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The Income Tax Act, 1961

The Income Tax Act, 1961

1. Latest Circular regarding E-Filing of Income TaxReturns (Details of Forms) - 10th Oct., 2006

§1.Latest Circular regarding E-Filing of Income Tax Returns (Details ofForms) - 10th Oct., 2006New Income Tax Return Forms for 2007-08Income Tax India - FAQ - How to file Income Tax Returns, Income Tax RatesApplicable 2006-2007, 2007 - 2008, Important Dates.. .

Circular No. 9 / 2006

F.No. 133/38/2006-TPLGovernment of IndiaMinistry of FinanceDepartment of Revenue

Central Board of Direct Taxes

New Delhi , the 10th October, 2006

Subject:- New Return Forms for Assessment Year 2006-07 matters connectedthereto reg .

The Central Board of Direct Taxes have notified following new return forms forAssessment Year 2006-07:-

(i) Form No.2F vide Notification S.O. No.848(E) effective from 1st June, 2006. This Form may be used only by assessees being resident individual/ Hinduundivided family (HUF)-

(a) not having Income from ‘business or profession’ or agricultural incomeor ‘capital gains’ (except long-term capital gains from transactions on


which securities transaction tax paid); or

(b) not claiming relief under section 89 in respect of arrears or advance ofsalary;

(c) not owning more than one house property.

(ii) Form No.1, Form No.2, Form No.3, and Form No.3B vide Notification S.O.No. 1163(E) effective from 24.7.2006 . The details of these forms are asunder-

(a) Form No.1 is a combined form for return of income and return of fringebenefits for companies other than those claiming exemption under section 11;

(b) Form No.2 is a combined form for return of income and return of fringebenefits for non-corporate assessees-

(i) not claiming exemption under section 11, and

(ii) having income from business or profession;

(c) Form No.3 is a form for return of income for non-corporate

assessees not claiming exemption under section 11 and not having income frombusiness or profession;

(d) Form No.3B is a residual form for return of fringe benefits for theassessees-

(i) who are required to furnish the return of income and also the return offringe benefits but

(a) have filed the return of income in Form No.1 or Form No.2 or Form No.2D orForm No.3A for the Assessment Year 2006-07 before the notification of thisForm No.3B, or

(b) opts to file the return of income in Form No. 2D

(ii) who are not required to furnish the return of income but are required tofurnish the return of fringe benefits.

These Forms are available at . If a taxpayer intends to file a return for anyearlier assessment year he will have to use the old forms.


2. These return forms have been designed to make them amenable for electronicfiling.In a case where the taxpayer does not use a digital signature, a twostep-procedure has been prescribed for furnishing these forms electronicallywithout digital signature. First step is

to transmit the details of the return and schedules thereto electronically(without digital signature) to the designated web-site and thereafter to filea paper Return. The date of the electronic transmission and acknowledgementnumber given electronically by the Income-tax

Department for such transmission has to be filled in the paper return.However, if the return is furnished electronically under the digitalsignature, it will not be necessary to furnish the paper return.

3. Apart from procedure mentioned in para 2, an assessee may also file, at hisoption, an e-return in accordance with following schemes:-

Electronic Furnishing of Return of Income Scheme, 2004 [Notified vide S.O. No.1073(E) dated 30.9.2004] . Under this Scheme, e-return has to be filed throughe-Return Intermediary, followed by a paper return . The scheme is applicableto all class of taxpayers who are assessed or assessable to tax at any of thecities specified in Schedule ‘A’ of the Scheme (i.e. net- worked cities);

(ii) Furnishing of Return of Income Internet Scheme, 2004 . [Notified videS.O. No.1074(E) dated 30.9.2004] Under this Scheme, e-return as to be filedunder the digital signature . The scheme is applicable only to “individual”taxpayers who has income under the head ‘”Salaries” but does not have anyincome under the head “Profits and gains of usiness or profession” and whoare assessed or assessable to tax at any of the cities specified in Schedule‘A’ of the Scheme (i.e. net- worked cities);

4. All corporate taxpayers are necessarily required to furnish the return forAssessment Year 2006-07 electronically after 24.7.2006. Thus, a company has tonecessarily file e-return either under digital signature or in accordance withtwo step procedure explained in para 2 or in accordance with the Schemementioned at para 3(i). However, for other class of taxpayers, it is optionalto furnish an e-return.

5. Further, these forms are not to be accompanied by any attachment/ annexure.Taxpayers should not enclose with these return forms any statement showing thecomputation of income or tax or notes thereto, copies of balance-sheet, profitand loss account or notes thereto, TDS/ TCS certificate, proof of payment ofadvance tax or self assessment tax, audit report or any other document.


6. Following clarifications are hereby issued In respect of certain issuesarising from furnishing the returns in above mentioned forms:-

(i) The report of audit under section 44AB is not to be attached with thereturn. It should not be furnished separately also before or after the duedate. However, an assessee should get the report of audit from an accountantunder said section before the due date of the furnishing of the return andshould fill out the relevant columns of these forms on the basis of suchreport. The assessee should retain the report with himself. It may befurnished in original during the assessment proceedings. No penalty undersection 271B shall be initiated or levied for not furnishing the tax auditreport on or before the due date. However, if the audit report has not beenobtained before the due date, provisions of section 271B shall be attracted.

While processing the return under section 143(1), the credit for Tax deductedat source (TDS)/ Tax collected at sources (TCS) shall be allowed on the basisof details furnished in the relevant schedules of these returns as if the TDS/TCS certificates have been filed. These returns are not to be accompanied withany other document including any statutory form or report of audit (other thanthe report under section 92E) which is otherwise required to be furnishedbefore the due date or along with the return for making any claim. Theprovisions of the law shall be deemed to have been complied with in respect ofthe requirement of the filing of the attachments or documents or reports alongwith the return. No penalty shall be initiated/ levied for not furnishing suchdocuments. All these documents should be retained by the taxpayers and befurnished in original during the scrutiny proceedings.

(iv) The report as required under section 92E of the shall continue to befurnished before the date specified in rule 10E.

(v) In the case of the old forms, the assessee could enclose documents,furnish reasons and make disclosures in support of claims made by him.However, it is not possible to do so in case of new forms as these areannexure-less. Accordingly, the assessee may, in pursuance to the first noticeissued under section 143(2), avail of the opportunity to file documents,furnish reasons and make disclosures in support of various claims made by himin the return filed in new form.

(vi) In case, a return is furnished under digital signature, the date of suchfurnishing shall be the date of furnishing the return. In case, a return isfurnished under two step procedure as explained in para 2 or in accordancewith the Scheme mentioned at para 3(i), the date of furnishing the e-returnwill be the date of furnishing the return only if-


(a) paper return has been filed within fifteen days from the date of filingthe e-return or within one month from the date of issue of this Circular,whichever is later; and

(b) paper return tallies with the e-return.

In case condition in (a) or (b) above is not satisfied, the paper return shallbe taken to be the return and date of filing the paper return shall be takenas the date of filing the return.

(vii) The e-Return has to be filed at http://incometaxindiaefiling.gov.in .The paper return, if any, in respect of such e-returns shall be filed eitherat separate counter(s) to be set up for this purpose at each local income-taxoffice (whether on net-work or not) or at designated postal offices.

(viii) It has been brought to the notice of the Board that some taxpayers havefiled the returns in the old forms (other than Form No.2D) even after thenotification of the new forms. Since, old return forms are invalid returnsafter the date of notification of new forms, the taxpayers should resubmit thereturn in new forms in accordance with the new procedure.

7. The returns filed electronically shall be processed on priority basis .

( Sharat Chandra )

Secretary, CBDT

Copy to :-

i. All Chambers of Commerce/Industry/Trade Associations.

ii. All Chief Commissioners/Directors General of Income-tax with a request to

circulate amongst all officers in their regions/ charges.

iii. Director General, National Academy of Direct Taxes, Nagpur .

iv. Directors, Regional Training Institutes, Ahmedabad/ Bangalore / Chandigarh/

Chennai/ Kolkata/ Lucknow / Mumbai.


v. Comptroller and Auditor General of India (40 copies)

vi. Ministry of Law (10 copies)

vii. Secretary, Settlement Commission, New Delhi .

viii. All officers and technical sections in CBDT.

( Sharat Chandra )

Secretary, CBDT

NewIncome Tax Return Forms for 2007-08

2. Preamble

§2.Preamble

PREAMBLE

[43 OF 1961]

An Act to consolidate and amend the law relating to income-tax and super-tax.

BE it enacted by Parliament in the Twelfth Year of the Republic of India asfollows :-

3. Abbreviations

§3.Abbreviations

ABBREVIATIONS

ABBREVIATIONS USED IN THIS ACT ARE -


Cl. Clause

Cls. Clauses

Expl/Expln. Explanation

Ins. Inserted

Misc. Miscellaneous

r. rule

rr. rules

Sch. Schedule

S./s. Section

Ss./ss. Sections

Subs. Substituted

w.e.f. With effect from

Abbreviations used Substitution of new authorities by

Direct Tax Laws (Amendment) Act, 1987,

s. 2 (w.e.f. 1-4-1988) / Direct Tax

Laws (Amendment) Act, 1989, s. 54

(w.e.f. 1-4-1988).

4. Short title, extent and commencement.

§4.Short title, extent and commencement.1. SHORT TITLE, EXTENT AND COMMENCEMENT.

(1) This Act may be called the Income-tax Act, 1961.


(2) It extends to the whole of India.

(3) Save as otherwise provided in this Act, it shall come into force on the1st day of April, 1962.

5. Definitions.

§5.Definitions.

Section 2

DEFINITIONS.

In this Act, unless the context otherwise requires, - (1) "Advance tax" meansthe advance tax payable in accordance with the provisions of Chapter XVII-C;

(1A) "Agricultural income" means - (a) any rent or revenue derived from landwhich is situated in India and is used for agricultural purposes;

(b) Any income derived from such land by - (i) Agriculture; or

(ii) The performance by a cultivator or receiver of rent-in-kind of anyprocess ordinarily employed by a cultivator or receiver of rent-in-kind torender the produce raised or received by him fit to be taken to market; or

(iii) The sale by a cultivator or receiver of rent-in-kind of the produceraised or received by him, in respect of which no process has been performedother than a process of the nature described in paragraph (ii) of this sub-clause;

(c) Any income derived from any building owned and occupied by the receiver ofthe rent or revenue of any such land, or occupied by the cultivator or thereceiver of rent-in-kind, of any land with respect to which, or the produce ofwhich, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) iscarried on :

Provided that - (i) The building is on or in the immediate vicinity of theland, and is a building which the receiver of the rent or revenue or thecultivator, or the receiver of rent-in-kind, by reason of his connection withthe land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) The land is either assessed to land revenue in India or is subject to a


local rate assessed and collected by officers of the Government as such orwhere the land is not so assessed to land revenue or subject to a local rate,it is not situated - (A) In any area which is comprised within thejurisdiction of a municipality (whether known as a municipality, municipalcorporation, notified area committee, town area committee, town committee orby any other name) or a cantonment board and which has a population of notless than ten thousand according to the last preceding census of which therelevant figures have been published before the first day of the previousyear; or

(B) In any area within such distance, not being more than eight kilometres,from the local limits of any municipality or cantonment board referred to initem (A), as the Central Government may, having regard to the extent of, andscope for, urbanisation of that area and other relevant considerations,specify in this behalf by notification in the Official Gazette.

Explanation : For the removal of doubts, it is hereby declared that revenuederived from land shall not include and shall be deemed never to have includedany income arising from the transfer of any land referred to in item (a) oritem (b) of sub-clause (iii) of clause (14) of this section;

(1B) "Amalgamation", in relation to companies, means the merger of one ormore companies with another company or the merger of two or more companies toform one company (the company or companies which so merge being referred to asthe amalgamating company or companies and the company with which they merge orwhich is formed as a result of the merger, as the amalgamated company) in sucha manner that - (i) all the property of the amalgamating company or companiesimmediately before the amalgamation becomes the property of the amalgamatedcompany by virtue of the amalgamation;

(ii) All the liabilities of the amalgamating company or companies immediatelybefore the amalgamation become the liabilities of the amalgamated company byvirtue of the amalgamation;

(iii) Shareholders holding not less than nine-tenths in value of the shares inthe amalgamating company or companies (other than shares already held thereinimmediately before the amalgamation by, or by a nominee for, the amalgamatedcompany or its subsidiary) become shareholders of the amalgamated company byvirtue of the amalgamation, otherwise than as a result of the acquisition ofthe property of one company by another company pursuant to the purchase ofsuch property by the other company or as a result of the distribution of suchproperty to the other company after the winding up of the first mentionedcompany;


(2) "Annual value", in relation to any property, means its annual value asdetermined under section 23;

(4) "Appellate Tribunal" means the Appellate Tribunal constituted undersection 252;

(5) "Approved gratuity fund" means a gratuity fund which has been andcontinues to be approved by the Chief Commissioner or Commissioner inaccordance with the rules contained in Part C of the Fourth Schedule;

(6) "Approved superannuation fund" means a superannuation fund or any part ofa superannuation fund which has been and continues to be approved by the ChiefCommissioner or Commissioner in accordance with the rules contained in Part Bof the Fourth Schedule;

(7) "Assessee" means a person by whom any tax or any other sum of money ispayable under this Act, and includes - (a) Every person in respect of whom anyproceeding under this Act has been taken for the assessment of his income orof the income of any other person in respect of which he is assessable, or ofthe loss sustained by him or by such other person, or the amount of refund dueto him or to such other person;

(b) Every person who is deemed to be an assessee under any provision of thisAct;

(c) Every person who is deemed to be an assessee in default under anyprovision of this Act;

(7A) "Assessing Officer" means the Assistant Commissioner or DeputyCommissioner or Assistant Director or Deputy Director or the Income-taxOfficer who is vested with the relevant jurisdiction by virtue of directionsor orders issued under sub-section (1) or sub-section (2) of section 120 orany other provision of this Act, and the Joint Commissioner or Joint Directorwho is directed under clause (b) of sub-section (4) of that section toexercise or perform all or any of the powers and functions conferred on, orassigned to, an Assessing Officer under this Act;

(8) "Assessment" includes reassessment;

(9) "Assessment year" means the period of twelve months commencing on the 1stday of April every year;

(9A) "Assistant Commissioner" means a person appointed to be an AssistantCommissioner of Income-tax or a Deputy Commissioner of Income-tax" under sub-section (1) of section 117;


(10) "Average rate of income-tax" means the rate arrived at by dividing theamount of income-tax calculated on the total income, by such total income;

(11) "Block of assets" means a group of assets falling within a class ofassets comprising - (a) Tangible assets, being buildings, machinery, plant orfurniture;

(b) Intangible assets, being know-how, patents, copyrights, trade-marks,licences, franchises or any other business or commercial rights of similarnature, in respect of which the same percentage of depreciation is prescribed;

(12) "Board" means the Central Board of Direct Taxes constituted under theCentral Boards of Revenue Act, 1963 (54 of 1963);

(13) "Business" includes any trade, commerce or manufacture or any adventureor concern in the nature of trade, commerce or manufacture;

(14) "Capital asset" means property of any kind held by an assessee, whetheror not connected with his business or profession, but does not include -

(i) Any stock-in-trade, consumable stores or raw materials held for thepurposes of his business or profession;

(ii) Personal effects, that is to say, movable property (including wearingapparel and furniture, but excluding jewellery) held for personal use by theassessee or any member of his family dependent on him.

Explanation : For the purposes of this sub-clause, "Jewellery" includes - (a)Ornaments made of gold, silver, platinum or any other precious metal or anyalloy containing one or more of such precious metals, whether or notcontaining any precious or semi-precious stone, and whether or not worked orsewn into any wearing apparel;

(b) Precious or semi-precious stones, whether or not set in any furniture,utensil or other article or worked or sewn into any wearing apparel;

(iii) Agricultural land in India, not being land situate -

(a) In any area which is comprised within the jurisdiction of a municipality(whether known as a municipality, municipal corporation, notified areacommittee, town area committee, town committee, or by any other name) or acantonment board and which has a population of not less than ten thousandaccording to the last preceding census of which the relevant figures have been


published before the 1st day of the previous year; or

(b) In any area within such distance, not being more than eight kilometresfrom the local limits of any municipality or cantonment board referred to initem (a), as the Central Government may, having regard to the extent of, andscope for, urbanisation of that area and other relevant considerations,specify 20 in this behalf by notification in the Official Gazette;

(iv) 6 1/2 per cent Gold Bonds, 1977, 22 or 7 per cent Gold Bonds, 1980,National Defence Gold Bonds, 1980, issued by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central Government;

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified bythe Central Government

(15) "Charitable purpose" includes relief of the poor, education, medicalrelief, and the advancement of any other object of general public utility

(15A) "Chief Commissioner" means a person appointed to be a Chief Commissionerof Income-tax under sub-section (1) of section 117;

(15B) "Child", in relation to an individual includes a step child and anadopted child of that individual;

(16) "Commissioner" means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117

(16A) "Commissioner (Appeals)" means a person appointed to be a Commissionerof Income-tax (Appeals) under sub-section (1) of section 117;

(17) "Company" means - (i) Any Indian company, or

(ii) Any body corporate incorporated by or under the laws of a country outsideIndia, or

(iii) Any institution, association or body which is or was assessable or wasassessed as a company for any assessment year under the Indian Income-tax Act,1922 (11 of 1922), or which is or was assessable or was assessed under thisAct as a company for any assessment year commencing on or before the 1st dayof April, 1970, or

(iv) Any institution, association or body, whether incorporated or not andwhether Indian or non-Indian, which is declared by general or special order ofthe Board to be a company :


Provided that such institution, association or body shall be deemed to be acompany only for such assessment year or assessment years (whether commencingbefore the 1st day of April, 1971 or on or after that date) as may bespecified in the declaration;

(18) "Company in which the public are substantially interested" - a company issaid to be a company in which the public are substantially interested -

(a) If it is a company owned by the Government or the Reserve Bank of India orin which not less than forty per cent of the shares are held (whether singlyor taken together) by the Government or the Reserve Bank of India or acorporation owned by that bank;

(aa) If it is a company which is registered under section 25 of the CompaniesAct, 1956 (1 of 1956); or

(ab) If it is a company having no share capital and if, having regard to itsobjects, the nature and composition of its membership and other relevantconsiderations, it is declared by order of the Board to be a company in whichthe public are substantially interested :

Provided that such company shall be deemed to be a company in which the publicare substantially interested only for such assessment year or assessment years(whether commencing before the 1st day of April, 1971, or on or after thatdate) as may be specified in the declaration;

(ac) If it is a mutual benefit finance company, that is to say, a companywhich carries on, as its principal business, the business of acceptance ofdeposits from its members and which is declared by the Central Governmentunder section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi orMutual Benefit Society;

(ad) If it is a company, wherein shares (not being shares entitled to a fixedrate of dividend whether with or without a further right to participate inprofits) carrying not less than fifty per cent of the voting power have beenallotted unconditionally to, or acquired unconditionally by, and werethroughout the relevant previous year beneficially held by, one or more co-operative societies;

(b) If it is a company which is not a 39 private company as defined in theCompanies Act, 1956 (1 of 1956), and the conditions specified either in item(A) or in item (B) are fulfilled, namely :-


(A) Shares in the company (not being shares entitled to a fixed rate ofdividend whether with or without a further right to participate in profits)were, as on the last day of the relevant previous year, listed in a recognisedstock exchange in India in accordance with the Securities Contracts(Regulation) Act, 1956 (42 of 1956), and any rules made thereunder;

(B) Shares in the company (not being shares entitled to a fixed rate ofdividend whether with or without a further right to participate in profits)carrying not less than fifty per cent of the voting power have been allottedunconditionally to, or acquired unconditionally by, and were throughout therelevant previous year beneficially held by -

(a) The Government, or

(b) A corporation established by a Central, State or Provincial Act, or

(c) Any company to which this clause applies or any subsidiary company of suchcompany if the whole of the share capital of such subsidiary company has beenheld by the parent company or by its nominees throughout the previous year.

Explanation : In its application to an Indian company whose business consistsmainly in the construction of ships or in the manufacture or processing ofgoods or in mining or in the generation or distribution of electricity or anyother form of power, item (B) shall have effect as if for the words "not lessthan fifty per cent", the words "not less than forty per cent" had beensubstituted;

(19) "Co-operative society" means a co-operative society registered under theCo-operative Societies Act, 1912 (2 of 1912), or under any other law for thetime being in force in any State for the registration of co-operativesocieties;

(19A) "Deputy Commissioner" means a person appointed to be a DeputyCommissioner of Income-tax under sub-section (1) of section 117;

(19AA) "Demerger", in relation to companies, means the transfer, pursuant to ascheme of arrangement under sections 391 to 394 of the Companies Act, 1956 (1of 1956), by a demerged company of its one or more undertakings to anyresulting company in such a manner that - (i) All the property of theundertaking, being transferred by the demerged company, immediately before thedemerger, becomes the property of the resulting company by virtue of thedemerger;

(ii) All the liabilities relatable to the undertaking, being transferred bythe demerged company, immediately before the demerger, become the liabilities


of the resulting company by virtue of the demerger;

(iii) The property and the liabilities of the undertaking or undertakingsbeing transferred by the demerged company are transferred at values appearingin its books of account immediately before the demerger;

(iv) The resulting company issues, in consideration of the demerger, itsshares to the shareholders of the demerged company on a proportionate basis;

(v) The shareholders holding not less than three-fourths in value of theshares in the demerged company (other than shares already held thereinimmediately before the demerger, or by a nominee for, the resulting companyor, its subsidiary) become shareholders of the resulting company or companiesby virtue of the demerger, otherwise than as a result of the acquisition ofthe property or assets of the demerged company or any undertaking thereof bythe resulting company;

(vi) The transfer of the undertaking is on a going concern basis;

(vii) The demerger is in accordance with the conditions, if any, notifiedunder sub-section (5) of section 72A by the Central Government in this behalf.

Explanation 1 : For the purposes of this clause, "undertaking" shall includeany part of an undertaking, or a unit or division of an undertaking or abusiness activity taken as a whole, but does not include individual assets orliabilities or any combination thereof not constituting a business activity.

Explanation 2 : For the purposes of this clause, the liabilities referred toin sub-clause (ii), shall include - (a) The liabilities which arise out of theactivities or operations of the undertaking;

(b) The specific loans or borrowings (including debentures) raised, incurredand utilised solely for the activities or operations of the undertaking; and

(c) In cases, other than those referred to in clause (a) or clause (b), somuch of the amounts of general or multipurpose borrowings, if any, of thedemerged company as stand in the same proportion which the value of the assetstransferred in a demerger bears to the total value of the assets of suchdemerged company immediately before the demerger.

6. Previous year defined.


§6.Previous year defined.

Section 3

"PREVIOUS YEAR" DEFINED.

(1) Save as otherwise provided in this section, "previous year" for the purposes of this Act,means the financial year immediately preceding the assessment year :

Provided that, in the case of a business or profession newly set up, or a source of income newlycoming into existence, in the said financial year, the previous year shall be the period beginningwith the date of setting up of the business or profession or, as the case may be, the date on whichthe source of income newly comes into existence and ending with the said financial year.

(2)"Previous year", in relation to the assessment year, commencing on the 1st day of April, 1989,means the period which begins with the date immediately following the last day of the previousyear relevant to the assessment year commencing on the 1st day of April, 1988 and ends on the31st day of March, 1989:

Provided that where the assessee has adopted more than one period as the "previous year" inrelation to the assessment year commencing on the 1st day of April, 1988 for different sources ofhis income, the previous year in relation to the assessment year commencing on the 1st day ofApril, 1989 shall be reckoned separately in the manner aforesaid in respect of each such sourceof income, and the longer or the longest of the periods so reckoned shall be the previous year forthe said assessment year :

Provided further that in the case of a business or profession newly set up, or a source of incomenewly coming into existence on or after the 1st day of April, 1987 but before the 1st day of April,1988 and where the accounts in relation to such business or profession or source of income havenot been made up to the 31st day of March, 1988, the "Previous year" in relation to theassessment year commencing on the 1st day of April, 1989, shall be the period beginning withthe date of setting up of the business or profession or, as the case may be, the date on which thesource of income newly comes into existence and ending on the 31st day of March, 1989 :

Provided also that where the assessee has adopted one or more periods as the "previous year" inrelation to the assessment year commencing on the 1st day of April, 1988, for any source orsources of his income, in addition to the business or profession or source of income referred to inthe second proviso, the previous year in relation to the assessment year commencing on the 1stday of April, 1989, shall be reckoned separately in the manner aforesaid in respect of each suchsource of income, and the longer or the longest of the periods so reckoned shall be the previousyear in relation to the said assessment year. 123

(3) Where the previous year in relation to the assessment year commencing on the 1st day ofApril, 1989, referred to in sub-section (2) exceeds a period of twelve months, the provisions ofthis Act shall apply subject to the modifications specified in the rules in the Tenth Schedule.


7. Charge of Income-Tax.

§ 7. Charge of Income-Tax.

Section 4

CHARGE OF INCOME-TAX.

(1) Where any Central Act enacts that income-tax shall be charged for any assessment year atany rate or rates, income-tax at that rate or those rates shall be charged for that year inaccordance with, and subject to the provisions (including provisions for the levy of additionalincome-tax) of, this Act in respect of the total income of the previous year of every person :

Provided that where by virtue of any provision of this Act income-tax is to be charged in respectof the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at thesource or paid in advance, where it is so deductible or payable under any provision of this Act.

8. Scope of total income.

§ 8. Scope of total income.

Section 5

SCOPE OF TOTAL INCOME.

(1) Subject to the provisions of this Act, the total income of any previous year of a person who isa resident includes all income from whatever source derived which - (a) Is received or is deemedto be received in India in such year by or on behalf of such person; or

(b) Accrues or arises or is deemed to accrue or arise to him in India during such year; or

(c) Accrues or arises to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) 127a of section 6, the income which accrues or arises to him outside India shall notbe so included unless it is derived from a business controlled in or a profession set up in India.


(2) Subject to the provisions of this Act, the total income of any previous year of a person who isa non-resident includes all income from whatever source derived which - (a) Is received or isdeemed to be received in India in such year by or on behalf of such person; or

(b) Accrues or arises or is deemed to accrue or arise to him in India during such year.

Explanation 1 : Income accruing or arising outside India shall not be deemed to be received inIndia within the meaning of this section by reason only of the fact that it is taken into account ina balance sheet prepared in India.

Explanation 2 : For the removal of doubts, it is hereby declared that income which has beenincluded in the total income of a person on the basis that it has accrued or arisen or is deemed tohave accrued or arisen to him shall not again be so included on the basis that it is received ordeemed to be received by him in India.

9. Apportionment of income between spouses governed byportuguese civil code.

§ 9. Apportionment of income between spouses governed by portuguese civil code.

Section 5A

APPORTIONMENT OF INCOME BETWEEN SPOUSES GOVERNED BY PORTUGUESECIVIL CODE.

(1) Where the husband and wife are governed by the system of community of property (knownunder the Portuguese Civil Code of 1860 as "COMMUNIAO DOS BENS") in force in the Stateof Goa and in the Union territories of Dadra and Nagar Haveli and Daman and Diu, the incomeof the husband and of the wife under any head of income shall not be assessed as that of suchcommunity of property (whether treated as an association of persons or a body of individuals),but such income of the husband and of the wife under each head of income (other than under thehead "Salaries") shall be apportioned equally between the husband and the wife and the incomeso apportioned shall be included separately in the total income of the husband and of the wiferespectively, and the remaining provisions of this Act shall apply accordingly.

(2) Where the husband or, as the case may be, the wife governed by the aforesaid system ofcommunity of property has any income under the head "Salaries", such income shall be includedin the total income of the spouse who has actually earned it.

10. Residence in India.


§ 10. Residence in India.Section 6

RESIDENCE IN INDIA.

For the purposes of this Act, - (1) An individual is said to be resident in India in any previousyear, if he - (a) Is in India in that year for a period or periods amounting in all to one hundredand eighty-two days or more; or

(c) Having within the four years preceding that year been in India for a period or periodsamounting in all to three hundred and sixty-five days or more, is in India for a period or periodsamounting in all to sixty days or more in that year.

Explanation : In the case of an individual, - (a) Being a citizen of India, who leaves India in anyprevious year as a member of the crew of an Indian ship as defined in clause (18) of section 3 ofthe Merchant Shipping Act, 1958, (44 of 1958) or for the purposes of employment outside India,the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixtydays", occurring therein, the words "one hundred and eighty-two days" had been substituted;

(b) Being a citizen of India, or a person of Indian origin within the meaning of Explanation toclause (e) of section 115C, who, being outside India, comes on a visit to India in any previousyear, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixtydays", occurring therein, the words "one hundred eighty-two days" had been substituted.

(2) A Hindu undivided family, firm or other association of persons is said to be resident in Indiain any previous year in every case except where during that year the control and management ofits affairs is situated wholly outside India.

(3) A company is said to be resident in India in any previous year, if - (i) It is an Indiancompany; or

(ii) During that year, the control and management of its affairs is situated wholly in India.

(4) Every other person is said to be resident in India in any previous year in every case, exceptwhere during that year the control and management of his affairs is situated wholly outside India.

(5) If a person is resident in India in a previous year relevant to an assessment year in respect ofany source of income, he shall be deemed to be resident in India in the previous year relevant tothe assessment year in respect of each of his other sources of income.

(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is- (a) An individual who has not been resident in India in nine out of the ten previous yearspreceding that year, or has not during the seven previous years preceding that year been in Indiafor a period of, or periods amounting in all to, seven hundred and thirty days or more, or


(b) A Hindu undivided family whose manager has not been resident in India in nine out of theten previous years preceding that year, or has not during the seven previous years preceding thatyear been in India for a period of, or periods amounting in all to, seven hundred and thirty daysor more.

11. Income deemed to be received.

§ 11. Income deemed to be received.

Section 7

INCOME DEEMED TO BE RECEIVED.

The following incomes shall be deemed to be received in the previous year :- (i) The annualaccretion in the previous year to the balance at the credit of an employee participating in arecognised provident fund, to the extent provided in rule 6 of Part A of the Fourth Schedule;

(ii) The transferred balance in a recognised provident fund, to the extent provided in sub-rule (4)of rule 11 of Part A of the Fourth Schedule.

12. Dividend Income.

§ 12. Dividend Income.

Section 8

DIVIDEND INCOME.

For the purposes of inclusion in the total income of an assessee, - (a) Any dividend declared by acompany or distributed or paid by it within the meaning of sub-clause (a) or sub-clause (b) orsub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall be deemed tobe the income of the previous year in which it is so declared, distributed or paid, as the case maybe;

(b) Any interim dividend shall be deemed to be the income of the previous year in which theamount of such dividend is unconditionally made available by the company to the member whois entitled to it.


13. Income deemed to accrue or arise in India.

§13.Income deemed to accrue or arise in India.

Section 9

INCOME DEEMED TO ACCRUE OR ARISE IN INDIA.

(1) The following incomes shall be deemed to accrue or arise in India :- (i) All income accruingor arising, whether directly or indirectly, through or from any business connection in India, orthrough or from any property in India, or through or from any asset or source of income in India,or through the transfer of a capital asset situate in India;

Explanation : For the purposes of this clause - (a) In the case of a business of which all theoperations are not carried out in India, the income of the business deemed under this clause toaccrue or arise in India shall be only such part of the income as is reasonably attributable to theoperations carried out in India;

(b) In the case of a non-resident, no income shall be deemed to accrue or arise in India to himthrough or from operations which are confined to the purchase of goods in India for the purposeof export;

(c) In the case of a non-resident, being a person engaged in the business of running a newsagency or of publishing newspapers, magazines or journals, no income shall be deemed to accrueor arise in India to him through or from activities which are confined to the collection of newsand views in India for transmission out of India;

(d) In the case of a non-resident, being - (1) An individual who is not a citizen of India; or

(2) A firm which does not have any partner who is a citizen of India or who is resident in India;or

(3) A company which does not have any shareholder who is a citizen of India or who is residentin India, no income shall be deemed to accrue or arise in India to such individual, firm orcompany through or from operations which are confined to the shooting of any cinematographfilm in India;

(ii) Income which falls under the head "Salaries", if it is earned in India;

Explanation : For the removal of doubts, it is hereby declared that income of the nature referredto in this clause payable for service rendered in India shall be regarded as income earned inIndia.

(iii) Income chargeable under the head "Salaries" payable by the Government to a citizen of


India for service outside India;

(iv) A dividend paid by an Indian company outside India;

(v) Income by way of interest payable by - (a) The Government; or

(b) A person who is a resident, except where the interest is payable in respect of any debtincurred or moneys borrowed and used, for the purposes of a business or profession carried on bysuch person outside India or for the purposes of making or earning any income from any sourceoutside India; or

(c) A person who is a non-resident, where the interest is payable in respect of any debt incurred,or moneys borrowed and used, for the purposes of a business or profession carried on by suchperson in India;

(vi) Income by way of royalty payable by - (a) The Government; or

(b) A person who is a resident, except where the royalty is payable in respect of any right,property or information used or services utilised for the purposes of a business or professioncarried on by such person outside India or for the purposes of making or earning any incomefrom any source outside India; or

(c) A person who is a non-resident, where the royalty is payable in respect of any right, propertyor information used or services utilised for the purposes of a business or profession carried on bysuch person in India, or for the purposes of making or earning any income from any source inIndia :

Provided that nothing contained in this clause shall apply in relation to so much of the income byway of royalty as consists of lump sum consideration for the transfer outside India of, or theimparting of information outside India in respect of, any data, documentation, drawing orspecification relating to any patent, invention, model, design, secret formula or process or trademark or similar property, if such income is payable in pursuance of an agreement made beforethe 1st day of April, 1976, and the agreement is approved by the Central Government :

Provided further that nothing contained in this clause shall apply in relation to so much of theincome by way of royalty as consists of lump sum payment made by a person, who is a resident,for the transfer of all or any rights (including the granting of a licence) in respect of computersoftware supplied by a non-resident manufacturer along with a computer or computer-basedequipment under any scheme approved under the Policy on Computer Software Export, SoftwareDevelopment and Training, 1986 of the Government of India.

Explanation 1 : For the purposes of the first proviso, an agreement made on or after the 1st dayof April, 1976, shall be deemed to have been made before that date if the agreement is made inaccordance with proposals approved by the Central Government before that date; so, however,that, where the recipient of the income by way of royalty is a foreign company, the agreement


shall not be deemed to have been made before that date unless, before the expiry of the timeallowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or onextension) for furnishing the return of income for the assessment year commencing on the 1stday of April, 1977, or the assessment year in respect of which such income first becomeschargeable to tax under this Act, whichever assessment year is later, the company exercises anoption by furnishing a declaration in writing to the Assessing Officer (such option being final forthat assessment year and for every subsequent assessment year) that the agreement may beregarded as an agreement made before the 1st day of April, 1976.

Explanation 2 : For the purposes of this clause, "royalty" means consideration (including anylump sum consideration but excluding any consideration which would be the income of therecipient chargeable under the head "Capital gains") for - (i) The transfer of all or any rights(including the granting of a licence) in respect of a patent, invention, model, design, secretformula or process or trade mark or similar property;

(ii) The imparting of any information concerning the working of or the use of, a patent,invention, model, design, secret formula or process or trade mark or similar property;

(iii) The use of any patent, invention, model, design, secret formula or process or trade mark orsimilar property;

(iv) The imparting of any information concerning technical, industrial, commercial or scientificknowledge, experience or skill;

(v) The transfer of all or any rights (including the granting of a licence) in respect of anycopyright, literary, artistic or scientific work including films or video tapes for use in connectionwith television or tapes for use in connection with radio broadcasting, but not includingconsideration for the sale, distribution or exhibition of cinematographic films; or

(vi) The rendering of any services in connection with the activities referred to in sub-clauses (i)to (v);

Explanation 3 : For the purposes of this clause, the expression "computer software" shall havethe meaning assigned to it in clause (b) of the Explanation to section 80HHE;

(vii) Income by way of fees for technical services payable by - (a) The Government; or

(b) A person who is a resident, except where the fees are payable in respect of services utilised ina business or profession carried on by such person outside India or for the purposes of making orearning any income from any source outside India; or

(c) A person who is a non-resident, where the fees are payable in respect of services utilised in abusiness or profession carried on by such person in India or for thepurposes of making or earningany income from any source in India :


Provided that nothing contained in this clause shall apply in relation to any income by way offees for technical services payable in pursuance of an agreement made before the 1st day ofApril, 1976, and approved by the Central Government.

Explanation 1 : For the purposes of the foregoing proviso, an agreement made on or after the 1stday of April, 1976, shall be deemed to have been made before that date if the agreement is madein accordance with proposals approvedby the Central Government before that date.

Explanation 2 : For the purposes of this clause, "fees for technical services" means anyconsideration (including any lump sum consideration) for the rendering of any managerial,technical or consultancy services (including the provision of services of technical or otherpersonnel) but does not include consideration for any construction, assembly, mining or likeproject undertaken by the recipient or consideration which would be income of the recipientchargeable under the head "Salaries".

(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India toa person residing permanently outside India shall not be deemed to accrue or arise in India, if thepension is payable to a person referred to in article 314 of the Constitution or to a person who,having been appointed before 15th day of August, 1947, to be a Judge of the Federal Court or ofa High Court within the meaning of the Government of India Act, 1935, continues to serve on orafter the commencement of the Constitution as a Judge in India.

14. Incomes not included in total income.

§ 14. Incomes not included in total income.

Section 10

INCOMES NOT INCLUDED IN TOTAL INCOME. In computing the total income of aprevious year of any person, any income falling within any of the following clauses shall not beincluded - (1) Agricultural income;

(2) Subject to the provisions of sub-section (2) of section 64, any sum received by an individualas a member of a Hindu undivided family, where such sum has been paid out of the income ofthe family, or, in the case of any impartible estate, where such sum has been paid out of theincome of the estate belonging to the family;

(2A) In the case of a person being a partner of a firm which is separately assessed as such, hisshare in the total income of the firm.

Explanation : For the purposes of this clause, the share of a partner in the total income of a firmseparately assessed as such shall, notwithstanding anything contained in any other law, be an


amount which bears to the total income of the firm the same proportion as the amount of hisshare in the profits of the firm in accordance with the partnership deed bears to such profits;

(3) 145 any receipts which are of a casual and non-recurring nature, to the extent such receipts donot exceed five thousand rupees in the aggregate :

Provided that where such receipts relate to winnings from races including horse races, theprovisions of this clause shall have effect as if for the words "five thousand rupees", the words"two thousand five hundred rupees" had been substituted :

Provided further that this clause shall not apply to - (i) Capital gains chargeable under theprovisions of section 45; or

(ii) Receipts arising from business or the exercise of a profession or occupation; or

(iii) Receipts by way of addition to the remuneration of an employee;

(4)(i) In the case of a non-resident, any income by way of interest on such securities or bonds asthe Central Government may, by notification in the Official Gazette, specify 148 in this behalf,including income by way of premium on the redemption of such bonds;

(ii) In the case of an individual, any income by way of interest on moneys standing to his creditin a Non-Resident (External) Account in any bank in India in accordance with the ForeignExchange Regulation Act, 1973 (46 of 1973), and the rules made thereunder :

Provided that such individual is a person resident outside India as defined in clause 149a (q) ofsection 2 of the said Act or is a person who has been permitted by the Reserve Bank of India tomaintain the aforesaid Account;

(4B) In the case of an individual, being a citizen of India or a person of Indian origin, who is anon-resident, any income from interest on such savings certificates issued by the CentralGovernment as that Government may, by notification in the Official Gazette, 151 specify in thisbehalf :

Provided that the individual has subscribed to such certificates in convertible foreign exchangeremitted from a country outside India in accordance with the provisions of Foreign ExchangeRegulation Act, 1973 (46 of 1973), and any rules made thereunder.

Explanation : For the purposes of this clause, - (a) A person shall be deemed to be of Indianorigin if he, or either of his parents or any of his grand-parents, was born in undivided India;

(b) "Convertible foreign exchange" means foreign exchange which is for the time being treatedby the Reserve Bank of India as convertible foreign exchange for the purposes of the ForeignExchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;


(5) In the case of an individual, the value of any travel concession or assistance received by, ordue to, him, - (a) From his employer for himself and his family, in connection with hisproceeding on leave to any place in India;

(b) From his employer or former employer for himself and his family, in connection with hisproceeding to any place in India after retirement from service or after the termination of hisservice, subject to such conditions as may be prescribed 153 (including conditions as to numberof journeys and the amount which shall be exempt per head) having regard to the travelconcession or assistance granted to the employees of the Central Government :

Provided that the amount exempt under this clause shall in no case exceed the amount ofexpenses actually incurred for the purpose of such travel.

Explanation : For the purposes of this clause, "family", in relation to an individual, means - (i)The spouse and children of the individual; and

(ii) The parents, brothers and sisters of the individual or any of them, wholly or mainlydependent on the individual;

(5B) In the case of an individual who renders services as a technician in the employment(commencing from a date after the 31st day of March, 1993) of the Government or of a localauthority or of any corporation set up under any special law or of any such institution or bodyestablished in India for carrying on scientific research as is approved for the purposes of thisclause by the prescribed authority or in any business carried on in India and the individual wasnot resident in India in any of the four financial years immediately preceding the financial year inwhich he arrived in India and the tax on his income for such services chargeable under the head"Salaries" is paid to the Central Government by the employer (which tax, in the case of anemployer, being a company, may be paid notwithstanding anything contained in section 200 ofthe Companies Act, 1956) (1 of 1956), the tax so paid by the employer for a period notexceeding forty-eight months commencing from the date of his arrival in India :

Provided that the Central Government may, if it considers it necessary or expedient in the publicinterest so to do, waive the condition relating to non-residence in India as specified in this clausein the case of any individual who is employed in India for designing, erection or commissioningof machinery or plant or supervising activities connected with such designing, erection orcommissioning.

Explanation : For the purposes of this clause, "technician" means a person having specialisedknowledge and experience in - (i) Constructional or manufacturing operations, or in mining or inthe generation of electricity or any other form of power, or

(ii) Agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or

(iii) Such other field as the Central Government may, having regard to availability of Indians


having specialised knowledge and experience therein, the needs of the country and other relevantcircumstances, by notification in the Official Gazette, specify, who is employed in India in acapacity in which such specialised knowledge and experience are actually utilised;

(6) In the case of an individual who is not a citizen of India, - (i) Subject to such conditions 156as the Central Government may prescribe, passage moneys or the value of any free orconcessional passage received by or due to such individual - (a) From his employer, for himself,his spouse and children, in connection with his proceeding on home leave out of India;

(b) From his employer or former employer for himself, his spouse and children, in connectionwith his proceeding to his home country out of India after retirement from service in India orafter the termination of such service;

(ii) The remuneration received by him as an official, by whatever name called, of an embassy,high commission, legation, commission, consulate or the trade representation of a foreign State,or as a member of the staff of any of these officials, for service in such capacity :

Provided that the remuneration received by him as a trade commissioner or other officialrepresentative in India of the Government of a foreign State (not holding office as such in anhonorary capacity), or as a member of the staff of any of those officials, shall be exempt only ifthe remuneration of the corresponding officials or, as the case may be, members of the staff, ifany, of the Government resident for similar purposes in the country concerned enjoys a similarexemption in that country :

Provided further that such members of the staff are subjects of the country represented and arenot engaged in any business or profession or employment in India otherwise than as members ofsuch staff;

(vi) The remuneration received by him as an employee of a foreign enterprise for servicesrendered by him during his stay in India, provided the following conditions are fulfilled - (a)The foreign enterprise is not engaged in any trade or business in India;

(b) His stay in India does not exceed in the aggregate a period of ninety days in such previousyear; and

(c) Such remuneration is not liable to be deducted from the income of the employer chargeableunder this Act;

(viii) Any income chargeable under the head "Salaries" received by or due to any such individualbeing a non-resident as remuneration for services rendered in connection with his employmenton a foreign ship where his total stay in India does not exceed in the aggregate a period of ninetydays in the previous year;

(xi) The remuneration received by him as an employee of the Government of a foreign Stateduring his stay in India in connection with his training in any establishment or office of, or in any


undertaking owned by, - (i) The Government; or

(ii) Any company in which the entire paid-up share capital is held by the Central Government, orany State Government or Governments, or partly by the Central Government and partly by oneor more State Governments; or

(iii) Any company which is a subsidiary of a company referred to in item (ii); or

(iv) Any corporation established by or under a Central, State or Provincial Act; or

(v) Any society registered under the Societies Registration Act, 1860 (14 of 1860), or under anyother corresponding law for the time being in force and wholly financed by the CentralGovernment, or any State Government or State Governments, or partly by the CentralGovernment and partly by one or more State Governments;

(6A) where in the case of a foreign company deriving income by way of royalty or fees fortechnical services received from Government or an Indian concern in pursuance of an agreementmade by the foreign company with Government or the Indian concern after the 31st day ofMarch, 1976 and, -

(a) Where the agreement relates to a matter included in the industrial policy, for the time being inforce, of the Government of India, such agreement is in accordance with that policy; and

(b) In any other case, the agreement is approved by the Central Government, the tax on suchincome is payable, under the terms of the agreement, by Government or the Indian concern to theCentral Government, the tax so paid;

Explanation : For the purposes of this clause and clause (6B), - (a) "Fees for technical services"shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;

(b) "Foreign company" shall have the same meaning as in section 80B;

(c) "Royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) ofsection 9;

(6B) Where in the case of a non-resident (not being a company) or of a foreign company derivingincome (not being salary, royalty or fees for technical services) from Government or an Indianconcern in pursuance of an agreement entered into by the Central Government with theGovernment of a foreign State or an international organisation, the tax on such income is payableby Government or the Indian concern to the Central Government under the terms of thatagreement or any other related agreement approved by the Central Government, the tax so paid;

(6BB) Where in the case of the Government of a foreign State or a foreign enterprise derivingincome from an Indian company engaged in the business of operation of aircraft, as a


consideration of acquiring an aircraft or an aircraft engine (other than payment for providingspares, facilities or services in connection with the operation of leased aircraft) on lease under anagreement entered into "after the 31st day of March, 1997 but before the 1st day of April, 1999and approved by the Central Government in this behalf and the tax on such income is payable bysuch Indian company under the terms of that agreement to the Central Government, the tax sopaid.

Explanation : For the purposes of this clause, the expression "foreign enterprise" means a personwho is a non-resident.;

(6C) Any income arising to such foreign company, as the Central Government may, bynotification in the Official Gazette, specify in this behalf, by way of fees for technical servicesreceived in pursuance of an agreement entered into with that Government for providing servicesin or outside India in projects connected with security of India;

(7) Any allowances or perquisites paid or allowed as such outside India by the Government to acitizen of India for rendering service outside India;

(8) In the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement enteredinto by the Central Government and the Government of a foreign State (the terms whereofprovide for the exemption given by this clause) - (a) The remuneration received by him directlyor indirectly from the Government of that foreign State for such duties, and

(b) Any other income of such individual which accrues or arises outside India, and is not deemedto accrue or arise in India, in respect of which such individual is required to pay any income orsocial security tax to the Government of that foreign State;

(8A) In the case of a consultant - (a) Any remuneration or fee received by him or it, directly orindirectly, out of the funds made available to an international organisation [hereafter referred toin this clause and clause (8B) as the agency] under a technical assistance grant agreementbetween the agency and the Government of a foreign State; and

(b) Any other income which accrues or arises to him or it outside India, and is not deemed toaccrue or arise in India, in respect of which such consultant is required to pay any income orsocial security tax to the Government of the country of his or its origin.

Explanation : In this clause, "consultant" means - (i) Any individual, who is either not a citizenof India or, being a citizen of India, is not ordinarily resident in India; or

(ii) Any other person, being a non-resident, engaged by the agency for rendering technicalservices in India in connection with any technical assistance programme or project, provided thefollowing conditions are fulfilled, namely :- (1) The technical assistance is in accordance withan agreement entered into by the Central Government and the agency; and


(2) The agreement relating to the engagement of the consultant is approved by the prescribedauthority for the purposes of this clause;

(8B) In the case of an individual who is assigned to duties in India in connection with anytechnical assistance programme and project in accordance with an agreement entered into by theCentral Government and the agency - (a) The remuneration received by him, directly orindirectly, for such duties from any consultant referred to in clause (8A); and

(b) Any other income of such individual which accrues or arises outside India, and is not deemedto accrue or arise in India, in respect of which such individual is required to pay any income orsocial security tax to the country of his origin, provided the following conditions are fulfilled,namely :-

(i) The individual is an employee of the consultant referred to in clause (8A) and is either not acitizen of India or, being a citizen of India, is not ordinarily resident in India; and

(ii) The contract of service of such individual is approved by the prescribed authority before thecommencement of his service;

(9) The income of any member of the family of any such individual as is referred to in clause (8)or clause (8A) or, as the case may be, clause (8B) accompanying him to India, which accrues orarises outside India, and is not deemed to accrue or arise in India, in respect of which suchmember is required to pay any income or social security tax to the Government of that foreignState or, as the case may be, country of origin of such member;

(10)(i) Any death-cum-retirement gratuity received under the revised Pension Rules of theCentral Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, orunder any similar scheme applicable to the members of the civil services of the Union or holdersof posts connected with defence or of civil posts under the Union (such members or holdersbeing persons not governed by the said Rules) or to the members of the all-India services or tothe members of the civil services of a State or holders of civil posts under a State or to theemployees of a local authority or any payment of retiring gratuity received under the PensionCode or Regulations applicable to the members of the defence services;

(ii) Any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent itdoes not exceed an amount calculated in accordance with the provisions of sub-sections (2) and(3) of section 4 of that Act 185 ;

(iii) Any other gratuity received by an employee on his retirement or on his becomingincapacitated prior to such retirement or on termination of his employment, or any gratuityreceived by his widow, children or dependants on his death, to the extent it does not, in eithercase, exceed one-half month"s salary for each year of completed service, calculated on the basisof the average salary for the ten months immediately preceding the month in which any suchevent occurs, subject to such limit 188 as the Central Government may, by notification in the


Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to theemployees of that Government:

Provided that where any gratuities referred to in this clause are received by an employee frommore than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause shall not exceed the limit so specified:

Provided further that where any such gratuity or gratuities was or were received in any one ormore earlier previous years also and the whole or any part of the amount of such gratuity orgratuities was not included in the total income of the assessee of such previous year or years, theamount exempt from income-tax under this clause shall not exceed the limit so specified asreduced by the amount or, as the case may be, the aggregate amount not included in the totalincome of any such previous year or years :

Explanation : In this clause, and in clause (10AA), "salary" shall have the meaning assigned to itin clause (h) of rule 2 of Part A of the Fourth Schedule;

(10A)(i) Any payment in commutation 193 of pension received under the Civil Pensions(Commutation) Rules of the Central Government or under any similar scheme applicable to themembers of the civil services of the Union or holders of posts connected with defence or of civilposts under the Union (such members or holders being persons not governed by the said Rules)or to the members of the all-India services or to the members of the defence services or themembers of the civil services of a State or holders of civil posts under a State or to the employeesof a local authority 194 ] or a corporation established by a Central, State or Provincial Act;

(ii) Any payment in commutation of pension received under any scheme of any other employer,to the extent it does not exceed - (a) In a case where the employee receives any gratuity, thecommuted value of one-third of the pension which he is normally entitled to receive, and

(b) In any other case, the commuted value of one-half of such pension, such commuted valuebeing determined having regard to the age of the recipient, the state of his health, the rate ofinterest and officially recognised tables of mortality :

(iii) Any payment in commutation of pension received from a fund under clause (23AAB);

(10AA)(i) Any payment received by an employee of the Central Government or a StateGovernment, as the cash equivalent of the leave salary in respect of the period of earned leave athis credit at the time of his retirement whether on superannuation or otherwise;

(ii) Any payment of the nature referred to in sub-clause (i) received by an employee, other thanan employee of the Central Government or a State Government, in respect of so much of theperiod of earned leave at his credit at the time of his retirement whether on superannuation orotherwise as does not exceed ten months, calculated on the basis of the average salary drawn bythe employee during the period of ten months immediately preceding his retirement whether onsuperannuation or otherwise, subject to such limit 200 as the Central Government may, by


notification in the Official Gazette, specify in this behalf having regard to the limit applicable inthis behalf to the employees of that Government :

Provided that where any such payments are received by an employee from more than oneemployer in the same previous year, the aggregate amount exempt from income-tax under thissub-clause shall not exceed the limit so specified:

Provided further that where any such payment or payments was or were received in any one ormore earlier previous years also and the whole or any part of the amount of such payment orpayments was or were not included in the total income of the assessee of such previous year oryears, the amount exempt from income-tax under this sub-clause shall not exceed the limit sospecified, as reduced by the amount or, as the case may be, the aggregate amount not included inthe total income of any such previous year or years :

Explanation : For the purposes of sub-clause (ii), - The entitlement to earned leave of anemployee shall not exceed thirty days for every year of actual service rendered by him as anemployee of the employer from whose service he has retired;

(10B) Any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of1947), or under any other Act or Rules, orders or notifications issued thereunder or under anystanding orders or under any award, contract of service or otherwise, at the time of hisretrenchment :

Provided that the amount exempt under this clause shall not exceed - (i) An amount calculated inaccordance with the provisions of 206 clause (b) of section 25F of the Industrial Disputes Act,1947 (14 of 1947); or

(ii) Such amount, not being less than fifty thousand rupees, as the Central Government may, bynotification in the Official Gazette, specify in this behalf,

whichever is less : Provided further that the preceding proviso shall not apply in respect of anycompensation received by a workman in accordance with any scheme which the CentralGovernment may, having regard to the need for extending special protection to the workmen inthe undertaking to which such scheme applies and other relevant circumstances, approve in thisbehalf.

Explanation : For the purposes of this clause - (a) Compensation received by a workman at thetime of the closing down of the undertaking in which he is employed shall be deemed to becompensation received at the time of his retrenchment;

(b) Compensation received by a workman, at the time of the transfer (whether by agreement orby operation of law) of the ownership or management of the undertaking in which he isemployed from the employer in relation to that undertaking to a new employer, shall be deemedto be compensation received at the time of his retrenchment if - (i) The service of the workman


has been interrupted by such transfer; or

(ii) The terms and conditions of service applicable to the workman after such transfer are in anyway less favourable to the workman than those applicable to him immediately before thetransfer; or

(iii) The new employer is, under the terms of such transfer or otherwise, legally not liable to payto the workman, in the event of his retrenchment, compensation on the basis that his service hasbeen continuous and has not been interrupted by the transfer;

(c) The expressions "employer" 208 and "workman" 208 shall have the same meanings as in theIndustrial Disputes Act, 1947 (14 of 1947);

(10BB) Any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act,1985 (21 of 1985), and any scheme framed thereunder except payment made to any assessee inconnection with the Bhopal Gas Leak Disaster to the extent such assessee has been allowed adeduction under this Act on account of any loss or damage caused to him by such disaster;

(10C) Any amount received by an employee of - (i) A public sector company; or

(ii) Any other company; or

(iii) An authority established under a Central, State or Provincial Act; or

(iv) A local authority; or

(v) A co-operative society; or

(vi) A University established or incorporated by or under a Central, State or Provincial Act andan institution declared to be a University under section 3 of the University Grants CommissionAct, 1956 (3 of 1956); or

(vii) An Indian Institute of Technology within the meaning of clause (g) of section 3 of theInstitutes of Technology Act, 1961 (59 of 1961); or

(viii) Such institute of management as the Central Government may, by notification in theOfficial Gazette, specify in this behalf, at the time of his voluntary retirement in accordance withany scheme or schemes of voluntary retirement, to the extent such amount does not exceed fivelakh rupees :

Provided that the schemes of the said companies or authorities, or societies or Universities or theInstitutes referred to in sub-clauses (vii) and (viii) as the case may be, governing the payment ofsuch amount are framed in accordance with such guidelines (including, inter alia, criteria ofeconomic viability) as may be prescribed and such schemes in relation to companies referred toin sub-clause (ii) or co-operative societies referred to in sub-clause (v) are approved by the Chief


Commissioner or, as the case may be, Director-General in this behalf :

Provided further that where exemption has been allowed to an employee under this clause forany assessment year, no exemption thereunder shall be allowed to him in relation to any otherassessment year;

(10D) Any sum received under a life insurance policy, including the sum allocated by way ofbonus on such policy other than any sum received under sub-section (3) of section 80DDA orunder a Keyman insurance policy.

Explanation : For the purposes of this clause, "Keyman insurance policy" means a life insurancepolicy taken by a person on the life of another person who is or was the employee of the firstmentioned person or is or was connected in any manner whatsoever with the business of the firstmentioned person;

(11) Any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925),applies or from any other provident fund set up by the Central Government and notified 211 by itin this behalf in the Official Gazette;

(12) the accumulated balance due and becoming payable to an employee participating in arecognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule;

(13) Any payment from an approved superannuation fund made - (i) On the death of abeneficiary; or

(ii) To an employee in lieu of or in commutation of an annuity on his retirement at or after aspecified age or on his becoming incapacitated prior to such retirement; or

(iii) By way of refund of contributions on the death of a beneficiary; or

(iv) By way of refund of contributions to an employee on his leaving the service in connectionwith which the fund is established otherwise than by retirement at or after a specified age or onhis becoming incapacitated prior to such retirement, to the extent to which such payment doesnot exceed the contributions made prior to the commencement of this Act and any interestthereon;

(13A) 213 any special allowance specifically granted to an assessee by his employer to meetexpenditure actually incurred on payment of rent (by whatever name called) in respect ofresidential accommodation occupied by the assessee, to such extent as may be prescribed havingregard to the area or place in which such accommodation is situate and other relevantconsiderations;

Explanation : For the removal of doubts, it is hereby declared that nothing contained in thisclause shall apply in a case where - (a) The residential accommodation occupied by the assessee


is owned by him; or

(b) The assessee has not actually incurred expenditure on payment of rent (by whatever namecalled) in respect of the residential accommodation occupied by him;

(14)(i) Any such special allowance or benefit, not being in the nature of a perquisite within themeaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarilyand exclusively incurred in the performance of the duties of an office or employment of profit, asmay be prescribed, to the extent to which such expenses are actually incurred for that purpose;

(ii) Any such allowance granted to the assessee either to meet his personal expenses at the placewhere the duties of his office or employment of profit are ordinarily performed by him or at theplace where he ordinarily resides, or to compensate him for the increased cost of living, as maybe prescribed and to the extent as may be prescribed.

Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personalallowance granted to the assessee to remunerate or compensate him for performing duties of aspecial nature relating to his office or employment unless such allowance is related to the placeof his posting or residence;

(14A) Any income received by a public financial institution as exchange risk premium from anyperson borrowing foreign currency from such institution, provided the amount of such premiumis credited by such institution to a fund specified under clause (23E).

Explanation : For the purposes of this clause, - (i) The expression "public financial institution"shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(ii) The expression "exchange risk premium" means a premium paid by a person borrowingforeign currency from a public financial institution to cover the risk which may be borne by suchinstitution on account of fluctuations in exchange rate of foreign currencies borrowed by suchinstitution;

(15)(i) Income by way of interest, premium on redemption or other payment on such securities,bonds, annuity certificates, savings certificates, other certificates issued by the CentralGovernment and deposits as the Central Government may, by notification 221 in the OfficialGazette, specify in this behalf, subject to such conditions and limits as may be specified in thesaid notification;

(iib) In the case of an individual or a Hindu undivided family, interest on such CapitalInvestment Bonds as the Central Government may, by notification in the Official Gazette,specify 224 in this behalf;

(iic) In the case of an individual or a Hindu undivided family, interest on such Relief Bonds asthe Central Government may, by notification in the Official Gazette, specify 226 in this behalf;


(iid) Interest on such bonds, as the Central Government may, by notification in the OfficialGazette, specify, 228 arising to - (a) A non-resident Indian, being an individual owning thebonds; or

(b) Any individual owning the bonds by virtue of being a nominee or survivor of the non-resident Indian; or

(c) Any individual to whom the bonds have been gifted by the non-resident Indian :

Provided that the aforesaid bonds are purchased by a non-resident Indian in foreign exchangeand the interest and principal received in respect of such bonds, whether on their maturity orotherwise, is not allowable to be taken out of India :

Provided further that where an individual, who is a non-resident Indian in any previous year inwhich the bonds are acquired, becomes a resident in India in any subsequent year, the provisionsof this sub-clause shall continue to apply in relation to such individual :

Provided also that in a case where the bonds are encashed in a previous year prior to theirmaturity by an individual who is so entitled, the provisions of this sub-clause shall not apply tosuch individual in relation to the assessment year relevant to such previous year.

Explanation : For the purposes of this sub-clause, theexpression "non-resident Indian" shall havethe meaning assigned to it in clause (e) of section 115C;

(iii) Interest on securities held by the Issue Department of the Central Bank of Ceylon constitutedunder the Ceylon Monetary Law Act, 1949;

(iiia) Interest payable to any bank incorporated in a country outside India and authorised toperform central banking functions in that country on any deposits made by it, with the approvalof the Reserve Bank of India, with any scheduled bank.

Explanation : For the purposes of this sub-clause, "scheduled bank" shall have the meaningassigned to it in 230 clause (ii) of the Explanation to clause (viia) of sub-section (1) of section36;

(iv) Interest payable - (a) By Government or a local authority on moneys borrowed by it from, ordebts owed by it to, sources outside India;

(b) By an industrial undertaking in India on moneys borrowed by it under a loan agreemententered into with any such financial institution in a foreign country as may be approved 232 inthis behalf by the Central Government by general or special order;

(ba) The business of providing telecommunication services; or;


(c) By an industrial undertaking in India on any moneys borrowed or debt incurred by it in aforeign country in respect of the purchase outside India of raw materials or components or capitalplant and machinery, to the extent to which such interest does not exceed the amount of interestcalculated at the rate approved 235 by the Central Government in this behalf, having regard tothe terms of the loan or debt and its repayment.

Explanation - : For the purposes of this item, "purchase of capital plant and machinery" includesthe purchase of such capital plant and machinery under a hire-purchase agreement or a leaseagreement with an option to purchase such plant and machinery;

(d) By the Industrial Finance Corporation of India established by the Industrial FinanceCorporation Act, 1948 (15 of 1948) or the Industrial Development Bank of India establishedunder the Industrial Development Bank of India Act, 1964 (18 of 1964), or the Export-ImportBank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981) or theNational Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53of 1987), or the Small Industries Development Bank of India established under section 3 of theSmall Industries Development Bank of India Act, 1989 (39 of 1989), or the Industrial Credit andInvestment Corporation of India [a company formed and registered under the Indian CompaniesAct, 1913 (7 of 1913)], on any moneys borrowed by it from sources outside India, to the extentto which such interest does not exceed the amount of interest calculated at the rate approved bythe Central Government in this behalf, having regard to the terms of the loan and its repayment;

(e) By any other financial institution established in India or a banking company to which theBanking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institutionreferred to in section 51 of that Act), on any moneys borrowed by it from sources outside Indiaunder a loan agreement approved by the Central Government where the moneys are borrowedeither for the purpose of advancing loans to industrial undertakings in India for purchase outsideIndia of raw materials or capital plant and machinery or for the purpose of importing any goodswhich the Central Government may consider necessary to import in the public interest to theextent to which such interest does not exceed the amount of interest calculated at the rateapproved by the Central Government in this behalf, having regard to the terms of the loan and itsrepayment;

(f) By an industrial undertaking in India on any moneys borrowed by it in foreign currency fromsources outside India under a loan agreement approved by the Central Government having regardto the need for industrial development in India, to the extent to which such interest does notexceed the amount of interest calculated at the rate approved by the Central Government in thisbehalf, having regard to the terms of the loan and its repayment;

(fa) By a scheduled bank, to a non-resident or to a person who is not ordinarily resident withinthe meaning of sub-section (6) 239c of section 6, on deposits in foreign currency where theacceptance of such deposits by the bank is approved by the Reserve Bank of India.

Explanation : For the purposes of this item, the expression "scheduled bank" shall have themeaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of


section 36;

(g) By a public company formed and registered in India with the main object of carrying on thebusiness of providing long term finance for construction or purchase of houses in India forresidential purposes, being a company approved by the Central Government for the purposes ofclause (viii) of sub-section (1) of section 36, on any moneys borrowed by it in foreign currencyfrom sources outside India under a loan agreement approved by the Central Government, to theextent to which such interest does not exceed the amount of interest calculated at the rateapproved by the Central Government in this behalf, having regard to the terms of the loan and itsrepayment.

Explanation : For the purposes of items (f), (fa) and (g), the expression "foreign currency" 242 shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of1973);

(h) By any public sector company in respect of such bonds or debentures and subject to suchconditions, including the condition that the holder of such bonds or debentures registers his nameand the holding with that company, as the Central Government may, by notification in theOfficial Gazette, specify 244 in this behalf;

(i) By Government on deposits made by an employee of the Central Government or a StateGovernment or a public sector company, in accordance with such scheme 247 as the CentralGovernment may, by notification in the Official Gazette, frame in this behalf, out of the moneysdue to him on account of his retirement, whether on superannuation or otherwise;

Explanation : For the purposes of this sub-clause, the expression "industrial undertaking" meansany undertaking which is engaged in - (a) The manufacture or processing of goods; or

(aa) The manufacture of computer software or recording of programme on any disc, tape,perforated media or other information device; or

(b) The business of generation or distribution of electricity or any other form of power; or

(ba) The business of providing telecommunication services; or

(c) Mining; or

(d) The construction of ships; or

(e) The operation of ships or aircrafts or construction or operation of rail systems;

Explanation 2 : For the purposes of this clause, the expression "interest" includes hedgingtransaction charges on account of currency fluctuation.


(v) Interest on - (a) Securities held by the Welfare Commissioner, Bhopal Gas Victims, Bhopal,in the Reserve Bank"s SGL Account No. SL/DH048;

(b) Deposits for the benefit of the victims of the Bhopal gas leak disaster held in such account,with the Reserve Bank of India or with a public sector bank, as the Central Government may, bynotification in the Official Gazette, specify, whether prospectively or retrospectively but in nocase earlier than the 1st day of April, 1994 in this behalf.

Explanation : For the purposes of this sub-clause, the expression "public sector bank" shall havethe meaning assigned to it in the Explanation to clause (23D);

(vi) Interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by theCentral Government;

(15A) Any payment made, by an Indian company engaged in the business of operation ofaircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares,facilities or services in connection with the operation of leased aircraft) on lease from theGovernment of a foreign State or a foreign enterprise under an agreement entered into betweenthe 1st day of April, 1997 and approved by the Central Government in this behalf.

Explanation : For the purposes of this clause, the expression "foreign enterprise" means a personwho is a non-resident;

(16) Scholarships granted to meet the cost of education;

(17) Any income by way of - (i) Daily allowance received by any person by reason of hismembership of Parliament or of any State Legislature or of any Committee thereof;

(ii) Any allowance received by any person by reason of his membership of Parliament under theMembers of Parliament (Constituency Allowance) Rules, 1986;

(iii) All other allowances not exceeding two thousand rupees per month in the aggregate receivedby any person by reason of his membership of any State Legislature or of any Committeethereof, which the Central Government may, by notification 253 in the Official Gazette, specifyin this behalf;

(17A) Any payment made, whether in cash or in kind, - (i) In pursuance of any award institutedin the public interest by the Central Government or any State Government or instituted by anyother body and approved by the Central Government in this behalf; or

(ii) As a reward by the Central Government or any State Government for such purposes as maybe approved by the Central Government in this behalf in the public interest;

(18) Any income by way of - (i) Pension received by an individual who has been in the serviceof the Central or State Government and has been awarded "Param Vir Chakra" or "Maha Vir


Chakra" or "Vir Chakra" or such other gallantry award as the Central Government may, bynotification in the Official Gazette, specify in this behalf;

(ii) Family pension received by any member of the family of an individual referred to in sub-clause (i).

Explanation. - For the purposes of this clause, the expression "family" shall have the meaningassigned to it in the Explanation to clause (5)."

(19A) The annual value of any one palace in the occupation of a Ruler, being a palace, theannual value whereof was exempt from income-tax before the commencement of theConstitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the MergedStates (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order,1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958 :

Provided that for the assessment year commencing on the 1st day of April, 1972, the annualvalue of every such palace in the occupation of such Ruler during the relevant previous year shallbe exempt from income-tax;

(20) The income of a local authority which is chargeable under the head, "Income from houseproperty", "Capital gains", or "Income from other sources" or from a trade or business carried onby it which accrues or arises from the supply of a commodity or service (not being water orelectricity) within its own jurisdictional area or from the supply of water or electricity within oroutside its own jurisdictional area;

(20A) Any income of an authority constituted in India by or under any law enacted either for thepurpose of dealing with and satisfying the need for housing accommodation or for the purpose ofplanning, development or improvement of cities, towns and villages, or for both;

(21) Any income of a scientific research association for the time being approved 262 for thepurpose of clause (ii) of sub-section (1) of section 35 :

Provided that the scientific research association - (a) Applies 262a its income, or accumulates itfor application, wholly and exclusively to the objects for which it is established, and theprovisions of sub-section (2) and sub-section (3) of section 11 shall apply in relation to suchaccumulation subject to the following modifications, namely :- (i) In sub-section (2), - (1) Thewords, brackets, letters, and figure "referred to in clause (a) or clause (b) of sub-section (1) readwith the Explanation to that sub-section" shall be omitted;

(2) For the words "to charitable or religious purposes", the words "for the purposes of scientificresearch" shall be substituted;

(3) The reference to "Assessing Officer" in clause (a) thereof shall be construed as a reference tothe "prescribed authority" referred to in clause (ii) of sub-section (1) of section 35;


(ii) In sub-section (3), in clause (a), for the words "charitable or religious purposes", the words"the purposes of scientific research" shall be substituted; and (b) does not invest or deposit itsfunds, other than - (i) Any assets held by the scientific research association where such assetsform part of the corpus of the fund of the association as on the 1st day of June, 1973;

(ii) Any assets (being debentures issued by, or on behalf of, any company or corporation),acquired by the scientific research association before the 1st day of March, 1983;

(iii) Any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause(i), by way of bonus shares allotted to the scientific research association;

(iv) Voluntary contributions received and maintained in the form of jewellery, furniture or anyother article as the Board may, by notification in the Official Gazette, specify, for any periodduring the previous year otherwise than in any one or more of the forms or modes specified insub-section (5) of section 11 :

Provided further that the exemption under this clause shall not be denied in relation to voluntarycontribution, other than voluntary contribution in cash or voluntary contribution of the naturereferred to in clause (b) of the first proviso to this clause, subject to the condition that suchvoluntary contribution is not held by the scientific research association, otherwise than in anyone or more of the forms or modes specified in sub-section (5) of section 11, after the expiry ofone year from the end of the previous year in which such asset is acquired or the 31st day ofMarch, 1992, whichever is later :

Provided also that nothing contained in this clause shall apply in relation to any income of thescientific research association, being profits and gains of business, unless the business isincidental to the attainment of its objectives and separate books of accounts are maintained by itin respect of such business;

(22B) Any income of such news agency set up in India solely for collection and distribution ofnews as the Central Government may, by notification in the Official Gazette, specify in thisbehalf :

Provided that the news agency applies its income or accumulates it for application solely forcollection and distribution of news and does not distribute its income in any manner to itsmembers :

Provided further that any notification issued by the Central Government under this clause shall,at any one time, have effect for such assessment year or years, not exceeding three assessmentyears (including an assessment year or years commencing before the date on which suchnotification is issued) as may be specified in the notification;

(23) Any income of an association or institution established in India which may be notified bythe Central Government in the Official Gazette having regard to the fact that the association or


institution has as its object the control, supervision, regulation or encouragement in India of thegames of cricket, hockey, football, tennis or such other games or sports as the CentralGovernment may, by notification in the Official Gazette, specify in this behalf :

Provided that the association or institution shall make an application in the prescribed form andmanner 266 to the prescribed authority for the purpose of grant of the exemption, or continuancethereof, under this clause :

Provided further that the Central Government may, before notifying the association or institutionunder this clause call for such documents (including audited annual accounts) or informationfrom the association or institution as it thinks necessary in order to satisfy itself about thegenuineness of the activities of the association or institution and that Government may also makesuch inquiries as it may deem necessary in this behalf :

Provided also that the association or institution, - (a) Applies its income or accumulates it forapplication, wholly and exclusively to the objects for which it is established and the provisions ofsub-section (2) and sub-section (3) of section 11 shall apply in relation to such accumulationsubject to the following modifications, namely :- (i) In sub-section (2), - (1) The words,brackets, letters and figure "referred to in clause (a) or clause (b) of sub-section (1) read with theExplanation to that sub-section" shall be omitted;

(2) For the words "to charitable or religious purposes", the words "for the purposes of games orsports" shall be substituted;

(3) The reference to "Assessing Officer" in clause (a) thereof shall be construed as a reference tothe "prescribed authority" referred to in the first proviso to this clause; (ii) in sub-section (3), inclause (a), for the words "charitable or religious purposes", the words "the purposes of games orsports" shall be substituted; and

(b) Does not invest or deposit its funds, other than - (i) Any assets held by the association orinstitution where such assets form part of the corpus of the fund of the association or institutionas on the 1st day of June, 1973;

(ii) Any assets (being debentures issued by, or on behalf of, any company or corporation),acquired by the association or institution before the 1st day of March, 1983;

(iii) Any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause(i), by way of bonus shares allotted to the association or institution;

(iv) Voluntary contributions received and maintained in the form of jewellery, furniture or anyother article as the Board may, by notification in the Official Gazette, specify, for any periodduring the previous year otherwise than in any one or more of the forms or modes specified insub-section (5) of section 11; and

(c) Does not distribute any part of its income in any manner to its members except as grants to


any association or institution affiliated to it :

Provided also that the exemption under this clause shall not be denied in relation to any fundsinvested or deposited before the 1st day of April, 1989 otherwise than in any one or more of theforms or modes specified in sub-section (5) of section 11 if such funds do not continue to remainso invested or deposited after [ 267a the 30th day of March, 1993:

Provided also that the exemption under this clause shall not be denied in relation to voluntarycontribution, other than voluntary contribution in cash or voluntary contribution of the naturereferred to in clause (b) of the third proviso to this clause, subject to the condition that suchvoluntary contribution is not held by the association or institution, otherwise than in any one ormore of the forms or modes specified in sub-section (5) of section 11, after the expiry of one yearfrom the end of the previous year in which such asset is acquired or the 31st day of March, 1992,whichever is later :

Provided also that nothing contained in this clause shall apply in relation to any income of theassociation or institution, being profits and gains of business, unless the business is incidental tothe attainment of its objectives and separate books of accounts are maintained by it in respect ofsuch business :

Provided also that any notification issued by the Central Government under this clause in relationto any association or institution shall, at any one time, have effect for such assessment year oryears, not exceeding three assessment years (including an assessment year or years commencingbefore the date on which such notification is issued) as may be specified in the notification;

(23A) Any income (other than income chargeable under the head "Income from house property"or any income received for rendering any specific services or income by way of interest orderived dividends from its investments) of an association or institution established in Indiahaving as its object the control, supervision, regulation or encouragement of the profession oflaw, medicine, accountancy, engineering or architecture or such other profession as the CentralGovernment may specify 271 in this behalf, from time to time, by notification in the OfficialGazette :

Provided that - (i) The association or institution applies its income, or accumulates it forapplication, solely to the objects for which it is established; and

(ii) The association or institution is for the time being approved 272 for the purpose of this clauseby the Central Government by general or special order;

(23AA) Any income received by any person on behalf of any Regimental Fund or Non-PublicFund established by the armed forces of the Union for the welfare of the past and presentmembers of such forces or their dependants;

(23AAA) Any income received by any person on behalf of a fund established, for such purposes


as may be notified by the Board in the Official Gazette, for the welfare of employees or theirdependants and of which fund such employees are members if such fund fulfils the followingconditions, namely :-

(a) The fund - (i) Applies its income, or accumulates it for application, wholly and exclusivelyto the objects for which it is established; and

(ii) Invests its funds and contributions and other sums received by it in the forms or modesspecified in sub-section (5) of section 11;

(b) The fund is approved by the Commissioner in accordance with the rules made in this behalf :

Provided that any such approval shall at any one time have effect for such assessment year oryears not exceeding three assessment years as may be specified in the order of approval;

(23AAB) Any income of a fund, by whatever name called, set up by the Life InsuranceCorporation of India on or after the 1st day of August, 1996 under a pension scheme, - (i) Towhich contribution is made by any person for the purpose of receiving pension from such fund;

(ii) Which is approved by the Controller of Insurance.

Explanation : For the purposes of this clause, the expression "Controller of Insurance" shall havethe meaning assigned to it in clause (5B) of section 2 of the Insurance Act, 1938 (4 of 1938);

(23B) Any income of an institution constituted as a public charitable trust or registered under theSocieties Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act inforce in any part of India, and existing solely for the development of khadi or village industriesor both, and not for the purposes of profit, to the extent such income is attributable to thebusiness of production, sale, or marketing, of khadi or products of village industries :

Provided that - (i) The institution applies its income, or accumulates it for application, solely forthe development of khadi or village industries or both; and

(ii) The institution is, for the time being, approved for the purpose of this clause by the Khadiand Village Industries Commission :

Provided further that the Commission shall not, at any one time, grant such approval for morethan three assessment years beginning with the assessment year next following the financial yearin which it is granted.

Explanation : For the purposes of this clause, - (i) "Khadi and Village Industries Commission"means the Khadi and Village Industries Commission established under the Khadi and VillageIndustries Commission Act, 1956 (61 of 1956);

(ii) "Khadi" and "village industries" have the meanings respectively assigned to them in that Act;


(23BB) Any income of an authority (whether known as the Khadi and Village Industries Boardor by any other name) established in a State by or under a State or Provincial Act for thedevelopment of khadi or village industries in the State.

Explanation : For the purposes of this clause, "khadi" and "village industries" have the meaningsrespectively assigned to them in the Khadi and Village Industries Commission Act, 1956 (61 of1956);

(23BBA) Any income of any body or authority (whether or not a body corporate or corporationsole) established, constituted or appointed by or under any Central, State or Provincial Act whichprovides for the administration of any one or more of the following, that is to say, publicreligious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs,churches, synagogues, agiaries or other places of public religious worship) or societies forreligious or charitable purposes registered as such under the Societies Registration Act, 1860 (21of 1860), or any other law for the time being in force :

Provided that nothing in this clause shall be construed to exempt from tax the income of anytrust, endowment or society referred to therein;

(23BBB) Any income of the European Economic Community derived in India by way ofinterest, dividends or capital gains from investments made out of its funds under such scheme asthe Central Government may, by notification in the Official Gazette, specify in this behalf.

Explanation : For the purposes of this clause, "European Economic Community" means theEuropean Economic Community established by the Treaty of Rome of 25th March, 1957;

(23BBC) Any income of the SAARC Fund for Regional Projects set up by Colombo Declarationissued on the 21st day of December, 1991 by the Heads of State or Government of the MemberCountries of South Asian Association for Regional Cooperation established on the 8th day ofDecember, 1985 by the Charter of the South Asian Association for Regional Cooperation;

(23C) Any income received by any person on behalf of - (i) The Prime Minister"s NationalRelief Fund; or

(ii) The Prime Minister"s Fund (Promotion of Folk Art); or

(iii) The Prime Minister"s Aid to Students Fund; or

(iiia) The National Foundation for Communal Harmony; or

(iiiab) Any university or other educational institution existing solely for educational purposesand not for purposes of profit, and which is wholly or substantially financed by the Government;or


(iiiac) Any hospital or other institution for the reception and treatment of persons suffering fromillness or mental defectiveness or for the reception and treatment of persons duringconvalescence or of persons requiring medical attention or rehabilitation, existing solely forphilanthropic purposes and not for purposes of profit and which is wholly or substantiallyfinanced by the Government; or

(iiiad) Any university or other educational institution existing solely for educational purposesand not for purposes of profit if the aggregate annual receipts of such university or educationalinstitution do not exceed the amount of annual receipts as may be prescribed; or

(iiiae) Any hospital or other institution for the reception and treatment of persons suffering fromillness or mental defectiveness or for the reception and treatment of persons duringconvalescence or of persons requiring medical attention or rehabilitation, existing solely forphilanthropic purposes and not for purposes of profit, if the aggregate annual receipts of suchhospital or institution do not exceed the amount of annual receipts as may be prescribed; or

(iv) Any other fund or institution established for charitable purposes which may be notified bythe Central Government in the Official Gazette, having regard to the objects of the fund orinstitution and its importance throughout India or throughout any State or States; or

(v) Any trust (including any other legal obligation) or institution wholly for public religiouspurposes or wholly for public religious and charitable purposes, which may be notified by theCentral Government in the Official Gazette, having regard to the manner in which the affairs ofthe trust or institution are administered and supervised for ensuring that the income accruingthereto is properly applied for the objects thereof;

(vi) Any university or other educational institution existing solely for educational purposes andnot for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad)and which may be approved by the prescribed authority; or

(via) Any hospital or other institution for the reception and treatment of persons suffering fromillness or mental defectiveness or for the reception and treatment of persons duringconvalescence or of persons requiring medical attention or rehabilitation, existing solely forphilanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause(iiiac) or sub-clause (iiiae) and which may be approved by the prescribed authority :

Provided that the fund or trust or institution or any university or other educational institution orany hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall make an application in the prescribed form and manner 278to the prescribed authority for the purpose of grant of the exemption, or continuance thereof,under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via)

Provided further that the Central Government, before notifying the fund or trust or institution orthe prescribed authority, before approving any university or other educational institution or any


hospital or other medical institution 277c ] under sub-clause (iv) or sub-clause (v) or sub-clause(vi) or sub-clause (via) 277c ], may call for such documents (including audited annual accounts)or information from the fund or trust or institution or any university or other educationalinstitution or any hospital or other medical institution, as the case may be, as it thinks necessaryin order to satisfy itself about the genuineness of the activities of the fund or trust or institution orany university or other educational institution or any hospital or other medical institution, as thecase may be, and that Central Government or the prescribed authority, as the case may also makesuch inquiries as it may deem necessary in this behalf :

Provided also that the fund or trust or institution or any university or other educational institutionor any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) - orsub-clause (vi) or sub-clause (via) - (a) Applies its income, or accumulates it for application278a , wholly and exclusively to the objects for which it is established; and

(b) Does not invest or deposit its funds, other than - (i) Any assets held by the fund, trust orinstitution or any university or other educational institution or any hospital or other medicalinstitution. where such assets form part of the corpus of the fund, trust of institution or anyuniversity or other educational institution or any hospital or other medical institution. as on the1st day of June, 1973;

(ii) Any assets (being debentures issued by, or on behalf of, any company or corporation),acquired by the fund, trust or institution or any university or other educational institution or anyhospital or other medical institution. before the 1st day of March, 1983;

(iii) Any accretion to the shares, forming part of the corpus fund, trust mentioned in sub-clause(i), by way of bonus shares allotted to the association or institution or any university or othereducational institution or any hospital or other medical institution;

(iv) Voluntary contributions received and maintained in the form of jewellery, furniture or anyother article as the Board may, by notification in the Official Gazette, specify, for any periodduring the previous year otherwise than in any one or more of the forms or modes specified insub-section (5) of section 11:

Provided also that the exemption under sub-clause (iv) or sub-clause (v) shall not be denied inrelation to any funds invested or deposited before the 1st day of April, 1989 otherwise than inany one or more of the forms or modes specified in sub-section (5) of section 11 if such funds donot continue to remain so invested or deposited after the 30th day of March, 1993:

Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied inrelation to any funds invested or deposited before the 1st day of June, 1998, otherwise than inany one or more of the forms or modes specified in sub-section (5) of section 11 if such funds donot continue to remain so invested or deposited after the 30th day of March, 2001 :

Provided also that the exemption under sub-clause (iv) or sub-clause (v) [ 279ba (or sub-clause(vi) or sub-clause (via) shall not be denied in relation to voluntary contribution, other than


voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) ofthe third proviso to this sub-clause, subject to the condition that such voluntary contribution isnot held by the trust or institution, or any university or other educational institution or anyhospital or other medical institution. otherwise than in any one or more of the forms or modesspecified in sub-section (5) of section 11, after the expiry of one year from the end of theprevious year in which such asset is acquired or the 31st day of March, 1992, whichever is later :

Provided also that nothing contained in sub-clause (iv) or sub-clause (v) or sub-clause (vi) orsub-clause (via) shall apply in relation to any income of the fund or trust or institution or anyuniversity or other educational institution or any hospital or other medical institution, beingprofits and gains of business, unless the business is incidental to the attainment of its objectivesand separate books of accounts are maintained by it in respect of such business :

Provided also that any notification issued by the Central Government under clause (vi) or clause(via) shall, at any one time, have effect for such assessment year or years, not exceeding threeassessment years (including an assessment year or years commencing before the date on whichsuch notification is issued) as may be specified in the notification;

(23D) Any income of - (i) A Mutual Fund registered under the Securities and Exchange Boardof India Act, 1992 (15 of 1992) or regulations made thereunder;

(ii) Such other Mutual Fund set up by a public sector bank or a public financial institution orauthorised by the Reserve Bank of India and subject to such conditions as the CentralGovernment may, by notification in the Official Gazette, specify in this behalf.

Explanation : For the purposes of this clause, - (a) The expression "public sector bank" meansthe State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), asubsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959),a corresponding new bank constituted under section 3 of the Banking Companies (Acquisitionand Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the BankingCompanies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);

(b) The expression "public financial institution" shall have the meaning assigned to it in section4A of the Companies Act, 1956 (1 of 1956);

(c) The expression "Securities and Exchange Board of India" shall have the meaning assigned toit in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act,1992. (15 of 1992);

(23E) Any income of such Exchange Risk Administration Fund set up by public financialinstitutions, either jointly or separately, as the Central Government may, by notification in theOfficial Gazette, specify in this behalf :

Provided that where any amount standing to the credit of the Fund and not charged to income-tax


during any previous year is shared, either wholly or in part, with a public financial institution, thewhole of the amount so shared shall be deemed to be the income of the previous year in whichsuch amount is so shared and shall accordingly be chargeable to income-tax.

Explanation : For the purposes of this clause, the expression "public financial institution" shallhave the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(23F) Any income by way of dividends or long-term capital gains of a venture capital fund or aventure capital company from investments made by way of equity shares in a venture capitalundertaking :

Provided that such venture capital fund or venture capital company is approved for the purposesof this clause by the prescribed authority in accordance with the rules made in this behalf andsatisfies the prescribed conditions :

Provided further that any approval by the prescribed authority shall, at any one time, have effectfor such assessment year or years, not exceeding three assessment years, as may be specified inthe order of approval :

Provided also that nothing contained in this clause shall apply in respect of any investment madeafter the 31st day of March, 1999.

Explanation : For the purposes of this clause, (a) "Venture capital fund" means such fund,operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of1908), established to raise monies by the trustees for investments mainly by way of acquiringequity shares of a venture capital undertaking in accordance with the prescribed guidelines;

(b) "Venture capital company" means such company as has made investments by way ofacquiring equity shares of venture capital undertakings in accordance with the prescribedguidelines; and

(c) "Venture capital undertaking" means such domestic company whose shares are not listed in arecognised stock exchange in India and which is engaged in the business or generation orgeneration and distribution of electricity or any other form of power or engaged in the businessof providing telecommunication services or in the business of developing, maintaining andoperating any infrastructure facility or engaged in the manufacture or production of sucharticles or things (including computer software) as may be notified by the Central Government inthis behalf;

(d) "Infrastructure facility" means road, highway, bridge, airport, port rail system, water supplyproject, irrigation project, sanitation and sewerage system or any other public facility of a similarnature as may be notified by the Board in this behalf in the Official Gazette and which fulfils theconditions specified in sub-section (4A) of section 80-IA;

(23FA) Any income by way of dividends, other than dividends referred to in section 115-O, or


long-term capital gains of a venture capital fund or a venture capital company from investmentsmade by way of equity shares in a venture capital undertaking :

Provided that such venture capital fund or venture capital company is approved, for the purposesof this clause, by the Central Government on an application made to it in accordance with therules made in this behalf and which satisfies the prescribed conditions : Provided further that anyapproval by the Central Government shall, at any one time, have effect for such assessment yearor years, not exceeding three assessment years, as may be specified in the order of approval.

Explanation. - For the purposes of this clause, - (a) "Venture capital fund" means such fund,operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of1908) established to raise monies by the trustees for investments mainly by way of acquiringequity shares of a venture capital undertaking in accordance with the prescribed guidelines;

(b) "Venture capital company" means such company as has made investments by way ofacquiring equity shares of venture capital undertakings in accordance with the prescribedguidelines; and

(c) "Venture capital undertaking" means such domestic company whose shares are not listed in arecognised stock exchange in India and which is engaged in the - (i) Business of - (A) Software;

(B) Information technology;

(C) Production of basic drugs in the pharmaceutical sector;

(D) Bio-technology;

(E) Agriculture and allied sectors; or

(F) Such other sectors as may be notified by the Central Government in this behalf; or

(ii) Production or manufacture of any article or substance for which patent has been granted tothe National Research Laboratory or any other scientific research institution approved by theDepartment of Science and Technology;

(23G) Any income by way of dividends, other than dividends referred to in section 115-O,interest or long-term capital gains of an infrastructure capital fund or an infrastructure capitalcompany from investments made on or after the 1st day of June, 1998 by way of shares or long-term finance in any enterprise wholly engaged in the business of developing, maintaining and operating, any infrastructure facility and which has been approved by the Central Government onan application made by it in accordance with the rules made in this behalf and which satisfies theprescribed conditions.

