Section 93 — Section 93 — Avoidance of Tax by Transactions…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Avoidance of income-tax by transactions resulting in transfer of income to non-residents.

93. (1) Where there is a transfer of assets by virtue or in consequence whereof, either alone or in

conjunction with associated operations, any income becomes payable to a non-resident, the following

provisions shall apply—

(a) where any person has, by means of any such transfer, either alone or in conjunction with associated

operations, acquired any rights by virtue of which he has, within the meaning of this section, power

to enjoy, whether forthwith or in the future, any income of a non-resident person which, if it were

income of the first-mentioned person, would be chargeable to income-tax, that income shall,

whether it would or would not have been chargeable to income-tax apart from the provisions of this

section, be deemed to be income of the first-mentioned person for all the purposes of this Act;

(b) where, whether before or after any such transfer, any such first-mentioned person receives or is

entitled to receive any capital sum the payment whereof is in any way connected with the transfer

or any associated operations, then any income which, by virtue or in consequence of the transfer,

either alone or in conjunction with associated operations, has become the income of a non-resident

shall, whether it would or would not have been chargeable to income-tax apart from the provisions

of this section, be deemed to be the income of the first-mentioned person for all the purposes of

this Act.

Explanation.—The provisions of this sub-section shall apply also in relation to transfers of assets and

associated operations carried out before the commencement of this Act.

(2) Where any person has been charged to income-tax on any income deemed to be his under the provisions

of this section and that income is subsequently received by him, whether as income or in any other form, it

shall not again be deemed to form part of his income for the purposes of this Act.

(3) The provisions of this section shall not apply if the first-mentioned person in sub-section (1) shows to the

satisfaction of the Assessing Officer that—

(a) neither the transfer nor any associated operation had for its purpose or for one of its purposes the

avoidance of liability to taxation; or

(b) the transfer and all associated operations were bona fide commercial transactions and were not

designed for the purpose of avoiding liability to taxation.

Explanation.—For the purposes of this section,—

(a) references to assets representing any assets, income or accumulations of income include references

to shares in or obligation of any company to which, or obligation of any other person to whom,

those assets, that income or those accumulations are or have been transferred;

(b) any body corporate incorporated outside India shall be treated as if it were a non-resident;

(c) a person shall be deemed to have power to enjoy the income of a non-resident if—

(i) the income is in fact so dealt with by any person as to be calculated at some point of time

and, whether in the form of income or not, to enure for the benefit of the first-mentioned

person in sub-section (1), or

(ii) the receipt or accrual of the income operates to increase the value to such first-mentioned

person of any assets held by him or for his benefit, or

(iii) such first-mentioned person receives or is entitled to receive at any time any benefit

provided or to be provided out of that income or out of moneys which are or will be

available for the purpose by reason of the effect or successive effects of the associated

operations on that income and assets which represent that income, or

(iv) such first-mentioned person has power by means of the exercise of any power of

appointment or power of revocation or otherwise to obtain for himself, whether with or

without the consent of any other person, the beneficial enjoyment of the income, or

(v) such first-mentioned person is able, in any manner whatsoever and whether directly or

indirectly, to control the application of the income;

(d) in determining whether a person has power to enjoy income, regard shall be had to the substantial

result and effect of the transfer and any associated operations, and all benefits which may at any

time accrue to such person as a result of the transfer and any associated operations shall be taken

into account irrespective of the nature or form of the benefits.

(4) (a) "Assets" includes property or rights of any kind and "transfer" in relation to rights includes the

creation of those rights ;

(b) "associated operation", in relation to any transfer, means an operation of any kind effected by any person

in relation to—

(i) any of the assets transferred, or

(ii) any assets representing, whether directly or indirectly, any of the assets transferred, or

(iii) the income arising from any such assets, or

(iv) any assets representing, whether directly or indirectly, the accumulations of income arising from

any such assets ;

(c) "benefit" includes a payment of any kind ;

(d) "capital sum" means—

(i) any sum paid or payable by way of a loan or repayment of a loan ; and

(ii) any other sum paid or payable otherwise than as income, being a sum which is not paid or payable

for full consideration in money or money's worth.

Function in the statutory architecture

Section 93 deals with a transfer of assets by which, alone or with associated operations, income becomes payable to a non-resident. Where a person has, by such a transfer, acquired rights giving him power to enjoy, now or later, income of the non-resident that would be taxable if it were his, that income is deemed to be his for all purposes of the Act, whether or not it would otherwise be chargeable. The same applies where he receives or is entitled to receive a capital sum connected with the transfer or associated operations. The sub-section applies also to transfers and operations carried out before the commencement of the Act.

