Section 102 of ITA, 1961 : Section 102: Definitions

Explanation using Example

Let's consider a hypothetical scenario where these definitions from Section 102 of The Income-tax Act, 1961 could be applied:

Mr. Sharma, an individual, owns a company called XYZ Pvt. Ltd. He decides to transfer a piece of land, which is an "asset", to his company. This transfer is part of a larger "arrangement" where the land will be used by the company to develop a commercial complex. The transfer of land is a "step" in the arrangement.

Mr. Sharma's brother, who is a "connected person" as he is a "relative" of Mr. Sharma, also holds 25% shares in XYZ Pvt. Ltd., which means he has a "substantial interest" in the business as per the given definition.

By transferring the land to XYZ Pvt. Ltd., Mr. Sharma could potentially receive a "benefit" in the form of increased share value due to the company's expanded asset base. Additionally, if the transfer is at less than the market value, it could lead to a "tax benefit" for Mr. Sharma by reducing his taxable income or increasing his loss for the year.

If the arrangement between Mr. Sharma and XYZ Pvt. Ltd. is scrutinized by the tax authorities, they will refer to these definitions to determine the nature of the transaction and any tax implications.