Explanation : For the purposes of the clause, - (a) "Infrastructure capital company" means such


company as has made investments by way of acquiring shares or providing long term finance toan enterprise wholly engaged in the business of developing, maintaining and operatinginfrastructure facility;

(b) "Infrastructure capital fund" means such fund operating under a trust deed, registered underthe provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by thetrustees for investment by way of acquiring shares or providing long-term finance to anenterprise wholly engaged in the business of developing, maintaining and operatinginfrastructure facility;

(c) "Infrastructure facility" means - (i) A road, highway, bridge, airport, port, rail system, awater supply project, irrigation project, sanitation and sewerage system or any other publicfacility of a similar nature as may be notified by the Board in this behalf in the Official Gazetteand which fulfils the conditions specified in sub-section (4A) of section 80-IA;

(ii) A project for generation or generation and distribution of electricity or any other form ofpower where such project starts generating power on or after the 1st day of April, 1993;

(ii) A project for generation or generation and distribution of electricity or any other form ofpower where such project starts generating power on or after the 1st day of April, 1993;"

(iii) A project for providing telecommunication services on or after the 1st day of April, 1995;

(iv) A project for housing which fulfils the conditions specified in sub-section (4F) of section 80-IA;

(d) "Long-term finance" shall have the meaning assigned to it in clause (viii) of sub-section (1)of section 36;

Explanation 2. - For the removal of doubts, it is hereby declared that any income by way ofdividends, interest or long-term capital gains of an infrastructure capital fund or an infrastructurecapital company from invtestment made before the 1st day of June, 1998 by way of shares orlong-term finance in any enterprise carrying of the business of developing, maintaining andoperating any infrastructure facility shall bot be included and the provisions of this clause as itstood immediately before its amendment by the Finance (No.2) Act, 1998 (21 of 1998) shallapply to such income;

(24) Any income chargeable under the heads "Income from house property" and "Income fromother sources" of - (a) A registered union within the meaning of the Trade Unions Act, 1926 (16of 1926) formed primarily for the purpose of regulating the relations between workmen andemployers or between workmen and workmen;

(b) An association of registered unions referred to in sub-clause (a);

(25)(i) Interest on securities which are held by, or are the property of, any provident fund to


which the Provident Funds Act, 1925 (19 of 1925), applies, and any capital gains of the fundarising from the sale, exchange or transfer of such securities;

(ii) Any income received by the trustees on behalf of a recognised provident fund;

(iii) Any income received by the trustees on behalf of an approved superannuation fund;

(iv) Any income received by the trustees on behalf of an approved gratuity fund;

(v) Any income received - (a) By the Board of Trustees constituted under the Coal MinesProvident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), on behalf of the Deposit-linked Insurance Fund established under section 3G of that Act; or

(b) By the Board of Trustees constituted under the Employees" Provident Funds andMiscellaneous Provisions Act, 1952 (19 of 1952), on behalf of the Deposit-linked InsuranceFund established under section 6C of that Act;

(25A) Any income of the Employees" State Insurance Fund set up under the provisions of theEmployees" State Insurance Act, 1948 (34 of 1948);

(26) In the case of a member of a Scheduled Tribe 289 as defined in clause (25) of article 366 ofthe Constitution, residing in any area specified in Part I or Part II of the Table appended toparagraph 20 of the Sixth Schedule to the Constitution or in the States of Arunachal Pradesh,Manipur, Mizoram, Nagaland and Tripura or in the areas covered by notification No.TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under theproviso to sub-paragraph (3) of the said paragraph 20 [as it stood immediately before thecommencement of the North-Eastern Area (Reorganisation) Act, 1971 (18 of 1971) or in theLadakh region of the State of Jammu and Kashmir, any income which accrues or arises to him, - (a) From any source in the areas or States aforesaid, or

(b) By way of dividend or interest on securities;

(26A) Any income accruing or arising to any person from any source in the district of Ladakh oroutside India in any previous year relevant to any assessment year commencing before the 1stday of April, 1989, where such person is resident in the said district in that previous year :

Provided that this clause shall not apply in the case of any such person unless he was resident inthat district in the previous year relevant to the assessment year commencing on the 1st day ofApril, 1962.

Explanation : For the purposes of this clause, a person shall be demeed to be resident in thedistrict of Ladakh if he fulfils the requirements of sub-section 293a (1) or sub-section (2) or sub-section (3) or sub-section (4) of section 6, as the case may be, subject to the modifications that - (i) References in those sub-sections 293b to India shall be construed as references to the said


district; and

(ii) In clause 293c (i) of sub-section (3), reference to Indian company shall be construed asreference to a company formed and registered under any law for the time being inforce in theState of Jammu and Kashmir and having its registered office in that district in that year;

Explanation 2 : In this clause, references to the district of Ladakh shall be construed as referencesto the areas comprised in the said district on the 30th day of June, 1979;

(26B) Any income of a corporation established by a Central, State or Provincial Act or of anyother body, institution or association (being a body, institution or association wholly financed byGovernment) where such corporation or other body or institution or association has beenestablished or formed for promoting the interests of the members of the Scheduled Castes or theScheduled Tribes or backward classes or of any two or all of them.

Explanation : For the purposes of this clause, - (a) "Scheduled Castes" and "Scheduled Tribes"shall have the meaning respectively assigned to them in clauses (24) and (25) of articles 366 ofthe Constitution;

(b) "Backward classes" means such classes of citizens, other than the Scheduled Castes and theScheduled Tribes, as may be notified - (i) By the Central Government; or

(ii) By any State Government, as the case may be, from time to time;

(26BB) Any income of a corporation established by the Central Government or any StateGovernment for promoting the interests of the members of a minority community.

Explanation : For the purposes of this clause, "minority community" means a communitynotified as such by the Central Government in the Official Gazette in this behalf;

(27) Any income of co-operative society formed for promoting the interests of the members ofeither the Scheduled Castes or Scheduled Tribes or both referred to in clause (26B) :

Provided that the membership of the co-operative society consists of only other co-operativesocieties formed for similar purposes and the finances of the society are provided by theGovernment and such other societies;

(29) In the case of an authority constituted under any law for the time being in force for themarketing of commodities, any income derived from the letting of godowns or warehouses forstorage, processing or facilitating the marketing of commodities;

(29A) Any income accruing or arising to - (a) The Coffee Board constituted under section 4 ofthe Coffee Act, 1942 (7 of 1942) in any previous year relevant to any assessment yearcommencing on or after the 1st day of April, 1962 or the previous year in which such Board wasconstituted, whichever is later;


(b) The Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act,1947 (24 of 1947) in any previous year relevant to any assessment year commencing on or afterthe 1st day of April, 1962 or the previous year in which such Board was constituted, whichever islater;

(c) The Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953) in any previousyear relevant to any assessment year commencing on or after the 1st day of April, 1962 or theprevious year in which such Board was constituted, whichever is later;

(d) The Tobacco Board constituted under the Tobacco Board Act, 1975 (4 of 1975) in anyprevious year relevant to any assessment year commencing on or after the 1st day of April, 1975or the previous year in which such Board was constituted, whichever is later;

(e) The Marine Products Export Development Authority established under section 4 of theMarine Products Export Development Authority Act, 1972 (13 of 1972) in any previous yearrelevant to any assessment year commencing on or after the 1st day of April, 1972 or theprevious year in which such Authority was constituted, whichever is later;

(f) The Agricultural and Processed Food Products Export Development Authority establishedunder section 4 of the Agricultural and Processed Food Products Export Development Act, 1985(2 of 1986) in any previous year relevant to any assessment year commencing on or after the 1stday of April, 1985 or the previous year in which such Authority was constituted, whichever islater;

(g) The Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act,1986 (10 of 1986) in any previous year relevant to any assessment year commencing on or afterthe 1st day of April, 1986 or the previous year in which such Board was constituted, whichever islater;

(30) 301 in the case of an assessee who carries on the business of growing and manufacturingtea in India, the amount of any subsidy received from or through the Tea Board under any suchscheme 302 for replantation or replacement 301 of tea bushes or for rejuvenation orconsolidation of areas used for cultivation of tea as the Central Government may, by notificationin the Official Gazette, specify :

Provided that the assessee furnishes to the Assessing Officer, along with his return of income forthe assessment year concerned or within such further time as the Assessing Officer may allow, acertificate from the Tea Board as to the amount of such subsidy paid to the assessee during theprevious year.

Explanation : In this clause, "Tea Board" means the Tea Board established under section 4 of theTea Act, 1953 (29 of 1953);


(31) In the case of an assessee who carries on the business of growing and manufacturing rubber,coffee, cardamom or such other commodity in India, as the Central Government may, bynotification in the Official Gazette, specify in this behalf, the amount of any subsidy receivedfrom or through the concerned Board under any such scheme for replantation or replacement ofrubber plants, coffee plants, cardamom plants or plants for the growing of such other commodityor for rejuvenation or consolidation of areas used for cultivation of rubber, coffee, cardamom orsuch other commodity as the Central Government may, by notification in the Official Gazette,specify :

Provided that the assessee furnishes to the Assessing Officer, along with his return of income forthe assessment year concerned or within such further time as the Assessing Officer may allow, acertificate from the concerned Board, as to the amount of such subsidy paid to the assesseeduring the previous year.

Explanation : In this clause, "concerned Board" means - (i) In relation to rubber, the RubberBoard constituted under section 4 of the Rubber Act, 1947 (24 of 1947),

(ii) In relation to coffee, the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7of 1942),

(iii) In relation to cardamom, the Spices Board constituted under section 3 of the Spices BoardAct, 1986 (10 of 1986),

(iv) In relation to any other commodity specified under this clause, any Board or other authorityestablished under any law for the time being in force which the Central Government may, bynotification in the Official Gazette, specify in this behalf;

(32) In the case of an assessee referred to in sub-section (1A) of section 64, any incomeincludible in his total income under that sub-section, to the extent such income does not exceedone thousand five hundred rupees in respect of each minor child whose income is so includible;

(33) Any income by way of dividends referred to in section 115-O.

15. Special provision in respect of newlyestablished industrial undertakings in free tadezones.

§15.Special provision in respect of newly established industrial undertakingsin free tade zones.

Section 10A


SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED INDUSTRIALUNDERTAKINGS IN FREE TRADE ZONES.

(1) Subject to the provisions of this section, any profits and gains derived by an assessee from anindustrial undertaking to which this section applies shall not be included in the total income ofthe assessee.

(2) This section applies to any industrial undertaking which fulfils all the following conditions,namely :-

(i) It has begun or begins to manufacture or produce articles or things during the previous yearrelevant to the assessment year -

(a) Commencing on or after the 1st day of April, 1981, in any free trade zone; or

(b) Commencing on or after the 1st day of April, 1994, in any electronic hardware technologypark or, as the case may be, software technology park;

(ia) In relation to an undertaking which begins to manufacture or produce any article or thing onor after the 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total sales thereof during the previous year;

(ii) It is not formed by the splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of any industrial undertaking which isformed as a result of the re-establishment, reconstruction or revival by the assessee of thebusiness of any such industrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section;

(iii) It is not formed by the transfer to a new business of machinery or plant previously used forany purpose. Explanation : The provisions of Explanation 1 and Explanation 2 to sub-section (2)of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for thepurposes of clause (ii) of that sub-section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income ofthe assessee in respect of any five consecutive assessment years, falling within a period of eightyears beginning with the assessment year relevant to the previous year in which the industrialundertaking begins to manufacture or produce articles or things specified by the assessee at hisoption

"Provided that nothing in this sub-section shall be construed to extend the aforesaid fiveassessment years to cover any period after the expiry of the said period of eight years."

(4) Notwithstanding anything contained in any other provision of this Act, in computing the totalincome of the assessee of the previous year relevant to the assessment year immediately


succeeding the last of the relevant assessment years, or of any previous year, relevant to anysubsequent assessment year -

(i) Section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36shall apply as if every allowance or deduction referred to therein and relating to or allowable forany of the relevant assessment years, in relation to any building, machinery, plant or furnitureused for the purposes of the business of the industrial undertaking in the previous year relevant tosuch assessment year or any expenditure incurred for the purposes of such business in suchprevious year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section(2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section(1) of section 36, as the case may be, shall not apply in relation to any such allowance ordeduction;

(ii) No loss referred to in sub-section (1) of section 72 or sub-section (1)[ 309 or sub-section (3)309 ] of section 74 and no deficiency referred to in sub-section (3) of section 80J, in so far assuch loss or deficiency relates to the business of the industrial undertaking, shall be carriedforward or set off where such loss, or as the case may be, deficiency relates to any of the relevantassessment years;

(iii) No deduction shall be allowed under section 80HH or section 80HHA or section 80-I[section 80-IA] [section 80-IB] or section 80J in relation to the profits and gains of the industrialundertaking; and

(iv) In computing the depreciation allowance under section 32, the written down value of anyasset used for the purposes of the business of the industrial undertaking shall be computed as ifthe assessee had claimed and been actually allowed the deduction in respect of depreciation foreach of the relevant assessment years.

(5) Where an industrial undertaking in any free trade zone has begun to manufacture or producearticles or things in any previous year relevant to the assessment year commencing on or after the1st day of April, 1977, but before the 1st day of April, 1981, the assessee may, at his option,before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139,whether fixed originally or on extension, for furnishing the return of income for the assessmentyear commencing on the 1st day of April, 1981, furnish to the [Assessing Officer] a declarationin writing that the provisions of sub-section (1) may be made applicable to him for each of therelevant assessment years as reduced by the number of assessment years which expired beforethe 1st day of April, 1981, and if he does so, then the provisions of sub-section (1) shall apply tohim for each of such relevant assessment years and the provisions of sub-section (4) shall alsoapply in computing the total income of the assessee for the assessment year immediatelysucceeding the last of the relevant assessment years and any subsequent assessment year.

(6) The provisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may be,apply in relation to the industrial undertaking referred to in this section as they apply for thepurposes of the industrial undertaking referred to in section 80-I.


(7) Notwithstanding anything contained in the foregoing provisions of this section, where theassessee, [before the due date for furnishing the return of income under sub-section (1) of section139], furnishes to the [Assessing Officer] a declaration in writing that the provisions of thissection may not be made applicable to him, the provisions of this section shall not apply to himfor any of the relevant assessment years.

(8) References [sub-section (5)] to any other provision of this Act, which has been amended oromitted by the Direct Tax Laws (Amendment) Act, 1987 shall, notwithstanding such amendmentor omission, be construed, for the [purposes of that sub-section], as if such amendment oromission had not been made.

Explanation : For the purposes of this section, - (i) "free trade zone" means the Kandla FreeTrade Zone and the Santacruz Electronics Export Processing Zone and includes any other freetrade zone which the Central Government may, by notification in the Official Gazette, specify316 for the purposes of this section;

(ii) "Relevant assessment years" means the five consecutive assessment years specified by theassessee at his option under sub-section (3);

(iii) "Manufacture" includes any -

(a) Process, or

(b) Assembling, or

(c) Recording of programmes on any disc, tape, perforated media or other information storagedevice.

(iv) "Electronic hardware technology park" means any park set up in accordance with theElectronic Hardware Technology Park (EHTP) Scheme notified by the Government of India inthe Ministry of Commerce 318b ;

(v) "Software technology park" means any park set up in accordance with the SoftwareTechnology Park Scheme notified by the Government of India in the Ministry of Commerce;

(vi) "Produce", in relation to articles or things referred to in clause (i) of sub-section (2), includesproduction of computer programmes 318b ;

16. Special provision in respect of newly established hundredpercent export-oriented undertakings.

§ 16. Special provision in respect of newly established hundred percent export-oriented


undertakings.Section 10B

SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED HUNDRED PER CENTEXPORT-ORIENTED UNDERTAKINGS.

(1) Subject to the provisions of this section, any profits and gains derived by an assessee from ahundred per cent export-oriented undertaking (hereafter in this section referred to as theundertaking) to which this section applies shall not be included in the total income of theassessee.

(2) This section applies to any undertaking which fulfils all the following conditions, namely :-

(i) It manufactures or produces any article or thing;

(ia) In relation to an undertaking which begins to manufacture or produce any article or thing onor after the 1st day of April, 1994, its exports of such articles and things are not less thanseventy-five per cent of the total sales thereof during the previous year;

(ii) It is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as aresult of the re-establishment, reconstruction or revival by the assessee of the business of anysuch industrial undertaking as is referred to in section 33B, in the circumstances and within theperiod specified in that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used forany purpose.

Explanation : The provisions of Explanation 1 and

Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of thissub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income ofthe assessee in respect of any consecutive assessment years, falling within a period of eight yearsbeginning with the assessment year relevant to the previous year in which the undertaking beginsto manufacture or produce articles or things, specified by the assessee at his option :

Provided that nothing in this sub-section shall be construed to extend the aforesaid fiveassessment years to cover any period after the expiry of the said period of eight years.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the totalincome of the assessee of the previous year relevant to the assessment year immediately


succeeding the last of the relevant assessment years, or of any previous year relevant to anysubsequent assessment year, -

(i) Section 32, section 32A, section 33 and clause (ix) of sub-section (1) of section 36 shall applyas if every allowance or deduction referred to therein and relating to or allowable for any of therelevant assessment years, in relation to any building, machinery, plant or furniture used for thepurposes of the business of the undertaking in the previous year relevant to such assessment yearor any expenditure incurred for the purposes of such business in such previous year had beengiven full effect to for that assessment year itself and accordingly sub-section (2) of section 32,clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33 or thesecond proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not applyin relation to any such allowance or deduction;

(ii) No loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) ofsection 74, in so far as such loss relates to the business of the undertaking, shall be carriedforward or set off where such loss relates to any of the relevant assessment years;

(iii) No deduction shall be allowed under section 80HH or section 80HHA or section 80-I [319ab or section 80-IA 319ab ][ 319e or section 80-IB 319e ] in relation to the profits and gainsof the undertaking; and

(iv) In computing the depreciation allowance under section 32, the written down value of anyasset used for the purposes of the business of the undertaking shall be computed as if the assesseehad claimed and been actually allowed the deduction in respect of depreciation for each of therelevant assessment years.

(5) Where the undertaking has begun to manufacture or produce articles or things in any previousyear relevant to the assessment year commencing before the 1st day of April, 1989, the assesseemay, at his option, before the due date for furnishing the return of his income under sub-section(1) of section 139 for the assessment year commencing on the 1st day of April, 1989, furnish tothe Assessing Officer a declaration in writing that the provisions of sub-section (1) may be madeapplicable to him for any five consecutive assessment years falling within a period of eight yearsbeginning with the assessment year commencing on the 1st day of April, 1989, and if he does so,then, the provisions of sub-section (1) shall apply to him for each of such assessment years andthe provisions of sub-section (4) shall also apply in computing the total income of the assesseefor the assessment year immediately succeeding the last of such assessment years and anysubsequent assessment year.

(6) The provisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may be,apply in relation to the undertaking referred to in this section as they apply for the purposes ofthe industrial undertaking referred to in section 80-I.

(7) Notwithstanding anything contained in the foregoing provisions of this section, where theassessee, before the due date for furnishing the return of his income under sub-section (1) ofsection 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this


section may not be made applicable to him, the provisions of this section shall not apply to himfor any of the relevant assessment years.

Explanation : For the purposes of this section, -

(i) "Hundred per cent export-oriented undertaking" means an undertaking which has beenapproved as a hundred per cent export-oriented undertaking by the Board appointed in this behalfby the Central Government in exercise of the powers conferred by section 14 of the Industries(Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;

(ii) "Relevant assessment years" means the ten consecutive assessment years referred to in sub-section

(iii) "Manufacture" includes any -

(a) Process, or

(b) Assembling, or

(c) Recording of programmes on any disc, tape, perforated media or other information storagedevice;

(iv) "Produce", in relation to any article or thing referred to in clause (i) of sub-section (2)includes production of computer programmes 319bb ;

17. Special provision in respect of certainindustrial undertakings in north-eastern region.

§17.Special provision in respect of certain industrial undertakings in north-eastern region.

Section 10C

SPECIAL PROVISION IN RESPECT OF CERTAIN INDUSTRIAL UNDERTAKINGS INNORTH-EASTERN REGION.

(1) Subject to the provisions of this section, any profits and gains derived by an assessee from anindustrial undertaking, which has begun or begins to manufacture or produce any article or thingon or after the 1st day of April, 1998 in any Integrated Infrastructure Development Centre orIndustrial Growth Centre located in the North-Eastern Region (hereafter in this section referredto as the industrial undertaking) shall not be included in the total income of the assessee.


(2) This section applies to any industrial undertaking which fulfils all the following conditions,namely :- (i) it is not formed by the splitting up, or the reconstruction of, a business already inexistence :

Provided that this condition shall not apply in respect of any industrial undertaking which isformed as a result of the re- establishment, reconstruction or revival by the assessee of thebusiness of any such industrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section;

(ii) It is not formed by the transfer to a new business of machinery or plant previously used forany purpose.

Explanation. - The provisions of Explanation 1 and

Explanation 2 to sub- section (3) of section 80-IA shall apply for the purposes of clause (ii) ofthis sub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) The profits and gains referred to in sub-section (1) shall not be included in the total income ofthe assessee in respect of ten consecutive assessment years beginning with the assessment yearrelevant to the previous year in which the industrial undertaking begins to manufacture orproduce articles or things.

(4) Notwithstanding anything contained in any other provision of this Act, in computing the totalincome of the assessee of any previous year relevant to any subsequent assessment year, -

(i) Section 32, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as ifdeduction referred to therein and relating to or allowable for any of the relevant assessmentyears, in relation to any building, machinery, plant or furniture used for the purposes of thebusiness of the industrial undertaking in the previous year relevant to such assessment year orany expenditure incurred for the purposes of such business in such previous year had been givenfull effect to for that assessment year itself and, accordingly, sub- section (2) of section 32, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, asthe case may be, shall not apply in relation to any such deduction;

(ii) No loss referred to in sub-section (1) of section 72 or sub- section (1) or sub-section (3) ofsection 74, in so far as such loss relates to the business of the industrial undertaking, shall becarried forward or set off where such loss relates to any of the relevant assessment years;

(iii) No deduction shall be allowed under section 80HH or section 80HHA or section 80-I orsection 80-IA or section 80-IB or section 80JJA in relation to the profits and gains of theindustrial undertakings; and

(iv) In computing the depreciation allowance under section 32, the written down value of anyasset used for the purposes of the business of the industrial undertaking shall be computed as if


the assessee had claimed and been actually allowed the deduction in respect of depreciation foreach of the relevant assessment years.

(5) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as maybe, apply in relation to the industrial undertaking referred to in this section as they apply for thepurposes of the industrial undertaking referred to in section 80-IA or section 80-IB, as the casemay be.

(6) Notwithstanding anything contained in the foregoing provisions of this section, where theassessee before the due date for furnishing the return of his income under sub-section (1) ofsection 139, furnishes to the Assessing Officer a declaration in writing that the provisions of thissection may not be made applicable to him, the provisions of this section shall not apply to himin any of the relevant assessment years.

Explanation. - For the purposes of this section, - (i) "Integrated Infrastructure DevelopmentCentre" means such centres located in the States of the North-Eastern Region, which the CentralGovernment, may, by notification in the Official Gazette, specify for the purposes of this section;

(ii) "Industrial Growth Centre" means such centres located in the States of the North-EasternRegion, which the Central Government may, by notification in the Official Gazette, specify forthe purposes of this section; (iii) "North-Eastern Region" means the region comprising the Statesof Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;

(iv) "Relevant assessment years" means the ten consecutive years beginning with the year inwhich the industrial undertaking begins to manufacture or produce articles or things.

18. Income from property held for charitable or religiouspurposes.

§ 18. Income from property held for charitable or religious purposes.Section 11

INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES.

(1) 320 Subject to the provisions of sections 60 to 63, the following income shall not be includedin the total income of the previous year of the person in receipt of the income -

(a) Income 322 derived from property held under trust wholly for charitable or religiouspurposes, to the extent to which such income is applied to such purposes in India; and, where anysuch income is accumulated or set apart for application to such purposes in India, to the extent towhich the income so accumulated or set apart is not in excess of twenty-five per cent of theincome from such property;


(b) Income derived from property held under trust in part only for such purposes, the trust havingbeen created before the commencement of this Act, to the extent to which such income is appliedto such purposes in India; and, where any such income is finally set apart for application to suchpurposes in India, to the extent to which the income so set apart is not in excess of twenty-fiveper cent of the income from such property;

(c) Income from property held under trust -

(i) Created on or after the 1st day of April, 1952, for a charitable purpose which tends to promoteinternational welfare in which India is interested, to the extent to which such income is applied tosuch purposes outside India, and

(ii) For charitable or religious purposes, created before the 1st day of April, 1952, to the extent towhich such income is applied to such purposes outside India :

Provided that the Board, by general or special order, has directed in either case that it shall not beincluded in the total income of the person in receipt of such income;

(d) Income in the form of voluntary contributions made with a specific direction that they shallform part of the corpus of the trust or institution.

Explanation : For the purposes of clauses (a) and (b), -

(1) In computing the twenty-five per cent of the income which may be accumulated or set apart,any such voluntary contributions as are referred to in section 12 shall be deemed to be part of theincome;

(2) If, in the previous year, the income applied to charitable or religious purposes in India fallsshort of seventy-five per cent of the income derived during that year from property held undertrust, or, as the case may be, held under trust in part, by any amount - (i) for the reasons that thewhole or any part of the income has not been received during that year, or

(ii) For any other reason, then -

(a) In the case referred to in sub-clause (i), so much of the income applied to such purposes inIndia during the previous year in which the income is received or during the previous yearimmediately following as does not exceed the said amount, and

(b) In the case referred to in sub-clause (ii), so much of the income applied to such purposes inIndia during theprevious year immediately following the previous year inwhich the income wasderived as does not exceed the said amount, may, at the option of the person in receipt of theincome (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income) be deemed to be income applied tosuch purposes during the previous year in which the income was derived; and the income sodeemed to have been applied shall not be taken into account in calculating the amount of


incomeapplied to such purposes, in the case referred to insub-clause (i), during the previous yearin which the income is received or during the previous year immediately following, as the casemay be, and, in the case referred to in sub-clause (ii), during the previous year immediatelyfollowing the previous year in which the income was derived.

(1A) For the purposes of sub-section (1), - (a) where a capital asset, being property held undertrust wholly for charitable or religious purposes, is transferred and the whole or any part of thenet consideration is utilised for acquiring another capital asset to be so held, then, the capital gainarising from the transfer shall be deemed to have been applied to charitable or religiouspurposesto the extent specified hereunder, namely :- (i) where the whole of the net consideration isutilised in acquiring the new capital asset, the whole of such capital gain;

(ii) Where only a part of the net consideration is utilised for acquiring the new capital asset, somuch of such capital gain as is equal to the amount, if any, by which the amount so utilisedexceeds the cost of the transferred asset;

(b) Where a capital asset, being property held under trust in part only for such purposes, istransferred and the whole or any part of the net consideration is utilised for acquiring anothercapital asset to be so held, then, the appropriate fraction of the capital gain arising from thetransfer shall be deemed to have been applied to charitable or religious purposes to the extentspecified hereunder, namely :-

(i) Where the whole of the net consideration is utilised in acquiring the new capital asset, thewhole of the appropriate fraction of such capital gain;

(ii) In any other case, so much of the appropriate fraction of the capital gain as is equal to theamount, if any, by which the appropriate fraction of the amount utilised for acquiring the newasset exceeds the appropriate fraction of the cost of the transferred asset.

Explanation : In this sub-section, - (i) "appropriate fraction" means the fraction which representsthe extent to which the income derived from the capital asset transferred was immediately beforesuch transfer applicable to charitable or religious purposes;

(ii) "Cost of the transferred asset" means the aggregate of the cost of acquisition (as ascertainedfor the purposes of sections 48 and 49) of the capital asset which is the subject of the transfer andthe cost of any improvement thereto within the meaning assigned to that expression in sub-clause(b) of clause (1) of section 55;

(iii) "Net consideration" means the full value of the consideration received or accruing as a resultof the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusivelyin connection with such transfer.

(1B) Where any income in respect of which an option is exercised under clause (2) of theExplanation to sub-section (1) is not applied to charitable or religious purposes in India during


the period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause,then, such income shall be deemed to be the income of the person in receipt thereof -

(a) In the case referred to in sub-clause (i) of the said clause, of the previous year immediatelyfollowing the previous year in which the income was received; or

(b) In the case referred to in sub-clause (ii) of the said clause, of the previous year immediatelyfollowing the previous year in which the income was derived.

(2) Where seventy-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to havebeen applied, to charitable or religious purposes in India during the previous year but isaccumulated or set apart, either in whole or in part, for application to such purposes in India,such income so accumulated or set apart shall not be included in the total income of the previousyear of the person in receipt of the income, provided the following conditions are complied with,namely :

(a) Such person specifies, by notice in writing given to the [Assessing Officer] in the prescribed334 manner, the purpose for which the income is being accumulated or set apart and the periodfor which the income is to be accumulated or set apart, which shall in no case exceed ten years;

(b) The money so accumulated or set apart is invested or deposited in the forms or modesspecified in sub-section (5).

Provided that in computing the period of ten years referred to in clause (a), the period duringwhich the income could not be applied for the purpose for which it is so accumulated or set apart,due to an order or injunction of any Court, shall be excluded.

(3) Any income referred to in sub-section (2) which - (a) is applied to purposes other thancharitable or religious purposes as aforesaid or ceases to be accumulated or set apart forapplication thereto, or

(b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section(5),

(c) Is not utilised for the purpose for which it is so accumulated or set apart during the periodreferred to in clause (a) of that sub-section or in the year immediately following the expirythereof, shall be deemed to be the income of such person of the previous year in which it is soapplied or ceases to be so accumulated or set apart or ceases to remain so invested or depositedor, as the case may be, of the previous year immediately following the expiry of the periodaforesaid.

(3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyondthe control of the person in receipt of the income, any income invested or deposited inaccordance with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose


for which it was accumulated or set apart, the [Assessing Officer] may, on an application madeto him in this behalf, allow such person to apply such income for such other charitable orreligious purpose in India as is specified in the application by such person and as is in conformitywith the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if thepurpose specified by such person in the application under this sub-section were a purposespecified in the notice given to the [Assessing Officer] under clause (a) of sub-section (2).

(4) For the purposes of this section "property held under trust" includes a business undertaking soheld, and where a claim is made that the income of any such undertaking shall not be included inthe total income of the persons in receipt thereof, the [Assessing Officer] shall have power todetermine the income of such undertaking in accordance with the provisions of this Act relatingto assessment; and where any income so determined is in excess of the income as shown in theaccounts of the undertaking, such excess shall be deemed to be applied to purposes other thancharitable or religious purposes.

(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply inrelation to any income of a trust or an institution, being profits and gains of business, unless thebusiness is incidental to the attainment of the objectives of the trust or, as the case may be,institution, and separate books of account are maintained by such trust or institution in respect ofsuch business.

(5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely :- (i) 343 investment in savings certificates as definedin clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and anyother securities or certificates issued by the Central Government under the Small SavingsSchemes of that Government;

(ii) Deposit in any account with the Post Office Savings Bank;

(iii) Deposit in any account with a scheduled bank or a co-operative society engaged in carryingon the business of banking (including a co-operative land mortgage bank or a co-operative landdevelopment bank).

Explanation : In this clause, "scheduled bank" means the State Bank of India constituted underthe State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank ofIndia (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted undersection 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to theReserve Bank of India Act, 1934 (2 of 1934);

(iv) Investment in units of the Unit Trust of India established under the Unit Trust of India Act,1963 (52 of 1963);


(v) Investment in any security for money created and issued by the Central Government or aState Government;

(vi) Investment in debentures issued by, or on behalf of, any company or corporation both theprincipal whereof and the interest whereon are fully and unconditionally guaranteed by theCentral Government or by a State Government;

(vii) Investment or deposit in any [ 344 public sector company 344 ];

(viii) Deposits with or investment in any bonds issued by a financial corporation which isengaged in providing long-term finance for industrial development in India and which isapproved by the Central Government for the purposes of clause (viii) of sub-section (1) ofsection 36;

(ix) Deposits with or investment in any bonds issued by a public company formed and registeredin India with the main object of carrying on the business of providing long term finance forconstruction or purchase of houses in India for residential purposes and which is approved by theCentral Government for the purposes of clause (viii) of sub-section (1) of section 36;

(x) Investment in immovable property.

Explanation : "Immovable property" does not include any machinery or plant (other thanmachinery or plant installed in a building for the convenient occupation of the building) eventhough attached to, or permanently fastened to, anything attached to the earth;

(xi) Deposits with the Industrial Development Bank of India established under the IndustrialDevelopment Bank of India Act, 1964 (18 of 1964);

(xii) Any other form or mode of investment or deposit as may be prescribed 347.

19. Income of trusts or institutions fromcontributions.

§19.Income of trusts or institutions from contributions.

Section 12

INCOME OF TRUSTS OR INSTITUTIONS FROM CONTRIBUTIONS.

Any voluntary contributions received by a trust created wholly for charitable or religiouspurposes or by an institution established wholly for such purposes (not being contributions madewith a specific direction that they shall form part of the corpus of the trust or institution) shall for


the purposes of section 11 be deemed to be income derived from property held under trustwholly for charitable or religious purposes and the provisions of that section and section 13 shallapply accordingly.

20. Conditions as to registration of trusts, etc.

§ 20. Conditions as to registration of trusts, etc.

Section 12A

CONDITIONS AS TO REGISTRATION OF TRUSTS, ETC.

The provisions of section 11 and section 12 shall not apply in relation to the income of any trustor institution unless the following conditions are fulfilled, namely :-

(a) the person in receipt of the income has made an application for registration of the trust orinstitution in the prescribed form and in the prescribed manner to the Commissioner before the1st day of July, 1973, or before the expiry of a period of one year from the date of the creation ofthe trust or the establishment of the institution, [Whichever is later and such trust or institution isregistered under section 12AA] :

Provided that where an application for registration of the trust or institution is made after theexpiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to theincome of such trust or institution, -

(i) From the date of the creation of the trust or the establishment of the institution if theCommissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of theincome was prevented from making the application before the expiry of the period aforesaid forsufficient reasons;

(ii) From the first day of the financial year in which the application is made, if the ChiefCommissioner or Commissioner is not so satisfied;

(b) Where the total income of the trust or institution as computed under this Act without givingeffect to the provisions of section 11 and section 12 exceeds [fifty thousand] rupees in anyprevious year, the accounts of the trust or institution for that year have been audited byanaccountant as defined in the Explanation below sub-section (2) of section 288 and the person inreceipt ofthe income furnishes along with the return of income for the relevant assessment yearthe report of such audit in the prescribed form duly signed and verified by such accountant andsetting forth such particulars as may be prescribed 350 .


21. Procedure for registration.

§ 21. Procedure for registration.Section 12AA

PROCEDURE FOR REGISTRATION.

(1) The Commissioner, on receipt of an application for registration of a trust or institution madeunder clause (a) of section 12A, shall - (a) Call for such documents or information from the trustor institution as he thinks necessary in order to satisfy himself about the genuineness of activitiesof the trust or institution and may also make such a inquiries as he may deem necessary in thisbehalf; and

(b) After satisfying himself about the objects of the trust or institution genuineness of itsactivities, he - (i) shall pass an order in writing registering the trust or institution;

(ii) Shall, if he is not so satisfied, pass an order in writing refusing to register the trust orinstitution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given areasonable opportunity of being heard.

(1A) All applications, pending before the Chief Commissioner on which no order has beenpassed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall standtransferred on that day to the Commissioner and the Commissioner may proceed with suchapplications under that sub-section from the stage at which they were on that day.

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall bepassed before the expiry of six months from the end of the month in which the application wasreceived under clause (a) of section 12A.

22. Section 11 not to apply in certain cases.

§ 22. Section 11 not to apply in certain cases.Section 13

SECTION 11 NOT TO APPLY IN CERTAIN CASES.

(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the totalincome of the previous year of the person in receipt thereof - (a) any part of the income from theproperty held under a trust for private religious purposes which does not enure for the benefit ofthe public;


(b) In the case of a trust for charitable purposes or a charitable institution created or establishedafter the commencement of this Act, any income thereof if the trust or institution is created orestablished for the benefit of any particular religious community or caste;

(c) In the case of a trust for charitable or religious purposes or a charitable or religiousinstitution, any income thereof -

(i) If such trust or institution has been created or established after the commencement of this Actand under the terms of the trust or the rules governing the institution, any part of such incomeenures, or

(ii) If any part of such income or any property of the trust or institution (whenever created orestablished) is during the previous year used or applied, directly or indirectly for the benefit ofany person referred to in sub-section (3) :

Provided that in the case of a trust or institution created or established before the commencementof this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whetherdirectly or indirectly, of any part of such income or any property of the trust or institution for thebenefit of any person referred to in sub-section (3), if such use or application is by way ofcompliance with a mandatory term of the trust or a mandatory rule governing the institution :

Provided further that in the case of a trust for religious purposes or a religious institution(whenever created or established) or a trust for charitable purposes or a charitable institutioncreated or established before the commencement of this Act, the provisions of sub-clause (ii)shall not apply to any use or application, whether directly or indirectly, of any part of suchincome or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June,1970;

(d) 355 in the case of a trust for charitable or religious purposes or a charitable or religiousinstitution, any income thereof, if for any period during the previous year -

(i) Any funds of the trust or institution are invested or deposited after the 28th day of February,1983 otherwise than in any one or more of the forms or modes specified insub-section (5) ofsection 11; or

(ii) Any funds of the trust or institution invested or deposited before the 1st day of March, 1983,otherwise than in any one or more of the forms or modes specified in sub-section (5) of section11 continue to remain so invested or deposited after the 30th day of November, 1983; or

(iii) Any shares in a company [not being a Government company 356 as defined in section 617of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, Stateor Provincial Act, are held by the trust or institution after the 30th day of November, 1983 :

Provided that nothing in this clause shall apply in relation to -


(i) Any assets held by the trust or institution where such assets form part of the corpus of the trustor institution as on the 1st day of June, 1973;

(ia) Any accretion to the shares, forming part of the corpus mentioned in clause (i), by way ofbonus shares allotted to the trust or institution;

(ii) Any assets (being debentures issued by, or on behalf of, any company or corporation)acquired by the trust or institution before the 1st day of March, 1983;

(iia) Any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than inany of the forms or modes specified in sub-section (5) of section 11, after the expiry of one yearfrom the end of the previous year in which such asset is acquired or the 31st day of March,1993,whichever is later;

(iii) Any funds representing the profits and gains of business, being profits and gains of anyprevious year relevant to the assessment year commencing on the 1st day of April, 1984 or anysubsequent assessment year.

Explanation : Where the trust or institution has any other income in addition to profits and gainsof business, the provisions of clause (iii) of this proviso shall not apply unless the trust orinstitution maintains separate books of account in respect of such business.

Explanation : For the purposes of sub-clause (ii) of clause (c), in determining whether any part ofthe income or any property of any trust or institution is during the previous year used or applied,directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as suchuse or application relates to any period before the 1st day of July, 1972, no regard shall be had tothe amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof]of the Finance Act, 1972.

(2) Without prejudice to the generality of the [Provisions of clause (c) and clause (d)] of sub-section (1), the income or the property of the trust or institution or any part of such income orproperty shall, for the purposes of that clause, be deemed to have been used or applied for thebenefit of a person referred to in sub-section (3), -

(a) If any part of the income or property of the trust or institution is, or continues to be, lent toany person referred to in sub-section (3) for any period during the previous year without eitheradequate security or adequate interest or both;

(b) If any land, building or other property of the trust or institution is, or continues to be, madeavailable for the use of any person referred to in sub-section (3), for any period during theprevious year without charging adequate rent or other compensation;


(c) If any amount is paid by way of salary, allowance or otherwise during the previous year toany person referred to in sub-section (3) out of the resources of the trust or institution for servicesrendered by that person to such trust or institution and the amount so paid is in excess of whatmay be reasonably paid for such services;

(d) If the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation;

(e) If any share, security or other property is purchased by or on behalf of the trust or institutionfrom any person referred to in sub-section (3) during the previous year for consideration which ismore than adequate;

(f) If any share, security or other property is sold by or on behalf of the trust or institution to anyperson referred to in sub-section (3) during the previous year for consideration which is less thanadequate;

(g) If any income or property of the trust or institution is diverted during the previous year infavour of any person referred to in sub-section (3) :

Provided that this clause shall not apply where the income, or the value of the property or, as thecase may be, the aggregate of the income and the value of the property, so diverted does notexceed one thousand rupees; 359 ]

(h) If any funds of the trust or institution are, or continue to remain, invested for any periodduring the previous year (not being a period before the 1st day of January, 1971) in any concernin which any person referred to in sub-section (3) has a substantial interest.

(3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following,namely :-

(a) The author of the trust or the founder of the institution;

(b) Any person who has made a substantial contribution to the trust or institution, that is to say,any person whose total contribution upto the end of the relevant previous year exceeds [fiftythousand] rupees;

(c) Where such author, founder or person is a Hindu undivided family, a member of the family;

(cc) Any trustee of the trust or manager (by whatever name called) of the institution;

(d) Any relative of any such author, founder, person, [member, trustee or manager] as aforesaid;

(e) Any concern in which any of the persons referred to in clauses (a), (b), [(c), (cc)] and (d) hassubstantial interest.


(4) Notwithstanding anything contained in clause (c) of sub-section (1) [But without prejudice tothe provisions contained in clause (d) of that sub-section, in a case where] the aggregate of thefunds of the trust or institution invested in a concern in which any person referred to in sub-section (3) has a substantial interest, does not exceed five per cent of the capital of that concern,the exemption under [Section 11 or section 12] shall not be denied in relation to any incomeother than the income arising to the trust or the institution from such investment, by reason onlythat the [Funds of the trust or the institution] have been invested in a concern in which suchperson has a substantial interest.

(5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (beingdebentures issued by, or on behalf of, any company or corporation) are acquired by the trust orinstitution after the 28th day of February, 1983 but before the 25th day of July, 1991, theexemption under section 11 or section 12 shall not be deniedin relation to any income other thanthe income arising to the trust or the institution from such assets, by reason only that the funds ofthe trust or the institution have been invested in such assets if such funds do not continue toremain so invested in such assets after the 31st day of March, 1992.

Explanation 1 : For the purposes of sections 11, 12, 12A and this section, "trust" includes anyother legal obligation and for the purposes of this section "relative", in relation to an individual,means -

(i) Spouse of the individual;

(ii) Brother or sister of the individual;

(iii) Brother or sister of the spouse of the individual;

(iv) Any lineal ascendant or descendant of the individual;

(v) Any lineal ascendant or descendant of the spouse of the individual;

(vi) Spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v);

(vii) Any lineal descendant of a brother or sister of either the individual or of the spouse of theindividual.

Explanation 2 : A trust or institution created or established for the benefit of Scheduled Castes,Backward Classes, Scheduled Tribes or women and children shall not be deemed to be a trust orinstitution created or established for the benefit of a religious community or caste within themeaning of clause (b) of sub-section (1).

Explanation 3 : For the purposes of this section, a person shall be deemed to have a substantialinterest in a concern, -


(i) In a case where the concern is a company, if its shares (not being shares entitled to a fixed rateof dividend whether with or without a further right to participate in profits) carrying not less thantwenty per cent of the voting power are, at any time during the previous year, owned beneficiallyby such person or partly by such person and partly by one or more of the other persons referredto in sub-section (3);

(ii) In the case of any other concern, if such person is entitled, or such person and one or more ofthe other persons referred to in sub-section (3) are entitled in the aggregate, at any time duringthe previous year, to not less than twenty per cent of the profits of such concern.

23. Special provision relating to incomes ofpolitical parties.

§23.Special provision relating to incomes of political parties.

Section 13A

SPECIAL PROVISION RELATING TO INCOMES OF POLITICAL PARTIES.

Any income of a political party which is chargeable under the head "Income from houseproperty" or "Income from other sources" or any income by way of voluntary contributionsreceived by a political party from any person shall not be included in the total income of theprevious year of such political party :

Provided that - (a) Such political party keeps and maintains such books of account and otherdocuments as would enable the [Assessing Officer] to properly deduce its income therefrom;

(b) In respect of each such voluntary contribution in excess of ten thousand rupees, such politicalparty keeps and maintains a record of such contribution and the name and address of the personwho has made such contribution; and

(c) The accounts of such political party are audited by an accountant as defined in theExplanation below sub-section (2) of section 288.

Explanation : For the purposes of this section, "political party" means an association or body ofindividual citizens of India registered with the Election Commission of India as a political partyunder paragraph 3 of the Election Symbols (Reservation and Allotment) Order, 1968, andincludes a political party deemed to be registered with that Commission under the proviso to sub-paragraph (2) of that paragraph.


24. Heads of income.

§ 24. Heads of income.Section 14

HEADS OF INCOME.

Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income -

A. - Salaries.

C. - Income from house property.

D. - Profits and gains of business or profession.

E. - Capital gains.

F. - Income from other sources.

25. Salaries.

§ 25. Salaries.

Section 15

SALARIES. 376 .

The following income shall be chargeable to income-tax under the head "Salaries" :- (a) Anysalary due from an employer 377 or a former employer to an assessee in the previous year,whether paid or not;

(b) Any salary paid or allowed to him in the previous year by or on behalf of an employer or aformer employer though not due or before it became due to him;

(c) Any arrears of salary paid or allowed to him in the previous year by or on behalf of anemployer or a former employer, if not charged to income-tax for any earlier previous year.

Explanation 1 : For the removal of doubts, it is hereby declared that where any salary paid inadvance is included in the total income of any person for any previous year it shall not beincluded again in the total income of the person when the salary becomes due.


Explanation 2 : Any salary, bonus, commission or remuneration, by whatever name called, dueto, or received by, a partner of a firm from the firm shall not be regarded as "salary" for thepurposes of this section.

26. Deductions from salaries.

§ 26. Deductions from salaries.Section 16

DEDUCTIONS FROM SALARIES.

The income chargeable under the head "Salaries" shall be computed after making the followingdeductions, namely :-

(i) In the case of an assessee whose income from salary, before allowing a deduction under theclause, - (a) Does not exceed one lakh rupees, a deduction of a sum equal to thirty-three andone-third per cent of the salary or twenty-five thousand rupees, whichever is less;

(b) Exceeds one lakh rupees but does not exceed five lakh rupees, a deduction of a sum of twentythousand rupees.

Explanation : For the purposes of this clause, where salary is due from, or paid or allowed by,more than one employer, the deduction under this clause shall be computed with reference to theaggregate salary due, paid or allowed to the assessee and shall in no case exceed the amountspecified under this clause;

(ii) A deduction in respect of any allowance in the nature of an entertainment allowancespecifically granted to the assessee by his employer -

(a) In the case of an assessee who is in receipt of a salary from the Government, a sum equal toone-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousandrupees, whichever is less; and

(b) In the case of any other assessee who is in receipt of such entertainment allowance and hasbeen continuously in receipt of such entertainment allowance regularly from his presentemployer from a date before the 1st day of April, 1955, the amount of such entertainmentallowance regularly received by the assessee from his present employer in any previous yearending before the 1st day of April, 1955, or a sum equal to one-fifth of his salary (exclusive ofany allowance, benefit or other perquisite) or seven thousand five hundred rupees, whichever isthe least;

(iii) A deduction of any sum paid by the assessee on account of a tax on employment within the


meaning of clause (2) of article 276 of the Constitution, leviable by or under any law.

27. Salary, "Perquisite" and "Profits in lieu of salary"Defined.

§ 27. Salary, "Perquisite" and "Profits in lieu of salary" Defined.

Section 17

"SALARY", "PERQUISITE" AND "PROFITS IN LIEU OF SALARY" DEFINED.

For the purposes of sections 15 and 16 and of this section, -

(1) "Salary" includes -

(i) Wages;

(ii) Any annuity or pension;

(iii) Any gratuity;

(iv) Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;

(v) Any advance of salary;

(va) Any payment received by an employee in respect of any period of leave not availed of byhim; 388 ]

(vi) The annual accretion to the balance at the credit of an employee participating in arecognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A ofthe Fourth Schedule; and

(vii) The aggregate of all sums that are comprised in the transferred balance as referred to insub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in arecognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4)thereof;

(2) "Perquisite" includes -

(i) The value of rent-free accommodation provided to the assessee by his employer;

(ii) The value of any concession in the matter of rent respecting any accommodation provided to


the assessee by his employer;

(iii) The value of any benefit or amenity granted or provided free of cost or at concessional ratein any of the following cases :-

(a) By a company to an employee who is a director thereof;

(b) By a company to an employee being a person who has a substantial interest in the company;

(c) By any employer (including a company) to an employee to whom the provisions ofparagraphs (a) and (b) of this sub-clause do not apply and whose income under the head"Salaries" (whether due from, or paid or allowed by, one or more employers), exclusive of thevalue of all benefits or amenities not provided for by way of monetary payment, exceeds twenty-four thousand rupees.

Explanation : For the removal of doubts, it is hereby declared that the use of any vehicleprovided by a company or an employer for journey by the assessee from his residence to hisoffice or other place of work, or from such office or place to his residence, shall not be regardedas a benefit or amenity granted or provided to him free of cost or at concessional rate for thepurposes of this sub-clause.

(iiia) The value of any specified security allotted or transferred, directly or indirectly, by anyperson free of cost or at concessional rate, to an individual who is or has been in employment ofthat person :

Provided that in a case where allotment or transfer of specified securities is made in pursuance ofan option exercised by an individual, the value of the specified securities shall be taxable in theprevious year in which such option is exercised by such individual.

Explanation - For the purposes of this clause, - (a) "Cost" means the amount actually paid foracquiring specified securities and where no money has been paid, the cost shall be taken as nil;

(b) "Specified security" means the securities as defined in clause (h) of section 2 of the SecuritiesContracts (Regulation) Act, 1956 (42 of 1956) and includes employees" stock option and sweatequity shares;

(c) "Sweat equity shares" means equity shares issued by a company to its employees or directorsat a discount or for consideration other than cash for providing know-how or making availablerights in the nature of intellectual property rights or value additions, by whatever name called;and

(d) "Value" means the difference between the fair market value and the cost for acquiringspecified securities.


(iv) Any sum paid by the employer in respect of any obligation which but for such payment,would have been payable by the assessee;

(v) Any sum payable by the employer, whether directly or through a fund, other than arecognised provident fund or an approved superannuation fund or a Deposit-linked InsuranceFund established under section 3G of the Coal Mines Provident Fund and MiscellaneousProvisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees"Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect an assurance onthe life of the assessee or to effect a contract for an annuity;

Provided that nothing in this clause shall apply to, - (i) The value of any medical treatmentprovided to an employee or any member of his family in any hospital maintained by theemployer;

(ii) Any sum paid by the employer in respect of any expenditure actually incurred by theemployee on his medical treatment or treatment of any member of his family -

(a) In any hospital maintained by the Government or any local authority or any other hospitalapproved by the Government for the purposes of medical treatment of its employees;

(b) In respect of the prescribed diseases or ailments in any hospital approved by the ChiefCommissioner having regard to the prescribed guidelines :

Provided that, in a case falling in sub-clause (b), the employee shall attach with his return ofincome a certificate from the hospital specifying the disease or ailment for which medicaltreatment was required and the receipt for the amount paid to the hospital;

(iii) Any portion of the premium paid by an employer in relation to an employee, to effect or tokeep in force an insurance on the health of such employee under any scheme approved by theCentral Government for the purposes of clause (ib) of sub-section (1) of section 36;

(iv) Any sum paid by the employer in respect of any premium paid by the employee to effect orto keep in force an insurance on his health or the health of any member of his family under anyscheme approved by the Central Government for the purposes of section 80D;

(v) Any sum paid by the employer in respect of any expenditure actually incurred by theemployee on his medical treatment or treatment of any member of his family [other than thetreatment referred to in clauses (i) and (ii)]; so, however, that such sum does not exceed fivethousand rupees, in the previous year, in the case of the employee and further five thousandrupees in the case of his family;

(vi) Any expenditure incurred by the employer on - (1) medical treatment of the employee, orany member of the family of such employee, outside India;

(2) Travel and stay abroad of the employee or any member of the family of such employee for


medical treatment;

(3) Travel and stay abroad of one attendant who accompanies the patient in connection with suchtreatment, subject to the condition that -

(A) The expenditure on medical treatment and stay abroad shall be excluded from perquisite onlyto the extent permitted by the Reserve Bank of India; and

(B) The expenditure on travel shall be excluded from perquisite only in the case of an employeewhose gross total income, as computed before including therein the said expenditure, does notexceed two lakh rupees;

(vii) Any sum paid by the employer in respect of any expenditure actually incurred by theemployee for any of the purposes specified in clause (vi) subject to the conditions specified in orunder that clause.

Explanation : For the purposes of clause (2), - (i) "Hospital" includes a dispensary or a clinic ora nursing home;

(ii) "Family", in relation to an individual, shall have the same meaning as in clause (5) of section10; and

(iii) "Gross total income" shall have the same meaning as in clause (5) of section 80B;

(3) "Profits in lieu of salary" includes -

(i) The amount of any compensation due to or received by an assessee from his employer orformer employer at or in connection with the termination of his employment the modification ofthe terms and conditions relating thereto;

(ii) Any payment other than any payment referred to in clause (10), clause (10A), clause (10B),clause (11), clause (12), clause (13) or clause (13A) of section (10), due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extentto which it does not consist of contributions by the assessee or interest on such contributions orany sum received under a Keyman insurance policy including the sum allocated by way of bonuson such policy.

Explanation : For the purposes of this sub-clause, the expression "Keyman insurance policy"shall have the meaning assigned to it in clause (10D) of section 10.

28. Omitted.


§28.Omitted.

Section 18

OMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4-1989

29. Omitted.

§ 29. Omitted.

Section 19


30. Omitted.

§ 30. Omitted.

Section 20

20 OMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4-1989.

31. Omitted.

§ 31. Omitted.Section 21


32. Income from house property.

§ 32. Income from house property.Section 22

INCOME FROM HOUSE PROPERTY.

The annual value of property consisting of any buildings or lands appurtenant thereto of which


the assessee is the owner 400 , other than such portions of such property as he may occupy forthe purposes of any business or profession carried on by him the profits of which are chargeableto income-tax, shall be chargeable to income-tax under the head "Income from house property".

33. Annual value how determined.

§ 33. Annual value how determined.

Section 23

ANNUAL VALUE HOW DETERMINED.

(1) For the purposes of section 22, the annual value of any property shall be deemed to be -

(a) The sum for which the property might reasonably be expected to let from year to year; or

(b) Where the property is let and the annual rent received or receivable by the owner in respectthereof is in excess of the sum referred to in clause (a), the amount so received or receivable :

Provided that where the property is in the occupation of a tenant, the taxes levied by any localauthority in respect of the property shall, to the extent such taxes are borne by the owner, bededucted (irrespective of the previous year in which the liability to pay such taxes was incurredby the owner according to the method of accounting regularly employed by him) in determiningthe annual value of the property of that previous year in which such taxes are actually paid byhim :

Provided further that the annual value as determined under this sub-section shall, - (a) In thecase of a building comprising one or more residential units, the erection of which is begun afterthe 1st day of April, 1961, and completed before the 1st day of April, 1970, for a period of threeyears from the date of completion of the building, be reduced by a sum equal to the aggregate of-

(i) In respect of any residential unit, whose annual value as so determined does not exceed sixhundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds six hundredrupees, an amount of six hundred rupees;

(b) In the case of a building comprising one or more residential units, the erection of which isbegun after the 1st day of April, 1961, and completed after the 31st day of March, 1970, butbefore the 1st day of April, 1978, for a period of five years from the date of completion of thebuilding, be reduced by a sum equal to aggregate of -


(i) In respect of any residential unit whose annual value as so determined does not exceed onethousand two hundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds one thousandtwo hundred rupees, an amount of one thousand two hundred rupees;

(c) In the case of a building comprising one or more residential units, the erection of which iscompleted after the 31st day of March, 1978 but before the 1st day of April, 1982, for a period offive years from the date of completion of the building, be reduced by a sum equal to theaggregate of -

(i) In respect of any residential unit whose annual value as so determined does not exceed twothousand four hundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds two thousandfour hundred rupees, an amount of two thousand four hundred rupees;

(d) In the case of a building comprising one or more residential units, the erection of which iscompleted after the 31st day of March, 1982 but before the 1st day of April, 1992, for a period offive years from the date of completion of the building, be reduced by a sum equal to theaggregate of - (i) In respect of any residential unit whose annual value as so determined does notexceed three thousand six hundred rupees, the amount of such annual value;

(ii) In respect of any residential unit whose annual value as so determined exceeds three thousandsix hundred rupees, an amount of three thousand six hundred rupees.

Explanation: For the purposes of this sub-section, "annual rent" means - (a) In a case where theproperty is let throughout the previous year, the actual rent received or receivable by the ownerin respect of such year; and

(b) In any other case, the amount which bears the same proportion to the amount of the actualrent received or receivable by the owner for the period for which the property is let, as the periodof twelve months bears to such period.

Explanation 2 : For the removal of doubts, it is hereby declared that where a deduction in respectof any taxes referred to in the first proviso to this sub-section is allowed in determining theannual value of the property in respect of any previous year (being a previous year relevant to theassessment year commencing on the 1st day of April, 1984 or any earlier assessment year), nodeduction shall be allowed under the first proviso in determining the annual value of the propertyin respect of the previous year in which such taxes are actually paid by the owner.

(2) Where the property consists of - (a) A house or part of a house in the occupation of theowner for the purposes of his own residence, - (i) Which is not actually let during any part of theprevious year and no other benefit therefrom is derived by the owner, the annual value of such


house or part of the house shall be taken to be nil; (ii) Which is let during any part or parts of theprevious year, that part of the annual value (annual value being determined in the same manneras if the property had been let) which is proportionate to the period during which the property isin the occupation of the owner for the purposes of his own residence, or, as the case may be,where such property is let out in parts, that portion of the annual value appropriate to any partwhich was occupied by the owner for his own residence, which is proportionate to the periodduring which such part is wholly occupied by him for his own residence shall be deducted indetermining the annual value.

Explanation :- The deduction under this sub-clause shall be made irrespective of whether theperiod during which the property or, as the case may be, part of the property was used for theresidence of the owner precedes or follows the period during which it is let;

(b) More than one house in the occupation of the owner for the purposes of his own residence,the provisions of clause (a) shall apply only in respect of one of such houses, which the assesseemay, at his option, specify in this behalf;

(c) More than one house and such houses are in the occupation of the owner for the purposes ofhis own residence, the annual value of the house or houses, other than the house in respect ofwhich the assessee has exercised an option under clause (b), shall be determined under sub-section (1) as if such house or houses had been let.

Explanation :- Where any such residential unit as is referred to in the second proviso to sub-section (1) is in the occupation of the owner for the purposes of his own residence, nothingcontained in that proviso shall apply in computing the annual value of that residential unit.

(3) Where the property referred to in sub-section (2) consists of one residential house only and itcannot actually be occupied by the owner by reason of the fact that owing to his employment,business or profession carried on at any other place, he has to reside at that other place in abuilding not belonging to him, the annual value of such house shall be taken to be nil :

Provided that the following conditions are fulfilled, namely :-

(i) Such house is not actually let, and

(ii) No other benefit therefrom is derived by the owner.

34. Deductions from Income from house property.

§ 34. Deductions from Income from house property.

Section 24


DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY.

(1) Income chargeable under the head "Income from house property" shall, subject to theprovisions of sub-section (2), be computed after making the following deductions, namely :-

(i) In respect of repairs of, and collection of rent from, the property, a sum equal to one-fourth ofthe annual value;

(ii) The amount of any premium paid to insure the property against risk of damage ordestruction;

(iv) Where the property is subject to an annual charge, (not being a charge created by theassessee voluntarily or a capital charge), the amount of such charge;

(v) Where the property is subject to a ground rent, the amount of such ground rent;

(vi) Where the property has been acquired, constructed, repaired, renewed or reconstructed withborrowed capital, the amount of any interest payable on such capital;

Explanation : Where the property has been acquired or constructed with borrowed capital, theinterest, if any, payable on such capital for the period prior to the previous year in which theproperty has been acquired or constructed, as reduced by any part thereof allowed as a deductionunder any other provision of this Act, shall be deducted under this clause in equal instalments forthe said previous year and for each of the four immediately succeeding previous years;

(vii) Any sums paid on account of land revenue or any other tax levied by the State Government in respect of the property;

(ix) Where the property is let and was vacant during a part of the year, that part of the annualvalue which is proportionate to the period during which the property is wholly unoccupied or,where the property is let out in parts, that portion of the annual value appropriate to any vacantpart, which is proportionate to the period during which such part is wholly unoccupied.

Explanation : The deduction under this clause shall be made irrespective of whether the periodduring which the property or, as the case may be, part of the property was vacant precedes orfollows the period during which it is let;

(x) Subject to such rules 421 as may be made in this behalf, the amount in respect of rent fromproperty let to a tenant which the assessee cannot realise.

(2) No deduction shall be allowed under sub-section (1) In respect of property of the naturereferred to in sub-clause (i) of clause (a) of sub-section (2), or sub-section (3) of section 23 :

Provided that nothing in this sub-section shall apply to the allowance of a deduction under clause


(vi) of sub-section (1) of an amount not exceeding thirty thousand rupees in respect of theproperty of the nature referred to in sub-clause (i) of clause (a) of sub-section (2) of section 23 orsub-section (3) of section 23.

Provided further that where the property is acquired or constructed with capital borrowed on orafter the 1st day of April, 1999 and such acquisition or construction is completed before the 1stday of April, 2001, the provisions of the first proviso shall have effect as if for the words "thirtythousand rupees", the words "seventy-five thousand rupees" had been substituted.

(3) The total amount deductible under sub-section (1) in respect of property of the nature referredto in sub-clause (ii) of clause (a) of sub-section (2) of section 23 shall not exceed the annualvalue of the property as determined under that section.

35. Amounts not deductible from income from houseproperty.

§35.Amounts not deductible from income from house property.Section 25

AMOUNTS NOT DEDUCTIBLE FROM INCOME FROM HOUSE PROPERTY.

Notwithstanding anything contained in section 24, any annual charge orinterest chargeable under this Act which is payable outside India (not beinginterest on a loan issued for public subscription before the 1st day of April,1938), on which tax has not been paid or deducted under Chapter XVII-B and inrespect of which there is no person in India who may be treated as an agentunder section 163 shall not be deducted in computing the income chargeableunder the head "Income from house property".

36. Special provision for cases where unrealisedrent allowed as deduction is realised subsequently.

§36.Special provision for cases where unrealised rent allowed as deduction isrealised subsequently.

Section 25A

SPECIAL PROVISION FOR CASES WHERE UNREALISED RENT ALLOWED AS DEDUCTION IS


REALISED SUBSEQUENTLY.

Where a deduction has been made under clause (x) of sub-section (1) of section24 in the assessment for any year in respect of rent from property let to atenant which the assessee cannot realise and subsequently during any previousyear the assessee has realised any amount in respect of such rent, the amountso realised shall be deemed to be income chargeable under the head "Incomefrom house property" and accordingly charged to income-tax (without making anydeduction under section 23 or section 24) as the income of that previous year,whether the assessee is the owner of that property in that year or not.

37. Property owned by Co-owners.

§37.Property owned by Co-owners.

Section 26

PROPERTY OWNED BY CO-OWNERS.

Where property consisting of building or buildings and lands appurtenantthereto is owned by two or more persons and their respective shares aredefinite and ascertainable, such persons shall not in respect of such propertybe assessed as an association of persons but the share of each such person inthe income from the property as computed in accordance with sections 22 to 25shall be included in his total income.

Explanation : For the purposes of this section, in applying the provisions ofsub-section (2) of section 23 for computing the share of each such person asis referred to in this section, such share shall be computed as if each suchperson is individually entitled to the relief provided in that sub-section.

38. Owner of house property, Annual Charge, etc.,Defined.

§38.Owner of house property, Annual Charge, etc., Defined.

Section 27

"OWNER OF HOUSE PROPERTY", "ANNUAL CHARGE", ETC., DEFINED.


For the purposes of sections 22 to 26 - (i) An individual who transfersotherwise than for adequate consideration any house property to his or herspouse, not being a transfer in connection with an agreement to live apart, orto a minor child not being a married daughter, shall be deemed to be theowner of the house property so transferred;

(ii) The holder of an impartible estate shall be deemed to be the individualowner of all the properties comprised in the estate;

(iii) A member of a co-operative society, company or other association ofpersons to whom a building or part thereof is allotted or leased under a housebuilding scheme of the society, company or association, as the case may be,shall be deemed to be the owner of that building or part thereof;

(iiia) A person who is allowed to take or retain possession of any building orpart thereof in part performance of a contract of the nature referred to insection 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemedto be the owner of that building or part thereof;

(iiib) A person who acquires any rights (excluding any rights by way of alease from month to month or for a period not exceeding one year) in or withrespect to any building or part thereof by virtue of any such transaction asis referred to in clause (f) of section 269UA, shall be deemed to be the ownerof that building or part thereof; 426 ]

(iv) "Annual charge" means a charge to secure an annual liability, but doesnot include any tax in respect of property or income from property imposed bya local authority, or the Central or a State Government;

(v) "Capital charge" means a charge to secure the discharge of a liability ofa capital nature;

(vi) Taxes levied by a local authority in respect of any property shall bedeemed to include service taxes levied by the local authority in respect ofthe property.

39. Profits and Gains of business or profession.

§39.Profits and Gains of business or profession.

Section 28

PROFITS AND GAINS OF BUSINESS OR PROFESSION.


The following income shall be chargeable to income-tax under the head "Profitsand gains of business or profession", - (i) The profits and gains of anybusiness or profession which was carried on by the assessee at any time duringthe previous year;

(ii) Any compensation or other payment due to or received by, - (a) Anyperson, by whatever name called, managing the whole or substantially the wholeof the affairs of an Indian company, at or in connection with the terminationof his management or the modification of the terms and conditions relatingthereto;

(b) Any person, by whatever name called, managing the whole or substantiallythe whole of the affairs in India of any other company, at or in connectionwith the termination of his office or the modification of the terms andconditions relating thereto;

(c) Any person, by whatever name called, holding an agency in India for anypart of the activities relating to the business of any other person, at or inconnection with the termination of the agency or the modification of the termsand conditions relating thereto;

(d) Any person, for or in connection with the vesting in the Government, or inany corporation owned or controlled by the Government, under any law for thetime being in force, of the management of any property or business;

(iii) Income derived by a trade, professional or similar association fromspecific services performed for its members;

(iiia) Profits on sale of a licence granted under the Imports (Control) Order,1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947);

(iiib) Cash assistance (by whatever name called) received or receivable by anyperson against exports under any scheme of the Government of India;

(iiic) Any duty of customs or excise re-paid or re-payable as drawback to anyperson against exports under the Customs and Central Excise Duties DrawbackRules, 1971;

(iv) The value of any benefit or perquisite, whether convertible into money ornot, arising from business or the exercise of a profession;

(v) Any interest, salary, bonus, commission or remuneration, by whatever namecalled, due to, or received by, a partner of a firm from such firm :


Provided that where any interest, salary, bonus, commission or remuneration,by whatever name called, or any part thereof has not been allowed to bededucted under clause

(b) Of section 40, the income under this clause shall be adjusted to theextent of the amount not so allowed to be deducted;

(vi) Any sum received under a Keyman insurance policy including the sumallocated by way of bonus on such policy.

Explanation : For the purposes of this clause, the expression "Keymaninsurance policy" shall have the meaning assigned to it in clause (10D) ofsection 10.

Explanation 1 : Where speculative transactions carried on by an assessee areof such a nature as to constitute a business, the business (hereinafterreferred to as "speculation business") shall be deemed to be distinct andseparate from any other business.

40. Income from profits and gains of business orprofession, how computed.

§40.Income from profits and gains of business or profession, how computed.

Section 29

INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION, HOW COMPUTED.

The income referred to in section 28 shall be computed in accordance with theprovisions contained in sections 30 to 43D.

41. Rent, Rates, Taxes, Repairs and Insurance forBuildings.

§41.Rent, Rates, Taxes, Repairs and Insurance for Buildings.

Section 30

RENT, RATES, TAXES, REPAIRS AND INSURANCE FOR BUILDINGS.


In respect of rent, rates, taxes, repairs and insurance for premises, used forthe purposes of the business or profession, the following deductions shall beallowed - (a) Where the premises are occupied by the assessee -

(i) As a tenant, the rent paid for such premises; and further if he hasundertaken to bear the cost of repairs to the premises, the amount paid onaccount of such repairs;

(ii) Otherwise than as a tenant, the amount paid by him on account of currentrepairs to the premises;

(b) Any sums paid on account of land revenue, local rates or municipal taxes;

(c) The amount of any premium paid in respect of insurance against risk ofdamage or destruction of the premises.

42. Repairs and Insurance of Machinery, Plant andFurniture.

§42.Repairs and Insurance of Machinery, Plant and Furniture.

Section 31

REPAIRS AND INSURANCE OF MACHINERY, PLANT AND FURNITURE.

In respect of repairs and insurance of machinery, plant or furniture used forthe purposes of the business or profession, the following deductions shall beallowed -

(i) The amount paid on account of current repairs thereto;

(ii) The amount of any premium paid in respect of insurance against risk ofdamage or destruction thereof.

43. Depreciation.

§43.Depreciation.Section 32

DEPRECIATION.


(1) In respect of depreciation of - (i) Buildings, machinery, plant orfurniture, being tangible assets;

(ii) Know-how, patents, copyrights, trade marks, licences, franchises or anyother business or commercial rights of similar nature, being intangible assetsacquired on or after the 1st day of April, 1998, owned, wholly or partly, bythe assessee and used for the purposes of the business or profession, thefollowing deductions shall be allowed - (i) In the case of assets of anundertaking engaged in generation or generation and distribution of power,such percentage on the actual cost thereof to the assessee as may beprescribed;

(ii) In the case of any block of assets, such percentage on the written downvalue thereof as may be prescribed 440 439 ]:

Provided that no deduction shall be allowed under this clause in respect of -(a) Any motor car manufactured outside India, where such motor car is acquiredby the assessee after the 28th day of February, 1975, unless it is used - (i)In a business of running it on hire for tourists; or

(ii) Outside India in his business or profession in another country; and

(b) Any machinery or plant if the actual cost thereof is allowed as adeduction in one or more years under an agreement entered into by the CentralGovernment under section 42 : 443 ]

Provided further that where an asset referred to in clause (i) or clause (ii),as the case may be, is acquired by the assessee during the previous year andis put to use for the purposes of business or profession for a period of lessthan one hundred and eighty days in that previous year, the deduction underthis sub-section in respect of such asset shall be restricted to fifty percent of the amount calculated at the percentage prescribed for an asset underclause (i) or clause (ii), as the case may be :

Provided also that where an asset being commercial vehicle is acquired by theassessee on or after the 1st day of October, 1998 but before the 1st day ofApril, 1999 and is put to use before the 1st day of April, 1999 for thepurposes of business or profession, the deduction in respect of such assesshall be allowed on such percentage on the written down value thereof as maybe prescribed.

Explanation : For the purposes of this proviso, - (a) The expression"commercial vehicle" means "heavy goods vehicle", "heavy passenger motorvehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger


motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and"road-roller";

(b) The expression "heavy goods vehicle", "heavy passenger motor vehicle","light motor vehicle", "medium goods vehicle", "medium passenger motorvehicle", "maxi-cab", "motor-cab", "tractor" and "road roller" shall have themeanings respectively as assigned to them in section 2 of the (59 of 1988).

Provided also that, in respect of the previous year relevant to the assessmentyear commencing on the 1st day of April, 1991 the deduction in relation to anyblock of assets under this clause shall, in the case of a company, berestricted to seventy-five per cent of the amount calculated at thepercentage, on the written down value of such assets, prescribed under thisAct immediately before the commencement of the Taxation Laws (Amendment) Act,1991.

Provided also that the aggregate deduction, in respect of depreciation ofbuildings, machinery, plant or furniture, being tangible assets or know-how,patents, copyrights, trademarks, licences, franchises or any other business orcommercial rights of similar nature, being intangible assets allowable to thepredecessor and the successor in the case of succession referred to in clause(xiii) and clause (xiv) of section 47 or section 170 or to the amalgamatingcompany and the amalgamated company in the case of amalgamation, as the casemay be, shall not exceed in any previous year the deduction calculated at theprescribed rates as if the succession had not taken place, and such deductionshall be apportioned between the predecessor and the successor, or theamalgamating company and the amalgamated company, as the case may be, in theratio of the number of days for which the assets were used by them.

Explanation 1 : Where the business or profession of the assessee is carried onin a building not owned by him but in respect of which the assessee holds alease or other right of occupancy and any capital expenditure is incurred bythe assessee for the purposes of the business or profession on theconstruction of any structure or doing of any work in or in relation to, andby way of renovation or extension of, or improvement to, the building, then,the provisions of this clause shall apply as if the said structure or work isa building owned by the assessee.

Explanation 2 : For the purposes of this clause "written down value of theblock of assets" shall have the same meaning as in clause (c) of sub-section(6) of section 43;

Explanation 3 : For the purposes of this sub-section, the expressions "assets"and "block of assets" shall mean - (a) Tangible assets, being buildings,


machinery, plant or furniture;

(b) Intangible assets, being know-how, patents, copyrights, trade marks,licences, franchises or any other business or commercial rights of similarnature.

Explanation 4 : For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in themanufacture or processing of goods or in the working of a mine, oil-well orother sources of mineral deposits (including searching for discovery ortesting of deposits for the winning of access thereto);

(iii) In the case of any building, machinery, plant or furniture in respect ofwhich depreciation is claimed under clause (i) and which is sold, discarded,demolished or destroyed in the previous year (other than the previous year inwhich it is first brought into use), the amount by which the moneys payable inrespect of such building, machinery, plant or furniture, together with theamount of scrap value, if any, fall short of the written down value thereof :

Provided that such deficiency is actually written off in the books of theassessee.

Explanation : For the purposes of this clause, - (1) "Moneys payable" inrespect of any building, machinery, plant or furniture includes - (a) Anyinsurance, salvage or compensation moneys payable in respect thereof;

(b) Where the building, machinery, plant or furniture is sold, the price forwhich it is sold, so, however, that where the actual cost of a motor car is,in accordance with the proviso to clause (1) of section 43, taken to betwenty-five thousand rupees, the moneys payable in respect of such motor carshall be taken to be a sum which bears to the amount for which the motor caris sold or, as the case may be, the amount of any insurance, salvage orcompensation moneys payable in respect thereof (including the amount of scrapvalue, if any) the same proportion as the amount of twenty-five thousandrupees bears to the actual cost of the motor car to the assessee as it wouldhave been computed before applying the said proviso;

(2) "Sold" includes a transfer by way of exchange or a compulsory acquisitionunder any law for the time being in force but does not include a transfer, ina scheme of amalgamation, of any asset by the amalgamating company to theamalgamated company where the amalgamated company is an Indian company.

(2) Where in the assessment of the assessee full effect cannot be given to anyallowance under clause (ii) of sub-section (1) in any previous year owing tothere being no profits or gains chargeable for that previous year or owing to


the profits or gains being less than the allowance, then, the allowance or thepart of allowance to which effect has not been given (hereinafter referred toas unabsorbed depreciation allowance), as the case may be, - (i) Shall be setoff against the profits and gains, if any, of any business or professioncarried on by him and assessable for that assessment year;

(ii) If the unabsorbed depreciation allowance cannot be wholly set off underclause (i), the amount not so set off shall be set off from the income underany other head, if any, assessable for that assessment year;

(iii) If the unabsorbed depreciation allowance cannot be wholly set off underclause (i) and clause (ii), the amount of allowance not so set off shall becarried forward to the following assessment year and - (a) It shall be set offagainst the profits and gains, if any, of any business or profession carriedon by him and assessable for that assessment year;

(b) If the unabsorbed depreciation allowance cannot be wholly so set off, theamount of unabsorbed depreciation allowance not so set off shall be carriedforward to the following assessment year not being more than eight assessmentyears immediately succeeding the assessment year for which the aforesaidallowance was first computed :

Provided that the business or profession for which the allowance wasoriginally computed continued to be carried on by him in the previous yearrelevant for that assessment year :

Provided further that the time limit of eight assessment years specified insub-clause (b) shall not apply in the case of a company for the assessmentyear beginning with the assessment year relevant to the previous year in whichthe said company has become a sick industrial company under sub-section (1) ofsection 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1of 1986) and ending with the assessment year relevant to the previous year inwhich the entire net worth of such company becomes equal to or exceeds theaccumulated losses.

Explanation : For the purposes of this clause, "net worth" shall have themeaning assigned to it in clause (ga) of sub-section (1) of section 3 of theSick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).

44. Investment Allowance.

§44.Investment Allowance.


Section 32A

INVESTMENT ALLOWANCE.

(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which isowned by the assessee and is wholly used for the purposes of the business carried on by him,there shall, in accordance with and subject to the provisions of this section, be allowed adeduction, in respect of the previous year in which the ship or aircraft was acquired or themachinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use inthe immediately succeeding previous year, then, in respect of that previous year, of a sum by wayof investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft,machinery or plant to the assessee :

Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section(8B), this sub-section shall have effect as if for the words "twenty-five per cent", the words"twenty per cent" had been substituted :

Provided further that no deduction shall be allowed under this section in respect of - (a) Anymachinery or plant installed in any office premises or any residential accommodation, includingany accommodation in the nature of a guest-house;

(b) Any office appliances or road transport vehicles;

(c) Any ship, machinery or plant in respect of which the deduction by way of development rebateis allowable under section 33; and

(d) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction(whether by way of depreciation or otherwise) in computing the income chargeable under thehead "Profits and gains of business or profession" of any one previous year.

Explanation : For the purposes of this sub-section, "actual cost" means the actual cost of the ship,aircraft, machinery or plant to the assessee as reduced by that part of such cost which has beenmet out of the amount released to the assessee under sub-section (6) of section 32AB.

(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following,namely :- (a) A new ship or new aircraft acquired after the 31st day of March, 1976, by anassessee engaged in the business of operation of ships or aircraft;

(b) Any new machinery or plant installed after the 31st day of March, 1976 - (i) For thepurposes of business of generation or distribution of electricity or any other form of power; or

(ii) 454 in a small-scale industrial undertaking for the purposes of business of manufacture orproduction of any article or thing; or


(iii) In any other industrial undertaking for the purposes of business of construction, manufactureor production of any article or thing, not being an article or thing specified in the list in theEleventh Schedule :

Provided that nothing contained in clauses (a) and (b) shall apply in relation to, - (i) A new shipor new aircraft acquired, or

(ii) Any new machinery or plant installed, after the 31st day of March, 1987 but before the 1stday of April, 1988, unless such ship or aircraft is acquired or such machinery or plant is installedin the circumstances specified in clause (a) of sub-section (8B) and the assessee furnishesevidence to the satisfaction of the Assessing Officer as specified in that clause;

(c) Any new machinery or plant installed after the 31st day of March, 1983, but before the 1stday of April, 1987, for the purposes of business of repairs to ocean-going vessels or otherpowered craft if the business is carried on by an Indian company and the business so carried on isfor the time being approved for the purposes of this clause by the Central Government.

Explanation : For the purposes of this sub-section and sub-sections (2B), (2C) and (4), - (1)(a)"new ship" or "new aircraft" includes a ship or aircraft which before the date of acquisition bythe assessee was used by any other person, if it was not at any time previous to the date of suchacquisition owned by any person resident in India;

(b) "New machinery or plant" includes machinery or plant which before its installation by theassessee was used outside India by any other person, if the following conditions are fulfilled,namely :- (i) Such machinery or plant was not, at any time previous to the date of suchinstallation by the assessee, used in India;

(ii) Such machinery or plant is imported into India from any country outside India; and

(iii) No deduction on account of depreciation in respect of such machinery or plant has beenallowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), orthis Act in computing the total income of any person for any period prior to the date of theinstallation of the machinery or plant by the assessee,

(2) An industrial undertaking shall be deemed to be a small-scale industrial undertaking, if theaggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, ason the last day of the previous year, for the purposes of the business of the undertaking does notexceed, -

(i) In a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees;

(ii) In a case where the previous year ends after the 31st day of July, 1980, but before the 18thday of March, 1985, twenty lakh rupees; and

(iii) In a case where the previous year ends after the 17th day of March, 1985, thirty-five lakh


rupees, and for this purpose the value of any machinery or plant shall be, -

(a) In the case of any machinery or plant owned by the assessee, the actual cost thereof to theassessee; and

(b) In the case of any machinery or plant hired by the assessee, the actual cost thereof as in thecase of the owner of such machinery or plant.

(2A) The deduction under sub-section (1) shall not be denied in respect of any machinery orplant installed and used mainly for the purposes of business of construction, manufacture orproduction of any article or thing, not being an article or thing specified in the list in the EleventhSchedule, by reason only that such machinery or plant is also used for the purposes of businessof construction, manufacture or production of any article or thing specified in the said list.

(2B) Where any new machinery or plant is installed after the 30th day of June, 1977 but beforethe 1st day of April, 1987, for the purposes of business of manufacture or production of anyarticle or thing and such article or thing -

(a) Is manufactured or produced by using any technology (including any process) or other know-how developed in, or

(b) Is an article or thing invented in, a laboratory owned or financed by the Government, or alaboratory owned by a public sector company or a University or by an institution recognised inthis behalf by the prescribed authority 463 , the provisions of sub-section (1) shall have effect inrelation to such machinery or plant as if for the words "twenty-five per cent.", the words "thirty-five per cent" had been substituted, if the following conditions are fulfilled, namely :-

(i) The right to use such technology (including any process) or other know-how or tomanufacture or produce such article or thing has been acquired from the owner of suchlaboratory or any person deriving title from such owner;

(ii) The assessee furnishes, along with the return of income for the assessment year for which thededuction is claimed, a certificate from the prescribed authority to the effect that such article orthing is manufactured or produced by using such technology (including any process) or otherknow-how developed in such laboratory or is an article or thing invented in such laboratory; and

(iii) The machinery or plant is not used for the purpose of business of manufacture or productionof any article or thing specified in the list in the Eleventh Schedule.

Explanation : For the purposes of this sub-section, - (a) "Laboratory financed by theGovernment" means a laboratory owned by any body [including a society registered under theSocieties Registration Act, 1860 (21 of 1860)] and financed wholly or mainly by theGovernment;


(c) "University" means a University established or incorporated by or under a Central, State orProvincial Act and includes an institution declared under section 3 of the University GrantsCommission Act, 1956 (3 of 1956), to be a University for the purposes of that Act.

(2C) Where any new machinery or plant, being machinery or plant which would assist in controlof pollution or protection of environment and which has been notified 466 in this behalf by theCentral Government in the Official Gazette, is installed after the 31st day of May, 1983 butbefore the 1st day of April, 1987, in any industrial undertaking referred to in sub-clause (i) orsub-clause (ii) or sub-clause (iii) of clause (b) of sub-section (2), the provisions of sub-section (1)shall have effect in relation to such machinery or plant as if for the words "twenty-five per cent",the words "thirty-five per cent" had been substituted.

(3) Where the total income of the assessee assessable for the assessment year relevant to theprevious year in which the ship or aircraft was acquired or the machinery or plant was installed,or, as the case may be, the immediately succeeding previous year [the total income for thispurpose being computed after deduction of the allowance under section 33 and section 33A, butwithout making any deduction under sub-section (1) of this section or any deduction underChapter VI-A is nil or is less than the full amount of the investment allowance, - (i) The sum tobe allowed by way of investment allowance for that assessment year under sub-section (1) shallbe only such amount as is sufficient to reduce the said total income to nil; and

(ii) The amount of the investment allowance, to the extent to which it has not been allowed asaforesaid, shall be carried forward to the following assessment year, and the investmentallowance to be allowed for the following assessment year shall be such amount as is sufficientto reduce the total income of the assessee assessable for that assessment year, computed in themanner aforesaid, to nil, and the balance of the investment allowance, if any, still outstandingshall be carried forward to the following assessment year and so on, so, however, that no portionof the investment allowance shall be carried forward for more than eight assessment yearsimmediately succeeding the assessment year relevant to the previous year in which the ship oraircraft was acquired or the machinery or plant was installed or, as the case may be, theimmediately succeeding previous year.

Explanation : Where for any assessment year, investment allowance is to be allowed inaccordance with the provisions of this sub-section in respect of any ship or aircraft acquired orany machinery or plant installed in more than one previous year, and the total income of theassessee assessable for that assessment year [the total income for this purpose being computedafter deduction of the allowance under section 33 and section 33A, but without making anydeduction under sub-section (1) of this section or any deduction under Chapter VI-A] is less thanthe aggregate of the amounts due to be allowed in respect of the asset aforesaid for thatassessment year, the following procedure shall be followed, namely :- (a) The allowance underclause (ii) shall be made before any allowance under clause (i) is made; and (b) where anallowance has to be made under clause (ii) in respect of amounts carried forward from more thanone assessment year, the amount carried forward from an earlier assessment year shall beallowed before any amount carried forward from a later assessment year.


(4) The deduction under sub-section (1) shall be allowed only if the following conditions arefulfilled, namely :- (i) The particulars prescribed 468 in this behalf have been furnished by theassessee in respect of the ship or aircraft or machinery or plant;

(ii) An amount equal to seventy-five per cent of the investment allowance to be actually allowedis debited to the profit and loss account of any previous year in respect of which the deduction isto be allowed under sub-section (3) or any earlier previous year [being a previous year not earlierthan the year in which the ship or aircraft was acquired or the machinery or plant was installed orthe ship, aircraft, machinery or plant was first put to use] and credited to a reserve account (to becalled the "Investment Allowance Reserve Account") to be utilised - (a) For the purposes ofacquiring, before the expiry of a period of ten years next following the previous year in whichthe ship or aircraft was acquired or the machinery or plant was installed, a new ship or a newaircraft or new machinery or plant [other than machinery or plant of the nature referred to inclauses (a), (b) and (d) of the second proviso to sub-section (1)] for the purposes of the businessof the undertaking; and

(b) Until the acquisition of a new ship or a new aircraft or new machinery or plant as aforesaid,for the purposes of the business of the undertaking other than for distribution by way ofdividends or profits or for remittance outside India as profits or for the creation of any assetoutside India :

Provided that this clause shall have effect in respect of a ship as if for the word "seventy-five",the word "fifty" had been substituted.

Explanation : Where the amount debited to the profit and loss account and credited to theInvestment Allowance Reserve Account under this sub-section is not less than the amountrequired to be so credited on the basis of the amount of deduction in respect of investmentallowance claimed in the return made by the assessee under section 139, but a higher deductionin respect of the investment allowance is admissible on the basis of the total income as proposedto be computed by the Assessing Officer under section 143, the Assessing Officer shall, bynotice in writing in this behalf, allow the assessee an opportunity to credit within the timespecified in the notice or within such further time as the Assessing Officer may allow, a furtheramount to the Investment Allowance Reserve Account out of the profits and gains of theprevious year in which such notice is served on the assessee or of the immediately precedingprevious year, if the accounts for that year have not been made up; and, if the assessee creditsany further amount to such account within the time aforesaid, the amount so credited shall bedeemed to have been credited to the Investment Allowance Reserve Account of the previous yearin which the deduction is admissible and such amount shall not be taken into account indetermining the adequacy of the reserve required to be credited by the assessee in respect of theprevious year in which such further credit is made :

Provided that such opportunity shall not be allowed by the Assessing Officer in a case where thedifference in the total income as proposed to be computed by him and the total income asreturned by the assessee arises out of the application of the proviso to sub-section (1) of section


145 or sub-section (2) of that section or the omission by the assessee to disclose his income fullyand truly.

(5) Any allowance made under this section in respect of any ship, aircraft, machinery or plantshall be deemed to have been wrongly made for the purposes of this Act - (a) If the ship, aircraft,machinery or plant is sold or otherwise transferred by the assessee to any person at any timebefore the expiry of eight years from the end of the previous year in which it was acquired orinstalled; or

(b) If at any time before the expiry of ten years from the end of the previous year in which theship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilisethe amount credited to the reserve account under sub-section (4) for the purposes of acquiring anew ship or a new aircraft or new machinery or plant [other than machinery or plant of the naturereferred to in clauses (a), (b) and (d) of the second proviso to sub-section (1)] for the purposes ofthe business of the undertaking; or

(c) If at any time before the expiry of the ten years aforesaid, the assessee utilises the amountcredited to the reserve account under sub-section (4) for distribution by way of dividends orprofits or for remittance outside India as profits or for the creation of any asset outside India orfor any other purpose which is not a purpose of the business of the undertaking, and theprovisions of sub-section (4A) of section 155 shall apply accordingly :

Provided that nothing in clause (a) shall apply - (i) Where the ship, aircraft, machinery or plantis sold or otherwise transferred by the assessee to the Government, a local authority, acorporation established by a Central, State or Provincial Act or a Government company asdefined in section 617 of the Companies Act, 1956 or (1 of 1956); or

(ii) Where the sale or transfer of the ship, aircraft, machinery or plant is made in connection withthe amalgamation or succession, referred to in sub-section (6) or sub-section (7).

(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfersto the amalgamated company any ship, aircraft, machinery or plant, in respect of whichinvestment allowance has been allowed to the amalgamating company under sub-section (1), - (a) The amalgamated company shall continue to fulfil the conditions mentioned in sub-section(4) in respect of the reserve created by the amalgamating company and in respect of the periodwithin which such ship, aircraft, machinery or plant shall not be sold or otherwise transferred andin default of any of these conditions, the provisions of sub-section (4A) of section 155 shallapply to the amalgamated company as they would have applied to the amalgamating companyhad it committed the default; and

(b) The balance of investment allowance, if any, still outstanding to the amalgamating companyin respect of such ship, aircraft, machinery or plant, shall be allowed to the amalgamatedcompany in accordance with the provisions of sub-section (3), so, however, that the total periodfor which the balance of investment allowance shall be carried forward in the assessments of theamalgamating company and the amalgamated company shall not exceed the period of eight years


specified in sub-section (3) and the amalgamated company shall be treated as the assessee inrespect of such ship, aircraft, machinery or plant, for the purposes of this section.

(7) Where a firm is succeeded to by a company in the business carried on by it as a result ofwhich the firm sells or otherwise transfers to the company any ship, aircraft, machinery or plant,the provisions of clauses (a) and (b) of sub-section (6) shall, so far as may be, apply to the firmand the company.

Explanation : The provisions of this sub-section shall apply only where - (i) All the property ofthe firm relating to the business immediately before the succession becomes the property of thecompany;

(ii) All the liabilities of the firm relating to the business immediately before the successionbecome the liabilities of the company; and

(iii) All the shareholders of the company were partners of the firm immediately before thesuccession.

