Section 119

Section 119 — the law in short

What the courts have decided on section 119, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Union of India v Azadi Bachao Andolan Supreme CourtHelps taxpayerValidity unconfirmed
  My investor is a Mauritius company held by people in a third country. Can the Department refuse it the treaty benefit on the ground that this is treaty shopping?
  No, not on that ground alone. The Supreme Court held that a resident of a third state taking advantage of a treaty between two others is not by itself illegal. If the treaty carries no limitation of benefits clause, there is no disabling condition to be read into it, and the motive with which the entity was incorporated is irrelevant. The Court also rejected the argument that avoidance of double taxation requires tax actually to be paid in one of the two states: an exemption agreed in a treaty operates whether or not the other state taxes. The Court declined to lift the corporate veil where the treaty had been made applicable by section 90.
• CIT v Anjum M.H. Ghaswala Supreme CourtHelps department
  Can interest under ss.234A, 234B and 234C be waived?
  Not by the authority hearing your case. The levy is mandatory and automatic, and even the Settlement Commission cannot reduce or waive it. The only route to relief is a CBDT circular issued under s.119.
• UCO Bank v CIT Supreme CourtHelps taxpayer
  A Board circular gives me a benefit the section itself does not clearly allow. Can the Assessing Officer ignore it and apply the strict law instead?
  No. The Supreme Court held that the Central Board of Direct Taxes has statutory power under section 119 to tone down the rigour of the law in favour of assessees and to secure a fair administration of the Act, and that circulars issued in exercise of that power bind the authorities administering the Act. Applying the circular of 9 October 1984, it held that interest on doubtful loans credited by a bank to a suspense account, where nothing had been recovered for three accounting years, was not taxable in the fourth year and afterwards until actually received. The bank's appeal was allowed.
• Keshavji Ravji & Co v CIT Supreme CourtHelps taxpayerSuperseded by amendment
  A Board circular supports my reading of the section. Can I hold the Tribunal or the High Court to it, and can a circular settle what a provision means?
  No. The Supreme Court held that the Board cannot pre-empt a judicial interpretation of a provision by issuing a circular, that a circular cannot impose on the taxpayer a burden higher than the Act on its true construction, and that the task of interpreting the law belongs exclusively to the courts, which circulars do not bind. Circulars issued under section 119 that are beneficial to assessees and tone down the rigour of the law do bind the authorities administering the Act, and their benefit is available even where they depart from the strict statute - but the Tribunal and the High Court are not such authorities.
• K.P. Varghese v ITO Supreme CourtHelps taxpayerSuperseded by amendment
  The AO says I sold below market value and wants to tax the difference. Can he do that?
  Not on the gap alone. Section 52(2) applied only where the consideration had actually been understated; a difference of more than fifteen per cent between fair market value and the declared price was not by itself enough, and the burden of establishing actual understatement lay on the Revenue.
• Ganesh Dass Khanna v ITO High CourtHelps taxpayerValidity unconfirmed
  I got a section 148 notice for 2016-17 where the alleged escaped income is under Rs 50 lakh. Is three years the limit, or can they use ten?
  Three years. The Delhi High Court held that where the escaped income is below Rs 50 lakh, clause (a) of section 149(1) applies and no notice under section 148 may issue after three years from the end of the relevant assessment year. It quashed the section 148A(d) orders and the consequent section 148 notices for assessment years 2016-17 and 2017-18 in a batch of writ petitions. It also declared bad in law paragraphs 6.1 and 6.2(ii) of the CBDT Instruction of 11 May 2022, to the extent they propound the travel back in time theory, holding those paragraphs ultra vires section 119 and section 149(1) and, in any event, vague.
• Mrs. Kannammal v ITO High CourtHelps taxpayer
  The stay order just says 'pay 20% as per Board's circular'. Is that a decision?
  No. Stay applications must be decided by reference to prima facie case, financial stringency and balance of convenience, and communicated as a speaking order. CBDT circulars are guidelines and cannot substitute those basic tests.
• The Chamber of Tax Consultants v UOI High CourtHelps taxpayerSuperseded by amendment
  Can the CBDT use ICDS notified under s.145(2) to override a Supreme Court or High Court decision on how income is computed?
  No. The Delhi High Court read s.145(2) down so that the power to notify income computation and disclosure standards cannot be used to override binding judicial precedent or a provision of the Act, and struck down several ICDS provisions that did exactly that — including part of ICDS III on construction contracts and part of ICDS VI on foreign exchange. Parliament's answer was the Finance Act 2018, which put much of the struck-down material into the Act itself.
• CBDT instruction of 18 August 2025 on Black Money Act prosecutions CBDT Circulars & InstructionsHelps taxpayer
  The foreign asset is small and no penalty is proposed. Can they still prosecute me for leaving it out of Schedule FA?
  Not on the Board's own instruction. It directs that prosecution under s.49 or s.50 of the Black Money Act is not to be initiated in cases where penalty under s.42 or s.43 is not imposed or not imposable because the asset falls within the proviso to those sections - assets other than immovable property whose aggregate value does not exceed Rs 20 lakh. It amends an earlier instruction of 15 March 2022.
• CBDT Compounding Guidelines 2024 CBDT Circulars & InstructionsHelps taxpayer
  I want to compound my income tax offence. What do the current guidelines let me do?
  Considerably more than the old ones. The guidelines of 17 October 2024 abolish the Category A/B classification, remove the cap on the number of applications and the 36-month outer time limit, extend compounding to ss.275A and 276B, allow a co-accused to apply for a company or HUF, and set TDS compounding charges at a single 1.5% per month with no interest on delayed payment of the charge.
• CBDT Circular 7/2024 CBDT Circulars & InstructionsHelps taxpayer
  Our Form 10AB was rejected for late filing. Does the CBDT let us apply again?
  Yes, but only within the window this circular opened. The due date for Form 10A and Form 10AB was extended to 30 June 2024, and entities whose Form 10AB was rejected solely for late filing or for filing under the wrong section code could file fresh applications within that extended time.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.