Section 99 is part of Chapter X-A, the General Anti-Avoidance Rule. It sets four rules for deciding whether a tax benefit exists: parties who are connected persons in relation to each other may be treated as one and the same person; any accommodating party may be disregarded; the accommodating party and any other party may be treated as one and the same person; and the arrangement may be considered or looked through by disregarding any corporate structure.
It applies to the question whether an arrangement obtains a tax benefit, which is one element of an impermissible avoidance arrangement under s. 96. "Connected person" is defined in s. 102, and "accommodating party" is explained in s. 97.
Operative consequences
A tax benefit may be found by looking at related or interposed parties together rather than separately.
A corporate structure does not prevent the arrangement from being looked through at this stage.
If the arrangement is declared an impermissible avoidance arrangement, the tax consequences follow under s. 98.
Status
Operative for assessment year 2026-27. The Finance Act, 2026 does not amend s. 99 of the 1961 Act. Its section 45 amends s. 99 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. 182.
Case Laws & Commentary
SECTION 99 — TREATMENT OF CONNECTED PERSON AND ACCOMMODATING PARTY
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 99 supplies interpretive rules for the threshold question of whether a 'tax benefit' exists. In making that determination, the authority may treat connected persons as one and the same person, disregard an accommodating party (or treat it and another party as one), and look through an arrangement by disregarding any corporate structure. The section ensures the tax-benefit enquiry is conducted on a consolidated, substance-based footing, so that a benefit cannot be obscured by spreading a transaction across related or interposed parties.
A.2 Sub-section / clause taxonomy
Section 99: For the purposes of Chapter X-A, in determining whether a tax benefit exists — (i) the parties who are connected persons in relation to each other may be treated as one and the same person; (ii) any accommodating party may be disregarded; (iii) such accommodating party and any other party may be treated as one and the same person; and (iv) the arrangement may be considered or looked through by disregarding any corporate structure.
A.3 Core doctrinal themes
Theme (1) — Consolidated view of related parties: the existence of a tax benefit is judged by collapsing connected persons and accommodating parties, preventing the splitting of a transaction to disguise the benefit (definitions of 'connected person' and 'accommodating party' in sections 102 and 97(3) respectively).
Theme (2) — Look-through is built into the very test: even the threshold 'tax benefit' enquiry permits disregarding corporate structures — the Vodafone look-through, now statutory, operative at the earliest stage of GAAR analysis.
Theme (3) — Interlock with sections 97 and 98: the 'accommodating party' concept feeds the commercial-substance test (section 97) and the consequence power (section 98(1)(c)); section 99 makes the same actors relevant to whether a benefit exists at all.
(1) When assessing GAAR exposure, compute the tax benefit on a consolidated basis across connected persons and any accommodating party — not entity-by-entity.
(3) Remember that interposing a company will not, by itself, prevent a look-through at the tax-benefit stage.
B. FINANCE ACT, 2026 — IMPACT NOTE
Section 99 is NOT amended by the Finance Act, 2026. As recorded in the firm's FA 2026 Amendment Tracker (item 23), the Transfer Pricing framework (sections 92 to 92F and 92CB to 92CE) and the General Anti-Avoidance Rule (sections 95 to 102) are preserved without material change, with continued integration with the Multilateral Instrument (MLI) Principal Purpose Test. The provision continues unchanged for AY 2026-27 onward.
Although the Income-tax Act, 2025 commences from 1 April 2026 (with the 1961 Act repealed subject to savings/transition provisions), the GAAR scheme has been carried forward in substance. Practitioners must continue to read Chapter X-A together with the MLI Principal Purpose Test for treaty-protected structures and with the relevant Income-tax Rules (10U to 10UC).
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Consolidated tax-benefit enquiry and use of interposed/related parties
Ayodhya Rami Reddy Alla v. PCIT (Central) [2024] 163 taxmann.com 277 (Telangana) (judgment dated 7 June 2024); SLP/appeal pending before the Supreme Court.
Facts: The assessee subscribed to shares of Ramky Estate and Farms Ltd. (REFL). REFL increased its authorised capital and issued bonus shares in the ratio 1:5, so that the value of each original share collapsed from about Rs.115 to about Rs.19.20. Immediately after the value crashed, the assessee sold the original (now-devalued) shares and booked a large short-term capital loss (of the order of Rs.462 crore), set off against substantial long-term capital gains. The Revenue invoked Chapter X-A and issued notice under section 144BA; the assessee filed a writ petition challenging the very initiation of GAAR proceedings, contending inter alia that the specific anti-avoidance rule in section 94(8) (bonus stripping) occupied the field to the exclusion of GAAR.
