Treatment of connected person and accommodating party

Section 182 — TREATMENT OF CONNECTED PERSON AND ACCOMMODATING PARTY

Section 182 of the Income-tax Act, 2025 corresponds to s. 99 of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 182 is a deeming and disregarding provision that applies within its Chapter when determining whether a tax benefit exists. It gives four permissive tools for testing an arrangement: connected persons may be treated as one person, an accommodating party may be disregarded or treated as one with another party, and the arrangement may be looked through by disregarding any corporate structure. Each power is expressed with "may", so its use is discretionary rather than automatic.

KEY ELEMENTS

• Clause (a) — connected persons: parties who are connected persons in relation to each other may be treated as one and the same person.
• Clause (b) — accommodating party disregarded: any accommodating party may be disregarded.
• Clause (c) — accommodating party combined: the accommodating party and any other party may be treated as one and the same person.
• Clause (d) — look-through: the arrangement may be considered or looked through by disregarding any corporate structure.
• Scope: each treatment operates "in this Chapter" and "in determining whether a tax benefit exists".

CHANGES FROM THE 1961 ACT

The section corresponds to s. 99 of the 1961 Act and is substantively the same. The four clauses are reproduced in the same words and order. The only visible changes are the lettering of the clauses ((a) to (d) in place of (i) to (iv)) and the opening words "In this Chapter" in place of "For the purposes of this Chapter".

PRACTITIONER NOTES

• By its words, the provision is confined to the question whether a tax benefit exists under this Chapter; it does not itself state any other consequence.
• Because the powers are permissive, where they are invoked it is relevant to examine whether treating parties as one, or disregarding a party or a corporate structure, is borne out by the facts of the arrangement.
• Clauses (b) and (c) offer two different treatments of an accommodating party: it may be ignored altogether, or be treated as one with another party.
• Under clause (d), the corporate form of the arrangement may be disregarded, so the existence of separate entities does not by itself settle the tax-benefit question.
• This section does not define "connected person", "accommodating party", "arrangement" or "tax benefit"; those meanings must be taken from the other provisions of the Chapter.

CROSS-REFERENCES

• s. 99 of the 1961 Act — the corresponding provision.
• The Chapter in which s. 182 appears — the provisions within which the tax-benefit determination is made and to which this section is confined.