(8) The Central Government, if it considers necessary or expedient so to do, may, by notificationin the Official Gazette, direct that the deduction allowable under this section shall not be allowedin respect of any ship or aircraft acquired or any machinery or plant installed after such date asmay be specified 475 therein.

(8A) The Central Government, if it considers necessary or expedient so to do, may, bynotification in the Official Gazette, omit any article or thing from the list of articles or thingsspecified in the Eleventh Schedule.

(8B) Notwithstanding anything contained in sub-section (8) or the notification of theGovernment of India in the Ministry of Finance (Department of Revenue) No. G.S.R. 870(E),dated the 12th June, 1986, issued thereunder, the provisions of this section shall apply in respectof, - (a)(i) A new ship or new aircraft acquired after the 31st day of March, 1987 but before the1st day of April, 1988, if the assessee furnishes evidence to the satisfaction of the AssessingOfficer that he had, before the 12th day of June, 1986, entered into a contract for the purchase ofsuch ship or aircraft with the builder or manufacturer or owner thereof, as the case may be;

(ii) Any new machinery or plant installed after the 31st day of March, 1987 but before the 1stday of April, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officerthat before the 12th day of June, 1986, he had purchased such machinery or plant or had enteredinto a contract for the purchase of such machinery or plant with the manufacturer or owner of, ora dealer in, such machinery or plant, or had, where such machinery or plant has beenmanufactured in an undertaking owned by the assessee, taken steps for the manufacture of suchmachinery or plant :

Provided that nothing contained in sub-section (1) shall entitle the assessee to claim deduction in


respect of a ship or aircraft or machinery or plant referred to in this clause in any previous yearexcept the previous year relevant to the assessment year commencing on the 1st day of April,1989;

(b) A new ship or new aircraft acquired or any new machinery or plant installed after the 31stday of March, 1988, but before such date as the Central Government, if it considers necessary orexpedient so to do, may, by notification in the Official Gazette, specify 477a in this behalf.

(8C) Subject to the provisions of clause (ii) of sub-section (3), where a deduction has beenallowed to an assessee under sub-section (1) in any assessment year, no deduction shall beallowed to the assessee under section 32AB in the said assessment year (hereinafter referred to asthe initial assessment year) and a block of further period of four years beginning with theassessment year immediately succeeding the initial assessment year.

45. Investment deposit account.

§45.Investment deposit account.

Section 32AB

INVESTMENT DEPOSIT ACCOUNT.

(1) Subject to the other provisions of this section, where an assessee, whose total incomeincludes income chargeable to tax under the head "Profits and gains of business or profession",has, out of such income, - (a) Deposited any amount in an account (hereafter in this sectionreferred to as deposit account) maintained by him with the Development Bank before the expiryof six months from the end of the previous year or before furnishing the return of his income,whichever is earlier; or

(b) Utilised any amount during the previous year for the purchase of any new ship, new aircraft,new machinery or plant, without depositing any amount in the deposit account under clause (a), in accordance with, and for the purposes specified in, a scheme 480 (hereafter in this sectionreferred to as the scheme) to be framed by the Central Government, or if the assessee is carryingon the business of growing and manufacturing tea in India, to be approved in this behalf by theTea Board, the assessee shall be allowed a deduction (such deduction being allowed before theloss, if any, brought forward from earlier years is set off under section 72) - (i) A sum equal tothe amount or, the aggregate of the amounts, so deposited and any amount so utilised; or

(ii) a sum equal to twenty per cent of the profits of business or profession as computed in theaccounts of the assessee audited in accordance with sub-section (5), whichever is less :

Provided that where such assessee is a firm, or any association of persons or any body ofindividuals, the deduction under this section shall not be allowed in the computation of the


income of any partner, or as the case may be, any member of such firm, association of persons orbody of individuals :

Provided further that no such deduction shall be allowed in relation to the assessment yearcommencing on the 1st day of April, 1991, or any subsequent assessment year.

(2) For the purposes of this section, - (ii) "New ship" or "new aircraft" includes a ship or aircraftwhich before the date of acquisition by the assessee was used by any other person, if it was not atany time previous to the date of such acquisition owned by any person resident in India;

(iii) "New machinery or plant" includes machinery or plant which before its installation by theassessee was used outside India by any other person, if the following conditions are fulfilled,namely :- (a) Such machinery or plant was not, at any time previous to the date of suchinstallation by the assessee, used in India;

(b) Such machinery or plant is imported into India from any country outside India; and

(c) No deduction on account of depreciation in respect of such machinery or plant has beenallowed or is allowable under this Act in computing the total income of any person for anyperiod prior to the date of the installation of the machinery or plant by the assessee;

(iv) "Tea Board" means the Tea Board established under section 4 of the Tea Act, 1953 (29 of1953).

(3) The profits of business or profession of an assessee for the purposes of sub-section (1) shallbe an amount arrived at after deducting an amount equal to the depreciation computed inaccordance with the provisions of sub-section (1) of section 32 from the amounts of profitscomputed in accordance with the requirements of Parts II and III of the Schedule VI to theCompanies Act, 1956 (1 of 1956), as increased by the aggregate of - (i) The amount ofdepreciation;

(ii) The amount of income-tax paid or payable, and provision therefor;

(iii) The amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of1964);

(iv) The amounts carried to any reserves, by whatever name called;

(v) The amount or amounts set aside to provisions made for meeting liabilities, other thanascertained liabilities;

(vi) The amount by way of provision for losses of subsidiary companies; and

(vii) The amount or amounts of dividends paid or proposed, if any debited to the profit and loss


account; and as reduced by any amount or amounts withdrawn from reserves or provisions, ifsuch amounts are credited to the profit and loss account;

(4) No deduction under sub-section (1) shall be allowed in respect of any amount utilised for thepurchase of - (a) Any machinery or plant to be installed in any office premises or residentialaccommodation, including any accommodation in the nature of a guest-house;

(b) Any office appliances (not being computers);

(c) Any road transport vehicles;

(d) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction(whether by way of depreciation or otherwise) in computing the income chargeable under thehead "Profits and gains of business or profession" of any one previous year;

(e) Any new machinery or plant to be installed in an industrial undertaking, other than a smallscale industrial undertaking, as defined in section 80HHA, for the purposes of business ofconstruction, manufacture or production of any article or thing specified in the list in theEleventh Schedule.

(5) The deduction under sub-section (1) shall not be admissible unless the accounts of thebusiness or profession of the assessee for the previous year relevant to the assessment year forwhich the deduction is claimed have been audited by an accountant as defined in the Explanationbelow sub-section (2) of section 288 and the assessee furnishes, along with his return of income,the report of such audit in the prescribed form 493 duly signed and verified by such accountant :

Provided that in a case where the assessee is required by or under any other law to get hisaccounts audited, it shall be sufficient compliance with the provisions of this sub-section if suchassessee gets the accounts of such business or profession audited under such law and furnishesthe report of the audit as required under such other law and a further report in the formprescribed under this sub-section.

(5A) Any amount standing to the credit of the assessee in the deposit account shall not beallowed to be withdrawn before the expiry of a period of five years from the date of depositexcept for the purposes specified in the scheme or in the circumstances specified below :- (a)Closure of business;

(b) Death of an assessee;

(c) Partition of a Hindu undivided family;

(d) Dissolution of a firm;

(e) Liquidation of a company.


Explanation : For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) inrelation to any withdrawals made from the deposit account either before or after the expiry of aperiod of five years from the date of deposit.

(5AA) Where any amount, standing to the credit of the assessee in the deposit account, iswithdrawn during any previous year by the assessee in the circumstances specified in clause (a)or clause (d) of sub-section (5A), the whole of such amount shall be deemed to be the profits andgains of business or profession of that previous year and shall accordingly be chargeable toincome-tax as the income of that previous year, as if the business had not closed or, as the casemay be, the firm had not been dissolved.

(5B) Where any amount standing to the credit of the assessee in the deposit account is utilised bythe assessee for the purposes of any expenditure in connection with the business or profession inaccordance with the scheme, such expenditure shall not be allowed in computing the incomechargeable under the head "Profits and gains of business or profession".

(6) Where any amount, standing to the credit of the assessee in the deposit account, releasedduring any previous year by the Development Bank for being utilised by the assessee forthepurposes specified in the scheme or at the closure of the account in circumstances other than thecircumstances specified in clauses (b), (c) and (e) of sub-section (5A) is not utilised inaccordance with, and within the time specified in, the scheme 498, either wholly or in part, thewhole of such amount, or as the case may be, part thereof which is not so utilised shall bedeemed to be the profits and gains of business or profession of that previous year and shallaccordingly be chargeable to income-tax as the income of that previous year.

(7) Where any asset acquired in accordance with the scheme is sold or otherwise transferred inany previous year by the assessee to any person at any time before the expiry of eight years fromthe end of the previous year in which it was acquired, such part of the cost of such asset as isrelatable to the deductions allowed under sub-section (1) shall be deemed to be the profits andgains of business or profession of the previous year in which the asset is sold or otherwisetransferred and shall accordingly be chargeable to income-tax as the income of that previous year:

Provided that nothing in this sub-section shall apply - (i) Where the asset is sold or otherwisetransferred by the assessee to Government, a local authority, a corporation established by orunder a Central, State or Provincial Act or a Government company as defined in section 617 ofthe Companies Act, 1956 (1 of 1956); or

(ii) Where the sale or transfer of the asset is made in connection with the succession of a firm bya company in the business or profession carried on by the firm as a result of which the firm sellsor otherwise transfers to the company any asset and the scheme continues to apply to thecompany in the manner applicable to the firm.


Explanation : The provisions of clause (ii) of the proviso shall apply only where - (i) All theproperties of the firm relating to the business or profession immediately before the successionbecome the properties of the company;

(ii) All the liabilities of the firm relating to the business or profession immediately before thesuccession become the liabilities of the company; and


(8) The Central Government may, if it considers it necessary or expedient so to do, bynotification in the Official Gazette, omit any article or thing from the list of articles or thingsspecified in the Eleventh Schedule.

(9) The Central Government may, after making such inquiry as it may think fit, direct, bynotification in the Official Gazette, that the provisions of this section shall not apply to any classof assessees, with effect from such date as it may specify in the notification.

(10) Where a deduction has been allowed to an assessee under this section in any assessmentyear, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in thesaid assessment year (hereinafter referred to as the initial assessment year) and a block of furtherperiod of four years beginning with the assessment year immediately succeeding the initialassessment year.

Explanation : In this section, - (a) "Computers" does not include calculating machines andcalculating devices;

(b) "Development Bank" means - (i) In the case of an assessee carrying on business of growingand manufacturing tea in India, the National Bank for Agriculture and Rural Developmentestablished under section 3 of the National Bank for Agriculture and Rural Development Act,1981 (61 of 1981);

(ii) In the case of other assessees, the Industrial Development Bank of India established under theIndustrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank orinstitution as may be specified in the scheme in this behalf.

46. Development Rebate.

§ 46. Development Rebate.Section 33

DEVELOPMENT REBATE.

(1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road


transport vehicles) which is owned by the assessee and is wholly used for the purposes of thebusiness carried on by him, there shall, in accordance with and subject to the provisions of thissection and of section 34, be allowed a deduction, in respect of the previous year in which theship was acquired or the machinery or plant was installed or, if the ship, machinery or plant isfirst put to use in the immediately succeeding previous year, then, in respect of that previousyear, a sum by way of development rebate as specified in clause (b).

(b) The sum referred to in clause (a) shall be - (A) In the case of a ship, forty per cent of theactual cost thereof to the assessee;

(B) in the case of machinery or plant, - (i) Where the machinery or plant is installed for thepurposes of business of construction, manufacture or production of any one or more of thearticles or things specified in the list in the Fifth Schedule, -

(a) Thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it isinstalled before the 1st day of April, 1970, and

(b) Twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970;

(ii) Where the machinery or plant is installed after the 31st day of March, 1967, by an assesseebeing an Indian company in premises used by it as a hotel and such hotel is for the time beingapproved in this behalf by the Central Government, - (a) Thirty-five per cent of the actual cost ofthe machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and


(iii) Where the machinery or plant is installed after the 31st day of March, 1967, being an assetrepresenting expenditure of a capital nature on scientific research related to the business carriedon by the assessee, - (a) Thirty-five per cent of the actual cost of the machinery or plant to theassessee, where it is installed before the 1st day of April, 1970, and


(iv) In any other case, - (a) Twenty per cent of the actual cost of the machinery or plant to theassessee, where it is installed before the 1st day of April, 1970, and

(b) Fifteen per cent of such cost, where it is installed after the 31st day of March, 1970.

1A)(a) An assessee who, after the 31st day of March, 1964, acquires any ship which before thedate of acquisition by him was used by any other person shall, subject to the provisions ofsection 34, also be allowed as a deduction a sum by way of development rebate at such rate orrates as may be prescribed, provided that the following conditions are fulfilled, namely :- (i)Such ship was not previous to the date of such acquisition owned at any time by any personresident in India;


(ii) Such ship is wholly used for the purposes of the business carried on by the assessee; and

(iii) Such other conditions as may be prescribed 503 .

(b) An assessee who installs any machinery or plant (other than office appliances or roadtransport vehicles) which before such installation by the assessee was used outside India by anyother person shall, subject to the provisions of section 34, also be allowed as a deduction a sumby way of development rebate at such rate or rates as may be prescribed, provided that thefollowing conditions are fulfilled, namely :-

(i) Such machinery or plant was not used in India at any time previous to the date of suchinstallation by the assessee;

(ii) It is imported in India by the assessee from any country outside India;

(iii) No deduction on account of depreciation or development rebate in respect of such machineryor plant has been allowed or is allowable under the provisions of the Indian Income-tax Act,1922 (11 of 1922), or this Act in computing the total income of any person for any period priorto the date of the installation of the machinery or plant by the assessee;

(iv) Such machinery or plant is wholly used for the purposes of the business carried on by theassessee; and

(v) Such other conditions as may be prescribed 503a .

(c) The development rebate under this sub-section shall be allowed as a deduction in respect ofthe previous year in which the ship was acquired or the machinery or plant was installed or, if theship, machinery or plant is first put to use in the immediately succeeding previous year, then, inrespect of that previous year.

(2) In the case of a ship acquired or machinery or plant installed after the 31st day of December,1957, where the total income of the assessee assessable for the assessment year relevant to theprevious year in which the ship was acquired or the machinery or plant installed or theimmediately succeeding previous year, as the case may be (the total income for this purposebeing computed without making any allowance under sub-section (1) or sub-section (1A) of thissection or sub-section (1) of section 33A or any deduction under Chapter VI-A is nil or is lessthan the full amount of the development rebate calculated at the rate applicable thereto undersub-section (1) or sub-section (1A), as the case may be, - (i) The sum to be allowed by way ofdevelopment rebate for that assessment year under sub-section (1) or sub-section (1A) shall beonly such amount as is sufficient to reduce the said total income to nil; and

(ii) The amount of the development rebate, to the extent to which it has not been allowed asaforesaid, shall be carried forward to the following assessment year, and the development rebateto be allowed for the following assessment year shall be such amount as is sufficient to reduce


the total income of the assessee assessable for that assessment year, computed in the manneraforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall becarried forward to the following assessment year and so on, so, however, that no portion of thedevelopment rebate shall be carried forward for more than eight assessment years immediatelysucceeding the assessment year relevant to the previous year in which the ship was acquired orthe machinery or plant installed or the immediately succeeding previous year, as the case maybe.

Explanation - Where for any assessment year development rebate is to be allowed in accordancewith the provisions of sub-section (2) in respect of ships acquired or machinery or plant installedin more than one previous year, and the total income of the assessee assessable for thatassessment year (the total income for this purpose being computed without making anyallowance under sub-section (1) or sub-section (1A) of this section or sub-section (1) of section33A or any deduction under Chapter VI-A is less than the aggregate of the amounts due to beallowed in respect of the assets aforesaid for that assessment year, the following procedure shallbe followed, namely :- (i) The allowance under clause (ii) of sub-section (2) shall be madebefore any allowance under clause (i) of that sub-section is made; and (ii) where an allowancehas to be made under clause (ii) of sub-section (2) in respect of amounts carried forward frommore than one assessment year, the amount carried forward from an earlier assessment year shallbe allowed before any amount carried forward from a later assessment year.

(3) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfersto the amalgamated company any ship, machinery or plant in respect of which developmentrebate has been allowed to the amalgamating company under sub-section (1) or sub-section (1A),- (a) The amalgamated company shall continue to fulfil the conditions mentioned in sub-section(3) of section 34 in respect of the reserve created by the amalgamating company and in respect ofthe period within which such ship, machinery or plant shall not be sold or otherwise transferredand in default of any of these conditions, the provisions of sub-section (5) of section 155 shallapply to the amalgamated company as they would have applied to the amalgamating companyhad it committed the default; and

(b) The balance of development rebate, if any, still outstanding to the amalgamating company inrespect of such ship, machinery or plant shall be allowed to the amalgamated company inaccordance with the provisions of sub-section (2), so, however, that the total period for which thebalance of development rebate shall be carried forward in the assessments of the amalgamatingcompany and the amalgamated company shall not exceed the period of eight years specified insub-section (2) and the amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for the purposes of this section and section 34.

(4) Where a firm is succeeded to by a company in the business carried on by it as a result ofwhich the firm sells or otherwise transfers to the company any ship, machinery or plant, theprovisions of clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm andthe company.

Explanation - The provisions of this clause shall apply only where - (i) All the property of the


firm relating to the business immediately before the succession becomes the property of thecompany;

(ii) All the liabilities of the firm relating to the business immediately before the successionbecome the liabilities of the company; and


(5) The Central Government, if it considers in necessary or expedient so to do, may, bynotification in the Official Gazette, direct that the deduction allowable under this section shallnot be allowed in respect of a ship acquired or machinery or plant installed after such date, notbeing earlier than three years from the date of such notification 510 , as may be specified therein.

(6) Notwithstanding anything contained in the foregoing provisions of this section, no deductionby way of development rebate shall be allowed in respect of any machinery or plant installedafter the 31st day of March, 1965, in any office premises or any residential accommodation,including any accommodation in the nature of a guest-house :

Provided that the provisions of this sub-section shall not apply in the case of an assessee being anIndian company, in respect of any machinery or plant installed by it in premises used by it as ahotel, where the hotel is for the time being approved in this behalf by the Central Government.

47. Development Allowance.

§47.Development Allowance.

Section 33A

DEVELOPMENT ALLOWANCE.

(1) In respect of planting of tea bushes in any land in India owned by an assessee who carries onbusiness of growing and manufacturing tea in India, a sum by way of development allowanceequivalent to - (i) Where tea bushes have been planted on any land not planted at any time withtea bushes or on any land which had been previously abandoned, fifty per cent of the actual costof planting; and

(ii) Where tea bushes are planted in replacement of tea bushes that have died or have becomepermanently useless on any land already planted, thirty per cent of the actual cost of planting, shall, subject to the provisions of this section, be allowed as a deduction in the manner specifiedhereunder, namely :-


(a) The amount of the development allowance shall, in the first instance, be computed withreference to that portion of the actual cost of planting which is incurred during the previous yearin which the land is prepared for planting or replanting, as the case may be, and in the previousyear next following, and the amount so computed shall be allowed as a deduction in respect ofsuch previous year next following; and

(b) Thereafter, the development allowance shall again be computed with reference to the actualcost of planting, and if the sum so computed exceeds the amount allowed as a deduction underclause (a), the amount of the excess shall be allowed as a deduction in respect of the thirdsucceeding previous year next following the previous year in which the land has been preparedfor planting or replanting, as the case may be :

Provided that no deduction under clause (i) shall be allowed unless the planting has commencedafter the 31st day of March, 1965, and been completed before the 1st day of April, 1990 :

Provided further that no deduction shall be allowed under clause (ii) unless the planting hascommenced after the 31st day of March, 1965, and been completed before the 1st day of April,1970.

(2) Where the total income of the assessee assessable for the assessment year relevant to theprevious year in respect of which the deduction is required to be allowed under sub-section (1)(the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without makingany deduction under sub-section (1) of this section or any deduction under Chapter VIA is nil oris less than the full amount of the development allowance calculated at the rates and in themanner specified in sub-section (1) - (i) The sum to be allowed by way of developmentallowance for that assessment year under sub-section (1) shall be only such amount as issufficient to reduce the said total income to nil; and

(ii) The amount of the development allowance, to the extent to which it has not been allowed asaforesaid, shall be carried forward to the following assessment year, and the developmentallowance to be allowed for the following assessment year shall be such amount as is sufficientto reduce the total income of the assessee assessable for that assessment year, computed in themanner aforesaid, to nil, and the balance of the development allowance, if any, still outstandingshall be carried forward to the following assessment year and so on, so, however, that no portionof the development allowance shall be carried forward for more than eight assessment yearsimmediately succeeding the assessment year in which the deduction was first allowable.

Explanation - Where for any assessment year development allowance is to be allowed inaccordance with the provisions of sub-section (2) in respect of more than one previous year, andthe total income of the assessee assessable for that assessment year (the total income for thispurpose being computed after deduction of the allowance under sub-section (1) or sub-section(1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A is less than the amount of thedevelopment allowance due to be made in respect of that assessment year; the following


procedure shall be followed, namely :- (i) The allowance under clause (ii) of sub-section (2) ofthis section shall be made before any allowance under clause (i) of that sub-section is made; and (ii) where an allowance has to be made under clause (ii) of sub-section (2) of this section inrespect of amounts carried forward from more than one assessment year, the amount carriedforward from an earlier assessment year shall be allowed before any amount carried forwardfrom a later assessment year.

(3) The deduction under sub-section (1) shall be allowed only if the following conditions arefulfilled, namely :- (i) The particulars prescribed 522 in this behalf have been furnished by theassessee;

(ii) An amount equal to seventy-five per cent of the development allowance to be actuallyallowed is debited to the profit and loss account of the relevant previous year and credited to areserve account to be utilised by the assessee during a period of eight years next following for thepurposes of the business of the undertaking, other than - (a) For distribution by way of dividendsor profits; or

(b) For remittance outside India as profits or for the creation of any asset outside India; and

(iii) Such other conditions as may be prescribed 524 .

(4) If any such land is sold or otherwise transferred by the assessee to any person at any timebefore the expiry of eight years from the end of the previous year in which the deduction undersub-section (1) was allowed, any allowance under this section shall be deemed to have beenwrongly made for the purposes of this Act, and the provisions of sub-section (5A) of section 155shall apply accordingly :

Provided that this sub-section shall not apply - (i) Where the land is sold or otherwise transferredby the assessee to the Government, a local authority, a corporation established by a Central, Stateor Provincial Act, or a Government company as defined in section 617 of the Companies Act,1956 (1 of 1956); or (ii) where the sale or transfer of the land is made in connection with theamalgamation or succession referred to in sub-section (5) or sub-section (6).

(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfersto the amalgamated company any land in respect of which development allowance has beenallowed to the amalgamating company under sub-section (1), - (a) The amalgamated companyshall continue to fulfil the conditions mentioned in sub-section (3) in respect of the reservecreated by the amalgamating company and in respect of the period within which such land shallnot be sold or otherwise transferred and in default of any of these conditions, the provisions ofsub-section (5A) of section 155 shall apply to the amalgamated company as they would haveapplied to the amalgamating company had it committed the default; and

(b) The balance of development allowance, if any, still outstanding to the amalgamatingcompany in respect of such land shall be allowed to the amalgamated company in accordance


with the provisions of sub-section (2), so, however, that the total period for which the balance ofdevelopment allowance shall be carried forward in the assessments of the amalgamatingcompany and the amalgamated company shall not exceed the period of eight years specified insub-section (2) and the amalgamated company shall be treated as the assessee in respect of suchland for the purposes of this section.

(6) Where a firm is succeeded to by a company in the business carried on by it as a result ofwhich the firm sells or otherwise transfers to the company any land on which developmentallowance has been allowed, the provisions of clauses (a) and (b) of sub-section (5) shall, so faras may be, apply to the firm and the company.

Explanation : The provisions of this sub-section shall apply if the conditions laid down in theExplanation to sub-section (4) of section 33 are fulfilled.

(7) For the purposes of this section, "actual cost of planting" means the aggregate of - (i) Thecost of preparing the land;

(ii) The cost of seeds, cutting and nurseries;

(iii) The cost of planting and replanting; and

(iv) The cost of upkeep thereof for the previous year in which the land has been prepared and thethree successive previous years next following such previous year, reduced by that portion of thecost, if any, as has been met directly or indirectly by any other person or authority :

Provided that where such cost exceeds - (i) Forty thousand rupees per hectare in respect of landsituate in a hilly area comprised in the district of Darjeeling; or

(ii) Thirty-five thousand rupees per hectare in respect of land situate in a hilly area comprised inan area other than the district of Darjeeling; or

(iii) Thirty thousand rupees per hectare in any other area, then, the excess shall be ignored.

Explanation : For the purposes of this proviso, "district of Darjeeling" means the district ofDarjeeling as on the 28th day of February, 1981, being the date of introduction of the FinanceBill, 1981, in the House of the People.

(8) The Board may, having regard to the elevation and topography, by general or special order,declare any areas to be hilly areas 526a for the purposes of this section and such order shall notbe questioned before any court of law or any other authority.

Explanation : For the purposes of this section, an assessee having a leasehold or other right ofoccupancy in any land shall be deemed to own such land and where the assessee transfers suchright, he shall be deemed to have sold or otherwise transferred such land.


48. Tea Development Account.

§ 48. Tea Development Account.

Section 33AB

TEA DEVELOPMENT ACCOUNT.

(1) Where an assessee carrying on business of growing and manufacturing tea in India has,before the expiry of six months from the end of the previous year or before furnishing the returnof his income, whichever is earlier, - (a) Deposited with the National Bank any amount oramounts in an account (hereinafter in this section referred to as the special account) maintainedby the assessee with that Bank in accordance with, and for the purposes specified in, a scheme(hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board; or

(b) Deposited any amount in an account (hereafter in this section referred to as the Tea DepositAccount) opened by the assessee in accordance with, and for the purposes specified in, a schemeframed by the Tea Board (hereafter in this section referred to as the deposit scheme) with theprevious approval of the Central Government, the assessee shall, subject to the provisions of thissection, be allowed a deduction (such deduction being allowed before the loss, if any, broughtforward from earlier years is set off under section 72) of - (a) A sum equal to the amount or theaggregate of the amounts so deposited; or

(b) A sum equal to twenty per cent of the profits of such business (computed under the head"Profits and gains of business or profession" before making any deduction under this section), whichever is less :

Provided that where such assessee is a firm, or any association of persons or any body ofindividuals, the deduction under this section shall not be allowed in the computation of theincome of any partner, or as the case may be, any member of such firm, association of persons orbody of individuals :

Provided further that where any deduction, in respect of any amount deposited in the specialaccount, or in the Tea Deposit Account has been allowed under this sub-section in any previousyear, no deduction shall be allowed in respect of such amount in any other previous year.

(2) The deduction under sub-section (1) shall not be admissible unless the accounts of suchbusiness of the assessee for the previous year relevant to the assessment year for which thededuction is claimed have been audited by an accountant as defined in the Explanation belowsub-section (2) of section 288 and the assessee furnishes, along with his return of income, thereport of such audit in the prescribed form duly signed and verified by such accountant :


Provided that in a case where the assessee is required by or under any other law to get hisaccounts audited, it shall be sufficient compliance with the provisions of this sub-section if suchassessee gets the accounts of such business audited under such law and furnishes the report of theaudit as required under such other law and a further report in the form prescribed under this sub-section.

(3) Any amount standing to the credit of the assessee in the special account or the Tea DepositAccount shall not be allowed to be withdrawn except for the purposes specified in the scheme or,as the case may be, in the deposit scheme or in the circumstances specified below :- (a) Closureof business;

(b) Death of an assessee;

(c) Partition of a Hindu undivided family;

(d) Dissolution of a firm;

(e) Liquidation of a company.

(4) Notwithstanding anything contained in sub-section (3), no deduction under sub-section (1)shall be allowed in respect of any amount utilised for the purchase of - (a) Any machinery orplant to be installed in any office premises or residential accommodation, including anyaccommodation in the nature of a guest-house;


(c) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction(whether by way of depreciation or otherwise) in computing the income chargeable under thehead "Profits and gains of business or profession" of any one previous year;

(d) Any new machinery or plant to be installed in an industrial undertaking for the purposes ofbusiness of construction, manufacture or production of any article or thing specified in the list inthe Eleventh Schedule.

(5) Where any amount, standing to the credit of the assessee in the special account, or in the TeaDeposit Account, is withdrawn during any previous year by the assessee in the circumstancesspecified in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemedto be the profits and gains of business or profession of that previous year and shall accordinglybe chargeable to income-tax as the income of that previous year, as if the business had not closedor, as the case may be, the firm had not been dissolved.

(6) Where any amount standing to the credit of the assessee in the special account or in the TeaDeposit Account is utilised by the assessee for the purposes of any expenditure in connectionwith such business in accordance with the scheme, or the deposit scheme, such expenditure shallnot be allowed in computing the income chargeable under the head "Profits and gains of business


or profession".

(7) Where any amount, standing to the credit of the assessee in the special account or in the TeaDeposit Account, which is released during any previous year by the National Bank or which iswithdrawn by the assessee from the Tea Deposit Account for being utilised by the assessee forthe purposes of such business in accordance with the scheme or the deposite scheme is not soutilised, either wholly or in part, within that previous year, the whole of such amount or, as thecase may be, part thereof which is not so utilised shall be deemed to be profits and gains ofbusiness and accordingly chargeable to income-tax as the income of that previous year :

Provided that this sub-section shall not apply in a case where such amount is released during anyprevious year at the closure of the account in circumstances specified in clauses (b), (c) and (e)of sub-section (3).

(8) Where any asset acquired in accordance with the scheme or the deposit scheme is sold orotherwise transferred in any previous year by the assessee to any person at any time before theexpiry of eight years from the end of the previous year in which it was acquired, such part of thecost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemedto be the profits and gains of business or profession of the previous year in which the asset is soldor otherwise transferred and shall accordingly be chargeable to income-tax as the income of thatprevious year :


(ii) Where the sale or transfer of the asset is made in connection with the succession of a firm bya company in the business or profession carried on by the firm as a result of which the firm sellsor otherwise transfers to the company any asset and the scheme or the deposite scheme continuesto apply to the company in the manner applicable to the firm.

Explanation : The provisions of clause (ii) of the proviso shall apply only where - (i) All theproperties of the firm relating to the business or profession immediately before the successionbecome the properties of the company;

(ii) All the liabilities of the firm relating to the business or profession immediately before thesuccession become the liabilities of the company; and


(9) The Central Government, if it considers necessary or expedient so to do, may, by notificationin the Official Gazette, direct that the deduction allowable under this section shall not be allowed


after such date as may be specified therein.

Explanation : In this section, - (a) "National Bank" means the National Bank for Agriculture andRural Development established under section 3 of the National Bank for Agriculture and RuralDevelopment Act, 1981 (61 of 1981).

(b) "Tea Board" means the Tea Board established under section 4 of the Tea Act, 1953 (29 of1953).

49. Site Restoration fund.

§49.Site Restoration fund.

Section 33ABA

SITE RESTORATION FUND.

(1) where an assessee is carrying on business consisting of the prospecting for, or extraction orproduction of, petroleum or natural gas or both in India and in relation to which the CentralGovernment has entered into an agreement with such assessee for such business, has before theend of the previous year -

(a) Deposited with the State Bank of India any amount or amounts in an account (hereinafter inthis section referred to as the special account) maintained by the assessee with that Bank inaccordance with, and for the purposes specified in, a scheme (hereafter in this section referred toas the scheme) approved in this behalf by the Government of India in the Ministry of Petroleumand Natural Gas; or

(b) Deposited any amount in an account (hereafter in this section referred to as the SiteRestoration Account) opened by the assessee in accordance with, and for the purposes specifiedin, a scheme framed by the Ministry referred to in clause (a) (hereafter in this section referred toas the deposit scheme), the assessee shall, subject to the provisions of this section, be allowed adeduction (such deduction being allowed before the loss, if any, brought forward from earlieryears is set off under section 72) of - (i) A sum equal to the amount or the aggregate of theamounts so deposited; or

(ii) A sum equal to twenty per cent of the profits of such business (computed under the head"Profit and gains of business or profession" before making any deduction under this section), whichever is less :

Provided that where such assessee is a firm, or any association of persons or any body ofindividuals, the deduction under this section shall not be allowed in the computation of theincome of any partner or, as the case may be, any member of such firm, association of persons or


body of individuals :

Provided further that where any deduction, in respect of any amount deposited in the specialaccount, or in the Site Restoration Account, has been allowed under this sub-section in anyprevious year, no deduction shall be allowed in respect of such amount in any other previousyear :

Provided also that any amount credited in the special account or Site Restoration Account byway of interest shall be demed to be deposit.

(2) The deduction under sub-section (1) shall not be admissible unless the accounts of suchbusiness of the assessee for the previous year relevant to the assessment year for which thededuction is claimed have been audited by an accountant as defined in the Explanation belowsub-section (2) of section 288 and the assessee furnishes, along with his return of income, thereport of such audit in the prescribed form duly signed and verified by such accountant :

Provided that in a case where the assessee is required by or under any other law to get hisaccounts audited, it shall be sufficient compliance with the provisions of this sub-section if suchassessee get the accounts of such business audited under such law and furnishes the report of theaudit as required under such other law and a further report in the form prescribed under the sub-section.

(3) Any amount standing to the credit of the assessee in the special account or the SiteRestoration Account shall not be allowed to be withdrawn except for the purposes specified inthe scheme or, as the case may be, in the deposit scheme.

(4) Notwithstanding anything contained in sub-section (3), not deduction under sub-section (1)shall be allowed in respect of any amount utilised for the purchase of - (a) Any machinery orplant to be installed in any office premises or residential accommodation, including anyaccommodation in the nature of a guest-house;


(c) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction(whether by way of depreciation or otherwise) in computing the income chargeable under thehead "Profits and gains of business or profession" of any one previous year;

(d) Any new machinery or plant to be installed in an industrial undertaking for the purposes ofbusiness of construction, manufacture or production of any article or thing specified in the list inthe Eleventh Schedule.

(5) Where any amount standing to the credit of the assessee in the special account or in the SiteRestoration Account is withdrawn or closure of the account during any previous year by theassessee, the amount so withdrawn from the account, as reduced by the amount, if any, payable


to the Central Government by way of profit or production share as provided in the agreementreferred to in section 42, shall be deemed to be the profits and gains of business or profession ofthat previous year and shall accordingly be chargeable to income-tax as the income of thatprevious year.

Explanation : Where any amount is withdrawn on closure of the account in a previous year inwhich the business carried on by the assessee is not longer in existence, the provisions of thissub-section shall apply as if the business is in existence in that previous year.

(6) Where any amount standing to the credit of the assessee in the special account or in the SiteRestoration Account is utilised by the assessee for the purposes of any expenditure in connectionwith such business in accordance with the scheme or the deposit scheme, such expenditure shallnot be allowed in computing the income chargeable under the head "Profits and gains of businessor profession".

(7) Where any amount, standing to the credit of the assessee in the special account or in the SiteRestoration Account, which is released during any previous year by the State Bank of India orwhich is withdrawn by the assessee from the Site Restoration Account for being utilised by theassessee for the purposes of such business in accordance with the scheme or the deposit schemeis not so utilised, wither wholly or in part, within that previous year, the whole of such amountor, as the case may be, part thereof which is not so utilised shall be deemed to be profits andgains of business and accordingly chargeable to income-tax as the income of that previous year :

(8) Where any asset acquired in accordance with the scheme or the deposit scheme is sold orotherwise transferred in any previous year by the assessee to any person at any time before theexpiry of eight years from the end of the previous year in which it was acquired, such part of thecost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemedto be the profits and gains of business or profession of the previous year in which the asset is soldor otherwise transferred and shall accordingly be chargeable to income-tax as the income of thatprevious year :


(ii) Where the sale or transfer of the asset is made in connection with the succession of a firm bya company in the business or profession carried on by the firm as a result of which the firm sellsor otherwise transfers to the company any asset and the scheme or the deposit scheme continuesto apply to the company in the manner applicable to the firm.

Explanation : The provisions of clause (ii) of the proviso shall apply only where - (i) All theproperties of the firm relating to the business of profession immediately before the successionbecome the properties of the company;


(ii) All the liability of the firm relating to the business or profession immediately before thesuccession become the liabilities of the company; and (iii) all the shareholders of the companywere partners of the firm immediately before the succession.

(9) The Central Government may, if it considers necessary or expedient so to do, by notificationin the Official Gazette, direct that the deduction allowable under this section shall not be allowedafter such date as may be specified therein.

Explanation : For the purposes of this section - (a) "State Bank of India" means the State Bankof India constituted under the State Bank of India Act, 1955 (23 of 1955);

(b) The expression "amount standing to the credit of the assessee in the special account or theSite Restoration Account" includes interest accrued to such accounts.

50. Reserves for Shipping Business.

§ 50. Reserves for Shipping Business.Section 33AC

RESERVES FOR SHIPPING BUSINESS.

(1) In the case of an assessee, being a Government company or a public company formed andregistered in India with the main object of carrying on the business of operation of ships, thereshall, in accordance with and subject to the provisions of this section, be allowed a deduction ofan amount not exceeding fifty per cent of profits derived from the business of operation of ships(computed under the head "Profits and gains of business or profession" and before making anydeduction under this section), as is debited to the profit and loss account of the previous year inrespect of which the deduction is to be allowed and credited to a reserve account, to be utilised inthe manner laid down in sub-section (2) :

Provided that where the aggregate of the amounts carried to such reserve account from time totime exceeds twice the amount of the paid-up share capital (excluding the amounts capitalisedfrom reserves) of the assessee, no allowance under this sub-section shall be made in respect ofsuch excess.

(2) The amount credited to the reserve account under sub-section (1) shall be utilised by theassessee before the expiry of a period of eight years next following the previous year in whichthe amount was credited - (a) For acquiring a new ship for the purposes of the business of theassessee; and

(b) Until the acquisition of a new ship, for the purposes of the business of the assessee other thanfor distribution by way of dividends or profits or for remittance outside India as profits or for thecreation of any asset outside India.


(3) Where any amount credited to the reserve account under sub-section (1), - (a) Has beenutilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (2),the amount so utilised; or

(b) Has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount notso utilised; or

(c) Has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (2), but such ship is sold or otherwise transferred, other than in any scheme of demergerby the assessee to any person at any time before the expiry of eight years from the end of theprevious year in which it was acquired, the amount so utilised in acquiring the ship, shall bedeemed to be the profits, - (i) In a case referred to in clause (a), in the year in which the amountwas so utilised; or

(ii) In a case referred to in clause (b), in the year immediately following the period of eight yearsspecified in sub-section (2); or

(iii) In a case referred to in clause (c), in the year in which the sale or transfer took place, andshall be charged to tax accordingly.

Explanation : For the purposes of this section, - (a) "Public company" shall have the meaningassigned to it in section 3 of the Companies Act, 1956 (1 of 1956);

(aa) "Government company" shall have the meaning assigned to it in section 617 of theCompanies Act, 1956 (1 of 1956);

(b) "New ship" shall have the same meaning as in clause (ii) of sub-section (2) of section 32AB.

51. Rehabilitation Allowance.

§ 51. Rehabilitation Allowance.Section 33B

REHABILITATION ALLOWANCE.

Where the business of any industrial undertaking carried on in India is discontinued in anyprevious year by reason of extensive damage to, or destruction of, any building, machinery, plantor furniture owned by the assessee and used for the purposes of such business as a direct result of- (i) Flood, typhoon, hurricane, cyclone, earth-quake or other convulsion of nature; or

(ii) Riot or civil disturbance; or

(iii) Accidental fire or explosion; or


(iv) Action by an enemy or action taken in combating an enemy (whether with or without adeclaration of war), and, thereafter, at any time before the expiry of three years from the end ofsuch previous year, the business is re-established, reconstructed or revived by the assessee, heshall, in respect of the previous year in which the business is so re-established, reconstructed orrevived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixtyper cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) ofsection 32 in respect of the building, machinery, plant or furniture so damaged or destroyed :

Provided that no deduction under this section shall be allowed in relation to the assessment yearcommencing on the 1st day of April, 1985 or any subsequent assessment year.

Explanation : In this section, "industrial undertaking" means any undertaking which is mainlyengaged in the business of generation or distribution of electricity or any other form of power orin the construction of ships or in the manufacture or processing of goods or in mining.

52. Conditions for depreciation allowance anddevelopment rebate.

§52.Conditions for depreciation allowance and development rebate.Section 34

CONDITIONS FOR DEPRECIATION ALLOWANCE AND DEVELOPMENT REBATE.

(1)(a) The deduction referred to in section 33 shall not be allowed unless anamount equal to seventy-five per cent of the development rebate to be actuallyallowed is debited to the profit and loss account any previous year in respectof which the deduction is to be allowed under sub-section (2) of that sectionor any earlier previous year (being a previous year not earlier than the yearin which the ship was acquired or the machinery or plant was installed or theship, machinery or plant was put to use) and credited to a reserve account tobe utilised by the assessee during a period of eight years next following forthe purposes of the business of the undertaking, other than - (i) Fordistribution by way of dividends or profits; or

(ii) For remittance outside India as profits or for the creation of any assetoutside India :

Provided that this clause shall not apply where the assessee is a company,being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54of 1948), or where the ship has been acquired or the machinery or plant hasbeen installed before the 1st day of January, 1958 :


Provided further that where a ship has been acquired after the 28th day ofFebruary, 1966, this clause shall have effect in respect of such ship as iffor the words "seventy-five", the word "fifty" had been substituted.

(b) If any ship, machinery or plant is sold or otherwise transferred by theassessee to any person at any time before the expiry of eight years from theend of the previous year in which it was acquired or installed, any allowancemade under section 33 or under the corresponding provisions of the IndianIncome-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plantshall be deemed to have been wrongly made for the purposes of this Act, andthe provisions of sub-section (5) of section 155 shall apply accordingly :

Provided that this clause shall not apply - (i) Where the ship has beenacquired or the machinery or plant has been installed before the 1st day ofJanuary, 1958; or

(ii) Where the ship, machinery or plant is sold or otherwise transferred bythe assessee to the Government, a local authority, a corporation establishedby a Central, State or Provincial Act or a Government company as defined insection 617 of the Companies Act, 1956 (1 of 1956); or

(iii) Where the sale or transfer of the ship, machinery or plant is made inconnection with amalgamation or succession, referred to in sub-section (3) orsub-section (4) of section 33.

53. Restriction on unabsorbed depreciation andunabsorbed investment allowance for limited periodin case of certain domestic companies.

§53.Restriction on unabsorbed depreciation and unabsorbed investmentallowance for limited period in case of certain domestic companies.

Section 34A

RESTRICTION ON UNABSORBED DEPRECIATION AND UNABSORBED INVESTMENT ALLOWANCE FORLIMITED PERIOD IN CASE OF CERTAIN DOMESTIC COMPANIES.

(1) In computing the profits and gains of the business of a domestic companyin relation to the previous year relevant to the assessment year commencing onthe 1st day of April, 1992, where effect is to be given to the unabsorbeddepreciation allowance or unabsorbed investment allowance or both in relation


to any previous year relevant to the assessment year commencing on or beforethe 1st day of April, 1991, the deduction shall be restricted to two-third ofsuch allowance or allowances and the balance, - (a) Where it relates todepreciation allowance, be added to the depreciation allowance for theprevious year relevant to the assessment year commencing on the 1st day ofApril, 1993 and be deemed to be part of that allowance or if there is no suchallowance for that previous year, be deemed to be the allowance for thatprevious year and so on for the succeeding previous years;

(b) Where it relates to investment allowance, be carried forward to theassessment year commencing on the 1st day of April, 1993 and the balance ofthe investment allowance, if any, still outstanding shall be carried forwardto the following assessment year and where the period of eight years hasexpired before the portion of such balance is adjusted, the said period shallbe extended beyond eight years till such time the portion of the said balanceis absorbed in the profits and gains of the business of the domestic company.

(2) For the assessment year commencing on the 1st day of April, 1992, theprovisions of sub-section (2) of section 32 and sub-section (3) of section 32Ashall apply to the extent such provisions are not inconsistent with theprovisions of sub-section (1) of this section.

(3) Nothing contained in sub-section (1) shall apply where the amount ofunabsorbed depreciation allowance or of the unabsorbed investment allowance,as the case may be, or the aggregate amount of such allowances in the case ofa domestic company is less than one lakh rupees.

(4) Nothing contained in sections 234B and 234C shall apply to any shortfallin the payment of any tax due on the assessed tax or, as the case may be,returned income where such shortfall is on account of restricting the amountof depreciation allowance or investment allowance under this section and theassessee has paid the amount of shortfall before furnishing the return ofincome under sub-section (1) of section 139.

54. Expenditure on scientific Research.

§54.Expenditure on scientific Research.Section 35A

EXPENDITURE ON ACQUISITION OF PATENT RIGHTS OR COPYRIGHTS.

(1) In respect of any expenditure of a capital nature incurred after the 28thday of February, 1966 but before the 1st day of April, 1998, on the


acquisition of patent rights or copyrights (hereafter, in this section,referred to as rights) used for the purposes of the business, there shall,subject to and in accordance with the provisions of this section, be allowedfor each of the relevant previous years, a deduction equal to the appropriatefraction of the amount of such expenditure.

Explanation : For the purposes of this section, - (i) "Relevant previous year"means the fourteen previous years beginning with the previous year in whichsuch expenditure is incurred or, where such expenditure is incurred before thecommencement of the business, the fourteen previous years beginning with theprevious year in which the business commenced :

Provided that where the rights commenced, that is to say, became effective, inany year prior to the previous year in which expenditure on the acquisitionthereof was incurred by the assessee, this clause shall have effect with thesubstitution for the reference to fourteen years of a reference to fourteenyears less the number of complete years, which, when the rights are acquiredby the assessee, have elapsed since the commencement thereof, and if fourteenyears have elapsed as aforesaid, of a reference to one year;

(ii) "Appropriate fraction" means the fraction the numerator of which is oneand the denominator of which is the number of the relevant previous years.

(2) Where the rights come to an end without being subsequently revived orwhere the whole or any part of the rights is sold and the proceeds of the sale(so far as they consist of capital sums) are not less than the cost ofacquisition thereof remaining unallowed, no deduction under sub-section (1)shall be allowed in respect of the previous year in which the rights come toan end or, as the case may be, the whole or any part of the rights is sold orin respect of any subsequent previous year.

(3) Where the rights either come to an end without being subsequently revivedor are sold in their entirety and the proceeds of the sale (so far as theyconsist of capital sums) are less than the cost of acquisition thereofremaining unallowed, a deduction equal to such cost remaining unallowed or, asthe case may be, such cost remaining unallowed as reduced by the proceeds ofthe sale, shall be allowed in respect of the previous year in which the rightscome to an end, or, as the case may be, are sold.

(4) Where the whole or any part of the rights is sold and the proceeds of thesale (so far as they consist of capital sums) exceed the amount of the cost ofacquisition thereof remaining unallowed, so much of the excess as does notexceed the difference between the cost of acquisition of the rights and theamount of such cost remaining unallowed shall be chargeable to income-tax asincome of the business of the previous year in which the whole or any part of


the rights is sold.

Explanation : Where the whole or any part of the rights is sold in a previousyear in which the business is no longer in existence, the provisions of thissub-section shall apply as if the business is in existence in that previousyear.

(5) Where a part of the rights is sold and sub-section (4) does not apply, theamount of the deduction to be allowed under sub-section (1) shall be arrivedat by - (a) Subtracting the proceeds of the sale (so far as theyconsist ofcapital sums) from the amount of the cost of acquisition of the rightsremaining unallowed; and

(b) Dividing the remainder by the number of relevant previous years which havenot expired at the beginning of the previous year during which the rights aresold.

(6) Where, in a scheme of amalgamation, the amalgamating company sells orotherwise transfers the rights to the amalgamated company (being an Indiancompany), - (i) The provisions of sub-sections (3) and (4) shall not apply inthe case of the amalgamating company, and

(ii) The provisions of this section shall, as far as may be, apply to theamalgamated company as they would have applied to the amalgamating company ifthe latter had not so sold or otherwise transferred the rights.

(7) Where in a scheme of demerger, the demerged company sells or otherwisetransfers the rights to the resulting company (being an Indian company), - (i)The provisions of sub-sections (3) and (4) shall not apply in the case of thedemerged company; and

(ii) The provisions of this section shall, as far as may be, apply to theresulting company as they would have applied to the demerged company, if thelatter had not sold or otherwise transferred the rights.

55. Expenditure on Know-How.

§55.Expenditure on Know-How.

Section 35AB

EXPENDITURE ON KNOW-HOW.


(1) Subject to the provisions of sub-section (2), where the assessee has paidin any previous year relevant to the assessment year commencing on or beforethe 1st day of April, 1998 any lump sum consideration for acquiring any know-how for use for the purposes of his business, one-sixth of the amount so paidshall be deducted in computing the profits and gains of the business for thatprevious year, and the balance amount shall be deducted in equal instalmentsfor each of the five immediately succeeding previous years.

(2) Where the know-how referred to in sub-section (1) is developed in alaboratory, university or institution referred to in sub-section (2B) ofsection 32A, one-third of the said lump sum consideration paid in the previousyear by the assessee shall be deducted in computing the profits and gains ofthe business for that year, and the balance amount shall be deducted in equalinstalments for each of the two immediately succeeding previous years.

(3) Where there is a transfer of an undertaking under a scheme of amalgamationor demerger and the amalgamating or the demerged company is entitled to adeduction under this section, then, the amalgamated company or the resultingcompany, as the case may be, shall be entitled to claim deduction under thissection in respect of such undertaking to the same extent and in respect ofthe residual period as it would have been allowable to the amalgamatingcompany or the demerged company, as the case may be, had such amalgamation ordemerger not taken place.

Explanation : For the purposes of this section, "know-how" means anyindustrial information or technique likely to assist in the manufacture orprocessing of goods or in the working of a mine, oil well or other sources ofmineral deposits (including the searching for, discovery or testing ofdeposits or the winning of access thereto).

56. Expenditure for Obtaining licence to operateTelecommunication Services.

§56.Expenditure for Obtaining licence to operate Telecommunication Services.Section 35ABB

EXPENDITURE FOR OBTAINING LICENCE TO OPERATE TELECOMMUNICATION SERVICES.

(1) In respect of any expenditure, being in the nature of capital expenditure,incurred for acquiring any right to operate telecommunication services eitherbefore the commencement of the business to operate telecommunication servicesor thereafter at any time during any previous year 554e ] and for which


payment has actually been made to obtain a licence, there shall, subject toand in accordance with the provisions of this section, be allowed for each ofthe relevant previous years, a deduction equal to the appropriate fraction ofthe amount of such expenditure.

Explanation : For the purposes of this section, - (i) "Relevant previousyears" means, - (A) In a case where the licence fee is actually paid beforethe commencement of the business to operate telecommunication services, theprevious years beginning with the previous year in which such businesscommenced;

(B) In any other case, the previous years beginning with the previous year inwhich the licence fee is actually paid, and the subsequent previous year oryears during which the licence, for which the fee is paid, shall be in force;

(ii) "Appropriate fraction" means the fraction the numerator of which is oneand the denominator of which is the total number of the relevant previousyears;

(iii) "Payment has actually been made" means the actual payment of expenditureirrespective of the previous year in which the liability for the expenditurewas incurred according to the method of accounting regularly employed by theassessee.

(2) Where the licence is transferred and the proceeds of the transfer (so faras they consist of capital sums) are less than the expenditure incurredremaining unallowed, a deduction equal to such expenditure remainingunallowed, as reduced by the proceeds of the transfer, shall be allowed inrespect of the previous year in which the licence is transferred.

(3) Where the whole or any part of the licence is transferred and the proceedsof the transfer (so far as they consist of capital sums) exceed the amount ofthe expenditure incurred remaining unallowed, so much of the excess as doesnot exceed the difference between the expenditure incurred to obtain thelicence and the amount of such expenditure remaining unallowed shall bechargeable to income-tax as profits and gains of the business in the previousyear in which the licence has been transferred.

Explanation : Where the licence is transferred in a previous year in which thebusiness is no longer in existence, the provisions of this sub-section shallapply as if the business is in existence in that previous year.

(4) Where the whole or any part of the licence is transferred and the proceedsof the transfer (so far as they consist of capital sums) are not less than theamount of expenditure incurred remaining unallowed, no deduction for such


expenditure shall be allowed under sub-section (1) in respect of the previousyear in which the licence is transferred or in respect of any subsequentprevious year or years.

(5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the deduction to be allowed under sub-section (1)for expenditure incurred remaining unallowed shall be arrived at by -

(a) Subtracting the proceeds of transfer (so far as they consist of capitalsums) from the expenditure remaining unallowed; and

(b) Dividing the remainder by the number of relevant previous years which havenot expired at the beginning of the previous year during which the licence istransferred.

(6) Where, in a scheme of amalgamation, the amalgamating company sells orotherwise transfers the licence to the amalgamated company (being an Indiancompany), - (i) The provisions of sub-sections (2), (3) and (4) shall notapply in the case of the amalgamating company; and

(ii) The provisions of this section shall, as far as may be, apply to theamalgamated company as they would have applied to the amalgamating company ifthe latter had not transferred the licence.

(7) Where, in a scheme of demerger, the demerged company sells or otherwisetransfers the licence to the resulting company (being an Indian company), -(i) The provisions of sub-sections (2), (3) and (4) shall not apply in thecase of the demerged company; and

(ii) The provisions of this section shall, as far as may be, apply to theresulting company as they would have applied to the demerged company if thelatter had not transferred the licence."

(8) Where a deduction for any previous year under sub-section (1) is claimedand allowed in respect of any expenditure referred to in that sub-section, nodeduction shall be allowed under sub-section (1) of section 32 for the sameprevious year or any subsequent previous year.

57. Expenditure on Eligible projects or schemes.

§57.Expenditure on Eligible projects or schemes.Section 35AC


EXPENDITURE ON ELIGIBLE PROJECTS OR SCHEMES.

(1) Where an assessee incurs any expenditure by way of payment of any sum to apublic sector company or a local authority or to an association or institutionapproved by the National Committee for carrying out any eligible project orscheme, the assessee shall, subject to the provisions of this section, beallowed a deduction of the amount of such expenditure incurred during theprevious year :

Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid ordirectly on the eligible project or scheme.

(2) The deduction under sub-section (1) shall not be allowed unless theassessee furnishes along with his return of income a certificate 554aa - (a)Where the payment is to a public sector company or a local authority or anassociation or institution referred to in sub-section (1), from such publicsector company or local authority or, as the case may be, association orinstitution;

(b) In any other case, from an accountant, as defined in the Explanation belowsub-section (2) of section 288, in such form, manner and containing suchparticulars (including particulars relating to the progress in the workrelating to the eligible project or scheme during the previous year) as may beprescribed.

(3) Where a deduction under this section is claimed and allowed for anyassessment year in respect of any expenditure referred to in sub-section (1),deduction shall not be allowed in respect of such expenditure under any otherprovision of this Act for the same or any other assessment year.

(4) Where an association or institution is approved by the National Committeeunder sub-section (1), and subsequently that Committee is satisfied that theproject or the scheme is not being carried on in accordance with all or any ofthe conditions subject to which approval was granted, it may, at any time,after giving a reasonable opportunity of showing cause against the proposedwithdrawal to the concerned association or institution, withdraw the approval.

(5) Where any project or scheme has been notified as an eligible project orscheme under clause (b) of the Explanation and subsequently the NationalCommittee is satisfied that the project or the scheme is not being carried outin accordance with all or any of the conditions subject to which such projector scheme was notified, such notification may be withdrawn in the same mannerin which it was issued :


Provided that a reasonable opportunity of showing cause against the proposedwithdrawal shall be given by the National Committee to the concernedassociation, institution, public sector company or the local authority, as thecase may be.

Explanation : For the purposes of this section, - (a) "National Committee"means the Committee constituted by the 554b Central Government, from amongstpersons of eminence in public life, in accordance with the rules made underthis Act;

(b) "Eligible project or scheme" means such project or scheme for promotingthe social and economic welfare of, or the uplift of, the public as theCentral Government may, by notification in the Official Gazette, specify inthis behalf on the recommendations of the National Committee.

58. Omitted.

§58.Omitted.Section 35B

EXPORT MARKETS DEVELOPMENT ALLOWANCE.

OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1989

59. Omitted.

§59.Omitted.

Section 35C

AGRICULTURAL DEVELOPMENT ALLOWANCE.

OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1989.

60. Omitted.

§60.Omitted.Section 35CC

RURAL DEVELOPMENT ALLOWANCE.



61. Expenditure by way of payment to associationsand institutions for carrying out rural developmentprogrammes.

§61.Expenditure by way of payment to associations and institutions forcarrying out rural development programmes.Section 35CCA

EXPENDITURE BY WAY OF PAYMENT TO ASSOCIATIONS AND INSTITUTIONS FOR CARRYINGOUT RURAL DEVELOPMENT PROGRAMMES.

(1) Where an assessee incurs any expenditure by way of payment of any sum -(a) To an association or institution, which has as its object the undertakingof any programme of rural development, to be used for carrying out anyprogramme of rural development approved by the prescribed authority 560 ; or

(b) To an association or institution, which has as its object the training ofpersons for implementing programmes of rural development;

(c) To a rural development fund set up and notified 563 by the CentralGovernment in this behalf;

(d) To the National Urban Poverty Eradication Fund set up and notified by theCentral Government in this behalf, the assessee shall, subject to theprovisions of sub-section (2) be allowed a deduction of the amount of suchexpenditure incurred during the previous year.

(2) The deduction under clause (a) of sub-section (1) shall not be allowed inrespect of expenditure by way of payment of any sum to any association orinstitution referred to in the said clause unless the assessee furnishes acertificate from such association or institution to the effect that - (a) Theprogramme of rural development had been approved by the prescribed authoritybefore the 1st day of March, 1983; and

(b) Where such payment is made after the 28th day of February, 1983, suchprogramme involves work by way of construction of any building or otherstructure (whether for use as a dispensary, school, training or welfarecentre, workshop or for any other purpose) or the laying of any road or theconstruction or boring of a well or tube-well or the installation of any plantor machinery, and such work has commenced before the 1st day of March, 1983.


(2A) The deduction under clause (b) of sub-section (1) shall not be allowed inrespect of expenditure by way of payment of any sum to any association orinstitution unless the assessee furnishes a certificate from such associationor institution to the effect that - (a) The prescribed authority had approvedthe association or institution before the 1st day of March, 1983; and

(b) The training of persons for implementing any programme of ruraldevelopment had been started by the association or institution before the 1stday of March, 1983.

(2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless suchassociation or institution has obtained from the prescribed authorityauthorisation in writing to issue certificates of such nature.

Explanation : For the purposes of this section, "programme of ruraldevelopment" shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC 565a .

(3) Where a deduction under this section is claimed and allowed for anyassessment year in respect of any expenditure referred to in sub-section (1),deduction shall not be allowed in respect of such expenditure under section35C or section 35CC or section 80G or any other provision of this Act for thesame or any other assessment year.

62. Expenditure by way of payment to association andinstitutions for carrying out programmes ofconservation of natural resources.

§62.Expenditure by way of payment to association and institutions forcarrying out programmes of conservation of natural resources.Section 35CCB

EXPENDITURE BY WAY OF PAYMENT TO ASSOCIATIONS AND INSTITUTIONS FOR CARRYINGOUT PROGRAMMES OF CONSERVATION OF NATURAL RESOURCES.

(1) Where an assessee incurs any expenditure by way of payment of any sum -(a) To an association or institution, which has as its object the undertakingof any programme of conservation of natural resources or of afforestation, tobe used for carrying out any programme of conservation of natural resources orafforestation approved by the prescribed authority; or


(b) To such fund for afforestation as may be notified by the CentralGovernment, the assessee shall, subject to the provisions of sub-section (2),be allowed a deduction of the amount of such expenditure incurred during theprevious year.

(2) The deduction under clause (a) of sub-section (1) shall not be allowedwith respect to expenditure by way of payment of any sum to any association orinstitution, unless such association or institution is for the time beingapproved in this behalf by the prescribed authority 568 :

Provided that the prescribed authority shall not grant such approval for morethan three years at a time.

(3) Where a deduction under this section is claimed and allowed for anyassessment year in respect of any expenditure referred to in sub-section (1),deduction shall not be allowed in respect of such expenditure under any otherprovision of this Act for the same or any other assessment year.

63. Amortisation of certain preliminary expenses.

§63.Amortisation of certain preliminary expenses.Section 35D

AMORTISATION OF CERTAIN PRELIMINARY EXPENSES.

(1) Where an assessee, being an Indian company or a person (other than acompany) who is resident in India, incurs, after the 31st day of March, 1970,any expenditure specified in sub-section (2), - (i) Before the commencement ofhis business, or

(ii) After the commencement of his business in connection with the extensionof his industrial undertaking or in connection with his setting up a newindustrial unit, the assessee shall, in accordance with and subject to theprovisions of this section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous yearsbeginning with the previous year in which the business commences or, as thecase may be, the previous year in which the extension of the industrialundertaking is completed or the new industrial unit commences production oroperation.

Provided that where an assessee incurs after the 31st day of March, 1998, anyexpenditure specified in sub-section (2), the provisions of this sub-section


shall have effect as if for the words "an amount equal to one-tenth of suchexpenditure for each of the ten successive previous years", the words "anamount equal to one-fifth of such expenditure for each of the five successiveprevious years" had been substituted.

(2) The expenditure referred to in sub-section (1) shall be the expenditurespecified in any one or more of the following clauses, namely :- (a)Expenditure in connection with - (i) Preparation of feasibility report;

(ii) Preparation of project report;

(iii) Conducting market survey or any other survey necessary for the businessof the assessee;

(iv) Engineering services relating to the business of the assessee :

Provided that the work in connection with the preparation of the feasibilityreport or the project report or the conducting of market survey or of anyother survey or the engineering services referred to in this clause is carriedout by the assessee himself or by a concern which is for the time beingapproved in this behalf by the Board;

(b) Legal charges for drafting any agreement between the assessee and anyother person for any purpose relating to the setting up or conduct of thebusiness of the assessee;

(c) Where the assessee is a company, also expenditure - (i) By way of legalcharges for drafting the Memorandum and Articles of Association of thecompany;

(ii) On printing of the Memorandum and Articles of Association;

(iii) By way of fees for registering the company under the provisions of theCompanies Act, 1956 (1 of 1956);

(iv) In connection with the issue, for public subscription, of shares in ordebentures of the company, being underwriting commission, brokerage andcharges for drafting, typing, printing and advertisement of the prospectus;

(d) Such other items of expenditure (not being expenditure eligible for anyallowance or deduction under any other provision of this Act) as may beprescribed.

(3) Where the aggregate amount of the expenditure referred to in sub-section(2) exceeds an amount calculated at two and one-half per cent - (a) Of the


cost of the project, or

(b) Where the assessee is an Indian company, at the option of the company, ofthe capital employed in the business of the company, the excess shall beignored for the purpose of computing the deduction allowable under sub-section(1).

Provided that where the aggregate amount of expenditure referred to in sub-section (2) is incurred after the 31st day of March, 1998, the provisions ofthis sub-section shall have effect as if for the words "two and one-half percent, the words "five per cent had been substituted.

Explanation : In this sub-section, - (a) "Cost of the project" means - (i) Ina case referred to in clause (i) of sub-section (1), the actual cost of thefixed assets, being land, buildings, leaseholds, plant, machinery, furniture,fittings and railway sidings (including expenditure on development of land andbuildings), which are shown in the books of the assessee as on the last day ofthe previous year in which the business of the assessee commences;

(ii) In a case referred to in clause (ii) of sub-section (1), the actual costof the fixed assets, being land, buildings, leaseholds, plant, machinery,furniture, fittings and railway sidings (including expenditure on developmentof land and buildings), which are shown in the books of the assessee as on thelast day of the previous year in which the extension of the industrialundertaking is completed or, as the case may be, the new industrial unitcommences production or operation, in so far as such fixed assets have beenacquired or developed in connection with the extension of the industrialundertaking or the setting up of the new industrial unit of the assessee;

(b) "Capital employed in the business of the company" means - (i) In a casereferred to in clause (i) of sub-section (1), the aggregate of the issuedshare capital, debentures and long-term borrowings as on the last day of theprevious year in which the business of the company commences;

(ii) In a case referred to in clause (ii) of sub-section (1), the aggregate ofthe issued share capital, debentures and long-term borrowings as on the lastday of the previous year in which the extension of the industrial undertakingis completed, or, as the case may be, the new industrial unit commencesproduction or operation, in so far as such capital, debentures and long-termborrowings have been issued or obtained in connection with the extension ofthe industrial undertaking or setting up of the new industrial unit of thecompany;

(c) "Long-term borrowings" means - (i) Any moneys borrowed by the company from


the Government or the Industrial Finance Corporation of India or theIndustrial Credit and Investment Corporation of India or any other financialinstitution which is for the time being approved by the Central Government forthe purposes of clause (viii) of sub-section (1) of section 36 or any bankinginstitution (not being a financial institution referred to above), or

(ii) Any moneys borrowed or debt incurred by it in a foreign country inrespect of the purchase outside India of capital plant and machinery, wherethe terms under which such moneys are borrowed or the debt is incurred providefor the repayment thereof during a period of not less than seven years.

(4) Where the assessee is a person other than a company or a co-operativesociety, no deduction shall be admissible under sub-section (1) unless theaccounts of the assessee for the year or years in which the expenditurespecified in sub-section (2) is incurred have been audited by an accountant asdefined in the Explanation below sub-section (2) of section 288, and theassessee furnishes, along with his return of income for the first year inwhich the deduction under this section is claimed, the report of such audit inthe prescribed form duly signed and verified by such accountant and settingforth such particulars as may be prescribed 570 .

(5) Where the undertaking of an Indian company which is entitled to thededuction under sub-section (1) is transferred, before the expiry of theperiod of ten years specified in sub-section (1), to another Indian company ina scheme of amalgamation, - (i) No deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year inwhich the amalgamation takes place; and

(ii) The provisions of this section shall, as far as may be, apply to theamalgamated company as they would have applied to the amalgamating company ifthe amalgamation had not taken place.

(5A) Where the undertaking of an Indian company which is entitled to thededuction under sub-section (1) is transferred, before the expiry of theperiod specified in sub-section (1), to another company in a scheme ofdemerger, -

(i) No deduction shall be admissible under sub-section (1) in the case of thedemerged company for the previous year in which the demerger takes place; and

(ii) The provisions of this section shall, as far as may be, apply to theresulting company, as they would have applied to the demerged company, if thedemerger had not taken place.

(6) Where a deduction under this section is claimed and allowed for any


assessment year in respect of any expenditure specified in sub-section (2),the expenditure in respect of which deduction is so allowed shall not qualifyfor deduction under any other provision of this Act for the same or any otherassessment year.

64. Amortisation of expenditure in case ofamalgamation or demerger.

§64.Amortisation of expenditure in case of amalgamation or demerger.Section 35DD

AMORTISATION OF EXPENDITURE IN CASE OF AMALGAMATION OR DEMERGER.

(1) Where an assessee, being an Indian company, incurs any expenditure, on orafter the 1st day of April, 1999, wholly and exclusively for the purposes ofamalgamation or demerger of an undertaking, the assessee shall be allowed adeduction of an amount equal to one-fifth of such expenditure for each of thefive successive previous years beginning with the previous year in which theamalgamation or demerger takes place.

(2) No deduction shall be allowed in respect of the expenditure mentioned insub-section (1) under any other provision of this Act.

65. Deduction for expenditure on prospecting, etc.,for certain minerals.

§65.Deduction for expenditure on prospecting, etc., for certain minerals.Section 35E

DEDUCTION FOR EXPENDITURE ON PROSPECTING, ETC., FOR CERTAIN MINERALS.

(1) Where an assessee, being an Indian company or a person (other than acompany) who is resident in India, is engaged in any operations relating toprospecting for, or extraction or production of, any mineral and incurs, afterthe 31st day of March, 1970, any expenditure specified in sub-section (2), theassessee shall, in accordance with and subject to the provisions of thissection, be allowed for each one of the relevant previous years a deduction ofan amount equal to one-tenth of the amount of such expenditure.

(2) The expenditure referred to in sub-section (1) is that incurred by theassessee after the date specified in that sub-section at any time during the


year of commercial production and any one or more of the four yearsimmediately preceding that year, wholly and exclusively on any operationsrelating to prospecting for any mineral or group of associated mineralsspecified in Part A or Part B, respectively, of the Seventh Schedule or on thedevelopment of a mine or other natural deposit of any such mineral or group ofassociated minerals :

Provided that there shall be excluded from such expenditure any portionthereof which is met directly or indirectly by any other person or authorityand any sale, salvage, compensation or insurance moneys realised by theassessee in respect of any property or rights brought into existence as aresult of the expenditure.

(3) Any expenditure - (i) On the acquisition of the site of the source of anymineral or group of associated minerals referred to in sub-section (2) or ofany rights in or over such site;

(ii) On the acquisition of the deposits of such mineral or group of associatedminerals or of any rights in or over such deposits; or

(iii) Of a capital nature in respect of any building, machinery, plant orfurniture for which allowance by way of depreciation is admissible undersection 32, shall not be deemed to be expenditure incurred by the assessee forany of the purposes specified in sub-section (2).

(4) The deduction to be allowed under sub-section (1) for any relevantprevious year shall be - (a) An amount equal to one-tenth of the expenditurespecified in sub-section (2) (such one-tenth being hereafter in this sub-section referred to as the instalment); or

(b) Such amount as is sufficient to reduce to nil the income (as computedbefore making the deduction under this section) of that previous year arisingfrom the commercial exploitation [whether or not such commercial exploitationis as a result of the operations or development referred to in sub-section(2)] of any mine or other natural deposit of the mineral or any one or more ofthe minerals in a group of associated minerals as aforesaid in respect ofwhich the expenditure was incurred, whichever amount is less :

Provided that the amount of the instalment relating to any relevant previousyear, to the extent to which it remains unallowed, shall be carried forwardand added to the instalment relating to the previous year next following anddeemed to be part of that instalment, and so on, for succeeding previousyears, so, however, that no part of any instalment shall be carried forwardbeyond the tenth previous year as reckoned from the year of commercialproduction.


(5) For the purposes of this section, - (a) "Operation relating toprospecting" means any operation undertaken for the purpose of exploring,locating or proving deposits of any mineral, and includes any such operationwhich proves to be infructuous or abortive;

(b) "Year of commercial production" means the previous year in which as aresult of any operation relating to prospecting, commercial production of anymineral or any one or more of the minerals in a group of associated mineralsspecified in Part A or Part B, respectively, of the Seventh Schedule,commences;

(c) "Relevant previous years" means the ten previous years beginning with theyear of commercial production.

(6) Where the assessee is a person other than a company or a co-operativesociety, no deduction shall be admissible under sub-section (1) unless theaccounts of the assessee for the year or years in which the expenditurespecified in sub-section (2) is incurred have been audited by an accountant asdefined in the Explanation below sub-section (2) of section 288, and theassessee furnishes, along with his return of income for the first year inwhich the deduction under this section is claimed, the report of such audit inthe prescribed form duly signed and verified by such accountant and settingforth such particulars as may be prescribed 571 .

(7) Where the undertaking of an Indian company which is entitled to thededuction under sub-section (1) is transferred, before the expiry of theperiod of ten years specified in sub-section (1), to another Indian company ina scheme of amalgamation - (i) No deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year inwhich the amalgamation takes place; and

(ii) The provisions of this section shall, as far as may be, apply to theamalgamated company as they would have applied to the amalgamating company ifthe amalgamation had not taken place.

(7A) Where the undertaking of an Indian company which is entitled to thededuction under sub-section (1) is transferred, before the expiry of theperiod of ten years specified in sub-section (1), to another Indian company ina scheme of demerger, - (i) No deduction shall be admissible under sub-section(1) in the case of the demerged company for the previous year in which thedemerger takes place; and

(ii) The provisions of this section shall, as far as may be, apply to the


resulting company as they would have applied to the demerged company, if thedemerger had not taken place.

(8) Where a deduction under this section is claimed and allowed for anyassessment year in respect of any expenditure specified in sub-section (2),the expenditure in respect of which is so allowed shall not qualify fordeduction under any other provision of this Act for the same or any otherassessment year.

66. Other Deductions.

§66.Other Deductions.Section 36

OTHER DEDUCTIONS.

(1) The deductions provided for in the following clauses shall be allowed inrespect of the matters dealt with therein, in computing the income referred toin section 28 - (i) The amount of any premium paid in respect of insuranceagainst risk of damage or destruction of stocks or stores used for thepurposes of the business or profession;

(ia) The amount of any premium paid by a federal milk co-operative society toeffect or to keep in force an insurance on the life of the cattle owned by amember of a co-operative society, being a primary society engaged in supplyingmilk raised by its members to such federal milk co-operative society;

(ib) The amount of any premium paid by cheque by the assessee as an employerto effect or to keep in force an insurance on the health of his employeesunder a scheme framed in this behalf by the General Insurance Corporation ofIndia formed under section 9 of the General Insurance Business(Nationalisation) Act, 1972 (57 of 1972), and approved by the CentralGovernment;

(ii) Any sum paid to an employee as bonus or commission for services rendered,where such sum would not have been payable to him as profits or dividend if ithad not been paid as bonus or commission;

(iia) A sum equal to one and one-third times the amount of the expenditureincurred on payment of any salary for any period of employment before the 1stday of March, 1984 to an employee who, as at the end of the previous year, -(a) Is totally blind, or

(b) Is subject to or suffers from a permanent physical disability (other than


blindness) which has the effect of reducing substantially his capacity toengage in a gainful employment or occupation :

Provided that the assessee produces before the Assessing Officer, in respectof the first assessment year for which deduction is claimed in relation toeach such employee under this clause, - (i) In a case referred to in sub-clause (a), a certificate as to his total blindness from a registered medicalpractitioner being an oculist; and

(ii) In a case referred to in sub-clause (b), a certificate as to thepermanent physical disability referred to in the said sub-clause from aregistered medical practitioner :

Provided further that nothing contained in this clause shall apply in the caseof an employee whose income in the previous year chargeable under the head"Salaries" exceeds twenty thousand rupees.

Explanation 1 : In this clause, "salary" includes the pay, allowances, bonusor commission payable monthly or otherwise.

Explanation 2 : For the removal of doubts, it is hereby declared that where adeduction under this clause is allowed for any assessment year in respect ofany expenditure, deduction shall not be allowed in respect of such expenditureunder any other provision of this Act for the same or any other assessmentyear; 575 ]

(iii) The amount of the interest paid in respect of capital borrowed for thepurposes of the business or profession.

Explanation : Recurring subscriptions paid periodically by shareholders orsubscribers in Mutual Benefit Societies which fulfil such conditions as may beprescribed, shall be deemed to be capital borrowed within the meaning of thisclause;

(iv) Any sum paid by the assessee as an employer by way of contributiontowards a recognised provident fund or an approved superannuation fund,subject to such limits as may be prescribed 579 for the purpose of recognisingthe provident fund or approving the superannuation fund, as the case may be;and subject to such conditions 580 as the Board may think fit to specify incases where the contributions are not in the nature of annual contributions offixed amounts or annual contributions fixed on some definite basis byreference to the income chargeable under the head "Salaries" or to thecontributions or to the numbers of members of the fund;


(v) Any sum paid by the assessee as an employer by way of contribution towardsan approved gratuity fund created by him for the exclusive benefit of hisemployees under an irrevocable trust;

(va) Any sum received by the assessee from any of his employees to which theprovisions of sub-clause (x) of clause (24) of section 2 apply, if such sum iscredited by the assessee to the employee"s account in the relevant fund orfunds on or before the due date.

Explanation : For the purposes of this clause, "due date" means the date bywhich the assessee is required as an employer to credit an employee"scontribution to the employee"s account in the relevant fund under any Act,rule, order or notification issued thereunder or under any standing order,award, contract of service or otherwise;

(vi) In respect of animals which have been used for the purposes of thebusiness or profession otherwise than as stock-in-trade and have died orbecome permanently useless for such purposes, the difference between theactual cost to the assessee of the animals and the amount, if any, realised inrespect of the carcasses or animals;

(vii) Subject to the provisions of sub-section (2), the amount of any bad debtor part thereof which is written off as irrecoverable in the accounts of theassessee for the previous year:

Provided that in the case of an assessee to which clause (viia) applies, theamount of the deduction relating to any such debt or part thereof shall belimited to the amount by which such debt or part thereof exceeds the creditbalance in the provision for bad and doubtful debts account made under thatclause;

(viia) In respect of any provision for bad and doubtful debts made by - (a) Ascheduled bank not being a bank incorporated by or under the laws of a countryoutside India or a non-scheduled bank, an amount not exceeding five per centof the total income (computed before making any deduction under this clauseand Chapter VI-A) and an amount not exceeding [ 585c ten per cent of theaggregate average advances made by the rural branches of such bank computed inthe prescribed manner;

Provided that a scheduled bank or a non-scheduled bank referred to in thissub-clause shall, at its option, be allowed in any of the relevant assessmentyears, deduction in respect of any provision made by it for any assetsclassified by the Reserve Bank of India as doubtful assets or loss assets inaccordance with the guidelines issued by it in this behalf, for an amount notexceeding five per cent. of the amount of such assets shown in the books of


account of the bank on the last day of the previous year.

Explanation. - For the purposes of this sub-clause, "relevant assessmentyears" means the five consecutive assessment years commencing on or after the1st day of April, 2000 and ending before the 1st day of April, 2005. 585g

(b) A bank, being a bank incorporated by or under the laws of a countryoutside India, an amount not exceeding five per cent of the total income(computed before making any deduction under this clause and Chapter VI-A);

(c) A public financial institution or a State financial corporation or a Stateindustrial investment corporation, an amount not exceeding five per cent ofthe total income (computed before making any deduction under this clause andChapter VI-A).

Explanation : For the purposes of this clause - (i) "Non-scheduled bank" meansa banking company 585f as defined in clause (c) of section 5 of the BankingRegulation Act, 1949 (10 of 1949) which is not a scheduled bank;

(a) "Rural branch" means a branch of a scheduled bank or a non-scheduled banksituated in a place which has a population of not more than ten thousandaccording to the last preceding census of which the relevant figures have beenpublished before the first day of the previous year;

(ii) "Scheduled bank" means the State Bank of India constituted under theState Bank of India Act, 1955, (23 of 1955) a subsidiary bank as defined inthe State Bank of India (Subsidiary Banks) Act, (38 of 1959) 1959, acorresponding new bank constituted under section 3 of the Banking Companies(Acquisition and Transfer of Undertakings) Act, 1970, (5 of 1970), or undersection 3 of the Banking Companies (Acquisition and Transfer of Undertakings)Act, 1980 (40 of 1980), or any other bank being a bank included in the SecondSchedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does notinclude a co-operative bank;

(iii) "Public financial institution" shall have the meaning assigned to it insection 4A of the Companies Act, 1956 (1 of 1956);

(iv) "State financial corporation" means a financial corporation establishedunder section 3 or section 3A or an institution notified under section 46 ofthe State Financial Corporations Act, 1951 (63 of 1951);

(v) "State industrial investment corporation" means a Government companywithin the meaning of section 617 of the Companies Act, 1956 (1 of 1956)engaged in the business of providing long-term finance for industrial projects


and approved by the Central Government under clause (viii) of this sub-section;

(viii) In respect of any special reserve created and maintained by a financialcorporation which is engaged in providing long-term finance for industrial oragricultural development or development of infrastructure facility in India orby a public company formed and registered in India with the main object ofcarrying on the business of providing long-term finance for construction orpurchase of houses in India for residential purposes, an amount not exceedingforty per cent of the profits derived from such business of providing long-term finance (computed under the head "Profits and gains of business orprofession" before making any deduction under this clause 590a ]) carried tosuch reserve account :

Provided that the corporation or as the case may be the company is for thetime being approved by the Central Government for the purposes of clause :

Provided further that where the aggregate of the amounts carried to suchreserve account from time to time exceeds twice the amount of the paid upshare capital and general reserves of the corporation or, as the case may be,the company, no allowance under this clause shall be made in respect of suchexcess;

Explanation : In this clause, - (a) "Financial corporation" shall include apublic company and a Government company;

(b) "Public company" 595 shall have the meaning assigned to it in section 3 ofthe Companies Act, 1956 (1 of 1956);

(c) "Government company" shall have the meaning assigned to it in section 617of the Companies Act, 1956 (1 of 1956).

(d) "Infrastructure facility" shall have the meaning assigned to it in clause(23G) of section 10;

(e) "Long-term finance" means any loan or advance where the terms under whichmoneys are loaned or advanced provide for repayment along with interestthereof during a period of not less than five years;

(ix) Any expenditure bona fide incurred by a company for the purpose ofpromoting family planning amongst its employees :

Provided that where such expenditure or any part thereof is of a capitalnature, one-fifth of such expenditure shall be deducted for the previous yearin which it was incurred; and the balance thereof shall be deducted in equal


instalments for each of the four immediately succeeding previous years :

Provided further that the provisions of sub-section (2) of section 32 or sub-section (2) of section 72 shall apply in relation to deductions allowableunder this clause as they apply in relation to deductions allowable in respectof depreciation :

Provided further that the provisions of clauses (ii), (iii), (iv) and (v) ofsub-section (2) and sub-section (5) of section 35, of sub-section (3) ofsection 41 and of Explanation 1 to clause (1) of section 43 shall, so far asmay be, apply in relation to an asset representing expenditure of a capitalnature for the purposes of promoting family planning as they apply in relationto an asset representing expenditure of a capital nature on scientificresearch;

(x) Any sum paid by a public financial institution by way of contributiontowards any fund specified under clause (23E) of section 10.

Explanation : For the purposes of this clause, "public financial institution"shall have the meaning assigned to it in section 4A of the Companies Act, 1956(1 of 1956).

(xi) Any expenditure incurred by the assessee, on or after the 1st day ofApril, 1999 but before the 1st day of April, 2000, wholly and exclusively inrespect of a non-Y2K compliant computer system, owned by the assessee and usedfor the purposes of his business or profession, so as to make such computersystem Y2K compliant computer system :

Provided that no such deduction shall be allowed in respect of suchexpenditure under any other provisions of this Act :

Provided further that no such deduction shall be admissible unless theassessee furnishes in the prescribed form, along with the return of income,the report of an accountant, as defined in the Explanation below sub-section(2) of section 288, certifying that the deduction has been correctly claimedin accordance with the provisions of this clause.

Explanation. - For the purposes of this clause, - (a) "Computer system" meansa device or collection of devices including input and output support devicesand excluding calculators which are not programmable and capable of being usedin conjunction with external files, or more of which contain computerprogrammes, electronic instructions, input data and output data, that performsfunctions including, but not limited to, logic, arithmetic, data storage andretrieval, communication and control;


(b) "Y2K compliant computer system" means a computer system capable ofcorrectly processing, providing or receiving data relating to date within andbetween the twentieth and twenty-first century.

(2) In making any deduction for a bad debt or part thereof, the followingprovisions shall apply - (i) No such deduction shall be allowed unless suchdebt or part thereof has been taken into account in computing the income ofthe assessee of the previous year in which the amount of such debt or partthereof is written off or of an earlier previous year, or represents moneylent in the ordinary course of the business of banking or money-lending whichis carried on by the assessee;

(ii) If the amount ultimately recovered on any such debt or part of debt isless than the difference between the debt or part and the amount so deducted,the deficiency shall be deductible in the previous year in which the ultimaterecovery is made;

(iii) Any such debt or part of debt may be deducted if it has already beenwritten off as irrecoverable in the accounts of an earlier previous year(being a previous year relevant to the assessment year commencing on the 1stday of April, 1988, or any earlier assessment year), but the Assessing Officerhad not allowed it to be deducted on the ground that it had not beenestablished to have become a bad debt in that year;

(iv) Where any such debt or part of debt is written off as irrecoverable inthe accounts of the previous year (being a previous year relevant to theassessment year commencing on the 1st day of April, 1988, or any earlierassessment year) and the Assessing Officer is satisfied that such debt or partbecame a bad debt in any earlier previous year not falling beyond a period offour previous years immediately preceding the previous year in which such debtor part is written off, provisions of sub-section (6) of section 155 shallapply;

(v) Where such debt or part of debt relates to advances made by an assessee towhich clause (viia) of sub-section (1) applies, no such deduction shall beallowed unless the assessee has debited the amount of such debt or part ofdebt in that previous year to the provision for bad and doubtful debts accountmade under that clause.

67. General.

§67.General.


Section 37

GENERAL.

(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and notbeing in the nature of capital expenditure or personal expenses of the assessee), laid out orexpended wholly and exclusively for the purposes of the business or profession shall be allowedin computing the income chargeable under the head "Profits and gains of business or profession".

Explanation : For the removal of doubts, it is hereby declared that any expenditure incurred by anassessee for any purpose which is an offence or which is prohibited by law shall not be deemedto have been incurred for the purpose of business or profession and no deduction or allowanceshall be made in respect of such expenditure.

(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made inrespect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract,pamphlet or the like published by a political party.

68. Building, etc., Partly used for business, etc., or notexclusively so used.

§ 68. Building, etc., Partly used for business, etc., or not exclusively so used.

Section 38

BUILDING, ETC., PARTLY USED FOR BUSINESS, ETC., OR NOT EXCLUSIVELY SOUSED.

(1) Where a part of any premises is used as dwelling house by the assessee, - (a) The deductionunder sub-clause (i) of clause (a) of section 30, in the case of rent, shall be such amount as theAssessing Officer may determine having regard to the proportionate annual value of the partused for the purpose of the business or profession, and in the case of any sum paid for repairs,such sum as is proportionate to the part of the premises used for the purpose of the business orprofession;

(b) The deduction under clause (b) of section 30 shall be such sum as the Assessing Officer maydetermine having regard to the part so used.

(2) Where any building, machinery, plant or furniture is not exclusively used for the purposes ofthe business or profession, the deductions under sub-clause (ii) of clause (a) and clause (c) ofsection 30, clauses (i) and (ii) of section 31 and clause (ii) of sub-section (1) of section 32 shall


be restricted to a fair proportionate part thereof which the Assessing Officer may determine,having regard to the user of such building, machinery, plant or furniture for the purposes of thebusiness or profession.

69. Omitted.


MANAGING AGENCY COMMISSION.

631 OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1989.

70. Amounts not Deductible.

§ 70. Amounts not Deductible.Section 40

AMOUNTS NOT DEDUCTIBLE.

Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not bededucted in computing the income chargeable under the head "Profits and gains of business orprofession", - (a) In the case of any assessee - (i) Any interest (not being interest on a loanissued for public subscription before the 1st day of April, 1938), royalty, fees for technicalservices or other sum chargeable under this Act, which is payable outside India, on which tax hasnot been paid or deducted under Chapter XVII-B :

Provided that where in respect of any such sum, tax has been paid or deducted under ChapterXVII-B in any subsequent year, such sum shall be allowed as a deduction in computing theincome of the previous year in which such tax has been paid or deducted.

Explanation : For the purposes of this sub-clause, - (A) "Royalty" shall have the same meaningas in Explanation 2 to clause (vi) of sub-section (1) of section 9;

(B) "Fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii)of sub-section (1) of section 9;

(ii) Any sum paid on account of any rate or tax levied on the profits or gains of any business orprofession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains;

(iia) Any sum paid on account of wealth-tax.


Explanation : For the purposes of this sub-clause, "wealth-tax" means wealth-tax chargeableunder the Wealth-tax Act, 1957 (27 of 1927) , or any tax of a similar character chargeable underany law in force in any country outside India or any tax chargeable under such law withreference to the value of the assets of, or the capital employed in, a business or profession carriedon by the assessee, whether or not the debts of the business or profession are allowed as adeduction in computing the amount with reference to which such tax is charged, but does notinclude any tax chargeable with reference to the value of any particular asset or the business orprofession;

(iii) Any payment which is chargeable under the head "Salaries", if it is payable outside Indiaand if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;

(iv) Any payment to a provident or other fund established for the benefit of employees of theassessee, unless the assessee has made effective arrangements to secure that tax shall be deductedat source from any payment made from the fund which are chargeable to tax under the head"salaries";

(b) In the case of any firm assessable as such, - (i) Any payment of salary, bonus, commission orremuneration, by whatever name called (hereinafter referred to as remuneration) to any partnerwho is not a working partner; or

(ii) Any payment of remuneration to any partner who is a working partner, or of interest to anypartner, which, in either case, is not authorised by, or is not in accordance with, the terms of thepartnership deed; or

(iii) Any payment of remuneration to any partner who is a working partner, or of interest to anypartner, which, in either case, is authorised by, and is in accordance with, the terms of thepartnership deed, but which relates to any period (falling prior to the date of such partnershipdeed) for which such payment was not authorised by, or is not in accordance with, any earlierpartnership deed, so, however, that the period of authorisation for such payment by any earlierpartnership deed does not cover any period prior to the date of such earlier partnership deed; or

(iv) Any payment of interest to any partner which is authorised by, and is in accordance with, theterms of the partnership deed and relates to any period falling after the date of such partnershipdeed in so far as such amount exceeds the amount calculated at the rate of eighteen per centsimple interest per annum; or

(v) Any payment of remuneration to any partner who is a working partner, which is authorisedby, and is in accordance with, the terms of the partnership deed and relates to any period fallingafter the date of such partnership deed in so far as the amount of such payment to all the partnersduring the previous year exceeds the aggregate amount computed as hereunder :- (1) In case ofa firm carrying on a profession referred to in section 44AA or which is notified for the purposeof that section -

(a) On the first Rs. 1,00,000 of the Rs. 50,000 or at the rate book-profit or in case of a loss of 90


per cent of the book-profit, whichever is more;

(b) On the next Rs. 1,00,000 of the at the rate of 60 per cent; book-profit

(c) On the balance of the book-profit at the rate of 40 per cent;

(2) In the case of any other firm - (a) On the first Rs. 75,000 of the Rs. 50,000 or at the rate ofbook-profit or in case of a loss 90 per cent of the book-profit, whichever is more;

(b) On the next Rs. 75,000 of the book-profit at the rate of 60 per cent;

(c) On the balance of the book-profit at the rate of 40 per cent :

Provided that in relation to any payment under this clause to the partner during the previous yearrelevant to the assessment year commencing on the 1st day of April, 1993, the terms of thepartnership deed may, at any time during the said previous year, provide for such payment.