Issue: Whether GAAR (Chapter X-A) could be invoked on a bonus-stripping transaction notwithstanding the existence of a specific anti-avoidance rule (section 94(8)); and whether the arrangement answered the description of an impermissible avoidance arrangement under section 96.
Held: The Telangana High Court dismissed the writ petition and upheld the invocation of GAAR. It held the arrangement was devoid of commercial rationale and designed with the main purpose of obtaining a tax benefit, satisfying both the 'main purpose' test and the 'tainted element' test in section 96. The mere existence of a specific anti-avoidance provision (section 94(8)) did not oust GAAR; GAAR can apply in addition to, or in lieu of, a SAAR (section 100), depending on the facts. The non obstante clause in section 95 was emphasised, and interference at the threshold (section 144BA notice) stage was declined.
Ratio: GAAR is not displaced merely because a specific anti-avoidance rule also covers the transaction; an arrangement satisfying the main-purpose and tainted-element tests of section 96 is impermissible notwithstanding the availability of, or technical compliance with, a SAAR (section 100). The non obstante clause in section 95 is given full effect, and a commercially hollow step inserted to manufacture a loss lacks commercial substance.
Relevance: First substantial High-Court interpretation of Chapter X-A since GAAR became operative (AY 2018-19). Establishes that (i) GAAR and SAAR can coexist and GAAR is not displaced merely because a SAAR also covers the transaction; (ii) an artificial, commercially hollow step inserted to manufacture a loss is an impermissible avoidance arrangement; (iii) writ interference against GAAR initiation is ordinarily inappropriate where the statutory machinery (Approving Panel) is available.
Cluster C-2 : Look-through of corporate structures — doctrinal foundation
Vodafone International Holdings B.V. v. Union of India (2012) 341 ITR 1 (SC).
Facts: Indirect transfer of an Indian asset through the sale of overseas holding-company shares; the Revenue sought to 'look through' the offshore structure to tax the underlying Indian gain.
Issue: Whether the Revenue may disregard an interposed corporate structure ('look through') or must respect it ('look at'), and the proper approach to substance versus form.
Held: The Supreme Court held that a genuine, strategically conceived corporate structure with commercial substance must be respected ('look at' the transaction as a whole); the Revenue cannot 'look through' it unless it is a sham or a device for tax avoidance lacking commercial substance.
Ratio: GAAR statutorily empowers the 'look through' approach (sections 96, 97, 98(1)(g), 99) that Vodafone confined to sham/colourable cases. Post-GAAR, the look-through is available where commercial substance is absent; Vodafone's 'commercial substance' touchstone remains the dividing criterion.
Relevance: Central to the commercial-substance enquiry under section 97 and the look-through consequences under sections 98-99; explains the doctrinal shift GAAR effected.
Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC).
Facts: Challenge to treaty-based planning (Mauritius route) and CBDT Circular No. 789; the Court examined the reach of McDowell and the legitimacy of genuine tax-efficient structures.
Issue: Whether a genuine transaction or structure, absent a sham, can be struck down as impermissible avoidance merely because it is tax-efficient.
Held: The Supreme Court clarified that McDowell does not authorise the Revenue to disregard every tax-mitigating arrangement; a transaction that is genuine and bona fide is not a colourable device merely because it is structured to attract a lower tax burden. Legitimate tax planning remains permissible.
Ratio: Draws the line GAAR now codifies: only arrangements lacking commercial substance / bona fide purpose are impermissible (section 96), while genuine commercial transactions are protected (the principle vindicated in Anvida Bandi).
Relevance: Framing authority for the commercial-substance and main-purpose enquiry; underpins the taxpayer's defence that a genuine arrangement is outside Chapter X-A.
D. PRACTITIONER'S NOTE
Defence strategy under section 99: (1) show that each party to the arrangement has an independent commercial role, so none can be characterised as a mere accommodating party; (2) demonstrate that connected-party dealings are at arm's length and commercially driven; (3) where a holding structure exists, evidence its genuine commercial substance (Vodafone) to resist a look-through.