A body corporate incorporated outside India is treated as a non-resident. A person has power to enjoy income if, for example, it is dealt with so as to enure for his benefit, increases the value of his assets, provides him a benefit, can be obtained by him through a power of appointment or revocation, or is under his control. Regard is had to the substantial result and effect of the transfer and associated operations.

Operative consequences

The deemed income is taxed in the hands of the transferor or person with the power to enjoy, not the non-resident.
Income already charged under the section is not charged again when later received by him (sub-section (2)).
The section does not apply if the person shows to the Assessing Officer's satisfaction that neither the transfer nor any associated operation had tax avoidance as a purpose, or that they were bona fide commercial transactions not designed to avoid tax (sub-section (3)).
"Capital sum" includes a loan or its repayment and any sum paid otherwise than as income and not for full consideration.

Status

Operative for assessment year 2026-27. The Finance Act, 2026 does not amend this section. The Finance Act, 2026 (section 44) amends s. 93 of the 2025 Act, which is a different provision.

The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act provision is s. 174.

Case Laws & Commentary

SECTION 93 — AVOIDANCE OF INCOME-TAX BY TRANSACTIONS RESULTING IN TRANSFER OF INCOME TO NON-RESIDENTS

Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)

A. SECTION COMMENTARY

A.1 Structural position & legislative purpose

Section 93 is a specific anti-avoidance provision aimed at the transfer of assets (alone or with associated operations) by virtue of which income becomes payable to a non-resident, while the power to enjoy that income, or a capital sum connected with it, is retained by a resident. Where the conditions are met, the income of the non-resident is deemed to be the income of the resident transferor (or the person having power to enjoy it) and is taxed in his hands. The section is modelled on the United Kingdom's 'transfer of assets abroad' code and is designed to defeat the device of shifting income-producing assets offshore while continuing to enjoy the fruits.

Clause (a) of sub-section (1) catches the case where the resident has acquired rights by which he has, or may have, the power to enjoy income of a non-resident; clause (b) of sub-section (1) catches the receipt (or entitlement) of a capital sum connected with the transfer; sub-section (2) provides that income so charged is not charged again when subsequently received. Sub-section (3) provides a bona fide exception — the section does not apply if the assessee shows that the transfer and associated operations were not designed for the purpose of avoiding income-tax, or were bona fide commercial transactions not designed for tax avoidance. The Explanation defines 'power to enjoy' widely, and sub-section (4) defines 'assets', 'associated operation', 'benefit' and 'capital sum'.

A.2 Sub-section / clause taxonomy

Sub-section (1): Where, by virtue or in consequence of a transfer of assets (alone or with associated operations), income becomes payable to a non-resident, and a resident (a) has, by means of such transfer/associated operations, acquired rights enabling him to enjoy (or have the power to enjoy) such income, whether forthwith or in the future, that income is deemed to be the income of such resident for all purposes of the Act.

Sub-section (1)(b): Where the resident receives or is entitled to receive any capital sum the payment of which is connected with the transfer or associated operations, the income payable to the non-resident is deemed to be the resident's income.

Sub-section (2): Where a person has been charged to income-tax on income deemed to be his under the section and that income is subsequently received by him, it is not again deemed to form part of his income.

Sub-section (3): Bona fide exception — the section does not apply if the assessee shows to the satisfaction of the AO that the transfer and associated operations were not designed for the purpose of avoiding liability to taxation, or were bona fide commercial transactions and not so designed.

Explanation and sub-section (4): The Explanation defines 'power to enjoy' income (wide, capturing benefit, control, application for the resident's benefit, etc.); sub-section (4) defines 'assets', 'associated operation', 'benefit' and 'capital sum' (including loans/repayments and sums otherwise than for full consideration).

A.3 Core doctrinal themes

Theme (1) — Substance over form / enjoyment test: the section looks through the legal transfer to who, in substance, can enjoy the income; the 'power to enjoy' Explanation is deliberately broad.

Theme (2) — Bona fide commercial exception (sub-section (3)): the taxpayer can escape by proving the transfer was for genuine commercial reasons and not tax-avoidance-motivated — the principal litigated question where the section is invoked.

Theme (3) — Overlap with GAAR (Chapter X-A) and s.9 deeming: s.93 is a targeted SAAR; with the advent of GAAR (ss.95-102, w.e.f. AY 2018-19) and the expanded source rules, the Revenue has multiple tools, and s.93's standalone use has been comparatively rare.

Theme (4) — Sparse modern jurisprudence: reported Indian decisions squarely under s.93 are limited; the provision's interpretation draws on its UK lineage and on general anti-avoidance principles.

A.4 Legislative evolution / Finance Act amendment trail

ITA 1961 (original): Section 93 enacted as a specific anti-avoidance measure against offshore income-shifting, drawing on the UK transfer-of-assets-abroad code.

Subsequent Finance Acts: Periodic refinement of the Explanations ('power to enjoy', 'associated operations', 'capital sum'); no wholesale recast.