Explanation 1 : Where an individual is a partner in a firm on behalf, or for the benefit, of anyother person (such partner and the other person being hereinafter referred to as "partner in arepresentative capacity" and "person so represented", respectively), - (i) Interest paid by thefirm to such individual otherwise than as partner in a representative capacity, shall not be takeninto account for the purposes of this clause;

(ii) Interest paid by the firm to such individual as partner in a representative capacity and interestpaid by the firm to the person so represented shall be taken into account for the purposes of thisclause.

Explanation 2. : Where an individual is a partner in a firm otherwise than as partner in arepresentative capacity, interest paid by the firm to such individual shall not be taken intoaccount for the purposes of this clause, if such interest is received by him on behalf, or for thebenefit, of any other person.

Explanation 3 : For the purposes of this clause, "book-profit" means the net profit, as shown inthe profit and loss account for the relevant previous year, computed in the manner laid down inChapter IV-D as increased by the aggregate amount of the remuneration paid or payable to allthe partners of the firm if such amount has been deducted while computing the net profit.

Explanation 4 : For the purposes of this clause, "working partner" means an individual who isactively engaged in conducting the affairs of the business or profession of the firm of which he isa partner.

(ba) In the case of an association of persons or body of individuals (other than a company or aco-operative society or a society registered under the Societies Registration Act, 1860 [21 of1860], or under any law corresponding to that Act in force in any part of India), any payment of


interest, salary, bonus, commission or remuneration, by whatever name called, made by suchassociation or body to a member of such association or body.

Explanation 1 : Where interest is paid by an association or body to any member thereof who hasalso paid interest to the association or body, the amount of interest to be disallowed under thisclause shall be limited to the amount by which the payment of interest by the association or bodyto the member exceeds the payment of interest by the member to the association or body.

Explanation 2 : Where an individual is a member of an association or body on behalf, or for thebenefit, of any other person (such member and the other person being hereinafter referred to as"member in a representative capacity" and "person so represented", respectively), - (i) Interestpaid by the association or body to such individual or by such individual to the association orbody otherwise than as member in a representative capacity, shall not be taken into account forthe purposes of this clause;

(ii) Interest paid by the association or body to such individual or by such individual to theassociation or body as member in a representative capacity and interest paid by the association orbody to the person so represented or by the person so represented to the association or body,shall be taken into account for the purposes of this clause.

Explanation 3 : Where an individual is a member of an association or body otherwise than asmember in a representative capacity, interest paid by the association or body to such individualshall not be taken into account for the purposes of this clause, if such interest is received by himon behalf, or for the benefit, of any other person.

71. Expenses or Payments not deductible in certaincircumstances.

§ 71. Expenses or Payments not deductible in certain circumstances.

Section 40A

EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES.

(1) The provisions of this section shall have effect notwithstanding anything to the contrarycontained in any other provision of this Act relating to the computation of income under the head"Profits and gains of business or profession".

(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is tobe made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is ofopinion that such expenditure is excessive or unreasonable having regard to the fair market valueof the goods, services or facilities for which the payment is made or the legitimate needs of the


business or profession of the assessee or the benefit derived by or accruing to him therefrom, somuch of the expenditure as is so considered by him to be excessive or unreasonable shall not beallowed as a deduction;

(b) The persons referred to in clause (a) are the following, namely :- (i) Where the assessee is anany relative of the assessee; individual

(ii) Where the assessee is a any director of the company, company, firm, association partner ofthe firm, or member of of persons or Hindu undivided the association or family, or any familyrelative of such director, partner or member;

(iii) Any individual who has a substantial interest in the business or profession of the assessee, orany relative of such individual;

(iv) A company, firm, association of persons or Hindu undivided family having substantialinterest in the business or profession of the assessee or any director, partner or member of suchcompany, firm, association or family, or any relative of such director, partner or member;

(v) A company, firm, association of persons or Hindu undivided family of which a director,partner or member, as the case may be, has a substantial interest in the business or profession ofthe assessee; or any director, partner or member of such company, firm, association or family orany relative of such director, partner or member;

(vi) Any person who carries on a business or profession, - (A) Where the assessee being anindividual, or any relative of such assessee, has a substantial interest in the business or professionof that person; or

(B) Where the assessee being a company, firm, association of persons or Hindu undividedfamily, or any director of such company, partner of such firm or member of the association orfamily, or any relative of such director, partner, or member, has a substantial interest in thebusiness or profession of that person.

Explanation : For the purposes of this sub-section, a person shall be deemed to have a substantialinterest in a business or profession, if - (a) In a case where the business or profession is carriedon by a company, such person is, at any time during the previous year, the beneficial owner ofshares (not being shares entitled to a fixed rate of dividend whether with or without a right toparticipate in profits) carrying not less than twenty per cent of the voting power; and

(b) In any other case, such person is, at any time during the previous year, beneficially entitled tonot less than twenty per cent of the profits of such business or profession.

(3) Where the assessee incurs any expenditure 645 in respect of which payment is made, aftersuch date (not being later than 31st day of March, 1969), as may be specified in this behalf by theCentral Government by notification in the Official Gazette, in a sum exceeding twenty thousandrupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, twenty


per cent of such expenditure shall not be allowed as a deduction:

Provided that where an allowance has been made in the assessment for any year not being anassessment year commencing prior to the 1st day of April, 1969, in respect of any liabilityincurred by the assessee for any expenditure and subsequently during any previous year theassessee makes any payment in respect thereof in a sum exceeding twenty thousand rupeesotherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowanceoriginally made shall be deemed to have been wrongly made and the Assessing Officer mayrecompute the total income of the assessee for the previous year in which such liability wasincurred and make the necessary amendment, and the provisions of section 154 shall, so far asmay be, apply thereto, the period of four years specified in sub-section (7) of that section beingreckoned from the end of the assessment year next following the previous year in which thepayment was so made :

Provided further that no disallowance under this sub-section shall be made where any payment ina sum exceeding twenty thousand rupees is made otherwise than by a crossed cheque drawn on abank or by a crossed bank draft, in such cases and under such circumstances as may beprescribed, having regard to the nature and extent of banking facilities available, considerationsof business expediency and other relevant factors.

(4) Notwithstanding anything contained in any other law for the time being in force or in anycontract, where any payment in respect of any expenditure has to be made by a crossed chequedrawn on a bank or by a crossed bank draft in order that such expenditure may not be disallowedas a deduction under sub-section (3), then the payment may be made by such cheque or draft;and where the payment is so made or tendered, no person shall be allowed to raise, in any suit orother proceeding, a plea based on the ground that the payment was not made or tendered in cashor in any other manner.

(7)(a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of anyprovision (whether called as such or by any other name) made by the assessee for the payment ofgratuity to his employees on their retirement or on termination of their employment for anyreason.

(b) Nothing in clause (a) shall apply in relation to - (i) Any provision made by the assessee forthe purpose of payment of a sum by way of any contribution towards an approved gratuity fund,or for the purpose of payment of any gratuity, that has become payable during the previous year;

(ii) Any provision made by the assessee for the previous year relevant to any assessment yearcommencing on or after the 1st day of April, 1973, but before the 1st day of April, 1976, to theextent the amount of such provision does not exceed the admissible amount, if the followingconditions are fulfilled, namely:-

(1) The provision is made in accordance with an actuarial valuation of the ascertainable liabilityof the assessee for payment of gratuity to his employees on their retirement or on termination of


their employment for any reason;

(2) The assessee creates an approved gratuity fund for the exclusive benefit of his employeesunder an irrevocable trust, the application for the approval of the fund having been made beforethe 1st day of January, 1976; and

(3) A sum equal to at least fifty per cent. of the admissible amount, or where any amount hasbeen utilised out of such provision for the purpose of payment of any gratuity before the creationof the approved gratuity fund, a sum equal to at least fifty per cent. of the admissible amount asreduced by the amount so utilised is paid by the assessee by way of contribution to the approvedgratuity fund before the 1st day of April, 1976, and the balance of the admissible amount, or, asthe case may be, the balance of the admissible amount as reduced by the amount so utilised, ispaid by the assessee by way of such contribution before the 1st day of April, 1977.

Explanation 1 : For the purpose of sub-clause (ii) of clause (b) of this sub-section, "admissibleamount" means the amount of the provision made by the assessee for the payment of gratuity tohis employees on their retirement or on termination of their employment for any reason, to theextent such amount does not exceed an amount calculated at the rate of eight and one third percent. of the salary [as defined in clause (h) of rule 2 of Part A of the Fourth Schedule] of eachemployee entitled to the payment of such gratuity for each year of his service in respect of whichsuch provision is made.

Explanation 2 : For the removal of doubts, it is hereby declared that where any provision madeby the assessee for the payment of gratuity to his employees on their retirement or on terminationof their employment for any reason has been allowed as a deduction in computing the income ofthe assessee for any assessment year, any sum paid out of such provision by way of contributiontowards an approved gratuity fund or by way of gratuity to any employee shall not be allowed asa deduction in computing the income of the assessee of the previous year in which the sum is sopaid.

(9) No deduction shall be allowed in respect of any sum paid by the assessee as an employertowards the setting up or formation of, or as contribution to, any fund, trust, company,association of persons, body of individuals, society registered under the Societies RegistrationAct, 1860 (21 of 1860) or other institution, for any purpose, except where such sum is so paid,for the purposes and to the extent provided by or under clause (iv) or clause (v) of sub-section (1)of section 36 or, as required by or under any other law for the time being in force.

(10) Notwithstanding anything contained in sub-section (9), where the Assessing Officer issatisfied that the fund, trust, company, association of persons, body of individuals, society orother institution referred to in that sub-section has, before the 1st day of March, 1984, bonafidelaid out or expended any expenditure (not being in the nature of capital expenditure) wholly andexclusively for the welfare of the employees of the assessee referred to in sub-section (9) out ofthe sum referred to in that sub-section, the amount of such expenditure shall, in case nodeduction has been allowed to the assessee in respect of such sum and subject to the otherprovisions of this Act, be deducted in computing the income referred to in section 28 of the


assessee of the previous year in which such expenditure is so laid out or expended, as if suchexpenditure had been laid out or expended by the assessee.

(11) Where the assessee has, before the 1st day of March, 1984, paid any sum to any fund, trust,company, association of persons, body of individuals, society or other institution referred to insub-section (9), then, notwithstanding anything contained in any other law or in any instrument,he shall be entitled - (i) To claim that so much of the amount paid by him as has not been laid outor expended by such fund, trust, company, association of persons, body of individuals, society orother institution (such amount being hereinafter referred to as the unutilised amount) be repaid tohim, and where any claim is so made, the unutilised amount shall be repaid, as soon as may be,to him;

(ii) To claim that any asset, being land, building, machinery, plant or furniture acquired orconstructed by the fund, trust, company, association of persons, body of individuals, society orother institution out of the sum paid by the assessee, be transferred to him, and where any claimis so made, such asset shall be transferred, as soon as may be, to him.

72. Profits chargeable to tax.

§72.Profits chargeable to tax.

Section 41

PROFITS CHARGEABLE TO TAX.

(1) Where an allowance or deduction has been made in the assessment for any year in respect ofloss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year, - (a) The first-mentioned personhas obtained, whether in cash or in any other manner whatsoever, any amount in respect of suchloss or expenditure or some benefit in respect of such trading liability by way of remission orcessation thereof, the amount obtained by such person or the value of benefit accruing to himshall be deemed to be profits and gains of business or profession and accordingly chargeable toincome-tax as the income of that previous year, whether the business or profession in respect ofwhich the allowance or deduction has been made is in existence in that year or not; or

(b) The successor in business has obtained, whether in cash or in any other manner whatsoever,any amount in respect of which loss or expenditure was incurred by the first-mentioned person orsome benefit in respect of the trading liability referred to in clause (a) by way of remission orcessation thereof, the amount obtained by the successor in business or the value of benefitaccruing to the successor in business shall be deemed to be profits and gains of the business orprofession, and accordingly chargeable to income-tax as the income of that previous year.


Explanation 1 : For the purposes of this sub-section, the expression "loss or expenditure or somebenefit in respect of any such trading liability by way of remission or cessation thereof" shallinclude the remission or cessation of any liability by a unilateral act by the first mentionedperson under clause (a) or the successor in business under clause (b) of that sub-section by wayof writing off such liability in his accounts.

Explanation : For the purposes of this sub-section, "successor in business" means, - (i) Wherethere has been an amalgamation of a company with another company, the amalgamatedcompany;

(ii) Where the first-mentioned person is succeeded by any other person in that business orprofession, the other person;

(iii) Where a firm carrying on a business or profession is succeeded by another firm, the otherfirm;

(iv) Where there has been a demerger, the resulting company.

"(2) Where any building, machinery, plant or furniture, - (a) Which is owned by the assessee;

(b) In respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32;and

(c) Which was or has been used for the purposes of business, is sold, discarded, demolished ordistroyed and the moneys payable in respect of such building, machinery, plant or furniture, asthe case may be, together with the amount of scrap value, if any, exceeds the written down value,so much of the excess as does not exceed the difference between the actual cost and the writtendown value shall be chargeable to income-tax as income of the business of the previous year inwhich the moneys payable for the building, machinery, plant or furniture became due.

Explanation : Where the moneys payable in respect of the building, machinery, plant or furniturereferred to in this sub-section become due in a previous year in which the business for thepurpose of which the building, machinery, plant or furniture was being used is no longer inexistence, the provision of this sub-section shall apply as if the business is in existence in thatprevious year.

(3) Where an asset representing expenditure of a capital nature on scientific research within themeaning of clause (iv) of sub-section (1), or clause (c) of sub-section (2B), of section 35 readwith clause (4) of section 43, is sold, without having been used for other purposes, and theproceeds of the sale together with the total amount of the deductions made under clause (i) or, asthe case may be, the amount of the deductions under clause (ia) of sub-section (2), or clause (c)of sub-section (2B), of section 35 exceed the amount of the capital expenditure, the excess or theamount of the deductions so made, whichever is the less, shall be chargeable to income-tax asincome of the business or profession of the previous year in which the sale took place.


Explanation : Where the moneys payable in respect of any asset referred to in this sub-sectionbecome due in a previous year in which the business is no longer in existence, the provisions ofthis sub-section shall apply as if the business is in existence in that previous year.

(4) Where a deduction has been allowed in respect of a bad debt or part of debt under theprovisions of clause (vii) of sub-section (1) of section 36, then, if the amount subsequentlyrecovered on any such debt or part is greater than the difference between the debt or part of debtand the amount so allowed, the excess shall be deemed to be profits and gains of business orprofession, and accordingly chargeable to income-tax as the income of the previous year inwhich it is recovered, whether the business or profession in respect of which the deduction hasbeen allowed is in existence in that year or not.

Explanation : For the purposes of sub-section (3), - (1) "Moneys payable" in respect of anybuilding, machinery, plant or furniture includes - (a) Any insurance, salvage or compensationmoneys payable in respect thereof;

(b) Where the building, machinery, plant or furniture is sold, the price for which it is sold, so,however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1)of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of suchmotor car shall be taken to be a sum which bears to the amount for which the motor car is soldor, as the case may be, the amount of any insurance, salvage or compensation moneys payable inrespect thereof (including the amount of scrap value, if any) the same proportion as the amountof twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as itwould have been computed before applying the said proviso;

(2) "Sold" includes a transfer by way of exchange or a compulsory acquisition under any law forthe time being in force but does not include a transfer, in a scheme of amalgamation, of any assetby the amalgamating company to the amalgamated company where the amalgamated company isan Indian company.

(4A) Where a deduction has been allowed in respect of any special reserve created andmaintained under clause (viii) of sub-section (1) of section 36, any amount subsequentlywithdrawn from such special reserve shall be deemed to be the profits and gains of business orprofession and accordingly be chargeable to income-tax as the income of the previous year inwhich such amount is withdrawn.

Explanation : Where any amount is withdrawn from the special reserve in a previous year inwhich the business is no longer in existence, the provisions of this sub-section shall apply as ifthe business is in existence in that previous year.

(5) Where the business or profession referred to in this section is no longer in existence and thereis income chargeable to tax under sub-section (1), sub-section (3) sub-section (4) or sub-section(4A) in respect of that business or profession, any loss, not being a loss sustained in speculationbusiness which arose in that business or profession during the previous year in which it ceased


to exist and which could not be set off against any other income of that previous year shall, so faras may be, be set off against the income chargeable to tax under the sub-sections aforesaid.

(6) References in sub-section (3) to any other provision of this Act which has been amended oromitted by the Direct Tax Laws (Amendment) Act, 1987 shall, notwithstanding such amendmentor omission, be construed, for the purposes of that sub-section, as if such amendment or omissionhad not been made.

73. Special provision for deductions in the case of businessfor prospecting, etc., for mineral oil.

§ 73. Special provision for deductions in the case of business for prospecting, etc., for mineraloil.

Section 42

SPECIAL PROVISION FOR DEDUCTIONS IN THE CASE OF BUSINESS FORPROSPECTING, ETC., FOR MINERAL OIL.

(1) For the purpose of computing the profits or gains of any business consisting of theprospecting for or extraction or production of mineral oils in relation to which the CentralGovernment has entered into an agreement with any person for the association or participation ofthe Central Government or any person authorised by it in such business (which agreement hasbeen laid on the Table of each House of Parliament), there shall be made in lieu of, or in additionto, the allowances admissible under this Act, such allowances as are specified in the agreement inrelation - (a) To expenditure by way of infructuous or abortive exploration expenses in respectof any area surrendered prior to the beginning of commercial production by the assessee;

(b) After the beginning of commercial production, to expenditure incurred by the assessee,whether before or after such commercial production, in respect of drilling or explorationactivities or services or in respect of physical assets used in that connection, except assets onwhich allowance for depreciation is admissible under section 32 :

Provided that in relation to any agreement entered into after 31st day of March, 1981, this clauseshall have effect subject to the modification that the words and figures "except assets on whichallowance for depreciation is admissible under section 32" had been omitted;

(c) To the depletion of mineral oil in the mining area in respect of the assessment year relevant tothe previous year in which commercial production is begun and for such succeeding year oryears as may be specified in the agreement; and such allowances shall be computed and made inthe manner specified in the agreement, the other provisions of this Act being deemed for thispurpose to have been modified to the extent necessary to give effect to the terms of the


agreement.

Explanation : For the purposes of this section, "mineral oil" includes petroleum and natural gas.

(2) Where the business of the assessee consisting of the prospecting for or extraction orproduction of petrolieum and natural gas is transferred wholly or partly or any interest in suchbusiness is transferred in accordance with the agreement referred to in sub-section (1), subject tothe provisions of the said agreement and where the proceeds of the transfer (so far as they consistof capital sums) - (a) Are less than the expenditure incurred remaining unallowed, a deductionequal to such expenditure remaining unallowed, as reduced by the proceeds of transfer, shall beallowed in respect of the previous year in which such business or interest, as the case may be, istransferred;

(b) Exceed the amount of the expenditure incurred remaining unallowed, so much of the excessas does not exceed the difference between the expenditure incurred in connection with thebusiness or to obtain interest therein and the amount of such expenditure remaining unallowed,shall be chargeable to income-tax as profits and gains of the business in the previous year inwhich the business of interest therein, whether wholly or partly, had been transferred :

Provided that in a case where the provisions of this clause do not apply, the deduction to beallowed for expenditure incurred reamining unallowed shall be arrived at by subtracting theproceeds of transfer (so far as they consist of capital sums) from the expenditure remainingunallowed.

Explanation : Where the business or interest in such business is transferred in a previous year inwhich such business carried on by the assessee is not longer in existence, the provisions of thisclause shall apply as if the business is in existence in that previous year;

(c) Are not less than the amount of the expenditure incurred remaining unallowed, not deductionfor such expenditure shall be allowed in respect of the previous year in which the business orinterest in such business is transferred or in respect of any subsequent year or years :

Provided that where in a scheme of amalgamation, the amalgamating company sells or otherwisetransfers the business to the amalgamated company (being an Indian company), the provisions ofthis sub-section - (i) Shall not apply in the case of the amalgamating company; and

(ii) Shall, as far as may be, apply to the amalgamated company as they would have applied to theamalgamating company if the latter had not transferred the business or interest in the business.

Explanation. - For the purposes of this section, "mineral oil" includes petroleum and natural gas.

74. Definitions of certain terms relevant to income from


profits and gains of business or profession.

§ 74. Definitions of certain terms relevant to income from profits and gains of business orprofession.

Section 43

DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFITS ANDGAINS OF BUSINESS OR PROFESSION.

In sections 28 to 41 and in this section, unless the context otherwise requires - (1) "Actual cost"means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, ifany, as has been met directly or indirectly by any other person or authority :

Provided that where the actual cost of an asset, being a motor car which is acquired by theassessee after the 31st day of March, 1967 but before the 1st day of March, 1975, and is usedotherwise than in a business of running it on hire for tourists, exceeds twenty-five thousandrupees, the excess of the actual cost over such amount shall be ignored, and the actual costthereof shall be taken to be twenty-five thousand rupees.

Explanation 1 : Where an asset is used in the business after it ceases to be used for scientificresearch related to that business and a deduction has to be made under clause (ii) of sub-section(1) of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be theactual cost to the assessee as reduced by the amount of any deduction allowed under clause (iv)of sub-section (1) of section 35 or under any corresponding provision of the Indian Income-taxAct, 1922 (11 of 1922).

Explanation 2 : Where an asset is acquired by the assessee by way of gift or inheritance, theactual cost of the asset to the assessee shall be the actual cost to the previous owner, as reducedby - (a) The amount of depreciation actually allowed under this Act and the correspondingprovisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous yearrelevant to the assessment year commencing before the 1st day of April, 1988; and

(b) The amount of depreciation that would have been allowable to the assessee for anyassessment year commencing on or after the 1st day of April, 1988, as if the asset was the onlyasset in the relevant block of assets.

Explanation 3 : Where, before the date of acquisition by the assessee, the assets were at any timeused by any other person for the purposes of his business or profession and the Assessing Officeris satisfied that the main purpose of the transfer of such assets, directly or indirectly to theassessee, was the reduction of a liability to income-tax (by claiming depreciation with referenceto an enhanced cost), the actual cost to the assessee shall be such an amount as the AssessingOfficer may, with the previous approval of the Joint Commissioner, determine having regard toall the circumstances of the case.


Explanation 4 : Where any asset which had once belonged to the assessee and had been used byhim for the purposes of his business or profession and thereafter ceased to be his property byreason of transfer or otherwise, is re-acquired by him, the actual cost to the assessee shall be - (i)The actual cost to him when he first acquired the asset as reduced by - (a) The amount ofdepreciation actually allowed to him under this Act or under the corresponding provisions of theIndian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to theassessment year commencing before the 1st day of April, 1988; and

(b) The amount of depreciation that would have been allowable to the assessee for anyassessment year commencing on or after the 1st day of April, 1988, as if the asset was the onlyasset in the relevant block of assets; or

(ii) The actual price for which the asset is re-acquired by him, whichever is less.

Explanation 4A : Where before the date of acquisition by the assessee (hereinafter referred to asthe first mentioned person), the assets were at any time used by any other person (hereinafterreferred to as the second mentioned person) for the purposes of his business or profession anddepreciation allowance has been claimed in respect of such assets in the case of the secondmentioned person and such person acquires on lease, hire or otherwise assets from the firstmentioned person, then, notwithstanding anything contained in Explanation 3, the actual cost ofthe transferred assets, in the case of the first mentioned person, shall be the same as the writtendown value of the said assets at the time of transfer thereof by the second mentioned person.

Explanation 5 : Where a building previously the property of the assessee is brought into use forthe purpose of the business or profession after the 28th day of February, 1946,the actual cost tothe assessee shall be the actual cost of the building to the assessee, as reduced by an amountequal to the depreciation calculated at the rate in force on that date that would have beenallowable had the building been used for the aforesaid purposes since the date of its acquisitionby the assessee.

Explanation 6 : When any capital asset is transferred by a holding company to its subsidiarycompany or by a subsidiary company to its holding company, then, if the conditions of clause(iv), or, as the case may be, of clause (v) of section 47 are satisfied, the actual cost of thetransferred capital asset to the transferee company shall be taken to be the same as it would havebeen if the transferor company had continued to hold the capital asset for the purposes of itsbusiness.

Explanation 7 : Where, in a scheme of amalgamation, any capital asset is transferred by theamalgamating company to the amalgamated company and the amalgamated company is anIndian company, the actual cost of the transferred capital asset to the amalgamated companyshall be taken to be the same as it would have been if the amalgamating company had continuedto hold the capital asset for the purposes of its own business.

Explanation 7A : Where, in a demerger, any capital asset is transferred by the demerged


company to the resulting company and the resulting company is an Indian company, the actualcost of the transferred capital asset to the resulting company shall be taken to be the same as itwould have been if the demerged company had continued to hold the capital asset for thepurpose of its own business :

Provided that such actual cost shall not exceed the written down value of such capital asset in thehands of the demerged company.

Explanation 8 : For the removal of doubts, it is hereby declared that where any amount is paid oris payable as interest in connection with the acquisition of an asset, so much of such amount as isrelatable to any period after such asset is first put to use shall not be included, and shall bedeemed never to have been included, in the actual cost of such asset.

Explanation 9 : For the removal of doubts, it is hereby declared that where an asset is or has beenacquired on or after the 1st day of March, 1994 by an assessee, the actual cost of asset shall bereduced by the amount of duty of excise or additional duty leviable under section 3 of theCustoms Tariff Act, 1975 (51 of 1975) in respect of which a claim of credit has been made andallowed under the Central Excise Rules, 1944.

Explanation 10 : Where a portion of the cost of an asset acquired by the assessee has been metdirectly or indirectly by the Central Government or a State Government or any authorityestablished under any law or by any other person, in the form of a subsidy or grant orreimbursement (by whatever name called), then, so much of the cost as is relatable to suchsubsidy or grant or reimbursement shall not be included in the actual cost of the asset to theassessee :

Provided that where such subsidy or grant or reimbursement is of such nature that it cannot bedirectly relatable to the asset acquired, so much of the amount which bears to the total subsidy orreimbursement or grant the same proportion as such asset bears to all the assets in respect of orwith reference to which the subsidy or grant or reimbursement is so received, shall not beincluded in the actual cost of the asset to the assessee;

Explanation 11 : Where an asset which was acquired outside India by an assessee, being a non-resident, is brought by him to India and used for the purposes of his business or profession, theactual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by anamount equal to the amount of depreciation calculated at the rate in force that would have beenallowable had the asset been used in India for the said purposes since the date of its acquisitionby the assessee;

(2) "Paid" means actually paid or incurred according to the method of accounting upon the basisof which the profits or gains are computed under the head "Profits and gains of business orprofession";

(3) "Plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used forthe purposes of the business or profession [ 676a but does not include tea bushes or livestock;


(4)(i) "Scientific research" means any activities for the extension of knowledge in the field ofnatural or applied science including agriculture, animal husbandry or fisheries;

(ii) References to expenditure incurred on scientific research include all expenditure incurred forthe prosecution, or the provision of facilities for the prosecution, of scientific research, but do notinclude any expenditure incurred in the acquisition of rights in, or arising out of, scientificresearch;

(iii) References to scientific research related to a business or class of business include - (a) Anyscientific research which may lead to or facilitate an extension of that business or, as the casemay be, all businesses of that class;

(b) Any scientific research of a medical nature which has a special relation to the welfare ofworkers employed in that business or, as the case may be, all businesses of that class;

(5) "Speculative transaction" means a transaction in which a contract for the purchase or sale ofany commodity, including stocks and shares, is periodically or ultimately settled otherwise thanby the actual delivery or transfer of the commodity or scrips :

Provided that for the purposes of this clause - (a) A contract in respect of raw materials ormerchandise entered into by a person in the course of his manufacturing or merchanting businessto guard against loss through future price fluctuations in respect of the contracts for actual delivery of goods manufactured by him or merchandise sold by him; or

(b) A contract in respect of stocks and shares entered into by a dealer or investor therein to guardagainst loss in his holdings of stocks and shares through price fluctuations; or

(c) A contract entered into by a member of a forward market or a stock exchange in the course ofany transaction in the nature of jobbing or arbitrage to guard against loss which may arise in theordinary course of his business as such member; shall not be deemed to be a speculativetransaction;

(6) "Written down value" means - (a) In the case of assets acquired in the previous year, theactual cost to the assessee;

(b) In the case of assets acquired before the previous year, the actual cost to the assessee less alldepreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922(11 of 1922), or any Act repealed by that Act, or under any executive orders issued when theIndian Income-tax Act, 1886 (8 of 1886), was in force :

Provided that in determining the written down value in respect of buildings, machinery or plantfor the purposes of clause (ii) of sub-section (1) of section 32, "depreciation actually allowed"shall not include depreciation allowed under sub-clauses (a), (b) and (c) of clause (vi) of sub-


section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where suchdepreciation was not deductible in determining the written down value for the purposes of thesaid clause (vi);

(c) In the case of any block of assets, - (i) In respect of any previous year relevant to theassessment year commencing on the 1st day of April, 1988, the aggregate of the written downvalues of all the assets falling within that block of assets at the beginning of the previous yearand adjusted, - (A) By the increase by the actual cost of any asset falling within that blockacquired during the previous year; and

(B) By the reduction of the moneys payable in respect of any asset falling within that block,which is sold or discarded or demolished or destroyed during that previous year together with theamount of the scrap value, if any, so, however, that the amount of such reduction does not exceedthe written down value as so increased; and

(C) In the case of a slump sale, decrease by the actual cost of the asset falling within that block asreduced- (a) By the amount of depreciation actually allowed to him under this Act or under thecorresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of anyprevious year relevant to the assessment year commencing before the 1st day of April, 1988; and

(b) By the amount of depreciation that would have been allowable to the assessee for anyassessment year commencing on or after the 1st day of April, 1988 as if the asset was the onlyasset in the relevant block of assets, so, however, that the amount of such decrease does notexceed the written down value;

(ii) In respect of any previous year relevant to the assessment year commencing on or after the1st day of April, 1989, the written down value of that block of assets in the immediatelypreceding previous year as reduced by the depreciation actually allowed in respect of that blockof assets in relation to the said preceding previous year and as further adjusted by the increase orthe reduction referred to in item (i).

Explanation 1 : When in a case of succession in business or profession, an assessment is made onthe successor under sub-section (2) of section 170 the written down value of any asset or anyblock of assets shall be the amount which would have been taken as its written down value if theassessment had been made directly on the person succeeded to.

Explanation 2 : Where in any previous year, any block of assets is transferred, - (a) By aholding company to its subsidiary company or by a subsidiary company to its holding companyand the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied;or

(b) By the amalgamating company to the amalgamated company in a scheme of amalgamation,and the amalgamated company is an Indian company, then, notwithstanding anything containedin clause (1), the actual cost of the block of assets in the case of the transferee-company or theamalgamated company, as the case may be, shall be the written down value of the block of assets


as in the case of the transferor company or the amalgamating company for the immediatelypreceding previous year as reduced by the amount of depreciation actually allowed in relation tothe said preceding previous year.

Explanation 2A : Where in any previous year, any asset forming part of a block of assets istransferred by a demerged company to the resulting company, then, notwithstanding anythingcontained in clause (1), the written down value of the block of assets of the demerged companyfor the immediately preceding previous year shall be reduced by the book value of the assetstransferred to the resulting company pursuant to the demerger.

Explanation 2B : Where in a previous year, any asset forming part of a block of assets istransferred by a demerged company to the resulting company, then, notwithstanding anythingcontained in clause (1), the written down value of the block of assets in the case of the resultingcompany shall be the value of the assets as appearing in the books of account of the demergedcompany immediately before the demerger : Provided that if the value of the assets as appearingin the books of account of the demerged company immediately before the demerger exceeds thewritten down value of such assets in the hands of the demerged company, the amountrepresenting such excess shall be reduced from the written down value of the assets.

Explanation 3 : Any allowance in respect of any depreciation carried forward under sub-section(2) of section 32 shall be deemed to be depreciation "actually allowed".

Explanation 4 : For the purposes of this clause, the expressions "moneys payable" and "sold"shall have the same meanings as in the Explanation below sub-section (4) of section 41.

75. Special provisions consequential to changes inrate of exchange of currency.

§75.Special provisions consequential to changes in rate of exchange ofcurrency.

Section 43A

SPECIAL PROVISIONS CONSEQUENTIAL TO CHANGES IN RATE OF EXCHANGE OFCURRENCY.

(1) Notwithstanding anything contained in any other provision of this Act, where an assessee hasacquired any asset from a country outside India for the purposes of his business or professionand, in consequence of a change in the rate of exchange at any time after the acquisition of suchasset, there is an increase or reduction in the liability of the assessee as expressed in Indiancurrency for making payment towards the whole or a part of the cost of the asset or forrepayment of the whole or a part of the moneys borrowed by him from any person, directly or


indirectly, in any foreign currency specifically for the purpose of acquiring the asset (being ineither case, the liability existing immediately before the date on which the change in the rate ofexchange takes effect), the amount by which the liability aforesaid is so increased or reducedduring the previous year shall be added to, or, as the case may be, deducted from, the actual costof the asset as defined in clause (1) of section 43 or the amount of expenditure of a capital naturereferred to in clause (iv) of sub-section (1) of section 35 or in section 35A or in clause (ix) ofsub-section (1) of section 36 or, in the case of a capital asset (not being a capital asset referred toin section 50), the cost of acquisition thereof for the purposes of section 48, and the amountarrived at after such addition or deduction shall be taken to be the actual cost of the asset or theamount of expenditure of a capital nature or, as the case may be, the cost of acquisition of thecapital asset as aforesaid.

Explanation 1 : In this sub-section, unless the context otherwise requires, - (a) "Rate ofexchange" means the rate of exchange determined or recognised by the Central Government forthe conversion of Indian currency into foreign currency or foreign currency into Indian currency;

(b) "Foreign currency" and "Indian currency" have the meanings respectively assigned to them insection 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947) 685 .

Explanation 2 : Where the whole or any part of the liability aforesaid is met, not by the assessee,but directly or indirectly, by any other person or authority, the liability so met shall not be takeninto account for the purposes of this sub-section.

Explanation 3 : Where the assessee has entered into a contract with an 686 authorised dealer asdefined in section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947) 686a forproviding him with a specified sum in a foreign currency on or after a stipulated future date atthe rate of exchange specified in the contract to enable him to meet the whole or any part of theliability aforesaid, the amount, if any, to be added to, or deducted from, the actual cost of theasset or the amount of expenditure of a capital nature or, as the case may be, the cost ofacquisition of the capital asset under this sub-section shall, in respect of so much of the sumspecified in the contract as is available for discharging the liability aforesaid, be computed withreference to the rate of exchange specified therein.

(2) The provisions of sub-section (1) shall not be taken into account in computing the actual costof an asset for the purpose of the deduction on account of development rebate under section 33.

76. Certain deductions to be only on actual payment.

§ 76. Certain deductions to be only on actual payment.

Section 43B


CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT.

Notwithstanding anything contained in any other provision of this Act, a deduction otherwiseallowable under this Act in respect of -

(a) Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called,under any law for the time being in force,

(b) Any sum payable by the assessee as an employer by way of contribution to any providentfund or superannuation fund or gratuity fund or any other fund for the welfare of employees,

(c) Any sum referred to in clause (ii) of sub-section (1) of section 36,

(d) Any sum payable by the assessee as interest on any loan or borrowing from any publicfinancial institution or a state financial corporation or a state industrial investment corporation, inaccordance with the terms and conditions of the agreement [ 692c governing such loan orborrowing.

(e) Any sum payable by the assessee as interest on any term loan from a scheduled bank inaccordance with the terms and conditions of the agreement governing such loan, shall beallowed (irrespective of the previous year in which the liability to pay such sum was incurred bythe assessee according to the method of accounting regularly employed by him) only incomputing the income referred to in section 28 of that previous year in which sum is actuallypaid by him.

Provided that nothing contained in this section shall apply in relation to any sum referred to inclause (a) or clause (c) or clause (d) or clause (e) which is actually paid by the assessee on orbefore the due date applicable in his case for furnishing the return of income under sub-section(1) of section 139 in respect of the previous year in which the liability to pay such sum wasincurred as aforesaid and the evidence of such payment is furnished by the assessee along withsuch return 694a :

Provided further that no deduction shall, in respect of any sum referred to in clause (b), beallowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by anyother mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36 and where such payment has been made otherwise than in cash, the sumhas been realised within fifteen days from the due date.

Explanation [1] : For the removal of doubts, it is hereby declared that where a deduction inrespect of any sum referred to in clause (a) or clause (b) of this section is allowed in computingthe income referred to in section 28 of the previous year (being a previous year relevant to theassessment year commencing on the 1st day of April, 1983 or any earlier assessment year) inwhich the liability to pay such sum was incurred by the assessee, the assessee shall not beentitled to any deduction under this section in respect of such sum in computing the income ofthe previous year in which the sum is actually paid by him.


Explanation 2 : For the purposes of clause (a), as in force at all material times, "any sumpayable" means a sum for which the assessee incurred liability in the previous year even thoughsuch sum might not have been payable within that year under the relevant law.

Explanation 3 : For the removal of doubts, it is hereby declared that where a deduction in respectof any sum referred to in clause (c) or clause (d) of this section is allowed in computing theincome referred to in section 28 of the previous year (being a previous year relevant to theassessment year commencing on the 1st day of April, 1988, or any earlier assessment year) inwhich the liability to pay such sum was incurred by the assessee, the assessee shall not beentitled to any deduction under this section in respect of such sum in computing the income ofthe previous year in which the sum is actually paid by him.

Explanation 3A : For the removal of doubts, it is hereby declared that where a deduction inrespect of any sum referred to in clause (e) of this section is allowed in computing the incomereferred to in section 28 of the previous year (being a previous year relevant to the assessmentyear commencing on the 1st day of April, 1996, or any earlier assessment year) in which theliability to pay such sum was incurred by the assessee, the assessee shall not be entitled to anydeduction under this section in respect of such sum in computing the income of the previous yearin which the sum is actually paid by him.

Explanation 4 : For the purposes of this section, - (a) "Public financial institution" shall have themeaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(aa) "Scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation toclause (viia) of sub-section (1) of section 36;

(b) "State financial corporation" means a financial corporation established under section 3 orsection 3A or an institution notified under section 46 of the State Financial Corporations Act,1951 (63 of 1951);

(c) "State industrial investment corporation" means a Government company within the meaningof section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providinglong-term finance for industrial projects and approved by the Central Government under clause(viii) of sub-section (1) of section 36.

77. special provision for computation of cost of acquisition ofcertain assets.

§ 77. special provision for computation of cost of acquisition of certain assets.

Section 43C


SPECIAL PROVISION FOR COMPUTATION OF COST OF ACQUISITION OF CERTAINASSETS.

(1) Where an asset not being an asset referred to in sub-section (2) of section 45 which becomesthe property of an amalgamated company under a scheme of amalgamation, is sold after the 29thday of February, 1988, by the amalgamated company as stock-in-trade of the business carried onby it, the cost of acquisition of the said asset to the amalgamated company in computing theprofits and gains from the sale of such asset shall be the cost of acquisition of the said asset to theamalgamating company, as increased by the cost, if any, of any improvement made thereto, andthe expenditure, if any, incurred, wholly and exclusively in connection with such transfer by theamalgamating company.

(2) Where an asset [not being an asset referred to in sub-section (2) of section 45] whichbecomes the property of the assessee on the total or partial partition of a Hindu undivided familyor under a gift or will or an irrevocable trust, is sold after the 29th day of February, 1988, by theassessee as stock-in-trade, of the business carried on by him, the cost of acquisition of the saidasset to the assessee in computing the profits and gains from the sale of such asset shall be thecost of acquisition of the said asset to the transferor or the donor, as the case may be, as increasedby the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred,wholly and exclusively in connection with such transfer (by way of effecting the partition,acceptance of the gift, obtaining probate in respect of the will or the creation of the trust),including the payment of gift-tax, if any, incurred by the transferor or the donor, as the case maybe.

78. Special provision in case of income of public financialinstitutions, etc.

§ 78. Special provision in case of income of public financial institutions, etc.Section 43D

SPECIAL PROVISION IN CASE OF INCOME OF PUBLIC FINANCIAL INSTITUTIONS,ETC.

Notwithstanding anything to the contrary contained in any other provision of this Act, in the caseof a public financial institution or a scheduled bank or a state financial corporation or a stateindustrial investment corporation, the income by way of interest in relation to such categories ofbad or doubtful debts as may be prescribed having regard to the guidelines issued by the ReserveBank of India in relation to such debts, shall be chargeable to tax in the previous year in which itis credited by the public financial institution or the scheduled bank or the state financialcorporation or the state industrial investment corporation to its profit and loss account for thatyear or, as the case may be, in which it is actually received by that institution or bank orcorporation, whichever is earlier.


Explanation : For the purposes of this section, - (a) "Public financial institution" shall have themeaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(b) "Scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation toclause (viia) of sub-section (1) of section 36;

(c) "State financial corporation" means a financial corporation established under section 3 orsection 3A or an institution notified under section 46 of the State Financial Corporations Act,1951 (63 of 1951);

(d) "State industrial investment corporation" means a Government company within the meaningof section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providinglong-term finance for industrial projects and approved by the Central Government under clause(viii) of sub-section (1) of section 36.

79. Insurance Business.

§ 79. Insurance Business.

Section 44

INSURANCE BUSINESS.

Notwithstanding anything to the contrary contained in the provisions of this Act relating to thecomputation of income chargeable under the head "Interest on securities" 701a , "Income fromhouse property", "Capital gains" or "Income from other sources", or in section 199 or in sections28 to 43B the profits and gains of any business of insurance, including any such business carriedon by a mutual insurance company or by a co-operative society, shall be computed in accordancewith the rules contained in the First Schedule.

80. Special provision for deduction in the case of Trade,Professional or Similar Association.

§ 80. Special provision for deduction in the case of Trade, Professional or Similar Association.Section 44A

SPECIAL PROVISIONS FOR DEDUCTION IN THE CASE OF TRADE, PROFESSIONALOR SIMILAR ASSOCIATION.

(1) Notwithstanding anything to the contrary contained in this Act, where the amount received


during a previous year by any trade, professional or similar association (other than an associationor institution referred to in clause (23A) of section 10) from its members, whether by way ofsubscription or otherwise (not being remuneration received for rendering any specific service tosuch members) falls short of the expenditure incurred by such association during that previousyear (not being expenditure deductible in computing the income under any other provision of thisAct and not being in the nature of capital expenditure) solely for the purposes of protection oradvancement of the common interests of its members, the amount so fallen short (hereinafterreferred to as deficiency) shall, subject to the provisions of this section, be allowed as adeduction in computing the income of the association assessable for the relevant assessment yearunder the head "Profits and gains of business or profession" and if there is no income assessableunder that head or the deficiency allowable exceeds such income, the whole or the balance of thedeficiency, as the case may be, shall be allowed as a deduction in computing the income of theassociation assessable for the relevant assessment year under any other head.

(2) In computing the income of the association for the relevant assessment year under sub-section (1), effect shall first be given to any other provision of this Act under which anyallowance or loss in respect of any earlier assessment year is carried forward and set off againstthe income for the relevant assessment year.

(3) The amount of deficiency to be allowed as a deduction under this section shall in no caseexceed one-half of the total income of the association as computed before making any allowanceunder this section.

(4) This section applies only to that trade, professional or similar association the income ofwhich or any part thereof is not distributed to its members except as grants to any association orinstitution affiliated to it.

81. Maintenance of Accounts by Certain personscarrying on profession or Business.

§81.Maintenance of Accounts by Certain persons carrying on profession orBusiness.Section 44AA

MAINTENANCE OF ACCOUNTS BY CERTAIN PERSONS CARRYING ON PROFESSION OR BUSINESS.

(1) Every person carrying on legal, medical, engineering or architecturalprofession or the profession of accountancy or technical consultancy orinterior decoration or any other profession as is notified 707 by the Board inthe Official Gazette shall keep and maintain such books of account and otherdocuments as may enable the Assessing Officer to compute his total income inaccordance with the provisions of this Act.


(2) Every person carrying on business or profession [not being a professionreferred to in sub-section (1)] shall, - (i) If his income from business orprofession exceeds one lakh twenty thousand rupees or his total sales,turnover or gross receipts, as the case may be, in business or professionexceed or exceeds ten lakh rupees in any one of the three years immediatelypreceding the previous year; or

(ii) Where the business or profession is newly set up in any previous year, ifhis income from business or profession is likely to exceed one lakh twentythousand rupees or his total sales, turnover or gross receipts, as the casemay be, in business or profession are or is likely to exceed ten lakh rupees,during such previous year; or

(iii) Where the profits and gains from the business are deemed to be theprofits and gains of the assessee under section 44AD or section 44AE orsection 44AF, as the case may be, and the assessee has claimed his income tobe lowerthan the profits or gains so deemed to be the profits and gains of hisbusiness, as the case may be, during such previous year, keep and maintainsuch books of account and other documents as may enable the Assessing Officerto compute his total income in accordance with the provisions of this Act.

(3) The Board may, having regard to the nature of the business or professioncarried on by any class of persons, prescribe, 709 by rules the books ofaccount and other documents (including inventories, wherever necessary) to bekept and maintained under sub-section (1) or sub-section (2), the particularsto be contained therein and the form the manner in which and the place atwhich they shall be kept and maintained.

(4) Without prejudice to the provisions of sub-section (3), the Board mayprescribe, by rules, the period for which the books of account and otherdocuments to be kept and maintained under sub-section (1) or sub-section (2)shall be retained.

82. Audit of Accounts of certain persons carrying onBusiness or Profession.

§82.Audit of Accounts of certain persons carrying on Business or Profession.Section 44AB

AUDIT OF ACCOUNTS OF CERTAIN PERSONS CARRYING ON BUSINESS OR PROFESSION.

Every person, - (a) Carrying on business shall, if his total sales, turnover711 or gross receipts, as the case may be, in business exceed or exceeds forty


lakh rupees in any previous year, or

(b) Carrying on profession shall, if his gross receipts in profession exceedten lakh rupees in any previous year, or

(c) Carrying on the business shall, if the profits and gains from the businessare deemed to be the profits and gains of such person under section 44AD orsection 44AE or section 44AF, as the case may be, and he has claimed hisincome to be lower than the profits or gains so deemed to be the profits andgains of his business, as the case may be, in any previous year, get hisaccounts of such previous year audited by an accountant before the specifieddate and furnished by that date the report of such audit in the prescribedform duly signed and verified by such accountant and setting forth suchparticulars as may be prescribed 714 :

Provided that this section shall not apply to the person, who derives incomeof the nature referred to in section 44B or section 44BB or section 44BBA orsection 44BBB, on and from the 1st day of April, 1985 or, as the case may be,the date on which the relevant section came into force, whichever is later :

Provided further that in a case where such person is required by or under anyother law to get his accounts audited, it shall be sufficient compliance withthe provisions of this section if such person gets the accounts of suchbusiness or profession audited under such law before the specified date andfurnished by that date the report of the audit as required under such otherlaw and a further report in the form prescribed under this section. 716

Explanation : For the purposes of this section, - (i) "Accountant" shall havethe same meaning as in the Explanation below sub-section (2) of section 288;

(ii) "Specified date", in relation to the accounts of the previous yearrelevant to an assessment year means, - (a) Where the assessee is a company,the 30th day of November of the assessment year;

(b) In any other case, the 31st day of October of the assessment year.

83. Omitted.

§83.Omitted.

Section 44AC

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS FROM THE BUSINESS OF TRADING


IN CERTAIN GOODS.


84. Special Provision for Computing profits andgains of business of civil construction, etc.

§84.Special Provision for Computing profits and gains of business of civilconstruction, etc.

Section 44AD

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF CIVILCONSTRUCTION, ETC.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C,in the case of an assessee engaged in the business of civil construction orsupply of labour for civil construction, a sum equal to eight per cent of thegross receipts paid or payable to the assessee in the previous year on accountof such business or, as the case may be, a sum higher than the aforesaid sumas declared by the assessee in his return of income, shall be deemed to be theprofits and gains of such business chargeable to tax under the head "Profitsand gains of business or profession" :

Provided that nothing contained in this sub-section shall apply in case theaforesaid gross receipts paid or payable exceed an amount of forty lakhrupees.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall,for the purposes of sub-section (1), be deemed to have been already given fulleffect to and no further deduction under those sections shall be allowed :

Provided that where the assessee is a firm, the salary and interest paid toits partners shall be deducted from the income computed under sub-section (1)subject to the conditions and limits specified in clause (b) of section 40.

(3) The written down value of any asset used for the purpose of the businessreferred to in sub-section (1) shall be deemed to have been calculated as ifthe assessee had claimed and had been actually allowed the deduction inrespect of the depreciation for each of the relevant assessment years.

(4) The provisions of sections 44AA and 44AB shall not apply in so far as they


relate to the business referred to in sub-section (1) and in computing themonetary limits under those sections, the gross receipts or, as the case maybe, the income from the said business shall be excluded.

(5) Nothing contained in the foregoing provisions of this section shall apply,where the assessee claims and produces evidence to prove that the profits andgains from the aforesaid business are lower than the profits and gainsspecified in sub-section (1), and thereupon the Assessing Officer shallproceed to make an assessment of the total income or loss of the assessee anddetermine the sum payable by the assessee on the basis of assessment madeunder sub-section (3) of section 143.

(6) Notwithstanding anything contained in the foregoing provisions of thissection, an assessee may lower profits and gains than the profits and gainsspecified in sub-section (1), if he keeps and maintains such books of accountsand other documents as required under sub-section (2) of section 44AA and getshis accounts audited and furnishes a report of such audit as required undersection 44AB.

Explanation. - For the purposes of this section, the expression "civilconstruction" includes - (a) The construction or repair of any building,bridge, dam or other structure or of any canal or road;

(b) The execution of any works contract.

85. Special Provision for Computing profits andgains of business of Plying, Hiring or Leasing goodscarriages.

§85.Special Provision for Computing profits and gains of business of Plying,Hiring or Leasing goods carriages.

Section 44AE

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF BUSINESS OF PLYING,HIRING OR LEASING GOODS CARRIAGES.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C,in the case of an assessee, who owns not more than ten goods carriages and whois engaged in the business of plying, hiring or leasing such goods carriages,the income of such business chargeable to tax under the head "Profits and


gains of business or profession" shall be deemed to be the aggregate of theprofits and gains, from all the goods carriages owned by him in the previousyear, computed in accordance with the provisions of sub-section (2).

(2) For the purposes of sub-section (1), the profits and gains from each goodscarriage, - (i) Being a heavy goods vehicle, shall be an amount equal to twothousand rupees for every month or a part of month during which the heavygoods vehicle is owned by the assessee in the previous year or, as the casemay be, an amount higher than the aforesaid amount as declared by him in hisreturn of income.

(ii) Other than a heavy goods vehicle, shall be an amount equal to onethousand eight hundred rupees for every month or part of a month during whichthe goods carriage is owned by the assessee in the previous year or, as thecase may be, an amount higher than the aforesaid amount as declared by him inhis return of income.



(4) The written down value of any asset used for the purpose of the businessreferred to in sub-section (1) shall be deemed to have been calculated as ifthe assessee had claimed and had been actually allowed the deduction inrespect of the depreciation for each of the relevant assessment years.

(5) The provisions of sections 44AA and 44AB shall not apply in so far as theyrelate to the business referred to in sub-section (1) and in computing themonetary limits under those sections, the gross receipts or, as the case maybe, the income from the said business shall be excluded.

(6) Nothing contained in the foregoing provisions of this section shall apply,where the assessee claims and produces evidence to prove that the profits andgains from the aforesaid business are lower than the profits and gainsspecified in sub-sections (1) and (2), and thereupon the Assessing Officershall proceed to make an assessment of the total income or loss of theassessee and determine the sum payable by the assessee on the basis ofassessment made under sub-section (3) of section 143.

(7) Notwithstanding anything contained in the foregoing provisions of thissection, an assessee may claim lower profits and gains than the profits and


gains specified in sub-sections (1) and (2), if he keeps and maintains suchbooks of account and other documents as required under sub-section (2) ofsection 44AA and gets his accounts audited and furnishes a report of suchaudit as required under section 44AB.

Explanation. - For the purposes of this section, - (a) The expressions "goodscarriage" and "heavy goods vehicle" shall have the meanings respectivelyassigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);

(b) An assessee, who is in possession of a goods carriage, whether taken onhire-purchase or on instalments and for which the whole or part of the amountpayable is still due, shall be deemed to be the owner of such goods carriage.

86. Special Provisions for Computing profits andgains of retail business.

§86.Special Provisions for Computing profits and gains of retail business.Section 44AF

SPECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS OF RETAIL BUSINESS.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C,in the case of an assessee engaged in retail trade in any goods ormerchandise, a sum equal to five per cent of the total turnover in theprevious year on account of such business or, as the case may be, a sum higherthan the aforesaid sum as declared by the assessee in his return of incomeshall be deemed to be the profits and gains of such business chargeable to taxunder the head "Profits and gains of business or profession" :

Provided that nothing contained in this sub-section shall apply in respect ofan assessee whose total turnover exceeds an amount of forty lakh rupees in theprevious year.



(3) The written down value of any asset used for the purpose of the businessreferred to in sub-section (1) shall be deemed to have been calculated as if


the assessee had claimed and had been actually allowed the deduction inrespect of the depreciation for each of the relevant assessment years.

(4) The provisions of sections 44AA and 44AB shall not apply in so far as theyrelate to the business referred to in sub-section (1) and in computing themonetary limits under those sections, the total turnover, or, as the case maybe, the income from the said business shall be excluded.

(5) Notwithstanding anything contained in the foregoing provisions of thissection, an assessee may claim lower profits and gains than the profits andgains specified in sub-section (1), if he keeps and maintains such books ofaccount and other documents as required under sub-section (2) of section 44AAand gets his accounts audited and furnishes a report of such audit as requiredunder section 44AB.

87. Specila Provision for Computing profits andgains of shipping business in the case of non-residents.

§87.Specila Provision for Computing profits and gains of shipping business inthe case of non-residents.Section 44B

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THECASE OF NON-RESIDENTS.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43Ain the case of an assessee, being a non-resident, engaged in the business ofoperation of ships, a sum equal to seven and a half per cent of the aggregateof the amounts specified in sub-section (2) shall be deemed to be the profitsand gains of such business chargeable to tax under the head "Profits and gainsof business or profession".

(2) The amounts referred to in sub-section (1) shall be the following, namely:- (i) The amount paid or payable (whether in or out of India) to the assesseeor to any person, on his behalf on account of the carriage of passengers,livestock, mail or goods shipped at any port in India; and

(ii) The amount received or deemed to be received in India by or on behalf ofthe assessee on account of the carriage of passengers, livestock, mail orgoods shipped at any port outside India.


Explanation : For the purposes of this sub-section, the amount referred to inclause (i) or clause (ii) shall include the amount paid or payable or receivedor deemed to be received, as the case may be, by way of demurrage charges orhandling charges or any other amount of similar nature.

88. Special Provision for Computing profits andgains in connection with the business ofexploration, etc., of mineral oils.

§88.Special Provision for Computing profits and gains in connection with thebusiness of exploration, etc., of mineral oils.Section 44BB

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS IN CONNECTION WITH THEBUSINESS OF EXPLORATION, ETC., OF MINERAL OILS.

(1) Notwithstanding anything to the contrary contained in sections 28 to 41and sections 43 and 43A, in the case of an assessee, being a non-residentengaged in the business of providing services, or facilities in connectionwith, or supplying plant and machinery on hire used, or to be used, in theprospecting for, or extraction or production of, mineral oils, a sum equal toten per cent of the aggregate of the amounts specified in sub-section (2)shall be deemed to be the profits and gains of such business chargeable to taxunder the head "Profits and gains of business or profession" :

Provided that this sub-section shall not apply in a case where the provisionsof section 42 or section 44D or section 115A or section 293A apply for thepurposes of computing profits or gains or any other income referred to inthose sections.

(2) The amounts referred to in sub-section (1) shall be the following, namely:- (a) The amount paid or payable (whether in or out of India) to the assesseeor to any person on his behalf on account of the provision of services andfacilities in connection with, or supply of plant and machinery on hire used,or to be used, in the prospecting for, or extraction or production of, mineraloils in India; and

(b) The amount received or deemed to be received in India by or on behalf ofthe assessee on account of the provision of services and facilities inconnection with, or supply of plant and machinery on hire used, or to be used,in the prospecting for, or extraction or production of, mineral oils outsideIndia.


Explanation : For the purposes of this section, - (i) "Plant" includes ships,aircrafts, vehicles, drilling units, scientific apparatus and equipment, usedfor the purposes of the said business;

(ii) "Mineral oil" includes petroleum and natural gas.

89. Special Provision for Computing profits andgains of the business of operation of aircraft inthe case of non-residents.

§89.Special Provision for Computing profits and gains of the business ofoperation of aircraft in the case of non-residents.

Section 44BBA

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF THE BUSINESS OF OPERATIONOF AIRCRAFT IN THE CASE OF NON-RESIDENTS.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43A,in the case of an assessee, being a non-resident, engaged in the business ofoperation of aircraft, a sum equal to five per cent. of the aggregate of theamounts specified in sub-section (2) shall be deemed to be the profits andgains of such business chargeable to tax under the head "Profits and gains ofbusiness or profession".

(2) The amounts referred to in sub-section (1) shall be the following, namely:- (a) The amount paid or payable (whether in or out of India) to the assesseeor to any person on his behalf on account of the carriage of passengers,livestock, mail or goods from any place in India; and

(b) The amount received or deemed to be received in India by or on behalf ofthe assessee on account of the carriage of passengers, livestock, mail orgoods from any place outside India.

90. Special provision for computing profits andgains of Foreign Comapnies engaged inthe business ofcivil construction, etc., in certain trunkey powerprojects.


§90.Special provision for computing profits and gains of Foreign Comapniesengaged inthe business of civil construction, etc., in certain trunkey powerprojects.Section 44BBB

SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF FOREIGN COMPANIES ENGAGEDIN THE BUSINESS OF CIVIL CONSTRUCTION, ETC., IN CERTAIN TURNKEY POWERPROJECTS.

Notwithstanding anything to the contrary contained in sections 28 to 44AA, inthe case of an assessee, being a foreign company, engaged in the business ofcivil construction or the business of erection of plant or machinery ortesting or commissioning thereof, in connection with a turnkey power projectapproved by the Central Government 727 in this behalf and financed under anyinternational aid programme, a sum equal to ten per cent of the amount paid orpayable (whether in or out of India) to the said assessee or to any person onhis behalf on account of such civil construction, erection, testing orcommissioning shall be deemed to be the profits and gains of such businesschargeable to tax under the head "Profits and gains of business orprofession".

91. Deduction of head office expenditure in the caseof Non-Residents.

§91.Deduction of head office expenditure in the case of Non-Residents.Section 44C

DEDUCTION OF HEAD OFFICE EXPENDITURE IN THE CASE OF NON-RESIDENTS.

Notwithstanding anything to the contrary contained in sections 28 to 43A, inthe case of an assessee, being a non-resident, no allowance shall be made, incomputing the income chargeable under the head "Profits and gains of businessor profession", in respect of so much of the expenditure in the nature of headoffice expenditure as is in excess of the amount computed as hereunder, namely:- (a) An amount equal to five per cent of the adjusted total income, or

(c) The amount of so much of the expenditure in the nature of head officeexpenditure incurred by the assessee as is attributable to the business orprofession of the assessee in India, whichever is the least :

Provided that in a case where the adjusted total income of the assessee is aloss, the amount under clause (a) shall be computed at the rate of five percent of the average adjusted total income of the assessee.


Explanation : For the purposes of this section, - (i) "Adjusted total income"means the total income computed in accordance with the provisions of this Act,without giving effect to the allowance referred to in this section or in sub-section (2) of section 32 or the deduction referred to in section 32A orsection 33 or section 33A or the first proviso to clause (ix) of sub-section(1) of section 36 or any loss carried forward under sub-section (1) of section72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) ofsection 74 or sub-section (3) of section 74A or the deductions under ChapterVI-A.

(ii) "Average adjusted total income" means, - (a) In a case where the totalincome of the assessee is assessable for each of the three assessment yearsimmediately preceding the relevant assessment year, one-third of the aggregateamount of the adjusted total income in respect of the previous years relevantto the aforesaid three assessment years;

(b) In a case where the total income of the assessee is assessable only fortwo of the aforesaid three assessment years, one-half of the aggregate amountof the adjusted total income in respect of the previous years relevant to theaforesaid two assessment years;

(c) In a case where the total income of the assessee is assessable only forone of the aforesaid three assessment years, the amount of the adjusted totalincome in respect of the previous year relevant to that assessment year;

(iv) "Head office expenditure" means executive and general administrationexpenditure incurred by the assessee outside India, including expenditureincurred in respect of - (a) Rent, rates, taxes, repairs or insurance of anypremises outside India used for the purposes of the business or profession;

(b) Salary, wages, annuity, pension, fees, bonus, commission, gratuity,perquisites or profits in lieu of or in addition to salary, whether paid orallowed to any employee or other person employed in or managing the affairsof, any office outside India;

(c) Travelling by any employee or other person employed in, or managing theaffairs of, any office outside India; and

(d) Such other matters connected with executive and general administration asmay be prescribed.

92. Special Provisions for Computing Income by way


of royalties, etc., in the case of ForeignCompanies.

§92.Special Provisions for Computing Income by way of royalties, etc., in thecase of Foreign Companies.Section 44D

SPECIAL PROVISIONS FOR COMPUTING INCOME BY WAY OF ROYALTIES, ETC., IN THE CASEOF FOREIGN COMPANIES.

Notwithstanding anything to the contrary contained in sections 28 to 44C, inthe case of an assessee, being a foreign company, - (a) The deductionsadmissible under the said sections in computing the income by way of royaltyor fees for technical services received from Government or an Indian concernin pursuance of an agreement made by the foreign company with Government orwith the Indian concern before the 1st day of April, 1976, shall not exceed inthe aggregate twenty per cent of the gross amount of such royalty or fees asreduced by so much of the gross amount of such royalty as consists of lump sumconsideration for the transfer outside India of, or the imparting ofinformation outside India in respect of, any data, documentation, drawing orspecification relating to any patent, invention, model, design, secret formulaor process or trade mark or similar property;

(b) No deduction in respect of any expenditure or allowance shall be allowedunder any of the said sections in computing the income by way of royalty orfees for technical services received from Government or an Indian concern inpursuance of an agreement made by a foreign company with Government or withthe Indian concern after the 31st day of March, 1976;

Explanation : For the purposes of this section, - (a) "Fees for technicalservices" shall have the same meaning as in Explanation 2 to clause (vii) ofsub-section (1) of section 9;

(b) "Foreign company" shall have the same meaning as in section 80B;

(c) "Royalty" shall have the same meaning as in Explanation 2 to clause (vi)of sub-section (1) of section 9;

(d) Royalty received from Government or an Indian concern in pursuance of anagreement made by a foreign company with Government or the Indian concernafter the 31st day of March, 1976, shall be deemed to have been received inpursuance of an agreement made before the 1st day of April, 1976, if suchagreement is deemed, for the purposes of the proviso to clause (vi) of sub-


section (1) of section 9, to have been made before the 1st day of April, 1976.

93. Capital Gains.

§93.Capital Gains.Section 45

CAPITAL GAINS.

(1) Any profits or gains arising from the transfer 737 of a capital asseteffected in the previous year shall, save as otherwise provided in sections54, 54B, 54D, 54E, 54EA, 54EB, 54F , 54G and 54H be chargeable to income-taxunder the head "Capital gains", and shall be deemed to be the income of theprevious year in which the transfer took place.

(1A) Notwithstanding anything contained in sub-section (1), where any personreceives at any time during any previous year any money or other assets underan insurance from an insurer on account of damage to, or destruction of, anycapital asset, as a result of - (i) Flood, typhoon, hurricane, cyclone,earthquake or other convulsion of nature; or

(ii) Riot or civil disturbance; or

(iii) Accidental fire or explosion; or

(iv) Action by an enemy or action taken in combating an enemy (whether with orwithout a declaration of war), then, any profits or gains arising from receiptof such money or other assets shall be chargeable to income-tax under the head"Capital gains" and shall be deemed to be the income of such person of theprevious year in which such money or other asset was received and for thepurposes of section 48, value of any money or the fair market value of otherassets on the date of such receipt shall be deemed to be the full value of theconsideration received or accruing as a result of the transfer of such capitalasset.

Explanation. - For the purposes of this sub-section, the expression "insurer"shall have the meaning assigned to it in clause (9) of section 2 of theInsurance Act, 1938 (4 of 1938).

(2) Notwithstanding anything contained in sub-section (1), the profits orgains arising from the transfer by way of conversion by the owner of a capitalasset into, or its treatment by him as, stock-in-trade of a business carriedon by him shall be chargeable to income-tax as his income of the previous yearin which such stock-in-trade is sold or otherwise transferred by him and, for


the purposes of section 48, the fair market value of the asset on the date ofsuch conversion or treatment shall be deemed to be the full value of theconsideration received or accruing as a result of the transfer of the capitalasset.

(2A) Where any person has had at any time during previous year any beneficialinterest in any securities, then, any profits or gains arising from transfermade by the depository or participant of such beneficial interest in respectof securities shall be chargeable to income-tax as the income of thebeneficial owner of the previous year in which such transfer took place andshall not be regarded as income of the depository who is deemed to beregistered owner of securities by virtue of sub-section (1) of section 10 ofthe Depositories Act, 1996, and for the purposes of - (i) Section 48; and

(ii) Proviso to clause (42A) of section 2, the cost of acquision and theperiod of holding of any securities shall be determined on the basis of thefirst-in-first-out method.

Explanation. - For the purposes of this sub-section, the expressions"beneficial owner", "depository" any "security" shall have the meaningsrespectively assigned to them in clauses (a), (e) and (l) of sub-section (1)of section 2 of the Depositories Act, 1996.

(3) The profits or gains arising from the transfer of a capital asset by aperson to a firm or other association of persons or body of individuals (notbeing a company or a co-operative society) in which he is or becomes a partneror member, by way of capital contribution or otherwise, shall be chargeable totax as his income of the previous year in which such transfer takes place and,for the purposes of section 48, the amount recorded in the books of account ofthe firm, association or body as the value of the capital asset shall bedeemed to be the full value of the consideration received or accruing as aresult of the transfer of the capital asset.

(4) The profits or gains arising from the transfer of a capital asset by wayof distribution of capital assets on the dissolution of a firm or otherassociation of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income ofthe firm, association or body, of the previous year in which the said transfertakes place and, for the purposes of section 48, the fair market value of theasset on the date of such transfer shall be deemed to be the full value of theconsideration received or accruing as a result of the transfer.

(5) Notwithstanding anything contained in sub-section (1), where the capitalgain arises from the transfer of a capital asset, being a transfer by way of


compulsory acquisition under any law, or a transfer the consideration forwhich was determined or approved by the Central Government or the Reserve Bankof India, and the compensation or the consideration for such transfer isenhanced or further enhanced by any court, Tribunal or other authority, thecapital gain shall be dealt with in the following manner, namely :- (a) Thecapital gain computed with reference to the compensation awarded in the firstinstance or, as the case may be, the consideration determined or approved inthe first instance by the Central Government or the Reserve Bank of Indiashall be chargeable as income under the head "Capital gains" of the previousyear in which such compensation or part thereof, or such consideration or partthereof, was first received; and

(b) The amount by which the compensation or consideration is enhanced orfurther enhanced by the court, tribunal or other authority shall be deemed tobe income chargeable under the head "Capital gains" of the previous year inwhich such amount is received by the assessee.

Explanation : For the purposes of this sub-section, - (i) In relation to theamount referred to in clause (b), the cost of acquisition and the cost ofimprovement shall be taken to be nil;

(ii) The provisions of this sub-section shall apply also in a case where thetransfer took place prior to the 1st day of April, 1988;

(iii) Where by reason of the death of the person who made the transfer, orfor any other reason, the enhanced compensation or consideration is receivedby any other person, the amount referred to in clause (b) shall be deemed tobe the income chargeable to tax under the head "Capital gains", of such otherperson.

(6) Notwithstanding anything contained in sub-section (1), the differencebetween the repurchase price of the units referred to in sub-section (2) ofsection 80CCB and the capital value of such units shall be deemed to be thecapital gains arising to the assessee in the previous year in which suchrepurchase takes place or the plan referred to in that section is terminatedand shall be taxed accordingly.

Explanation : For the purposes of this sub-section, "capital value of suchunits" means any amount invested by the assessee in the units referred to insub-section (2) of section 80CCB.

94. Capital gains on distribution of assets by


companies in liquidation.

§94.Capital gains on distribution of assets by companies in liquidation.

Section 46

CAPITAL GAINS ON DISTRIBUTION OF ASSETS BY COMPANIES IN LIQUIDATION.

(1) Notwithstanding anything contained in section 45, where the assets of a company aredistributed to its shareholders on its liquidation, such distribution shall not be regarded as atransfer by the company for the purposes of section 45.

(2) Where a shareholder on the liquidation of a company receives any money or other assetsfrom the company, he shall be chargeable to income-tax under the head "Capital gains", inrespect of the money so received or the market value of the other assets on the date ofdistribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c)of clause (22) of section 2 and the sum so arrived at, shall be deemed to be the full value of theconsideration for the purposes of section 48.

95. Capital gains on purchases by company of its own orother specified securities.

§ 95. Capital gains on purchases by company of its own or other specified securities.Section 46A

CAPITAL GAINS ON PURCHASES BY COMPANY OF ITS OWN OR OTHER SPECIFIEDSECURITIES. -

Where a shareholder or a holder of other specified securities receives any consideration from anycompany for purchase of its own shares or other specified securities held by such shareholder orholder of other specified securities, then, subject to the provisions of section 48, the differencebetween the cost of acquisition and the value of consideration received by the shareholder or theholder of other specified securities, as the case may be, shall be deemed to be the capital gainsarising to such shareholder or the holder of other specified securities, as the case may be, in theyear in which such shares or other specified securities were purchased by the company.

Explanation. - For the purposes of this section, "specified securities" shall have the meaningassigned to it in Explanation to section 77A of the Companies Act, 1956 (1 of 1956).


96. Transactions not regarded as transfer.

§ 96. Transactions not regarded as transfer.Section 47

TRANSACTIONS NOT REGARDED AS TRANSFER.

Nothing contained in section 45 shall apply to the following transfers : (i) Any distribution ofcapital assets on the total or partial partition of a Hindu undivided family;

(iii) Any transfer of a capital asset under a gift or will or an irrevocable trust;

(iv) Any transfer of a capital asset by a company to its subsidiary company, if - (a) The parentcompany or its nominees hold the whole of the share capital of the subsidiary company; and

(b) The subsidiary company is an Indian company;

(v) Any transfer of a capital asset by a subsidiary company to the holding company, if - (a) Thewhole of the share capital of the subsidiary company is held by the holding company, and

(b) The holding company is an Indian company :

Provided that nothing contained in clause (iv) or clause (v) shall apply to the transfer of a capitalasset made after the 29th day of February, 1988, as stock-in-trade;

(vi) Any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating companyto the amalgamated company if the amalgamated company is an Indian company;

(via) Any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held inan Indian company, by the amalgamating foreign company to the amalgamated foreign company,if - (a) At least twenty-five per cent of the shareholders of the amalgamating foreign companycontinue to remain shareholders of the amalgamated foreign company, and

(b) Such transfer does not attract tax on capital gains in the country, in which the amalgamatingcompany is incorporated;

(vib) Any transfer, in a demerger, of a capital asset by the demerged company to the resultingcompany, if the resulting company is an Indian company;

(vic) Any transfer in a demerger, of a capital asset, being a share or shares held in an Indiancompany, by the demerged foreign company to the resulting foreign company, if - (a) At leastseventy-five per cent of the shareholders of the demerged foreign company continue to remainshareholders of the resulting foreign company; and


(b) Such transfer does not attract tax on capital gains in the country, in which the demergedforeign company is incorporated :

Provided that the provisions of sections 391 to 394 of the Companies Act, 1956 (1 of 1956) shallnot apply in case of demergers referred to in this clause;

(vid) Any transfer or issue of shares by the resulting company, in a scheme of demerger to theshareholders of the demerged company if the transfer or issue is made in consideration ofdemerger of the undertaking;

(vii) Any transfer by a shareholder, in a scheme of amalgamation, of a capital asset being a shareor shares held by him in the amalgamating company, if - (a) The transfer is made inconsideration of the allotment to him of any share or shares in the amalgamated company, and

(b) The amalgamated company is an Indian company;

(viia) Any transfer of capital asset, being bonds or shares referred to in sub-section (1) of section115AC, made outside India by a non-resident to another non-resident;

(viii) Any transfer of agricultural land in India effected before the 1st day of March, 1970;

(ix) Any transfer of a capital asset, being any work of art, archaeological, scientific or artcollection, book, manuscript, drawing, painting, photograph or print, to the Government or aUniversity or the National Museum, National Art Gallery, National Archives or any such otherpublic museum or institution as may be notified 753 by the Central Government in the OfficialGazette to be of national importance or to be of renown throughout any State or States.

Explanation : For the purposes of this clause, "University" means a University established orincorporated by or under a Central, State or Provincial Act and includes an institution declaredunder section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a Universityfor the purposes of that Act.

(x) Any transfer by way of conversion of bonds or debentures, debenture-stock or depositcertificates in any form, of a company into shares or debentures of that company.

(xi) Any transfer made on or before the 753ca 31st day of December, 1998, 753ca by a person(not being a company) of a capital asset being membership of a recognised stock exchange to acompany in exchange for shares allotted by that company to the transferor.

Explanation : For the purposes of this clause, the expression "membership of a recognised stockexchange" means the membership of a stock exchange in India which is recognised under theprovisions of the Securities Contract (Regulation) Act, 1956 (42 of 1956);

(xii) Any transfer of a capital asset, being land of a sick industrial company, made under ascheme prepared and sanctioned under section 18 of the Sick Industrial Companies (Special


Provisions) Act, 1985 (1 of 1986) where such sick industrial company is being managed by itsworkers" co-operative :

Provided that such transfer is made during the period commencing from the previous year inwhich the said company has become a sick industrial company under sub-section (1) of section17 of that Act and ending with the previous year during which the entire net worth of suchcompany becomes equal to or exceeds the accumulated losses.

Explanation : For the purposes of this clause, "net worth" shall have the meaning assigned to it inclause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions)Act, 1985 (1 of 1986).

(xiii) Where a firm is succeeded by a company in the business carried on by it as a result ofwhich the firm sells or otherwise transfers any capital asset or intangible asset to the company :

Provided that - (a) All the assets and liabilities of the firm relating to the business immediatelybefore the succession become the assets and liabilities of the company;

(b) All the partners of the firm immediately before the succession become the shareholders of thecompany in the same proportion in which their capital accounts stood in the books of the firm onthe date of succession;

(c) The partners of the firm do not receive any consideration or benefit, directly or indirectly, inany form or manner, other than by way of allotment of shares in the company; and

(d) The aggregate of the shareholding in the company of the partners of the firm is not less thanfifty per cent of the total voting power in the company and their share holding continues to be assuch for a period of five years from the date of the succession;

(xiv) Where a sole proprietary concern is succeeded by a company in the business carried on byit as a result of which the sole proprietary concern sells or otherwise transfers any capital asset orintangible asset to the company :

Provided that - (a) All the assets and liabilities of the sole proprietary concern relating to thebusiness immediately before the succession become the assets and liabilities of the company;

(b) The shareholding of the sole proprietor in the company is not less than fifty per cent of thetotal voting power in the company and his shareholding continues to so remain as such for aperiod of five years from the date of the succession; and

(c) The sole proprietor does not receive any consideration or benefit, directly or indirectly, in anyform or manner, other than by way of allotment of shares in the company;

(xv) Any transfer in a scheme for lending of any securities under an agreement or arrangement,


which the assessee has entered into with the borrower of such securities and which is subject tothe guidelines issued by the Securities and Exchange Board of India, established under section 3of the Securities and Exchange Board of India Act, 1992 (15 of 1992), in this regard.

97. Withdrawal of exemption in certain cases.

§ 97. Withdrawal of exemption in certain cases.

Section 47A

WITHDRAWAL OF EXEMPTION IN CERTAIN CASES.

(1) Where at any time before the expiry of a period of eight years from the date of the transfer ofa capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47, - (i) Suchcapital asset is converted by the transferee company into, or is treated by it as, stock-in-trade ofits business; or

(ii) The parent company or its nominees or, as the case may be, the holding company ceases orcease to hold the whole of the share capital of the subsidiary company, the amount of profits orgains arising from the transfer of such capital asset not charged under section 45 by virtue of theprovisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall,notwithstanding anything contained in the said clauses, be deemed to be income chargeableunder the head "Capital gains" of the previous year in which such transfer took place.

(2) Where at any time, before the expiry of a period of three years from the date of the transferof a capital asset referred to in clause (xi) of section 47, any of the shares allotted to thetransferor in exchange for a membership in a recognised stock exchange are transferred, theamount of profits and gains not charged under section 45 by virtue of the provisions contained inclause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemedto be the income chargeable under the head "Capital gains" of the previous year in which suchshares are transferred.

(3) Where any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause(xiv) of section 47 are not complied with, the amount of profits or gins arising from the transferof such capital assets or intangible asset not charged under section 45 by virtue of conditions laiddown in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed tobe the profits and gains chargeable to tax of the successor company for the previous year inwhich the requirements of the proviso to clause (xiii) or the proviso to clause (xiv), as the casemay be, are not complied with.


98. Mode of Computation.

§ 98. Mode of Computation.Section 48

MODE OF COMPUTATION.

The income chargeable under the head "Capital gains" shall be computed, by deducting from thefull value of the consideration received or accruing as a result of the transfer of the capital assetthe following amounts, namely :-

(i) Expenditure incurred wholly and exclusively in connection with such transfer;

(ii) The cost of acquisition of the asset and the cost of any improvement thereto :

Provided that in the case of an assessee, who is a non-resident, capital gains arising from thetransfer of a capital asset being shares in, or debentures of, an Indian company shall be computedby converting the cost of acquisition, expenditure incurred wholly and exclusively in connectionwith such transfer and the full value of the consideration received or accruing as a result of thetransfer of the capital asset into the same foreign currency as was initially utilised in the purchaseof the shares or debentures, and the capital gains so computed in such foreign currency shall bereconverted into Indian currency, so however, that the aforesaid manner of computation ofcapital gains shall be applicable in respect of capital gains accruing or arising from everyreinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :

Provided further that where long-term capital gain arises from the transfer of a long-term capitalasset, other than capital gain arising to a non-resident from the transfer of shares in, ordebentures of, an Indian company referred to in the first proviso, the provisions of clause (ii)shall have effect as if for the words "cost of acquisition" and "cost of any improvement", thewords "indexed cost of acquisition" and "indexed cost of any improvement" had respectivelybeen substituted.

Provided also that nothing contained in the second proviso shall apply to the long-term capitalgain arising from the transfer of a long-term capital asset being bond or debenture other thancapital indexed bonds issued by the Government.

Explanation : For the purposes of this section, - (i) "Foreign currency" and "Indian currency"shall have the meanings respectively assigned to them in section 2 of the Foreign ExchangeRegulation Act, 1973 (46 of 1973);

(ii) The conversion of Indian currency into foreign currency and the reconversion of foreigncurrency into Indian currency shall be at the rate of exchange prescribed in this behalf;

(iii) "Indexed cost of acquisition" means an amount which bears to the cost of acquisition the


same proportion as Cost Inflation Index for the year in which the asset is transferred bears to theCost Inflation Index for the first year in which the asset was held by the assessee or for the yearbeginning on the 1st day of April, 1981, whichever is later;

(iv) "Indexed cost of any improvement" means an amount which bears to the cost ofimprovement the same proportion as Cost Inflation Index for the year in which the asset istransferred bears to the Cost Inflation Index for the year in which the improvement to the assettook place;

(v) "Cost Inflation Index" for any year means such Index as the Central Government may, havingregard to seventy-five per cent of average rise in the Consumer Price Index for urban non-manualemployees for that year, by notification in the Official Gazette, specify 759 in this behalf.

99. Cost with reference to certain modes ofacquisition.

§99.Cost with reference to certain modes of acquisition.

Section 49

COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITION.

(1) Where the capital asset became the property of the assessee - (i) On any distribution ofassets on the total or partial partition of a Hindu undivided family;

(ii) Under a gift or will;

(a) By succession, inheritance or devolution, or

(b) On any distribution of assets on the dissolution of a firm, body of individuals, or otherassociation of persons, where such dissolution had taken place at any time before the 1st day ofApril, 1987,

(c) On any distribution of assets on the liquidation of a company, or

(d) Under a transfer to a revocable or an irrevocable trust, or

(e) Under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause

(via) 762a of section 47

(iv) Such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of


section 64 at any time after the 31st day of December, 1969, the cost of the acquisition of theassets shall be deemed to be the cost for which the previous owner of the property acquired it, asincreased by the cost of any improvement of the assets incurred or borne by the previous owneror the assessee, as the case may be.

Explanation : In this sub-section the expression "previous owner of the property" in relation toany capital asset owned by an assessee means the last previous owner of the capital asset whoacquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause(iii) or clause (iv) of this sub-section.

(2) Where the capital asset being a share or shares in an amalgamated company which is anIndian company became the property of the assessee in consideration of a transfer referred to inclause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost ofacquisition to him of the share or shares in the amalgamating company.

(2A) Where the capital asset, being a share or debenture in a company, became the property ofthe assessee in consideration of a transfer referred to in clause (x) of section 47, the cost ofacquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture,debenture-stock or deposit certificates in relation to which such asset is acquired by the assessee.

(2B) Where the capital gain arises from the transfer of the specified security referred to in sub-clause (iiia) of clause (2) of section 17, the cost of acquisition of such specified security shall bethe fair market value on the date of exercise of option.

(2C) The cost of acquisition of the shares in the resulting company shall be the amount whichbears to the cost of acquisition of shares held by the assessee in the demerged company the sameproportion as the net book value of the assets transferred in a demerger bears to the net worth ofthe demerged company immediately before such demerger.

(2D) The cost of acquisition of the original shares held by the shareholder in the demergedcompany shall be deemed to have been reduced by the amount as so arrived at under sub-section(2C).

Explanation. - For the purposes of this section, "net worth" shall mean the aggregate of the paidup share capital and general reserves as appearing in the books of account of the demergedcompany immediately before the demerger.

(3) Notwithstanding anything contained in sub-section (1), where the capital gain arising fromthe transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section47 is deemed to be income chargeable under the head "Capital gains" by virtue of the provisionscontained in section 47A, the cost of acquisition of such asset to the transferee company shall bethe cost for which such asset was acquired by it.


100. Special Provision for computation of capital gains incase of depreciable assets.

§ 100. Special Provision for computation of capital gains in case of depreciable assets.

Section 50

SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OFDEPRECIABLE ASSETS.

Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is anasset forming part of a block of assets in respect of which depreciation has been allowed underthis Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and49 shall be subject to the following modifications :- (1) Where the full value of the considerationreceived or accruing as a result of the transfer of the asset together with the full value of suchconsideration received or accruing as a result of the transfer of any other capital asset fallingwithin the block of assets during the previous year, exceeds the aggregate of the followingamounts, namely :-

(i) Expenditure incurred wholly and exclusively in connection with such transfer or transfers;

(ii) The written down value or the block of assets at the beginning of the previous year; and

(iii) The actual cost of any asset falling within the block of assets acquired during the previousyear, such excess shall be deemed to be the capital gains arising from the transfer of short-termcapital assets;

(2) Where any block of assets ceases to exist as such, for the reason that all the assets in thatblock are transferred during the previous year, the cost of acquisition of the block of assets shallbe the written down value of the block of assets at the beginning of the previous year, asincreased by the actual cost of any asset falling within that block of assets acquired by theassessee during the previous year and the income received or accruing as a result of such transferor transfers shall be deemed to be the capital gains arising from the transfer of short-term capitalassets.

101. Special provision for cost of acquisition in case ofdepreciable asset.

§ 101. Special provision for cost of acquisition in case of depreciable asset.

Section 50A


SPECIAL PROVISION FOR COST OF ACQUISITION IN CASE OF DEPRECIABLEASSET.

Where the capital asset is an asset in respect of which a deduction on account of depreciationunder clause (i) of sub-section (1) of section 32 has been obtained by the assessee in anyprevious year, the provisions of sections 48 and 49 shall apply subject to the modification thatthe written down value, as defined in clause (6) of section 43, of the asset, as adjusted, shall betaken as the cost of acquisition of the asset.

102. Special provisions for computation of capital gains incase of slump sale.

§ 102. Special provisions for computation of capital gains in case of slump sale.Section 50BSPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF SLUMPSALE.

(1) Any profits or gains arising from the slump sale effected in the previous year shall bechargeable to income-tax as capital gains arising from the transfer of long-term capital assets andshall be deemed to be the income of the previous year in which the transfer took place :

Provided that any profits or gains arising from the transfer under the slump sale of any capitalasset being one or more undertakings owned and held by an assessee for not more than thirty-sixmonths immediately preceding the date of its transfer shall be deemed to be the capital gainsarising from the transfer of short-term capital assets.

(2) In relation to capital assets being an undertaking or division transferred by way of such sale,the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be thecost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and noregard shall be given to the provisions contained in the second proviso to section 48.

(3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with thereturn of income, a report of an accountant as defined in the Explanation below sub-section (2) ofsection 288 indicating the computation of the net worth of the undertaking or division, as thecase may be, and certifying that the net worth of the undertaking or division, as the case may be,has been correctly arrived at in accordance with the provisions of this section.

Explanation. - For the purposes of this section, "net worth" means the net worth as defined inclause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions)Act, 1985 (1 of 1986).

103. Advance money received.


§ 103. Advance money received.Section 51

ADVANCE MONEY RECEIVED.

Where any capital asset was on any previous occasion the subject of negotiations for its transfer,any advance or other money received and retained by the assessee in respect of such negotiationsshall be deducted from the cost for which the asset was acquired or the written down value or thefair market value, as the case may be, in computing the cost of acquisition.

104. Omitted.


CONSIDERATION FOR TRANSFER IN CASES OF UNDERSTATEMENT.


105. Omitted.


EXEMPTION OF CAPITAL GAINS FROM A RESIDENTIAL HOUSE.


106. Profit on sale of property used for Residence.

§ 106. Profit on sale of property used for Residence.

Section 54

PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE.

(1) Subject to the provisions of sub-section (2), where in the case of an assessee being anindividual or a Hindu undivided family, the capital gain arises from the transfer of a long-termcapital asset, being buildings or lands appurtenant thereto, and being a residential house, the


income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year beforeor two years after the date on which the transfer took place purchased, or has within a period ofthree years after that date constructed, a residential house, then, instead of the capital gain beingcharged to income-tax as income of the previous year in which the transfer took place, it shall bedealt with in accordance with the following provisions of this section, that is to say, - (i) If theamount of the capital gain is greater than the cost of the residential house so purchased orconstructed (hereafter in this section referred to as the new asset), the difference between theamount of the capital gain and the cost of the new asset shall be charged under section 45 as theincome of the previous year; and for the purpose of computing in respect of the new asset anycapital gain arising from its transfer within a period of three years of its purchase or construction,as the case may be, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capitalgain shall not be charged under section 45; and for the purpose of computing in respect of thenew asset any capital gain arising from its transfer within a period of three years of its purchaseor construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

(2) The amount of the capital gain which is not appropriated by the assessee towards thepurchase of the new asset made within one year before the date on which the transfer of theoriginal asset took place, or which is not utilised by him for the purchase or construction of thenew asset before the date of furnishing the return of income under section 139 786 , shall bedeposited by him before furnishing such return [such deposit being made in any case not laterthan the due date applicable in the case of the assessee for furnishing the return of income undersub-section (1) of section 139 in an account in any such bank or institution as may be specifiedin, and utilised in accordance with, any scheme 787 which the Central Government may, bynotification in the Official Gazette, frame in this behalf and such return shall be accompanied byproof of such deposit; and, for the purposes of sub-section (1), the amount, if any, alreadyutilised by the assessee for the purchase or construction of the new asset together with theamount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly forthe purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) The amount not so utilised shall be charged under section 45 as the income of the previousyear in which the period of three years from the date of the transfer of the original asset expires;and

(ii) The assessee shall be entitled to withdraw such amount in accordance with the schemeaforesaid.

107. Omitted.

§107.Omitted.


Section 54A

RELIEF OF TAX ON CAPITAL GAINS IN CERTAIN CASES.

OMITTED BY THE FINANCE (NO. 2) ACT, 1971, W.E.F. 1-4-1972

108. Capital gain on transfer of land used foragricultural purposes not to be charged in certaincases.

§108.Capital gain on transfer of land used for agricultural purposes not tobe charged in certain cases.Section 54B

CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSES NOT TO BECHARGED IN CERTAIN CASES.

(1) Subject to the provisions of sub-section (2), where the capital gainarises from the transfer of a capital asset being land which, in the two yearsimmediately preceding the date on which the transfer took place, was beingused by the assessee or a parent of his for agricultural purposes hereinafterreferred to as the original asset, and the assessee has, within a period oftwo years after that date, purchased any other land for being used foragricultural purposes, then, instead of the capital gain being charged toincome-tax as income of the previous year in which the transfer took place, itshall be dealt with in accordance with the following provisions of thissection, that is to say, - (i) If the amount of the capital gain is greaterthan the cost of the land so purchased (hereinafter referred to as the newasset), the difference between the amount of the capital gain and the cost ofthe new asset shall be charged under section 45 as the income of the previousyear; and for the purpose of computing in respect of the new asset any capitalgain arising from its transfer within a period of three years of its purchase,the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost ofthe new asset, the capital gain shall not be charged under section 45; and forthe purpose of computing in respect of the new asset any capital gain arisingfrom its transfer within a period of three years of its purchase, the costshall be reduced by the amount of the capital gain.