Candid note: section 99 is definitional/interpretive and has not yet generated a body of directly-construing Indian case law. The concepts it deploys (accommodating party, connected person, look-through) are illustrated in Ayodhya Rami Reddy Alla and rest doctrinally on Vodafone/Azadi Bachao. The limited direct authority is stated candidly; no off-point citation has been used.
E. SOURCES & CITATIONS
Statutory text verified against the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025), Chapter X-A (sections 95 to 102), cross-checked for FA 2026 against the firm's '00 Finance Act 2026 Amendment Tracker.xlsx' (item 23: TP + GAAR framework preserved without material change). Marginal headings reproduced verbatim from the Gazette text.
Case citations verified against publicly reported sources: Ayodhya Rami Reddy Alla v. PCIT (Central) [2024] 163 taxmann.com 277 (Telangana) (also at Indian Kanoon, judgment dated 7 June 2024); Anvida Bandi v. DCIT [2025] 177 taxmann.com 726 (Telangana) (TS-1110-HC-2025(TEL)); McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC); Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC); Vodafone International Holdings B.V. v. UOI (2012) 341 ITR 1 (SC); CIT v. Walfort Share & Stock Brokers (P) Ltd. (2010) 326 ITR 1 (SC). Administrative material: CBDT Circular No. 7 of 2017 dated 27 January 2017 (sixteen Q&A clarifications on GAAR implementation); Income-tax Rules 10U to 10UC (de minimis monetary threshold of Rs.3 crore and grandfathering of pre-1 April 2017 investments); Expert Committee on GAAR (Shome Committee) Report, 2012.
Only decisions and materials actually on point for this section's substantive law are listed; no citation has been invented or paraphrased into existence. Where direct authority on a sub-provision is limited, that position is stated candidly rather than supported by off-point citations.
Caveat: This material is treatise-style commentary for practitioners and academic use. It is not legal opinion. GAAR jurisprudence is at an early and evolving stage (the lead authority, Ayodhya Rami Reddy Alla, is sub judice before the Supreme Court). Verify the current statutory text, the latest CBDT circulars/notifications, the Rule position and the most recent appellate developments before relying on any proposition in advisory work, assessment, the Approving Panel process or litigation.
Function in the statutory architecture
Section 99 is part of Chapter X-A, the General Anti-Avoidance Rule. It sets four rules for deciding whether a tax benefit exists: parties who are connected persons in relation to each other may be treated as one and the same person; any accommodating party may be disregarded; the accommodating party and any other party may be treated as one and the same person; and the arrangement may be considered or looked through by disregarding any corporate structure.
It applies to the question whether an arrangement obtains a tax benefit, which is one element of an impermissible avoidance arrangement under s. 96. "Connected person" is defined in s. 102, and "accommodating party" is explained in s. 97.
Operative consequences
Status
Operative for assessment year 2026-27. The Finance Act, 2026 does not amend s. 99 of the 1961 Act. Its section 45 amends s. 99 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. 182.
Case Laws & Commentary
SECTION 99 — TREATMENT OF CONNECTED PERSON AND ACCOMMODATING PARTY
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 99 supplies interpretive rules for the threshold question of whether a 'tax benefit' exists. In making that determination, the authority may treat connected persons as one and the same person, disregard an accommodating party (or treat it and another party as one), and look through an arrangement by disregarding any corporate structure. The section ensures the tax-benefit enquiry is conducted on a consolidated, substance-based footing, so that a benefit cannot be obscured by spreading a transaction across related or interposed parties.
A.2 Sub-section / clause taxonomy
Section 99: For the purposes of Chapter X-A, in determining whether a tax benefit exists — (i) the parties who are connected persons in relation to each other may be treated as one and the same person; (ii) any accommodating party may be disregarded; (iii) such accommodating party and any other party may be treated as one and the same person; and (iv) the arrangement may be considered or looked through by disregarding any corporate structure.
A.3 Core doctrinal themes
Theme (1) — Consolidated view of related parties: the existence of a tax benefit is judged by collapsing connected persons and accommodating parties, preventing the splitting of a transaction to disguise the benefit (definitions of 'connected person' and 'accommodating party' in sections 102 and 97(3) respectively).
Theme (2) — Look-through is built into the very test: even the threshold 'tax benefit' enquiry permits disregarding corporate structures — the Vodafone look-through, now statutory, operative at the earliest stage of GAAR analysis.
