Treatment of connected person and accommodating party
[Section-182 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
In this Chapter, in determining whether a tax benefit exists,—
- (a) the parties who are connected persons in relation to each other maybe treated as one and the same person;
- (b) any accommodating party may be disregarded;
- (c) the accommodating party and any other party may be treated as one and the same person;
- (d) the arrangement may be considered or looked through by disregarding any corporate structure.
FAQs on Section 182 of Income Tax Act 2025
What is the purpose of Section 182 under the Income Tax Act, 2025?
Section 182 is designed to ensure that tax benefits arising from arrangements involving connected persons or accommodating parties are correctly identified and addressed by allowing the tax authority to look through such structures.
Who are considered connected persons under Section 182?
Connected persons refer to parties who have a relationship or connection that may influence their dealings or arrangements for tax purposes.
Can connected persons be treated as a single entity under this section?
Yes, connected persons may be treated as one and the same person when determining the existence of a tax benefit.
What is an accommodating party in the context of Section 182?
An accommodating party is a person or entity involved in an arrangement primarily to create a tax benefit for another party without genuine commercial substance.
How is an accommodating party treated under Section 182?
The accommodating party may be disregarded entirely, or treated as one and the same person with another party in the arrangement, depending on the facts of the case.
Can the corporate structure be ignored under this section?
Yes, the tax authorities may disregard any corporate structure and look through the arrangement to assess the real substance of the transaction.
Does this section allow for recharacterization of transactions?
Yes, by treating parties as the same or ignoring entities, the section effectively allows the recharacterization of arrangements to identify tax benefits.
From when is Section 182 applicable?
Section 182 applies from the assessment year beginning on or after 1st April, 2026.
What is the main implication of applying Section 182?
The implication is that artificial arrangements or misuse of connected or accommodating parties to obtain tax benefits can be neutralized or denied.
Does Section 182 override the legal form of transactions?
Yes, it allows the authorities to look beyond the legal form and focus on the substance of the arrangement.
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