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Deemed cost of acquisition set as fair market value where accreted income is taxed under Chapter XIIEB.
Where capital gain arises from transfer of an asset held by a trust or institution for which accreted income has been computed and tax paid under Chapter XIIEB, the cost of acquisition of that asset shall be deemed to be the fair market value taken into account for computing accreted income as on the specified date referred to in sub section (2) of section 115TD.
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Cost of acquisition tied to stamp duty value for land pooling allotments determining capital gains computation.
Where capital gains arise from transfer of a specified capital asset received under the Andhra Pradesh Capital City Land Pooling Scheme and transferred after two years from the end of the financial year in which possession was handed over, the cost of acquisition shall be deemed to be the stamp duty value of the asset as on the last day of the second financial year after the end of the financial year when possession was handed over; the amendment also defines "stamp duty value."
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Cost of acquisition set as deemed full value of consideration for project-share transfers under development agreements, effective 2018-19.
The amendment provides that the cost of acquisition of a share in a project consisting of land or building, given as consideration under specified agreements (for example, joint development agreements), shall be the amount deemed as the full value of consideration under the related provision, subject to the proviso excluding certain capital assets, and applies prospectively from the effective date for subsequent assessment years.
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A new deeming provision treats the cost of acquisition of equity shares received in consideration of a transfer under clause (xb) of section 47 as the cost of the preference shares in relation to which those equity shares are acquired, thereby carrying over the preference share cost for computing capital gains.
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The amendment deems the cost of acquisition of a capital asset comprising unit(s) in a consolidated mutual fund plan to be the cost of acquisition of the corresponding unit(s) in the consolidating plan when the consolidated units were obtained by a specified transfer, thereby fixing the cost basis for capital gains computation.
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Where shares in an Indian company are transferred in a demerger, the transferee's cost of acquisition shall be the cost for which the previous owner acquired those shares, increased by any cost of improvements, by virtue of the Clause 25 amendment; the change takes effect from 1 April 2018 and applies to assessment year 2018-19 onward.
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Amendment revises the benchmark year used in the computation of the indexed cost of acquisition by replacing the earlier base-year reference with a more recent base year, with consequential changes to the mode of computation and prospective application to the stated assessment year and subsequent years, thereby altering the use of the Cost Inflation Index in proportionately adjusting cost of acquisition for capital gains.
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Amendment clarifies that for a non-resident holder of a rupee-denominated bond of an Indian company, any gain arising from appreciation of the rupee against a foreign currency at redemption shall be ignored in computing the full value of consideration for capital gains; the change substitutes "held by" for "subscribed by" and operates prospectively from the notified effective date.
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Conversion of preference shares into equity not treated as transfer, changing capital gains treatment from assessment year 2018-19.
The Finance Bill, 2017 adds a new clause excluding conversion of preference shares into equity of the same company from the definition of transfer for capital gains purposes. This amendment, aligning preference-share conversion with existing non-transfer treatment for bond or debenture conversions, takes effect from 1 April 2018 and applies to assessment year 2018-19 onward.
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The Bill inserts a provision that any transfer made outside India of a capital asset consisting of a rupee denominated bond of an Indian company issued outside India, where both transferor and transferee are non residents, shall not be regarded as transfer for capital gains purposes; this change complements existing non recognition for conversion of bonds into shares and applies prospectively from the operative year specified in the Bill.
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Section 45 is amended by inserting section 45(5A) to tax capital gains of individuals and HUFs from transfers of land or building under specified agreements in the previous year when the competent authority issues the project completion certificate; the stamp duty value of the assessee's share on that date, increased by any cash consideration, is deemed the full value of consideration. If the assessee transfers the share on or before that certificate date, capital gains are taxable in the year of that transfer and general provisions (excluding section 45(5A)) apply to determine full value. The amendment defines key terms and takes effect from 1 April 2018.
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A proviso to the tax audit requirement exempts persons who declare profits under the presumptive taxation scheme and whose total sales, turnover or gross receipts do not exceed the revised turnover ceiling, thereby narrowing the class required to obtain an audit when they comply with sub section (1) of the presumptive taxation provision. The amendment is effective from 1 April 2017 for the relevant assessment year and subsequent years.
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Amendment extends the rule that interest on certain bad or doubtful debts is taxable in the year it is credited to profit and loss or actually received, whichever is earlier, to co-operative banks while excluding primary agricultural credit societies and primary co-operative agricultural and rural development banks; it also adds in-section definitions of those terms and specifies a prospective operative date applying to the indicated assessment year and subsequent years.
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Amendment adds a proviso to section 43(1) that excludes from the actual cost for depreciation any expenditure on acquisition of an asset where payments to a person in a day exceed a specified cash threshold unless made by account-payee cheque, account-payee bank draft or electronic clearing system through a bank account, thereby conditioning depreciation eligibility on permitted modes of payment.
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The Finance Bill 2017 amends section 40A to withdraw automatic deductibility for payments under specified domestic transactions made at Arm's Length Price; such payments are now subject to the disallowance rules of section 40A(2). The amendment also alters the proviso to clause (a) of sub section (2) consequential to the transfer pricing provision, aligning domestic specified transaction treatment with the transfer pricing framework and applying retrospectively as provided in the Bill.
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Amendment lowers the cash payment threshold for deductibility from twenty thousand rupees to ten thousand rupees per person per day and requires payments above that limit to be made by account payee cheque, account payee bank draft, or electronic clearing through a bank account; amounts paid otherwise will be disallowed as deductions or deemed to be profits and gains of business or profession. Consequential changes to related sub provisions are also proposed, effective 1 April 2018 for the relevant assessment year.