Theme (3) — Interlock with sections 97 and 98: the 'accommodating party' concept feeds the commercial-substance test (section 97) and the consequence power (section 98(1)(c)); section 99 makes the same actors relevant to whether a benefit exists at all.
A.4 Legislative evolution / Finance Act amendment trail
Finance Act 2012/2013: present formulation. Finance Act 2026: no amendment (Tracker item 23).
A.5 CA practitioner pointers
(1) When assessing GAAR exposure, compute the tax benefit on a consolidated basis across connected persons and any accommodating party — not entity-by-entity.
(2) Identify and, where commercially appropriate, eliminate accommodating parties whose participation lacks independent commercial purpose.
(3) Remember that interposing a company will not, by itself, prevent a look-through at the tax-benefit stage.
B. FINANCE ACT, 2026 — IMPACT NOTE
Section 99 is NOT amended by the Finance Act, 2026. As recorded in the firm's FA 2026 Amendment Tracker (item 23), the Transfer Pricing framework (sections 92 to 92F and 92CB to 92CE) and the General Anti-Avoidance Rule (sections 95 to 102) are preserved without material change, with continued integration with the Multilateral Instrument (MLI) Principal Purpose Test. The provision continues unchanged for AY 2026-27 onward.
Although the Income-tax Act, 2025 commences from 1 April 2026 (with the 1961 Act repealed subject to savings/transition provisions), the GAAR scheme has been carried forward in substance. Practitioners must continue to read Chapter X-A together with the MLI Principal Purpose Test for treaty-protected structures and with the relevant Income-tax Rules (10U to 10UC).
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Consolidated tax-benefit enquiry and use of interposed/related parties
Ayodhya Rami Reddy Alla v. PCIT (Central) [2024] 163 taxmann.com 277 (Telangana) (judgment dated 7 June 2024); SLP/appeal pending before the Supreme Court.
Facts: The assessee subscribed to shares of Ramky Estate and Farms Ltd. (REFL). REFL increased its authorised capital and issued bonus shares in the ratio 1:5, so that the value of each original share collapsed from about Rs.115 to about Rs.19.20. Immediately after the value crashed, the assessee sold the original (now-devalued) shares and booked a large short-term capital loss (of the order of Rs.462 crore), set off against substantial long-term capital gains. The Revenue invoked Chapter X-A and issued notice under section 144BA; the assessee filed a writ petition challenging the very initiation of GAAR proceedings, contending inter alia that the specific anti-avoidance rule in section 94(8) (bonus stripping) occupied the field to the exclusion of GAAR.
Issue: Whether GAAR (Chapter X-A) could be invoked on a bonus-stripping transaction notwithstanding the existence of a specific anti-avoidance rule (section 94(8)); and whether the arrangement answered the description of an impermissible avoidance arrangement under section 96.
Held: The Telangana High Court dismissed the writ petition and upheld the invocation of GAAR. It held the arrangement was devoid of commercial rationale and designed with the main purpose of obtaining a tax benefit, satisfying both the 'main purpose' test and the 'tainted element' test in section 96. The mere existence of a specific anti-avoidance provision (section 94(8)) did not oust GAAR; GAAR can apply in addition to, or in lieu of, a SAAR (section 100), depending on the facts. The non obstante clause in section 95 was emphasised, and interference at the threshold (section 144BA notice) stage was declined.
Ratio: GAAR is not displaced merely because a specific anti-avoidance rule also covers the transaction; an arrangement satisfying the main-purpose and tainted-element tests of section 96 is impermissible notwithstanding the availability of, or technical compliance with, a SAAR (section 100). The non obstante clause in section 95 is given full effect, and a commercially hollow step inserted to manufacture a loss lacks commercial substance.
Relevance: First substantial High-Court interpretation of Chapter X-A since GAAR became operative (AY 2018-19). Establishes that (i) GAAR and SAAR can coexist and GAAR is not displaced merely because a SAAR also covers the transaction; (ii) an artificial, commercially hollow step inserted to manufacture a loss is an impermissible avoidance arrangement; (iii) writ interference against GAAR initiation is ordinarily inappropriate where the statutory machinery (Approving Panel) is available.
Cluster C-2 : Look-through of corporate structures — doctrinal foundation
Vodafone International Holdings B.V. v. Union of India (2012) 341 ITR 1 (SC).
Facts: Indirect transfer of an Indian asset through the sale of overseas holding-company shares; the Revenue sought to 'look through' the offshore structure to tax the underlying Indian gain.
