AIBE XVIII — December 2023 — Q.10 (Income Tax Act, 1961)

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Q.10

Taxation Law Medium Act + Section Given

Bare Act Income Tax Act, 1961 · Section 3

Which of the following would be the first previous year in case of a business or profession newly set up on 31st March, 2020 as per the Income Tax Act, 1961?

A Start from 1st April 2019, end 31 March 2020

✓ Start from 31st March 2020, end 31st March 2020 Answer

C Start from 1st April 2020, end 31st December 2020

D Start from 1st January 2020, end 31st March 2020

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Explanation & Strategy

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Since the business was set up on the last day of the financial year (31 March 2020), the first previous year is just that single day — 31 March 2020 to 31 March 2020.

1 Pick up IT Act.
2 Go to Section 3 — 'Previous year' definition.
3 Read the proviso: for business newly set up, previous year = date of setup to end of that financial year.
4 Setup date: 31 March 2020. Financial year ends: 31 March 2020. So previous year = just one day (31 March 2020).

The text reads: Section 3: For business newly set up, the previous year shall be the period beginning with the date of setting up and ending with the financial year.

At a Glance

Subject Taxation Law

Difficulty Medium

Act Income Tax Act, 1961

Section Section 3

Answer (B) Act + Section Given

Paper AIBE XVIII — December 2023

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