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Comparison of section 257 "Proceedings before income-tax authorities to be judicial proceedings." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

9 September, 2025

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Section 257 Proceedings before income-tax authorities to be judicial proceedings.

Income-tax Act, 2025

At a Glance

The documents are two textual versions of Clause/Section 257 concerning proceedings before income-tax authorities: (1) Section 257 of the Income-tax Act, 2025 (final/enacted text as presented) and (2) Clause 257 of the Income Tax Bill, 2025 - Old Version. Both declare proceedings before income-tax authorities to be judicial proceedings and treat income-tax authorities as civil courts for certain statutory purposes. The primary difference is the insertion, in the enacted text, of a limiting phrase in subsection (2) - "but not for the purposes of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023." This matters for taxpayers, tax authorities and courts because it adjusts the scope of civil-court status conferred on income-tax authorities. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hooks: Section/Clause 257 is located within the Income-tax Act/Bill, 2025 and references specific provisions of two recently enacted central statutes: the Bharatiya Nyaya Sanhita, 2023 (45 of 2023) - sections 229, 233 and 267 - and the Bharatiya Nagarik Suraksha Sanhita, 2023 (46 of 2023) - section 215 and, in the enacted text, Chapter XXVIII. Coverage: the provision addresses the legal character of proceedings before income-tax authorities by declaring them "judicial proceedings" for certain penal/statutory purposes and by deeming income-tax authorities to be "Civil Court[s]" for a specified statutory purpose. Definitions or explanations: Not stated in the document beyond the cross-references to the cited sections/Chapter in the other statutes.

Statutory Provision Mode

Text & Scope

Section/Clause 257 contains two subsections. Subsection (1) declares that "any proceeding under this Act before an income-tax authority shall be deemed to be a judicial proceeding" for the meaning of sections 229 and 267 and "for the purposes of section 233" of the Bharatiya Nyaya Sanhita, 2023 (45 of 2023). Subsection (2) deems every income-tax authority to be a Civil Court for the purposes of section 215 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (46 of 2023). The enacted text further qualifies subsection (2) by excluding Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023. The provision thus creates cross-statutory recognition: tax proceedings acquire the legal status of "judicial proceedings" and income-tax authorities acquire "civil court" status for certain specified statutory references.

Interpretation

The text indicates a legislative intent to align procedural and evidentiary characterisations of tax proceedings with provisions of the Bharatiya Nyaya Sanhita and to confer certain civil-court attributes under the Bharatiya Nagarik Suraksha Sanhita. The explicit citation of particular sections suggests a targeted application rather than a wholesale importation of all features of judicial or civil-court status. The insertion of the negative qualification regarding Chapter XXVIII indicates a deliberate limitation to avoid extending civil-court status into that Chapter. The provision does not expressly list the consequences that follow from deeming tax proceedings "judicial proceedings" or income-tax authorities "Civil Courts" beyond the cross-references.

Exceptions/Provisos

The only express proviso in the enacted version is the carve-out in subsection (2): income-tax authorities are not to be considered civil courts "for the purposes of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023." No other exceptions, thresholds, or conditions are set out in the text. If further exceptions exist in Rules or other provisions, they are Not stated in the document.

