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Work-in-progress treatment: costs to secure construction contracts must be capitalised and not deducted until related work is performed.
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Incidental income in construction contracts: deduct from contract costs; investment returns taxed separately under income provisions.
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Retention money recognition: recognise as revenue only when reasonable certainty of ultimate collection exists under ICDS construction rules.
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Contract revenue recognition: recognize only costs incurred when outcome is not reliably estimable; early-stage limit applies.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognized only to the extent of costs incurred, subject to an early-stage completion limit specified in the Income Computation and Disclosure Standard on Construction Contracts.
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Percentage of completion method recognizes construction contract revenue, expenses and profit by proportion of work completed.
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Bad debt deduction available without book write off when previously taxed income becomes irrecoverable under the statutory proviso.
If contract revenue was offered to tax under ICDS but not recorded in the books and later becomes irrecoverable, it cannot be written off in the absence of a book entry; instead, deduction may be claimed under the statutory proviso allowing bad debt deduction without book write off where the amount was taken into account in computing income in the previous year in which it became irrecoverable or an earlier year.

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Comparison of section 242 "Jurisdiction of Assessing Officers." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

6 September, 2025

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Section 242 Jurisdiction of Assessing Officers.

Income-tax Act, 2025

At a Glance

The materials are two versions of Clause/Section 242 dealing with the jurisdiction of Assessing Officers: the "Income Tax Bill, 2025 - Old Version" (Document 2) and the enacted "Income-tax Act, 2025" provision (Document 1). The documents largely mirror each other but contain a few drafting and substantive differences affecting (i) the references to other provisions that trigger limitation for questioning jurisdiction and (ii) the scope clause preserving Assessing Officer powers. The provision affects taxpayers and the income-tax department (Assessing Officers, specified income-tax authorities, the Board). Effective date or commencement is Not stated in the document.

Background & Scope

Statutory hook: Clause/Section 242 titled "Jurisdiction of Assessing Officers" within the Income Tax Bill/Act, 2025, under the heading Authorities, jurisdiction and functions. The provision addresses (a) when an Assessing Officer, vested with jurisdiction over an area by directions or orders u/s 241(1)/(2)/(3), has jurisdiction in respect of persons carrying on business/profession or other residents within that area; (b) mechanisms for resolving jurisdictional disputes between Assessing Officers and specified income-tax authorities; (c) time-bars and procedural limits for assessees to call into question an Assessing Officer's jurisdiction; and (d) the preservatory clause on the powers of the Assessing Officer in respect of income within the vested area. Definitions and broader legislative context beyond explicit cross-references to sections 241, 263, 268, 270, 271, 247, 248, 294 and (in the Bill) 153C(2) are Not stated in the document.

Statutory Provision Mode

Text & Scope

Coverage and ingredients in the enacted provision (Document 1):

  • Sub-section (1): Where an Assessing Officer is vested with jurisdiction over an area by virtue of directions/orders u/s 241(1)/(2)/(3), he shall have jurisdiction within that area: (a) over persons carrying on business or profession if their place of business/profession (or principal place, where multiple places) is situated within the area; and (b) over any other person residing within the area.
  • Sub-section (2): Questions as to whether an Assessing Officer has jurisdiction to assess any person shall be determined by the specified income-tax authority.
  • Sub-section (3): Where the question relates to areas within jurisdictions of different specified income-tax authorities, determination shall be either (a) by the specified income-tax authorities concerned; or (b) by the Board or such specified income-tax authority as the Board may, by notification, specify in this behalf, if they are not in agreement.
  • Sub-section (4): Bars assessees from calling into question Assessing Officer jurisdiction after specified timelines: (a) if a return is made u/s 263(1), after one month from service of notice u/s 268(1) or 270(8) or after completion of assessment, whichever earlier; (b) where no such return, after expiry of time allowed by notice u/s 268(1) or 280(2) for making the return or by notice u/s 271(2) to show cause why assessment should not be completed to the best of AO's judgment, whichever earlier; (c) where action taken u/s 247 or 248, after one month from service of notice u/s 294(1)(a) or after completion of assessment, whichever earlier.
  • Sub-section (5): Subject to subsection (4), if an assessee challenges jurisdiction and the AO is not satisfied with the claim, the AO shall refer the matter for determination under subsections (2) or (3) before making the assessment.
  • Sub-section (6): Regardless of anything in this section or in directions/orders u/s 241, every Assessing Officer shall have all powers conferred on an Assessing Officer under this Act in respect of income accruing/arising/received within the area over which he has been vested with jurisdiction by virtue of directions/orders u/s 241(1)/(2)/(3).

Interpretation

The text seeks to define territorial/person-based jurisdiction of Assessing Officers where jurisdiction is conferred by administrative directions/orders u/s 241. It aligns jurisdiction with the location of business/principal place of business for businesses and with residence for other persons. The mechanism for resolving disputes prioritises intra-departmental resolution by specified income-tax authorities and, if disagreement arises, escalation to the Board or a Board-designated authority. The procedural bars in sub-section (4) function as transactional limitation points to prevent late jurisdictional objections. Sub-section (6) is a preservatory clause ensuring AOs retain all powers under the Act with respect to income within their vested area irrespective of other clauses.

