Pune at para 6 of ITA Nos. 2111 and 1980/PUN/2017 (8 December 2020). Three things follow, and each of them decides real cases. First, the non-obstante clause means it is no answer that a specific provision of the Act permits what you did; the Chapter is expressly given priority over the rest of the Act, and s.100 goes further by allowing it to be applied "in addition to, or in lieu of, any other basis" for determining tax. Second, s.95(2) is a hard date. An arrangement entered into in 2012 is not immune — Rule 10U(2) applies the Chapter to any arrangement irrespective of when it was entered into, in respect of the tax benefit obtained on or after 1 April 2017 — but the assessment year in which the officer is working must be AY 2018-19 or later. A GAAR-flavoured addition in an assessment for AY 2017-18 or earlier is not a Chapter X-A addition at all, whatever the order calls it; it has to stand or fall on ordinary law. Third, the Explanation defeats the most natural line of defence. A taxpayer who says "look at the transaction as a whole, it was a genuine business reorganisation" has to meet the point that Parliament has expressly authorised the Chapter to be trained on a single step, and s.96(2) then presumes that a step whose main purpose is a tax benefit taints the whole arrangement unless the assessee proves the contrary. The counter-argument lives in s.97(1)(a), which asks whether the substance of the arrangement AS A WHOLE differs from the form of its individual steps — and in s.102(1), which defines "arrangement" so as to include "any step in" a transaction. If it applies to you, the first step is this: Find the assessment year on the face of the notice. If it is AY 2017-18 or earlier, take the point that s.95(2) does not permit the Chapter to be applied at all, and make the Revenue identify the ordinary provision it is really relying on.
Section 95, confirmed word for word on two separately published versions of the section, reads: "CHAPTER X-A GENERAL ANTI-AVOIDANCE RULE. Applicability of General Anti-Avoidance Rule. 95. (1) Notwithstanding anything contained in the Act, an arrangement entered into by an assessee may be declared to be an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter. (2) This Chapter shall apply in respect of any assessment year beginning on or after the 1st day of April, 2018. Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement." The matter was decided on 2018-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that Chapter X-A is opened by s.95(1), which overrides the rest of the Act by an express non-obstante clause and permits an arrangement to be declared an impermissible avoidance arrangement with the tax consequences then determined under the Chapter; that by s.95(2) the Chapter applies only to an assessment year beginning on or after 1 April 2018, so AY 2018-19 is the earliest year in which it can operate; and that by the Explanation the Chapter may be applied to any step in, or a part of, an arrangement exactly as it applies to the whole arrangement.
Not a judgment; no judicial reasoning is stated for the section itself. On its operation the ITAT Pune recorded at paragraph 6 of its order of 8 December 2020 that "Chapter X-A of the Act containing GAAR has also been made applicable from the 1st day of April, 2018" and that "Starting with a non-obstante clause, section 95(1) provides that an arrangement entered into by an assessee may be declared an impermissible avoidance arrangement and the consequence in relation to tax arising therefrom may be determined subject to the provisions of this Chapter." In the words reproduced by the source cited on this page: "Explanation.—For the removal of doubts, it is hereby declared that the provisions of this Chapter may be applied to any step in, or a part of, the arrangement as they are applicable to the arrangement."
It was decided by the CBDT Circulars & Instructions on 2018-04-01 and is reported as Section 95 of the Income-tax Act, 1961; sub-section (1) reproduced by the ITAT Pune at para 6 of ITA Nos. 2111 and 1980/PUN/2017 (8 December 2020). 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 95, section 95(1), section 95(2), section 96, section 96(2), section 97, section 98, section 100, section 102, section 144BA, section Rule 10U, 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. Not a judgment. The statutory position is that Chapter X-A is opened by s.95(1), which overrides the rest of the Act by an express non-obstante clause and permits an arrangement to be declared an impermissible avoidance arrangement with the tax consequences then determined under the Chapter; that by s.95(2) the Chapter applies only to an assessment year beginning on or after 1 April 2018, so AY 2018-19 is the earliest year in which it can operate; and that by the Explanation the Chapter may be applied to any step in, or a part of, an arrangement exactly as it applies to the whole arrangement. It arises in How Tax Law Is Read and Assessment & Scrutiny matters, on section 95, section 95(1), section 95(2), section 96, section 96(2), section 97, section 98, section 100, section 102, section 144BA, section Rule 10U 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. Ask the officer, in writing, to identify precisely which ARRANGEMENT and which STEP he says is impermissible. The Explanation entitles him to work at step level, but it also obliges him to say which step, because s.96 then has to be satisfied in relation to that step and s.98 consequences have to be framed around it. Do not rest on the fact that a specific section of the Act permitted the transaction. The non-obstante clause in s.95(1) and s.100 answer that argument on their face; you need a case on the s.96 tests themselves. Check the procedure before you argue merits: s.95 confers no power on the Assessing Officer to make a Chapter X-A addition on his own. The only route is the reference under s.144BA(1) to the Principal Commissioner or Commissioner, and s.144BA(12) forbids an assessment order carrying Chapter X-A consequences without that officer's prior approval. Run the exclusions in Rule 10U before anything else. If the aggregate tax benefit to all the parties in the relevant assessment year does not exceed three crore rupees, the Chapter does not apply at all and the merits never arise.