(2) The amount of the capital gain which is not utilised by the assessee forthe purchase of the new asset before the date of furnishing the return of


income under section 139, shall be deposited by him before furnishing suchreturn such deposit being made in any case not later than the due dateapplicable in the case of the assessee for furnishing the return of incomeunder sub-section (1) of section 139 in an account in any such bank orinstitution as may be specified in, and utilised in accordance with, anyscheme 794 which the Central Government may, by notification in the OfficialGazette, frame in this behalf and such return shall be accompanied by proof ofsuch deposit; and, for the purposes of sub-section (1), the amount, if any,already utilised by the assessee for the purchase of the new asset togetherwith the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilisedwholly or partly for the purchase of the new asset within the period specifiedin sub-section (1), then, - (i) The amount not so utilised shall be chargedunder section 45 as the income of the previous year in which the period of twoyears from the date of the transfer of the original asset expires; and

(ii) The assessee shall be entitled to withdraw such amount in accordance withthe scheme aforesaid.

109. Omitted.

§109.Omitted.Section 54C

CAPITAL GAIN ON TRANSFER OF JEWLLERY HELD FOR PERSONAL USE NOT TO BE CHARGEDIN CERTAIN CASES.


110. Capital gain on compulsory acquisition of landsand buildings not to be charged in certain cases.

§110.Capital gain on compulsory acquisition of lands and buildings not to becharged in certain cases.Section 54D

CAPITAL GAIN ON COMPULSORY ACQUISITION OF LANDS AND BUILDINGS NOT TO BECHARGED IN CERTAIN CASES.

(1) Subject to the provisions of sub-section (2), where the capital gainarises from the transfer by way of compulsory acquisition under any law of a


capital asset, being land or building or any right in land or building,forming part of an industrial undertaking belonging to the assessee which, inthe two years immediately preceding the date on which the transfer took place,was being used by the assessee for the purposes of the business of the saidundertaking hereafter in this section referred to as the original asset) andthe assessee has within a period of three years after that date purchased anyother land or building or any right in any other land or building orconstructed any other building for the purposes of shifting or re-establishingthe said undertaking or setting up another industrial undertaking, then,instead of the capital gain being charged to income-tax as the income of theprevious year in which the transfer took place, it shall be dealt with inaccordance with the following provisions of this section, that is to say, -(i) If the amount of the capital gain is greater than the cost of the land,building or right so purchased or the building so constructed (such land,building or right being hereafter in this section referred to as the newasset), the difference between the amount of the capital gain and the cost ofthe new asset shall be charged under section 45 as the income of the previousyear; and for the purpose of computing in respect of the new asset any capitalgain arising from its transfer within a period of three years of its purchaseor construction, as the case may be, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost ofthe new asset, the capital gain shall not be charged under section 45; and forthe purpose of computing in respect of new asset any capital gain arising fromits transfer within a period of three years of its purchase or construction,as the case may be, the cost shall be reduced by the amount of the capitalgain.

(2) The amount of the capital gain which is not utilised by the assessee forthe purchase or construction of the new asset before the date of furnishingthe return of income under section 139, shall be deposited by him beforefurnishing such return [such deposit being made in any case not later than thedue date applicable in the case of the assessee for furnishing the return ofincome under sub-section (1) of section 139] in an account in any such bank orinstitution as may be specified in, and utilised in accordance with, anyscheme 801 which the Central Government may, by notification in the OfficialGazette, frame in this behalf and such return shall be accompanied by proof ofsuch deposit; and, for the purposes of sub-section (1), the amount, if any,already utilised by the assessee for the purchase or construction of the newasset together with the amount so deposited shall be deemed to be the cost ofthe new asset :

Provided that if the amount deposited under this sub-section is not utilisedwholly or partly for the purchase or construction of the new asset within theperiod specified in sub-section (1), then, - (i) The amount not so utilised


shall be charged under section 45 as the income of the previous year in whichthe period of three years from the date of the transfer of the original assetexpires; and

(ii) The assessee shall be entitled to withdraw such amount in accordance withthe scheme aforesaid.

111. Capital gain on transfer of capital assets notto be charged in certain cases.

§111.Capital gain on transfer of capital assets not to be charged in certaincases.Section 54E

CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS NOT TO BE CHARGED IN CERTAIN CASES.

(1) Where the capital gain arises from the transfer of a long-term capitalasset before the 1st day of April, 1992, (the capital asset so transferredbeing hereafter in this section referred to as the original asset) and theassessee has, within a period of six months after the date of such transfer,invested or deposited the whole or any part of the net consideration in anyspecified asset (such specified asset being hereafter in this section referredto as the new asset), the capital gain shall be dealt with in accordance withthe following provisions of this section, that is to say, -

(a) If the cost of the new asset is not less than the net consideration inrespect of the original asset, the whole of such capital gain shall not becharged under section 45;

(b) If the cost of the new asset is less than the net consideration in respectof the original asset, so much of the capital gain as bears to the whole ofthe capital gain the same proportion as the cost of acquisition of the newasset bears to the net consideration shall not be charged under section 45;

Provided that in a case where the original asset is transferred after the 28thday of February, 1983, the provisions of this sub-section shall not applyunless the assessee has invested or deposited the whole or, as the case maybe, any part of the net consideration in the new asset by initiallysubscribing to such new asset :

Provided further that in a case where the transfer of the original asset is byway of compulsory acquisition under any law and the full amount ofcompensation awarded for such acquisition is not received by the assessee on


the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not receivedon the date of transfer, be reckoned from the date immediately following thedate on which such compensation is received by the assessee or the 31st day ofMarch, 1992, whichever is earlier.

Explanation 1 : For the purposes of this sub-section, "specified asset" means,- (a) In a case where the original asset is transferred before the 1st day ofMarch, 1979, any of the following assets, namely :- (i) Securities of theCentral Government or a State Government;

(ii) Savings certificates as defined in clause (c) of section 2 of theGovernment Savings Certificates Act, 1959 (46 of 1959);

(iii) Units in the Unit Trust of India established under the Unit Trust ofIndia Act, 1963 (52 of 1963);

(iv) Debentures specified by the Central Government for the purposes of clause(ii) of sub-section (1) of section 80L;

(v) Shares in any Indian company which are issued to the public or are listedin a recognised stock exchange in India in accordance with the SecuritiesContracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder,where the investment in such shares is made before the 1st day of March, 1978;

(va) Equity shares forming part of any eligible issue of capital where theinvestment in such shares is made after the 28th day of February, 1978;

(vi) Deposits for a period of not less than three years with the State Bank ofIndia established under the State Bank of India Act, 1955 (23 of 1955), or anysubsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act,1959 (38 of 1959), or any nationalised bank, that is to say, any correspondingnew bank constituted under section 3 of the Banking Companies (Acquisition andTransfer of Undertakings) Act, 1970 (5 of 1970), or any co-operative societyengaged in carrying on the business of banking (including a co-operative landmortgage bank or a co-operative land development bank);

(b) In a case where the original asset is transferred after the 28th day ofFebruary, 1979 but before the 1st day of March, 1983 such National RuralDevelopment Bonds as the Central Government may notify 813 in this behalf inthe Official Gazette;

(c) In a case where the original asset is transferred after the 28th day ofFebruary, 1983, but before the 1st day of April, 1986, any of the following


assets, namely :- (i) Securities of the Central Government which thatGovernment may, by notification in the Official Gazette, specify in thisbehalf;

(ii) Special series of units of the Unit Trust of India established under theUnit Trust of India Act, 1963 (52 of 1963), which the Central Government may,by notification in the Official Gazette, specify 815 in this behalf;

(iii) Such National Rural Development Bonds as have been notified under clause(b) of Explanation 1 or as may be notified 816 in this behalf under thisclause by the Central Government;

(iv) Such debentures issued by the Housing and Urban Development CorporationLimited [a Government company as defined in section 617 of the Companies Act,1956 (1 of 1956)], as the Central Government may, by notification in theOfficial Gazette, specify 817 in this behalf;

(d) In a case where the original asset is transferred after the 31st day ofMarch, 1986 any of the assets specified in clause (c) and such bonds issued byany public sector company, as the Central Government may, by notification inthe Official Gazette, specify 819 in this behalf;

(e) In a case where the original asset is transferred after the 31st day ofMarch, 1989, any of the assets specified in clauses (c) and (d) and suchdebentures or bonds issued by the National Housing Bank established undersection 3 of the National Housing Bank Act, 1987 (53 of 1987), as the CentralGovernment may, by notification in the Official Gazette, specify in thisbehalf.

Explanation 2 : "Eligible issue of capital" shall have the meaning assigned toit in sub-section (3) of section 80CC.

Explanation 3 : An assessee shall not be deemed to have invested the whole orany part of the net consideration in any equity shares referred to in sub-clause (va) of clause (a) of Explanation 1, unless the assessee has subscribedto or purchased the shares in the manner specified in sub-section (4) ofsection 80CC.

Explanation 4 : "Cost" in relation to any new asset, being a deposit referredto in sub-clause (vi) of clause (a) of Explanation 1, means the amount of suchdeposit.

Explanation 5 : "Net consideration" in relation to the transfer of a capitalasset, means the full value of the consideration received or accruing as aresult of the transfer of the capital asset as reduced by any expenditure


incurred wholly and exclusively in connection with such transfer.

(1A) Where the assessee deposits after the 27th day of April, 1978 the wholeor any part of the net consideration in respect of the original asset in anynew asset, being a deposit referred to in sub-clause (vi) of clause (a) ofExplanation 1 below sub-section (1), the cost of such new asset shall not betaken into account for the purposes of that sub-section unless the followingconditions are fulfilled, namely :- (a) The assessee furnishes, along with thedeposit, a declaration in writing, to the bank or the co-operative societyreferred to in the said sub-clause (vi) With which such deposit is made, tothe effect that the assessee will not take any loan or advance on the securityof such deposit during a period of three years from the date on which thedeposit is made;

(b) The assessee furnishes, along with the return of income for the assessmentyear relevant to the previous year in which the transfer of the original assetwas effected or within such further time as may be allowed by the AssessingOfficer, a copy of the declaration referred to in clause (a) duly attested byan officer not below the rank of sub-agent, agent or manager of such bank oran officer of corresponding rank of such co-operative society.

(1B) Where on the fulfilment of the conditions specified in sub-section (1A)the cost of the new asset referred to in that sub-section is taken intoaccount for the purposes of sub-section (1), the assessee shall, within aperiod of ninety days from the expiry of the period of three years reckonedfrom the date of such deposit, furnish to the Assessing Officer a certificatefrom the officer referred to in clause (b) of sub-section (1A) to the effectthat the assessee has not taken any loan or advance on the security of suchdeposit during the said period of three years.

(1C) Notwithstanding anything contained in sub-section (1), where the capitalgain arises from the transfer of the original asset, made after the 31st dayof March, 1992, in respect of which the assessee had received any amount byway of advance on or before the 29th day of February, 1992 and had invested ordeposited the whole or any part of such amount in the new asset on or beforethe later date, then, the provisions of clauses (a) and (b) of sub-section (1)shall apply in the case of such investment or deposit as they apply in thecase of investment or deposit under that sub-section.

(2) Where the new asset is transferred, or converted (otherwise than bytransfer) into money, within a period of three years from the date of itsacquisition, the amount of capital gain arising from the transfer of theoriginal asset not charged under section 45 on the basis of the cost of suchnew asset as provided in clause (a) or, as the case may be, clause (b), of


sub-section (1) shall be deemed to be income chargeable under the head"Capital gains" relating to long-term capital assets of the previous year inwhich the new asset is transferred or converted (otherwise than by transfer)into money.

Explanation 1 : Where the assessee deposits after the 27th day of April, 1978the whole or any part of the net consideration in respect of the originalasset in any new asset, being a deposit referred to in sub-clause (vi) ofclause (a) of Explanation 1 below sub-section (1), and such assessee takes anyloan or advance on the security of such deposit, he shall be deemed to haveconverted (otherwise than by transfer) such deposit into money on the date onwhich such loan or advance is taken.

Explanation 2 : In a case where the original asset is transferred after the28th day of February, 1983 and the assessee invests the whole or any part ofthe net consideration in respect of the original asset in any new asset andsuch assessee takes any loan or advance on the security of such new asset, heshall be deemed to have converted (otherwise than by transfer) such new asseton the date on which such loan or advance is taken.

(3) Where the cost of the equity shares referred to in sub-clause (va) ofclause (a) of Explanation 1 below sub-section (1) is taken into account forthe purposes of clause (a) or clause (b) of sub-section (1) a deduction withreference to such cost shall not be allowed under section 80CC.

112. Capital gain on transfer of land-term capitalassets not to be charged in the case of investmentin specified securities.

§112.Capital gain on transfer of land-term capital assets not to be chargedin the case of investment in specified securities.

Section 54EA

CAPITAL GAIN ON TRANSFER OF LONG-TERM CAPITAL ASSETS NOT TO BECHARGED IN THE CASE OF INVESTMENT IN SPECIFIED SECURITIES.

(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital assetso transferred being hereafter in this section referred to as the original asset) and the assessee has,at any time within a period of six months after the date of such transfer, invested the whole orany part of the net consideration in any of the bonds, debentures, shares of a public company orunits of any mutual fund referred to in clause (23D) of section 10, specified by the Board in this


behalf by notification in the Official Gazette (such assets hereafter in this section referred to asthe specified securities, the capital gain shall be dealt with in accordance with the followingprovisions of this section, that is to say, - (a) If the cost of the specified securities is not less thanthe net consideration in respect of the original asset, the whole of such capital gain shall not becharged under section 45;

(b) If the cost of the specified securities is less than the net consideration in respect of theoriginal asset, so much of the capital gain as bears to the whole of the capital gain the sameproportion as the cost of acquisition of the specified securities bears to the net consideration shallnot be charged under section 45.

(2) Where the specified securities are transferred or converted (otherwise than by transfer) intomoney at any time within a period of three years from the date of their acquisition, the amount ofcapital gain arising from the transfer of the original asset not charged under section 45 on thebasis of the cost of such specified securities as provided in clause (a) or clause (b) of sub-section(1) shall be deemed to be the income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which the specified securities are transferred orconverted (otherwise than by transfer) into money.

Explanation : In a case where the original asset is transferred and the assessee invests the wholeor any part of the net consideration in respect of the original asset in any specified securities andsuch assessee takes any loan or advance on the security of such specified securities, he shall bedeemed to have converted (otherwise than by transfer) such specified securities into money onthe date on which such loan or advance is taken.

(3) Where the cost of the specified securities has been taken into account for the purposes ofclause (a) or clause (b) of sub-section (1), a rebate with reference to such cost shall not beallowed under section 88.

Explanation : For the purposes of this section, - (a) "Cost", in relation to any specified securities,means the amount invested in such specified securities out of the net consideration received oraccruing as a result of the transfer of the original asset;

(b) "Net consideration", in relation to the transfer of a capital asset, means the full value of theconsideration received or accruing as a result of the transfer of the capital asset as reduced by theexpenditure incurred wholly and exclusively in connection with such transfer.

113. Capital gain on transfer of long-term capital assets notto be charged in certain cases.

§ 113. Capital gain on transfer of long-term capital assets not to be charged in certain cases.Section 54EB


CAPITAL GAIN ON TRANSFER OF LONG-TERM CAPITAL ASSETS NOT TO BECHARGED IN CERTAIN CASES.

(1) Where the capital gain arises from the transfer of a long-term capital asset (the capital assetso transferred being hereafter in this section referred to as the original asset), and the assesseehas, at any time within a period of six months after the date of such transfer invested the wholeor any part of capital gains, in any of the assets specified by the Board in this behalf bynotification in the Official Gazette (such assets hereafter in this section referred to as the long-term specified assets), the capital gain shall be dealt with in accordance with the followingprovisions of this section, that is to say, - (a) If the cost of the long-term specified asset is lessthan the capital gain arising from the transfer of the original asset, the whole of such capital gainshall not be charged under section 45;

(b) If the cost of the long-term specified asset is less than the capital gain arising from thetransfer of the original asset, so much of the capital gain as bears to the whole of the capital gainthe same proportion as the cost of acquisition of the long-term specified asset bears to the wholeof the capital gain, shall not be charged under section 45.

Explanation : "cost", in relation to any long-term specified asset, means the amount invested insuch specified asset out of capital gains received or accruing as a result of the transfer of theoriginal asset.

(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer)into money at any time within a period of seven years from the date of its acquisition, the amountof capital gains arising from the transfer of the original asset not charged under section 45 on thebasis of the cost of such long-term specified asset as provided in clause (a), or as the case maybe, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head"Capital gains" relating to long-term capital assets of the previous year in which the long-termspecified asset is transferred or converted (otherwise than by transfer) into money.

Explanation : In a case where the original asset is transferred and the assessee invests the wholeor any part of the capital gain received or accrued as a result of transfer of the original asset inany long-term specified asset and such assessee takes any loan or advance on the security of suchspecified asset, he shall be deemed to have converted (otherwise than by transfer) such specifiedasset into money on the date on which such loan or advance is taken.

(3) Where the cost of the long-term specified asset has been taken into account for the purposesof clause (a) or clause (b) of sub-section (1), a deduction from the amount of income-tax withreference to such cost shall not be allowed under section 88.

114. Capital gain on transfer of certain capital assets not tobe charged in case of investment in residential house.


§ 114. Capital gain on transfer of certain capital assets not to be charged in case of investment inresidential house.Section 54F

CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGEDIN CASE OF INVESTMENT IN RESIDENTIAL HOUSE.

(1) Subject to the provisions of sub-section (4), where in the case of an assessee being anindividual or a Hindu undivided family, the capital gain arises from the transfer of any long-termcapital asset, not being a residential house (hereafter in this section referred to as the originalasset), and the assessee has, within a period of one year before or two years after the date onwhich the transfer took place purchased, or has within a period of three years after that dateconstructed 842a , a residential house (hereafter in this section referred to as the new asset), thecapital gain shall be dealt with in accordance with the following provisions of this section, that isto say, - (a) If the cost of the new asset is not less than the net consideration in respect of theoriginal asset, the whole of such capital gain shall not be charged under section 45;

(b) If the cost of the new asset is less than the net consideration in respect of the original asset, somuch of the capital gain as bears to the whole of the capital gain the same proportion as the costof the new asset bears to the net consideration, shall not be charged under section 45 :

Provided that nothing contained in this sub-section shall apply where the assessee owns on thedate of the transfer of the original asset, or purchases, within the period of one year after suchdate, or constructs, within the period of three years after such date, any residential house, theincome from which is chargeable under the head "Income from house property", other than thenew asset.

Explanation : For the purposes of this section, - "Net consideration", in relation to the transfer ofa capital asset, means the full value of the consideration received or accruing as a result of thetransfer of the capital asset as reduced by any expenditure incurred wholly and exclusively inconnection with such transfer.

(2) Where the assessee purchases, within the period of two years after the date of the transfer ofthe original asset, or constructs, within the period of three years after such date, any residentialhouse, the income from which is chargeable under the head "Income from house property", otherthan the new asset, the amount of capital gain arising from the transfer of the original asset notcharged under section 45 on the basis of the cost of such new asset as provided in clause (a), or,as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable underthe head "Capital gains" relating to long-term capital assets of the previous year in which suchresidential house is purchased or constructed.

(3) Where the new asset is transferred within a period of three years from the date of its purchaseor, as the case may be, its construction, the amount of capital gain arising from the transfer of theoriginal asset not charged under section 45 on the basis of the cost of such new asset as providedin clause (a) or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income


chargeable under the head "Capital gains" relating to long-term capital assets of the previous yearin which such new asset is transferred.

(4) The amount of the net consideration which is not appropriated by the assessee towards thepurchase of the new asset made within one year before the date on which the transfer of theoriginal asset took place, or which is not utilised by him for the purchase or construction of thenew asset before the date of furnishing the return of income under section 139, shall be depositedby him before furnishing such return [such deposit being made in any case not later than the duedate applicable in the case of the assessee for furnishing the return of income under sub-section(1) of section 139] in an account in any such bank or institution as may be specified in, andutilised in accordance with, any scheme which the Central Government may, by notification inthe Official Gazette, frame in this behalf and such return shall be accompanied by proof of suchdeposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by theassessee for the purchase or construction of the new asset together with the amount so depositedshall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly forthe purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) The amount by which - (a) The amount of capital gain arising from the transfer of theoriginal asset not charged under section 45 on the basis of the cost of the new asset as providedin clause (a) or, as the case may be, clause (b) of sub-section (1), exceeds,

(b) The amount that would not have been so charged had the amount actually utilised by theassessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset, shall be charged under section 45 as income of theprevious year in which the period of three years from the date of the transfer of the original assetexpires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordancewith the scheme aforesaid.

115. Exemption of capital gains on transfer of assets in casesof shifting of industrial undertaking from urban area.

§ 115. Exemption of capital gains on transfer of assets in cases of shifting of industrialundertaking from urban area.Section 54G

EXEMPTION OF CAPITAL GAINS ON TRANSFER OF ASSETS IN CASES OF SHIFTINGOF INDUSTRIAL UNDERTAKING FROM URBAN AREA.

(1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer ofa capital asset, being machinery or plant or building or land or any rights in building or land usedfor the purposes of the business of an industrial undertaking situate in an urban area, effected inthe course of, or in consequence of, the shifting of such industrial undertaking (hereafter in this


section referred to as the original asset) to any area (other than an urban area) and the assesseehas within a period of one year before or three years after the date on which the transfer tookplace, - (a) Purchased new machinery or plant for the purposes of business of the industrialundertaking in the area to which the said undertaking is shifted;

(b) Acquired building or land or constructed building for the purposes of his business in the saidarea;

(c) Shifted the original asset and transferred the establishment of such undertaking to such area;and

(d) Incurred expenses on such other purpose as may be specified in a scheme framed by theCentral Government for the purposes of this section, then, instead of the capital gain beingcharged to income-tax as income of the previous year in which the transfer took place, it shall bedealt with in accordance with the following provisions of this section, that is to say, - (i) If theamount of the capital gain is greater than the cost and expenses incurred in relation to all or anyof the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in thissection referred to as the new asset), the difference between the amount of the capital gain andthe cost of the new asset shall be charged under section 45 as the income of the previous year;and for the purpose of computing in respect of the new asset any capital gain arising from itstransfer within a period of three years of its being purchased, acquired, constructed ortransferred, as the case may be, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to, or less than, the cost of the new asset, the capitalgain shall not be charged under section 45; and for the purpose of computing in respect of thenew asset any capital gain arising from its transfer within a period of three years of its beingpurchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced bythe amount of the capital gain.

Explanation : In this sub-section, "urban area" means any such area within the limits of amunicipal corporation or municipality as the Central Government may, having regard to thepopulation, concentration of industries, need for proper planning of the area and other relevantfactors, by general or special order, declare to be an urban area for the purposes of this sub-section.

(2) The amount of capital gain which is not appropriated by the assessee towards the cost andexpenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within one year before the date on which the transfer of the original asset took place,or which is not utilised by him for all or any of the purposes aforesaid before the date offurnishing the return of income under section 139, shall be deposited by him before furnishingsuch return [such deposit being made in any case not later than the due date applicable in thecase of the assessee for furnishing the return of income under sub-section (1) of section 139] inan account in any such bank or institution as may be specified in, and utilised in accordance with,any scheme 848 which the Central Government may, by notification in the Official Gazette,


frame in this behalf and such return shall be accompanied by proof of such deposit, and, for thepurposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any ofthe purposes aforesaid together with the amount, so deposited shall be deemed to be the cost ofthe new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly forall or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the periodspecified in that sub-section, then, - (i) The amount not so utilised shall be charged under section45 as the income of the previous year in which the period of three years from the date of thetransfer of the original asset expires; and

(ii) The assessee shall be entitled to withdraw such amount in accordance with the schemeaforesaid.

116. Extension of time for acquiring new asset ordepositing or investing amount of capital gain.

§116.Extension of time for acquiring new asset or depositing or investingamount of capital gain.Section 54H

EXTENSION OF TIME FOR ACQUIRING NEW ASSET OR DEPOSITING OR INVESTING AMOUNT OFCAPITAL GAIN.

Notwithstanding anything contained in sections 54, 54B, 54D, 54EA, 54EB and54F, where the transfer of the original asset is by way of compulsoryacquisition under any law and the amount of compensation awarded for suchacquisition is not received by the assessee on the date of such transfer, theperiod for acquiring the new asset by the assessee referred to in thosesections or, as the case may be, the period available to the assessee underthose sections for depositing or investing the amount of capital gain inrelation to such compensation as is not received on the date of the transfer,shall be reckoned from the date of receipt of such compensation :

Provided that where the compensation in respect of transfer of the originalasset by way of compulsory acquisition under any law is received before the1st day of April, 1991, the aforesaid period or periods, if expired, shallextend upto the 31st day of December, 1991.

117. Meaning of "Adjusted", "Cost of improvement"


and "Cost of Acquisition".

§117.Meaning of "Adjusted", "Cost of improvement" and "Cost of Acquisition".Section 55

MEANING OF "ADJUSTED", "COST OF IMPROVEMENT" AND "COST OF ACQUISITION".

(1) For the purposes of sections 48 and 49 , - (a) "Cost of any improvement",- (1) In relation to a capital asset being goodwill of a business or a rightto manufacture, produce or process any article or thing shall be taken to benil; and

(2) In relation to any other capital asset, - (i) Where the capital assetbecame the property of the previous owner 852 or the assessee before the 1stday of April, 1981, means all expenditure of a capital nature incurred inmaking any additions or alterations to the capital asset on or after the saiddate by the previous owner or the assessee, and

(ii) In any other case, means all expenditure of a capital nature incurred inmaking any additions or alterations to the capital asset by the assessee afterit became his property, and, where the capital asset became the property ofthe assessee by any of the modes specified in sub-section (1) of section 49,by the previous owner, but does not include any expenditure which isdeductible in computing the income chargeable under the head "Interest onsecurities", 853c "Income from house property", "Profits and gains of businessor profession", or "Income from other sources", and the expression"improvement" shall be construed accordingly.

(2) For the purposes of sections 48 and 49, "cost of acquisition", - (a) Inrelation to a capital asset, being goodwill of a business, or a right tomanufacture, produce or process any article or thing, tenancy rights, stagecarriage permits or loom hours, - (i) In the case of acquisition of suchasset by the assessee by purchase from a previous owner, means the amount ofthe purchase price; and

(ii) In any other case [not being a case falling under sub-clauses (i) to (iv)of sub-section (1) of section 49], shall be taken to be nil;

(aa) In a case where, by virtue of holding a capital asset, being a share orany other security, within the meaning of clause (h) of section 2 of theSecurities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in thisclause referred to as the financial asset), the assessee - (A) Becomesentitled to subscribe to any additional financial asset; or


(B) Is allotted any additional financial asset without any payment, then,subject to the provisions of sub-clauses (i) and (ii) of clause (b), - (i) Inrelation to the original financial asset, on the basis of which the assesseebecomes entitled to any additional financial asset, means the amount actuallypaid for acquiring the original financial asset;

(ii) In relation to any right to renounce the said entitlement to subscribe tothe financial asset, when such right is renounced by the assessee in favour ofany person, shall be taken to be nil in the case of such assessee;

(iii) In relation to the financial asset, to which the assessee has subscribedon the basis of the said entitlement, means the amount actually paid by himfor acquiring such asset; and

(iiia) In relation to the financial asset allotted to the assessee without anypayment and on the basis of holding of any other financial asset, shall betaken to be nil in the case of such assessee;

(iv) In relation to any financial asset purchased by any person in whosefavour the right to subscribe to such asset has been renounced, means theaggregate of the amount of the purchase price paid by him to the personrenouncing such right and the amount paid by him to the company orinstitution, as the case may be, for acquiring such financial asset;

(b) In relation to any other capital asset, - (i) Where the capital assetbecame the property of the assessee before the 1st day of April, 1981, meansthe cost of acquisition of the asset to the assessee or the fair market valueof the asset as on the 1st day of April, 1981, at the option of the assessee;

(ii) Where the capital asset became the property of the assessee by any of themodes specified in sub-section (1) of section 49, and the capital asset becamethe property of the previous owner before the 1st day of April, 1981, meansthe cost of the capital asset to the previous owner or the fair market valueof the asset on the 1st day of April, 1981, at the option of the assessee;

(iii) Where the capital asset became the property of the assessee on thedistribution of the capital assets of a company on its liquidation and theassessee has been assessed to income-tax under the head "Capital gains" inrespect of that asset under section 46, means the fair market value of theasset on the date of distribution;

(v) Where the capital asset, being a share or a stock of a company, became theproperty of the assessee on - (a) The consolidation and division of all or anyof the share capital of the company into shares of larger amount than itsexisting shares,


(b) The conversion of any shares of the company into stock,

(c) The re-conversion of any stock of the company into shares,

(d) The sub-division of any of the shares of the company into shares ofsmaller amount, or

(e) The conversion of one kind of shares of the company into another kind,means the cost of acquisition of the asset calculated with reference to thecost of acquisition of the shares or stock from which such asset is derived.

(3) Where the cost for which the previous owner acquired the property cannotbe ascertained, the cost of acquisition to the previous owner means the fairmarket value on the date on which the capital asset became the property of theprevious owner.

118. Reference to valuation officer.

§118.Reference to valuation officer.

Section 55A

REFERENCE TO VALUATION OFFICER.

With a view to ascertaining the fair market value of a capital asset for thepurposes of this Chapter, the Assessing Officer may refer the valuation of thecapital asset to a Valuation Officer - (a) In a case where the value of theasset as claimed by the assessee is in accordance with the estimate made by aregistered valuer, if the Assessing Officer is of opinion that the value soclaimed is less than its fair market value;

(b) In any other case, if the Assessing Officer is of opinion - (i) That thefair market value of the asset exceeds the value of the asset as claimed bythe assessee by more than such percentage of the value of the asset as soclaimed or by more than such amount as may be prescribed 859 in this behalf;or

(ii) That having regard to the nature of the asset and other relevantcircumstances, it is necessary so to do, and where any such reference is made,the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A,clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of


section 23, sub-section (5) of section 24, section 34AA, section 35 andsection 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessarymodifications, apply in relation to such reference as they apply in relationto a reference made by the Assessing Officer under sub-section (1) of section16A of that Act.

Explanation : In this section, "Valuation Officer" has the same meaning as inclause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

119. Income from other sources.

§119.Income from other sources.Section 56

INCOME FROM OTHER SOURCES.

(1) Income of every kind 860 which is not to be excluded from the total incomeunder this Act shall be chargeable to income-tax under the head "Income fromother sources", if it is not chargeable to income-tax under any of the headsspecified in section 14, items A to E.

(2) In particular, and without prejudice to the generality of the provisionsof sub-section (1), the following incomes shall be chargeable to income-taxunder the head "Income from other sources", namely :- (i) Dividends;

(ia) Income referred to in sub-clause (viii) of clause (24) of section 2;

(ib) Income referred to in sub-clause (ix) of clause (24) of section 2;

(ic) Income referred to in sub-clause (x) of clause (24) of section 2, if suchincome is not chargeable to income-tax under the head "Profits and gains ofbusiness or profession";

(id) Income by way of interest on securities, if the income is not chargeableto income-tax under the head "Profits and gains of business or profession";

(ii) Income from machinery, plant or furniture belonging to the assessee andlet on hire, if the income is not chargeable to income-tax under the head"Profits and gains of business or profession";

(iii) Where an assessee lets on hire machinery, plant or furniture belongingto him and also buildings, and the letting of the buildings is inseparablefrom the letting of the said machinery, plant or furniture, the income fromsuch letting, if it is not chargeable to income-tax under the head "Profits


and gains of business or profession";

(iv) Income referred to in sub-clause (xi) of clause (24) of section 2, ifsuch income is not chargeable to income-tax under the head "Profits and gainsof business or profession" or under the head "Salaries".

120. Deductions.

§120.Deductions.

Section 57

DEDUCTIONS.

The income chargeable under the head "Income from other sources" shall becomputed after making the following deductions, namely :- (i) In the case ofdividends or interest on securities, any reasonable sum paid by way ofcommission or remuneration to a banker or any other person for the purpose ofrealising such dividend or interest on behalf of the assessee;

(ia) In the case of income of the nature referred to in sub-clause (x) ofclause (24) of section 2 which is chargeable to income-tax under the head"Income from other sources", deductions, so far as may be, in accordance withthe provisions of clause (va) of sub-section (1) of section 36;

(ii) In the case of income of the nature referred to in clauses (ii) and (iii)of sub-section (2) of section 56, deductions, so far as may be, in accordancewith the provisions of sub-clause (ii) of clause (a) and clause (c) of section30, section 31, and sub-sections (1), and (2) of section 32 and subject to theprovisions of section 38;

(iia) In the case of income in the nature of family pension, a deduction of asum equal to thirty-three and one-third per cent of such income or fifteenthousand rupees, whichever is less.

Explanation : For the purposes of this clause, "family pension" means aregular monthly amount payable by the employer to a person belonging to thefamily of an employee in the event of his death;

(iii) Any other expenditure (not being in the nature of capital expenditure)laid out or expended wholly and exclusively for the purpose of making orearning such income :


121. Amounts not deductible.

§121.Amounts not deductible.

Section 58

AMOUNTS NOT DEDUCTIBLE.

(1) Notwithstanding anything to the contrary contained in section 57, the following amountsshall not be deductible in computing the income chargeable under the head "Income from othersources", namely :- (a) In the case of any assessee, - (i) Any personal expenses of the assessee;

(ia) Any expenditure of the nature referred to in sub-section (12) of section 40A;

(ii) Any interest chargeable under this Act which is payable outside India (not being interest on aloan issued for public subscription before the 1st day of April, 1938), on which tax has not beenpaid or deducted under Chapter XVII-B

(iii) Any payment which is chargeable under the head "Salaries" if it is payable outside India,unless tax has been paid thereon or deducted therefrom under Chapter XVII-B;

(1A) The provisions of sub-clause (iia) of clause (a) of section 40 shall, so far as may be, applyin computing the income chargeable under the head "Income from other sources" as they applyin computing the income chargeable under the head "Profits and gains of business or profession".

(2) The provisions of section 40A shall, so far as may be, apply in computing the incomechargeable under the head "Income from other sources" as they apply in computing the incomechargeable under the head "Profits and gains of business or profession".

(3) In the case of an assessee, being a foreign company, the provisions of section 44D shall, sofar as may be, apply in computing the income chargeable under the head "Income from othersources" as they apply in computing the income chargeable under the head "Profits and gains ofbusiness or profession".

(4) In the case of an assessee having income chargeable under the head "Income from othersources," no deduction in respect of any expenditure or allowance in connection with suchincome shall be allowed under any provision of this Act in computing the income by way of anywinnings from lotteries, crossword puzzles, races including horse races, card games and othergames of any sort or from gambling or betting of any form or nature, whatsoever :

Provided that nothing contained in this sub-section shall apply in computing the income of anassessee, being the owner of horses maintained by him for running in horse races, from the


activity of owning and maintaining such horses.

Explanation : For the purposes of this sub-section, "horse race" means a horse race upon whichwagering or betting may be lawfully made.

122. Profits chargeable to tax.

§ 122. Profits chargeable to tax.Section 59

PROFITS CHARGEABLE TO TAX.

(1) The provisions of sub-section (1) of section 41 shall apply, so far as may be, in computing theincome of an assessee under section 56, as they apply in computing the income of an assesseeunder the head "Profits and gains of business or profession".

123. Transfer of Income where there is no transfer of assets.

§ 123. Transfer of Income where there is no transfer of assets.

Section 60

TRANSFER OF INCOME WHERE THERE IS NO TRANSFER OF ASSETS.

All income arising to any person by virtue of a transfer whether revocable or not and whethereffected before or after the commencement of this Act shall, where there is no transfer of theassets from which the income arises, be chargeable to income-tax as the income of the transferorand shall be included in his total income.

124. Revocable transfer of assets.

§ 124. Revocable transfer of assets.Section 61

REVOCABLE TRANSFER OF ASSETS.

All income arising to any person by virtue of a revocable transfer of assets shall be chargeable toincome-tax as the income of the transferor and shall be included in his total income.


125. Transfer irrevocable for a specified period.

§ 125. Transfer irrevocable for a specified period.Section 62

TRANSFER IRREVOCABLE FOR A SPECIFIED PERIOD.

(1) The provisions of section 61 shall not apply to any income arising to any person by virtue ofa transfer - (i) By way of trust which is not revocable during the lifetime of the beneficiary, and,in the case of any other transfer, which is not revocable during the life time of the transferee; or

(ii) Made before the day of April, 1961, which is not revocable for a period exceeding six years :

Provided that the transferor derives no direct or indirect benefit from such income in either case.

(2) Notwithstanding anything contained in sub-section (1), all income arising to any person byvirtue of any such transfer shall be chargeable to income-tax as the income of the transferor asand when the power to revoke the transfer arises, and shall then be included in his total income.

126. Transfer and Revocable Transfer Defined.

§ 126. Transfer and Revocable Transfer Defined.Section 63

"TRANSFER" AND "REVOCABLE TRANSFER" DEFINED.

For the purposes of sections 60, 61 and 62 and of this section, - (a) A transfer shall be deemed tobe revocable if - (i) It contains any provision for the re-transfer directly or indirectly of thewhole or any part of the income or assets to the transferor, or

(ii) It, in any way, gives the transferor a right to re-assume power directly or indirectly over thewhole or any part of the income or assets;

(b) "Transfer" includes any settlement, trust, covenant, agreement or arrangement.

127. Income of individual to include Income of Spouse,Minor Child, etc.

§ 127. Income of individual to include Income of Spouse, Minor Child, etc.Section 64


INCOME OF INDIVIDUAL TO INCLUDE INCOME OF SPOUSE, MINOR CHILD, ETC.

(1) In computing the total income of any individual, there shall be included all such income asarises directly or indirectly -

(ii) To the spouse of such individual by way of salary, commission, fees or any other form ofremuneration whether in cash or in kind from a concern in which such individual has asubstantial interest :

Provided that nothing in this clause shall apply in relation to any income arising to the spousewhere the spouse possesses technical or professional qualification and the income is solelyattributable to the application of his or her technical or professional knowledge and experience;

(iv) Subject to the provisions of clause (i) of section 27, to the spouse of such individual fromassets transferred directly or indirectly to the spouse by such individual otherwise than foradequate consideration or in connection with an agreement to live apart;

(vi) To the son"s wife, of such individual from assets transferred directly or indirectly on or afterthe 1st day of June, 1973, to the son"s wife by such individual otherwise than for adequateconsideration;

(vii) To any person or association of persons from assets transferred directly or indirectlyotherwise than for adequate consideration to the person or association of persons by suchindividual to the extent to which the income from such assets is for the immediate or deferredbenefit of his or her spouse.

(viii) To any person or association of persons from assets transferred directly or indirectly on orafter the 1st day of June, 1973, otherwise than for adequate consideration, to the person orassociation of persons by such individual, to the extent to which the income from such assets isfor the immediate or deferred benefit of his son"s wife.

Explanation 1 : For the purposes of clause (ii), the individual in computing whose total incomethe income referred to in that clause is to be included, shall be the husband or wife whose totalincome (excluding the income referred to in that clause) is greater; and where any such income isonce included in the total income of either spouse, any such income arising in any succeedingyear shall not be included in the total income of the other spouse unless the Assessing Officer issatisfied, after giving that spouse an opportunity of being heard, that it is necessary so to do.

Explanation 2 : For the purposes of clause (ii), an individual shall be deemed to have asubstantial interest in a concern - (i) In a case where the concern is a company, if its shares (notbeing shares entitled to a fixed rate of dividend whether with or without a further right toparticipate in profits) carrying not less than twenty per cent of the voting power are, at any timeduring the previous year, owned beneficially by such person or partly by such person and partlyby one or more of his relatives;


(ii) In any other case, if such person is entitled, or such person and one or more of his relativesare entitled in the aggregate, at any time during the previous year, to not less than twenty per centof the profits of such concern.

Explanation 3 : For the purposes of clauses (iv) and (vi), where the assets transferred directly orindirectly by an individual to his spouse or son"s wife (hereafter in this Explanation referred to as"the transferee") are invested by the transferee, - (i) In any business, such investment being notin the nature of contribution of capital as a partner in a firm or, as the case may be, for beingadmitted to the benefits of partnership in a firm, that part of the income arising out of thebusiness to the transferee in any previous year, which bears the same proportion to the income ofthe transferee from the business as the value of the assets aforesaid as on the first day of theprevious year bears to the total investment in the business by the transferee as on the said day;

(ii) In the nature of contribution of capital as a partner in a firm, that part of the interestreceivable by the transferee from the firm in any previous year, which bears the same proportionto the interest receivable by the transferee from the firm as the value of investment aforesaid ason the first day of the previous year bears to the total investment by way of capital contributionas a partner in the firm as on the said day, shall be included in the total income of the individualin that previous year.

(1A) In computing the total income of any individual, there shall be included all such income asarises or accrues to his minor child not being a minor child suffering from any disability of thenature specified in section 80U:

Provided that nothing contained in this sub-section shall apply in respect of such income as arisesor accrues to the minor child on account of any - (a) Manual work done by him; or

(b) Activity involving application of his skill, talent or specialised knowledge and experience.

Explanation : For the purposes of this sub-section, the income of the minor child shall beincluded, - (a) Where the marriage of his parents subsists, in the income of that parent whosetotal income (excluding the income includible under this sub-section) is greater; or

(b) Where the marriage of his parents does not subsist, in the income of that parent whomaintains the minor child in the previous year, and where any such income is once included inthe total income of either parent, any such income arising in any succeeding year shall not beincluded in the total income of the other parent, unless the Assessing Officer is satisfied, aftergiving that parent an opportunity of being heard, that it is necessary so to do.

(2) Where, in the case of an individual being a member of a Hindu undivided family, anyproperty having been the separate property of the individual has, at any time after the 31st day ofDecember, 1969 been converted by the individual into property belonging to the family throughthe act of impressing such separate property with the character of property belonging to thefamily or throwing it into the common stock of the family or been transferred by the individual,


directly or indirectly, to the family otherwise than for adequate consideration (the property soconverted or transferred being hereinafter referred to as the converted property) then,notwithstanding anything contained in any other provision of this Act or in any other law for thetime being in force, for the purpose of computation of the total income of the individual underthis Act for any assessment year commencing on or after the 1st day of April, 1971, -

(a) The individual shall be deemed to have transferred the converted property, through thefamily, to the members of the family for being held by them jointly;

(b) The income derived from the converted property or any part thereof shall be deemed to ariseto the individual and not to the family;

(c) Where the converted property has been the subject-matter of a partition (whether partial ortotal) amongst the members of the family, the income derived from such converted property as isreceived by the spouse on partition shall be deemed to arise to the spouse or minor child fromassets transferred indirectly by the individual to the spouse and the provisions of sub-section (1)shall, so far as may be, apply accordingly:

Provided that the income referred to in clause (b) or clause (c) shall, on being included in thetotal income of the individual, be excluded from the total income of the family or, as the casemay be, the spouse of the individual.

Explanation 1 : For the purposes of sub-section (2), - "Property" includes any interest inproperty, movable or immovable, the proceeds of sale thereof and any money or investment forthe time being representing the proceeds of sale thereof and where the property is converted intoany other property by any method, such other property.

Explanation 2 : For the purposes of this section, "income" includes loss.

128. Liability of person in respect of incomeincluded in the income of another person.

§128.Liability of person in respect of income included in the income ofanother person.

Section 65

LIABILITY OF PERSON IN RESPECT OF INCOME INCLUDED IN THE INCOME OFANOTHER PERSON.

Where, by reason of the provisions contained in this Chapter or in clause (i) of section 27, theincome from any asset or from membership in a firm of a person other than the assessee is


included in the total income of the assessee, the person in whose name such asset stands or whois a member of the firm shall, notwithstanding anything to the contrary contained in any otherlaw for the time being in force, be liable, on the service of a notice of demand by the AssessingOfficer in this behalf, to pay that portion of the tax levied on the assessee which is attributable tothe income so included, and the provisions of Chapter XVII-D shall, so far as may be, applyaccordingly :

Provided that where any such asset is held jointly by more than one person, they shall be jointlyand severally liable to pay the tax which is attributable to the income from the assets so included.

129. Total Income.

§ 129. Total Income.Section 66

TOTAL INCOME.

In computing the total income of an assessee, there shall be included all income on which noincome-tax is payable under Chapter VII.

130. Omitted.


METHOD OF COMPUTING A PARTNER"S SHARE IN THE INCOME OF THE FIRM.

OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4-1993.

131. Method of computing a member"s share in income ofassociation of persons or body of individuals.

§ 131. Method of computing a member"s share in income of association of persons or body ofindividuals.

Section 67A

METHOD OF COMPUTING A MEMBER"S SHARE IN INCOME OF ASSOCIATION OFPERSONS OR BODY OF INDIVIDUALS.


(1) In computing the total income of an assessee who is a member of an association of persons ora body of individuals wherein the shares of the members are determinate and known [other thana company or a co-operative society or society registered under the Societies Registration Act,1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India],whether the net result of the computation of the total income of such association or body is aprofit or a loss, his share (whether a net profit or net loss) shall be computed as follows, namely:- (a) Any interest, salary, bonus, commission or remuneration by whatever name called, paid toany member in respect of the previous year shall be deducted from the total income of theassociation or body and the balance ascertained and apportioned among the members in theproportions in which they are entitled to share in the income of the association or body;

(b) Where the amount apportioned to a member under clause (a) is a profit, any interest, salary,bonus, commission or remuneration aforesaid paid to the member by the association or body inrespect of the previous year shall be added to that amount, and the result shall be treated as themember"s share in the income of the association or body;

(c) Where the amount apportioned to a member under clause (a) is a loss, any interest, salary,bonus, commission or remuneration aforesaid paid to the member by the association or body inrespect of the previous year shall be adjusted against that amount, and the result shall be treatedas the member"s share in the income of the association or body.

(2) The share of a member in the income or loss of the association or body, as computed undersub-section (1), shall, for the purposes of assessment, be apportioned under the various heads ofincome in the same manner in which the income or loss of the association or body has beendetermined under each head of income.

(3) Any interest paid by a member on capital borrowed by him for the purposes of investment inthe association or body shall, in computing his share chargeable under the head "Profits andgains of business or profession" in respect of his share in the income of the association or body,be deducted from his share.

Explanation : In this section "paid" has the same meaning as is assigned to it in clause (2) ofsection 43.

132. Cash Credits.

§ 132. Cash Credits.Section 68

CASH CREDITS.

Where any sum is found credited in the books of an assessee maintained for any previous year,and assessee offers no explanation about the nature and source thereof or the explanation offeredby him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be


charged to income-tax as the income of the assessee of that previous year.

133. Unexplained investments.

§ 133. Unexplained investments.

Section 69

UNEXPLAINED INVESTMENTS.

Where in the financial year immediately preceding the assessment year the assessee has madeinvestments which are not recorded in the books of account, if any, maintained by him for anysource of income, and the assessee offers no explanation about the nature and source of theinvestments or the explanation offered by him is not, in the opinion of the Assessing Officer,satisfactory, the value of the investments may be deemed to be the income of the assessee ofsuch financial year.

134. Unexplained money, etc.

§ 134. Unexplained money, etc.Section 69A

UNEXPLAINED MONEY, ETC.

Where in any financial year the assessee is found to be the owner of any money, bullion,jewellery or other valuable article and such money, bullion, jewellery or valuable article is notrecorded in the books of account, if any, maintained by him for any source of income, and theassessee offers no explanation about the nature and source of acquisition of the money, bullion,jewellery or other valuable article, or the explanation offered by him is not, in the opinion of theAssessing Officer, satisfactory, the money and the value of the bullion, jewellery or othervaluable article may be deemed to be the income of the assessee of such financial year.

135. Amount of Investments, etc., not fully disclosed in booksof accounts.

§ 135. Amount of Investments, etc., not fully disclosed in books of accounts.Section 69B

AMOUNT OF INVESTMENTS, ETC., NOT FULLY DISCLOSED IN BOOKS OFACCOUNT.


Where in any financial year the assessee has made investments or is found to be the owner of anybullion, jewellery, or other valuable article, and the Assessing Officer finds that the amountexpended on making such investments or in acquiring such bullion, jewellery or other valuablearticle exceeds the amount recorded in this behalf in the books of account maintained by theassessee for any source of income, and the assessee offers no explanation about such excessamount or the explanation offered by him is not, in the opinion of the Assessing Officer,satisfactory, the excess amount may be deemed to be the income of the assessee for suchfinancial year.

136. Unexplained expenditure, etc.

§ 136. Unexplained expenditure, etc.Section 69C

UNEXPLAINED EXPENDITURE, ETC.

Where in any financial year an assessee has incurred any expenditure and he offers noexplanation about the source of such expenditure or part thereof, or the explanation, if any,offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount coveredby such expenditure or part thereof, as the case may be, may be deemed to be the income of theassessee for such financial year;

Provided that, notwithstanding anything contained in any other provision of this Act, suchunexplained expenditure which is deemed to be the income of the assessee shall not be allowedas a deduction under any head of income.

137. Amount borrowed or repaid on hundi.

§ 137. Amount borrowed or repaid on hundi.Section 69D

AMOUNT BORROWED OR REPAID ON HUNDI.

Where any amount is borrowed on a hundi from, or any amount due thereon is repaid to, anyperson otherwise than through an account payee cheque drawn on a bank, the amount soborrowed or repaid shall be deemed to be the income of the person borrowing or repaying theamount aforesaid for the previous year in which the amount was borrowed or repaid, as the casemay be :

Provided that, if in any case amount borrowed on hundi has been deemed under the provisions ofthis section to be the income of any person, such person shall not be liable to be assessed again in


respect of such amount under the provisions of this section on repayment of such amount.

Explanation : For the purposes of this section, the amount repaid shall include the amount ofinterest paid on the amount borrowed.

138. Set off of loss from one source against income fromanother source under the same head of income.

§ 138. Set off of loss from one source against income from another source under the same headof income.

Section 70

SET OFF OF LOSS FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCEUNDER THE SAME HEAD OF INCOME.

Save as otherwise provided in this Act, where the net result for any assessment year in respect ofany source falling under any head of income is a loss, the assessee shall be entitled to have theamount of such loss set off against his income from any other source under the same head.

139. Set off of loss from one head against income fromanother.

§ 139. Set off of loss from one head against income from another.Section 71

SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER.

(1) Where in respect of any assessment year, the net result of the computation under any head ofincome, other than "Capital gains", is a loss and the assessee has no income under the head"Capital gains", he shall, subject to the provisions of this Chapter, be entitled to have the amountof such loss set off against his income, if any, assessable for that assessment year under any otherhead 924 .

(2) Where in respect of any assessment year, the net result of the computation under any head ofincome, other than "Capital gains", is a loss and the assessee has income assessable under thehead "Capital gains", such loss may, subject to the provisions of this Chapter, be set off againsthis income, if any, assessable for that assessment year under any head of income including thehead "Capital gains" (whether relating to short-term capital assets or any other capital assets).


(3) Where in respect of any assessment year, the net result of the computation under the head"Capital gains" is a loss and the assessee has income assessable under any other head of income,the assessee shall not be entitled to have such loss set off against income under the other head.

(4) where the net result of the computation under the head "Income from house property" is aloss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st dayof April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter theloss referred to in section 71A shall be set of in the relevant assessment year in accordance withthe provisions of that section.

140. Transitional provisions for set off of loss under the head"Income from house property".

§ 140. Transitional provisions for set off of loss under the head "Income from house property".Section 71A

TRANSITIONAL PROVISIONS FOR SET OFF OF LOSS UNDER THE HEAD "INCOMEFROM HOUSE PROPERTY".

Where in respect of the assessment year commencing on the 1st day of April, 1993 or the 1st dayof April, 1994, the net result of the computation under the head "Income from house property" isa loss, such loss in so far as it relates to interest on borrowed capital referred to in clause (vi) ofsub-section (1) of section 24 and to the extent it has not been set off shall be carried forward andset off in the assessment year commencing on the 1st day of April, 1995, and the balance, if any,in the assessment year commencing on the 1st day of April, 1996, against the income under anyhead.

141. Carry forward and set off of loss from houseproperty.

§141.Carry forward and set off of loss from house property.Section 71B

CARRY FORWARD AND SET OFF OF LOSS FROM HOUSE PROPERTY.

Where for any assessment year the net result of computation under the head"Income from house property" is a loss to the assessee and such loss cannot beor is not wholly set-off against income from any other head of income inaccordance with the provisions of section 71, so much of the loss as has notbeen so set-off or where he has not income under any other head, the wholeloss shall, subject to the other provisions of this Chapter, be carried


forward to the following assessment year and - (i) Be set-off against theincome from house property assessable for that assessment year; and

(ii) The loss, if any, which has not been set-off wholly, the amount of lossnot so set-off shall be carried forward to the following assessment year, notbeing more than eight assessment years immediately succeeding the assessmentyear for which the loss was first computed.

142. Carry forward and set off of business losses.

§142.Carry forward and set off of business losses.Section 72

CARRY FORWARD AND SET OFF OF BUSINESS LOSSES.

(1) Where for any assessment year, the net result of the computation under thehead "Profits and gains of business or profession" is a loss to the assessee,not being a loss sustained in a speculation business, and such loss cannot beor is not wholly set off against income under any head of income in accordancewith the provisions of section 71, so much of the loss as has not been so setoff or, where he has no income under any other head, the whole loss shall,subject to the other provisions of this

Chapter, be carried forward to the following assessment year, and - (i) Itshall be set be off against the profits and gains, if any, of any business orprofession carried on by him and assessable for that assessment year :

Provided that the business or profession for which the loss was originallycomputed continued to be carried on by him in the previous year relevant forthat assessment year; and

(ii) If the loss cannot be wholly set off, the amount of loss not so set offshall be carried forward to the following assessment year and so on 925 ] :

Provided that where the whole or any part of such loss is sustained in anysuch business as is referred to in section 33B which is discontinued in thecircumstances specified in that section, and thereafter, at any time beforethe expiry of the period of three years referred to in that section, suchbusiness is re-established, reconstructed or revived by the assessee, so muchof the loss as is attributable to such business shall be carried forward tothe assessment year relevant to the previous year in which the business is sore-established, reconstructed or revived, and - (a) It shall be set offagainst the profits and gains, if any, of that business or any other businesscarried on by him and assessable for that assessment year; and


(b) If the loss cannot be wholly so set off, the amount of loss not so set offshall, in case the business so re-established, reconstructed or revivedcontinues to be carried on by the assessee, be carried forward to thefollowing assessment year and so on for seven assessment years immediatelysucceeding.

(2) Where any allowance or part thereof is, under sub-section (2) of section32 or sub-section (4) of section 35, to be carried forward, effect shall firstbe given to provisions of this section.

(3) No loss (other than the loss referred to in the proviso to sub-section (1)of this section) shall be carried forward under this section for more thaneight assessment years immediately succeeding the assessment year for whichthe loss was first computed.

143. Provisions relating to carry forward and setoff of accumulated loss and unabsorbed depreciationallowance in amalgamation or demerger, etc.

§143.Provisions relating to carry forward and set off of accumulated loss andunabsorbed depreciation allowance in amalgamation or demerger, etc.Section 72A

PROVISIONS RELATING TO CARRY FORWARD AND SET OFF OF ACCUMULATED LOSS ANDUNABSORBED DEPRECIATION ALLOWANCE IN AMALGAMATION OR DEMERGER, ETC. -

(1) Where there has been an amalgamation of a company owning an industrialundertaking or a ship with another company and the Central Government, on therecommendation of the specified authority, is satisfied that the followingconditions are fulfilled, namely :- (a) The amalgamating company was notimmediately before such amalgamation, financially viable by reason of itsliabilities, losses and other relevant factors;

(b) The amalgamation was in the public interest; and

(c) Such other conditions as the Central Government may, by notification inthe Official Gazette, specify, to ensure that the benefit under this sectionis restricted to amalgamations which would facilitate the rehabilitation orrevival of the business of the amalgamating company, then, the CentralGovernment may make a declaration to that effect, and thereupon,notwithstanding anything contained in any other provision of this Act, the


accumulated loss and the unabsorbed depreciation of the amalgamating companyshall be deemed to be the loss or, as the case may be, allowance fordepreciation of the amalgamated company for the previous year in which theamalgamation was effected, and the other provisions of this Act relating toset off and carry forward of loss and allowance for depreciation shall applyaccordingly.

(2) Notwithstanding anything contained in sub-section (1), the accumulatedloss shall not be set off or carried forward and the unabsorbed depreciationshall not be allowed in the assessment of the amalgamated company unless thefollowing conditions are fulfilled, namely :- (i) During the previous yearrelevant to the assessment year for which such set off or allowance isclaimed, the business of the amalgamating company is carried on by theamalgamated company without any modification or reorganisation or with suchmodification or reorganisation as may be approved by the Central Government toenable the amalgamated company to carry on such business more economically ormore efficiently;

(ii) The amalgamated company furnishes, along with its return of income forthe said assessment year, a certificate from the specified authority to theeffect that adequate steps have been taken by that company for therehabilitation or revival of the business of the amalgamating company.

(3) Where a company owning an industrial undertaking or a ship proposes toamalgamate with any other company and such other company submits the proposedscheme of amalgamation to the specified authority and that authority issatisfied, after examining the scheme and taking into account all relevantfacts, that the conditions referred to in sub-section (1) would be fulfilledif such amalgamation is effected in accordance with such scheme or, as thecase may be, in accordance with such scheme as modified in such manner as thatauthority may specify, it shall intimate such other company that, after theamalgamation is effected in accordance with such scheme or, as the case maybe, such scheme as so modified, it would make (unless there is any materialchange in the relevant facts) a recommendation to the Central Government undersub-section (1).

(4) Where there has been reorganisation of business, whereby, a firm issucceeded by a company fulfilling the conditions laid down in clause (xiii) ofsection 47 or a proprietary concern is succeeded by a company fulfilling theconditions laid down in clause (xiv) of section 47, then, notwithstandinganything contained in any other provisions of this Act, the accumulated lossand the unabsorbed depreciation of the predecessor firm or the proprietaryconcern, as the case may be, shall be deemed to be the loss or allowance fordepreciation of the successor company for the previous year in which businessreorganisation was effected and other provisions of this act relating to set


off and carry forward of loss and allowance for depreciation shall applyaccordingly :-

Provided that if any of the conditions laid down in the proviso to clause(xiii) or the proviso to clause (xiv) to section 47 are not complied with, theset off of loss or allowance of depreciation made in any previous year in thehands of the successor company, shall be deemed to be the income of thecompany chargeable to tax in the year in which such conditions are notcomplied with.

(5) For the purposes of sub-section (4),- (a) "Accumulated loss" means so muchof the loss of the predecessor firm or the proprietary concern, as the casemay be, under the head Profits and gains of business or profession" (not beinga loss sustained in a speculation business) which such predecessor firm or theproprietary concern would have been entitled to carry forward and set offunder the provisions of section 72 if the reorganisation of business had nottaken place,

(b) "Unabsorbed depreciation" means so much of the allowance for depreciationof the predecessor firm or the proprietary concern, as the case may be, whichremains to be allowed and which would have been allowed to the predecessorfirm or the proprietary concern, as the case may be, under the provisions ofthis Act, if the reorganisation of business had not taken place.

144. Losses in speculation business.

§144.Losses in speculation business.Section 73

LOSSES IN SPECULATION BUSINESS.

(1) Any loss, computed in respect of a speculation business 932 carried on bythe assessee, shall not be set off except against profits and gains, if any,of another speculation business.

(2) Where for any assessment year any loss computed in respect of aspeculation business has not been wholly set off under sub-section (1), somuch of the loss as is not so set off or the whole loss where the assessee hadno income from any other speculation business shall, subject to the otherprovisions of this Chapter, be carried forward to the following assessmentyear, and - (i) It shall be set off against the profits and gains, if any, ofany speculation business carried on by him assessable for that assessmentyear; and


(ii) If the loss cannot be wholly so set off, the amount of loss not so setoff shall be carried forward to the following assessment year and so on.

(3) In respect of allowance on account of depreciation or capital expenditureon scientific research, the provisions of sub-section (2) of section 72 shallapply in relation to speculation business as they apply in relation to anyother business.

(4) No loss shall be carried forward under this section for more than eightassessment years immediately succeeding the assessment year for which the losswas first computed.

Explanation : Where any part of the business of a company other than a companywhose gross total income consists mainly of income which is chargeable underthe heads "Interest on securities", "Income from house property", "Capitalgains" and "Income from other sources", or a company the principal business ofwhich is the business of banking or the granting of loans and advances)consists in the purchase and sale of shares of other companies, such companyshall, for the purposes of this section, be deemed to be carrying on aspeculation business to the extent to which the business consists of thepurchase and sale of such shares.

145. Losses under the head "Capital Gains".

§145.Losses under the head "Capital Gains".

Section 74

LOSSES UNDER THE HEAD "CAPITAL GAINS".

(1) Where in respect of any assessment year, the net result of the computationunder the head "Capital gains" is a loss to the assessee, the whole lossshall, subject to the other provisions of this Chapter, be carried forward tothe following assessment year, and - (a) It shall be set off aginst income, ifany, under the head "Capital gains" assessable for that assessment year; and

(b) If the loss cannot be wholly so set off, the amount of loss not so set offshall be carried forward to the following assessment year, and so on.

(2) No loss shall be carried forward under this section for more than eightassessment years immediately succeeding the assessment year for which the losswas first computed.


(3) Any loss computed under the head "Capital gains" in respect of theassessment year commencing on the 1st day of April, 1987, or any earlierassessment year which is carried forward in accordance with the provisions ofthis section as it stood before the 1st day of April, 1988, shall be dealtwith in the assessment year commencing on the 1st day of April, 1988, or anysubsequent assessment year as follows :- (a) In so far as such loss relates toshort-term capital assets, it shall be carried forward and set off inaccordance with the provisions of sub-sections (1) and (2);

(b) In so far as such loss relates to long-term capital assets, it shall bereduced by the deductions specified in sub-section (2) of section 48 and thereduced amount shall be carried forward and set off in accordance with theprovisions of sub-section (1) but such carry forward shall not be allowedbeyond the fourth assessment year immediately succeeding the assessment yearfor which the loss was first computed.

146. Losses from certain specified sources fallingunder the head "Income from other Sources"

§146.Losses from certain specified sources falling under the head "Incomefrom other Sources"Section 74A

LOSSES FROM CERTAIN SPECIFIED SOURCES FALLING UNDER THE HEAD "INCOME FROMOTHER SOURCES".

(1) In the case of an assessee, being the owner of horses maintained by himfor running in horse races (such horses being hereafter in this sub-sectionreferred to as race horses), the amount of the loss incurred by the assesseein the activity of owning and maintaining race horses in any assessment yearshall not be set off against income, if any, from any source other than theactivity of owning and maintaining race horses in that year and shall, subjectto the other provisions of this Chapter, be carried forward to the followingassessment year and - (a) It shall be set off against the income, if any, fromthe activity of owning and maintaining race horses assessable for thatassessment year :

Provided that the activity of owning and maintaining race horses is carried onby him in the previous year relevant for that assessment year; and (b) if theloss cannot be wholly so set off, the amount of loss not so set off shall becarried forward to the following assessment year and so on; so, however, thatno portion of the loss shall be carried forward for more than four assessment


years immediately succeeding the assessment year for which the loss was firstcomputed.

Explanation : For the purposes of this sub-section - (a) "Amount of lossincurred by the assessee in the activity of owning and maintaining racehorses" means - (i) In a case where the assessee has no income by way of stakemoney, the amount of expenditure (not being in the nature of capitalexpenditure) laid out or expended by him wholly and exclusively for thepurposes of maintaining race horses;

(ii) In a case where the assessee has income by way of stake money, the amountby which such income falls short of the amount of expenditure (not being inthe nature of capital expenditure) laid out or expended by the assessee whollyand exclusively for the purposes of maintaining race horses;

(b) "Horse race" means a horse race upon which wagering or betting may belawfully made;

(c) Income by way of stake money means the gross amount of prize moneyreceived on a race horse or race horses by the owner thereof on account of thehorse or horses or any one or more of the horses winning or being placedsecond or in any lower position in horse races.

147. Losses of firms.

§147.Losses of firms.Section 75

LOSSES OF FIRMS.

Where the assessee is a firm, any loss in relation to the assessment yearcommencing on or before the 1st day of April, 1992, which could not be set offagainst any other income of the firm and which had been apportioned to apartner of the firm but could not be set off by such partner prior to theassessment year commencing on the 1st day of April, 1993, then, such lossshall be allowed to be set off against the income of the firm subject to thecondition that the partner continues in the said firm and to be carriedforward for set off under sections 70, 71, 72, 73, 74 and 74A.

148. Carry forward and set off of losses in case ofchange in constitution of firm or on succession.


§148.Carry forward and set off of losses in case of change in constitution offirm or on succession.

Section 78

CARRY FORWARD AND SET OFF OF LOSSES IN CASE OF CHANGE IN CONSTITUTION OF FIRMOR ON SUCCESSION.

(1) Where a change has occurred in the constitution of a firm, nothing in thisChapter shall entitle the firm to have carried forward and set off so much ofthe loss proportionate to the share of a retired or deceased partner asexceeds his share of profits, if any, in the firm in respect of the previousyear.

(2) Where any person carrying on any business or profession has been succeededin such capacity by another person otherwise than by inheritance, nothing inthis Chapter shall entitle any person other than the person incurring the lossto have it carried forward and set off against his income.

149. Carry forward and set off of losses in the caseof certain companies.

§149.Carry forward and set off of losses in the case of certain companies.Section 79

CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPANIES.

Notwithstanding anything contained in this Chapter, where a change inshareholding has taken place in a previous year in the case of a company, notbeing a company in which the public are substantially interested, no lossincurred in any year prior to the previous year shall be carried forward andset off against the income of the previous year unless - (a) On the last dayof the previous year the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons whobeneficially held shares of the company carrying not less than fifty-one percent of the voting power on the last day of the year or years in which theloss was incurred :

Provided that nothing contained in this section shall apply to a case where achange in the said voting power takes place in a previous year consequent uponthe death of a shareholder or on account of transfer of shares by way of giftto any relative of the shareholder making such gift.


Provided further that nothing contained in this section shall apply to anychange in the shareholding of an Indian company which is a subsidiary of aforeign company as a result of amalgamation or demerger of a foreign companysubject to the condition that fifty-one per cent shareholders of theamalgamating or demerged foreign company continue to be the shareholders ofthe amalgamated or the resulting foreign company.

150. Submission of return for losses.

§150.Submission of return for losses.Section 80

SUBMISSION OF RETURN FOR LOSSES.

Notwithstanding anything contained in this Chapter, no loss which has not beendetermined in pursuance of a return filed in accordance with the provisions ofsub-section (3) of section 139, shall be carried forward and set off undersub-section (1) of section 72 or sub-section (2) of section 73 or Sub-section(1) or sub-section (3) of section 74 or sub-section (3) of section 74A.

151. Deductions to be made in computing totalincome.

§151.Deductions to be made in computing total income.Section 80A

DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME.

(1) In computing the total income of an assessee, there shall be allowed fromhis gross total income, in accordance with and subject to the provisions ofthis Chapter, the deductions specified in sections 80C to 80U.

(2) The aggregate amount of the deductions under this Chapter shall not, inany case, exceed the gross total income of the assessee.

(3) Where, in computing the total income of an association of persons or abody of individuals, any deduction is admissible under section 80G or section80GGA or section 80HH or section 80HHA or section 80HHB or section 80HHC orsection 80HHD or section 80-I or section 80-IA, 80-IB or section 80J orsection 80JJ, no deduction under the same section shall be made in computingthe total income of a member of the association of persons or body of


individuals in relation to the share of such member in the income of theassociation of persons or body of individuals.

152. Omitted.

§152.Omitted.Section 80AA

COMPUTATION OF DEDUCTION UNDER SECTION 80M.


153. Deductions to be made with reference to theIncome included in the gross total income.

§153.Deductions to be made with reference to the Income included in the grosstotal income.Section 80AB

DEDUCTIONS TO BE MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTALINCOME.

Where any deduction is required to be made or allowed under any sectionincluded in this Chapter under the heading "C. - Deductions in respect ofcertain incomes" in respect of any income of the nature specified in thatsection which is included in the gross total income of the assessee, then,notwithstanding anything contained in that section, for the purpose ofcomputing the deduction under that section, the amount of income of thatnature as computed in accordance with the provisions of this Act (beforemaking any deduction under this Chapter) shall alone be deemed to be theamount of income of that nature which is derived or received by the assesseeand which is included in his gross total income.

154. Definitions.

§154.Definitions.Section 80B

DEFINITIONS.

In this Chapter - (1) "Gross total income" means the total income computed in


accordance with the provisions of this Act, before making any deduction underthis Chapter;

155. Omitted.


DEDUCTION IN RESPECT OF LIFE INSURANCE PREMIA, CONTRIBUTIONS TO PROVIDENTFUND, ETC.


156. Omitted.

§156.Omitted.

Section 80CC

DEDUCTION IN RESPECT OF INVESTMENT IN CERTAIN NEW SHARES.

OMITTED BY THE FINANCE (NO. 2) ACT, 1996, W.R.E.F. 1-4-1993

157. Deduction in respect of deposits under nationalsavings scheme or payment to a deferred annuityplan.

§157.Deduction in respect of deposits under national savings scheme orpayment to a deferred annuity plan.Section 80CCA

DEDUCTION IN RESPECT OF DEPOSITS UNDER NATIONAL SAVINGS SCHEME OR PAYMENT TO ADEFERRED ANNUITY PLAN.

(1) Where an assessee, being - (a) An individual, or

(b) A Hindu undivided family, has in the previous year - (i) Deposited anyamount in accordance with such scheme as the Central Government may, bynotification 995 in the Official Gazette, specify in this behalf; or


(ii) Paid any amount to effect or to keep in force a contract for such annuityplan of the Life Insurance Corporation as the Central Government may, bynotification in the Official Gazette, specify 996 , out of his incomechargeable to tax, he shall, in accordance with, and subject to, theprovisions of this section, be allowed a deduction in the computation of histotal income of the whole of the amount deposited or paid (excluding interestor bonus accrued or credited to the assessee"s account, if any) as does notexceed the amount of twenty thousand rupees in the previous year :

Provided that in relation to - (a) The assessment years commencing on the 1stday of April, 1989 and the 1st day of April, 1990, this sub-section shall haveeffect as if for the words "twenty thousand rupees", the words "thirtythousand rupees" had been substituted;

(b) The assessment year commencing on the 1st day of April, 1991 andsubsequent assessment years, this sub-section shall have effect as if for thewords "twenty thousand rupees", the words "forty thousand rupees" had beensubstituted :

Provided further that no deduction under this sub-section shall be allowed inrelation to any amount deposited or paid under clauses (i) and (ii) on orafter the 1st day of April, 1992. (2) Where any amount - (a) Standing to thecredit of the assessee under the scheme referred to in clause (i) of sub-section (1) in respect of which a deduction has been allowed under sub-section(1) together with the interest accrued on such amount is withdrawn in whole orin part in any previous year, or

(b) Is received on account of the surrender of the policy or as annuity orbonus in accordance with the annuity plan of the Life Insurance Corporation inany previous year, an amount equal to the whole of the amount referred to inclause (a) or clause (b) shall be deemed to be the income of the assessee ofthat previous year in which such withdrawal is made or, as the case may be,amount is received, and shall, accordingly, be chargeable to tax as the incomeof that previous year 998 :

Provided that nothing contained in this sub-section shall apply to any amountreceived by the assessee on account of the surrender of the policy inaccordance with the terms of the annuity plan of the Life InsuranceCorporation where the assessee elects to surrender before the 1st day ofOctober, 1992, the said annuity plan in respect of which he had paid anyamount under clause (ii) of sub-section (1) before the 1st day of April, 1992.

(3) Notwithstanding anything contained in any other provision of this Act,where a partition has taken place among the members of a Hindu undivided


family or where an association of persons has been dissolved after a deductionhas been allowed under sub-section (1), the provisions of sub-section (2)shall apply as if the person in receipt of income referred to therein is theassessee.

Explanation I : For the removal of doubts, it is hereby declared that intereston the deposits made under the scheme referred to in clause (i) of sub-section(1) Shall not be chargeable to tax except in the manner and to the extentspecified in sub-section (2).

Explanation II : For the purposes of this section, "Life InsuranceCorporation" shall have the same meaning as in clause (a) of sub-section (8)of section 80C.

158. Deduction in respect of investment made underequity linked savings scheme.

§158.Deduction in respect of investment made under equity linked savingsscheme.Section 80CCB

DEDUCTION IN RESPECT OF INVESTMENT MADE UNDER EQUITY LINKED SAVINGS SCHEME.

(1) Where an assessee, being - (a) An individual, or

(b) A Hindu undivided family, has acquired in the previous year, out of hisincome chargeable to tax, units of any Mutual Fund specified under clause(23D) of section 10 or of the Unit Trust of India established under the UnitTrust of India Act, 1963 (52 of 1963), under any plan formulated in accordancewith such scheme 999f as the Central Government may, by notification in theOfficial Gazette, specify in this behalf (hereafter in this section referredto as the Equity Linked Savings Scheme), he shall, in accordance with, andsubject to, the provisions of this section, be allowed a deduction in thecomputation of his total income of so much of the amount invested as does notexceed the amount of ten thousand rupees in the previous year :

Provided that no deduction shall be allowed in relation to any amount investedunder this sub-section on or after the 1st day of April, 1992.

(2) Where any amount invested by the assessee in the units issued under a planformulated under the Equity Linked Savings Scheme in respect of which adeduction has been allowed under sub-section (1) is returned to him in wholeor in part either by way of repurchase of such units or on the termination of


the plan, by the Fund or the Trust, as the case may be, in any previous year,it shall be deemed to be the income of the assessee of that previous year andchargeable to tax accordingly.

(3) Notwithstanding anything contained in any other provision of this Act,where a partition has taken place among the members of a Hindu undividedfamily or where an association of persons has been dissolved after a deductionhas been allowed under sub-section (1), the provisions of sub-section (2)shall apply as if the person in receipt of income referred to therein is theassessee.

159. Deduction in respect of contribution to certainpension funds.

§159.Deduction in respect of contribution to certain pension funds.Section 80CCC

DEDUCTION IN RESPECT OF CONTRIBUTION TO CERTAIN PENSION FUNDS.

(1) Where an assessee being an individual has in the previous year paid ordeposited any amount out of his income chargeable to tax to effect or keep inforce a contract for any annuity plan of Life Insurance Corporation of Indiafor receiving pension from the fund referred to in clause (23AAB) of section10, he shall, in accordance with, and subject to, the provisions of thissection, be allowed a deduction in the computation of his total income, of thewhole of the amount paid or deposited (excluding interest or bonus accrued orcredited to the assessee"s account, if any) as does not exceed the amount often thousand rupees in the previous year.

(2) Where any amount standing to the credit of the assessee in a fund,referred to in sub-section (1) in respect of which a deduction has beenallowed under sub-section (1), together with the interest or bonus accrued orcredited to the assessee"s account, if any, is received by the assessee or hisnominee-

(a) On account of the surrender of the annuity plan whether in whole or inpart, in any previous year, or

(b) As pension received from the annuity plan, an amount equal to the whole ofthe amount referred to in clause (a) or clause (b) shall be deemed to be theincome of the assessee or his nominee, as the case may be, in that previousyear in which such withdrawal is made or, as the case may be, pension isreceived, and shall accordingly be chargeable to tax as income of that


previous year.

(3) Where any amount paid or deposited by the assessee has been taken intoaccount for the purposes of this section, a rebate with reference to suchamount shall not be allowed under section 88.

160. Deduction in respect of medical insurancepremia.

§160.Deduction in respect of medical insurance premia.Section 80D

DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIA.

(1) In computing the total income of an assessee, there shall be deducted, atthe following rates, such sum as is specified in sub-section (2) and paid byhim by cheque in the previous year out of his income chargeable to tax, namely:- (i) In a case where such sum does not exceed in the aggregate ten thousandrupees, the whole of such sum; and

(ii) In any other case, ten thousand rupees.

Provided that where the sum specified in sub-section (2) is paid to effect orto keep in force an insurance on the health of the assessee, or his wife orher husband or dependant parents or any member of the family in case theassessee is a Hindu undivided family, and who is a senior citizen, theprovisions of this section shall have effect as if for the words "ten thousandrupees", the words "fifteen thousand rupees" had been substituted.

(2) The sum referred to in sub-section (1) shall be the following, namely :-(a) Where the assessee is an individual, any sum paid to effect or to keep inforce an insurance on the health of the assessee or on the health of the wifeor husband, dependent parents or dependent children of the assessee;

(b) Where the assessee is a Hindu undivided family, any sum paid to effect orto keep in force an insurance on the health of any member of the family;

Provided that such insurance shall be in accordance with a scheme 1001c framedin this behalf by the General Insurance Corporation of India formed undersection 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of1972), and approved by the Central Government in this behalf.

Explanation : For the purpose of this section, "senior citizen" shall have the


meaning assigned to it in the Explanation to section 80DDB.

161. Deduction in respect of maintenance includingmedical treatment of handicapped dependent.

§161.Deduction in respect of maintenance including medical treatment ofhandicapped dependent.Section 80DD

DEDUCTION IN RESPECT OF MAINTENANCE INCLUDING MEDICAL TREATMENT OF HANDICAPPEDDEPENDENT.

(1) In computing the total income of an assessee who is a resident of India,being an individual or a Hindu undivided family, there shall be deducted, inaccordance with the subject to the provisions of this section, the amount -(a) Of expenditure incurred by way of medical treatment (including nursing),training and rehabilitation of a handicapped dependent; or

(b) Paid or deposited under any scheme framed in this behalf by the LifeInsurance Corporation or Unit Trust of India subject to the conditionsspecified in sub-section (2) and approved by the Board in this behalf for themaintenance of handicapped dependant, out of his income chargeable to tax :

Provided that no such amount shall exceed forty thousand rupees in theaggregate under clause (a) or clause (b) or both.

(2) The deduction under clause (b) of sub-section (1) shall be allowed only ifthe following conditions are fulfilled, namely :- (a) The scheme referred toin clause (b) of sub-section (1) provides for payment of annuity or lump sumamount for the benefit of a handicapped dependant in the event of the death ofthe individual or the member of the Hindu undivided family in whose namesubscription to the scheme has been made;

(b) The assessee nominates either the handicapped dependant or any otherperson or a trust to receive the payment on his behalf, for the benefit of thehandicapped dependant.

(3) If the handicapped dependant predeceases the individual or the member ofthe Hindu undivided family referred to in sub-section (2), an amount equal tothe amount paid or deposited under clause (b) of sub-section (1) shall bedeemed to be the income of the assessee of the previous year in which suchamount is received by the assessee and shall accordingly be chargeable to taxas the income of that previous year.


(4) In this section, - (a) "Government hospital" includes a departmentaldispensary whether full-time or part-time established and run by a Departmentof the Government for the medical attendance and treatment of a class orclasses of Government servants and members of their families, a hospitalmaintained by a local authority and any other hospital maintained by a localauthority and any other hospital with which arrangements have been made by theGovernment for the treatment of Government servants;

(b) "Handicapped dependant" means a person who - (i) is a relative of theindividual or, as the case may be, is a member of the Hindu undivided familyand is not dependant on any person other than such individual or Hinduundivided family for his support or maintenance; and

(ii) Is suffering from a permanent physical disability (including blindness)or is subject to mental retardation, being a permanent physical disability ormental retardation specified in the rules made by the Board for the purposesof this section, which is certified by a physician, a surgeon, an oculist or apsychiatrist, as the case may be, working in a Government hospital, and whichhas the effect of reducing considerably such person"s capacity for normal workor engaging in gainful employment or occupation;

(c) "Life Insurance Corporation" shall have the same meaning as in clause(iii) of sub-section (8) of section 88; (d) "Unit Trust of India" means theUnit Trust of India established under the Unit Trust of India Act, 1963 (52 of1963).

162. Deduction in respect of medical treatment, etc.

§162.Deduction in respect of medical treatment, etc.Section 80DDB

DEDUCTION IN RESPECT OF MEDICAL TREATMENT, ETC.

Where an assessee who is resident in India has, during the previous year,actually incurred any expenditure for the medical treatment of such disease orailment as may be specified in the rules made in this behalf by the Board -(a) For himself or a dependant relative, in case the assessee is anindividual; or

(b) For any member of a Hindu undivided family, in case the assessee is aHindu undivided family, the assessee shall be allowed a deduction of a sum offifteen thousand rupees in respect of that previous year in which suchexpenditure was incurred :


Provided that no such deduction shall be allowed unless the assessee furnishesa certificate in such form and from such authority as may be prescribed.

Provided further that the deduction under this section shall be reduced by theamount received, if any, under an insurance from an insurer for the medicaltreatment of the person referred to in clause (a) or clause (b) :

Provided also that where the expenditure incurred is in respect of theassessee or his dependant relative or any member of a Hindu undivided familyof the assessee and who is a senior citizen, the provisions of this sectionshall have effect as if for the words "forty thousand rupees", the words"sixty thousand rupees" had been substituted.

Explanation : For the purposes of this section, "dependant" means a person whois not dependant for his support or maintenance on any person other than theassessee.

163. Deduction in respect of repayment of loan takenfor higher education.

§163.Deduction in respect of repayment of loan taken for higher education.Section 80E

DEDUCTION IN RESPECT OF REPAYMENT OF LOAN TAKEN FOR HIGHER EDUCATION.

(1) In computing the total income of an assessee, being an individual, thereshall be deducted, in accordance with and subject to the provisions of thissection, any amount paid by him in the previous year, out of his incomechargeable to tax, by way of repayment of loan, taken by him from anyfinancial institution or any approved charitable institution for the purposeof pursuing his higher education, or interest on such loan :

Provided that the amount which may be so deducted shall not exceed twenty-fivethousand rupees.

(2) The deduction specified in sub-section (1) shall be allowed in computingthe total income in respect of the initial assessment year and sevenassessment years immediately succeeding the initial assessment year or untilloan referred to in sub-section (1) together with interest thereon is paid bythe assessee in full, whichever is earlier.

(3) For the purposes of this section, - (a) "Approved charitable institution"


means an institution specified in, or, as the case may be, an institutionestablished for charitable purposes and notified by the Central Governmentunder clause (23C) of section 10 or an institution referred to in clause (a)of sub-section (2) of section 80G;

(b) "Financial institution" means a banking company to which the BankingRegulation Act, 1949 (10 of 1949) applies (including any bank or bankinginstitution referred to in section 51 of that Act); or any other financialinstitution which the Central Government may, by notification in the OfficialGazette, specify in this behalf;

(c) "Higher education" means full-time studies for any graduate or post-graduate course in engineering, medicine, management or for post-graduatecourse in applied sciences or pure sciences including mathematics andstatistics 1002f ;

(d) "Initial assessment year" means the assessment year relevant to theprevious year, in which the assessee starts repaying the loan or interestthereon.

164. Omitted.

§164.Omitted.Section 80F

DEDUCTION IN RESPECT OF EDUCATIONAL EXPENSES IN CERTAIN CASES.


165. Omitted.

§165.Omitted.Section 80FF

DEDUCTION IN RESPECT OF EXPENSES ON HIGHER EDUCATION IN CERTAIN CASES.


166. Deduction in respect of donations to certainfunds, charitable institutions, etc.


§166.Deduction in respect of donations to certain funds, charitableinstitutions, etc.Section 80G

DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS,ETC.

(1) In computing the total income of an assessee, there shall be deducted, inaccordance with and subject to the provisions of this section, - (i) In a casewhere the aggregate of the sums specified in sub-section (2) includes any sumor sums of the nature specified in sub-clause (iiia) or in sub-clause (iiiaa)or in sub-clause (iiiab) or in sub-clause (iiie) or in sub-clause (iiif) or insub-clause (iiig) or in sub-clause (iiih) sub-clause (iiiha) or sub-clause(iiihb) or sub-clause (iiihc) or sub-clause (iiihd) or sub-clause (iiihe) orsub-clause (iiihf) or sub-clause (iiihg) or sub-clause (iiihh) or sub-clause(iiihi) or in sub-clause (vii) of clause (a) thereof, an amount equal to thewhole of the sum or, as the case may be, sums of such nature plus fifty percent of the balance of such aggregate; and

(ii) In any other case, an amount equal to fifty per cent of the aggregate ofthe sums specified in sub-section (2).

(2) The sums referred to in sub-section (1) shall be the following, namely :-(a) Any sums paid by the assessee in the previous year as donations to - (i)The National Defence Fund set up by the Central Government; or

(ii) The Jawaharlal Nehru Memorial Fund referred to in the Deed of Declarationof Trust adopted by the National Committee at its meeting held on the 17th dayof August, 1964; or

(iii) The Prime Minister"s Drought Relief Fund; or

(iiia) The Prime Minister"s National Relief Fund; or

(iiiaa) The Prime Minister"s Armenia Earthquake Relief Fund; or

(iiiab) The Africa (Public Contributions - India) Fund; or

(iiib) The National Children"s Fund; or

(iiic) The Indira Gandhi Memorial Trust, the deed of declaration in respectwhereof was registered at New Delhi on the 21st day of February, 1985; or

(iiid) The Rajiv Gandhi Foundation, the deed of declaration in respect whereofwas registered at New Delhi on the 21st day of June, 1991; or


(iiie) The National Foundation for Communal Harmony; or

(iiif) A University or any educational institution of national eminence as maybe approved by the prescribed authority in this behalf; or

(iiig) The Maharashtra Chief Minister"s Relief Fund during the periodbeginning on the 1st day of October, 1993 and ending on the 6th day ofOctober, 1993 or to the Chief Minister"s Earthquake Relief Fund, Maharashtra;or

(iiih) Any Zila Saksharta Samiti constituted in any district under thechairmanship of the Collector of that district for the purposes of improvementof primary education in villages and towns in such district and for literacyand post-literacy activities.

Explanation : For the purposes of this sub-clause, "town" means a town whichhas a population not exceeding one lakh according to the last preceding censusof which the relevant figures have been published before the first day of theprevious year; or

(iiiha) The National Blood Transfusion Council or to any State BloodTransfusion Council which has its sole object the control, supervision,regulation or encouragement in India of the services related to operation andrequirements of blood banks.

Explanation : For the purposes of this sub-clause, - (a) "National BloodTransfusion Council" means as society registered under the SocietiesRegistration Act, 1860 (21 of 1960) and has an officer not below the rank ofan Additional Secretary to the Government of India dealing with the AIDSControl Project as its Chairman, by whatever name called;

(b) "State Blood Transfusion Council" means a society registered, inconsultation with the National Blood Transfusion Council, under the SocietiesRegistration Act, 1860 (21 of 1860) or under any law corresponding to that Actin force in any part of India and has Secretary to the Government of thatState dealing with the Department of Health, as its Chairman, by whatever namecalled; or

(iiihb) Any fund set up by a State Government to provide medical relief to thepoor; or

(iiihc) The Army Central Welfare Fund or the Indian Naval Benevolent Fund orthe Air Force Central Welfare Fund established by the armed forces of the


Union for the welfare of the past and present members of such forces or theirdependants; or

(iiihd) The Andhra Pradesh Chief Minister"s Cyclone Relief Fund, 1996; or

(iiihe) The National Illness Assistance Fund; or

(iiihf) The Chief Minister"s Relief Fund or the Lieutenant Governor"s ReliefFund in respect of any State or Union territory, as the case may be :

Provided that such Fund is - (a) The only Fund of its kind established in theState or the Union territory, as the case may be;

(b) Under the overall control of the Chief Secretary or the Department ofFinance of the State or the Union territory, as the case may be;

(c) Administered in such manner as may be specified by the State Government orthe Lieutenant Governor, as the case may be; or

(iiihg) The National Sports Fund to be set up by the Central Government; or

(iiihh) The National Cultural Fund set up by the Central Government; or

(iiihi) The Fund for Technology Development and Application set up by theCentral Government; or

(iv) Any other fund or any institution to which this section applies; or

(v) The Government or any local authority, to be utilised, for any charitablepurpose other than the purpose of promoting family planning; or

(vi) Any authority referred to in clause (20A) of section 10; or

(via) Any corporation referred to in clause (26BB) of section 10; or

(vii) The Government or to any such local authority, institution orassociation as may be approved 1014 in this behalf by the Central Government,to be utilised for the purposes of promoting family planning;

(b) Any sums paid by the assessee in the previous year as donation for therenovation or repair of any such temple, mosque, gurdwara, church or otherplace as is notified by the Central Government in the Official Gazette to beof historic, archaeological or artistic importance or to be a place of publicworship or renown throughout any State or States.


(4) Where the aggregate of the sums referred to in sub-clauses (iv), (v),(vi), (via) and (vii) of clause (a) and in clause (b) of sub-section (2)exceeds ten per cent of the gross total income (as reduced by any portionthereof on which income-tax is not payable under any provision of this Act andby any amount in respect of which the assessee is entitled to a deductionunder any other provision of this Chapter), then the amount in excess of tenper cent of the gross total income shall be ignored for the purpose ofcomputing the aggregate of the sums in respect of which deduction is to beallowed under sub-section (1).

