Section 288(2)

Section 288(2) — the law in short

What the courts have decided on section 288(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• T.D. Venkata Rao v Union of India Supreme CourtHelps department
  I am a registered income-tax practitioner under s.288(2). Can I sign a tax audit report?
  No. Being an authorised representative under s.288(2) carries no right to conduct the compulsory audit under s.44AB. The Court gave one reason: chartered accountants, by reason of their training, have a special aptitude in the matter of audits and form a class by themselves, so it is reasonable to require the audit to be done by them; the Article 19 challenge failed "for the same reasons", and the practitioners remain entitled to act as authorised representatives.
• Statutory position — s.206C(6A) first proviso, Form 27BA, and the two interest rates in s.206C(7) from 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I did not collect TCS but my buyer has filed his return and paid the tax. Am I still an assessee in default, and what interest do I owe?
  The first proviso to s.206C(6A) says a person responsible for collecting tax under sub-section (1) or sub-section (1C) who fails to collect is not to be deemed an assessee in default if the buyer or licensee or lessee has furnished his return of income under s.139, has taken the amount into account in computing income in that return, and has paid the tax due on the income declared — and the collector furnishes a certificate to that effect from an accountant in the prescribed form. Rule 37J prescribes that certificate as Form 27BA, to be furnished to the Director General of Income-tax (Systems) or his authorised person in the procedures, formats and standards that officer specifies.
• Statutory position — the meaning of 'scrap' in the Explanation to s.206C, and the s.206C(1) table as it stands from 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer says everything I sold as waste was 'scrap' and wants one per cent. What does the Act actually define as scrap, and what else is in the s.206C(1) table now?
  Explanation clause (b) to s.206C defines 'scrap' as 'waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons'. The definition has two limbs that must both be satisfied — an origin limb (waste and scrap from the manufacture or mechanical working of materials) and a condition limb (definitely not usable as such) — and it is the second limb that decides most disputes, because material which the buyer takes and uses as raw material is on its face usable as such.
• Statutory position — s.72A(2), s.72A(3) and Rule 9C: the five conditions, the fifty per cent production test, the Form No. 62 certificate and the year the set-off is taken back CBDT Circulars & InstructionsCuts both ways
  We took over an amalgamating company's brought-forward losses. What exactly must we satisfy under section 72A(2) and Rule 9C, and if we fail, in which year does the department take the set-off back?
  Section 72A(2) imposes five conditions in two groups. The amalgamating company must (a)(i) have been engaged in the business in which the accumulated loss occurred or depreciation remains unabsorbed for three or more years, and (a)(ii) have held continuously, as on the date of the amalgamation, at least three-fourths of the book value of fixed assets held by it two years prior to that date. The amalgamated company must (b)(i) hold continuously for a minimum of five years from the date of amalgamation at least three-fourths of the book value of the fixed assets of the amalgamating company acquired in the scheme, (b)(ii) continue the business of the amalgamating company for a minimum of five years from that date, and (b)(iii) fulfil the conditions prescribed by Rule 9C — achieving at least fifty per cent of the installed capacity of the amalgamating company's industrial undertaking before the end of four years from the date of amalgamation and maintaining it to the end of five years, and furnishing to the Assessing Officer a certificate in Form No. 62 verified by an accountant. If any condition in sub-section (2) is not complied with, s.72A(3) deems the set-off or depreciation allowance already made in any previous year to be the income of the amalgamated company chargeable to tax for the year in which the condition is not complied with.
• Statutory position — s.201: who is deemed an assessee in default, the Form 26A escape that covers non-deduction only, one per cent and one and one-half per cent for two different periods, and the six-year limit from 1 April 2025 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
  Section 201(1) deems a person who does not deduct, does not pay, or after deducting fails to pay the whole or any part of the tax to be an assessee in default in respect of that tax. Its first proviso takes him out of that deeming, but only for a failure to deduct, and only if the payee has furnished his return under section 139, has taken the sum into account in computing income in that return and has paid the tax due on the income declared — and the deductor furnishes a certificate to that effect from an accountant, which rule 31ACB requires in Form 26A. Interest under section 201(1A) runs at two rates for two different periods: one per cent for every month or part of a month from the date the tax was deductible to the date it was deducted, and one and one-half per cent for every month or part of a month from the date it was deducted to the date it was actually paid. Where the first proviso to section 201(1) rescues the deductor from the tax, the proviso to section 201(1A) still charges the one per cent, from the date the tax was deductible to the date the payee furnished his return. Since 1 April 2025 an order under section 201(1) for a failure to deduct cannot be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which a correction statement is delivered under the first proviso to section 200(3), whichever is later; until 31 March 2025 the figure was seven years and the limit protected only a failure to deduct from a person resident in India. Section 201 governs a default on a sum paid or credited up to 31 March 2026; where the earlier of credit or payment falls on or after 1 April 2026, the consequences provision is section 398 of the Income-tax Act, 2025.
