Furnishing of information or documents by an Indian concern in certain cases

Section 506 — FURNISHING OF INFORMATION OR DOCUMENTS BY AN INDIAN CONCERN IN CERTAIN CASES

Section 506 of the Income-tax Act, 2025 corresponds to s. 285A of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 506 places a reporting obligation on an Indian concern through which a foreign company or entity holds Indian assets. It applies where two conditions are met together: a share of, or interest in, a company or entity registered or incorporated outside India derives its value substantially from assets located in India, as referred to in s. 9(10)(a); and that company or entity holds such assets in India, directly or indirectly, through or in an Indian concern. The consequence is that the Indian concern must furnish information or documents, within the prescribed period, to the prescribed income-tax authority, in the prescribed manner, for the purposes of determining income accruing or arising in India under s. 9.

KEY ELEMENTS

• Clause (a) — a share of, or interest in, a company or entity registered or incorporated outside India derives, directly or indirectly, its value substantially from assets located in India, as referred to in s. 9(10)(a).
• Clause (b) — that company or entity holds, directly or indirectly, such assets in India through, or in, an Indian concern.
• Person obliged — the Indian concern, not the foreign company or entity.
• Purpose — determination of any income accruing or arising in India under the said section.
• What is to be furnished — information or documents.
• Recipient, period and manner — the prescribed income-tax authority, within the prescribed period, in such manner as may be prescribed.

CHANGES FROM THE 1961 ACT

Section 506 corresponds to s. 285A of the 1961 Act and is substantively the same. The reference to "Explanation 5 to clause (i) of sub-section (1) of section 9" of the 1961 Act becomes s. 9(10)(a), and the purpose clause, which referred to clause (i) of sub-section (1) of s. 9 of the 1961 Act, now refers to "the said section". The single running sentence of the 1961 provision is broken into clauses (a) and (b) followed by the operative words. The recipient, period and manner remain matters to be prescribed.

PRACTITIONER NOTES

• The obligation rests on the Indian concern, although the share or interest whose value is in issue is in the company or entity registered or incorporated outside India.
• Both clauses must be satisfied; an Indian concern is not obliged merely because a foreign entity has an interest in it, unless the foreign share or interest derives its value substantially from Indian assets as referred to in s. 9(10)(a).
• Holding may be direct or indirect at both levels — the value derivation in clause (a) and the holding of assets in clause (b).
• The period, authority and manner are left to be prescribed; the section itself fixes none of them.

CROSS-REFERENCES

• s. 9(10)(a) — the reference for assets from which the foreign share or interest derives its value.
• s. 9 — the section under which income accruing or arising in India is to be determined.
• s. 285A of the 1961 Act — corresponding provision.