(5) This section applies to donations to any institution or fund referred toin sub-clause (iv) of clause (a) of sub-section (2), only if it is establishedin India for a charitable purpose and if it fulfils the following conditions,namely :- (i) Where the institution or fund derives any income, such incomewould not be liable to inclusion in its total income under the provisions ofsections 11 and 12 or clause (23) or clause (23AA) or clause (23C) of section10 :

Provided that where an institution or fund derives any income, being profitsand gains of business, the condition that such income would not be liable toinclusion in its total income under the provisions of section 11 shall notapply in relation to such income, if - (a) The institution or fund maintainsseparate books of account in respect of such business;

(b) The donations made to the institution or fund are not used by it, directlyor indirectly, for the purposes of such business; and

(c) The institution or fund issues to the person making the donation acertificate to the effect that it maintains separate books of account inrespect of such business and that the donations received by it will not beused, directly or indirectly, for the purposes of such business;

(ii) The instrument under which the institution or fund is constituted doesnot, or the rules governing the institution or fund do not, contain anyprovision for the transfer or application at any time of the whole or any partof the income or assets of the institution or fund for any purpose other thana charitable purpose;

(iii) The institution or fund is not expressed to be for the benefit of anyparticular religious community or caste;

(iv) The institution or fund maintains regular accounts of its receipts andexpenditure;


(v) The institution or fund is either constituted as a public charitable trustor is registered under the Societies Registration Act, 1860 (21 of 1860), orunder any law corresponding to that Act in force in any part of India or undersection 25 of the Companies Act, 1956 (1 of 1956), or is a Universityestablished by law, or is any other educational institution recognised by theGovernment or by a University established by law, or affiliated to anyUniversity established by law or is an institution approved by the CentralGovernment for the purposes of clause (23) of section 10, 1022 ] or is aninstitution financed wholly or in part by the Government or a local authority;

(vi) In relation to donations made after the 31st day of March, 1992, theinstitution or fund is for the time being approved by the Commissioner inaccordance with the rules made in this behalf :

Provided that any approval shall have effect for such assessment year oryears, not exceeding five assessment years, as may be specified in theapproval.

(5A) Where a deduction under this section is claimed and allowed for anyassessment year in respect of any sum specified in sub-section (2), the sum inrespect of which deduction is so allowed shall not qualify for deduction underany other provisions of this Act for the same or any other assessment year.

(5B) Notwithstanding anything contained in clause (ii) of sub-section (5) andExplanation 3, an institution or fund which incurs expenditure, during anyprevious year, which is of a religious nature for an amount not exceeding fiveper cent. of its total income in that previous year shall be deemed to be aninstitution or fund to which the provisions of this section apply.

Explanation 1 : An institution or fund established for the benefit ofScheduled Castes, backward classes, Scheduled Tribes or of women and childrenshall not be deemed to be an institution or fund expressed to be for thebenefit of a religious community or caste within the meaning of clause (iii)of sub-section (5).

Explanation 2 : For the removal of doubts, it is hereby declared that adeduction to which the assessee is entitled in respect of any donation made toan institution or fund to which sub-section (5) applies shall not be deniedmerely on either or both of the following grounds, namely :- (i) That,subsequent to the donation, any part of the income of the institution or fundhas become chargeable to tax due to non-compliance with any of the provisionsof [ 1024a section 11, section 12 or section 12A;

(ii) That, under clause (c) of sub-section (1) of section 13, the exemptionunder section 11 or section 12 is denied to the institution or fund in


relation to any income arising to it from any investment referred to in clause(h) of sub-section (2) of section 13 where the aggregate of the funds investedby it in a concern referred to in the said clause (h) does not exceed five percent of the capital of that concern.

Explanation 3 : In this section "charitable purpose" does not include anypurpose the whole or substantially the whole of which is of a religiousnature.

Explanation 4 : For the purposes of this section, an association approved bythe Central Government for the purposes of clause (23) of section 10 shallalso be deemed to be an institution, and every association or institutionapproved by the Central Government for the purposes of the said clause shallbe deemed to be an institution established in India for a charitable purpose.

Explanation 5 : For the removal of doubts, it is hereby declared that nodeduction shall be allowed under this section in respect of any donationunless such donation is of a sum of money.

167. Deduction in respect of rents paid.

§167.Deduction in respect of rents paid.

Section 80GG

DEDUCTIONS IN RESPECT OF RENTS PAID.

In computing the total income of an assessee, not being an assessee having any income fallingwithin clause (13A) of section 10, there shall be deducted any expenditure incurred by him inexcess of ten per cent of his total income towards payment of rent (by whatever name called) inrespect of any furnished or unfurnished accommodation occupied by him for the purposes of hisown residence, to the extent to which such excess expenditure does not exceed two thousandrupees per month or twenty-five per cent of his total income for the year, whichever is less, andsubject to such other conditions or limitations as may be prescribed, having regard to the area orplace in which such accommodation is situated and other relevant considerations :

Provided that nothing in this section shall apply to an assessee in any case where any residentialaccommodation is - (i) Owned by the assessee or by his spouse or minor child or, where suchassessee is a member of a Hindu undivided family, at the place where he ordinarily resides orperforms duties of his office or employment or carries on his business or profession; or

(ii) Owned by the assessee at any other place, being accommodation in the occupation of the


assessee, the value of which is to be determined under sub-clause (i) of clause (a) or, as the casemay be, clause (b) of sub-section (2) of section 23.

Explanation : In this section, the expressions "ten per cent of his total income" and "twenty-fiveper cent of his total income" shall mean ten per cent or twenty-five per cent, as the case may be,of the assessee"s total income before allowing deduction for any expenditure under this section.

168. Deduction in respect of certain donations for scientificresearch or rural development.

§ 168. Deduction in respect of certain donations for scientific research or rural development.Section 80GGA

DEDUCTION IN RESPECT OF CERTAIN DONATIONS FOR SCIENTIFIC RESEARCH ORRURAL DEVELOPMENT.

(1) In computing the total income of an assessee, there shall be deducted, in accordance with andsubject to the provisions of this section, the sums specified in sub-section (2).

(2) The sums referred to in sub-section (1) shall be the following, namely :- (a) Any sum paid bythe assessee in the previous year to a scientific research association which has as its object theundertaking of scientific research or to a University, college or other institution to be used forscientific research :

Provided that such association, University, college or institution is for the time being approvedfor the purposes of clause (ii) of sub-section (1) of section 35;

(aa) Any sum paid by the assessee in the previous year to a university, college or other institutionto be used for research in social science or statistical research :

Provided that such university, college or institution is for the time being approved for thepurposes of clause (iii) of sub-section (1) of section 35;

(b) Any sum paid by the assessee in the previous year - (i) To an association or institution,which has as its object the undertaking of any programme of rural development, to be used forcarrying out any programme of rural development approved for the purposes of section 35CCA;or

(ii) To an association or institution which has as its object the training of persons forimplementing programmes of rural development :

Provided that the assessee furnishes the certificate referred to in sub-section (2) or, as the casemay be, sub-section (2A) of section 35CCA from such association or institution;


(bb) Any sum paid by the assessee in the previous year to a public sector company or a localauthority or to an association or institution approved by the National Committee, for carrying outany eligible project or scheme :

Provided that the assessee furnishes the certificate referred to in clause (a) of sub-section (2) ofsection 35AC from such public sector company or local authority or, as the case may be,association or institution.

Explanation : For the purposes of this clause, the expressions "National Committee" and "eligibleproject or scheme" shall have the meanings respectively assigned to them in the Explanation tosection 35AC;

(c) Any sum paid by the assessee in the previous year to an association or institution, which hasas its object the undertaking of any programme of conservation of natural resources or ofafforestation to be used for carrying out any programme of conservation of natural resources orof afforestation approved for the purposes of section 35CCB :

Provided that the association or institution is for the time being approved for the purposes of sub-section (2) of section 35CCB;

(cc) Any sum paid by the assessee in the previous year to such fund for afforestation as isnotified by the Central Government under clause (b) of sub-section (1) of section 35CCB;

(d) Any sum paid by the assessee in the previous year to a rural development fund set up andnotified by the Central Government for the purposes of clause (c) of sub-section (1) of section35CCA.

(e) Any sum paid by the assessee in the previous year to the National Urban Poverty EradicationFund set up and notified by the Central Government for the purposes of clause (d) of sub-section(1) of section 35CCA.

(3) Notwithstanding anything contained in sub-section (1), no deduction under this section shallbe allowed in the case of an assessee whose gross total income includes income which ischargeable under the head "Profits and gains of business or profession".

(4) Where a deduction under this section is claimed and allowed for any assessment year inrespect of any payments of the nature specified in sub-section (2), deduction shall not be allowedin respect of such payments under any other provision of this Act for the same or any otherassessment year.

169. Omitted.

§ 169. Omitted.


Section 80H

DEDUCTION IN CASE OF NEW INDUSTRIAL UNDERTAKINGS EMPLOYINGDISPLACED PERSONS, ETC.

OMITTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1975, W.E.F. 1-4-1976.

170. Deduction in respect of profits and gains from newlyestablished industrial undertakings or hotel business inbackward areas.

§ 170. Deduction in respect of profits and gains from newly established industrial undertakingsor hotel business in backward areas.Section 80HH

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM NEWLY ESTABLISHEDINDUSTRIAL UNDERTAKINGS OR HOTEL BUSINESS IN BACKWARD AREAS.

(1) Where the gross total income of an assessee includes any profits and gains derived from anindustrial undertaking, or the business of a hotel, to which this section applies, there shall, inaccordance with and subject to the provisions of this section, be allowed, in computing the totalincome of the assessee, a deduction from such profits and gains of an amount equal to twenty percent thereof.

(2) This section applies to any industrial undertaking which fulfils all the following conditions,namely :- (i) It has begun or begins to manufacture or produce articles after the 31st day ofDecember, 1970 but before the 1st day of April, 1990, in any backward area;

(ii) It is not formed by the splitting up, or the reconstruction, of a business already in existence inany backward area :

Provided that this condition shall not apply in respect of any industrial undertaking which isformed as a result of the re-establishment, reconstruction or revival by the assessee of thebusiness of any such industrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section;

(iii) It is not formed by the transfer to a new business of machinery or plant previously used forany purpose in any backward area;

(iv) It employs ten or more workers in a manufacturing process carried on with the aid of power,or employs twenty or more workers in a manufacturing process carried on without the aid ofpower.


Explanation : Where any machinery or plant or any part thereof previously used for any purposein any backward area is transferred to a new business in that area or in any other backward areaand the total value of the machinery or plant or part so transferred does not exceed twenty percent of the total value of the machinery or plant used in the business, then, for the purposes ofclause (iii) of this sub-section, the condition specified therein shall be deemed to have beenfulfilled.

(3) This section applies to the business of any hotel, where all the following conditions arefulfilled, namely :- (i) The business of the hotel has started or starts functioning after the 31stday of December, 1970 but before the 1st day of April, 1990, in any backward area;

(ii) The business of the hotel is not formed by the splitting up, or the reconstruction, of a businessalready in existence;

(iii) The hotel is for the time being approved for the purposes of this sub-section by the CentralGovernment.

(4) The deduction specified in sub-section (1) shall be allowed in computing the total income inrespect of each of the ten assessment years beginning with the assessment year relevant to theprevious year, in which the industrial undertaking begins to manufacture or produce articles orthe business of the hotel starts functioning :

Provided that, - (i) In the case of an industrial undertaking which has begun to manufacture orproduce articles, and

(ii) In the case of the business of a hotel which has started functioning, after the 31st day ofDecember, 1970, but before the 1st day of April, 1973, this sub-section shall have effect as if thereference to ten assessment years were a reference to ten assessment years as reduced by thenumber of assessment years which expired before the 1st day of April, 1974.

(5) Where the assessee is a person other than a company or a co-operative society the deductionunder sub-section (1) shall not be admissible unless the accounts of the industrial undertaking orthe business of the hotel for the previous year relevant to the assessment year for which thededuction is claimed have been audited by an accountant as defined in the Explanation belowsub-section (2) of section 288 and the assessee furnishes, along with his return of income, thereport of such audit in the prescribed form 1041a duly signed and verified by such accountant.

(6) Where any goods held for the purposes of the business of the industrial undertaking or thehotel are transferred to any other business carried on by the assessee, or where any goods heldfor the purposes of any other business carried on by the assessee are transferred to the business ofthe industrial undertaking or the hotel and, in either case, the consideration, if any, for suchtransfer as recorded in the accounts of the business of the industrial undertaking or the hotel doesnot correspond to the market value of such goods as on the date of the transfer, then, for thepurposes of the deduction under this section, the profits and gains of the industrial undertaking or


the business of the hotel shall be computed as if the transfer, in either case, had been made at themarket value of such goods as on that date :

Provided that where, in the opinion of the Assessing Officer, the computation of the profits andgains of the industrial undertaking or the business of the hotel in the manner hereinbeforespecified presents exceptional difficulties, the Assessing Officer may compute such profits andgains on such reasonable basis as he may deem fit.

Explanation : In this sub-section, "market value", in relation to any goods means the price thatsuch goods would ordinarily fetch on sale in the open market.

(7) Where it appears to the Assessing Officer that, owing to the close connection between theassessee carrying on the business of the industrial undertaking or the hotel to which this sectionapplies and any other person, or for any other reason, the course of business between them is soarranged that the business transacted between them produces to the assessee more than theordinary profits which might be expected to arise in the business of the industrial undertaking orthe hotel, the Assessing Officer shall, in computing the profits and gains of the industrialundertaking or the hotel for the purposes of the deduction under this section, take the amount ofprofits as may be reasonably deemed to have been derived therefrom.

(9) In a case where the assessee is entitled also to the deduction under section 80-I or section 80Jin relation to the profits and gains of an industrial undertaking or the business of a hotel to whichthis section applies, effect shall first be given to the provisions of this section.

(9A) Where a deduction in relation to the profits and gains of a small scale industrial undertakingto which section 80HHA applies is claimed and allowed under that section for any assessmentyear, deduction in relation to such profits and gains shall not be allowed under this section for thesame or any other assessment year.

(10) Nothing contained in this section shall apply in relation to any undertaking engaged inmining.

(11) For the purposes of this section, "backward area" means such area as the CentralGovernment may, having regard to the stage of development of that area, by notification in theOfficial Gazette, specify in this behalf :

Provided that any notification under this sub-section may be issued so as to have retrospectiveeffect to a date not earlier than the 1st day of April, 1983.

171. Deduction in respect of profits and gains fromnewly established small-scale industrial


undertakings in certain areas.

§171.Deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas.

Section 80HHA

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM NEWLY ESTABLISHEDSMALL-SCALE INDUSTRIAL UNDERTAKINGS IN CERTAIN AREAS.

(1) Where the gross total income of an assessee includes any profits and gains derived from asmall-scale industrial undertaking to which this section applies, there shall, in accordance withand subject to the provisions of this section, be allowed, in computing the total income of theassessee a deduction from such profits and gains of an amount equal to twenty per cent thereof.

(2) This section applies to any small-scale industrial undertaking which fulfils all the followingconditions, namely :- (i) It begins to manufacture or produce articles after the 30th day ofSeptember, 1977, but before the 1st day of April, 1990 1049 ], in any rural area;

(ii) It is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any small-scale industrial undertakingwhich is formed as a result of the re-establishment, reconstruction or revival by the assessee ofthe business of any such industrial undertaking as is referred to in section 33B, in thecircumstances and within the period specified in the section;

(iii) It is not formed by the transfer to a new business of machinery or plant previously used forany purpose;

(iv) It employs ten or more workers in a manufacturing process carried on with the aid of power,or employs twenty or more workers in a manufacturing process carried on without the aid ofpower.

Explanation : Where in the case of a small-scale industrial undertaking, any machinery or plantor any part thereof previously used for any purpose is transferred to a new business and the totalvalue of the machinery or plant or part so transferred does not exceed twenty per cent. of the totalvalue of the machinery or plant used in the business, then, for the purposes of clause (iii) of thissub-section, the condition specified therein shall be deemed to have been fulfilled.

(3) The deduction specified in sub-section (1) shall be allowed in computing the total income ofeach of the ten previous years beginning with the previous year in which the industrialundertaking begins to manufacture or produce articles :

Provided that such deduction shall not be allowed in computing the total income of any of the ten


previous years aforesaid in respect of which the industrial undertaking is not a small-scaleindustrial undertaking within the meaning of clause (b) of the Explanation below sub-section (8).

(4) Where the assessee is a person, other then a company or a co-operative society, the deductionunder sub-section (1) shall not be admissible unless the accounts of the small-scale industrialundertaking for the previous year relevant to the assessment year for which the deduction isclaimed have been audited by an accountant as defined in the Explanation below sub-section (2)of section 288 and the assessee furnishes, along with his return of income, the report of suchaudit in the prescribed form 1051a duly signed and verified by such accountant.

(5) The provisions of sub-sections (6) and (7) of section 80HH shall, so far as may be, apply inrelation to the computation of the profits and gains of a small-scale industrial undertaking for thepurposes of the deduction under this section as they apply in relation to the computation of theprofits and gains of an industrial undertaking for the purposes of the deduction under thatsection.

(6) In a case where the assessee is entitled also to the deduction under section 80-I or section 80Jin relation to the profits and gains of a small-scale industrial undertaking to which this sectionapplies, effect shall first be given to the provisions of this section.

(7) Where a deduction in relation to the profits and gains of a small" scale industrial undertakingto which section 80HH applies is claimed and allowed under that section for any assessmentyear, deduction in relation to such profits and gains shall not be allowed under this section forthe same or any other assessment year.

(8) Nothing contained in this section shall apply in relation to any small-scale industrialundertaking engaged in mining.

Explanation : For the purposes of this section, - (a) "Rural area" means any area other than - (i)An area which is comprised within the jurisdiction of a municipality (whether known as amunicipality, municipal corporation, notified area committee, town area committee, towncommittee or by any other name) or a cantonment board and which has a population of not lessthan ten thousand according to the last preceding census of which the relevant figures have beenpublished before the first day of the previous year; or

(ii) An area within such distance, not being more than fifteen kilometres from the local limits ofany municipality or cantonment board referred to in sub-clause (i), as the Central Governmentmay, having regard to the stage of development of such area (including the extent of, and scopefor, urbanisation of such area) and other relevant considerations, specify in this behalf bynotification in the Official Gazette;

(b) An industrial undertaking shall be deemed to be a small-scale industrial undertaking which is,on the last day of the previous year, regarded as a small-scale industrial undertaking undersection 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951).


172. Deduction in respect of profits and gains from projectsoutside India.

§ 172. Deduction in respect of profits and gains from projects outside India.

Section 80HHB

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM PROJECTS OUTSIDEINDIA.

(1) Where the gross total income of an assessee being an Indian company or a person (other thana company) who is resident in India includes any profits and gains derived from the business of - (a) The execution of a foreign project undertaken by the assessee in pursuance of a contractentered into by him, or

(b) The execution of any work undertaken by him and forming part of a foreign projectundertaken by any other person in pursuance of a contract entered into by such other person, withthe Government of a foreign State or any statutory or other public authority or agency in aforeign State, or a foreign enterprise, there shall, in accordance with and subject to the provisionsof this section, be allowed, in computing the total income of the assessee, a deduction from suchprofits and gains of an amount equal to fifty per cent thereof :

Provided that the consideration for the execution of such project or, as the case may be, of suchwork is payable in convertible foreign exchange.

(2) For the purposes of this section, - (a) "Convertible foreign exchange" 1057a means foreignexchange which is for the time being treated by the Reserve Bank of India as convertible foreignexchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and anyrules made thereunder;

(b) "Foreign project" means a project for - (i) The construction of any building, road, dam,bridge or other structure outside India;

(ii) The assembly or installation of any machinery or plant outside India;

(iii) The execution of such other work (of whatever nature) as may be prescribed.

(3) The deduction under this section shall be allowed only if the following conditions arefulfilled, namely :- (i) The assessee maintains separate accounts in respect of the profits andgains derived from the business of the execution of the foreign project, or, as the case may be, ofthe work forming part of the foreign project undertaken by him and, where the assessee is aperson other than an Indian company or a co-operative society, such accounts have been audited


by an accountant as defined in the Explanation below sub-section (2) of section 288 and theassessee furnishes, along with his return of income, the report of such audit in the prescribedform 1058 duly signed and verified by such accountant;

(ia) The assessee furnishes, along with his return of income, a certificate in the prescribed formfrom an accountant as defined in the Explanation below sub-section (2) of section 288, dulysigned and verified by such accountant, certifying that the deduction has been correctly claimedin accordance with the provisions of this section (ii) an amount equal to fifty per cent of theprofits and gains referred to in sub-section (1) is debited to the profit and loss account of theprevious year in respect of which the deduction under this section is to be allowed and credited toa reserve account (to be called the "Foreign Projects Reserve Account") to be utilised by theassessee during a period of five years next following for the purposes of his business other thanfor distribution by way of dividends or profits;

(iii) An amount equal to fifty per cent of the profits and gains referred to in sub-section (1) isbrought by the assessee in convertible foreign exchange into India, in accordance with theprovisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules madethereunder, within a period of six months from the end of the previous year referred to in clause(ii) or, within such further period as the competent authority may allow in this behalf.

173. Deduction in respect of profits and gains from housingprojects in certain cases.

§ 173. Deduction in respect of profits and gains from housing projects in certain cases.Section 80HHBA

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM HOUSING PROJECTS INCERTAIN CASES.

(1) Where the gross total income of an assessee being an Indian company or a person (other thana company) who is a resident in India includes any profits and gains derived from the executionof a housing project awarded to the assessee on the basis of global tender and such project isaided by the World Bank, their shall, in accordance with the subject to the provisions of thissection, be allowed, in computing the total income of the assessee, a deduction from such profitsand gains of an amount equal to fifty per cent thereof.

(2) The deductions under this section shall be allowed only if the following conditions arefulfilled, namely :- (i) The assessee maintains separate account in respect of the profits and gainsderived from the business of the execution of the housing project undertaken by him and, wherethe assessee is a person other than an Indian company or a co-operative society, such accountshave been audited by an accountant as defined in the Explanation below sub-section (2) ofsection 288 and the assessee furnishes along with his return of income the report of such audit inthe prescribed form duly signed and verified by such accountant;


(ii) An amount equal to fifty per cent of the profits and gains referred to in sub-section (1) isdebited to the profits and loss account of the previous year in respect of which the deductionunder this section is to be allowed and credited to a reserve account (to be called the HousingProjects Reserve Account) to be utilised by the assessee during a period of five years nextfollowing for the purposes of his business other than for distribution by way of dividends orprofit :

Provided that where the amount credited by the assessee to the Housing Projects ReserveAccount in pursuance of clause (ii) is less than fifty per cent of the profits and gains referred to insub-section (1), the deduction under this section shall be limited to the amount so credited inpursuance of clause (ii).

(3) If at any time before the expiry of five years from the end of the previous year in which thededuction under sub-section (1) is allowed, the assessee utilises the amount credited to theHousing Projects Reserve Account for distribution by way of dividends or profit or for any otherpurpose which is not a purpose of the business of the assessee, the deduction originally allowedunder sub-section (1) shall be deemed to have been wrongly allowed and the Assessing Officermay, notwithstanding anything contained in this Act, recompute the total income of the assesseefor the relevant previous year and make necessary amendment and the provision of section 154shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of thatsection being reckoned from the end of the previous year in which the money was so utilised. (4)Notwithstanding anything contained in any other provision of this Chapter under heading "C. -Deduction in respect of certain incomes", no part of the income payable to the assessee for theexecution of a housing project under sub-section (1) shall qualify for deduction for anyassessment year under any other provision.

Explanation : For the purposes of this section, - (a) "Housing project" means a project for - (i)The construction of any building, road, bridge or other structure in any part of India;

(ii) The execution of such other work (of whatever nature) as may be prescribed;

(b) "World Bank" means the International Bank for Reconstruction and Development Bankreferred to in the International Monetary Fund and Bank Act, 1945.

174. Deduction in respect of profits retained for exportbusiness.

§ 174. Deduction in respect of profits retained for export business.Section 80HHC

DEDUCTION IN RESPECT OF PROFITS RETAINED FOR EXPORT BUSINESS.


(1) Where an assessee, being an Indian company or a person (other than a company) resident inIndia, is engaged in the business of export out of India of any goods or merchandise to which thissection applies, there shall, in accordance with and subject to the provisions of this section, beallowed, in computing the total income of the assessee, a deduction of the profits derived by theassessee from the export of such goods or merchandise :

Provided that if the assessee, being a holder of an Export House Certificate or a Trading HouseCertificate (hereafter in this section referred to as an Export House or a Trading House, as thecase may be,) issues a certificate referred to in clause (b) of sub-section (4A), that in respect ofthe amount of the export turnover specified therein, the deduction under this sub-section is to beallowed to a supporting manufacturer, then the amount of deduction in the case of the assesseeshall be reduced by such amount which bears to the total profits derived by the assessee from theexport of trading goods, the same proportion as the amount of export turnover specified in thesaid certificate bears to the total export turnover of the assessee in respect of such trading goods.

(1A) Where the assessee, being a supporting manufacturer, has, during the previous year, soldgoods or merchandise to any Export House or Trading House in respect of which the ExportHouse or Trading House has issued a certificate under the proviso to sub-section (1), there shall,in accordance with and subject to the provisions of this section, be allowed in computing the totalincome of the assessee, a deduction of the profits derived by the assessee from the sale of goodsor merchandise to the Export House or Trading House in respect of which the certificate hasbeen issued by the Export House or Trading House.

(2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), ifthe sale proceeds of such goods or merchandise exported out of India are received in, or broughtinto India by the assessee (other than the supporting manufacturer) in convertible foreignexchange within a period of six months from the end of the previous year or, within such furtherperiod as the competent authority may allow in this behalf

Explanation : For the purposes of this clause, the expression "competent authority" means theReserve Bank of India or such other authority as is authorised under any law for the time beingin force for regulating payments and dealings in foreign exchange.

(b) This section does not apply to the following goods or merchandise, namely :- (i) Mineral oil;and

(ii) Minerals and ores (other than processed minerals and ores specified 1069b in the TwelfthSchedule).

Explanation 1 : The sale proceeds referred to in clause (a) shall be deemed to have been receivedin India where such sale proceeds are credited to a separate account maintained for the purposeby the assessee with any bank outside India with the approval of the Reserve Bank of India.

Explanation 2 : For the removal of doubts, it is hereby declared that where any goods ormerchandise are transferred by an assessee to a branch, office, warehouse or any other


establishment of the assessee situate outside India and such goods or merchandise are sold fromsuch branch, office, warehouse or establishment, then, such transfer shall be deemed to be exportout of India of such goods and merchandise and the value of such goods or merchandise declaredin the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the CustomsAct, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceedsthereof.

(3) For the purposes of sub-section (1), - (a) Where the export out of India is of goods ormerchandise manufactured or processed by the assessee, the profits derived from such exportshall be the amount which bears to the profits of the business, the same proportion as the exportturnover in respect of such goods bears to the total turnover of the business carried on by theassessee;

(b) Where the export out of India is of trading goods, the profits derived from such export shallbe the export turnover in respect of such trading goods as reduced by the direct costs and indirectcosts attributable to such export;

(c) Where the export out of India is of goods or merchandise manufactured or processed by theassessee and of trading goods, the profits derived from such export shall, - (i) In respect of thegoods or merchandise manufactured or processed by the assessee, be the amount which bears tothe adjusted profits of the business, the same proportion as the adjusted export turnover inrespect of such goods bears to the adjusted total turnover of the business carried on by theassessee; and

(ii) In respect of trading goods, be the export turnover in respect of such trading goods asreduced by the direct and indirect costs attributable to export of such trading goods :

Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-sectionshall be further increased by the amount which bears to ninety per cent of any sum referred to inclause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses(iiib) and (iiic), of section 28, the same proportion as the export turnover bears to the totalturnover of business carried on by the assessee.

Explanation : For the purposes of this sub-section, - (a) "Adjusted export turnover" means theexport turnover as reduced by the export turnover in respect of trading goods;

(b) "Adjusted profits of the business" means the profits of the business as reduced by the profitsderived from the business of export out of India of trading goods as computed in the mannerprovided in clause (b) of sub-section (3);

(c) "Adjusted total turnover" means the total turnover of the business as reduced by the exportturnover in respect of trading goods;

(d) "Direct costs" means costs directly attributable to the trading goods exported out of India


including the purchase price of such goods;

(e) "Indirect costs" means costs, not being direct costs, allocated in the ratio of the exportturnover in respect of trading goods to the total turnover;

(f) "Trading goods" means goods which are not manufactured or processed by the assessee.

(3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from thesale of goods or merchandise shall be, - (a) In a case where the business carried on by thesupporting manufacturer consists exclusively of sale of goods or merchandise to one or moreExport Houses or Trading Houses, the profits of the business;

(b) In a case where the business carried on by the supporting manufacturer does not consistexclusively of sale of goods or merchandise to one or more Export Houses or Trading Houses,the amount which bears to the profits of the business the same proportion as the turnover inrespect of sale to the respective Export House or Trading House bears to the total turnover of thebusiness carried on by the assessee.

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes inthe prescribed form 1073 , along with the return of income, the report of an accountant, asdefined in the Explanation below sub-section (2) of section 288, certifying that the deduction hasbeen correctly claimed [ 1074 in accordance with the provisions of this section.

(4A) The deduction under sub-section (1A) shall not be admissible unless the supportingmanufacturer furnishes in the prescribed form along with his return of income, - (a) The report1076 of an accountant, as defined in the Explanation below sub-section (2) of section 288,certifying that the deduction has been correctly claimed on the basis of the profits of thesupporting manufacturer in respect of his sale of goods or merchandise to the Export House orTrading House; and

(b) A certificate 1078 from the Export House or Trading House containing such particulars asmay be prescribed and verified in the manner prescribed that in respect of the export turnovermentioned in the certificate, the Export House or Trading House has not claimed the deductionunder this section :

Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditingthe accounts of the Export House or Trading House under the provisions of this Act or under anyother law.

(4B) For the purpose of computing the total income under sub-section (1) or sub-section (1A),any income not charged to tax under this Act shall be excluded.

Explanation : For the purposes of this section, - (a) "Convertible foreign exchange" meansforeign exchange which is for the time being treated by the Reserve Bank of India as convertibleforeign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973),


and any rules made thereunder;

(aa) "Export out of India" shall not include any transaction by way of sale or otherwise, in ashop, emporium or any other establishment situate in India, not involving clearance at anycustoms station as defined in the Customs Act, 1962 (52 of 1962);

(b) "Export turnover" means the sale proceeds received in, or brought into, India by the assesseein convertible foreign exchange in accordance with clause (a) of sub-section (2) of any goods ormerchandise to which this section applies and which are exported out of India, but does notinclude freight or insurance attributable to the transport of the goods or merchandise beyond thecustoms station as defined in the Customs Act, 1962 (52 of 1962);

(ba) "Total turnover" shall not include freight or insurance attributable to the transport of thegoods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of1962) :

Provided that in relation to any assessment year commencing on or after the 1st day of April,1991, the expression "total turnover" shall have effect as if it also excluded any sum referred toin clauses (iiia), (iiib) and (iiic) of section 28;

(baa) "Profits of the business" means the profits of the business as computed under the head"Profits and gains of business or profession" as reduced by - (1) Ninety per cent of any sumreferred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage,commission, interest, rent, charges or any other receipt of a similar nature included in suchprofits; and

(2) The profits of any branch, office, warehouse or any other establishment of the assessee situateoutside India;

(c) "Export House Certificate" or "Trading House Certificate" means a valid Export HouseCertificate or Trading House Certificate, as the case may be, issued by the Chief Controller ofImports and Exports, Government of India;

(d) "Supporting manufacturer" means a person being an Indian company or a person (other thana company) resident in India, manufacturing including processing, goods or merchandise andselling such goods or merchandise to an Export House or a Trading House for the purposes ofexport.

175. Deduction in respect of earnings in convertibleforeign exchange.

§175.Deduction in respect of earnings in convertible foreign exchange.


Section 80HHD

DEDUCTION IN RESPECT OF EARNINGS IN CONVERTIBLE FOREIGN EXCHANGE.

(1) Where an assessee, being an Indian company or a person (other than a company) resident inIndia, is engaged in the business of a hotel, or of a tour operator, approved by the prescribedauthority in this behalf, or of a travel agent, there shall, in accordance with and subject to theprovisions of this section, be allowed, in computing the total income of the assessee, a deductionof a sum equal to the aggregate of - (a) Fifty per cent of the profits derived by him from servicesprovided to foreign tourists; and (b) so much of the amount out of the remaining profits referredto in clause (a) as is debited to the profit and loss account of the previous year in respect ofwhich the deduction is to be allowed and credited to a reserve account to be utilised for thepurposes of the business of the assessee in the manner laid down in sub-section (4) :

Provided that a hotel or, as the case may be, a tour operator approved by the prescribed authorityon or after the 30th day of November, 1989 and before the 1st day of October, 1991, shall bedeemed to have been approved by the prescribed authority for the purposes of this section inrelation to the assessment year commencing on the 1st day of April, 1989 or the 1st day of April,1990 or, as the case may be, the 1st day of April, 1991, if the assessee was engaged in thebusiness of such hotel or as such tour operator during the previous year relevant to any of thesaid assessment years.

(2) This section applies only to services provided to foreign tourists the receipts in relation towhich are received in, or brought into, India by the assessee in convertible foreign exchangewithin a period of six months from the end of the previous year or, within such further period asthe competent authority may allow in this behalf.

Explanation 1 : For the purposes of this sub-section, any payment received by an assessee,engaged in the business of a hotel or of a tour operator or of a travel agent, in Indian currencyobtained by conversion of foreign exchange brought into India through an authorised dealer,from another hotelier, tour operator or travel agent, as the case may be, on behalf of a foreigntourist or group of foreign tourists, shall be deemed to have been received by the assessee inconvertible foreign exchange if the person making the payment furnishes to the assessee acertificate specified in sub-section (2A).

Explnation 2 : For the purposes of this sub-section, the expression "competant authority" meansthe Reserve Bank of India or such other authority as is authorised under any law for the timebeing in force for regulating payments and dealings in foreign exchange.

(2A) Every person making payment to an assessee referred to in the Explanation 1 to sub-section(2) out of Indian currency obtained by conversion of foreign exchange received from or onbehalf of a foreign tourist or a group of foreign tourists shall furnish to that assessee a certificatein the prescribed form indicating the amount received in foreign exchange, its conversion into


Indian currency and such other particulars as may be prescribed.

(3) For the purposes of sub-section (1), profits derived from services provided to foreign touristsshall be the amount which bears to the profits of the business (as computed under the head"Profits and gains of business or profession") the same proportion as the receipts specified insub-section (2) as reduced by any payment, referred to in sub-section (2A), made by the assesseebear to the total receipts of the business carried on by the assessee.

(4) The amount credited to the reserve account under clause (b) of sub-section (1), shall beutilised by the assessee before the expiry of a period of five years next following the previousyear in which the amount was credited for the following purposes, namely :- (a) Construction ofnew hotels approved by the prescribed authority in this behalf or expansion of facilities inexisting hotels already so approved;

(b) Purchase of new cars and new coaches by tour operators already so approved or by travelagents;

(c) Purchase of sports equipment for mountaineering, trekking, golf, river-rafting and othersports in or on water;

(d) Construction of conference or convention centres;

(e) Provision of such new facilities for the growth of Indian tourism as the Central Governmentmay, by notification in the Official Gazette, specify in this behalf :

(f) Subscription to equiry shares forming part of any eligible issue of capital made by a publiccompany :

Provided that where any of the activities referred to in clauses (a) to (e) would result in creationof any asset owned by the assessee outside India, such asset should be created only afterobtaining prior approval of the prescribed authority.

(5) Where any amount credited to the reserve account under clause (b) of sub-section (1), - (a)Has been utilised for any purpose other than those referred to in sub-section (4), the amount soutilised; or

(b) Has not been utilised in the manner specified in sub-section (4), the amount not so utilised, shall be deemed to be the profits, - (i) In a case referred to in clause (a), in the year in which theamount was so utilised; or

(ii) In a case referred to in clause (b), in the year immediately following the period of five yearsspecified in sub-section (4), and shall be charged to tax accordingly.

(5A) Where any amount credited to the reserve account under clause (b) of sub-section (1) hasbeen utilised for subscription to any equity shares referred to in clause (f) of sub-section (4) and


either whole or any part of such equity shares are transferred or converted into money by theassessee at any time within a period of three years from the date of their acquisition, theaggregate amount so utilised in respect of such equity shares shall be deemed to be the profits ofthe previous year in which the equity shares are transferred or converted into money.

Explanation : A person shall be treated as having acquired any shares on the date on which hisname is entered in relation to those shares in the register of members of the public company.

(6) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes inthe prescribed form 1087 , along with the return of income, the report of an accountant, asdefined in the Explanation below sub-section (2) of section 288, certifying that the deduction hasbeen correctly claimed on the basis of the amount of convertible foreign exchange received bythe assessee for services provided by him to the foreign tourists, payments made by him to anyassessee referred to in sub-section (2A) and the payments received by him in Indian currency asreferred to in the Explanation 1 to sub-section (2).

(7) Where a deduction under sub-section (1) is claimed and allowed in respect of profits derivedfrom the business of a hotel, such part of profits shall not qualify to that extent for deduction forany assessment year under any other provisions of this Chapter under the heading "C. -Deductions in respect of certain incomes", and shall in no case exceed the profits and gains ofsuch hotel.

Explanation : For the purposes of this section, - (a) "Travel agent" means a travel agent or otherperson (not being an airline or a shipping company) who holds a valid licence granted by theReserve Bank of India under section 32 of the Foreign Exchange Regulation Act, 1973 (46 of1973);

(b) "Convertible foreign exchange" shall have the meaning assigned to it in clause (a) of theExplanation to section 80HHC;

(c) "Services provided to foreign tourists" shall not include services by way of sale in any shopowned or managed by the person who carries on the business of a hotel or of a tour operator or ofa travel agent;

(d) "Authorised dealer", "foreign exchange" and "Indian currency" shall have the meaningsrespectively assigned to them in clauses (b), (h) and (k) of section 2 of the Foreign ExchangeRegulation Act, 1973 (46 of 1973).

(e) "Eligible issue of capital" means an issue made by a public company formed and registered inIndia and the entire proceeds of the issue is utilised wholly and exclusively for the purpose ofcarrying on the business of -

(i) Wetting up and running of new hotels approved by the prescribed authority; or


(ii) Providing such new facility for the growth of tourism in India, as the Central Governmentmay, by notification in the Official Gazette, specify.

176. Deduction in respect of profits from export ofComputer Software, etc.

§ 176. Deduction in respect of profits from export of Computer Software, etc.Section 80HHE

DEDUCTION IN RESPECT OF PROFITS FROM EXPORT OF COMPUTER SOFTWARE,ETC.

(1) Where an assessee, being an Indian company or a person (other than a company) resident inIndia, is engaged in the business of, - (i) Export out of India of computer software or itstransmission from India to a place outside India by any means;

(ii) Providing technical services outside India in connection with the development or productionof computer software, there shall, in accordance with and subject to the provisions of thissection, be allowed, in computing the total income of the assessee, a deduction of the profitsderived by the assessee from such business :

Provided that if the assessee, being a company engaged in the export out of India of computersoftware issues a certificate referred to in clause (b) of sub-section (4A), that in respect of theamount of the export specified therein, the deduction under this sub-section is to be allowed to asupporting software developer, then the amount of deduction in the case of an assessee shall bereduced by such amount which bears to the total profits derived by the assessee from the exportthe same proportion as the amount of the export turnover specified in such certificate bears to thetotal export turnover of the assessee.

(1A) Where the assessee, being a supporting software developer, has during the previous year,developed and sold computer software to an exporting company in respect of which the saidcompany has issued a certificate under the proviso to sub-section (1) there shall, in accordancewith and subject to the provisions of this section, be allowed in computing the total income of theassessee a deduction of the profits derived by the assessee from the developing and selling ofcomputer software to the exporting company in respect of which the certificate has been issuedby the said company.

(2) The deduction specified in sub-section (1) shall be allowed only if the consideration inrespect of the computer software referred to in that sub-section is received in, or brought into,India by the assessee in convertible foreign exchange, within a period of six months from the endof the previous year or, within such further period as the competent authority may allow in thisbehalf.


Explanation 1 : The said consideration shall be deemed to have been received in India where it iscredited to a separate account maintained for the purpose by the assessee with any bank outsideIndia with the approval of the Reserve Bank of India.

Explanation 2 : For the purposes of this sub-section, the expression "competent authority" meansthe Reserve Bank of India or such other authority as is authorised under any law for the timebeing in force for regulating payments and dealings in foreign exchange.

(3) For the purposes of sub-section (1), profits derived from the business referred to in that sub-section shall be the amount which bears to the profits of the business, the same proportion as theexport turnover bears to the total turnover of the business carried on by the assessee.

(3A) For the purposes of sub-section (1A), profits derived by a supporting software developershall be, - (i) In case where the business carried on by the supporting software developerconsists exclusively of developing and selling of computer software to one or more exportingcompanies solely engaged in exports, the profits of such business;

(ii) In a case where the business carried on by a supporting software developer does not consistexclusively of developing and selling of computer software to one or more exporting companies,the amount which bears to the profits of the business, the same proportion as the turnover inrespect of sale to the respective exporting company bears to the total turnover of the businesscarried on by the assessee.

(4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes inthe prescribed form 1087g , along with the return of income, the report of an accountant, asdefined in the Explanation below sub-section (2) of section 288, certifying that the deduction hasbeen correctly claimed in accordance with the provisions of this section.

(4A) The deduction under sub-section (1A) shall not be admissible unless the supportingsoftware developer furnishes in the prescribed form along with his return of income, - (i) Thereport of an accountant, as defined in the Explanation below sub-section (2) of section 288certifying that the deduction has been correctly claimed on the basis of the profits of thesupporting software developer in respect of sale of computer software export to the exportingcompany; and

(ii) A certificate from the exporting company containing such particulars as may be prescribedand verified in the manner prescribed that in respect of the export turnover mentioned in thecertificate, in exporting company has not claimed deduction under this section :

Provided that the certificate specified in clause (b) shall be duly certified by the auditor auditingthe accounts of the exporting assessee under the provisions of this Act or under any other law.

(5) Where a deduction under this section is claimed and allowed in respect of profits of thebusiness referred to in sub-section (1) for any assessment year, no deduction shall be allowed inrelation to such profits under any other provision of this Act for the same or any other assessment


year.

Explanation : For the purposes of this section, - (a) "Convertible foreign exchange" shall havethe meaning assigned to it in clause (a) of the Explanation to section 80HHC;

(b) "Computer software" means any computer programme recorded on any disc, tape, perforatedmedia or other information storage device and includes any such programme or any customisedelectronic data which is transmitted from India to a place outside India by any means;

(c) "Export turnover" means the consideration in respect of computer software received in, orbrought into, India by the assessee in convertible foreign exchange in accordance with sub-section (2), but does not include freight, telecommunication charges or insurance attributable tothe delivery of the computer software outside India or expenses, if any, incurred in foreignexchange in providing the technical services outside India;

(ca) "Exporting company" means a company referred to in sub-section (1) making actual exportof computer software;

(d) "Profits of the business" means the profits of the business as computed under the head"Profits and gains of business or profession" as reduced by -

(1) Ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges orany other receipt of a similar nature included in such profits; and

(2) The profits of any branch, office, warehouse or any other establishment of the assessee situateoutside India;

(e) "Total turnover" shall not include - (i) Any sum referred to in clauses (iiia), (iiib) and (iiic) ofsection 28;

(ii) Any freight, telecommunication charges or insurance attributable to the delivery of thecomputer software outside India; and

(iii) Expenses, if any, incurred in foreign exchange in providing the technical services outsideIndia.

(ea) "Supporting software developer" means an Indian company or a person (other than acompany) resident in India, developing and selling computer software to an exporting companyfor the purposes of export.

177. Deduction in respect of profits and gains fromexport or transfer of film Software, etc.


§177.Deduction in respect of profits and gains from export or transfer offilm Software, etc.Section 80HHF

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM EXPORT OR TRANSFER OF FILMSOFTWARE, ETC.

(1) Where an assessee, being an Indian company, is engaged in the business ofexport or transfer by any means out of India, of any film software, televisionsoftware, music software, television news software, including telecast rights(hereafter in this section referred to as the software or software rights),there shall, in accordance with and subject to the provisions of this section,be allowed, in computing the total income of the assessee, a deduction of theprofits derived by the assessee from such business.

(2) The deduction specified in sub-section (1) shall be allowed only if theconsideration in respect of the software or software rights referred to inthat sub-section is received in, or brought into, India by the assessee inconvertible foreign exchange, within a period of six months from the end ofthe previous year or within such further period as the competent authority mayallow in this behalf.

(3) For the purposes of sub-section (1), profits derived from the businessreferred to in that sub-section shall be the amount which bears to the profitsof the business, the same proportion as the export turnover bears to the totalturnover of the business carried on by the assessee.

(4) The deduction under sub-section (1) shall not be admissible unless theassessee furnishes in the prescribed form, along with the return of income,the report of an accountant, as defined in the Explanation below sub-section(2) of section 288, certifying that the deduction has been correctly claimedin accordance with the provisions of this section.

(5) Where a deduction under this section is claimed and allowed in respect ofprofits of the business referred to in sub-section (1) for any assessmentyear, no deduction shall be allowed in relation to such profits under anyother provision of this Act for the same or any other assessment year.

(6) Notwithstanding anything contained in this section, no deduction shall beallowed in respect of the software or software rights referred to in sub-section (1), if such business is prohibited by any law for the time being inforce.

Explanation. - For the purposes of this section, - (a) "Competent authority"


means the Reserve Bank of India or such other authority as is authorised underany law for the time being in force for regulating payments and dealings inforeign exchange;

(b) "Convertible foreign exchange" shall have the meaning assigned to it inclause (a) of the Explanation to section 80HHC;

(c) "Export turnover" means the consideration in respect of the software orsoftware rights specified in clauses (d), (e), (g), (h) and (i), received in,or brought into, India by the assessee in convertible foreign exchange inaccordance with sub-section (2), but does not include freight,telecommunication charges or insurance attributable to the delivery of suchsoftware outside India or expenses, if any, incurred in foreign exchange inproviding the technical services outside India;

(d) "Film software" means a copy of a cinematograph film made by any processanalogous to cinematography on acetate polyester or celluloid film positive,magnetic tape, digital media or other optical or magnetic devices andcertified by the Board of film certification constituted by the CentralGovernment under section 3 of the Cinematograph Act, 1952 (37 of 1952);

(e) "Music software" includes series of sounds or music recorded on magnetictape, cassette, compact discs and digital media which can be played orreproduced on any appropriate apparatus;

(f) "Profits of the business" means the profits of the business as computedunder the head "Profits and gains of business or profession" as reduced by-(A) ninety per cent of any receipts by way of brokerage, commission, interest,rent, charges or any other receipt of a similar nature included in suchprofits; and

(B) The profits of any branch, office, warehouse or any other establishment ofthe assessee situated outside India;

(g) "Telecast rights" means a licence or contract to exhibit motion picturesor television programmes over a television network either through terrestrialtransmission or through a satellite broadcast in a specified territory;

(h) "Television news software" means a collection of sounds and images,reportage, data and voice of actualities broadcast either through terrestrialtransmission, wire or satellite, live or pre- recorded on video cassettes ordigital media;

(i) "Television software" means any programme or series of sounds and imagesrecorded on film or tape or digital media or broadcast through terrestrial


transmitter, satellite or any other means of diffusion;

(j) "Total turnover" shall not include - (A) Any sum referred to in clauses(iiia), (iiib) and (iiic) of section 28;

(B) Any freight, telecommunication charges or insurance attributable to thedelivery of the film software, music software, telecast rights, televisionnews software, or television software as defined in clause (d), (e), (g), (h)or (i), as the case may be, outside India;

(C) Expenses, if any, incurred in foreign exchange in providing the technicalservices outside India.

178. Deduction in respect of profits and gains fromindustrial undertakings after a certain date, etc.

§178.Deduction in respect of profits and gains from industrial undertakingsafter a certain date, etc.Section 80-I

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS AFTER ACERTAIN DATE, ETC.

(1) Where the gross total income of an assessee includes any profits and gainsderived from an industrial undertaking or a ship or the business of a hotel orthe business of repairs to ocean-going vessels or other powered craft to whichthis section applies, there shall, in accordance with and subject to theprovisions of this section, be allowed, in computing the total income of theassessee, a deduction from such profits and gains of an amount equal to twentyper cent thereof :

Provided that in the case of an assessee, being a company the provisions ofthis sub-section shall have effect in relation to profits and gains derivedfrom an industrial undertaking or a ship or the business of a hotel as if forthe words "twenty per cent" the words "twenty-five per cent" had beensubstituted.

(1A) Notwithstanding anything contained in sub-section (1), in relation to anyprofits and gains derived by an assessee from - (i) An industrial undertakingwhich begins to manufacture or produce articles or things or to operate itscold storage plant or plants; or

(ii) A ship which is first brought into use; or


(iii) The business of a hotel which starts functioning, on or after the 1stday of April, 1990, but before the 1st day of April, 1991, there shall, inaccordance with and subject to the provisions of this section, be allowed incomputing the total income of the assessee, a deduction from such profits andgains of an amount equal to twenty-five per cent thereof :

Provided that in the case of an assessee, being a company, the provisions ofthis sub-section shall have effect in relation to profits and gains derivedfrom an industrial undertaking or a ship or the business of a hotel as if forthe words "twenty-five per cent", the words "thirty per cent" had beensubstituted.

(2) This section applies to any industrial undertaking which fulfils all thefollowing conditions, namely :- (i) It is not formed by the splitting up, orthe reconstruction, of a business already in existence;

(ii) It is not formed by the transfer to a new business of machinery or plantpreviously used for any purpose;

(iii) It manufactures or produces any article or thing, not being any articleor thing specified in the list in the Eleventh Schedule, or operates one ormore cold storage plant, or plants in any part of India, and begins tomanufacture or produce articles or things or to operate such plant or plants,at any time within the period of ten years next following the 31st day ofMarch, 1981, or such further period as the Central Government may, bynotification in the Official Gazette, specify with reference to any particularindustrial undertaking;

(iv) In a case where the industrial undertaking manufactures or producesarticles or things, the undertaking employs ten or more workers in amanufacturing process carried on with the aid of power, or employs twenty ormore workers in a manufacturing process carried on without the aid of power:

Provided that the condition in clause (i) shall not apply in respect of anyindustrial undertaking which is formed as a result of the re-establishment,reconstruction or revival by the assessee of the business of any suchindustrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section :

Provided further that the conditions in clause (iii) shall, in relation to asmall-scale industrial undertaking, apply as if the words "not being anyarticle or thing specified in the list in the Eleventh Schedule" had beenomitted.


Explanation 1 : For the purposes of clause (ii) of this sub-section, anymachinery or plant which was used outside India by any person other than theassessee shall not be regarded as machinery or plant previously used for anypurpose, if the following conditions are fulfilled, namely :- (a) suchmachinery or plant was not, at any time previous to the date of theinstallation by the assessee, used in India;

(b) Such machinery or plant is imported into India from any country outsideIndia; and

(c) No deduction on account of depreciation in respect of such machinery orplant has been allowed or is allowable under the provisions of this Act incomputing the total income of any person for any period prior to the date ofthe installation of the machinery or plant by the assessee.

Explanation 2 : Where in the case of an industrial undertaking, any machineryor plant or any part thereof previously used for any purpose is transferredto a new business and the total value of the machinery or plant or part sotransferred does not exceed twenty per cent. of the total value of themachinery or plant used in the business, then, for the purposes of clause (ii)of this sub-section, the condition specified therein shall be deemed to havebeen complied with.

Explanation 3 : For the purposes of this sub-section, "small-scale industrialundertaking" shall have the same meaning as in clause (b) of the Explanationbelow sub-section (8) of section 80HHA.

(3) This section applies to any ship, where all the following conditions arefulfilled, namely :- (i) It is owned by an Indian company and is wholly usedfor the purposes of the business carried on by it;

(ii) It was not, previous to the date of its acquisition by the Indiancompany, owned or used in Indian territorial waters by a person resident inIndia; and

(iii) It is brought into use by the Indian company at any time within theperiod of ten years next following the 1st day of April, 1981.

(4) This section applies to the business of any hotel, where all the followingconditions are fulfilled, namely :- (i) The business of the hotel is notformed by the splitting up, or the reconstruction of a business already inexistence or by the transfer to a new business of a building previously usedas a hotel or of any machinery or plant previously used for any purpose;


(ii) The business of the hotel is owned and carried on by a company registeredin India with a paid-up capital of not less than five hundred thousand rupees;

(iii) The hotel is for the time being approved for the purposes of this sub-section by the Central Government;

(iv) The business of the hotel starts functioning after the 31st day of March,1981 but [ 1094 before the 1st day of April, 1991.

(4A) This section applies to the business of repairs to ocean-going vessels orother powered craft which fulfils all the following conditions, namely :- (i)The business is not formed by the splitting up, or the reconstruction, of abusiness already in existence;


(iii) It is carried on by an Indian company and the work by way of repairs toocean-going vessels or other powered craft has been commenced by such companyafter the 31st day of March, 1983 but before the 1st day of April, 1988; and

(iv) It is for the time being approved for the purposes of this sub-section bythe Central Government.

(5) The deduction specified in sub-section (1) shall be allowed in computingthe total income in respect of the assessment year relevant to the previousyear in which the industrial undertaking begins to manufacture or producearticles or things or to operate its cold storage plant or plants or the shipis first brought into use or the business of the hotel starts functioning orthe company commences work by way of repairs to ocean-going vessels or otherpowered craft (such assessment year being hereafter in this section referredto as the initial assessment year) and each of the seven assessment yearsimmediately succeeding the initial assessment year :

Provided that in the case of an assessee, being a co-operative society, theprovisions of this sub-section shall have effect as if for the words "sevenassessment years", the words "nine assessment years" had been substituted :

Provided further that in the case of an assessee carrying on the business ofrepairs to ocean-going vessels or other powered craft, the provisions of thissub-section shall have effect as if for the words "seven assessment years",the words "four assessment years" had been substituted :

Provided also that in the case of - (i) An industrial undertaking which beginsto manufacture or produce articles or things or to operate its cold storage


plant or plants; or

(ii) A ship which is first brought into use; or

(iii) The business of a hotel which starts functioning, on or after the 1stday of April, 1990 but before the 1st day of April, 1991, provisions of thissub-section shall have effect as if for the words "seven assessment years",the words "nine assessment years" had been substituted :

Provided also that in the case of an assessee, being a co-operative society,deriving profits and gains from an industrial undertaking or a ship or a hotelreferred to in the third proviso, the provisions of that proviso shall haveeffect as if for the words "nine assessment years", the words "elevenassessment years" had been substituted.

(6) Notwithstanding anything contained in any other provision of this Act, theprofits and gains of an industrial undertaking or a ship or the business of ahotel or the business of repairs to ocean-going vessels or other powered craftto which the provisions of sub-section (1) apply shall, for the purposes ofdetermining the quantum of deduction under sub-section (1) for the assessmentyear immediately succeeding the initial assessment year or any subsequentassessment year, be computed as if such industrial undertaking or ship or thebusiness of the hotel or the business of repairs to ocean-going vessels orother powered craft were the only source of income of the assessee during theprevious years relevant to the initial assessment year and to every subsequentassessment year upto and including the assessment year for which thedetermination is to be made.

(7) Where the assessee is a person other than a company or a co-operativesociety, the deduction under sub-section (1) from profits and gains derivedfrom an industrial undertaking shall not be admissible unless the accounts ofthe industrial undertaking for the previous year relevant to the assessmentyear for which the deduction is claimed have been audited by an accountant, asdefined in the Explanation below sub-section (2) of section 288, and theassessee furnishes, along with his return of income, the report of such auditin the prescribed form 1098 duly signed and verified by such accountant.

(8) Where any goods held for the purposes of the business of the industrialundertaking or the hotel or the operation of the ship or the business ofrepairs to ocean-going vessels or other powered craft are transferred to anyother business carried on by the assessee, or where any goods held for thepurposes of any other business carried on by the assessee are transferred tothe business of the industrial undertaking or the hotel or the operation ofthe ship or the business of repairs to ocean-going vessels or other powered


craft and, in either case the consideration, if any, for such transfer asrecorded in the accounts of the business of the industrial undertaking or thehotel or the operation of the ship or the business of repairs to ocean-goingvessels or other powered craft does not correspond to the market value of suchgoods as on the date of the transfer, then, for the purposes of the deductionunder this section, the profits and gains of the industrial undertaking or thebusiness of the hotel or the operation of the ship or the business of repairsto ocean-going vessels or other powered craft shall be computed as if thetransfer, in either case, had been made at the market value of such goods ason that date :

Provided that where, in the opinion of the Assessing Officer, the computationof the profits and gains of the industrial undertaking or the business of thehotel or operation of the ship or the business of repairs to ocean-goingvessels or other powered craft in the manner hereinbefore specified presentsexceptional difficulties, the Assessing Officer may compute such profits andgains on such reasonable basis as he may deem fit.

Explanation : In this sub-section, "market value", in relation to any goodsmeans the price that such goods would ordinarily fetch on sale in the openmarket.

(9) Where it appears to the Assessing Officer that, owing to the closeconnection between the assessee carrying on the business of the industrialundertaking or the hotel or the operation of the ship or the business ofrepairs to ocean-going vessels or other powered craft to which this sectionapplies and any other person, or for any other reason, the course of businessbetween them is so arranged that the business transacted between them producesto the assessee more than the ordinary profits which might be expected toarise in the business of the industrial undertaking or the hotel or theoperation of the ship, or the business of repairs to ocean-going vessels orother powered craft the Assessing Officer shall, in computing the profits andgains of the industrial undertaking or the hotel or the ship or the businessof repairs to ocean-going vessels or other powered craft for the purposes ofthe deduction under this section, take the amount of profits as may bereasonably deemed to have been derived therefrom.

(10) The Central Government may, after making such inquiry as it may thinkfit, direct, by notification in the Official Gazette, that the exemptionconferred by this section shall not apply to any class of industrialundertakings with effect from such date as it may specify in the notification.


179. Deduction in respect of profits and gains fromindustrial undertakings, etc., in certain cases.

§179.Deduction in respect of profits and gains from industrial undertakings,etc., in certain cases.

Section 80-IA

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIALUNDERTAKINGS, ETC., IN CERTAIN CASES.

(1) Where the gross total income of an assessee includes any profits and gains derived from anybusiness of an industrial undertaking or a hotel or operation of a ship or developing, maintainingand operating any infrastructure facility or scientific and industrial research and developmentorproviding telecommunication services whether basic or cellularor operating an industrial park orcommercial production or refining of mineral oil in the North Eastern Regionor in any part ofIndia on or after the 1st day of April, 1997 (such business being hereinafter referred to as theeligible business) to which this section applies, there shall, in accordance with and subject to theprovisions of this section, be allowed, in computing the total income of the assessee, a deductionfrom such profits and gains of an amount equal to the percentage specified in sub-section (5) andfor such number of assessment years as is specified in sub-section (6).

(2) This section applies to any industrial undertaking which fulfils all the following conditions,namely :- (i) It is not formed by splitting up, or the reconstruction, of a business already inexistence :

Provided that this condition shall not apply in respect of an industrial undertaking which isformed as a result of the re-establishment, reconstruction or revival by the assessee of thebusiness of any such industrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section;

(ii) It is not formed by the transfer to a new business of machinery or plant previously used forany purpose;

(iii) It manufactures or produces any article or thing, not being any article or thing specified inthe list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any partof India :

Provided that the condition in this clause shall, in relation to a small-scale industrial undertaking,or an industrial undertaking referred to in sub-clause (b) of clause (iv) which begins tomanufacture or produce an article or thing during the period beginning on the 1st day of April,1993 and ending on 31st day of March, 1998 apply as if the words "not being any article or thingspecified in the list in the Eleventh Schedule" had been omitted;


(iv)(a) In the case of an industrial undertaking not specified in sub-clause (b), or sub-clause (c), itbegins to manufacture or produce articles or things or to operate such plant or plants, at any timeduring the period beginning on the 1st day of April, 1991 and ending on the 31st day of March,1995, or such further period as the Central Government may, by notification in the OfficialGazette, specify with reference to any particular industrial undertaking;

(b) In the case of an industrial undertaking located in an industrially backward State specified inthe Eighth Schedule or set up in any part of India for the generation, or generation anddistribution, of power, it begins to manufacture or produce articles or things or to operate its coldstorage plant or plants or to generate power at any time during the period beginning on the 1stday of April, 1993 and ending on the 31st day of March, 2000.

Provided that in the case of an industrial undertaking set up in any part of India for thegeneration or generation and distribution, of power, the period ending shall have effect as if forthe figures "1998", the figures 2003 had been substituted.

(c) In the case of an industrial undertaking located in such industrially backward district as theCentral Government may, having regard to the prescribed guidelines, by notification in theOfficial Gazette, specify in this behalf, as industrially backward district of Category "A" orindustrially backward district of Category "B" and it begins to manufacture or produce articles orthing or to operate its cold storage plant or plants at any time during the period beginning on the1st day of October, 1994 and ending on the 31st day of March, 2000

(d) In the case of an industrial undertaking being a small scale industrial undertaking, notspecified in sub-clause (b) or in sub-clause (c), it begins to manufacture or produce articles orthings or to operate its cold storage plant at any time during the period beginning on the 1st dayof April, 1995 and ending on the 31st day of March, 2000;

(v) In a case where the industrial undertaking manufactures or produces articles or things, theundertaking employs ten or more workers in a manufacturing process carried on with the aid ofpower, or employs twenty or more workers in a manufacturing process carried on without the aidof power.

Explanation 1 : For the purposes of clause (ii) of this sub-section, any machinery or plant whichwas used outside India by any person other than the assessee shall not be regarded as machineryor plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a)Such machinery or plant was not, at any time previous to the date of the installation by theassessee, used in India;

(b) Such machinery or plant is imported into India from any country outside India; and

(c) No deduction on account of depreciation in respect of such machinery or plant has beenallowed or is allowable under the provisions of this Act in computing the total income of anyperson for any period prior to the date of the installation of the machinery or plant by theassessee.


Explanation 2 : Where in the case of an industrial undertaking, any machinery or plant or anypart thereof previously used for any purpose is transferred to a new business and the total valueof the machinery or plant or part so transferred does not exceed twenty per cent. of the total valueof the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with.

(3) This section applies to any ship, where all the following conditions are fulfilled, namely :- (i)It is owned by an Indian company and is wholly used for the purposes of the business carried onby it;

(ii) It was not, previous to the date of its acquisition by the Indian company, owned or used inIndian territorial waters by a person resident in India; and

(iii) It is brought into use by the Indian company at any time during the period beginning on the1st day of April, 1991 and ending on the 31st day of March, 1995.

(4)This section applies to the business of any hotel - (a) Where conditions (i), (ii) and (v); and

(b) Either of the conditions (iii) or (iv); or

(c) Either of the conditions (iiia) or (iva), are fulfilled, namely :- (i) The business of the hotel isnot formed by the splitting up, or the reconstruction, of a business already in existence or by thetransfer to a new business of a building previously used as a hotel or of any machinery or plantpreviously used for any purpose;

(ii) The business of the hotel is owned and carried on by a company registered in India with apaid-up capital of not less than five hundred thousand rupees;

(iii) The business of the hotel, located in a hilly area or a rural area or a place of pilgrimage orsuch other place as the Central Government may having regard to the need for development ofinfra-structure for tourism in any place and other relevant considerations specify for the purposeof this clause, starts functioning at any time during the period beginning on the 1st day of April,1990 and ending on the 31st day of March, 1994;

(iiia) The business of the hotel, located in a hilly area or a rural area or a place of pilgrimage orsuch other place as the Central Government may, having regard to the need for development ofinfrastructure for tourism in any place and other relevant considerations, specify for the purposeof this clause, starts functioning at any time during the period beginning on the 1st day of April,1998, and ending on the 31st day of March, 2001 :

Provided that nothing contained in this clause shall apply to any hotel located at a place withinthe municipal jurisdiction (whether known as a municipality, municipal corporation, notified areacommittee, town area committee or a cantonment board or by any other name) of Calcutta,


Chennai, Delhi and Mumbai;

(iv) The business of the hotel - (1) Located in any place, or

(2) Located in a place other than a place referred to in clause (iii) of this sub-section, startsfunctioning at any time during the period beginning on the 1st day of April, 1991 and ending onthe 31st day of March, 1995;

(iva) The business of the hotel, located in a place other than a place referred to in clause (iiia) ofthis sub-section and not being located at a place within the municipal jurisdiction (whetherknown as a municipality, municipal corporation, notified area committee, town area committeeor a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai, startsfunctioning at any time during the period beginning on the 1st day of April, 1997, and ending onthe 31st day of March, 2001;

(v) The hotel is for the time being approved by the prescribed authority

(4A) This section applies to any enterprise carrying on the business of developing, maintainingand operating any infrastructure facility which fulfills all the following conditions, namely :- (i)The enterprise is owned by a company registered in India or by a consortium of such companies;

(ii) The enterprise has entered into an agreement with the Central Government or a StateGovernment or a local authority or any other statutory body for developing, maintaining andoperating a new infrastructure facility subject to the condition that such infrastructure facilityshall be transferred to the Central Government, State Government, local authority or such otherstatutory body, as the case may be, within the period stipulated in the agreement;

(iii) The enterprise starts operating and maintaining the infrastructure facility on or after the 1stday of April, 1995 :

Provided that the provisions of this section shall apply in case of refining of mineral oil wherethe undertaking beings refining on or after the 1st day of October, 1998.

(4B) This section applies to any company registered in India carrying on scientific and industrialresearch and development which fulfills all the following conditions, namely :- (i) The companyhas the main object of scientific and industrial research and development;

(ii) The company is for the time being approved by the prescribed authority at any time beforethe 1st day of April, 1998.

(4C) This section applies to any undertaking which starts providing telecommunication serviceswhether basic or cellular including radio paging, domestic satellite service or network oftrunking and electronic data interchange services at any time on or after the 1st day of April,1995, but before the 31st day of March, 2000.


(4D) This section applies to any undertaking which begins to operate an industrial park notifiedby the Central Government in accordance with the scheme framed and notified by thatGovernment for the period beginning on the 1st day of April, 1997, and ending on the 31st dayof March, 2002.

(4E) This section applies to any undertaking which begins commercial production or refining ofmineral oil in the North Eastern Region or in any part of India on or after the 1st day of April,1997.

Provided that the proviso of this section shall apply in case of refining of mineral oil where theundertaking begins refining on or after the 1st day of October, 1998.

(4F) This section applies to an undertaking, engaged in developing and building housing projectsapproved by a local authority subject to the condition that the size of the plot of land has aminimum of one acre, and the residential unit has a built up area not exceeding one thousandsquare fee :

Provided that the undertaking commences development and construction of the housing projecton or after the 1st day of October, 1998 and completes the same before the 31st day of March,2001.

(5) The amount referred to in sub-section (1) shall be - (i)(a) In the case of an industrialundertaking referred to in sub-clause (a) or sub-clause (d) of clause (iv) of sub-section (2),twenty-five per cent. of the profits and gains derived from such industrial undertakings;

(b) In the case of an industrial undertaking referred to in sub-clause (b) or sub-clause (c) ofclause (iv) of sub-section (2), hundred per cent. of the profits and gains derived from suchindustrial undertaking for the initial five assessment years and thereafter twenty-five per cent. ofthe profits and gains derived from such industrial undertaking :

Provided that where the assessee is a company, the provisions of this clause shall have effect asif for the words "twenty-five per cent.", the words "thirty per cent." had been substituted :

Provided further that in case of an industrial undertaking located in an industrially backwarddistrict of Category "B", the provisions of this clause shall have effect as if for the words "fiveassessment years", the words three assessment years" had been substituted;

(ia) In the case of an enterprise referred to in sub-section (4A), hundred per cent. of the profitsand gains derived from such business for the initial five assessment years and thereafter, thirtyper cent. of such profits and gains;

(ib) In the case of a company referred to in sub-section (4B), hundred per cent. of the profits andgains derived from such business;


(ic) In the case of an undertaking referred to in sub-section (4C), hundred per cent. of the profitsand gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent. of the profits and gains derived from such business :

Provided that where the assessee is a company, the provisions of this clause shall have effect asif for the words "twenty-five per cent.", the words "thirty per cent." had been substituted;

(id) In the case of an industrial park referred to in sub-section (4D), hundred per cent. of theprofits and gains derived from such business for the initial five assessment years and thereafter,twenty-five per cent. of the profits and gains derived from such business :

Provided that where the assessee is a company, the provisions of this clause shall have effect asif for the words "twenty-five per cent.", the words "thirty per cent." had been substituted;

(ii) In the case of a hotel referred to in clause (iii) of sub-section (4), fifty per cent. of the profitsand gains derived from the business of such hotel :

Provided that the said hotel is approved by the prescribed authority for the purpose of this clausein accordance with the rules made under this Act :

Provided further that the said hotel approved by the prescribed authority before the 31st day ofMarch, 1992, shall be deemed to have been approved by the prescribed authority for the purposesof this section in relation to the assessment year commencing on the 1st day of April, 1991;

(iia) In the case of a hotel referred to in clause (iiia) of sub-section (4), fifty per cent. of theprofits and gains derived from the business of such hotel :

Provided that the said hotel is approved by the prescribed authority for the purposes of thisclause in accordance with the rules made under this Act;

(iii) In the case of a hotel referred to in clause (iv) or clause (iva) of sub-section (4), thirty percent. of the profits and gains derived from the business of such hotel;

(iv) In the case of a ship, thirty per cent. of the profits and gains derived from such ship.

(v) In the case of undertaking referred to in sub-section (4E) hundred per cent. of profits andgains derived from such business for the initial seven assessment years.

(vi) In the case of a housing project referred to in sub-section (4F), hundred per cent, of profitsand gains derived from such business.

(6) The number of assessment years referred to in sub-section (1) shall, including the initialassessment year, be - (i) Twelve in the case of an assessee, being a co-operative society,deriving profits and gains from an industrial undertaking;


(ii) Ten in the case of any assessee, not being a co-operative society, deriving profits and gainsfrom an industrial undertaking specified in sub-clause (a) or sub-clause (b) or sub-clause (d) ofclause (iv) of sub-section (2), or located in an industrially backward district of Category "A"specified in sub-clause (c) of clause (iv) of that sub-section;

(iia) Eight in the case of an assessee deriving profits and gains from an industrial undertakinglocated in an industrially backward district of Category "B" specified in sub-clause (c) of clause(iv) of sub-section (2) and such an undertaking is not covered under clauses (i) and (ii) of thissub-section;"; 1100kg-1

(iii) Ten in the case of any other assessee deriving profits and gains, from a ship or the businessof a hotel;

(iv) Any ten consecutive assessment years falling within a period of twelve assessment yearsbeginning with the assessment year in which an assessee begins operating and maintaininginfrastructure facility :

Provided that where the assessee begins operating and maintaining any infrastructure facilityreferred to in sub-clause (ii) of clause (ca) of sub-section (12), the provisions of this clause shallhave effect as if for the word "twelve", the word "twenty" has been substituted.";

(v) Five in the case of an assessee, being a company referred to in sub-section (4B), derivingprofits and gains from scientific and industrial research and development.

(vi) Ten in the case of an assessee, being an undertaking referred to in sub-section (4C), derivingprofits and gains from telecommunication services whether basic or cellular including radiopaging and domestic satellite service

(vii) Ten in the case of an assessee, being an undertaking referred to in sub-section (4D),deriving profits and gains from operating an industrial park;

(viii) Seven in the case of an assessee being an undertaking referred to in sub-section (4E)deriving profits and gains from commercial production or refining of mineral oil in the NorthEastern Region and other parts of the country on or after the 1st day of April, 1997

(7) Notwithstanding anything contained in any other provision of this Act, the profits and gainsof an eligible business to which the provisions of sub-section (1) apply shall, for the purposes ofdetermining the quantum of deduction under sub-section (5) for the assessment year immediatelysucceeding the initial assessment year or any subsequent assessment year, be computed as if sucheligible business were the only source of income of the assessee during the previous yearrelevant to the initial assessment year and to every subsequent assessment year up to andincluding the assessment year for which the determination is to be made.

(7A) Notwithstanding anything contained in sub-section (4A), where housing or other activities


are an integral part of the highway project and the profits of which are computed on such basisand manner as may be prescribed, such profit shall not be liable to tax where the profit has beentransferred to a special reserve account and the same is actually utilised for the highway projectexcluding housing and other activities before the expiry of three years following the year inwhich such amount was transferred to the reserve account; and the amount remaining unutilisedshall be chargeable to tax as income of the year in which transfer to reserve account took place,";

(8) Where the assessee is a person other than a company or a co-operative society, the deductionunder sub-section (1) from profits and gains derived from an industrial undertaking shall not beadmissible unless the accounts of the industrial undertaking for the previous year relevant to theassessment year for which the deduction is claimed have been audited by an accountant, asdefined in the Explanation below sub-section (2) of section 288, and the assessee furnishes,along with his return of income, the report of such audit in the prescribed form 1100m dulysigned and verified by such accountant.

(9) Where any goods held for the purposes of the eligible business are transferred to any otherbusiness carried on by the assessee, or where any goods held for the purposes of any otherbusiness carried on by the assessee are transferred to the eligible business and, in either case, theconsideration, if any, for such transfer as recorded in the accounts of the eligible business doesnot correspond to the market value of such goods as on the date of the transfer, then, for thepurposes of the deduction under this section, the profits and gains of such eligible business shallbe computed as if the transfer, in either case, had been made at the market value of such goods ason that date :

Provided that where, in the opinion of the Assessing Officer, the computation of the profits andgains of the eligible business in the manner hereinbefore specified presents exceptionaldifficulties, the Assessing Officer may compute such profits and gains on such reasonable basisas he may deem fit.

Explanation : In this sub-section, "market value", in relation to any goods, means the price thatsuch goods would ordinarily fetch on sale in the open market.

(9A) Where any amount of profits and gains of an industrial undertaking or of a hotel in the caseof an assessee is claimed and allowed under this section for any assessment year, deduction tothe extent of such profits and gains shall not be allowed under any other provisions of thisChapter under the heading "C. - Deductions in respect of certain incomes". and shall in no caseexceed the profits and gains of the undertaking or hotel, as the case may be.

(10) Where it appears to the Assessing Officer that, owing to the close connection between theassessee carrying on the eligible business to which this section applies and any other person, orfor any other reason, the course of business between them is so arranged that the businesstransacted between them produces to the assessee more than the ordinary profits which might beexpected to arise in such eligible business, the Assessing Officer shall, in computing the profitsand gains of such eligible business for the purposes of the deduction under this section, take theamount of profits as may be reasonably deemed to have been derived therefrom.


(11) The Central Government may, after making such inquiry as it may think fit, direct, bynotification in the Official Gazette, that the exemption conferred by this section shall not apply toany class of industrial undertakings with effect from such date as it may specify in thenotification.

(12) For the purposes of this section, - (a) "Domestic satellite" means a satellite owned andoperated by an Indian company for providing telecommunication service;

(aa) "Hilly area" means any area located at a height of one thousand metres or more above thesea level;

(b) "Industrial undertaking" shall have the meaning assigned to it in the Explanation to section33B;

(c) "Initial assessment year" - (1) In the case of an industrial undertaking or cold storage plant orship or hotel, means the assessment year relevant to the previous year in which the industrialundertaking begins to manufacture or produce articles or things, or to operate its cold storage,plant or plants or the ship is first brought into use or the business of the hotel starts functioning;

(2) In the case of an enterprise, carrying on the business of developing, operating andmaintaining any infrastructure facility, means the assessment year specified by the assessee at hisoption to be the initial year, not falling beyond the twelfth assessment year starting from theprevious year in which the enterprise begins operating and maintaining the infrastructure facility;

(3) In the case of a company carrying on scientific and industrial research and development,means the assessment year relevant to the previous year in which the company is approved bythe prescribed authority for the purposes of sub-section (4B);

(4) In the case of an undertaking referred to under sub-section (4C) means the assessment yearrelevant to the previous year in which the undertaking starts to provide the telecommunicationservices whether basic or cellular including radio paging and domestic satellite service.

(5) In the case of undertaking operating an industrial park referred to under sub-section (4D)means the assessment year relevant to the previous year in which the undertaking starts operatingsuch industrial park notified for the purposes of the said sub-section;

(6) In the case of an undertaking engaged in the business of commercial production of mineraloil referred to in sub-section (4E) means the assessment year relevant to the previous year inwhich the undertaking commences the commercial production of mineral oil;

(ca) "Infrastructure facility" means - (i) A road, bridge, highway, airport, port, inland waterwaysand inland waterways and inland portrail system or any other public facility of a similar nature asmay be notified by the Board in this behalf in the Official Gazette;


(ii) A highway including housing or other activities being an integral part of the highway project;and

(iii) Water supply project, irrigation project, sanitation and sewerage system;

(d) "Place of pilgrimage" means a place where any temple, mosque, gurdwara, church or otherplace of public worship of renown throughout any State or States is situated;

(e) "Rural area" means any area other than - (i) An area which is comprised within thejurisdiction of a municipality (whether known as a municipality, municipal corporation, notifiedarea committee, town area committee or by any other name) or a cantonment board and whichhas a population of not less than ten thousand according to the preceding census of whichrelevant figures have been published before the first day of the previous year; or

(ii) An area within such distance not being more than fifteen kilometres from the local limits ofany municipality or cantonment board referred to in sub-clause (i), as the Central Governmentmay, having regard to the stage of development of such area (including the extent of, and scopefor, urbanisation of such area) and other relevant considerations specify in this behalf bynotification in the Official Gazette;

(f) "Small-scale industrial undertaking" means an industrial undertaking which is, as on the lastday of the previous year, regarded as a small-scale industrial undertaking under section 11B ofthe Industries (Development and Regulation) Act, 1951 (65 of 1951);

(g) "North Eastern Region" means the region comprising of the State of Arunachal Pradesh,Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.

180. Deduction in respect of profits and gains fromcertain industrial undertakings other thaninfrastructure development undertakings.

§180.Deduction in respect of profits and gains from certain industrialundertakings other than infrastructure development undertakings.Section 80-IB

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGSOTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKING. -

(1) Where the gross total income of an assessee includes any profits and gainsderived from any business referred to in sub- sections (3) to (11) (suchbusiness being hereinafter referred to as the eligible business), there shall,in accordance with and subject to the provisions of this section, be allowed,


in computing the total income of the assessee, a deduction from such profitsand gains of an amount equal to such percentage and for such number ofassessment years as specified in this section.

(2) This section applies to any industrial undertaking which fulfils all thefollowing conditions, namely :- (i) It is not formed by splitting up, or thereconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of an industrialundertaking which is formed as a result of the re- establishment,reconstruction or revival by the assessee of the business of any suchindustrial undertaking as is referred to in section 33B, in the circumstancesand within the period specified in that section;


(iii) It manufactures or produces any article or thing, not being any articleor thing specified in the list in the Eleventh Schedule, or operates one ormore cold storage plant or plants, in any part of India :

Provided that the condition in this clause shall, in relation to a small scaleindustrial undertaking or an industrial undertaking referred to in sub-section(4) shall apply as if the words "not being any article or thing specified inthe list in the Eleventh Schedule" had been omitted.

Explanation 1 : For the purposes of clause (ii), any machinery or plant whichwas used outside India by anyperson other than the assessee shall not beregarded as machinery or plant previously used for any purpose, if thefollowing conditions are fulfilled, namely :- (a) Such machinery or plant wasnot, at any time previous to the date of the installation by the assessee,used in India;

(b) Such machinery or plant is imported into India from any country outsideIndia; and

(c) No deduction on account of depreciation in respect of such machinery orplant has been allowed or is allowable under the provisions of this Act incomputing the total income of any person for any period prior to the date ofthe installation of the machinery or plant by the assessee.

Explanation 2 : Where in the case of an industrial undertaking, any machineryor plant or any part thereof previously used for any purpose is transferred toa new business and the total value of the machinery or plant or part sotransferred does not exceed twenty per cent of the total value of the


machinery or plant used in the business, then, for the purposes of clause (ii)of this sub-section, the condition specified therein shall be deemed to havebeen complied with;

(iv) In a case where the industrial undertaking manufactures or producesarticles or things, the undertaking employs ten or more workers in amanufacturing process carried on with the aid of power, or employs twenty ormore workers in a manufacturing process carried on without the aid of power.

(3) The amount of deduction in the case of an industrial undertaking shall betwenty-five per cent (or thirty per cent. where the assessee is a company), ofthe profits and gains derived from such industrial undertaking for a period often consecutive assessment years (or twelve consecutive assessment years wherethe assessee is a co- operative society) beginning with the initial assessmentyear subject to the fulfilment of the following conditions, namely :-

(i) It begins to manufacture or produce, articles or things or to operate suchplant or plants at any time during the period beginning from the 1st day ofApril, 1991 and ending on the 31st day of March, 1995 or such further periodas the Central Government may, by notification in the Official Gazette,specify with reference to any particular undertaking;

(ii) Where it is an industrial undertaking being a small scale industrialundertaking, it begins to manufacture or produce articles or things or tooperate its cold storage plant not specified in sub- section (4) or sub-section (5) at any time during the period beginning on the 1st day of April,1995 and ending on the 31st day of March, 2000.

(4) The amount of deduction in the case of an industrial undertaking in anindustrially backward State specified in the Eighth Schedule shall be hundredper cent of the profits and gains derived from such industrial undertaking forfive assessment years beginning with the initial assessment year andthereafter twenty-five per cent (or thirty per cent where the assessee is acompany) of the profits and gains derived from such industrial undertaking :

Provided that the total period of deduction does not exceed ten consecutiveassessment years (or twelve consecutive assessment years where the assessee isa co-operative society) subject to fulfilment of the condition that it beginsto manufacture or produce articles or things or to operate its cold storageplant or plants during the period beginning on the 1st day of April, 1993 andending on the 31st day of March, 2000 :

Provided further that in the case of such industries in the North- EasternRegion, as may be notified by the Central Government, the amount of deduction


shall be hundred per cent of profits and gains for a period of ten assessmentyears, and the total period of deduction shall in such a case not exceed tenassessment years.

(5) The amount of deduction in the case of an industrial undertaking locatedin such industrially backward districts as the Central Government may, havingregard to the prescribed guidelines, by notification in the Official Gazette,specify in this behalf as industrially backward district of category "A" or anindustrially backward district of category "B" shall be, - (i) Hundred percent of the profits and gains derived from an industrial undertaking locatedin a backward district of category "A" for five assessment years beginningwith the initial assessment year and thereafter, twenty-five per cent (orthirty per cent. where the assessee is a company) of the profits and gains ofan industrial undertaking :

Provided that the total period of deduction shall not exceed ten consecutiveassessment years or where the assessee is a co-operative society, twelveconsecutive assessment years :

Provided further that the industrial undertaking begins to manufacture orproduce articles or things or to operate its cold storage plant or plants atany time during the period beginning on the 1st day of October, 1994 andending on the 31st day of March, 2000;

(ii) Hundred per cent of the profits and gains derived from an industrialundertaking located in a backward district of category "B" for threeassessment years beginning with the initial assessment year and thereafter,twenty-five per cent (or thirty per cent. where the assessee is a company) ofthe profits and gains of an industrial undertaking :

Provided that the total period of deduction does not exceed eight consecutiveassessment years (or where the assessee is a co-operative society, twelveconsecutive assessment years):

Provided further that the industrial undertaking begins to manufacture orproduce articles or things or to operate its cold storage plant or plants atany time during the period beginning on the 1st day of October, 1994 andending on the 31st day of March, 2000.

(6) The amount of deduction in the case of the business of a ship shall bethirty per cent of the profits and gains derived from such ship for a periodof ten consecutive assessment years including the initial assessment yearprovided that the ship- (i) Is owned by an Indian company and is wholly usedfor the purposes of the business carried on by it;


(ii) Was not, previous to the date of its acquisition by the Indian company,owned or used in Indian territorial waters by a person resident in India; and

(iii) Is brought into use by the Indian company at any time during the periodbeginning on the 1st day of April, 1991 and ending on the 31st day of March,1995.

(7) The amount of deduction in the case of any hotel shall be- (a) Fifty percent of the profits and gains derived from the business of such hotel for aperiod of ten consecutive years beginning from the initial assessment year asis located in a hilly area or a rural area or a place of pilgrimage or suchother place as the Central Government may, having regard to the need fordevelopment of infrastructure for tourism in any place and other relevantconsiderations, specify by notification in the Official Gazette and such hotelstarts functioning at any time during the period beginning on the 1st day ofApril, 1990 and ending on the 31st day of March, 1994 or beginning on the 1stday of April, 1997 and ending on the 31st day of March, 2001 :

Provided that nothing contained in this clause shall apply to a hotel locatedat a place within the municipal jurisdiction (whether known as a municipality,municipal corporation, notified area committee or a cantonment board or by anyother name) of Calcutta, Chennai, Delhi or Mumbai, which has started or startsfunctioning on or after the 1st day of April, 1997 and before the 31st day ofMarch, 2001 :

Provided further that the said hotel is approved by the prescribed authorityfor the purpose of this clause in accordance with the rules made under thisAct and where the said hotel is approved by the prescribed authority beforethe 31st day of March, 1992, shall be deemed to have been approved by theprescribed authority for the purpose of this section in relation to theassessment year commencing on the 1st day of April, 1991;

(b) Thirty per cent of the profits and gains derived from the business of suchhotel as is located in any place other than those mentioned in sub-clause (a)for a period of ten consecutive years beginning from the initial assessmentyear if such hotel has started or starts functioning at any time during theperiod beginning on the 1st day of April, 1991 and ending on the 31st day ofMarch, 1995 or beginning on the 1st day of April, 1997 and ending on the 31stday of March, 2001 :

Provided that nothing contained in this clause shall apply to a hotel locatedat a place within the municipal jurisdiction (whether known as a municipality,municipal corporation, notified area committee, town area committee or acantonment board or by any other name) of Calcutta, Chennai, Delhi or Mumbai,


which has started or starts functioning on or after the 1st day of April, 1997and before the 31st day of March, 2001;

(c) The deduction under clause (a) or clause (b) shall be available only if-(i) The business of the hotel is not formed by the splitting up, or thereconstruction, of a business already in existence or by the transfer to a newbusiness of a building previously used as a hotel or of any machinery or plantpreviously used for any purpose;

(ii) The business of the hotel is owned and carried on by a company registeredin India with a paid-up capital of not less than five hundred thousand rupees;

(iii) The hotel is for the time being approved by the prescribed authority :

Provided that any hotel approved by the prescribed authority before the 1stday of April, 1999 shall be deemed to have been approved under this sub-section.

(8) The amount of deduction in the case of any company carrying on scientificresearch and development shall be hundred per cent of the profits and gains ofsuch business for a period of five assessment years beginning from the initialassessment year if such company - (a) Is registered in India;

(b) Has the main object of scientific and industrial research and development;

(c) Is for the time being approved by the prescribed authority at any timebefore the 1st day of April, 1999.

(9) The amount of deduction to an undertaking which begins commercialproduction or refining of mineral oil shall be hundred per cent of the profitsfor a period of seven consecutive assessment years including the initialassessment year :

Provided that where the undertaking is located in North-Eastern Region, it hasbegun or begins commercial production of mineral oil before the 1st day ofApril, 1997 and where it is located in any part of India, it begins commercialproduction of mineral oil on or after the 1st day of April, 1997 :

Provided further that where the undertaking is engaged in refining of mineraloil, it begins refining on or after the 1st day of October, 1998.

(10) The amount of profits in case of an undertaking developing and buildinghousing projects approved by a local authority, shall be hundred per cent ofthe profits derived in any previous year relevant to any assessment year fromsuch housing project if, - (a) Such undertaking has commenced or commences


development and construction of the housing project on or after the 1st day ofOctober, 1998 and completes the same before the 31st day of March, 2001;

(b) The project is on the size of a plot of land which has a minimum area ofone acre; and

(c) The residential unit has a maximum built-up area of one thousand squarefeet where such residential unit is situated within the cities of Delhi orMumbai or within twenty-five kilometres from the municipal limits of thesecities and one thousand and five hundred square feet at any other place.

(11) Notwithstanding anything contained in clause (iii) of sub-section (2) andsub-sections (3), (4) and (5), the amount of deduction in a case of industrialundertaking deriving profit from the business of setting up and operating acold chain facility for agricultural produce, shall be hundred per cent of theprofits and gains derived from such industrial undertaking for five assessmentyears beginning with the initial assessment year and thereafter, twenty-fiveper cent (or thirty per cent where the assessee is a company) of the profitsand gains derived from the operation of such facility in a manner that thetotal period of deduction does not exceed ten consecutive assessment years (ortwelve consecutive assessment years where the assessee is a co-operativesociety) and subject to fulfilment of the condition that it begins to operatesuch facility on or after the 1st day of April, 1999 but before the 31st dayof March, 2003.

(12) Where any undertaking of an Indian company which is entitled to thededuction under this section is transferred, before the expiry of the periodspecified in this section, to another Indian company in a scheme ofamalgamation or demerger - (a) No deduction shall be admissible under thissection to the amalgamating or the demerged company for the previous year inwhich the amalgamation or the demerger takes place; and

(b) The provisions of this section shall, as far as may be, apply to theamalgamated or the resulting company as they would have applied to theamalgamating or the demerged company if the amalgamation or demerger had nottaken place.

(13) The provisions contained in sub-section (5) and sub-sections (7) to (12)of section 80-IA shall, so far as may be, apply to the eligible business underthis section.

(14) For the purposes of this section, - (a) "Cold chain facility" means achain of facilities for storage or transportation of agricultural produceunder scientifically controlled conditions including refrigeration and other


facilities necessary for the preservation of such produce;

(b) "Hilly area" means any area located at a height of one thousand metres ormore above the sea level;

(c) "Initial assessment year" - (i) In the case of an industrial undertakingor cold storage plant or ship or hotel, means the assessment year relevant tothe previous year in which the industrial undertaking begins to manufacture orproduce articles or things, or to operate its cold storage plant or plants orthe cold chain facility or the ship is first brought into use or the businessof the hotel starts functioning;

(ii) In the case of a company carrying on scientific and industrial researchand development, means the assessment year relevant to the previous year inwhich the company is approved by the prescribed authority for the purposes ofsub-section (8);

(iii) In the case of an undertaking engaged in the business of commercialproduction or refining of mineral oil referred to in sub- section (9), meansthe assessment year relevant to the previous year in which the undertakingcommences the commercial production or refining of mineral oil;

(d) "North-Eastern Region" means the region comprising the States of ArunachalPradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;

(e) "Place of pilgrimage" means a place where any temple, mosque, gurdwara,church or other place of public worship of renown throughout any State orStates is situated;

(f) "Rural area" means any area other than - (i) An area which is comprisedwithin the jurisdiction of a municipality (whether known as a municipality,municipal corporation, notified area committee, town area committee or by anyother name) or a cantonment board and which has a population of not less thanten thousand according to the preceding census of which relevant figures havebeen published before the first day of the previous year; or

(ii) An area within such distance not being more than fifteen kilometres fromthe local limits of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to the stage ofdevelopment of such area including the extent of, and scope for, urbanisationof such area and other relevant considerations specify in this behalf bynotification in the Official Gazette;

(g) "Small-scale industrial undertaking" means an industrial undertaking whichis, as on the last day of the previous year, regarded as a small-scale


industrial undertaking under section 11B of the Industries (Development andRegulation) Act, 1951 (65 of 1951).