Exceptions/Provisos

No explicit provisos beyond the time-based bars in sub-section (4). The provision does not state exceptions for specific classes of assessments, types of income, or emergency/extraordinary circumstances. Not stated in the document: any express savings clause as to assessments initiated prior to enactment, transitional arrangements, or judicial review constraints beyond the departmental determination mechanism.

Illustrations

  • Example 1: A taxpayer carries on business at three offices; the principal place of business is within the area vested with AO-X. AO-X therefore has jurisdiction to assess that taxpayer in terms of sub-section (1)(a).
  • Example 2: A resident individual lives within the vested area; AO-X has jurisdiction under sub-section (1)(b) irrespective of where income arises. (Factual specifics of residence definition are Not stated in the document.)
  • Example 3: Two specified income-tax authorities dispute which has jurisdiction over a taxpayer whose business spans both their areas; under sub-section (3), they must determine the question between them, or-if they disagree-the Board or a Board-specified authority will decide.

Interplay

The provision cross-references multiple other provisions (sections 241, 247, 248, 263, 268, 270, 271, 280, 294). The Bill version additionally referenced section 153C(2) of the Income-tax Act, 1961 in the time-bar sub-clause (4)(c); the enacted version omits that reference. The enacted provision also omits an explicit mention of directions/orders u/s 241(4) in sub-section (6) that appeared in the Bill version. Any interaction with rules, notifications or circulars beyond the Board's power to notify a specified income-tax authority is Not stated in the document.

Practical Implications

  • Compliance and risk areas: Taxpayers must be vigilant about the procedural timelines in sub-section (4) when seeking to challenge an AO's territorial/person-based jurisdiction. Failure to raise jurisdictional objections within these specified windows will likely bar such challenges under the provision.
  • Departmental administration: The provision formalises an intra-departmental mechanism for resolving jurisdictional disputes, reducing immediate recourse to courts and concentrating determinations within specified income-tax authorities or the Board.
  • Scope of AO powers: Sub-section (6) conserves an AO's statutory powers over income within the vested area. However, the omission in the enacted text of a reference to section 241(4) (present in the Bill) may narrow the stated trigger for vesting in some circumstances; the practical effect depends on the content and scope of section 241(4), which is Not stated in the document.
  • Record-keeping/evidence: The text implies that taxpayers should retain documentary evidence of principal place of business and residence to substantiate or contest territorial assertions. Timely responses to notices under the listed sections (268, 271, 280, 294, 270) will be critical to preserve the right to challenge jurisdiction.

Key Takeaways

  • Section 242 sets out territorial and person-based jurisdiction rules for Assessing Officers when jurisdiction is vested by directions/orders u/s 241(1)-(3).
  • Disputes over jurisdiction are to be determined within the taxation administration-first by specified income-tax authorities and, if disagreement persists, by the Board or a Board-designated authority.
  • There are strict temporal bars on an assessee's ability to question AO jurisdiction tied to notices under other specified sections; taxpayers must act within those windows.
  • Sub-section (6) preserves Assessing Officer powers to exercise all powers under the Act in relation to income connected to the vested area.
  • Material differences between the Bill and enacted text: (i) removal in the enacted text of reference to section 153C(2) in the time-bar clause; and (ii) omission of an explicit reference to section 241(4) in the preservatory clause-both could affect scope and application.
  • Where the Bill text contains drafting errors/duplication (e.g., "concerned specified income-tax authority concerned"), the enacted text appears to have corrected or rephrased those passages.
  • Several contextual and operational details (definitions, commencement date, precise effect vis-`a-vis section 241(4), and procedural mechanisms for determinations) are Not stated in the document.

Differences Identified and Practical Impact (Concise)

Topic Bill (Old Version) Act (Enacted Section 242)
Reference in sub-section (3)(a) Typographical duplication: "by the concerned specified income-tax authority concerned." Cleaned up to "the specified income-tax authorities concerned." (clarity improved)
Escalation in sub-section (3)(b) "if they are not in agreement, by the Board or by such specified income-tax authority as the Board may, by notification, specify." Reordered: "by the Board or by such specified income-tax authority as the Board may, by notification, specify in this behalf, if they are not in agreement." (substantive alignment; minor drafting change)
Time-bar in sub-section (4)(c) Refers to notice u/s 153C(2) of the Income-tax Act, 1961 or section 294(1)(a). Omits reference to section 153C(2); refers only to section 294(1)(a).
Preservatory clause (sub-section (6)) Includes directions/orders u/s 241(1)/(2)/(3) or (4). Refers only to directions/orders u/s 241(1)/(2)/(3) (omits explicit mention of section 241(4)).

Practical impact: omission of cross-references present in the Bill may narrow the textual triggers that give rise to AO jurisdiction and the time-bars for challenging that jurisdiction; the full practical import depends on the contents and role of the omitted cross-referenced provisions (sections 153C(2) and 241(4)), which are Not stated in the document.


Full Text:

Section 242 Jurisdiction of Assessing Officers.

Topics

Acts Income Tax