Issue: Whether the Revenue may disregard an interposed corporate structure ('look through') or must respect it ('look at'), and the proper approach to substance versus form.
Held: The Supreme Court held that a genuine, strategically conceived corporate structure with commercial substance must be respected ('look at' the transaction as a whole); the Revenue cannot 'look through' it unless it is a sham or a device for tax avoidance lacking commercial substance.
Ratio: GAAR statutorily empowers the 'look through' approach (sections 96, 97, 98(1)(g), 99) that Vodafone confined to sham/colourable cases. Post-GAAR, the look-through is available where commercial substance is absent; Vodafone's 'commercial substance' touchstone remains the dividing criterion.
Relevance: Central to the commercial-substance enquiry under section 97 and the look-through consequences under sections 98-99; explains the doctrinal shift GAAR effected.
Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC).
Facts: Challenge to treaty-based planning (Mauritius route) and CBDT Circular No. 789; the Court examined the reach of McDowell and the legitimacy of genuine tax-efficient structures.
Issue: Whether a genuine transaction or structure, absent a sham, can be struck down as impermissible avoidance merely because it is tax-efficient.
Held: The Supreme Court clarified that McDowell does not authorise the Revenue to disregard every tax-mitigating arrangement; a transaction that is genuine and bona fide is not a colourable device merely because it is structured to attract a lower tax burden. Legitimate tax planning remains permissible.
Ratio: Draws the line GAAR now codifies: only arrangements lacking commercial substance / bona fide purpose are impermissible (section 96), while genuine commercial transactions are protected (the principle vindicated in Anvida Bandi).
Relevance: Framing authority for the commercial-substance and main-purpose enquiry; underpins the taxpayer's defence that a genuine arrangement is outside Chapter X-A.
D. PRACTITIONER'S NOTE
Defence strategy under section 99: (1) show that each party to the arrangement has an independent commercial role, so none can be characterised as a mere accommodating party; (2) demonstrate that connected-party dealings are at arm's length and commercially driven; (3) where a holding structure exists, evidence its genuine commercial substance (Vodafone) to resist a look-through.
Candid note: section 99 is definitional/interpretive and has not yet generated a body of directly-construing Indian case law. The concepts it deploys (accommodating party, connected person, look-through) are illustrated in Ayodhya Rami Reddy Alla and rest doctrinally on Vodafone/Azadi Bachao. The limited direct authority is stated candidly; no off-point citation has been used.
E. SOURCES & CITATIONS
Statutory text verified against the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025), Chapter X-A (sections 95 to 102), cross-checked for FA 2026 against the firm's '00 Finance Act 2026 Amendment Tracker.xlsx' (item 23: TP + GAAR framework preserved without material change). Marginal headings reproduced verbatim from the Gazette text.
Case citations verified against publicly reported sources: Ayodhya Rami Reddy Alla v. PCIT (Central) [2024] 163 taxmann.com 277 (Telangana) (also at Indian Kanoon, judgment dated 7 June 2024); Anvida Bandi v. DCIT [2025] 177 taxmann.com 726 (Telangana) (TS-1110-HC-2025(TEL)); McDowell & Co. Ltd. v. CTO (1985) 154 ITR 148 (SC); Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC); Vodafone International Holdings B.V. v. UOI (2012) 341 ITR 1 (SC); CIT v. Walfort Share & Stock Brokers (P) Ltd. (2010) 326 ITR 1 (SC). Administrative material: CBDT Circular No. 7 of 2017 dated 27 January 2017 (sixteen Q&A clarifications on GAAR implementation); Income-tax Rules 10U to 10UC (de minimis monetary threshold of Rs.3 crore and grandfathering of pre-1 April 2017 investments); Expert Committee on GAAR (Shome Committee) Report, 2012.
Only decisions and materials actually on point for this section's substantive law are listed; no citation has been invented or paraphrased into existence. Where direct authority on a sub-provision is limited, that position is stated candidly rather than supported by off-point citations.
Caveat: This material is treatise-style commentary for practitioners and academic use. It is not legal opinion. GAAR jurisprudence is at an early and evolving stage (the lead authority, Ayodhya Rami Reddy Alla, is sub judice before the Supreme Court). Verify the current statutory text, the latest CBDT circulars/notifications, the Rule position and the most recent appellate developments before relying on any proposition in advisory work, assessment, the Approving Panel process or litigation.