181. Omitted.

§181.Omitted.Section 80J

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM NEWLY ESTABLISHED INDUSTRIALUNDERTAKINGS OR SHIPS OR HOTAL BUSINESS IN CERTAIN CASES.

OMITTED BY THE FINANCE (NO. 2) ACT, 1996, W.R.E.F. 1-4-1989.

182. Omitted.

§182.Omitted.Section 80JJ

DEDUCTION IN RESPECT OF PROFITS AND GAINGS FROM BUSINESS OF POULTRY FARMING.


183. Deduction in respect of profit and gains frombusiness of collecting and processing of Bio-Degradable waste.

§183.Deduction in respect of profit and gains from business of collecting andprocessing of Bio-Degradable waste.Section 80JJA

DEDUCTION IN RESPECT OF PROFIT AND GAINS FROM BUSINESS OF COLLECTING ANDPROCESSING OF BIO-DEGRADABLE WASTE.

Where the gross total income of an assessee includes any profits and gainsderived from the business of collecting and processing or treating of bio-degradable waster for generating power or producing bio- fertilizers, bio-pesticides or other biological agents or for producing bio-gas or, makingpellets or briquettes for fuel for organic manure, there shall be allowed, incomputing the total income of the assessee a deduction of an amount equal tothe whole of such profits and gains for a period of five consecutive


assessment years beginning with the assessment year relevant to the previousyear in which such business commences.

184. Deduction in respect of employment of newworkmen.

§184.Deduction in respect of employment of new workmen.Section 80JJAA

DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN.

(1) Where the gross total income of an assessee, being an Indian company,includes any profits and gains derived from any industrial undertaking engagedin the manufacture or production of article or thing, there shall, subject tothe conditions specified in sub-section (2), be allowed a deduction of anamount equal to thirty per cent of additional wages paid to the new regularworkmen employed by the assessee in the previous year for three assessmentyears including the assessment year relevant to the previous year in whichsuch employment is provided.

(2) No deduction under sub-section (1) shall be allowed - (a) If theindustrial undertaking is formed by splitting up or reconstruction of anexisting undertaking or amalgamation with another industrial undertaking;

(b) Unless the assessee furnishes alongwith the return of income the report ofthe accountant, as defined in the Explanation below sub-section (2) of section288 giving such particulars in the report as may be prescribed.

Explanation : For the purposes of this section, the expressions, - (i)"Additional wages" means the wages said to the new regular workman in excessof one hundred workmen employed during the previous year :

Provided that in the case of an existing undertaking, the additional wagesshall be nil if the increase in the number of regular workman employed duringthe year is less than ten per cent of existing number of workmen employed insuch undertaking as on the last day of the preceding year;

(ii) "Regular workman", does not include - (a) A casual workman; or

(b) A workman employed through contract labour; or

(c) Any other workman employed for a period of less than three hundred daysduring the previous year;


(iii) "Workman" shall have the meaning assigned to it in clause (s) of section2 of the Industrial Disputes Act, 1947 (14 of 1947).

185. Omitted

§185.OmittedSection 80K

DEDUCTION IN RESPECT OF DIVIDENDS ATTRIBUTABLE TO PROFITS AND GAINS FROM NEWINDUSTRIAL UNDERTAKINGS OR SHIPS OR HOTEL BUSINESS.


186. Deductions in respect of interest on certainsecurities, dividends, etc.

§186.Deductions in respect of interest on certain securities, dividends, etc.Section 80L

DEDUCTIONS IN RESPECT OF INTEREST ON CERTAIN SECURITIES, DIVIDENDS, ETC.

(1) Where the gross total income of an assessee, being - (a) An individual, or

(b) A Hindu undivided family, includes any income by way of - (i) Interest onany security of the Central Government or a State Government;

(ia) Interest on National Savings Certificates (VI Issue) or National SavingsCertificates (VII Issue) or National Savings Certificates (VIII Issue) issuedunder the Government Savings Certificates Act, 1959 (46 of 1959);

(ii) Interest on such debentures, issued by any institution or authority orany public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as theCentral Government may, by notification in the Official Gazette, specify inthis behalf;

(iia) Interest on deposits under such National Deposit Scheme 1134 as may beframed by the Central Government and notified by it in this behalf in theOfficial Gazette;

(iii) Interest of deposits under any other scheme framed by the Central


Government and notified by it in this behalf in the Official Gazette;

(iiia) Interest on deposits under the Post Office (Monthly Income Account)Rules, 1987;

(vi) Interest on deposits with a banking company to which the BankingRegulation Act, 1949 (10 of 1949), applies (including any bank or bankinginstitution referred to in section 51 of that Act), or a co-operative societyengaged in carrying on the business of banking (including a co-operative landmortgage bank or a co-operative land development bank);

(via) Interest on deposits with any such bank, not being a banking company ora co-operative society referred to in clause (vi) but being a bank establishedby or under any law made by Parliament, as may be approved 1141 by the CentralGovernment for the purposes of this clause;

(vii) Interest on deposits with a financial corporation which is engaged inproviding long-term finance for industrial development in India :

Provided that the corporation is for the time being approved by the CentralGovernment for the purposes of clause (viii) of sub-section (1) of section 36;

(viia) Interest on deposits with any authority constituted in India by orunder any law enacted either for the purpose of dealing with and satisfyingthe need for housing accommodation or for the purpose of planning, developmentor improvement of cities, towns and villages, or for both;

(viii) Interest on deposits with a co-operative society, not being a co-operative society referred to in clause (vi), made by a member of the society;

(ix) Dividends from any co-operative society;

(x) Interest on deposits with any public company formed and registered inIndia with the main object of carrying on the business of providing long-termfinance for construction or purchase of houses in India for residentialpurposes : There shall, in accordance with and subject to the provisions ofthis section, be allowed, in computing the total income of the assessee adeduction as specified hereunder, namely :- (1) In a case where the amount ofsuch income does not exceed in the aggregate twelve thousand rupees, the wholeof such amount, and

(2) In any other case twelve thousand rupees.

Provided that where any income referred in clause (i) clause (v) or clause(va) remains unallowed after the deduction under the foregoing provision of


this section, there shall be allowed in computing the total income of theassessee, an additional deduction of an amount equal to so much of such incomeas has remained unallowed; so, however, that the amount of such additionaldeduction shall not exceed three thousand rupees.

Explanation : For the purposes of this sub-section, the expression "security"means a Government security as defined in clause (2) of section 2 of thePublic Debt Act, 1944 (18 of 1944).

(3) For the removal of doubts, it is hereby declared that where the incomereferred to in sub-section (1) is derived from any asset held by, or on behalfof, a firm, an association of persons or a body of individuals, no deductionshall be allowed under the said sub-section in respect of such income incomputing the total income of any partner of the firm or any member of theassociation or body.

Related Judements

187. Omitted.

§187.Omitted.

Section 80M

DEDUCTION IN RESPECT OF CERTAIN INTER-CORPORATE DIVIDENDS.


188. Omitted.

§188.Omitted.Section 80MM

DEDUCTION IN THE CASE OF AN INDIAN COMPANY IN RESPECT OF ROYALTIES, ETC.,RECEIVED FROM ANY CONCERN IN INDIA.


189. Omitted.


§189.Omitted.Section 80N

DEDUCTION IN RESPECT OF DIVIDENDS RECEIVED FROM CERTAIN FOREGIN COMPANIES.


190. Deduction in respect of royalties, etc., fromcertain Foreign Enterprises.

§190.Deduction in respect of royalties, etc., from certain ForeignEnterprises.Section 80-O

DEDUCTION IN RESPECT OF ROYALTIES, ETC., FROM CERTAIN FOREIGN ENTERPRISES.

Where the gross total income of an assessee, being an Indian company, or aperson (other than a company) who is resident in India includes any incomereceived by the assessee from the Government of a foreign State or foreignenterprise in consideration for the use outside India of any patent,invention, design or registered trade mark, and such income is received inconvertible foreign exchange in India, or having been received in convertibleforeign exchange outside India, or having been converted into convertibleforeign exchange outside India, is brought into India, by or on behalf of theassessee in accordance with any law for the time being in force for regulatingpayments and dealings in foreign exchange, there shall be allowed, inaccordance with and subject to the provisions of this section, a deduction ofan amount equal to fifty per cent of the income so received in, or broughtinto, India, in computing the total income of the assessee :

Provided that such income is received in India within a period of six monthsfrom the end of the previous year or within such further period as thecompetent authority may allow in this behalf.

Provided further that no deduction under this section shall be allowed unlessthe assessee furnishes a certificate, in the prescribed form, along with thereturn of income, certifying that the deduction has been correctly claimed inaccordance with the provisions of this section.

Explanation : For the purposes of this section, - (i) "Convertible foreignexchange" means foreign exchange which is for the time being treated by theReserve Bank of India as convertible foreign exchange for the purposes of thelaw for the time being in force for regulating payments and dealings in


foreign exchange;

(ii) "Foreign enterprise" means a person who is a non-resident;

(iii) Services rendered or agreed to be rendered outside India shall includeservices rendered from India but shall not include services rendered in India.

(iv) "Competent authority" means the Reserve Bank of India or such otherauthority as is authorised under any law for the time being in force forregulating payments and dealings in foreign exchange.

191. Deduction in respect of Income of Co-Operativesocieties.

§191.Deduction in respect of Income of Co-Operative societies.Section 80P

DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES.

(1) Where, in the case of an assessee being a co-operative society, the grosstotal income includes any income referred to in sub-section (2), there shallbe deducted, in accordance with and subject to the provisions of this section,the sums specified in sub-section (2), in computing the total income of theassessee.

(2) The sums referred to in sub-section (1) shall be the following, namely :-(a) In the case of a co-operative society engaged in - (i) Carrying on thebusiness of banking or providing credit facilities to its members, or

(ii) A cottage industry, or

(iii) The marketing of the agricultural produce grown by its members, or

(iv) The purchase of agricultural implements, seeds, livestock or otherarticles intended for agriculture for the purpose of supplying them to itsmembers, or

(v) The processing, without the aid of power, of the agricultural produce ofits members,

(vi) The collective disposal of the labour of its members, or

(vii) Fishing or allied activities, that is to say, the catching, curing,


processing, preserving, storing or marketing of fish or the purchase ofmaterials and equipment in connection therewith for the purpose of supplyingthem to its members, the whole of the amount of profits and gains of businessattributable to any one or more of such activities :

Provided that in the case of a co-operative society falling under sub-clause(vi) or sub-clause (vii), the rules and bye-laws of the society restrict thevoting rights to the following classes of its members, namely :- (1) Theindividuals who contribute their labour or, as the case may be, carry on thefishing or allied activities;

(2) The co-operative credit societies which provide financial assistance tothe society;

(3) The State Government;

(b) In the case of a co-operative society, being a primary society engaged insupplying milk, oilseeds, fruits or vegetables raised or grown by its membersto-

(i) A federal co-operative society, being a society engaged in the business ofsupplying milk, oilseeds, fruits or vegetables, as the case may be; or

(ii) The Government or a local authority; or

(iii) A Government company as defined in section 617 of the Companies Act,1956 (1 of 1956), or a corporation established by or under a Central, State orProvincial Act (being a company or corporation engaged in supplying milk,oilseeds, fruits or vegetables, as the case may be, to the public), the wholeof the amount of profits and gains of such business;

(c) In the case of a co-operative society engaged in activities other thanthose specified in clause (a) or clause (b) (either independently of, or inaddition to, all or any of the activities so specified), so much of itsprofits and gains attributable to such activities as does not exceed, - (i)Where such co-operative society is a consumer"s co-operative society, onehundred thousand rupees; and

(ii) In any other case, thousand rupees.

Explanation : In this clause, "consumers" co-operative society" means asociety for the benefit of the consumers;

(d) In respect of any income by way of interest or dividends derived by theco-operative society from its investments with any other co-operative society,


the whole of such income;

(e) In respect of any income derived by the co-operative society from theletting of godowns or warehouses for storage, processing or facilitating themarketing of commodities, the whole of such income;

(f) In the case of a co-operative society, not being a housing society or anurban consumers" society or a society carrying on transport business or asociety engaged in the performance of any manufacturing operations with theaid of power, where the gross total income does not exceed twenty thousandrupees, the amount of any income by way of interest on securities or anyincome from house property chargeable under section 22.

Explanation : For the purposes of this section, an "urban consumers" co-operative society" means a society for the benefit of the consumers within thelimits of a municipal corporation, municipality, municipal committee, notifiedarea committee, town area or cantonment.

(3) In a case where the assessee is entitled also to the deduction undersection 80HH, or section 80HHA or section 80HHB or section 80HHC or section80HHD or section 80-I or section 80-IA or section 80J or section 80JJ, thededuction under sub-section (1) of this section, in relation to the sumsspecified in clause (a) or clause (b) or clause (c) of sub-section (2), shallbe allowed with reference to the income, if any, as referred to in thoseclauses included in the gross total income as reduced by the deductions under,section 80HH, section 80HHA, section 80HHB section 80HHC, section 80HHD,section 80-I, section 80-IA, section 80J and section 80JJ.

192. Deduction in respect of profits and gains fromthe business of publication of books.

§192.Deduction in respect of profits and gains from the business ofpublication of books.Section 80Q

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM THE BUSINESS OF PUBLICATION OFBOOKS.

(1) Where in the case of an assessee the gross total income of the previousyear relevant to the assessment year commencing on the 1st day of April, 1992,or to any one of the four assessment years next following that assessment


year, includes any profits and gains derived from a business carried on inIndia of printing and publication of books or publication of books, thereshall, in accordance with and subject to the provisions of this section, beallowed, in computing the total income of the assessee, a deduction from suchprofits and gains of an amount equal to twenty per cent thereof.

(2) In a case where the assessee is entitled also to the deduction undersection 80HH or section 80HHA or section 80HHC or section 80-I or section 80-IA or section 80J or section 80P, in relation to any part of the profits andgains referred to in sub-section (1), the deduction under sub-section (1)shall be allowed with reference to such profits and gains included in thegross total income as reduced by the deductions under section 80HH, section80HHA, section 80HHC, section 80-I, section 80-IA, section 80J and section80P.

(3) For the purposes of this section "books" shall not include newspapers,journals, magazines, diaries, brochures, tracts, pamphlets and otherpublications of similar nature by whatever name called.

193. Omitted.

§193.Omitted.Section 80QQ

DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM THE BUSINESS OF PUBLICATION OFBOOKS.


194. Deduction in respect of professional income ofauthors of text books in Indian Languages.

§194.Deduction in respect of professional income of authors of text books inIndian Languages.Section 80QQA

DEDUCTION IN RESPECT OF PROFESSIONAL INCOME OF AUTHORS OF TEXT BOOKS IN INDIANLANGUAGES.

(1) Where, in the case of an individual resident in India, being an author,the gross total income of the previous year relevant to the assessment yearcommencing on - (a) the 1st day of April, 1980, or to any one of the nine


assessment years next following that assessment year; or

(b) the 1st day of April, 1992, or to any one of the four assessment yearsnext following that assessment year, includes any income derived by him in theexercise of his profession on account of any lump sum consideration for theassignment or grant of any of his interest in the copyright of any book, or ofroyalties or copyright fees (whether receivable in lump sum or otherwise) inrespect of such book, there shall, in accordance with and subject to theprovisions of this section, be allowed, in computing the total income of theassessee, a deduction from such income of an amount equal to twenty-five percent thereof.

(2) No deduction under sub-section (1) shall be allowed unless - (a) The bookis either in the nature of a dictionary, thesaurus or encyclopaedia or is onethat has been prescribed or recommended as a text book or included in thecurriculum, by any University, for a degree or post-graduate course of thatUniversity; and

(b) The book is written in any language specified in the Eighth Schedule tothe Constitution or in any such other language as the Central Government may,by notification in the official Gazette, specify in this behalf having regardto the need for promotion of publication of books of the nature referred to inclause (a) in that language and other relevant factors.

Explanation : For the purposes of this section, - (i) "Author" includes ajoint author;

(ii) "Lump sum" in regard to royalties or copyright fees, includes an advancepayment on account of such royalties or copyright fees which is notreturnable;

(iii) "University" shall have the same meaning as in the Explanation to clause(ix) of section 47.

195. Decuction in respect of remuneration fromcertain Foreign sources in the case or Professors,Teachers, etc.

§195.Decuction in respect of remuneration from certain Foreign sources in thecase or Professors, Teachers, etc.Section 80R


DEDUCTION IN RESPECT OF REMUNERATION FROM CERTAIN FOREIGN SOURCES IN THE CASEOF PROFESSORS, TEACHERS, ETC.

Where the gross total income of an individual who is a citizen of Indiaincludes any remuneration received by him outside India from any University orother educational institution established outside India or any otherassociation or body established outside India, for any service rendered by himduring his stay outside India in his capacity as a professor, teacher orresearch worker in such University, institution, association or body, thereshall be allowed, in computing the total income of the individual, a deductionfrom such remuneration of an amount equal to seventy-five per cent of suchremuneration, as is brought into India by, or on behalf of, the assessee inconvertible foreign exchange within a period of six months from the end of theprevious year or within such further period as the competent authority mayallow in this behalf:

Provided that no deduction under this section shall be allowed unless theassessee furnishes a certificate, in the prescribed form, along with thereturn of income, certifying that the deduction has been correctly claimed inaccordance with the provisions of this section.

Explanation. - For the purposes of this section, the expression "competentauthority" means the Reserve Bank of India or such other authority as isauthorised under any law for the time being in force for regulating paymentsand dealings in foreign exchange.

196. Deduction in respect of professional incomefrom Foreign sources in certain cases.

§196.Deduction in respect of professional income from Foreign sources incertain cases.Section 80RR

DEDUCTION IN RESPECT OF PROFESSIONAL INCOME FROM FOREIGN SOURCES IN CERTAINCASES.

Where the gross total income of an individual resident in India, being anauthor, playwright, artist 1204 , musician, actor or sportsman (including anathlete), includes any income derived by him in the exercise of his professionfrom the Government of a foreign State or any person not resident in India,there shall be allowed in computing the total income of the individual, adeduction from such income of an amount equal to seventy-five per cent of suchincome, as is brought into India by, or on behalf of, the assessee in


convertible foreign exchange within a period of six months from the end of theprevious year or within such further period as the competent authority mayallow in this behal.

Provided that no deduction under this section shall be allowed unless theassessee furnishes a certificate, in the prescribed form, along with thereturn of income, certifying that the deduction has been correctly claimed inaccordance with the provisions of this section.

Explanation. - For the purposes of this section, the expression "competentauthority" means the Reserve Bank of India or such other authority as isauthorised under any law for the time being in force for regulating paymentsand dealings in foreign exchange.

197. Deduction in respect of remuneration receivedfor services rendered outside India.

§197.Deduction in respect of remuneration received for services renderedoutside India.Section 80RRA

DEDUCTION IN RESPECT OF REMUNERATION RECEIVED FOR SERVICES RENDERED OUTSIDEINDIA.

(1) Where the gross total income of an individual who is a citizen of Indiaincludes any remuneration received by him in foreign currency from anyemployer (being a foreign employer or an Indian concern) for any servicerendered by him outside India, there shall, in accordance with and subject tothe provisions of this section, be allowed in computing the total income ofthe individual, a deduction from such remuneration of an amount equal toseventy-five per cent of such remuneration, as is brought into India by, or onbehalf of, the assessee in convertible foreign exchange within a period of sixmonths from the end of the previous year or within such further period as thecompetent authority may allow in this behalf

Provided that no deduction under this sub-section shall be allowed unless theassessee furnishes a certificate, in the prescribed form, along with thereturn of income, certifying that the deduction has been correctly claimed inaccordance with the provisions of this section :

(2) The deduction under this section shall be allowed - (i) in the case of anindividual who is or was, immediately before undertaking such service, in theemployment of the Central Government or any State Government, only if such


service is sponsored by the Central Government;

(ii) in the case of any other individual, only if he is a technician and theterms and conditions of his service outside India are approved in this behalfby the Central Government or the prescribed authority.

Explanation : For the purposes of this section, - (a) "Foreign currency" shallhave the meaning assigned to it in the Foreign Exchange Regulation Act, 1973(46 of 1973);

(b) "Foreign employer" means, - (i) The Government of a foreign State; or

(ii) A foreign enterprise; or

(iii) Any association or body established outside India;

(c) "Technician" means a person having specialised knowledge and experience in- (i) Constructional or manufacturing operations or mining or the generationor distribution of electricity or any other form of power; or

(ii) Griculture, animal husbandry, dairy farming, deep sea fishing or shipbuilding; or

(iii) Public administration or industrial or business management; or

(iv) Accountancy; or

(v) Any field of natural or applied science (including medical science) orsocial science; or

(vi) Any other field which the Board may prescribe 1211 in this behalf, who isemployed in a capacity in which such specialised knowledge and experience areactually utilised.

(d) "Competent authority" means the Reserve Bank of India or such otherauthority as is authorised under any law for the time being in force forregulating payments and dealings in foreign exchange.

198. Omitted.

§198.Omitted.Section 80S

DEDUCTION IN RESPECT OF COMPENSATION FOR TERMINATION OF MANAGING AGENCY, ETC.,


IN THE CASE OF ASSESSEES OTHER THAN COMPANIES.


199. Omitted.

§199.Omitted.Section 80T

DEDUCTION IN RESPECT OF LONG-TERM CAPITAL GAINS IN THE CASES OF ASSESSEESOTHER THAN COMPANIES.


200. Omitted.

§200.Omitted.Section 80TT

DEDUCTION IN RESPECT OF WINNINGS FROM LOTTERY.


201. Deduction in the Case of Permanent PhysicalDisability (Including Blindness).

§201.Deduction in the Case of Permanent Physical Disability (IncludingBlindness).Section 80U

DEDUCTION IN THE CASE OF PERMANENT PHYSICAL DISABILITY (INCLUDING BLINDNESS).

In computing the total income of an individual, being a resident, who, at theend of the previous year, is suffering from a permanent physical disability(including blindness) or is subject to mental retardation, being a permanentphysical disability or mental retardation specified in the rules 1224 made inthis behalf by the Board, which is certified by a physician, a surgeon, anoculist or a psychiatrist, as the case may be, working in a Governmenthospital, and which has the effect of reducing considerably such individual"scapacity for normal work or engaging in a gainful employment or occupation,there shall be allowed a deduction of a sum of forty thousand rupees :


Provided that such individual produces the aforesaid certificate before theAssessing Officer in respect of the first assessment year for which he claimsdeduction under this section :

Provided further that the requirement of producing the aforesaid certificatefrom a physician, a surgeon, an oculist or a psychiatrist, as the case may be,working in a Government hospital shall not apply to an individual who hasalready produced a certificate before the Assessing Officer under theprovisions of this section as they stood immediately before the 1st day ofApril, 1992.

Explanation : For the purposes of this section, the expression "Governmenthospital" shall have the meaning assigned to it in the Explanation to section80DD.

202. Omitted.

§202.Omitted.Section 80V

DEDUCTION FROM GROSS TOTAL INCOME OF THE PARENT IN CERTAIN CASES.


203. Omitted.

§203.Omitted.Section 80VV

DEDUCTION IN RESPECT OF EXPENSES INCURRED IN CONNECTION WITH CERTAINPROCEEDINGS UNDER THE ACT.


204. Omitted.

§204.Omitted.Section 80VVA



205. Omitted.

§205.Omitted.

Section 81


206. Omitted.

§206.Omitted.Section 82


207. Omitted.



208. Omitted.



209. Omitted.




210. Omitted.

§210.Omitted.Section 85A


211. Omitted.



212. Omitted.



213. Share of member of an association of persons orbody of individuals in the Income of the Associationor Body.

§213.Share of member of an association of persons or body of individuals inthe Income of the Association or Body.Section 86

SHARE OF MEMBER OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IN THEINCOME OF THE ASSOCIATION OR BODY.

Where the assessee is a member of an association of persons or body ofindividuals [other than a company or a co-operative society or a societyregistered under the Societies Registration Act, 1860 (21 of 1860) or underany law corresponding to that Act in force in any part of India], income-taxshall not be payable by the assessee in respect of his share in the income ofthe association or body computed in the manner provided in section 67A :

Provided that, - (a) Where the association or body is chargeable to tax on


its total income at the maximum marginal rate or any higher rate under any ofthe provisions of this Act, the share of a member computed as aforesaid shallnot be included in his total income;

(b) In any other case, the share of a member computed as aforesaid shall formpart of his total income :

Provided further that where no income-tax is chargeable on the total income ofthe association or body, the share of a member computed as aforesaid shall bechargeable to tax as part of his total income and nothing contained in thissection shall apply to the case.

214. Omitted.


DEDUCTION FROM TAX ON CERTAIN SECURITIES.


215. Rebate to be allowed in Computing Income-Tax.

§215.Rebate to be allowed in Computing Income-Tax.Section 87

REBATE TO BE ALLOWED IN COMPUTING INCOME-TAX.

(1) In computing the amount of income-tax on the total income of an assesseewith which he is chargeable for any assessment year, there shall be allowedfrom the amount of income-tax (as computed before allowing the deductionsunder this Chapter), in accordance with and subject to the provisions ofsections 88, 88A and 88B, the deductions specified in those sections.

(2) The aggregate amount of the deductions under section 88 or section 88A orsection 88B shall not, in any case, exceed the amount of income-tax (ascomputed before allowing the deductions under this Chapter) on the totalincome of the assessee with which he is chargeable for any assessment year.

216. Omitted.


§216.Omitted.

Section 87A


217. Rebate on Life Insurance Premia, Contributionto Provident Fund, etc.

§217.Rebate on Life Insurance Premia, Contribution to Provident Fund, etc.Section 88

REBATE ON LIFE INSURANCE PREMIA, CONTRIBUTION TO PROVIDENT FUND, ETC.

(1) Subject to the provisions of this section, an assessee, being - (a) Anindividual, or

(b) A Hindu undivided family, shall be entitled to a deduction, from theamount of income-tax (as computed before allowing the deductions, under thisChapter) on his total income with which he is chargeable for any assessmentyear, of an amount equal to twenty per cent of the aggregate of the sumsreferred to in sub-section (2) :

Provided that in the case of an individual, whose income, derived from theexercise of his profession as an author, playwright, artist, musician, actoror sportsman (including an athlete), is twenty-five per cent or more of histotal income, the provisions of this sub-section shall have effect as if forthe words "twenty per cent", the words "twenty-five per cent" had beensubstituted.

(2) The sums referred to in sub-section (1) shall be any sums paid ordeposited in the previous year by the assessee out of his income chargeable totax - (i) To effect or to keep in force an insurance on the life of personsspecified in sub-section (4);

(ii) To effect or to keep in force a contract for a deferred annuity, notbeing an annuity plan referred to in clause (xiiia), on the life of personsspecified in sub-section (4) :

Provided that such contract does not contain a provision for the exercise bythe insured of an option to receive a cash payment in lieu of the payment ofthe annuity;


(iii) By way of deduction from the salary payable by or on behalf of theGovernment to any individual being a sum deducted in accordance with theconditions of his service, for the purpose of securing to him a deferredannuity or making provision for his wife or children, in so far as the sum sodeducted does not exceed one-fifth of the salary;

(iv) As a contribution by an individual to any provident fund to which theProvident Funds Act, 1925 (19 of 1925), applies;

(v) As a contribution to any provident fund set up by the Central Governmentand notified 1244 by it in this behalf in the Official Gazette, where suchcontribution is to an account standing in the name of any person specified insub-section (4);

(vi) As a contribution by an employee to a recognised provident fund;

(vii) As a contribution by an employee to an approved superannuation fund;

(viii) in a ten-year account or a fifteen-year account under the Post OfficeSavings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time totime, where such sums are deposited in an account standing in the name of thepersons specified in sub-section (4);

(ix) As subscription to any such security of the Central Government or anysuch deposit scheme as that Government may, by notification in the OfficialGazette, specify in this behalf;

(x) As subscription to the National Savings Certificates (VI Issue) andNational Savings Certificates (VII Issue) issued under the Government SavingsCertificates Act, 1959 (46 of 1959);

(xi) As subscription to any such savings certificate as defined in clause (c)of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), asthe Central Government may, by notification in the Official Gazette, specify1245 in this behalf;

(xii) As a contribution, in the name of any person specified in sub-section(4), for participation in the Unit-linked Insurance Plan, 1971 (hereafter inthis section referred to as the Unit-linked Insurance Plan) deemed to havebeen made under sub-clause (a) of clause (8) of section 19 of the Unit Trustof India Act, 1963 (52 of 1963);

(xiii) As a contribution in the name of any person specified in sub-section(4) for participation in any such unit-linked insurance plan of the LIC Mutual


Fund notified under clause (23D) of section 10, as the Central Government may,by notification in the Official Gazette, specify in this behalf;

(xiiia) To effect or to keep in force a contract for such annuity plan of theLife Insurance Corporation as the Central Government may, by notification inthe Official Gazette, specify;

(xiiib) As subscription, not exceeding ten thousand rupees, to any units ofany Mutual Fund notified under clause (23D) of section 10 or the Unit Trust ofIndia established under the Unit Trust of India Act, 1963 (52 of 1963), underany plan formulated in accordance with such scheme as the Central Governmentmay, by notification in the Official Gazette, specify in this behalf;

(xiiic) As a contribution by an individual to any pension fund set up by anyMutual Fund notified under clause (23D) of section 10, or by the Unit Trust ofIndia established under the Unit Trust of India Act, 1963 (52 of 1963), as theCentral Government may, by notification in the Official Gazette, specify1246aa in this behalf;

(xiv) As subscription to any such deposit scheme of, or as a contribution toany such pension fund set up by, the National Housing Bank established undersection 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter inthis section referred to as the National Housing Bank), as the CentralGovernment may, by notification in the Official Gazette, specify 1246c in thisbehalf;

(xiva) As subscription to any such deposit scheme of - (a) A public sectorcompany which is engaged in providing long-term finance for construction orpurchase of houses in India for residential purposes; or

(b) Any authority constituted in India by or under any law enacted either forthe purpose of dealing with and satisfying the need for housing accommodationor for the purpose of planning, development or improvement of cities, townsand villages, or for both, not being a scheme the interest on depositswhereunder qualifies for the purposes of computing the deduction under section80L, as the Central Government may, by notification in the Official Gazette,specify in this behalf;

(xv) For the purposes of purchase or construction of a residential houseproperty the income from which is chargeable to tax under the head "Incomefrom house property" (or which would, if it had not been used for theassessee"s own residence, have been chargeable to tax under that head), wheresuch payments are made towards or by way of - (a) Any instalment or partpayment of the amount due under any self-financing or other scheme of anydevelopment authority, housing board or other authority engaged in the


construction and sale of house property on ownership basis; or

(b) Any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards thecost of the house property allotted to him; or

(c) Repayment of the amount borrowed by the assessee from - (1) The CentralGovernment or any State Government, or

(2) Any bank, including a co-operative bank, or

(3) The Life Insurance Corporation, or

(4) The National Housing Bank, or

(5) Any public company formed and registered in India with the main object ofcarrying on the business of providing long-term finance for construction orpurchase of houses in India for residential purposes which is approved for thepurposes of clause (viii) of sub-section (1) of section 36, or

(6) Any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged inthe business of financing the construction of houses, or

(7) The assessee"s employer where such employer is a public company or apublic sector company or a university established by law or a collegeaffiliated to such university or a local authority or a co-operative society;

(d) Stamp duty, registration fee and other expenses for the purpose oftransfer of such house property to the assessee, but shall not include anypayment towards or by way of - (A) The admission fee, cost of share andinitial deposit which a shareholder of a company or a member of a co-operativesociety has to pay for becoming such shareholder or member; or

(C) The cost of any addition or alteration to, or renovation or repair of, thehouse property which is carried out after the issue of the completioncertificate in respect of the house property by the authority competent toissue such certificate or after the house property or any part thereof haseither been occupied by the assessee or any other person on his behalf or beenlet out; or

(D) Any expenditure in respect of which deduction is allowable under theprovisions of section 24.


(xvi) As subscription to equity shares or debentures forming part of anyeligible issue of capital approved by the Board on an application made by apublic company or as subscription to any eligible issue of capital by anypublic financial institution in the prescribed form :

Provided that where a deduction is claimed and allowed under this clause withreference to the cost of any equity shares or debentures, the cost of suchshares or debentures shall not be taken into account for the purposes ofsections 54EA and 54EB.

Explanation : For the purposes of this clause, - (i) "Eligible issue ofcapital" means an issue made by a public company formed and registered inIndia or a public financial institution and the entire proceeds of the issueis utilised wholly and exclusively either for the purposes of developing,maintaining and operating an infrastructure facility or for generating, or forgenerating and distributing, power or for providing telecommunication serviceswhether basic or cellular;

(ii) "Infrastructure facility" shall have the meaning assigned to it in clause(ca) of sub-section (12) of section 80-IA;

(iii) "Public company" shall have the meaning assigned to it in section 3 ofthe Companies Act, 1956 (1 of 1956);

(iv) "Public financial institution" shall have the meaning assigned to it insection 4A of the Companies Act, 1956 (1 of 1956).

(xvii) As subscription to any units of any mutual fund referred to in clause(23D) of section 10 and approved by the Board on an application made by suchmutual fund in the prescribed form :

Provided that where a deduction is claimed and allowed under this clause withreference to the cost of units, the cost of such units shall not be taken intoaccount for the purposes of sections 54EA and 54EB :

Provided further that this clause shall apply if the amount of subscription tosuch units is subscribed only in the eligible issue of capital of any company.

Explanation : For the purposes of this clause "eligible issue of capital"means an issue referred to in clause (i) of Explanation to clause (xvi) insub-section (2) of section 88.

(4) The persons referred to in sub-section (2) shall be the following, namely:- (a) for the purposes of clauses (i), (v), (xii) and (xiii) of that sub-section, - (i) In the case of an individual, the individual, the wife or


husband and any child of such individual, and

(ii) In the case of a Hindu undivided family, any member thereof;

(b) For the purposes of clause (ii) of that sub-section, - (i) In the case ofan individual, the individual, the wife or husband and any child of suchindividual, and

(c) For the purposes of clause (viii) of that sub-section, - (i) In the caseof an individual, such individual or a minor of whom he is the guardian;

(ii) In the case of a Hindu undivided family, any member of the family;

(5) Where the aggregate of any sums specified in clause (xv) of sub-section(2) exceeds an amount of ten thousand rupees, a deduction under sub-section(1) shall be allowed with reference to so much of the aggregate as does notexceed an amount of ten thousand rupees.

(5A) Where the aggregate of any sums specified in clause (i) to clause (xv) ofsub-section (2) exceeds an amount of sixty thousand rupees, a deduction undersub-section (1) shall be allowed with reference to so much of the aggregate asdoes not exceed an amount of sixty thousand rupees :

Provided that in the case of an individual referred to in the proviso to sub-section (1), the provisions of this sub-section shall have effect as if forthe words "sixty thousand rupees", the words "seventy thousand rupees" hadbeen substituted.

(6) The deduction from the amount of income-tax under sub-section (1) shallnot exceed - (i) In the case of an individual, whose income, derived from theexercise of his profession as an author, playwright, artist, musician, actoror sportsman (including an athlete), is twenty-five per cent or more of histotal income, seventeen thousand five hundred rupees;

(ii) In any other case, fourteen thousand rupees.

(7) Where, in any previous year, an assessee - (i) Terminates his contract ofinsurance referred to in clause (i) of sub-section (2) by notice to thateffect or where the contract ceases to be in force by reason of failure to payany premium, by not reviving contract of insurance, - (a) In case of anysingle premium policy, within two years after the date of commencement ofinsurance; or

(b) In any other case, before premiums have been paid for two years; or


(ii) Terminates his participation in any unit-linked insurance plan referredto in clause (xii) or clause (xiii) of sub-section (2), by notice to thateffect or where he ceases to participate by reason of failure to pay anycontribution, by not reviving his participation, before contributions inrespect of such participation have been paid for five years; or

(iii) Transfers the house property referred to in clause (xv) of sub-section(2) before the expiry of five years from the end of the financial year inwhich possession of such property is obtained by him, or receives back,whether by way of refund or otherwise, any sum specified in that clause, then-

(a) No deduction shall be allowed to the assessee under sub-section (1) withreference to any of the sums, referred to in clauses (i), (xii), (xiii) and(xv) of sub-section (2), paid in such previous year; and

(b) The aggregate amount of the deductions of income-tax so allowed in respectof the previous year or years preceding such previous year, shall be deemed tobe tax payable by the assessee in the assessment year relevant to suchprevious year and shall be added to the tax on the total income of theassessee with which he is chargeable for such assessment year.

(7A) If any equity shares or debentures, with reference to the cost of which adeduction is allowed under sub-section (1) are sold or otherwise transferredby the assessee to any person at any time within a period of three years fromthe date of their acquisition, the aggregate amount of the deductions ofincome-tax so allowed in respect of such equity shares or debentures in theprevious year or years preceding the previous year in which such sale ortransfer has taken place shall be deemed to be tax payable by the assessee forthe assessment year relevant to such previous year and shall be added to theamount of income-tax on the total income of the assessee with which he ischargeable for such assessment year.

Explanation : A person shall be treated as having acquired any shares ordebentures on the data on which his name is entered in relation to thoseshares or debentures in the register of members or of debenture-holders, asthe case may be, of the public company.

(8) In this section, - (i) "Contribution" to any fund shall not include anysums in repayment of loan;

(ii) "Insurance" shall include - (a) A policy of insurance on the life of anindividual or the spouse or the child of such individual or a member of aHindu undivided family securing the payment of specified sum on the stipulated


date of maturity, if such person is alive on such date notwithstanding thatthe policy of insurance provides only for the return of premiums paid (with orwithout any interest thereon) in the event of such person dying before thesaid stipulated date;

(b) A policy of insurance effected by an individual or a member of a Hinduundivided family for the benefit of a minor with the object of enabling theminor, after he has attained majority to secure insurance on his own life byadopting the policy and on his being alive on a date (after such adoption)specified in the policy in this behalf;

(iii) "Life Insurance Corporation" means the Life Insurance Corporation ofIndia established under the Life Insurance Corporation Act, 1956 (31 of 1956);

(iv) "Public company" shall have the same meaning as in section 3 of theCompanies Act, 1956 (1 of 1956);

(v) "Security" means a Government security as defined in clause (2) of section2 of the Public Debt Act, 1944 (18 of 1944);

(vi) "Transfer" shall be deemed to include also the transactions referred toin clause (f) of section 269UA.

218. Omitted.

§218.Omitted.

Section 88A

REBATE IN RESPECT OF INVESTMENT IN CERTAIN NEW SHARES OR UNITS.

OMITTED BY THE FINANCE (NO. 2) ACT, 1996, W.R.E.F. 1-4-1994

219. Rebate of Income-Tax in case of Individuals of Sixty-Five Years or Above.

§ 219. Rebate of Income-Tax in case of Individuals of Sixty-Five Years or Above.Section 88B

REBATE OF INCOME-TAX IN CASE OF INDIVIDUALS OF SIXTY-FIVE YEARS ORABOVE.


An assessee, being an individual resident in India, who is of the age of sixty-five years or more atany time during the previous year shall be entitled to a deduction from the amount of income-tax(as computed before allowing the deductions under this Chapter) on his total income, with whichhe is chargeable for any assessment year, of an amount equal to hundred per cent of suchincome-tax or an amount of ten thousand rupees, whichever is less.

220. Relief when salary, etc., is paid in arrears or in advance.

§ 220. Relief when salary, etc., is paid in arrears or in advance.Section 89

RELIEF WHEN SALARY, ETC., IS PAID IN ARREARS OR IN ADVANCE.

(1) Where by reason of any portion of an assessee"s salary being paid in arrears or in advance orby reason of his having received in any one financial year salary for more than twelve months ora payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, hisincome is assessed at a rate higher than that at which it would otherwise have been assessed theAssessing Officer shall, on an application made to him in this behalf, grant such relief as may beprescribed.

221. Omitted.

§ 221. Omitted.

Section 89A

TAX RELIEF IN RELATION TO EXPORT TURNOVER.


222. Agreement with Foreign Countries.

§ 222. Agreement with Foreign Countries.Section 90

AGREEMENT WITH FOREIGN COUNTRIES.

(1) The Central Government may enter into an agreement with the Government of any countryoutside India - (a) For the granting of relief in respect of income on which have been paid bothincome-tax under this Act and income-tax in that country, or


(b) For the avoidance of double taxation of income under this Act and under the correspondinglaw in force in that country, or

(c) For exchange of information for the prevention of evasion or avoidance of income-taxchargeable under this Act or under the corresponding law in force in that country, orinvestigation of cases of such evasion or avoidance, or

(d) For recovery of income-tax under this Act and under the corresponding law in force in thatcountry, and may, by notification in the Official Gazette, make such provisions as may benecessary for implementing the agreement.

(2) Where the Central Government has entered into an agreement with the Government of anycountry outside India under sub-section (1) for granting relief of tax, or as the case may be,avoidance of double taxation, then, in relation to the assessee to whom such agreement applies,the provisions of this Act shall apply to the extent they are more beneficial to that assessee.

223. Countries with which no agreement exists.

§ 223. Countries with which no agreement exists.Section 91

COUNTRIES WITH WHICH NO AGREEMENT EXISTS.

(1) If any person who is resident in India in any previous year proves that, in respect of hisincome which accrued or arose during that previous year outside India (and which is not deemedto accrue or arise in India), he has paid in any country with which there is no agreement undersection 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise,under the law in force in that country, he shall be entitled to the deduction from the Indianincome-tax payable by him of a sum calculated on such doubly taxed income at the Indian rateof tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax ifboth the rates are equal.

(2) If any person who is resident in India in any previous year proves that in respect of hisincome which accrued or arose to him during that previous year in Pakistan he has paid in thatcountry, by deduction or otherwise, tax payable to the Government under any law for the timebeing in force in that country relating to taxation of agricultural income, he shall be entitled to adeduction from the Indian income-tax payable by him - (a) Of the amount of the tax paid inPakistan under any law aforesaid on such income which is liable to tax under this Act also; or

(b) Of a sum calculated on that income at the Indian rate of tax; whichever is less.

(3) If any non-resident person is assessed on his share in the income of a registered firm assessed


as resident in India in any previous year and such share includes any income accruing or arisingoutside India during that previous year (and which is not deemed to accrue or arise in India) in acountry with which there is no agreement under section 90 for the relief or avoidance of doubletaxation and he proves that he has paid income-tax by deduction or otherwise under the law inforce in that country in respect of the income so included he shall be entitled to a deduction fromthe Indian income-tax payable by him of a sum calculated on such doubly taxed income soincluded at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, orat the Indian rate of tax if both the rates are equal.

Explanation : In this section, - (i) The expression "Indian income-tax" means income-taxcharged in accordance with the provisions of this Act;

(ii) The expression "Indian rate of tax" means the rate determined by dividing the amount ofIndian income-tax, after deduction of any relief due under the provisions of this Act but beforededuction of any relief due under this chapter, by the total income;

(iii) The expression "rate of tax of the said country" means income-tax and super-tax actuallypaid in the said country in accordance with the corresponding laws in force in the said countryafter deduction of all relief due, but before deduction of any relief due in the said country inrespect of double taxation, divided by the whole amount of the income as assessed in the saidcountry;

(iv) The expression "income-tax" in relation to any country includes any excess profits tax orbusiness profits tax charged on the profits by the Government of any part of that country or alocal authority in that country.

224. Income from Transactions with Non-Residents, HowComputed in certain cases.

§ 224. Income from Transactions with Non-Residents, How Computed in certain cases.Section 92

INCOME FROM TRANSACTIONS WITH NON-RESIDENTS, HOW COMPUTED INCERTAIN CASES.

Where a business is carried on between a resident and a non-resident and it appears to theAssessing Officer that, owing to the close connection between them, the course of business is soarranged that the business transacted between them produces to the resident either no profits orless than the ordinary profits which might be expected to arise in that business, the AssessingOfficer shall determine the amount of profits which may reasonably be deemed to have beenderived therefrom and include such amount in the total income of the resident.


225. Avoidance of Income-Tax by transactions resulting intransfer of Income to Non-Residents.

§ 225. Avoidance of Income-Tax by transactions resulting in transfer of Income to Non-Residents.Section 93

AVOIDANCE OF INCOME-TAX BY TRANSACTIONS RESULTING IN TRANSFER OFINCOME TO NON-RESIDENTS.

(1) Where there is a transfer of assets by virtue or in consequence whereof, either alone or inconjunction with associated operations, any income becomes payable to a non-resident, thefollowing provisions shall apply - (a) Where any person has, by means of any such transfer,either alone or in conjunction with associated operations, acquired any rights by virtue of whichhe has, within the meaning of this section, power to enjoy, whether forthwith or in the future, anyincome of a non-resident person which, if it were income of the first-mentioned person, would bechargeable to income-tax, that income shall, whether it would or would not have been chargeableto income-tax apart from the provisions of this section, be deemed to be income of the first-mentioned person for all the purposes of this Act;

(b) Where, whether before or after any such transfer, any such first-mentioned person receives oris entitled to receive any capital sum the payment whereof is in any way connected with thetransfer or any associated operations, then any income which, by virtue or in consequence of thetransfer, either alone or in conjunction with associated operations, has become the income of anon-resident shall, whether it would or would not have been chargeable to income-tax apart fromthe provisions of this section, be deemed to be the income of the first-mentioned person for allthe purposes of this Act.

Explanation : The provisions of this sub-section shall apply also in relation to transfers of assetsand associated operations carried out before the commencement of this Act.

(2) Where any person has been charged to income-tax on any income deemed to be his under theprovisions of this section and that income is subsequently received by him, whether as income orin any other form, it shall not again be deemed to form part of his income for the purposes of thisAct.

(3) The provisions of this section shall not apply if the first-mentioned person in sub-section (1)shows to the satisfaction of the Assessing Officer that - (a) Neither the transfer nor anyassociated operation had for its purpose or for one of its purposes the avoidance of liability totaxation; or

(b) The transfer and all associated operations were bona fide commercial transactions and werenot designed for the purpose of avoiding liability to taxation.


Explanation : For the purposes of this section, - (a) References to assets representing any assets,income or accumulations of income include references to shares in or obligation of any companyto which, or obligations of any other person to whom, those assets, that income or thoseaccumulations are or have been transferred;

(b) Any body corporate incorporated outside India shall be treated as if it were a non-resident;

(c) A person shall be deemed to have power to enjoy the income of a non-resident if - (i) Theincome is in fact so dealt with by any person as to be calculated at some point of time and,whether in the form of income or not, to ensure for the benefit of the first-mentioned person insub-section (1), or

(ii) The receipt or accrual of the income operates to increase the value to such first-mentionedperson of any assets held by him or for his benefit, or

(iii) Such first-mentioned person receives or is entitled to receive at any time any benefitprovided or to be provided out of that income or out of moneys which are or will be available forthe purpose by reason of the effect or successive effects of the associated operations on thatincome and assets which represent that income, or

(iv) Such first-mentioned person has power by means of the exercise of any power ofappointment or power of revocation or otherwise to obtain for himself, whether with or withoutthe consent of any other person, the beneficial enjoyment of the income, or

(v) Such first-mentioned person is able, in any manner whatsoever, and whether directly orindirectly, to control the application of the income;

(d) In determining whether a person has power to enjoy income, regard shall be had to thesubstantial result and effect of the transfer and any associated operations, and all benefits whichmay at any time accrue to such person as a result of the transfer and any associated operationsshall be taken into account irrespective of the nature or form of the benefits.

(4)(a) "Assets" includes property or rights of any kind and "transfer" in relation to rights includesthe creation of those rights;

(b) "Associated operation", in relation to any transfer, means an operation of any kind effectedby any person in relation to - (i) Any of the assets transferred, or

(ii) Any assets representing, whether directly or indirectly, any of the assets transferred, or

(iii) The income arising from any such assets, or

(iv) Any assets representing, whether directly or indirectly, the accumulations of income arisingfrom any such assets;


(c) "Benefit" includes a payment of any kind;

(d) "Capital sum" means - (i) Any sum paid or payable by way of a loan or repayment of a loan;and

(ii) Any other sum paid or payable otherwise than as income, being a sum which is not paid orpayable for full consideration in money or money"s worth.

226. Avoidance of tax by certain transactions insecurities.

§226.Avoidance of tax by certain transactions in securities.Section 94

AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS IN SECURITIES.

(1) Where the owner of any securities [in this sub-section and in sub-section(2) referred to as "the owner") sells or transfers those securities, and buysback or reacquires the securities, then, if the result of the transaction isthat any interest becoming payable in respect of the securities is receivableotherwise than by the owner, the interest payable as aforesaid shall, whetherit would or would not have been chargeable to income-tax apart from theprovisions of this sub-section be deemed, for all the purposes of this Act, tobe the income of the owner and not to be the income of any other person.

Explanation : The references in this sub-section to buying back or reacquiringthe securities shall be deemed to include references to buying or acquiringsimilar securities so, however, that where similar securities are bought oracquired, the owner shall be under no greater liability to income-tax than hewould have been under if the original securities had been bought back orreacquired.

(2) Where any person has had at any time during any previous year anybeneficial interest in any securities, and the result of any transactionrelating to such securities or the income thereof is that, in respect of suchsecurities within such year, either no income is received by him or the incomereceived by him is less than the sum to which the income would have amountedif the income from such securities had accrued from day to day and beenapportioned accordingly, then the income from such securities for such yearshall be deemed to be the income of such person.

(3) The provisions of sub-section (1) or sub-section (2) shall not apply if


the owner, or the person who has had a beneficial interest in the securities,as the case may be, proves to the satisfaction of the Assessing Officer - (a)That there has been no avoidance of income-tax, or

(b) That the avoidance of income-tax was exceptional and not systematic andthat there was not in his case in any of the three preceding years anyavoidance of income-tax by a transaction of the nature referred to in sub-section (1) or sub-section (2).

(4) Where any person carrying on a business which consists wholly or partly indealing in securities, buys or acquires any securities and sells back orretransfers the securities, then, if the result of the transaction is thatinterest becoming payable in respect of the securities is receivable by himbut is not deemed to be his income by reason of the provisions contained insub-section (1), no account shall be taken of the transaction in computing forany of the purposes of this Act the profits arising from or loss sustained inthe business.

(5) Sub-section (4) shall have effect, subject to any necessary modifications,as if references to selling back or retransferring the securities includedreferences to selling or transferring similar securities.

(6) The Assessing Officer may, by notice in writing, require any person tofurnish him within such time as he may direct (not being less than twenty-eight days), in respect of all securities of which such person was the owneror in which he had a beneficial interest at any time during the periodspecified in the notice, such particulars as he considers necessary for thepurposes of this section and for the purpose of discovering whether income-taxhas been borne in respect of the interest on all those securities.

Explanation : For the purposes of this section, - (a) "Interest" includes adividend;

(b) "Securities" includes stocks and shares;

(c) Securities shall be deemed to be similar if they entitle their holders tothe same rights against the same persons as to capital and interest and thesame remedies for the enforcement of those rights, notwithstanding anydifference in the total nominal amounts of the respective securities or in theform in which they are held or in the manner in which they can be transferred.

227. Omitted.

§227.Omitted.


Section 95


228. Omitted.

§228.Omitted.

Section 96


229. Omitted.



230. Omitted.



231. Omitted.



232. Omitted.



[100 OMITTED BY THE FINANCE ACT, 1965, W.E.F. 1-4-1965 1264]

233. Omitted.


[101 OMITTED BY THE FINANCE ACT, 1965, W.E.F. 1-4-1965 1264 ]

234. Omitted.


[102 OMITTED BY THE FINANCE ACT, 1965, W.E.F. 1-4-1965]

235. Omitted.



236. Omitted.


INCOME-TAX ON UNDISTRIBUTED INCOME OF CERTAIN COMPANIES.


237. Omitted.


SPECIAL PROVISIONS FOR CERTAIN COMPANIES.


[ 105 OMITTED BY THE FINANCE ACT, 1987, W.E.F. 1-4-1988 ]

238. Omitted.


PERIOD OF LIMITATION FOR MAKING ORDERS UNDER SECTION 104.


239. Omitted.


APPROVAL OF INSPECTING ASSISTANT COMMISSIONER FOR ORDERS UNDER SECTION 104.


240. Omitted.


REDUCTION OF MINIMUM DISTRIBUTION IN CERTAIN CASES.

107A OMITTED BY THE FINANCE ACT, 1987, W.E.F. 1-4-1988

241. Omitted.


SAVINGS FOR COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED.


242. Omitted.



"DISTRIBUTABLE INCOME", "INVESTMENT COMPANY" AND "STATUTORY PERCENTAGE"DEFINED.


243. Determination of Tax where Total Incomeincludes Income on which no tax is payable.

§243.Determination of Tax where Total Income includes Income on which no taxis payable.Section 110

DETERMINATION OF TAX WHERE TOTAL INCOME INCLUDES INCOME ON WHICH NO TAX ISPAYABLE.

Where there is included in the total income of an assessee any income on whichno income-tax is payable under the provisions of this Act, the assessee shallbe entitled to a deduction, from the amount of income-tax with which he ischargeable on his total income, of an amount equal to the income-taxcalculated at the average rate of income-tax on the amount on which no income-tax is payable.

244. Tax on Accumulated Balance of recognisedprovident fund.

§244.Tax on Accumulated Balance of recognised provident fund.Section 111

TAX ON ACCUMULATED BALANCE OF RECOGNISED PROVIDENT FUND.

(1) Where the accumulated balance due to an employee participating in arecognised provident fund is included in his total income, owing to theprovisions of rule 8 of Part A of the Fourth Schedule not being applicable,the [Assessing Officer] shall calculate the total of the various sums of [tax]in accordance with the provisions of sub-rule (1) of rule 9 thereof.

(2) Where the accumulated balance due to an employee participating in a


recognised provident fund which is not included in his total income under theprovisions of rule 8 of Part A of the Fourth Schedule becomes payable, super-tax shall be calculated in the manner provided in sub-rule (2) of rule 9thereof.

245. Tax on Long-Term Capital gains.

§245.Tax on Long-Term Capital gains.Section 112

TAX ON LONG-TERM CAPITAL GAINS.

(1) Where the total income of an assessee includes any income, arising fromthe transfer of a long-term capital asset, which is chargeable under the head"Capital gains", the tax payable by the assessee on the total income shall bethe aggregate of, - (a) in the case of an individual or a Hindu undividedfamily, [being a resident] -

(i) The amount of income-tax payable on the total income as reduced by theamount of such long-term capital gains, had the total income as so reducedbeen his total income; and

(ii) The amount of income-tax calculated on such long-term capital gains atthe rate of twenty per cent : Provided that where the total income as reducedby such long-term capital gains is below the maximum amount which is notchargeable to income-tax, then, such long-term capital gains shall be reducedby the amount by which the total income as so reduced falls short of themaximum amount which is not chargeable to income-tax and the tax on thebalance of such long-term capital gains shall be computed at the rate oftwenty per cent;

(b) In the case of a [domestic company], - (i) The amount of income-taxpayable on the total income as reduced by the amount of such long-term capitalgains, had the total income as so reduced been its total income; and

(ii) The amount of income-tax calculated on such long-term capital gains atthe rate of [ twenty per cent ]

(c) In the case of a non-resident (not being a company) or a foreign company,-

(i) The amount of income-tax payable on the total income as reduced by theamount of such long-term capital gains, had the total income as so reducedbeen its total income; and


(ii) The amount of income-tax calculated on such long-term capital gains atthe rate of twenty per cent in any other case,

(i) The amount of income-tax payable on the total income as reduced by theamount of long-term capital gains, had the total income as so reduced been itstotal income; and

(ii) The amount of income-tax calculated on such long-term capital gains atthe rate of [ twenty per cent ].

Provided that where the tax payable in respect of any income arising from thetransfer of a long-term capital asset, being listed securities, exceeds tenper cent of the amount of capital gains before giving effect to the provisionsof the second proviso to section 48, then, such excess shall be ignored forthe purpose of computing the tax payable by the assessee.

Explanation : For the purposes of this sub-section, "listed securities" meansthe securities - (a) As defined in clause (h) of section 2 of the SecuritiesContracts (Regulation) Act, 1956 (32 of 1956); and

(b) Listed in any recognised stock exchange in India.

(2) Where the gross total income of an assessee includes any income arisingfrom the transfer of a long-term capital asset, the gross total income shallbe reduced by the amount of such income and the deduction under Chapter VI-Ashall be allowed as if the gross total income as so reduced were the grosstotal income of the assessee.

(3) Where the total income of an assessee includes any income arising from thetransfer of a long-term capital asset, the total income shall be reduced bythe amount of such income and the rebate under section 88 shall be allowedfrom the income-tax on the total income as so reduced.

246. Omitted.


TAX ON INTEREST ON NATIONAL SAVINGS CERTIFICATES (FIRST ISSUE).

[112A OMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4-1989]


247. Tax in the case of block assessment of searchcases.

§247.Tax in the case of block assessment of search cases.Section 113

TAX IN THE CASE OF BLOCK ASSESSMENT OF SEARCH CASES.

The total undisclosed income of the block period, determined under section158BC, shall be chargeable to tax at the rate of sixty per cent.

248. Omitted.


TAX ON CAPITAL GAINS IN CASES OF ASSESSEES OTHER THAN COMPANIES.

[114 OMITTED BY THE FINANCE (NO. 2) ACT, 1967, W.E.F. 1-4-1968]

249. Omitted.


TAX ON CAPITAL GAINS IN CASE OF COMPANIES. [115 OMITTED BY THE FINANCE ACT,1987, W.E.F. 1-4-1988]

250. Tax on Dividends, royalty and Technical servicefees in the case of Foreign Companies.

§250.Tax on Dividends, royalty and Technical service fees in the case ofForeign Companies.

Section 115A

TAX ON DIVIDENDS, ROYALTY AND TECHNICAL SERVICE FEES IN THE CASE OF FOREIGNCOMPANIES.


(1) Where the total income of -

(a) A non-resident (not being a company) or of a foreign company, includes anyincome by way of -

(i) A dividends other than dividends referred to in section 115-O; or

(ii) Interest received from Government or an Indian concern on monies borrowedor debt incurred by Government or the Indian concern in foreign currency; or

(iii) Income received in respect of units, purchased in foreign currency, of aMutual Fund specified under clause (23D) of section 10 or of the Unit Trust ofIndia, the income-tax payable shall be aggregate of -

(A) The amount of income-tax calculated on the amount of income by way of[dividends other than dividends referred to in section 115-O], if any,included in the total income, at the rate of twenty per cent;

(B) The amount of income-tax calculated on the amount of income by way ofinterest referred to in sub-clause (ii), if any, included in the total income,at the rate of twenty per cent;

(C) The amount of income-tax calculated on the income in respect of unitsreferred to in sub-clause (iii), if any, included in the total income, at therate of twenty percent; and

(D) The amount of income-tax with which he or it would have been chargeablehad his or its total income been reduced by the amount of income referred toin sub-clause (i), sub-clause (ii) and sub-clause (iii);

(b) A foreign company, includes any income by way of royalty or fees fortechnical services received from Government or an Indian concern in pursuanceof an agreement made by the foreign company with Government or the Indianconcern after the 31st day of March, 1976, and where such agreement is with anIndian concern, the agreement is approved by the Central Government or whereit relates to a matter included in the industrial policy for the time being inforce, of the Government of India, the agreement is in accordance with thatpolicy, then, subject to the provisions of sub-sections (1A) and (2), theincome-tax payable shall be the aggregate of, -

(A) The amount of income-tax calculated on the income by way of royalty, ifany, included in the total income, at the rate of thirty per cent if suchroyalty is received in pursuance of an agreement made on or before the 31stday of May, 1997, and twenty per cent where such royalty is received in


pursuance of an agreement made after the 31st day of May, 1997;

(B) The amount of income-tax calculated on the income by way of fees fortechnical services, if any, included in the total income, at the rate ofthirty per cent if such fees for technical services are received in pursuanceof an agreement made on or before the 31st day of May, 1997, and twenty percent where such fees for technical services are received in pursuance of anagreement made after the 31st day of May, 1997;

(C) The amount of income-tax with which it would have been chargeable had itstotal income been reduced by the amount of income by way of royalty and feesfor technical services.


(a) "Fees for technical services" shall have the same meaning as inExplanation 2 to clause (vii) of sub-section (1) of section 9;

(b) "Foreign currency" shall have the same meaning as in the

Explanation below item (g) of sub-clause (iv) of clause (15) of section 10;

(c) "Royalty" shall have the same meaning as in Explanation 2 to clause (vi)of sub-section (1) of section 9;

(d) "Unit Trust of India" means the Unit Trust of India established under theUnit Trust of India Act, 1963 (52 of 1963).

(1A) Where the royalty referred to in clause (b) of sub-section (1) is inconsideration for the transfer of all or any rights (including the granting ofa licence) in respect of copyright in any book to an Indian concern [ or inrespect of any computer software to a person resident in India ], theprovisions of sub-section (1) shall apply in relation to such royalty as ifthe words [the agreement is approved by the Central Government or where itrelates to a matter] included in the industrial policy, for the time being inforce, of the Government of India, the agreement is in accordance with thatpolicy occurring in the said clause had been omitted :

Provided that such book is on a subject, the books on which are permitted,according to the Import Trade Control Policy of the Government of India forthe period commencing from the 1st day of April, 1977, and ending with the31st day of March, 1978, to be imported into India under an Open GeneralLicence :

Provided further that such computer software is permitted according to the


Import Trade Control Policy of the Government of India for the time being inforce to be imported into India under an Open General Licence.

Explanation : In this sub-section "Open General Licence" means an Open GeneralLicence issued by the Central Government in pursuance of the Imports (Control)Order, 1955.

Explanation 2 : In this sub-section, the expression "Computer software" shallhave the meaning assigned to it in clause (b) of the Explanation to section80HHE.

(2) Nothing contained in sub-section (1) shall apply in relation to any incomeby way of royalty received by a foreign company from an Indian concern inpursuance of an agreement made by it with the Indian concern after the 31stday of March, 1976, if such agreement is deemed, for the [purposes of thefirst proviso] to clause (vi) of sub-section (1) of section 9, to have beenmade before the1st day of April, 1976; and the provisions of the annualFinance Act for calculating, charging, deducting or computing income-tax shallapply in relation to such income as if such income had been received inpursuance of an agreement made before the 1st day of April, 1976 ].

(3) No deduction in respect of any expenditure or allowance shall be allowedto the assessee under sections 28 to 44C and section 57 in computing his orits income referred to in sub-section (1).

(4) Where in the case of an assessee referred to in sub-section (1), - (a) Thegross total income consists only of the income referred to in clause (a) ofthat sub-section, no deduction shall be allowed to him or it under Chapter VI-A;

(b) The gross total income includes any income referred to in clause (a) ofthat sub-section, the gross total income shall be reduced by the amount ofsuch income and the deduction under Chapter VI-A shall be allowed as if thegross total income as so reduced were the gross total income of the assessee.

(5) It shall not be necessary for an assessee referred to in sub-section (1)to furnish under sub-section (1) of section 139 a return of his or its incomeif - (a) his or its total income in respect of which he or it is assessableunder this Act during the previous year consisted only of income referred toin clause (a) of sub-section (1); and

(b) The tax deductible at source under the provisions of Chapter XVII-B hasbeen deducted from such income.


251. Tax on Income from units purchased in ForeignCurrency or capital gains arising from theirtransfer.

§251.Tax on Income from units purchased in Foreign Currency or capital gainsarising from their transfer.Section 115AB

TAX ON INCOME FROM UNITS PURCHASED IN FOREIGN CURRENCY OR CAPITAL GAINSARISING FROM THEIR TRANSFER.

(1) Where the total income of an assessee, being an overseas financialorganisation (hereinafter referred to as Offshore Fund) includes -

(a) Income received in respect of units purchased in foreign currency; or

(b) Income by way of long-term capital gains arising from the transfer ofunits purchased in foreign currency, the income-tax payable shall be theaggregate of - (i) the amount of income-tax calculated on the income inrespect of units referred to in clause (a), if any, included in the totalincome, at the rate of ten per cent;

(ii) The amount of income-tax calculated on the income by way of long-termcapital gains referred to in clause (b), if any, included in the total income,at the rate of ten per cent; and

(iii) The amount of income-tax with which the Offshore Fund would have beenchargeable had its total income been reduced by the amount of income referredto in clause (a) and clause (b).

(2) Where the gross total income of the Offshore Fund, - (a) consists only ofincome from units or income by way of long-term capital gains arising from thetransfer of units, or both, no deduction shall be allowed to the assesseeunder sections 28 to 44C or clause (i) or clause (iii) of section 57 or underChapter VI-A [ nothing contained in the provisions of the second proviso tosection 48 shall apply to income referred to in clause (b) of sub-section(1)];

(b) Includes any income referred to in clause (a), the gross total incomeshall be reduced by the amount of such income and the deduction under ChapterVI-A shall be allowed as if the gross total income as so reduced were thegross total income of the assessee.



(a) "Overseas financial organisation" means any fund, institution, associationor body, whether incorporated or not, established under the laws of a countryoutside India, which has entered into an arrangement for investment in Indiawith any public sector bank or public financial institution or a mutual fundspecified under clause (23D) of section 10 and such arrangement is approved bythe Central Government for this purpose;

(b) "Unit" means unit of a mutual fund specified under clause (23D) of section10 or of the Unit Trust of India;

(c) "Foreign currency" shall have the meaning as in the Foreign ExchangeRegulation Act, 1973 (46 of 1973);

(d) "Public sector bank" shall have the meaning assigned to it in clause (23D)of section 10;

(e) "Public financial institution" shall have the meaning assigned to it insection 4A of the Companies Act, 1956 (1 of 1956);

(f) "Unit Trust of India" means the Unit Trust of India established under theUnit Trust of India Act, 1963 (52 of 1963).

252. Tax on Income from bonds or shares purchased inForeign currency or capital gains arising from theirtransfer.

§252.Tax on Income from bonds or shares purchased in Foreign currency orcapital gains arising from their transfer.Section 115AC

TAX ON INCOME FROM BONDS OR SHARES PURCHASED IN FOREIGN CURRENCY OR CAPITALGAINS ARISING FROM THEIR TRANSFER.

(1) Where the total income of an assessee, being a non-resident, includes -(a) income by way of interest or [Dividends other than dividends referred toin section 115-O], on bonds or shares of an Indian company issued inaccordance with such scheme as the Central Government may, by notification inthe Official Gazette, specify 1290j in this behalf [Bonds or shares of apublic sector company, sold by the Government] and purchased by him in foreigncurrency; or


(b) Income by way of long-term capital gains arising from the transfer ofbonds or, as the case may be, shares referred to in clause (a), the income-taxpayable shall be the aggregate of -

(i) The amount of income-tax calculated on the income by way of interest or[Dividends other than dividends referred to in section 115-O], as the case maybe, in respect of bonds or shares referred to in clause (a), if any, includedin the total income, at the rate of ten per cent;

(ii) The amount of income-tax calculated on the income by way of long-termcapital gains referred to in clause (b), if any, at the rate of ten per cent;and

(iii) The amount of income-tax with which the non-resident would have beenchargeable had his total income been reduced by the amount of income referredto in clause (a) and clause (b).

(2) Where the gross total income of the non-resident - (a) consists only ofincome by way of interest or [ Dividends other than dividends referred to insection 115-O ] in respect of bonds or, as the case may be, shares referred toin clause (a) of sub-section (1), no deduction shall be allowed to him undersections 28 to 44C or clause (i) or clause (iii) of section 57 or underChapter VI-A;

(b) Includes any income referred to in clause (a) or clause (b) of sub-section(1) the gross total income shall be reduced by the amount of such income andthe deduction under Chapter VI-A shall be allowed as if the gross total incomeas so reduced, were the gross total income of the assessee.

(3) Nothing contained in the first and second provisos to section 48 shallapply for the computation of long-term capital gains arising out of thetransfer of long-term capital asset, being bonds or shares referred to inclause (b) of sub-section (1).

(4) It shall not be necessary for a non-resident to furnish under sub-section(1) of section 139 a return of his income if -

(a) His total income in respect of which he is assessable under this Actduring the previous year consisted only of income referred to in clause (a) ofsub-section (1); and



(5) Where the assessee acquired shares or bonds in an amalgamated or resultingcompany by virtue of his holding shares or bonds in the amalgamating ordemerged company, as the case may be, in accordance with the provisions ofsub-section (1), the provisions of the said sub-section shall apply to suchshares or bonds.

253. Tax on Income from global depository receeiptspurchased in Foreign Currency or capital gainsarising from their transfer.

§253.Tax on Income from global depository receeipts purchased in ForeignCurrency or capital gains arising from their transfer.Section 115ACA

TAX ON INCOME FROM GLOBAL DEPOSITORY RECEEIPTS PURCHASED IN FOREIGN CURRENCYOR CAPITAL GAINS ARISING FROM THEIR TRANSFER. -

(1) Where the total income of an assessee, being an individual, who is aresident and an employee of an Indian company engaged in informationtechnology software and information technology services (hereafter in thissection referred to as the resident employee), includes -

(a) Income by way of dividends, other than dividends referred to in section115-O, on Global Depository Receipts of an Indian company engaged ininformation technology software and information technology services, issued inaccordance with such employees" stock option scheme as the Central Governmentmay, by notification in the Official Gazette, specify in this behalf andpurchased by him in foreign currency; or

(b) Income by way of long-term capital gains arising from the transfer ofGlobal Depository Receipts referred to in clause (a), the income-tax payableshall be the aggregate of - (i) the amount of income-tax calculated on theincome by way of dividends, other than dividends referred to in section 115-O,in respect of Global Depository Receipts referred to in clause (a), if any,included in the total income, at the rate of ten per cent;

(ii) The amount of income-tax calculated on the income by way of long- termcapital gains referred to in clause (b), if any, at the rate of ten per cent;and

(iii) The amount of income-tax with which the resident employee would havebeen chargeable had his total income been reduced by the amount of income


referred to in clauses (a) and (b).

(2) Where the gross total income of the resident employee - (a) consists onlyof income by way of dividends, other than dividends referred to in section115-O, in respect of Global Depository Receipts referred to in clause (a) ofsub-section (1), no deduction shall be allowed to him under any otherprovision of this Act;

(b) Includes any income referred to in clause (a) or clause (b) of sub-section(1), the gross total income shall be reduced by the amount of such income andthe deduction under any provision of this Act shall be allowed as if the grosstotal income as so reduced were the gross total income of the assessee.

(3) Nothing contained in the first and second provisos to section 48 shallapply for the computation of long-term capital gains arising out of thetransfer of long-term capital asset, being Global Depository Receipts referredto in clause (b) of sub-section (1).

Explanation. - For the purposes of this section, - (a) "Global DepositoryReceipts" means any instrument in the form of a depository receipt orcertificate (by whatever name called) created by the Overseas Depository Bankoutside India and issued to non-resident investors against the issue ofordinary shares or foreign currency convertible bonds of issuing company;

(b) "Information technology service" means any service which results from theuse of any information technology software over a system of informationtechnology products for realising value addition;

(c) "Information technology software" means any representation ofinstructions, data, sound or image, including source code and object code,recorded in a machine readable form and capable of being manipulated orproviding inter-activity to a user, by means of an automatic data processingmachine falling under heading information technology products but does notinclude non-information technology products;

(d) "Overseas Depository Bank" means a bank authorised by the issuing companyto issue Global Depository Receipts against issue of Foreign CurrencyConvertible Bonds or ordinary shares of the issuing company.

254. Tax on Income of Foreign InstitutionalInvestors from securities or capital gains arisingfrom their transfer.


§254.Tax on Income of Foreign Institutional Investors from securities orcapital gains arising from their transfer.Section 115AD

TAX ON INCOME OF FOREIGN INSTITUTIONAL INVESTORS FROM SECURITIES OR CAPITALGAINS ARISING FROM THEIR TRANSFER.

(1) Where the total income of a Foreign Institutional Investor includes - [(a)income [other than income by way of dividends referred to in section 115-O ]received in respect of securities (other than unit referred to in section115AB); ]

(b) Income by way of short-term or long-term capital gains arising from thetransfer of such securities, the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income in respect ofsecurities referred to in clause (a), if any, included in the total income, atthe rate of twenty per cent;

(ii) The amount of income-tax calculated on the income by way of short-termcapital gains referred to in clause (b), if any, included in the total income,at the rate of thirty per cent;

(iii) The amount of income-tax calculated on the income by way of long-termcapital gains referred to in clause (b), if any, included in the total income,at the rate of ten per cent; and

(iv) The amount of income-tax with which the Foreign Institutional Investorwould have been chargeable had its total income been reduced by the amount ofincome referred to in clause (a) and clause (b).

(2) Where the gross total income of the Foreign Institutional Investor - (a)consists only of income in respect of securities referred to in clause (a) ofsub-section (1), no deduction shall be allowed to it under sections 28 to 44Cor clause (i) or clause (iii) of section 57 or under Chapter VI-A;

(b) Includes any income referred to in clause (a) or clause (b) of sub-section(1), the gross total income shall be reduced by the amount of such income andthe deduction under Chapter VI-A shall be allowed as if the gross total incomeas so reduced, were the gross total income of the Foreign InstitutionalInvestor.

(3) Nothing contained in the first and second provisos to section 48 shallapply for the computation of capital gains arising out of the transfer ofsecurities referred to in clause (b) of sub-section (1).


Explanation : For the purposes of this section, - (a) the expression "ForeignInstitutional Investor" means such investor as the Central Government may, bynotification in the Official Gazette, specify 1291a in this behalf;

(b) The expression "securities" shall have the meaning assigned to it inclause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42of 1956).

255. Tax on Profits and gains of Life InsuranceBusiness.

§255.Tax on Profits and gains of Life Insurance Business.Section 115B

TAX ON PROFITS AND GAINS OF LIFE INSURANCE BUSINESS.

(1) Where the total income of an assessee includes any profits and gains fromlife insurance business, the income-tax payable shall be the aggregate of -(i) The amount of income-tax calculated on the amount of profits and gains ofthe life insurance business included in the total income, at the rate oftwelve and one-half per cent; and

(ii) The amount of income-tax with which the assessee would have beenchargeable had the total income of the assessee been reduced by the amount ofprofits and gains of life insurance business.

(2) Notwithstanding anything contained in sub-section (1) or in any other lawfor the time being in force or any instrument having the force of law, theassessee shall, in addition to the payment of income-tax computed under sub-section (1), deposit, during [the previous years relevant to the assessmentyears commencing on the 1st day of April, 1989, and the 1st day of April,1990], an amount equal to thirty-three and one-third per cent of the amount ofincome-tax computed under clause (i) of sub-section (1), in such socialsecurity fund (hereafter in this sub-section referred to as the securityfund), as the Central Government may, by notification in the Official Gazette,specify 1293 in this behalf :

Provided that where the assessee makes during the said [Previous years] anydeposit of an amount of not less than two and one-half per cent of the profitsand gains of the life insurance business in the security fund, the amount ofincome-tax payable by the assessee under the said clause (i) shall be reducedby an amount equal to two and one-half per cent of such profits and gains and,


accordingly, the deposit of thirty-three and one-third per cent required to bemade under this sub-section shall be calculated on the income-tax as soreduced.

256. Tax on winnings from lotteries, crosswordpuzzles, races including hourse races, card gamesand other games of any sport or gambling or bettingof any form or nature whatsoever.

§256.Tax on winnings from lotteries, crossword puzzles, races includinghourse races, card games and other games of any sport or gambling or bettingof any form or nature whatsoever.Section 115BB

TAX ON WINNINGS FROM LOTTERIES, CROSSWORD PUZZLES, RACES INCLUDING HORSERACES, CARD GAMES AND OTHER GAMES OF ANY SORT OR GAMBLING OR BETTING OF ANYFORM OR NATURE WHATSOEVER.

Where the total income of an assessee includes any income by way of winningsfrom any lottery or crossword puzzle or race including horse race (not beingincome from the activity of owning and maintaining race horses) or card gameand other game of any sort or from gambling or betting of any form or naturewhatsoever, the income-tax payable shall be the aggregate of -

(i) The amount of income-tax calculated on income by way of winnings from suchlottery or crossword puzzle or race including horse race or card game andother game of any sort or from gambling or betting of any form or naturewhatsoever, at the rate of forty per cent.; and

(ii) The amount of income-tax with which the assessee would have beenchargeable had his total income been reduced by the amount of income referredto in clause (i).

Explanation : For the purposes of this section. "horse race" shall have thesame meaning as in section 74A.

257. Tax on Non-Resident Sports or SportsAssociations.

§257.Tax on Non-Resident Sports or Sports Associations.


Section 115BBA

TAX ON NON-RESIDENT SPORTSMEN OR SPORTS ASSOCIATIONS.

(1) Where the total income of an assessee, - (a) being a sportsman (includingan athlete,) who is not a citizen of India and is a non-resident, includes anyincome received or receivable by way of -

(i) Participation in India in any game (other than a game the winningswherefrom are taxable under section 115BB) or sport; or

(ii) Advertisement; or

(iii) Contribution of articles relating to any game or sport in India innewspapers, magazines or journals; or

(b) Being a non-resident sports association or institution, includes anyamount guaranteed to be paid or payable to such association or institution inrelation to any game (other than a game the winnings wherefrom are taxableunder section 115BB) or sport played in India, the income-tax payable by theassessee shall be the aggregate of -

(i) The amount of income-tax calculated on income referred to in clause (a) orclause (b) at the rate of ten per cent; and

(ii) The amount of income-tax with which the assessee would have beenchargeable had the total income of the assessee been reduced by the amount ofincome referred to in clause (a) or clause (b) :

Provided that no deduction in respect of any expenditure or allowance shall beallowed under any provision of this Act in computing the income referred to inclause (a) or clause (b).

(2) It shall not be necessary for the assessee to furnish under sub-section(1) of section 139 a return of his income if -

(a) His total income in respect of which he is assessable under this Actduring the previous year consisted only of income referred to in clause (a) orclause (b) of sub-section (1); and



258. Definitions.

§258.Definitions.Section 115C

DEFINITIONS.

In this Chapter, unless the context otherwise requires, -

(a) "Convertible foreign exchange" means foreign exchange which is for thetime being treated by the Reserve Bank of India as convertible foreignexchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of1973), and any rules made thereunder;

(b) "Foreign exchange asset" means any specified asset which the assessee hasacquired or purchased with, or subscribed to in, convertible foreign exchange;

(c) "Investment income" means any [Income derived other than dividendsreferred to in section 115-O] from a foreign exchange asset;

(d) "Long-term capital gains" means income chargeable under the head "Capitalgains" relating to a capital asset, being a foreign exchange asset which isnot a short-term capital asset;

(e) "Non-resident Indian" means an individual, being a citizen of India or aperson of Indian origin who is not a "resident".

Explanation : A person shall be deemed to be of Indian origin if he, or eitherof his parents or any of his grand-parents, was born in undivided India;

(f) "Specified asset" means any of the following assets, namely :-

(i) Shares in an Indian company;

(ii) Debentures issued by an Indian company which is not a private company asdefined in the Companies Act, 1956 (1 of 1956);

(iii) Deposits with an Indian company which is not a private company asdefined in the Companies Act, 1956 (1 of 1956);

(iv) Any security of the Central Government as defined in clause (2) ofsection 2 of the Public Debt Act, 1944 (18 of 1944);

(v) Such other assets as the Central Government may specify in this behalf by


notification in the Official Gazette.

259. Special provision for computation of totalIncome of Non-Residents.

§259.Special provision for computation of total Income of Non-Residents.Section 115D

SPECIAL PROVISION FOR COMPUTATION OF TOTAL INCOME OF NON-RESIDENTS.

(1) No deduction in respect of any expenditure or allowance shall be allowedunder any provision of this Act in computing the investment income of a non-resident Indian.

(2) Where in the case of an assessee, being a non-resident Indian, - (a) thegross total income consists only of investment income or income by way oflong-term capital gains or both, no deduction shall be allowed to the assessee[Under Chapter VI-A and nothing contained in the provisions of the secondproviso to section 48 shall apply to income chargeable under the head "Capitalgains"];

(b) The gross total income includes any income referred to in clause (a), thegross total income shall be reduced by the amount of such income and thedeductions under Chapter VI-A shall be allowed as if the gross total income asso reduced were the gross total income of the assessee.

260. Tax on Investment Income and Long-Term Capitalgains.

§260.Tax on Investment Income and Long-Term Capital gains.Section 115E

TAX ON INVESTMENT INCOME AND LONG-TERM CAPITAL GAINS.

Where the total income of an assessee, being a non-resident Indian, includes -

(a) Any income from investment or income from long-term capital gains of anasset other than a specified asset;

(b) Income by way of long-term capital gains, the tax payable by him shall bethe aggregate of - (i) the amount of income-tax calculated on the income in


respect of investment income referred to in clause (a), if any, included inthe total income, at the rate of twenty per cent;

(ii) The amount of income-tax calculated on the income by way of long-termcapital gains referred to in clause (b), if any, included in the total income,at the rate of ten per cent; and

(iii) The amount of income-tax with which he would have been chargeable hadhis total income been reduced by the amount of income referred to in clauses(a) and (b).

261. Capital gains on transfer of Foreign Exchangeassets not to be charged in certain cases.

§261.Capital gains on transfer of Foreign Exchange assets not to be chargedin certain cases.Section 115F

CAPITAL GAINS ON TRANSFER OF FOREIGN EXCHANGE ASSETS NOT TO BE CHARGED INCERTAIN CASES.

(1) Where, in the case of an assessee being a non-resident Indian, any long-term capital gains arise from the transfer of a foreign exchange asset (theasset so transferred being hereafter in this section referred to as theoriginal asset), and the assessee has, within a period of six months after thedate of such transfer, invested the whole or any part of the net considerationin any specified asset, or in any savings certificates referred to in clause(4B), of section 10 (such specified asset, or such savings certificates beinghereafter in this section referred to as the new asset), the capital gainshall be dealt with in accordance with the following provisions of thissection, that is to say, -

(a) If the cost of the new asset is not less than the net consideration inrespect of the original asset, the whole of such capital gains shall not becharged under section 45;

(b) If the cost of the new asset is less than the net consideration in respectof the original asset, so much of the capital gain as bears to the whole ofthe capital gain the same proportion as the cost of acquisition of the newasset bears to the net consideration shall not be charged under section 45.

Explanation : For the purposes of this sub-section, - (i) "cost", in relationto any new asset, being a deposit referred to in sub-clause (iii), or


specified under sub-clause (v), of clause (f) of section 115C, means theamount of such deposit;

(ii) "Net consideration" in relation to the transfer of the original asset,means the full value of the consideration received or accruing as a result ofthe transfer of such asset as reduced by any expenditure incurred wholly andexclusively in connection with such transfer.

(2) Where the new asset is transferred or converted (otherwise than bytransfer) into money, within a period of three years from the date of itsacquisition, the amount of capital gain arising from the transfer of theoriginal asset not charged under section 45 on the basis of the cost of suchnew asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be income chargeable under the head "Capitalgains" relating to capital assets other than short-term capital assets of theprevious year in which the new asset is transferred or converted (otherwisethan by transfer) into money.

262. Return of Income not to be filed in certaincases.

§262.Return of Income not to be filed in certain cases.Section 115G

RETURN OF INCOME NOT TO BE FILED IN CERTAIN CASES.

It shall not be necessary for a non-resident Indian to furnish under sub-section (1) of section 139 a return of his income if -

(a) His total income in respect of which he is assessable under this Actduring the previous year consisted only of investment income or income by wayof long-term capital gains or both; and


263. Benefit under chapter to be available incertain cases evern after the assessee becomesResident.

§263.Benefit under chapter to be available in certain cases evern after the


assessee becomes Resident.Section 115H

BENEFIT UNDER CHAPTER TO BE AVAILABLE IN CERTAIN CASES EVEN AFTER THE ASSESSEEBECOMES RESIDENT.

Where a person, who is a non-resident Indian in any previous year, becomesassessable as resident in India in respect of the total income of anysubsequent year, he may furnish to the [Assessing Officer] a declaration inwriting along with his return of income under section 139 for the assessmentyear for which he is so assessable, to the effect that the provisions of thisChapter shall continue to apply to him in relation to the investment incomederived from any foreign exchange asset being an asset of the nature referredto in sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v)of clause (f) of section 115C; and if he does so, the provisions of thisChapter shall continue to apply to him in relation to such income for thatassessment year and for every subsequent assessment year until the transfer orconversion (otherwise than by transfer) into money of such assets.

264. Chapter not to apply if the assessee sochooses.

§264.Chapter not to apply if the assessee so chooses.Section 115-I

CHAPTER NOT TO APPLY IF THE ASSESSEE SO CHOOSES.

A non-resident Indian may elect not to be governed by the provisions of thisChapter for any assessment year by furnishing [His return of income for thatassessment year under section 139 declaring therein] that the provisions ofthis chapter shall not apply to him for that assessment year and, if he doesso, the provisions of this Chapter shall not apply to him for that assessmentyear and his total income for that assessment year shall be computed and taxon such total income shall be charged in accordance with the other provisionsof this Act.

265. Special Provisions relating to certaincompanies.

§265.Special Provisions relating to certain companies.Section 115J


SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES.

(1) Notwithstanding anything contained in any other provision of this Act,where in the case of an assessee being a company (other than a company engagedin the business of generation or distribution of electricity), the totalincome, as computed under this Act in respect of any previous year relevant tothe assessment year commencing on or after the 1st day of April, 1988 [Butbefore the 1st day of April, 1991], (hereafter in this section referred to asthe relevant previous year), is less than thirty per cent of its book profit,the total income of such assessee chargeable to tax for the relevant previousyear shall be deemed to be an amount equal to thirty per cent of such bookprofit.

(1A) Every assessee, being a company, shall, for the purposes of this section,prepare its profit and loss account for the relevant previous year inaccordance with the provisions of Parts II and III of Schedule VI to theCompanies Act, 1956 (1 of 1956).

Explanation : For the purposes of this section, "book profit" means the netprofit as shown in the profit and loss account for the relevant previous year[Prepared under sub-section (1A)], as increased by -

(a) The amount of income-tax paid or payable, and the provision therefor; or

(b) The amounts carried to any reserves (other than the reserves specified insection 80HHD, or sub-section (1) of section 33AC) by whatever name called; or

(c) The amount or amounts set aside to provisions made for meetingliabilities, other than ascertained liabilities; or

(d) The amount by way of provision for losses of subsidiary companies; or

(e) The amount or amounts of dividends paid or proposed; or

(f) The amount or amounts of expenditure relatable to any income to which anyof the provisions of Chapter III.

(g) The amount withdrawn from the reserve account under section 80HHD, whereit has been utilised for any purpose other than those referred to in sub-section (4) of that section; or

(h) The amount credited to the reserve account under section 80HHD, to theextent that amount has not been utilised within the period specified in sub-section (4) of that section;


(ha) The amount deemed to be the profits under sub-section (3) of section33AC; if any amount referred to in clauses (a) to (f) is debited or, as thecase may be, the amount referred to in clauses (g) and (h) is not credited tothe profit and loss account, and as reduced by, -

(i) The amount withdrawn from reserves (other than the reserves specified insection 80HHD) or provisions, if any such amount is credited to the profit andloss account :

Provided that, where this section is applicable to an assessee in any previousyear (including the relevant previous year), the amount withdrawn fromreserves created or provisions made in a previous year relevant to theassessment year commencing on or after the 1st day of April, 1988 shall not bereduced from the book profit unless the book profit of such year has beenincreased by those reserves or provisions (out of which the said amount waswithdrawn) under this Explanation;

(ii) The amount of income to which any of the provisions of Chapter IIIapplies, if any such amount is credited to the profit and loss account; or

(iii) The amounts [as arrived at after increasing the net profit by theamounts referred to in clauses (a) to (f) and reducing the net profit by theamounts referred to in clauses (i) and (ii)] attributable to the business, theprofits from which are eligible for deduction under section 80HHC or section80HHD; so, however, that such amounts are computed in the manner specified insub-section (3) or sub-section (3A) of section 80HHC or sub-section (3) ofsection 80HHD, as the case may be 1317b ; ] the amount of the loss or theamount of depreciation which would be required to be set off against theprofit of the relevant previous year as if the provisions of clause (b) of thefirst proviso to sub-section (1) of section 205 of the Companies Act, 1956 (1of 1956), are applicable.

(2) Nothing contained in sub-section (1) shall affect the determination of theamounts in relation to the relevant previous year to be carried forward to thesubsequent year or years under the provisions of sub-section (2) of section 32or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J.

266. Deemed Income Relating to certain Companies.

§266.Deemed Income Relating to certain Companies.


Section 115JA

DEEMED INCOME RELATING TO CERTAIN COMPANIES.

(1) Notwithstanding anything contained in any other provisions of this Act,where in the case of an assessee, being a company, the total income, ascomputed under this Act in respect of any previous year relevant to theassessment year commencing on or after the 1st day of April, 1997 (hereafterin this section referred to as the relevant previous year) is less than thirtyper cent of its book profit, the total income of such assessee chargeable totax for the relevant previous year shall be deemed to be an amount equal tothirty per cent of such book profit.