Illustrations

  • Example 1: A proceeding before an income-tax authority involving assessment or penalty will be treated as a "judicial proceeding" for the application of sections 229 and 267 and for section 233 of the Bharatiya Nyaya Sanhita, 2023. The precise consequences depend on those sections' content (Not stated in the document).
  • Example 2: An income-tax authority exercising powers referenced in section 215 of the Bharatiya Nagarik Suraksha Sanhita will be treated as a Civil Court for that limited purpose. However, any procedural entitlement or sanction located in Chapter XXVIII of that statute cannot be invoked against or by the income-tax authority under this deeming (details of Chapter XXVIII: Not stated in the document).

Interplay

The provision expressly interacts with the Bharatiya Nyaya Sanhita, 2023 and the Bharatiya Nagarik Suraksha Sanhita, 2023 by adopting their terminology and conferring specified legal character on tax proceedings and authorities. The enacted text narrows the interaction with the latter Act by excluding Chapter XXVIII. Any interaction with other Rules, Notifications, or Circulars is Not stated in the document.

Differences between the Bill (Old Version) and the Enacted Section

Two substantive differences are visible between the texts provided:

  • Non-application carve-out: The enacted Section 257 adds a proviso that income-tax authorities are deemed to be Civil Courts for the purposes of section 215 of the Bharatiya Nagarik Suraksha Sanhita, 2023, "but not for the purposes of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023." The Bill version included only the deeming to be a Civil Court without this exclusion.

  • Stylistic/enactment status: The Bill is labeled "Clause 257 - Income Tax Bill, 2025 - Old Version"; the enacted text is labeled "Section 257 - Income-tax Act, 2025." This reflects passage into law rather than a substantive textual difference beyond the added exclusion. Any other drafting changes: Not stated in the document.

Practical impact of each change:

  • The added exclusion narrows the deeming effect by preventing the Civil Court characterization from extending to Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023. Practically, this limits the rights, remedies, or procedural effects conferred by Chapter XXVIII (whatever those may be under the 2023 statute) from attaching to income-tax authorities; conversely, it preserves those Chapter XXVIII provisions as inapplicable to tax authorities. The specific consequences depend on the subject-matter of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023 (e.g., special powers, procedures, or sanctions), which the document does not explicate. Therefore the operational impact: narrower application of the Civil Court deeming. Details of Chapter XXVIII's content: Not stated in the document.

  • The change from "Clause" to "Section" signals enactment and legal force; the addition of the exclusion therefore reflects parliamentary intent to circumscribe the practical scope of Civil Court status for tax authorities. Any legislative history or reasons for insertion of the exclusion: Not stated in the document.

Practical Implications

  • Compliance and risk areas: Tax practitioners should take cognisance that proceedings before income-tax authorities are judicial proceedings for the cited sections of the Bharatiya Nyaya Sanhita; this may affect admissibility of evidence, obligations to maintain records, or procedural safeguards where those sections apply. The enacted exclusion of Chapter XXVIII reduces uncertainty as to whether certain civil-court regimes apply; specific risk implications depend on the content of Chapter XXVIII (Not stated in the document).
  • Record-keeping/evidence points: The deeming as "judicial proceedings" may impose or trigger evidentiary consequences under the referenced sections (for example, penalties for false statements or obstruction under those statutes may apply), so maintaining contemporaneous, accurate records is impliedly important. The text does not prescribe specific record retention timelines or forms (Not stated in the document).

Key Takeaways

  • Both versions treat proceedings before income-tax authorities as "judicial proceedings" for specified provisions of the Bharatiya Nyaya Sanhita, 2023.
  • Both versions deem income-tax authorities to be "Civil Court[s]" for purposes of section 215 of the Bharatiya Nagarik Suraksha Sanhita, 2023.
  • The enacted Section adds a limitation: income-tax authorities are not to be treated as civil courts for the purposes of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023 - a narrowing absent from the Bill's Old Version.
  • The limiting clause reduces potential scope creep and clarifies that certain provisions in Chapter XXVIII do not attach to income-tax authorities by virtue of this deeming.
  • Details as to the substantive consequences flowing from the cited sections or from Chapter XXVIII are Not stated in the document; implications therefore depend on those external texts.

Full Text:

Section 257 Proceedings before income-tax authorities to be judicial proceedings.

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Acts Income Tax