• Statutory position — s.33AB: the tea, coffee and rubber development account — the deposit deadline, the forty per cent ceiling, the Form 3AC audit, and which assessment years each figure governs CBDT Circulars & InstructionsCuts both ways
  My client grows and manufactures tea. It put money into the NABARD account after the year had closed and now wants the section 33AB deduction. By when did the deposit have to be made, how much can be claimed, and what has to be filed by the specified date under s.44AB?
  Section 33AB(1) allows a deduction to an assessee carrying on the business of growing and manufacturing tea or coffee or rubber in India which has, "before the expiry of six months from the end of the previous year or before the due date of furnishing the return of his income, whichever is earlier", either deposited with the National Bank (NABARD) in a special account under a scheme approved by the Tea Board, Coffee Board or Rubber Board, or deposited in a Deposit Account under a scheme framed by that Board with the previous approval of the Central Government. The deduction is the LOWER of the amount deposited and forty per cent of the profits of that business computed under "Profits and gains of business or profession" before any deduction under section 33AB itself, and it is expressly given before brought-forward losses are set off under section 72. The forty per cent figure is not original: "forty" was substituted for "twenty" by the Finance Act, 2001 with effect from 1 April 2002, so twenty per cent governs assessment years up to AY 2001-02 and forty per cent AY 2002-03 onwards. Coffee and rubber were not in the section at all until the Finance Act, 2003 brought them in with effect from 1 April 2004 — that is, from AY 2004-05; for AY 2003-04 and earlier the section is a tea provision only.
• Statutory position — s.33ABA: the Site Restoration Fund for petroleum and natural gas — the deposit must be in before the year ends, the ceiling is twenty per cent, and the closure clawback is net of the Government's production share CBDT Circulars & InstructionsCuts both ways
  My client is an oil and gas producer under a production sharing contract. It missed the year end and deposited into the Site Restoration Account in April. Does the six-month grace that tea companies get apply here too, and what is the ceiling?
  No. Section 33ABA gives no grace at all: the deposit must be made "before the end of the previous year", not within six months of it, and that single word is the commonest way the deduction is lost. The section applies to an assessee carrying on the business of prospecting for, or extraction or production of, petroleum or natural gas or both in India in relation to which the Central Government has entered into an agreement with that assessee. The deposit is either with the State Bank of India in a special account under a scheme approved by the Government of India in the Ministry of Petroleum and Natural Gas, or in a Site Restoration Account under a deposit scheme framed by that Ministry. The deduction is the LOWER of the amount deposited and twenty per cent of the profits of that business computed under "Profits and gains of business or profession" before any deduction under section 33ABA — twenty, not the forty per cent that section 33AB allows — and it is given before brought-forward losses are set off under section 72. The section was inserted by the Finance (No. 2) Act, 1998 with effect from 1 April 1999, so it governs AY 1999-2000 onwards. One later amendment matters: Act No. 12 of 2020, with effect from 1 April 2020, substituted the audit limb of sub-section (2), so that from AY 2020-21 the accounts must be audited, and the report furnished, before the specified date referred to in section 44AB — one month before the section 139(1) due date — rather than along with the return.
• Statutory position — s.271J: the Rs 10,000 penalty on the accountant, merchant banker or registered valuer personally CBDT Circulars & InstructionsCuts both ways
  A notice under section 271J has come to me, the chartered accountant who signed the report, not to my client. On what can it be levied, and how much?
  Section 271J allows the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under the Act, to direct an accountant, a merchant banker or a registered valuer who has furnished incorrect information in any report or certificate under the Act or the Rules to pay a penalty of Rs 10,000 for each such report or certificate. It reaches only those three classes of person, each defined in the Explanation; it cannot be levied on the assessee who filed the report.
• Statutory position — section 44DA: royalty and fees for technical services effectively connected with a permanent establishment, and the second proviso that shuts section 44BB out from 1 April 2011 CBDT Circulars & InstructionsCuts both ways
  Our foreign company earns fees for technical services from an Indian oil company and we have a permanent establishment here. We have always returned the income at 10 per cent under section 44BB. The Assessing Officer says section 44DA applies instead. When did that change, and what does section 44DA require us to do?
  It changed with the Finance Act 2010, with effect from 1 April 2011, which inserted a second proviso to s.44DA(1) reading "Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section." Section 44DA(1) applies where royalty or fees for technical services are received from Government or an Indian concern under an agreement made after 31 March 2003, the non-resident or foreign company carries on business in India through a permanent establishment or performs professional services from a fixed place of profession, and the right, property or contract in respect of which the royalty or fees are paid is effectively connected with that permanent establishment or fixed place; the income is then computed under "Profits and gains of business or profession" in accordance with the provisions of the Act — that is, on a net basis — and s.44DA(2) requires books under s.44AA, an audit by an accountant within the meaning of the Explanation below s.288(2), and the audit report furnished along with the return.

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.