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If a taxpayer changes its taxable year, the interval between the last full taxable year prior...

If a taxpayer changes its taxable year, the interval between the last full taxable year prior to the change and the starting date of the new taxable year shall be considered as a short independent fiscal period.

The first year of a new taxpayer or the last year of a taxpayer in case of discontinuation or liquidation, may be a short independent fiscal year. Why? Explain with example

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Answer #1

In the first scenario when the taxpayer changes its taxable year , it is considered as a short independent fiscal year because even though the taxable year has changed , the business operations will continue and I order to stop tax evasion by the firm.such practice of considering the time gap as short independent fiscal year is adopted by the tax authorities.

Even in the second case, the businesses is not carried down from beginning of the year till the end . So the operations will take place and the firm generates revenue for that time as the case may be.So in this situation also it is appropriate for the tax authorities to consider the period as short independent fiscal year.

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