AY 2018-19 onward (s.95(2)): General anti-avoidance rules (Chapter X-A) supplement the targeted reach of s.93.

FA 2026: No amendment to s.93; the provision is preserved.

A.5 CA practitioner pointers

(1) When advising on offshore structures, test whether a resident retains 'power to enjoy' the income or a connected capital sum — if so, s.93 (and GAAR) exposure must be addressed.

(2) Build and retain contemporaneous evidence of bona fide commercial purpose to invoke the sub-section (3) exception — this is the decisive defence.

(3) Treat s.93 alongside s.9 source-deeming, s.92 TP, and GAAR (Chapter X-A) as part of an integrated anti-avoidance analysis; a structure may survive one and fall foul of another.

B. FA 2026 IMPACT NOTE

Section 93 is NOT amended by the Finance Act, 2026. The transfer-of-assets anti-avoidance code, including the bona fide commercial exception, continues up to AY 2026-27.

No FA 2026 change to s.93; practitioners should, however, read it together with the now-operative GAAR (Chapter X-A) and the MLI principal-purpose-test overlay for treaty-protected structures.

C. CASE LAW — CLUSTERED BY ISSUE

Section 93 is a long-standing but sparingly-litigated SAAR; squarely-on-point reported Indian authority is limited, and the provision's interpretation leans on its UK transfer-of-assets-abroad lineage and on general anti-avoidance doctrine. The candid position is stated rather than supported by off-point citations. The general anti-avoidance authorities that frame the section's operation are noted below.

Cluster C-1 : Anti-avoidance framing — substance, bona fide purpose and legitimate tax planning

1. McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC)

Facts: A general anti-avoidance question on whether colourable devices to reduce tax could be disregarded; the Constitution Bench addressed the legitimacy of tax-avoidance arrangements.

Issue: Whether tax planning through colourable devices/dubious methods is permissible.

Held: The Supreme Court held that colourable devices and dubious methods to avoid tax cannot be regarded as legitimate; tax planning may be legitimate provided it is within the framework of law, but artificial schemes whose sole purpose is avoidance can be disregarded.

Ratio: Substance prevails over artificial form; sham/colourable devices designed solely to avoid tax are not protected — the doctrinal backdrop against which s.93's 'designed for the purpose of avoiding taxation' test operates.

Relevance: Framing authority for the s.93(3) bona fide test; cited wherever the purpose of an offshore transfer is in issue.

2. Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC)

Facts: Challenge to treaty-shopping through Mauritius; the Court considered the limits of McDowell and the legitimacy of treaty-based planning.

Issue: Whether legitimate use of a treaty/structure, absent a sham, can be struck down as avoidance.

Held: The Supreme Court clarified that McDowell does not authorise the Revenue to disregard every tax-mitigating structure; a genuine transaction with a bona fide commercial character is not a colourable device merely because it is tax-efficient.

Ratio: Legitimate, bona fide structures are protected; only sham/colourable arrangements are disregarded — directly relevant to the s.93(3) commercial-purpose exception.

Relevance: Read with s.93(3): a genuine commercial transfer is outside the section even if tax-efficient.

D. PRACTITIONER'S NOTE

Defence strategy under s.93: (1) demonstrate that no resident retains the 'power to enjoy' the non-resident's income or a connected capital sum; (2) if the structure is caught prima facie, invoke the sub-section (3) bona fide commercial exception with documented commercial rationale (Azadi Bachao framing); (3) anticipate parallel GAAR analysis and ensure the arrangement has commercial substance and a main purpose other than tax benefit.

Candid note: given the scarcity of direct s.93 case law, opinions should rest on the statutory text, its UK lineage, and the general avoidance doctrine (McDowell as qualified by Azadi Bachao), and should expressly address GAAR.

E. SOURCES & CITATIONS

Caveat: This material is treatise-style commentary for practitioners and academic use. It is not legal opinion. Verify the current text, the latest CBDT circulars/notifications and the most recent appellate position before relying on any proposition in assessment, audit (Form 3CEB) or litigation.

Case law on Section 93

ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.

Section 93 case laws

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 93(1) and Explanation — transfer of assets abroad: power to enjoy income of a non-resident	s. 174(1), (2)
s. 93(1)(b) — capital sum connected with the transfer	s. 174(3)
s. 93(2) — no second charge on later receipt	s. 174(4)
s. 93(3) — exception for no tax-avoidance purpose or bona fide commercial transactions	s. 174(5)
Explanation and s. 93(4) — "power to enjoy", "assets", "associated operation", "benefit", "capital sum"	s. 174(6), (7)

Section 93 — Avoidance of Tax by Transactions Resulting in Transfer of Income to NR

Case Laws & Commentary

Case law on Section 93