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Learn Section 139(1) with Santa Clause

Karan Khatri 
on 28 December 2015

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CA Student:  Hi Santa, how are things? Got a minute? I’ve got my list here and I’d like to go over it with you if you don’t mind…

Santa Clause: Well, I am busy. And besides, have you been good this year?

CA Student: Well, see Santa, I've done my best. But we all have our weaknesses. 

Santa Clause: Yes indeed, you do.

CA Student: Please give me a minutes  or two.

Santa Clause: Ok, tell me what you want to know?

CA Student: Does every company/firm has to file its return of income?

Santa Clause: Obligation to file return of income is given under section 139(1) of the Income Tax Act.

CA Student: So, what Section 139(1) Says?

Santa Clause: Section 139(1) states that: Every person, being a company or a firm; or being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to tax.

CA Student: Who is 'any other person in which  he is assessable under the Act'?

Santa Clause: In case of non-resident: Agent of non-resident and in case of deceased: his legal hire.

CA Student: Ok.

Santa Clause: Further, all this persons shall, on or before the due date, furnish a return of income.

CA Student: I have heard that any person having assets out side India has to file return of income even though it does not exceeds the maximum amount which is not chargeable to tax, can you put some light on this?

Santa Clause: This is mentioned in the Fourth and the Fifth Proviso to Section 139(1). it provides that a person having any asset including any financial interest in any entity located outside India or has signing authority in any account located outside India, shall furnish a return of income.

CA Student: So, if I do not have any asset outside India, however I am a beneficiary of any asset, I don't have to file a return.

Santa Clause: No. As per the new Fifth proviso inserted by Finance Act, 2015, it provides that a beneficiary of any asset including any financial interest in any entity located outside India has to furnish a return of income.

CA Student: Oh! that was something new to me. Do Section 139(1) provides further any thing apart from which we discussed?

Santa Clause: Yes, there is sixth proviso to section 139(1). It provides that-  an individual or HUF or AOP or BOI whether incorporated or not or artificial juridical person, the maximum amount which is not chargeable to income tax should be calculated without giving effect to the provisions of Chapter VI-A.

CA Student: So I can summarise that a company/firm is under an obligation to file return on income if
- it is newly incorporated which has not commenced business,
- it is a foreign company/firm operating in India,
- Company/Firm entire income is exempt from Income-tax,
- Company/Firm is in the process of setting up the business,
- Company/Firm has incurred a loss,
- Company/Firm has closed all its activities and is in the nature of a defunct company/firm.

Santa Clause:  Now I think you have understood section 139(1) very well.

CA Student: Yes indeed.

Santa Clause: I will leave now, I have to distribute gifts to children's and give gifts of knowledge to students like you. Ho Ho Ho Ho! Merry Christmas and a Happy New Year. 

Merry-Christmas-and-Happy-New-Year-Tree-Animated

Note: Santa Clause and CA Student are fictional characters. Santa Clause is have come here to send gifts of knowledge to Students - and hence imagined as a Direct Tax Teacher.  

(This Article was made and posted on my blog CA ka Gyaan.)


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