Still good law. The text is current: two separately published versions of the section carry it identically, and s.95(1) is reproduced in substantially the same words in a Tribunal order of 8 December 2020. No later published version of s.95 has been traced, so a still later one cannot be excluded. Validity of the section against any constitutional or vires challenge has not been checked; a challenge to the invocation of Chapter X-A is currently pending before the Bombay High Court in Hinduja Global Solutions Ltd v PCIT, W.P. No. 4867 of 2025, in which Rule was issued on 19 December 2025. Two points of substance a reader should carry from the section itself. Sub-section (1) opens with 'Notwithstanding anything contained in the Act', so the Chapter overrides the rest of the Act where it applies, and an argument that a transaction is expressly permitted by some other provision does not by itself take it outside Chapter X-A. And the Explanation is not a drafting flourish: it lets the Chapter be applied to a single step in an arrangement as if that step were the whole arrangement, so a taxpayer who defends the commercial substance of a transaction as a whole has not yet answered a case aimed at one step within it. The threshold and grandfathering in rule 10U are separate questions and are dealt with in this library under that rule, and they have to be cleared before s.95 is reached at all. 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.
Section 95 as it stands is the text substituted for the Finance Act 2012 version; the Finance Act 2012 had inserted a Chapter X-A which never came into force in that form. Two separately published versions of the section carry the present text word for word, and s.95(1) is reproduced in substantially the same words by the ITAT Pune at paragraph 6 of ITA Nos. 2111 and 1980/PUN/2017 (8 December 2020). A reader checking the section number elsewhere should be warned. Several older published texts bearing the number 95 carry a wholly different section, which was part of Chapter XI — additional income-tax on undistributed profits — and which was omitted by the Finance Act 1965 with effect from 1 April 1965. The number was reused, and nothing on this page is taken from that older provision. Anyone reading a pre-1965 text of 'section 95' is reading about something else entirely. The date in decided_on, 1 April 2018, is not a commencement date for the section itself. It is the first day of the first assessment year to which s.95(2) applies the Chapter, taken from the sub-section's own words, and it is not a decision date. Two steps of the history could not be verified from any official source and are recorded here as unverified. The substituted Chapter is said to have been brought in by the Finance Act 2013 with effect from 1 April 2016, and the Finance Act 2015 is said to have moved the s.95(2) date from 2016 to 2018. Neither has been confirmed, and neither should be relied on; what is established is the text of s.95(2) itself, which fixes the assessment year from which the Chapter applies. Judicial treatment of s.95 has not been checked beyond the decision named above and the Telangana High Court common order of 7 June 2024, which this library already carries. Nothing on this page states how the section has been construed, and the pending challenge recorded in the validity note should be watched before the section is relied on as settled. 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.
Not a judgment. The statutory position is that Chapter X-A is opened by s.95(1), which overrides the rest of the Act by an express non-obstante clause and permits an arrangement to be declared an impermissible avoidance arrangement with the tax consequences then determined under the Chapter; that by s.95(2) the Chapter applies only to an assessment year beginning on or after 1 April 2018, so AY 2018-19 is the earliest year in which it can operate; and that by the Explanation the Chapter may be applied to any step in, or a part of, an arrangement exactly as it applies to the whole arrangement.
TaxSphere, “Statutory position — s.95: the gateway into Chapter X-A, the years it reaches, and the Explanation that lets the department attack one STEP of an otherwise genuine transaction”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-95-chapter-x-a-gateway-non-obstante-clause-and-the-explanation-that-reaches-a-single-step/ (validity last checked 2026-09-09)
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The Commissioner's notice under s.144BA(2) says my arrangement is an impermissible avoidance arrangement. What exactly does the Revenue have to establish, and who has to prove what?
The AO invoked GAAR even though a specific anti-avoidance section covers my transaction. Can he do that?
The Assessing Officer says my client's 2015 restructuring is an impermissible avoidance arrangement. Can GAAR reach an arrangement entered into before it came into force, and is there a monetary floor below which it simply does not apply?
My client is a treaty resident and the treaty plainly gives him the better of it. The department is invoking Chapter X-A anyway. Can it, when s.90(2) says the more beneficial provision applies?