(2) Every assessee, being a company, shall, for the purposes of this sectionprepare its profit and loss account for the relevant previous year inaccordance with the provisions of parts II and III of Schedule VI to theCompanies Act, 1956 (1 of 1956) :

Provided that while preparing profit and loss account, the depreciation shallbe calculated on the same method and rates which have been adopted forcalculating the depreciation for the purpose of preparing the profit and lossaccount laid before the company at its annual general meeting in accordancewith the provisions of section 210 of the Companies Act, 1956 (1 of 1956) :

Provided further that where a company has adopted or adopts the financial yearunder the Companies Act, 1956 (1 of 1956) which is different from the previousyear under the Act, the method and rates for calculation of depreciation shallcorrespond to the method and rates which have been adopted for calculating thedepreciation for such financial year orpart of such financial year fallingwithin the relevant previous year.

Explanation : For the purposes of this section, "book profit" means the netprofit as shown in the profit and loss account for the relevant previous yearprepared under sub-section (2), as increased by -

(a) The amount of income-tax paid or payable, and the provision therefor; or

(b) The amounts carried to any reserves by whatever name called; or

(c) The amount or amounts set aside to provisions made for meetingliabilities, other than ascertained liabilities; or

(d) The amount by way of provision for losses of subsidiary companies; or


(e) The amount or amounts of dividends paid or proposed; or

(f) The amount or amounts of expenditure relatable to any income to which anyof the provisions of Chapter III applies; if any amount referred to in clauses(a) to (f) is debited to the profit and loss account, and as reduced by, -

(i) The amount withdrawn from any reserves or provisions if any such amount iscredited to the profit and loss account :

Provided that, where this section is applicable to an assessee in any previousyear (including the relevant previous year), the amount withdrawn fromreserves created or provisions made in a previous year relevant to theassessment year commencing on or after the 1st day of April, 1997 shall not bereduced from the book profit unless the book profit of such year has beenincreased by those reserves or provisions (out of which the said amount waswithdrawn) under this Explanation; or

(ii) The amount of income to which any of the provisions of Chapter IIIapplies, if any such amount is credited to the profit and loss account; or

(iii) The amount of loss brought forward or unabsorbed depreciation, whicheveris less as per books of account.

Explanation : For the purposes of this clause, the loss shall not includedepreciation; or

(iv) The amount of profits derived by an industrial undertaking from thebusiness of generation or generation and distribution of power; or

(v) The amount of profits derived by an industrial undertaking located in anindustrially backward State or district as referred to in [Sub-clause (b) orsub-clause (c) of clause (iv) of sub-section (2) of section 80-IA], for theassessment years such industrial undertaking is eligible to claim a deductionof hundred per cent of profits and gains under sub-section (5) of section 80-IA

(vi) The amount of profits derived by an industrial undertaking from thebusiness of developing, maintaining and operating any infrastructure facilityas defined under [sub-section (12) of section 80-IA and subject to fulfillingthe conditions laid down in that sub-section (4A) of section 80-IA],; or

(vii) The amount of profits of sick industrial company for the assessment yearcommencing from the assessment year relevant to the previous year in which thesaid company has become a sick industrial company under sub-section (1) of


section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1of 1986) and ending with the assessment year during which the entire net worthof such company becomes equal to or exceeds the accumulated losses.

Explanation : For the purposes of this clause, "net worth" shall have themeaning assigned to it in clause (ga) of sub-section (1) section 3 of the SickIndustrial Companies (Special Provisions) Act, 1985 (1 of 1986);

(viii) The amount of profits, eligible for deduction under section 80HHC,computed under clause (a), (b) or (c) of sub-section (3) or sub-section (3A),as the case may be, of that section and subject to the conditions specified insub-sections (4) and (4A) of that section;

(ix) The amount of profits eligible for deduction under section 80HHE,computed under sub-section (3) of that section.

(3) Nothing contained in sub-section (1) shall affect the determination of theamounts in relation to the relevant previous year to be carried forward to thesubsequent year or years under the provisions of sub-section (2) of section 32or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section72 or section 73 or section 74 or sub-section (3) of section 74A.

(4) Save as otherwise provided in this section, all other provisions of thisAct shall apply to every assessee, being a company, mentioned in this section.

267. Tax credit in respect of tax paid on deemedIncome Relating to certain Companies.

§267.Tax credit in respect of tax paid on deemed Income Relating to certainCompanies.Section 115JAA

TAX CREDIT IN RESPECT OF TAX PAID ON DEEMED INCOME RELATING TO CERTAINCOMPANIES.

(1) Where any amount of tax is paid under sub-section (1) of section 115JA byan assessee being a company for any assessment year, then, credit in respectof tax so paid shall be allowed to him in accordance with the provisions ofthis section.

(2) The tax credit to be allowed under sub-section (1) shall be the differenceof the tax paid for any assessment year under sub-section (1) of section 115JAand the amount of tax payable by the assessee on his total income computed in


accordance with the other provisions of this Act : Provided that no interestshall be payable on the tax credit allowed under sub-section (1).

(3) The amount of tax credit determined under sub-section (2) shall be carriedforward and set off in accordance with the provisions of sub-section (4) andsub-section (5) but such carry forward shall not be allowed beyond the fifthassessment year immediately succeeding the assessment year in which tax creditbecomes allowable under sub-section (1).

(4) Tax credit shall be allowed set-off in a year when tax becomes payable onthe total income computed in accordance with the provisions of this Act otherthan section 115JA.

(5) Set off in respect of brought forward tax credit shall be allowed for anyassessment year to the extent of the difference between the tax on his totalincome and the tax which would have been payable under the provisions of sub-section (1) of section 115JA for that assessment year.

(6) Where as a result of an order under sub-section (1) or sub-section (3) ofsection 143, section 144, section 147, section 154, section 155, sub-section(4) of section 245D, section 250, section 254, section 260, section 262,section 263 or section 264, the amount of tax payable under this Act isreduced or increased, as the case may be, the amount of tax credit allowedunder this section shall also be increased or reduced accordingly.

268. Omitted.

§268.Omitted.Section 115K


269. Omitted.

§269.Omitted.Section 115L


270. Omitted.


§270.Omitted.Section 115M


271. Omitted.

§271.Omitted.Section 115N


272. Tax on Distributed profits of DomesticCompanies.

§272.Tax on Distributed profits of Domestic Companies.Section 115-O

TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES.

(1) Notwithstanding anything contained in any other provision of this Act andsubject to the provisions of this section, in addition to the income-taxchargeable in respect of the total income of a domestic company for anyassessment year, any amount declared, distributed or paid by such company byway of dividends (whether interim or otherwise) on or after the 1st day ofJune, 1997, whether out of current or accumulated profits shall be charged toadditional income-tax (hereafter referred to as tax on distributed profits) atthe rate of ten per cent

(2) Notwithstanding that no income-tax is payable by a domestic company on itstotal income computed in accordance with the provisions of this Act, the taxon distributed profits under sub-section (1) shall be payable by such company.

(3) The principal officer of the domestic company and the company shall beliable to pay the tax on distributed profits to the credit of the CentralGovernment within fourteen days from the date of -

(a) Declaration of any dividend; or

(b) Distribution of any dividend; or

(c) Payment of any dividend, whichever is earliest.


(4) The tax on distributed profits so paid by the company shall be treated asthe final payment of tax in respect of the amount declared, distributed orpaid as dividends and no further credit therefor shall be claimed by thecompany or by any other person in respect of the amount of tax so paid.

(5) No deduction under any other provision of this Act shall be allowed to thecompany or a shareholder in respect of the amount which has been charged totax under sub-section (1) or the tax thereon.

273. Interest payable for Non-Payment of Tax byDomestic Companies.

§273.Interest payable for Non-Payment of Tax by Domestic Companies.Section 115P

INTEREST PAYABLE FOR NON-PAYMENT OF TAX BY DOMESTIC COMPANIES.

Where the principal officer of a domestic company and the company fails to paythe whole or any part of the tax on distributed profits referred to in sub-section (1) of section 115-O, within the time allowed under sub-section (3) ofthat section, he or it shall be liable to pay simple interest at the rate oftwo per cent for every month or part thereof on the amount of such tax for theperiod beginning on the date immediately after the last date on which such taxwas payable and ending with the date on which the tax is actually paid.

274. When Company is deemed to be in default.

§274.When Company is deemed to be in default.Section 115Q

WHEN COMPANY IS DEEMED TO BE IN DEFAULT.

If any principal officer of a domestic company and the company does not paytax on distributed profits in accordance with the provisions of section 115-O,then, he or it shall be deemed to be an assessee in default in respect of theamount of tax payable by him or it and all the provisions of this Act for thecollection and recovery of income-tax shall apply.

Explanation : For the purposes of this Chapter, the expression "dividends"shall have the same meaning as is given to "dividend" in clause (22) ofsection 2 but shall not include sub-clause (e) thereof.


275. Tax on Distributed Income to Unit Holders.

§275.Tax on Distributed Income to Unit Holders.Section 115R

TAX ON DISTRIBUTED INCOME TO UNIT HOLDERS. -

(1) Notwithstanding anything contained in any other provisions of this Act andsection 32 of the Unit Trust of India Act, 1963 (52 of 1963), any amount ofincome distributed by the Unit Trust of India to its unit holders shall bechargeable to tax and the Unit Trust of India shall be liable to payadditional income-tax on such distributed income at the rate of ten per cent :

Provided that nothing contained in this sub-section shall apply in respect ofany income distributed to a unit holder of open-ended equity oriented funds inrespect of any distribution made from such fund for a period of three yearscommencing from the 1st day of April, 1999.

(2) Notwithstanding anything contained in any other provisions of this Act,any amount of income distributed by a Mutual Fund to its unit holders shall bechargeable to tax and such Mutual Fund shall be liable to pay additionalincome-tax at the rate of ten per cent :

Provided that nothing contained in this sub-section shall apply in respect ofany income distributed to a unit holder of open-ended equity oriented funds inrespect of any distribution made from such fund for a period of three yearscommencing from the 1st day of April, 1999.

(3) The person responsible for making payment of the income distributed by theUnit Trust of India or a Mutual Fund and the Unit Trust of India or the MutualFund, as the case may be, shall be liable to pay tax to the credit of theCentral Government within fourteen days from the date of distribution orpayment of such income, whichever is earlier.

(4) No deduction under any other provision of this Act shall be allowed to theUnit Trust of India or to a Mutual Fund in respect of the income which hasbeen charged to tax under sub-section (1) or sub- section (2).

276. Interest payable for non-payment of tax.

§276.Interest payable for non-payment of tax.Section 115S


INTEREST PAYABLE FOR NON-PAYMENT OF TAX.

Where the person responsible for making payment of the income distributed bythe Unit Trust of India or a Mutual Fund and the Unit Trust of India or theMutual Fund, as the case may be, fails to pay the whole or any part of the taxreferred to in sub-section (1) or sub-section (2) of section 115R, within thetime allowed under sub-section (3) of that section, he or it shall be liableto pay simple interest at the rate of two per cent. every month or partthereof on the amount of such tax for the period beginning on the dateimmediately after the last date on which such tax was payable and ending withthe date on which the tax is actually paid.

277. Unit Trust Of India or Mutual Fund to beassessee in default.

§277.Unit Trust Of India or Mutual Fund to be assessee in default.Section 115T

UNIT TRUST OF INDIA OR MUTUAL FUND TO BE ASSESSEE IN DEFAULT.

If any person responsible for making payment of the income distributed by theUnit Trust of India or a Mutual Fund and the Unit Trust of India or the MutualFund, as the case may be, does not pay tax, as is referred to in sub-section(1) or sub-section (2) of section 115R, then, he or it shall be deemed to bean assessee in default in respect of the amount of tax payable by him or itand all the provisions of this Act for the collection and recovery of income-tax shall apply.

Explanation. - For the purposes of this Chapter, - (a) "Mutual Fund" means aMutual Fund specified under clause (23D) of section 10;

(b) "Open-ended equity oriented fund" means - (i) The Unit Scheme, 1964 madeby the Unit Trust of India; and

(ii) Such fund where the investible funds are invested by way of equity sharesin domestic companies to the extent of more than fifty per cent of the totalproceeds of such fund :

Provided that the percentage of equity share holding of the fund shall becomputed with reference to the annual averageof the monthly averages of theopening and closing figures;


(c) "Unit Trust of India" means the Unit Trust of India established under theUnit Trust of India Act, 1963 (52 of 1963).

278. Income-Tax Authorities.

§278.Income-Tax Authorities.Section 116

INCOME-TAX AUTHORITIES.

There shall be the following classes of income-tax authorities for thepurposes of this Act, namely :- (a) The Central Board of Direct Taxesconstituted under the Central Boards of Revenue Act, 1963 (54 of 1963),

(b) Directors-General of Income-tax or Chief Commissioners of Income-tax,

(c) Directors of Income-tax or Commissioners of Income-tax or Commissioners ofIncome-tax (Appeals),

(cc) Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional Commissioners of Income-tax (Appeals),

(cca) Joint Directors of Income-tax or Joint Commissioner of Income-tax;

(d) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax orDeputy Commissioners of Income-tax (Appeals),

(e) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,

(f) Income-tax Officers,

(g) Tax Recovery Officers,

(h) Inspectors of Income-tax.

279. Appointment of Income-Tax Authorities.

§279.Appointment of Income-Tax Authorities.Section 117

APPOINTMENT OF INCOME-TAX AUTHORITIES.


(1) The Central Government may appoint such persons as it thinks fit to beincome-tax authorities.

(2) Without prejudice to the provisions of sub-section (1), and subject to therules and orders of the Central Government regulating the conditions ofservice of persons in public services and posts, the Central Government mayauthorise the Board, or a Director-General, a Chief Commissioner or a Directoror a Commissioner to appoint income-tax authorities below the rank of anAssistant Commissioner or Deputy Commissioner.

(3) Subject to the rules and orders of the Central Government regulating theconditions of service of persons in public services and posts, an income-taxauthority authorised in this behalf by the Board may appoint such executive orministerial staff as may be necessary to assist it in the execution of itsfunctions.

280. Control of Income-Tax Authorities.

§280.Control of Income-Tax Authorities.Section 118

CONTROL OF INCOME-TAX AUTHORITIES.

The Board may, by notification in the Official Gazette, direct that anyincome-tax authority or authorities specified in the notification shall besubordinate to such other income-tax authority or authorities as may bespecified in such notification.

281. Instructions to Subordinate Authorities.

§281.Instructions to Subordinate Authorities.

Section 119

INSTRUCTIONS TO SUBORDINATE AUTHORITIES.

(1) The Board may from time to time, issue such orders, instructions anddirections to other income-tax authorities as it may deem fit for the properadministration of this Act, and such authorities and all other personsemployed in the execution of this Act shall observe and follow such orders,instructions and directions of the Board :


Provided that no such orders, instructions or directions shall be issued -

(a) So as to require any income-tax authority to make a particular assessmentor to dispose of a particular case in a particular manner; or

(b) So as to interfere with the discretion of the Commissioner (Appeals) inthe exercise of his appellate functions.

(2) Without prejudice to the generality of the foregoing power, -

(a) The Board may, if it considers it necessary or expedient so to do, for thepurpose of proper and efficient management of the work of assessment andcollection of revenue, issue, from time to time (whether by way of relaxationof any of the provisions of sections [ 1325 139, 1325 ] 143, 144, 147, 148,154, 155, [ 1326 sub-section (1A) of section 201, sections 210, 211, 234A,234B, 234C 1326 ] 271 and 273 or otherwise), general or special orders inrespect of any class of incomes or class of cases, setting forth directions orinstructions (not being prejudicial to assessees) as to the guidelines,principles or procedures to be followed by other income-tax authorities in thework relating to assessment or collection of revenue or the initiation ofproceedings for the imposition of penalties and any such order may, if theBoard is of opinion that it is necessary in the public interest so to do, bepublished and circulated in the prescribed manner 1326a for generalinformation;

(b) The Board may, if it considers it desirable or expedient so to do foravoiding genuine hardship in any case or class of cases, by general or specialorder, authorise any Income-tax authority, not being Commissioner (Appeals) toadmit an application or claim for any exemption, deduction, refund or anyother relief under this Act after the expiry of the period specified byorunder this Act for making such application or claim and deal with the sameon merits in accordance with law.

(c) The Board may, if it considers it desirable or expedient so to do foravoiding genuine hardship in any caseor class or cases, by general or specialorder for reasons to be specified therein, relax any requirement contained inany of the provisions of Chapter IV or Chapter VI-A, where the assessee hasfailed to comply with any requirement specified in such provision for claimingdeduction thereunder, subject to the following conditions, namely :- (i) thedefault in complying with such requirement was due to circumstances beyond thecontrol of the assessee; and

(ii) The assessee has complied with such requirement before the completion ofassessment in relation to the previousyear in which such deduction is claimed


:

Provided that the Central Government shall cause every order issued under thisclause to be laid before each House of Parliament.

282. Jurisdiction of Income-Tax Authorities.

§282.Jurisdiction of Income-Tax Authorities.Section 120

JURISDICTION OF INCOME-TAX AUTHORITIES.

(1) Income-tax authorities shall exercise all or any of the powers and performall or any of the functions conferred on or, as the case may be, assigned tosuch authorities by or under this Act in accordance with such directions asthe Board may issue for the exercise of the powers andperformance of thefunctions by all or any of those authorities.

(2) The directions of the Board under sub-section (1) may authorise any otherincome-tax authority to issue orders in writing for the exercise of the powersand performance of the functions by all or any of the other income-taxauthorities who are subordinate to it.

(3) In issuing the directions or orders referred to in sub-sections (1) and(2), the Board or other income-tax authority authorised by it may have regardto any one or more of the following criteria, namely :-

(a) Territorial area;

(b) Persons or classes of persons;

(c) Incomes or classes of income; and

(d) Cases or classes of cases.

(4) Without prejudice to the provisions of sub-sections (1) and (2), the Boardmay, by general or special order, and subject to such conditions, restrictionsor limitations as may be specified therein, -

(a) Authorise any Director General or Director to perform such functions ofany other income-tax authority as may be assigned to him by the Board;

(b) Empower the Director-General or Chief Commissioner or Commissioner toissue orders in writing that the powers and functions conferred on, or as the


case may be, assigned to, the Assessing Officer by or under this Act inrespect of any specified area or persons or classes of persons or incomes orclasses of income or cases or classes of cases, shall be exercised orperformed by [ [Joint] Commissioner or a [Joint] Director], and, where anyorder is made under this clause, references in any other provision of thisAct, or in any rule made thereunder to the Assessing Officer shall be deemedto be references to [such [Joint] Commissioner or [Joint] Director] by whomthe powers and functions are to be exercised or performed under such order,and any provision of this Act requiring approval or sanction of the [Joint]Commissioner shall not apply.

(5) The directions and orders referred to in sub-sections (1) and (2) may,wherever considered necessary or appropriate for the proper management of thework, require two or more Assessing Officers (whether or not of the sameclass) to exercise and perform, concurrently, the powers and functions inrespect of any area or persons or classes of persons or incomes or classes ofincome or cases or classes of cases; and, where such powers and functions areexercised and performed concurrently by the Assessing Officers of differentclasses, any authority lower in rank amongst them shall exercise the powersand perform the functions as any higher authority amongst them may direct, andfurther, references in any other provision of this Act or in any rule madethereunder to the Assessing Officer shall be deemed to be references to suchhigher authority and any provision of this Act requiring approval or sanctionof any such authority shall not apply.

(6) Notwithstanding anything contained in any direction or order issued underthis section, or in section 124, the Board may, by notification in theOfficial Gazette, direct that for the purpose of furnishing of the return ofincome or the doing of any other act or thing under this Act or any rule madethereunder by any person or class of persons, the income-tax authorityexercising and performing the powers and functions in relation to the saidperson or class of persons shall be such authority as may be specified in thenotification.

283. Omitted.

§283.Omitted.

Section 121

JURISDICTION OF COMMISSIONERS.


121 OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988

284. Omitted.


JURISDICTION OF COMMISSIONERS (APPEALS).

121A OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988

285. Omitted.


JURISDICTION OF APPELLATE ASSISTANT COMMISSIONERS.


286. Omitted.


JURISDICTION OF INSPECTING ASSISTANT COMMISSIONERS.


287. Jurisdiction of Assessing Officers.

§287.Jurisdiction of Assessing Officers.Section 124

JURISDICTION OF ASSESSING OFFICERS.

(1) Where by virtue of any direction or order issued under sub-section (1) orsub-section (2) of section 120, the Assessing Officer has been vested withjurisdiction over anyarea, within the limits of such area, he shall havejurisdiction -


(a) In respect of any person carrying on a business or profession, if theplace at which he carries on his business or profession is situate within thearea, or where his business or profession is carried on in more places thanone, if the principal place of his business or profession is situate withinthe area, and

(b) In respect of any other person residing within the area.

(2) Where a question arises under this section as to whether an AssessingOfficer has jurisdiction to assess any person, the question shall bedetermined by the Director-General or the Chief Commissioner or theCommissioner; or where the question is one relating to areas within thejurisdiction of different Directors-General or Chief Commissioners orCommissioners, by the Directors-General or Chief Commissioners orCommissioners concerned or, if they are not in agreement, by the Board or bysuch Director-General or Chief Commissioner or Commissioner as the Board may,by notification in the Official Gazette, specify.

(3) No person shall be entitled to call in question the jurisdiction of anAssessing Officer - (a) where he has made a return under sub-section (1) ofsection 139, after the expiry of one month from the date on which he wasserved with a notice under sub-section (1) of section 142 or sub-section (2)of section 143 or after the completion of the assessment, whichever isearlier;

(b) Where he has made no such return, after the expiry of the time allowed bythe notice under sub-section (1) of section 142 or under section 148 for themaking of the return or by the notice under the first proviso to section 144to show cause why the assessment should not be completed to the best of thejudgment of the Assessing Officer, whichever is earlier.

(4) Subject to the provisions of sub-section (3), where an assessee calls inquestion the jurisdiction of an Assessing Officer, then the Assessing Officershall, if not satisfied with the correctness of the claim, refer the matterfor determination under sub-section (2) before the assessment is made.

(5) Notwithstanding anything contained in this section or in any direction ororder issued under section 120, every Assessing Officer shall have all thepowers conferred by or under this Act on an Assessing Officer in respect ofthe income accruing or arising or received within the area, if any, over whichhe has been vested with jurisdiction by virtue of the directions or ordersissued under sub-section (1) or sub-section (2) of section 120.


288. Omitted.


POWERS OF COMMISSIONER RESPECTING SPECIFIED AREAS, CASES, PERSONS, ETC.


289. Omitted.


CONCURRENT JURISDICTION OF INSPECTING ASSISTANT COMMISSIONER AND INCOME-TAXOFFICER.


290. Omitted.


POWERS OF BOARD RESPECTING SPECIFIED AREA, CLASSES OF PERSONS OR INCOMES.


291. Power to transfer cases.

§291.Power to transfer cases.Section 127

POWER TO TRANSFER CASES.

(1) The Director General or Chief Commissioner or Commissioner may, aftergiving the assessee a reasonable opportunity of being heard in the matter,wherever it is possible to do so, and after recording his reasons for doingso, transfer any case from one or more Assessing Officers subordinate to him(whether with or without concurrent jurisdiction) to any other AssessingOfficer or Assessing Officers (whether with or without concurrent


jurisdiction) also subordinate to him.

(2) Where the Assessing Officer or Assessing Officers from whom the case is tobe transferred and the Assessing Officer or Assessing Officers to whom thecase is to be transferred are not subordinate to the same Director General orChief Commissioner or Commissioner, - (a) where the Directors General or ChiefCommissioners or Commissioners to whom such Assessing Officers are subordinateare in agreement, then the Director General or Chief Commissioner orCommissioner from whose jurisdiction the case is to be transferred may, aftergiving the assessee a reasonable opportunity of being heard in the matter,wherever it is possible to do so, and after recording his reasons for doingso, pass the order;

(b) Where the Directors General or Chief Commissioners or Commissionersaforesaid are not in agreement, the order transferring the case may,similarly, be passed by the Board or any such Director General or ChiefCommissioner or Commissioner as the Board may, by notification in the OfficialGazette, authorise in this behalf.

(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to requireany such opportunity to be given where the transfer is from any AssessingOfficer or Assessing Officers (whether with or without concurrentjurisdiction) to any other Assessing Officer or Assessing Officers (whetherwith or without concurrent jurisdiction) and the offices of all such officersare situated in the same city, locality or place.

(4) The transfer of a case under sub-section (1) or sub-section (2) may bemade at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or AssessingOfficers from whom the case is transferred.

Explanation : In section 120 and this section, the word "case", in relation toany person whose name is specified in any order or direction issuedthereunder, means all proceedings under this Act in respect of any year whichmay be pending on the date of such order or direction or which may have beencompleted on or before such date, and includes also all proceedings under thisAct which may be commenced after the date of such order or direction inrespect of any year.

292. Omitted.

§292.Omitted.


Section 128

FUNCTIONS OF INSPECTORS OF INCOME-TAX.


293. Change of Incumbent of an office.

§293.Change of Incumbent of an office.Section 129

CHANGE OF INCUMBENT OF AN OFFICE.

Whenever in respect of any proceeding under this Act an income-tax authorityceases to exercise jurisdiction and is succeeded by another who has andexercises jurisdiction, the income-tax authority so succeeding may continuethe proceeding from the stage at which the proceeding was left by hispredecessor :

Provided that the assessee concerned may demand that before the proceeding isso continued the previous proceeding or any part thereof be reopened or thatbefore any order of assessment is passed against him, he be reheard.

294. Omitted.


COMMISSIONER OF INSPECTORS OF INCOME-TAX.


295. Omitted.


INCOME-TAX OFFICER COMPETENT TO PERFORM ANY FUNCTION OR FUNCTIONS.



296. Power regarding Discovery, Production ofEvidence, etc.

§296.Power regarding Discovery, Production of Evidence, etc.Section 131

POWER REGARDING DISCOVERY, PRODUCTION OF EVIDENCE, ETC. (1) The [AssessingOfficer], [Deputy Commissioner (Appeals)], [Deputy Commissioner],[Commissioner (Appeals)] and [Chief Commissioner or Commissioner] shall, forthe purposes of this Act, have the same powers as are vested in a Court underthe Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respectof the following matters, namely :- (a) Discovery and inspection;

(b) Enforcing the attendance of any person, including any officer of a bankingcompany and examining him on oath;

(c) Compelling the production of books of account and other documents; and

(d) Issuing commissions.

(1A) If the Director General or Director or [ Joint] Director or AssistantDirector, [ Deputy Director] or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) ofthat sub-section, 1339 ] has reason to suspect that any income has beenconcealed, or is likely to be concealed, by any person or class of persons,within his jurisdiction, then, for the purpose of making any enquiry orinvestigation relating thereto, it shall be competent for him to exercise thepowers conferred under sub-section (1) on the income-tax authorities referredto in that sub-section, notwithstanding that no proceedings with respect tosuch person or class of persons are pending before him or any other income-taxauthority.

(3) Subject to any rules made in this behalf, any authority referred to insub-section (1) [Sub-section (1A)] may impound and retain in its custody forsuch period as it thinks fit any books of account or other documents producedbefore it in any proceeding under this Act :

Provided that [ Assessing Officer ] or an [ Assistant Director ] shall not -

(a) Impound any books of account or other documents without recording hisreasons for so doing, or

(b) Retain in his custody any such books or documents for a period exceeding


fifteen days (exclusive of holidays) without obtaining the approval of [ 1344the Chief Commissioner or Director General or Commissioner or Directortherefor, as the case may be.

297. Search and Seizure.

§297.Search and Seizure.

Section 132

SEARCH AND SEIZURE.

(1) Where the [Director General or Director] or the [Chief Commissioner orCommissioner] or any such [Joint Director] or [Joint Commissioner], as may beempowered in this behalf by the Board, in consequence of information in hispossession, has reason to believe that -

(a) Any person to whom a summons under sub-section (1) of section 37 of theIndian income-tax Act, 1922 (11 of 1922) or under sub-section (1) of section131 of this Act, or a notice under sub-section (4) of section 22 of the IndianIncome-tax Act 1922 (11 of 1922), or under sub-section (1) of section 142 ofthis Act was issued to produce, or cause to be produced, any books of accountor other documents has omitted or failed to produce, or cause to be produced,such books of account, or other documents as required by such summons ornotice, or

(b) Any person to whom a summons or notice as aforesaid has been or might beissued will not, or would not, produce or cause to be produced, any books ofaccount or other documents which will be useful for, or relevant to, anyproceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under thisAct, or

(c) Any person is in possession of any money, bullion, jewellery or othervaluable article or thing and such money, bullion, jewellery or other valuablearticle or thing represents either wholly or partly income or property [Whichhas not been, or would not be, disclosed] for the purposes of the IndianIncome-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this sectionreferred to as the undisclosed income or property), [ 1348 then, -

(A) The [Director General or Director] or the [Chief Commissioner orCommissioner], as the case may be, may authorise any [Joint Director], [JointCommissioner], [Assistant Director], [Assistant Commissioner [DeputyCommissioner] or Income-tax Officer.


(B) Such [Joint Director] or [Deputy Commissioner], as the case may be, mayauthorise any [Assistant Director], [Assistant Commissioner or Income-taxOfficer], (the officer so authorised in all cases being hereinafter referredto as the authorised officer) to - 1348 ]

(i) Enter and search any [Building, place, vessel, vehicle or aircraft] wherehe has reason to suspect that such books of account, other document, money,bullion, jewellery or other valuable article or thing are kept;

(ii) Break open the lock of any door, box, locker, safe, almirah or otherreceptacle for exercising the powers conferred by clause (i) where the keysthereof are not available;

(iia) Search any person who has got out of, or is about to get into, or is inthe building, place, vessel, vehicle or aircraft, if the authorised officerhas reason to suspect that such person has secreted about his person any suchbooks of account, other documents, money, bullion, jewellery or other valuablearticle or thing;

(iii) Seize any such books of account, other documents, money, bullion,jewellery or other valuable article or thing found as a result of such search;

(iv) Place marks of identification on any books of account or other documentsor make or cause to be made extracts or copies therefrom;

(v) Make a note or an inventory of any such money, bullion, jewellery or othervaluable article or thing :

Provided that where any building, place, vessel, vehicle or aircraft referredto in clause (i) is within the area of jurisdiction of any [Chief Commissioneror Commissioner], but such [Chief Commissioner or Commissioner] has nojurisdiction over the person referred to in clause (a) or clause (b) or clause(c), then, notwithstanding anything contained in [section 120], it shall becompetent for him to exercise the powers 1355 under this sub-section in allcases where he has reason to believe that any delay in getting theauthorisation from the [Chief Commissioner or Commissioner] havingjurisdiction over such person may be prejudicial to the interests of therevenue :

Provided further that where it is not possible or practicable to take physicalpossession of any valuable article or thing and remove it to a safe place dueto its volume, weight or other physical characteristics or due to its being ofa dangerous nature, the authorised officer may serve an order on the owner or


the person who is in immediate possession or control thereof that he shall notremove, part with or otherwise deal with it, except with the previouspermission of such authorised officer and such action of the authorisedofficer shall be deemed to be seizure of such valuable article or thing underclause (iii).

(1A) Where any [Chief Commissioner or Commissioner], in consequence ofinformation in his possession, has reason to suspect that any books ofaccount, other documents, money, bullion, jewellery or other valuable articleor thing in respect of which an officer has been authorised by the [DirectorGeneral or Director] or any other [Chief Commissioner or Commissioner] or anysuch [Joint Director] or [Joint Commissioner] as may be empowered 1357 in thisbehalf by the Board to take action under clauses (i) to (v) of sub-section (1)are or is kept in any building, place, vessel, vehicle or aircraft notmentioned in the authorisation under sub-section (1), such [Chief Commissioneror Commissioner], may, notwithstanding anything contained in [Section 120],authorise the said officer to take action under any of the clauses aforesaidin respect of such building, place, vessel, vehicle or aircraft]

(2) The authorised officer may requisition the services of any police officeror of any officer of the Central Government, or of both, to assist him for allor any of the purposes specified in sub-section (1) [Sub-section (1A)] and itshall be the duty of every such officer to comply with such requisition.

(3) The authorised officer may, where it is not practicable to seize any suchbooks of account, other documents, money, bullion, jewellery or other valuablearticle or thing, [For reasons other than those mentioned in the secondproviso to sub-section (1)] serve an order on the owner or the person who isin immediate possession or control thereof that he shall not remove, part withor otherwise deal with it except with the previous permission of such officerand such officer may take such steps as may be necessary for ensuringcompliance with this sub-section.

Explanation : For the removal of doubts, it is hereby declared that serving ofan order as aforesaid under this sub-section shall not be deemed to be seizureof such books of account, other documents, money, bullion, jewellery or othervaluable article or thing under clause (iii) of sub-section (1).

(4) The authorised officer may, during the course of the search or seizure,examine on oath any person who is found to be in possession or control of anybooks of account, documents, money, bullion, jewellery or other valuablearticle or thing and any statement made by such person during such examinationmay thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act.


Explanation : For the removal of doubts, it is herebydeclared that theexamination of any person under this sub-section may be not merely in respectof any books of account, other documents or assets found as a result of thesearch, but also in respect of all matters relevant for the purposes of anyinvestigation connected with any proceeding under the Indian Income-tax Act,1922 (11 of 1922) or under this Act.

(4A) Where any books of account, other documents, money, bullion, jewellery orother valuable article or thing are or is found in the possession or controlof any person in the course of a search, it may be presumed -

(i) That such books of account, other documents, money, bullion, jewellery orother valuable article or thing belong or belongs to such person;

(ii) That the contents of such books of account and other documents are true;and

(iii) That the signature and every other part of such books of account andother documents which purport to be in the handwriting of any particularperson or which may reasonably be assumed to have been signed by, or to be inthe handwriting of, any particular person, are in that person"s handwriting,and in the case of a document, stamped, executed or attested, that it was dulystamped and executed or attested by the person by whom it purports to havebeen so executed or attested.

(5) Where any money, bullion, jewellery or other valuable article or thing(hereafter in this section and in sections 132A and 132B referred to as theassets) is seized under sub-section (1) or sub-section (1A), [ 1361a as aresult of a search initiated or requisition made before the 1st day of July,1995 the Income-tax Officer, after affording a reasonable opportunity to theperson concerned of being heard and making such enquiry as may be prescribed1362 , shall, within [One hundred and twenty days] of the seizure, make anorder with the previous approval of the [Joint Commissioner],

(i) Estimating the undisclosed income (including the income from theundisclosed property) in a summary manner to the best of his judgment on thebasis of such materials as are available with him;

(ii) Calculating the amount of tax on the income so estimated in accordancewith the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or thisAct;

(iia) Determining the amount of interest payable and the amount of penaltyimposable in accordance with the provisions of the Indian Income-tax Act, 1922


(11 of 1922), or this Act, as if the order had been the order of regularassessment;

(iii) Specifying the amount that will be required to satisfy any existingliability under this Act and any one or more of the Acts specified in clause(a) of sub-section (1) of section 230A in respect of which such person is indefault or is deemed to be in default, and retain in his custody such assetsor part thereof as are in his opinion sufficient to satisfy the aggregate ofthe amounts referred to in [Clauses (ii), (iia) and (iii)] and forthwithrelease the remaining portion, if any, of the assets to the person from whosecustody they were seized :

Provided that if, after taking into account the materials available with him,the [Income-tax Officer] is of the view that it is not possible to ascertainto which particular previous year or years such income or any part thereofrelates, he may calculate the tax on such income or part, as the case may be,as if such income or part were the total income chargeable to tax at the ratesin force in the financial year in which the assets were seized [ 1367 and mayalso determine the interest or penalty, if any, payable or imposableaccordingly:

Provided further that where a person has paid or made satisfactoryarrangements for payment of all the amounts referred to in [Clauses (ii),(iia) and (iii)] or any part thereof, the [Income-tax Officer] may, with theprevious approval of the [Chief Commissioner or Commissioner], release theassets or such part thereof as he may deem fit in the circumstances of thecase.

(6) The assets retained under sub-section (5) may be dealt with in accordancewith the provisions of [Section 132B].

(7) If the [ Income-tax Officer] is satisfied that the seized assets or anypart thereof were held by such person for or on behalf of any other person the[ Income-tax Officer] may proceed under sub-section (5) against such otherperson, and all the provisions of this section shall apply accordingly.

(8) The books of account or other documents seized under sub-section (1) [Sub-section (1A)] shall not be retained by the authorised officer for a periodexceeding one hundred and eighty days form the date of the seizure unless thereasons for retaining the same are recorded by him in writing and the approvalof the [Chief Commissioner, Commissioner, Director-General or Director] forsuch retention is obtained :

Provided that the [Chief Commissioner, Commissioner, Director-General orDirector] shall not authorise the retention of the books of account and other


documents for a period exceeding thirty days after all the proceedings underthe Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of theyears for which the books of account or other documents are relevant arecompleted.

(8A) An order under sub-section (3) shall not be in force for a periodexceeding sixty days from the date of the order, except where the authorisedofficer, for reasons to be recorded by him in writing, extends the period ofoperation of the order beyond sixty days, after obtaining the approval of the[Director or as the case may be commissioner] for such extension :

Provided that the [Director or, as the case may be commissioner] shall notapprove the extension of the period for any period beyond the expiry of thirtydays after the completion of all the proceedings under this Act in respect ofthe years for which the books of account, other documents, money, bullion,jewellery or other valuable articles or things are relevant.

(9) The person from whose custody any books of account or other documents areseized under sub-section (1) [Sub-section (1A)] may make copies thereof, ortake extracts therefrom, in the presence of the authorised officer or anyother person empowered by him in this behalf, at such place and time as theauthorised officer may appoint in this behalf.

(9A) Where the authorised officer has no jurisdiction over the person referredto in clause (a) or clause (b) or clause (c) of sub-section (1), the books ofaccount or other documents or assets seized under that sub-section shall behanded over by the authorised officer to the [Income-tax Officer] havingjurisdiction over such person within a period of fifteen days of such seizureand thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such [Income-taxOfficer].

(10) If a person legally entitled to the books of account or other documentsseized under sub-section (1) [Sub-section (1A)] objects for any reason to theapproval given by the [ Chief Commissioner, Commissioner, Director-General orDirector] under sub-section (8), he may make an application to the Boardstating therein the reasons for such objection and requesting for the returnof the books of account or other documents.

(11) If any person objects for any reason to an order made under sub-section(5), he may, within thirty days of the date of such order, make an applicationto Chief Commissioner or Commissioner, stating therein the reasons for suchobjection and requesting for appropriate relief in the matter.


(11A) Every application referred to in sub-section (11) which is pendingimmediately before the 1st day of October, 1984, before an authority notifiedunder that sub-section as it stood immediately before that day shall standtransferred on that day to the [Chief Commissioner or Commissioner], and the[Chief Commissioner or Commissioner] may proceed with such application fromthe stage at which it was on that day :

Provided that the applicant may demand that before proceeding further with theapplication, he be reheard.

(12) On receipt of the application under sub-section (10) the Board, or onreceipt of the application under sub-section (11) The Chief Commissioner orCommissioner, may, after giving the applicant an opportunity of being heard,pass such orders [As it or he thinks fit].

(13) The provisions of the (2 of 1974), relating to searches and seizure shallapply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).

(14) The Board may make rules 1379 in relation to any search or seizure underthis section; in particular, and without prejudice to the generality of theforegoing power, such rules may provide for the procedure to be followed bythe authorised officer -

(i) For obtaining ingress into [Any building, place, vessel, vehicle oraircraft] to be searched where free ingress thereto is not available;

(ii) For ensuring safe custody of any books of account or other documents orassets seized.

Explanation 1 : In computing [The period referred to in sub-section (5) forthe purposes of that sub-section], any period during which any proceedingunder this section is stayed by an order or injunction of any court shall beexcluded.

Explanation 2 : In this section, the word "proceeding" means any proceeding inrespect of any year, whether under the Indian Income-tax Act, 1922 (11 of1922), or this Act, which may be pending on the date on which a search isauthorised 1382 under this section or which may have been completed on orbefore such date and includes also all proceedings under this Act which may becommenced after such date in respect of any year.


298. Powers to requisition books of account , etc.

§298.Powers to requisition books of account , etc.

Section 132A

POWERS TO REQUISITION BOOKS OF ACCOUNT, ETC.

(1) Where the [Director General or Director] or the [Chief Commissioner or Commissioner], inconsequence of information in his possession, has reason to believe that -

(a) Any person to whom a summons under sub-section (1) of section 37 of the Indian Income-taxAct, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section(1) of section 142 of this Act was issued to produce, or cause to be produced, any books ofaccount or other documents has omitted or failed to produce, or cause to be produced, suchbooks of account or other documents, as required by such summons or notice and the said booksof account or other documents have been taken into custody by any officer or authority underany other law for the time being in force, or

(b) Any books of account or other documents will be useful for, or relevant to, any proceedingunder the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom asummons or notice as aforesaid has been or might be issued will not, or would not, produce orcause to be produced, such books of account or other documents on the return of such books ofaccount or other documents by any officer or authority by whom or which such books of accountor other documents have been taken into custody under any other law for the time being in force,or

(c) Any assets represent either wholly or partly income or property which has not been, or wouldnot have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), orthis Act by any person from whose possession or control such assets have been taken intocustody by any officer or authority under any other law for the time being in force, then, the[Director General or Director] or the [Chief Commissioner or Commissioner] may authorise any[Joint Director], [Joint Commissioner], [Assistant Director], [Deputy Director] [AssistantCommissioner [Deputy Commissioner] or Income-tax Officer] [hereafter in this section and insub-section (2) of section 278D referred to as the requisitioning officer] to require the officer orauthority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver suchbooks of account, other documents or assets to the requisitioning officer.

(2) On a requisition being made under sub-section (1), the officer or authority referred to inclause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver thebooks of account, other documents or assets to the requisitioning officer either forthwith or whensuch officer or authority is of the opinion that it is no longer necessary to retain the same in his orits custody.


(3) Where any books of account, other documents or assets have been delivered to therequisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132and section 132B shall, so far as may be, apply as if such books of account, other documents orassets had been seized under sub-section (1) of section 132 by the requisitioning officer from thecustody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, ofsub-section (1) of this section and as if for the words "the authorised officer" occurring in any ofthe aforesaid sub-sections (4A) to (14), the words "the requisitioning officer" were substituted.

299. Application of Retained Assets.

§ 299. Application of Retained Assets.

Section 132B

APPLICATION OF RETAINED ASSETS.

(1) The assets retained under sub-section (5) of section 132 may be dealt with in the followingmanner, namely :- (i) The amount of the existing liability referred to in clause (iii) of the saidsub-section and the amount of the liability determined on completion of the regular assessmentor reassessment for all the assessment years relevant to the previous years to which the incomereferred to in clause (i) of that sub-section relates [Including any penalty levied or interestpayable in connection with such assessment or reassessment] and in respect of which he is indefault or is deemed to be in default may be recovered out of such assets.

(ii) If the assets consist solely of money, or partly of money and partly of other assets, the[Assessing Officer] may apply such money in the discharge of the liabilities referred to in clause(i) and the assessee shall be discharged of such liability to the extent of the money so applied.

(iii) The assets other than money may also be applied for the discharge of any such liabilityreferred to in clause (i) as remains undischarged and for this purpose such assets shall be deemedto be under distraint as if such distraint was effected by the [Assessing Officer or, as the casemay be, Tax Recovery Officer] under authorisation from the [Chief Commissioner orCommissioner] under sub-section (5) of section 226 and the [Assessing Officer or, as the casemay be, Tax Recovery Officer] may recover the amount of such liabilities by the sale of suchassets and such sale shall be effected in the manner laid down in the Third Schedule.

(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilitiesaforesaid by any other mode laid down in this Act. 1389

(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) ofsub-section (1) are discharged shall be forthwith made over or paid to the persons from whosecustody the assets were seized.


(4)(a) The Central Government shall pay simple interest at the rate of [Fifteen per cent] perannum on the amount by which the aggregate of money retained under section 132 and of theproceeds, if any, of the assets sold towards the discharge of the existing liability referred to inclause (iii) of sub-section (5) of that section exceeds the aggregate of the amounts required tomeet the liabilities referred to in clause (i) of sub-section (1) of this section.

(b) Such interest shall run from the date immediately following the expiry of the period of sixmonths from the date of the order under sub-section (5) of section 132 to the date of the regularassessment or reassessment referred to in clause (i) of sub-section (1) or, as the case may be, tothe date of last of such assessments or reassessments.

300. Power to call for Information.

§ 300. Power to call for Information.

Section 133

POWER TO CALL FOR INFORMATION.

The Assessing Officer, the [Deputy Commissioner (Appeals), ] [The Joint Commissioner] or theCommissioner (Appeals)] may, for the purposes of this Act, -

(1) Require any firm to furnish him with a return of the names and addresses of the partners ofthe firm and their respective shares;

(2) Require any Hindu undivided family to furnish him with a return of the names and addressesof the manager and the members of the family;

(3) Require any person whom he has reason to believe to be a trustee, guardian or agent, tofurnish him with a return of the names of the persons for or of whom he is trustee, guardian oragent, and of their addresses;

(4) Require any assessee of furnish a statement of the names and addresses of all persons towhom he has paid in any previous year rent, interest, commission, royalty or brokerage, or anyannuity, not being any annuity taxable under the head "Salaries" amounting to more than [ 1393one thousand rupees, or such higher amount as may be prescribed 1393 ], together withparticulars of all such payments made;

(5) Require any dealer, broker or agent or any person concerned in the management of a stock orcommodity exchange to furnish a statement of the names and addresses of all persons to whomhe or the exchange has paid any sum in connection with the transfer, whether by way of sale,exchange or otherwise, of assets, or on whose behalf or from whom he or the exchange has


received any such sum, together with particulars of all such payments and receipts;

(6) Require any person, including a banking company or any officer thereof, to furnishinformation in relation to such points or matters, or to furnish statements of accounts and affairsverified in the manner specified by the [Assessing Officer], the Deputy Commissioner (Appeals)the [Joint Commissioner(Appeals),] [The Joint Commissioner] or the Commissioner (Appeals)],giving information in relation to such points or matters as, in the opinion of the [AssessingOfficer], the [Deputy Commissioner (Appeals)], [The Joint Commissioner] or theCommissioner (Appeals)], will be useful for, or relevant to any [ Inquiry ] proceeding under thisAct :

Provided that the powers referred to in clause (6), may also be exercised by the Director-General,the Chief Commissioner, the Director and the Commissioner

Provided further that the power in respect of an inquiry, in a case where no proceeding ispending, shall not be exercised by any income-tax authority below the rank of Director orCommissioner without the prior approval of the Director or, as the case may be, theCommissioner.

301. Power of Survey.

§ 301. Power of Survey.

Section 133A

POWER OF SURVEY.

(1) Notwithstanding anything contained in any other provision of this Act, an income-taxauthority may enter - (a) any place within the limits of the area assigned to him, or

(b) Any place occupied by any person in respect of whom he exercises jurisdiction, [(c) Anyplace in respect of which he is authorised for the purposes of this section by such income-taxauthority, who is assigned the area within which such place is situated or who exercisesjurisdiction in respect of any person occupying such place] at which a business or profession iscarried on, whether such place be the principal place or not of such business or profession, andrequire any proprietor, employee or any other person who may at that time and place beattending in any manner to, or helping in, the carrying on of such business or profession -

(i) To afford him the necessary facility to inspect such books of account or other documents as hemay require and which may be available at such place,

(ii) To afford him the necessary facility to check or verify the cash, stock or other valuable article


or thing which may be found therein, and

(iii) To furnish such information as he may require as to any matter which may be useful for, orrelevant to, any proceeding under this Act.

Explanation : For the purposes of this sub-section, a place where a business or profession iscarried on shall also include any other place, whether any business or profession is carried ontherein or not, in which the person carrying on the business or profession states that any of hisbooks of account or other documents or any part of his cash or stock or other valuable article orthing relating to his business or profession are or is kept.

(2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business orprofession and, in the case of any other place, only after sunrise and before sunset.

(3) An income-tax authority acting under this section may, - (i) if he so deems necessary, placemarks of identification on the books of account or other documents inspected by him and makeor cause to be made extracts or copies therefrom,

(ii) Make an inventory of any cash, stock or other valuable article or thing checked or verified byhim,

(iii) Record the statement of any person which may be useful for, or relevant to, any proceedingunder this Act.

(4) An income-tax authority acting under this section shall, on no account, remove or cause to beremoved from the place wherein he has entered, any books of account or other documents or anycash, stock or other valuable article or thing.

(5) Where, having regard to the nature, and scale of expenditure incurred by an assessee, inconnection with any function, ceremony or event, the Income-tax authority is of the opinion thatit is necessary or expedient so to do, he may, at any time after such function, ceremony or event,require the assessee by whom such expenditure has been incurred or any person who, in theopinion of the Income-tax authority, is likely to possess information as respects the expenditureincurred, to furnish such information as he may require as to any matter which may be useful for,or relevant to, any proceeding under this Act and may have the statements of the assessee or anyother person recorded and any statement so recorded may thereafter be used in evidence in anyproceeding under this Act.

(6) If a person under this section is required to afford facility to the income-tax authority toinspect books of account or other documents or to check or verify any cash, stock or othervaluable article or thing or to furnish any information or to have his statement recorded, eitherrefuses or evades to do so, the income-tax authority shall have all the powers under [Sub-section(1) of section 131] for enforcing compliance with the requirement made.


Explanation : In this section, - (a) "income-tax authority" means Commissioner, JointCommissioner, a Director, a Joint Director, or an Assistant Director or Deputy Director or anAssessing Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section(3) and sub-section (5), includes an Inspector of Income-tax, if so authorised by any suchauthority;

(b) "Proceeding" means any proceeding under this Act in respect of any year which may bepending on the date on which the powers under this section are exercised or which may havebeen completed on or before such date and includes also all proceedings under this Act whichmay be commenced after such date in respect of any year.

302. Power to Collect Certain Information.

§302.Power to Collect Certain Information.

Section 133B

POWER TO COLLECT CERTAIN INFORMATION.

(1) Notwithstanding anything contained in any other provision of this Act, an income-taxauthority may, for the purpose of collecting any information which may be useful for, or relevantto, the purposes of this Act, enter -

(a) Any building or place within the limits, of the area assigned to such authority; or

(b) Any building or place occupied by any person in respect of whom he exercises jurisdiction, at which a business or profession is carried on, whether such place be the principal place or notof such business or profession, and require any proprietor, employee or any other person whomay at that time and place be attending in any manner to, or helping in, the carrying on of suchbusiness or profession to furnish such information as may be prescribed 1402 .

(2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business orprofession.

(3) For the removal of doubts, it is hereby declared that an income-tax authority acting under thissection shall, on no account, remove or cause to be removed from the building or place whereinhe has entered, any books of account or other documents or any cash, stock or other valuablearticle or thing.

Explanation : In this section, "income-tax authority" means a Joint Commissioner, an aAssistant Director or Deputy Director or an Assessing Officer, and includes an Inspector of


Income-tax who has been authorised by the Assessing Officer to exercise the powers conferredunder this section in relation to the area in respect of which the Assessing Officer exercisesjurisdiction or part thereof.

303. Power to Inspect Registers of Companies.

§ 303. Power to Inspect Registers of Companies.Section 134

POWER TO INSPECT REGISTERS OF COMPANIES.

The Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or theCommissioner (Appeals), or any person subordinate to him authorised in writing in this behalf bythe a Assessing Officer, the a Deputy Commissioner (Appeals), the Joint Commissioner or theCommissioner (Appeals), may inspect, and if necessary, take copies, or cause copies to be taken,of any register of the members, debenture holders or mortgagees of any company or of any entryin such register.

304. Powers of Director General or Director ChiefCommissioner or Commissioner and Joint Commissioner.

§ 304. Powers of Director General or Director Chief Commissioner or Commissioner and JointCommissioner.Section 135

POWERS OF DIRECTOR GENERAL OR DIRECTOR CHIEF COMMISSIONER ORCOMMISSIONER AND JOINT COMMISSIONER.

The Director General or Director, the Chief Commissioner or Commissioner and the JointCommissioner shall be competent to make any enquiry under this Act, and for this purpose shallhave all the powers that an Assessing Officer has under this Act in relation to the making ofenquiries.

305. Proceedings before Income-Tax Authorities to beJudicial Proceedings.

§ 305. Proceedings before Income-Tax Authorities to be Judicial Proceedings.Section 136

PROCEEDINGS BEFORE INCOME-TAX AUTHORITIES TO BE JUDICIAL


PROCEEDINGS.

Any proceeding under this Act before an income-tax authority shall be deemed to be a judicialproceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of theIndian Penal Code, 1860 (45 of 1860), and every income-tax authority shall be deemed to be aCivil Court for the purposes of section 195, but not for the purposes of Chapter XXVI of theCode of Criminal Procedure, 1973 (2 of 1974).

306. Omitted.


DISCLOSURE OF INFORMATION PROHIBITED.

137 OMITTED BY THE FINANCE ACT, 1964, W.E.F. 1-4-1964.

307. Disclosure of Information respecting Assesses.

§ 307. Disclosure of Information respecting Assesses.Section 138

DISCLOSURE OF INFORMATION RESPECTING ASSESSEES.

(1)(a) The Board or any other income-tax authority specified 1408 by it by a general or specialorder in this behalf may furnish or cause to be furnished to - (i) Any officer, authority or bodyperforming any functions under any law relating to the imposition of any tax, duty or cess, or todealings in foreign exchange 1409 as defined in section 2(d) of the Foreign Exchange RegulationAct, 1947 (7 of 1947) 1410 ; or

(ii) Such officer, authority or body performing functions under any other law as the CentralGovernment may, if in its opinion it is necessary so to do in the public interest, specify bynotification in the Official Gazette in this behalf, any such information received or obtained byany income-tax authority in the performance of his functions under this Act as may, in theopinion of the Board or other income-tax authority, be necessary for the purpose of enabling theofficer, authority or body to perform his or its functions under that law.

(b) Where a person makes an application to the Chief Commissioner or Commissioner in theprescribed form 1413b for any information relating to any assessee received or obtained by anyincome-tax authority in the performance of his functions under this Act, the Chief Commissioneror Commissioner may, if he is satisfied that it is in the public interest so to do, furnish or cause tobe furnished the information asked for and his decision in this behalf shall be final and shall not


be called in question in any court of law.

(2) Notwithstanding anything contained in sub-section (1) or any other law for the time being inforce, the Central Government may, having regard to the practices and usages customary or anyother relevant factors, by order notified in the Official Gazette, direct that no information ordocument shall be furnished or produced by a public servant in respect of such matters relating tosuch class of assessees or except to such authorities as may be specified in the order.

308. Return of Income.

§ 308. Return of Income.Section 139

RETURN OF INCOME.

(1) Every person, if his total income or the total income of any other person in respect of whichhe is assessable under this Act during the previous year exceeded the maximum amount which isnot chargeable to income-tax, shall, on or before the due date, furnish a return of his income orthe income of such other person during the previous year in the prescribed form 1416 andverified in the prescribed manner and setting forth such other particulars as may be prescribed :

Provided that a person, not furnishing return under this sub-section and residing in such area asmay be specified by the Board in this behalf by a notification in the Official Gazette, and who atany time during the previous year fulfils any one of the following conditions, namely :-

(i) Is in occupation of an immovable property exceeding a specified floor area, whether by wayof ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or

(ii) Is the owner or the lessee of motor vehicle other than a two- wheeled motor vehicle, whetherhaving any detachable side car having extra wheel attached to such two-wheeled motor vehicleor not; or

(iii) Is a subscriber to a telephone; or

(iv) Has incurred expenditure for himself or any other person on travel to any foreign country,

(v) Is the holder of the credit card, not being an "Add-on" card, issued by any bank or institution;or

(vi) Is a member of a club where entrace fee charged is twenty-five thousand rupees or more : shall furnish a return, of his income during the previous year, on or before the due date in theprescribed form and verified in the prescribed manner and setting forth such other particulars asmay be prescribed. Provided further that the Central Government may, by notification in theOfficial Gazette, specify class or classes of persons to whom the provisions of the first proviso


shall not apply,

Explanation 1 : In this sub-section, "due date" means -

(a) Where the assessee is a company, the 30th day of November of the assessment year;

(b) Where the assessee is a person, other than a company, - (i) In a case where the accounts ofthe assessee are required under this Act or any other law to be audited or where the report of anaccountant is required to be furnished under section 80HHC or section 80HHD or where theprescribed certificate is required to be furnished under section 80R or section 80RR or sub-section (1) of section 80RRA, or in the case of a co-operative society or in the case of a workingpartner of a firm whose accounts are required under this Act or any other law to be audited, the31st day of October of the assessment year;

(ii) In a case where the total income referred to in this sub-section includes any income frombusiness or profession, not being a case falling under sub-clause (i), the 31st day of August of theassessment year;

(iii) In any other case, the 30th day of June of the assessment year.

Explanation 2 : For the purposes of sub-clause (i) of clause (b) of Explanation 1, the expression"working partner" shall have the meaning assigned to it in Explanation 4 of clause (b) of section40.

Explanation 3 : For the purposes of this sub-section, the expression "motor vehicle" shall havethe meaning assigned to it in clause (28) of section 2 of the (59 of 1988).

Explanation 4 : For the purposes of this sub-section, the expression "travel to any foreigncountry" does not include travel to the neighbouring countries or to such places of pilgrimage asthe Board may specify in this behalf by notification in the Official Gazette.

(3) If any person, who has sustained a loss in any previous year under the head "Profits andgains of business or profession" or under the head "Capital gains" and claims that the loss or anypart thereof should be carried forward under sub-section (1) of section 72 or sub-section (2) ofsection 73, or sub-section (1) or sub-section (3) of section 74 , or sub-section (3) of section 74A,he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribedform and verified in the prescribed manner and containing such other particulars as may beprescribed, 1429 and all the provisions of this Act shall apply as if it were a return under sub-section (1).

(4) Any person who has not furnished a return within the time allowed to him under sub-section(1), or within the time allowed under a notice issued under sub-section (1) of section 142, mayfurnish the return for any previous year at any time before the expiry of one year from the end ofthe relevant assessment year or before the completion of the assessment, whichever is earlier :


Provided that where the return relates to a previous year relevant to the assessment yearcommencing on the 1st day of April, 1988, or any earlier assessment year, the reference to oneyear aforesaid shall be construed as reference to two years from the end of the relevantassessment year.

(4A) Every person in receipt of income derived from property held under trust or other legalobligation wholly for charitable or religious purposes or in part only for such purposes, or ofincome being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2,shall, if the total income in respect of which he is assessable as a representative assessee (thetotal income for this purpose being computed under this Act without giving effect to theprovisions of sections 11 and 12) exceeds the maximum amount which is not chargeable toincome-tax, furnish a return of such income of the previous year in the prescribed form andverified in the prescribed manner and setting forth such other particulars as may be prescribed1432 and all the provisions of this Act shall, so far as may be, apply as if it were a return requiredto be furnished under sub-section (1).

(4B) The chief executive officer (whether such chief executive officer is known as secretary orby any other designation) of every political party shall, if the total income in respect of which thepolitical party is assessable (the total income for this purpose being computed under this Actwithout giving effect to the provisions of section 13A) exceeds the maximum amount which isnot chargeable to income-tax, furnish a return of such income of the previous year in theprescribed form and verified in the prescribed 1433a manner and setting forth such otherparticulars as may be prescribed and all the provisions of this Act, shall, so far as may be, applyas if it were a return required to be furnished under sub-section (1).

(5) If any person, having furnished a return under sub-section (1), or in pursuance of a noticeissued under sub-section (1) of section 142, discovers any omission or any wrong statementtherein, he may furnish a revised return at any time before the expiry of one year from the end ofthe relevant assessment year or before the completion of the assessment, whichever is earlier :

Provided that where the return relates to the previous year relevant to the assessment yearcommencing on the 1st day of April, 1988, or any earlier assessment year, the reference to oneyear aforesaid shall be construed as a reference to two years from the end of the relevantassessment year.

(6) The prescribed form of the returns referred to in sub-sections (1) and (3) of this section, andin clause (i) of sub-section (1) of section 142 shall, in such cases as may be prescribed, requirethe assessee to furnish the particulars of income exempt from tax, assets of the prescribed naturevalue and belonging to him, his bank account and credit card held by him, expenditure exceedingthe prescribed limits incurred by him under prescribed heads and such other outgoings as may beprescribed.

(6A) Without prejudice to the provisions of sub-section (6), the prescribed form of the returnsreferred to in this section, and in clause (i) of sub-section (1) of section 142 shall, in the case of


an assessee engaged in any business or profession, also require him to furnish the report of anyaudit referred to in section 44AB, or, where the report has been furnished prior to the furnishingof the return, a copy of such report together with proof of furnishing the report, the particulars ofthe location and style of the principal place where he carries on the business or profession and allthe branches thereof, the names and addresses of his partners, if any, in such business orprofession and, if he is a member of an association or body of individuals, the names of the othermembers of the association or the body of individuals and the extent of the share of the assesseeand the shares of all such partners or the members, as the case may be, in the profits of thebusiness or profession and any branches thereof.

(8)(a) Where the return under sub-section (1) or sub-section (2) or sub-section (4) for anassessment year is furnished after the specified date, or is not furnished, then [whether or not theAssessing Officer has extended the date for furnishing the return under sub-section (1) or sub-section (2)], the assessee shall be liable to pay simple interest at fifteen per cent per annum,reckoned 1443 from the day immediately following the specified date to the date of thefurnishing of the return or, where no return has been furnished, the date of completion of theassessment under section 144, on the amount of the tax payable on the total income asdetermined on regular assessment, as reduced by the advance tax, if any, paid, and any taxdeducted at source : Provided that the Assessing Officer may, in such cases and under suchcircumstances as may be prescribed, 1444 reduce or waive the interest payable by any assesseeunder this sub-section.

Explanation 1 : For the purposes of this sub-section, "specified date", in relation to a return for anassessment year, means, - (a) In the case of every assessee whose total income, or the totalincome of any person in respect of which he is assessable under this Act, includes any incomefrom business or profession, the date of the expiry of four months from the end of the previousyear or where there is more than one previous year, from the end of the previous year whichexpired last before the commencement of the assessment year, or the 30th day of June of theassessment year, whichever is later;

(b) In the case of every other assessee, the 30th day of June of the assessment year.

Explanation 2 : Where, in relation to an assessment year, an assessment is made for the first timeunder section 147, the assessment so made shall be regarded as a regular assessment for thepurposes of this sub-section.

(b) Where as a result of an order under section 147 or section 154 or section 155 or section 250or section 254 or section 260 or section 262 or section 263 or section 264 or an order of theSettlement Commission under sub-section (4) of section 245D, the amount of tax on whichinterest was payable under this sub-section has been increased or reduced, as the case may be,the interest shall be increased or reduced accordingly, and - (i) in a case where the interest isincreased, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribedform specifying the sum payable, and such notice of demand shall be deemed to be a noticeunder section 156 and the provisions of this Act shall apply accordingly;


(ii) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(c) The provisions of this sub-section shall apply in respect of the assessment for the assessmentyear commencing on the 1st day of April, 1988, or any earlier assessment year, and referencestherein to the other provisions of this Act shall be construed as references to the said provisionsas they were applicable to the relevant assessment year.

(9) Where the Assessing Officer considers that the return of income furnished by the assessee isdefective, he may intimate the defect to the assessee and give him an opportunity to rectify thedefect within a period of fifteen days from the date of such intimation or within such furtherperiod which, on an application made in this behalf, the Assessing Officer may, in his discretion,allow; and if the defect is not rectified within the said period of fifteen days or, as the case maybe, the further period so allowed, then, notwithstanding anything contained in any otherprovision of this Act, the return shall be treated as an invalid return and the provisions of this Actshall apply as if the assessee had failed to furnish the return :

Provided that where the assessee rectifies the defect after the expiry of the said period of fifteendays or the further period allowed, but before the assessment is made, the Assessing Officer maycondone the delay and treat the return as a valid return.

Explanation : For the purposes of this sub-section, a return of income shall be regarded asdefective unless all the following conditions are fulfilled, namely :- (a) the annexures,statements and columns in the return of income relating to computation of income chargeableunder each head of income, computation of gross total income and total income have been dulyfilled in;

(b) The return is accompanied by a statement showing the computation of the tax payable on thebasis of the return;

(bb) The return is accompanied by the report of the audit referred to in section 44AB, or, wherethe report has been furnished prior to the furnishing of the return, by a copy of such reporttogether with proof of furnishing the report;

(c) The return is accompanied by proof of - (i) the tax, if any, claimed to have been deducted atsource and the advance tax and tax on self-assessment, if any, claimed to have been paid;

(ii) The amount of compulsory deposit, if any, claimed to have been made under the CompulsoryDeposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974);

(d) Where regular books of account are maintained by the assessee the return is accompanied bycopies of - (i) manufacturing account, trading account, profit and loss account or, as the casemay be, income and expenditure account or any other similar account and balance sheet;

(ii) In the case of a proprietary business or profession, the personal account of the proprietor; in


the case of a firm, association of persons or body of individuals, personal accounts of thepartners or members; and in the case of a partner or member of a firm, association of persons orbody of individuals, also his personal account in the firm, association of persons or body ofindividuals;

(e) Where the accounts of the assessee have been audited, the return is accompanied by copies ofthe audited profit and loss account and balance sheet and the auditor"s report and, where an auditof cost accounts of the assessee has been conducted, under section 233B of the Companies Act,1956 (1 of 1956), also the report under that section;

(f) Where regular books of account are not maintained by the assessee the return is accompaniedby a statement indicating the amounts of turnover or, as the case may be, gross receipts, grossprofit, expenses and net profit of the business or profession and the basis on which such amountshave been computed, and also disclosing the amounts of total sundry debtors, sundry creditors,stock-in-trade and cash balance as at the end of the previous year.

309. Permanent Account Number.

§309.Permanent Account Number.Section 139A

PERMANENT ACCOUNT NUMBER.

(1) Every person, - (i) If his total income or the total income of any otherperson in respect of which he is assessable under this Act during any previousyear exceeded the maximum amount which is not chargeable to income-tax; or

(ii) Carrying on any business or profession whose total sales, turnover orgross receipts are or is likely to exceed five lakh rupees in any previousyear; or

(iii) Who is required to furnish a return of income under sub-section (4A) ofsection 139, and who has not been allotted a permanent account number shall,within such time, as may be prescribed, apply to the Assessing Officer for theallotment of a permanent account number.

(2) The Assessing Officer may also allot to any other person by whom tax ispayable, a permanent account number.

(3) Any person, not falling under sub-section (1) or sub-section (2), mayapply to the Assessing Officer for the allotment of a permanent account number


and, there upon, the Assessing Officer shall allot a permanent account numberto such person forthwith.

(4) For the purpose of allotment of permanent account numbers under the newseries, the Board may, by notification in the Official Gazette, specify thedate from which the persons referred to in sub-sections (1) and (2) and otherpersons who have been allotted permanent account numbers and residing in aplace to be specified in such notification, shall, within such time as may bespecified, apply to the Assessing Officer for the allotment of a permanentaccount number under the new series and upon allotment of such permanentaccount number to a person, the permanent account number, if any, allotted tohim earlier shall cease to have effect :

Provided that the persons to whom permanent account number under the newseries has already been allotted shall not apply for such number again.

(5) Every person shall - (a) Quote such number in all his returns to, orcorrespondence with, any income-tax authority;

(b) Quote such number in all challans for the payment of any sum due underthis Act;

(c) Quote such number in all documents pertaining to such transactions as maybe prescribed by the Board in the interests of the Revenue, and entered intoby him :

Provided that the Board may prescribe different dates for differenttransactions or class of transactions or for different class of persons;

Provided further that a person shall quote General Index Register Number tilsuch time Permanent Account Number is not allotted to such person.";

(d) Intimate the Assessing Officer any change in his address or in the nameand nature of his business on the basis of which the permanent account numberwas allotted to him.

(6) Every person receiving any document relating to a transaction prescribedunder clause (c) of sub-section (5) shall ensure that the permanent accountnumber or the General Index Register Number has been duly quoted in thedocument.

(7) No person who has already been allotted a permanent account number underthe new series shall apply, obtain or possess another permanent accountnumber.


(8) The Board may make rules providing for - (a) The form and the manner inwhich an application may be made for the allotment of a permanent accountnumber and the particulars which such application shall contain;

(b) The categories of transactions in relation to which permanent accountnumbers or the General Index Register Number shall be quoted by every personin the documents pertaining to such transactions;

(c) The categories of documents pertaining to business or profession in whichsuch numbers shall be quoted by every person.

(d) Class or classes of person to whom the provisions of this section shallnot apply;

(e) The form in which the person who has not been allotted a Permanent AccountNumber or who does not have General Index Register Number shall make hisdeclaration.";

(f) The manner in which the Permanent Account Number or the General IndexRegister Number shall be quoted in respect of the categories of transactionsreferred to in clause (c);

(g) The time and the m,manner in which the transactions referred to in clause(c) shall be intimated top the prescribed authority.

Explanation : For the purposes of this section, - (a) "Assessing Officer"includes an income-tax authority who is assigned the duty of allottingpermanent account numbers;

(b) "Permanent account number" means a number which the Assessing Officer mayallot to any person for the purpose of identification and includes a permanentaccount number allotted under the new series;

(c) "Permanent account number under the new series" means a permanent accountnumber having ten alphanumeric characters and issued in the form of alaminated card. 1458/1466 ]

(d) "General Index Register Number" means a number given by an AssessingOfficer to an assessee in the General Index Register maintained by him andcontaining the designation and particulars of the ward or circle or range ofthe Assessing Officer.

310. Return by whom to be signed.


§310.Return by whom to be signed.Section 140

RETURN BY WHOM TO BE SIGNED.

The return under section 139 shall be signed and verified - (a) In the case ofan individual, - (i) By the individual himself;

(ii) Where he is absent from India, by the individual himself or by someperson duly authorised by him in this behalf;

(iii) Where he is mentally incapacitated from attending to his affairs, by hisguardian or any other person competent to act on his behalf; and

(iv) Where, for any other reason, it is not possible for the individual tosign the return, by any person duly authorised by him in this behalf :

Provided that in a case referred to in sub-clause (ii) or sub-clause (iv), theperson signing the return holds a valid power of attorney from the individualto do so, which shall be attached to the return;

(b) In the case of a Hindu undivided family, by the karta, and, where thekarta is absent from India or is mentally incapacitated from attending to hisaffairs, by any other adult member of such family;

(c) In the case of a company, by the managing director thereof, or where forany unavoidable reason such managing director is not able to sign and verifythe return, or where there is no managing director, by any director thereof :

Provided that where the company is not resident in India, the return may besigned and verified by a person who holds a valid power of attorney from suchcompany to do so, which shall be attached to the return :

Provided further that, -

(a) Where the company is being wound up, whether under the orders of a courtor otherwise, or where any person has been appointed as the receiver of anyassets of the company, the return shall be signed and verified by theliquidator referred to in sub-section (1) of section 178;

(b) Where the management of the company has been taken over by the CentralGovernment or any State Government under any law, the return of the companyshall be signed and verified by the principal officer thereof;


(cc) In the case of a firm, by the managing partner thereof, or where for anyunavoidable reason such managing partner is not able to sign and verify thereturn, or where there is no managing partner as such, by any partner thereof,not being a minor;

(d) In the case of a local authority, by the principal officer thereof;

(dd) In the case of a political party referred to in sub-section (4B) ofsection 139, by the chief executive officer of such party (whether such chiefexecutive officer is known as secretary or by any other designation);

(e) In the case of any other association, by any member of the association orthe principal officer thereof; and

(f) In the case of any other person, by that person or by some personcompetent to act on his behalf.

311. Self-Assessment.

§311.Self-Assessment.Section 140A

SELF-ASSESSMENT.

(1) Where any tax is payable on the basis of any return required to befurnished under section 139 or section 148 or section 148 or, as the case maybe, section 158BC, after taking into account the amount of tax, if any,already paid under any provision of this Act, the assessee shall be liable topay such tax, together with interest payable under any provision of this Actfor any delay in furnishing the return or any default or delay in payment ofadvance tax, before furnishing the return and the return shall be accompaniedby proof of payment of such tax and interest.

Explanation : Where the amount paid by the assessee under this sub-sectionfalls short of the aggregate of the tax and interest as aforesaid, the amountso paid shall first be adjusted towards the interest payable as aforesaid andthe balance, if any, shall be adjusted towards the tax payable.

(2) After a regular assessment under section 143 or section 144, or anassessment under section 158BC has been made, any amount paid under sub-section (1) shall be deemed to have been paid towards such regular assessmentor assessment, as the case may be 1472c.

(3) If any assessee fails to pay the whole or any part of such tax or interest


or both in accordance with the provisions of sub-section (1), he shall,without prejudice to any other consequences which he may incur, be deemed tobe an assessee in default in respect of the tax or interest or both remainingunpaid, and all the provisions of this Act shall apply accordingly.

(4) The provisions of this section as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shallapply to and in relation to any assessment for the assessment year commencingon the 1st day of April, 1988, or any earlier assessment year and referencesin this section to the other provisions of this Act shall be construed asreferences to those provisions as for the time being in force and applicableto the relevant assessment year.

312. Omitted.

§312.Omitted.

Section 141

PROVISIONAL ASSESSMENT.

141 OMITTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970, W.E.F. 1-4-1971

313. Omitted.


PROVISIONAL ASSESSMENT FOR REFUND.


314. Enquiry before Assessment.

§314.Enquiry before Assessment.Section 142

ENQUIRY BEFORE ASSESSMENT.

(1) For the purpose of making an assessment under this Act, the Assessing


Officer may serve on any person who has made a return under section 139 or inwhose case the time allowed under sub-section (1) of that section forfurnishing the return has expired a notice requiring him, on a date to betherein specified, - (i) Where such person has not made a return within thetime allowed under sub-section (1) of section 139, to furnish a return of hisincome or the income of any other person in respect of which he is assessableunder this Act, in the prescribed form and verified in the prescribed mannerand setting forth such other particulars as may be prescribed,

(ii) To produce, or cause to be produced, such accounts or documents as theAssessing Officer may require, or

(iii) 1484b to furnish in writing and verified in the prescribed mannerinformation in such form and on such points or matters (including a statementof all assets and liabilities of the assessee, whether included in theaccounts or not) as the Assessing Officer may require :

Provided that -

(a) The previous approval of the Joint Commissioner shall be obtained beforerequiring the assessee to furnish a statement of all assets and liabilitiesnot included in the accounts;

(b) The Assessing Officer shall not require the production of any accountsrelating to a period more than three years prior to the previous year.

(2) For the purpose of obtaining full information in respect of the income orloss of any person, the Assessing Officer may make such enquiry as heconsiders necessary.

(2A) If, at any stage of the proceedings before him, the Assessing Officer,having regard to the nature and complexity of the accounts of the assessee andthe interests of the revenue, is of the opinion that it is necessary so to do,he may, with the previous approval of the Chief Commissioner or Commissioner,direct the assessee to get the accounts audited by an accountant, as definedin the Explanation below sub-section (2) of section 288, nominated by theChief Commissioner or Commissioner in this behalf and to furnish a report ofsuch audit in the prescribed form 1486 duly signed and verified by suchaccountant and setting forth such particulars 1486 as may be prescribed andsuch other particulars as the Assessing Officer may require.

(2B) The provisions of sub-section (2A) shall have effect notwithstanding thatthe accounts of the assessee have been audited under any other law for thetime being in force or otherwise.


(2C) Every report under sub-section (2A) shall be furnished by the assessee tothe Assessing Officer within such period as may be specified by the AssessingOfficer :

Provided that the Assessing Officer may, on an application made in this behalfby the assessee and for any good and sufficient reason, extend the said periodby such further period or periods as he thinks fit; so, however, that theaggregate of the period originally fixed and the period or periods so extendedshall not, in any case, exceed one hundred and eighty days from the date onwhich the direction under sub-section (2A) is received by the assessee.

(2D) The expenses of, and incidental to, any audit under sub-section (2A)(including the remuneration of the accountant) shall be determined by theChief Commissioner or Commissioner (which determination shall be final) andpaid by the assessee and in default of such payment, shall be recoverable fromthe assessee in the manner provided in Chapter XVII-D for the recovery ofarrears of tax.

(3) The assessee shall, except where the assessment is made under section 144,be given an opportunity of being heard in respect of any material gathered onthe basis of any enquiry under sub-section (2) or any audit under sub-section(2A) and proposed to be utilised for the purpose of the assessment.

(4) The provisions of this section as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shallapply to and in relation to any assessment for the assessment year commencingon the 1st day of April, 1988, or any earlier assessment year and referencesin this section to the other provisions of this Act shall be construed asreferences to those provisions as for the time being in force and applicableto the relevant assessment year.

315. Assessment.

§315.Assessment.

Section 143

ASSESSMENT.

(1) Where a return has been made under section 139, or in response to a notice under sub-section(1) of section 142, - (i) if any tax or interest is found due on the basis of such return, afteradjustment of any tax deducted at source, any advance tax paid, any tax paid on self assessment


and any amount paid otherwise by way of tax or interest, then, without prejudice to theprovisions of sub- section (2), an intimation shall be sent to the assessee specifying the sum sopayable, and such intimation shall be deemed to be a notice of demand issued under section 156and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee and anintimation to this effect shall be sent to the assessee :

Provided that except as otherwise provided in this sub-section, the acknowledgment of the returnshall be deemed to be intimation under this sub-section where either no sum is payable by theassessee or no refund is due to him :

Provided further that no intimation under this sub-section shall be sent after the expiry of twoyears from the end of the assessment year in which the income was first assessable.

(2) Where a return has been made under section 139, or in response to a notice under sub-section(1) of section 142, the Assessing Officer shall if he considers it necessary or expedient to ensurethat the assessee has not understated the income or has not computed excessive loss or has notunderpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to bespecified therein, either to attend his office or to produce, or cause to be produced there, anyevidence on which the assessee may rely in support of the return :

Provided that no notice under this sub-section shall be served on the assessee after the expiry oftwelve months from the end of the month in which the return is furnished.

(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as maybe, after hearing such evidence as the assessee may produce and such other evidence as theAssessing Officer may require on specified points, and after taking into account all relevantmaterial which he has gathered, the Assessing Officer shall, by an order in writing, make anassessment of the total income or loss of the assessee, and determine the sum payable by him orrefund of any amount due to him on the basis of such assessment.

(4) Where a regular assessment under sub-section (3) of this section or section 144 is made, -

(a) Any tax or interest paid by the assessee under sub-section (1) shall be deemed to have beenpaid towards such regular assessment;

(b) If no refund is due on regular assessment or the amount refunded under sub-section (1)exceeds the amount refundable on regular assessment, the whole or the excess amount sorefunded shall be deemed to be tax payable by the assessee and the provisions of this Act shallapply accordingly.


316. Best Judgment Assessment.

§ 316. Best Judgment Assessment.

Section 144

BEST JUDGMENT ASSESSMENT.

(1) If any person -

(a) Fails to make the return required under sub-section (1) of section 139 and has not made areturn or a revised return under sub-section (4) or sub-section (5) of that section, or

(b) Fails to comply with all the terms of a notice issued under sub-section (1) of section 142 orfails to comply with a direction issued under sub-section (2A) of that section, or

(c) Having made a return, fails to comply with all the terms of a notice issued under sub-section(2) of section 143, the Assessing Officer], after taking into account all relevant material whichthe Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard,make the assessment of the total income or loss to the best of his judgment and determine thesum payable by the assessee on the basis of such assessment :

Provided that such opportunity shall be given by the Assessing Officer by serving a noticecalling upon the assessee to show cause, on a date and time to be specified in the notice, why theassessment should not be completed to the best of his judgment :

Provided further that it shall not be necessary to give such opportunity in a case where a noticeunder sub-section (1) of section 142 has been issued prior to the making of an assessment underthis section.

(2) The provisions of this section as they stood immediately before their amendment by theDirect Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to anyassessment for the assessment year commencing on the 1st day of April, 1988, or any earlierassessment year and references in this section to the other provisions of this Act shall beconstrued as references to those provisions as for the time being in force and applicable to therelevant assessment year.

317. Power of Deputy Commissioner to issue Directions incertain cases.

§ 317. Power of Deputy Commissioner to issue Directions in certain cases.


Section 144A

POWER OF DEPUTY COMMISSIONER TO ISSUE DIRECTIONS IN CERTAIN CASES.

A Joint Commissioner may, on his own motion or on a reference being made to him by the Assessing Officer or on the application of an assessee, call for and examine the record of anyproceeding in which an assessment is pending and, if he considers that, having regard to thenature of the case or the amount involved or for any other reason, it is necessary or expedient soto do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer toenable him to complete the assessment and such directions shall be binding on the AssessingOfficer :

Provided that no directions which are prejudicial to the assessee shall be issued before anopportunity is given to the assessee to be heard.

Explanation : For the purposes of this section, no direction as to the lines on which aninvestigation connected with the assessment should be made, shall be deemed to be a directionprejudicial to the assessee.

318. Omitted.

§ 318. Omitted.Section 144B

REFERENCE TO DEPUTY COMMISSIONER IN CERTAIN CASES.

OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1989.

319. Method of Accounting.

§ 319. Method of Accounting.

Section 145

METHOD OF ACCOUNTING.

(1) Income chargeable under the head "Profits and gains of business or profession" or "Incomefrom other sources" shall, subject to the provisions of sub-section (2), be computed in accordancewith either cash or mercantile system of accounting regularly employed by the assessee.


(2) The Central Government may notify in the Official Gazette from time to time accountingstandards to be followed by any class of assessees or in respect of any class of income.

(3) Where the Assessing Officer is not satisfied about the correctness or completeness of theaccounts of the assessee, or where the method of accounting provided in sub-section (1) oraccounting standards as notified under sub-section (2), have not been regularly followed by theassessee, the Assessing Officer may make an assessment in the manner provided in section 144.

320. Method of Accounting in certain cases.

§ 320. Method of Accounting in certain cases.Section 145A

METHOD OF ACCOUNTING IN CERTAIN CASES.

Notwithstanding anything to the contrary contained in section 145, the valuation of purchase andsale of goods and inventory for the purposes of determining the income chargeable under thehead "Profits and gains of business or profession" shall be - (a) In accordance with the methodof accounting regularly employed by the assessee; and

(b) Further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called)actually paid or incurred by the assessee to bring the goods to the place of its location andcondition as on the date of valuation.

Explanation : For the purposes of this section, any tax, duty, cess or fee (by whatever namecalled) under any law for the time being in force, shall include all such payment notwithstandingany right arising as a consequence to such payment.

321. Omitted.


REOPENING OF ASSESSMENT AT THE INSTANCE OF THE ASSESSEE.


322. Income Escaping Assessment.

§ 322. Income Escaping Assessment.Section 147


INCOME ESCAPING ASSESSMENT.

If the Assessing Officer has reason to believe that any income chargeable to tax has escapedassessment for any assessment year, he may, subject to the provisions of sections 148 to 153,assess or reassess such income and also any other income chargeable to tax which has escapedassessment and which comes to his notice subsequently in the course of the proceedings underthis section, or recompute the loss or the depreciation allowance or any other allowance, as thecase may be, for the assessment year concerned (hereafter in this section and in sections 148 to153 referred to as the relevant assessment year) :

Provided that where an assessment under sub-section (3) of section 143 or this section has beenmade for the relevant assessment year, no action shall be taken under this section after the expiryof four years from the end of the relevant assessment year, unless any income chargeable to taxhas escaped assessment for such assessment year by reason of the failure on the part of theassessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for hisassessment for that assessment year.

Explanation 1 : Production before the Assessing Officer of account books or other evidence fromwhich material evidence could with due diligence have been discovered by the Assessing Officerwill not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2 : For the purposes of this section, the following shall also be deemed to be caseswhere income chargeable to tax has escaped assessment, namely :- (a) Where no return ofincome has been furnished by the assessee although his total income or the total income of anyother person in respect of which he is assessable under this Act during the previous yearexceeded the maximum amount which is not chargeable to income-tax;

(b) Where a return of income has been furnished by the assessee but no assessment has beenmade and it is noticed by the Assessing Officer that the assessee has understated the income orhas claimed excessive loss, deduction, allowance or relief in the return;

(c) Where an assessment has been made, but - (i) Income chargeable to tax has beenunderassessed; or

(ii) Such income has been assessed at too low a rate; or

(iii) Such income has been made the subject of excessive relief under this Act; or

(iv) Excessive loss or depreciation allowance or any other allowance under this Act has beencomputed.


323. Issue of Notice where Income has escapedassessment.

§323.Issue of Notice where Income has escaped assessment.

Section 148

ISSUE OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT.

(1) Before making the assessment, reassessment or recomputation under section 147, theAssessing Officer shall serve on the assessee a notice requiring him to furnish within suchperiod, as may be specified in the notice, a return of his income or the income of any otherperson in respect of which he is assessable under this Act during the previous year correspondingto the relevant assessment year, in the prescribed form and verified in the prescribed manner andsetting forth such other particulars as may be prescribed; and the provisions of this Act shall, sofar as may be, apply accordingly as if such return were a return required to be furnished undersection 139.

(2) The Assessing Officer shall, before issuing any notice under this section, record his reasonsfor doing so.

324. The limit for notice.

§ 324. The limit for notice.Section 149

TIME LIMIT FOR NOTICE.

(1) No notice under section 148 shall be issued for the relevant assessment year, - (a) in a casewhere an assessment under sub-section (3) of section 143 or section 147 has been made for suchassessment year, -

(i) If four years have elapsed from the end of the relevant assessment year, unless the case fallsunder sub-clause (ii) or sub-clause (iii);

(ii) If four years, but not more than seven years, have elapsed from the end of the relevantassessment year unless the income chargeable to tax which has escaped assessment amounts toor is likely to amount to rupees fifty thousand or more for that year;

(iii) If seven years, but not more than ten years, have elapsed from the end of the relevantassessment year, unless the income chargeable to tax which has escaped assessment amounts toor is likely to amount to rupees one lakh or more for that year;


(b) In any other case, - (i) If four years have elapsed from the end of the relevant assessmentyear, unless the case falls under sub-clause (ii) or sub-clause (iii);

(ii) If four years, but not more than seven years, have elapsed from the end of the relevantassessment year, unless the income chargeable to tax which has escaped assessment amounts toor is likely to amount to rupees twenty-five thousand or more for that year;

(iii) If seven years, but not more than ten years, have elapsed from the end of the relevantassessment year, unless the income chargeable to tax which has escaped assessment amounts toor is likely to amount to rupees fifty thousands or more for that year.

Explanation : In determining income chargeable to tax which has escaped assessment for thepurposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as theyapply for the purposes of that section.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions ofsection 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as theagent of a non-resident under section 163 and the assessment, reassessment or recomputation tobe made in pursuance of the notice is to be made on him as the agent of such non-resident, thenotice shall not be issued after the expiry of a period of two years from the end of the relevantassessment year.

325. Provision for cases where assessment is in prusuance ofan order on appeal, etc.

§ 325. Provision for cases where assessment is in prusuance of an order on appeal, etc.Section 150

PROVISION FOR CASES WHERE ASSESSMENT IS IN PURSUANCE OF AN ORDER ONAPPEAL, ETC.

(1) Notwithstanding anything contained in section 149, the notice under section 148 may beissued at any time for the purpose of making an assessment or reassessment or recomputation inconsequence of or to give effect to any finding or direction contained in an order passed by anyauthority in any proceeding under this Act by way of appeal, reference or revision or by a courtin any proceeding under any other law.

(2) The provisions of sub-section (1) shall not apply in any case where any such assessment,reassessment or recomputation as is referred to in that sub-section relates to an assessment yearin respect of which an assessment, reassessment or recomputation could not have been made atthe time the order which was the subject-matter of the appeal, reference or revision, as the case


may be, was made by reason of any other provision limiting the time within which any action forassessment, reassessment or recomputation may be taken.

326. Sanction for issue of notice.

§ 326. Sanction for issue of notice.Section 151

SANCTION FOR ISSUE OF NOTICE.

(1) In a case where an assessment under sub-section (3) of section 143 or section 147 has beenmade for the relevant assessment year, no notice shall be issued under section 148 by anAssessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner unless the Joint Joint Commissioner is satisfied on the reasons recorded by such AssessingOfficer that it is a fit case for the issue of such notice :

Provided that, after the expiry of four years from the end of the relevant assessment year, no suchnotice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on thereasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of suchnotice.

(2) In a case other than a case falling under sub-section (1), no notice shall be issued undersection 148 by an Assessing Officer, who is below the rank of Deputy Commissioner, after theexpiry of four years from the end of the relevant assessment year, unless the Joint Commissioneris satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue ofsuch notice.

327. Other Provisions.

§ 327. Other Provisions.Section 152

OTHER PROVISIONS.

(1) In an assessment, reassessment or recomputation made under section 147, the tax shall bechargeable at the rate or rates at which it would have been charged had the income not escapedassessment.

(2) Where an assessment is reopened under section 147, the assessee may, if he has notimpugned any part of the original assessment order for that year either under sections 246 to 248or under section 264, claim that the proceedings under section 147 shall be dropped on hisshowing that he had been assessed on an amount or to a sum not lower than what he would be


rightly liable for even if the income alleged to have escaped assessment had been taken intoaccount, or the assessment or computation had been properly made :

Provided that in so doing he shall not be entitled to reopen matters concluded by an order undersections 154, 155, 260, 262 or 263.

328. Time limit for completion of assessments andreassessments.

§ 328. Time limit for completion of assessments and reassessments.Section 153

TIME LIMIT FOR COMPLETION OF ASSESSMENTS AND REASSESSMENTS.

(1) No order of assessment shall be made under section 143 or section 144 at any time after theexpiry of - (a) Two years from the end of the assessment year in which the income was firstassessable; or

(b) One year from the end of the financial year in which a return or a revised return relating tothe assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, isfiled under sub-section (4) or sub-section (5) of section 139, whichever is later.

(2) No order of assessment, reassessment or recomputation shall be made under section 147 afterthe expiry of two years from the end of the financial year in which the notice under section 148was served :

Provided that where the notice under section 148 was served on or before the 31st day of March,1987, such assessment, reassessment or recomputation may be made at any time up to the 31stday of March, 1990.

(2A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to theassessment year commencing on the 1st day of April, 1971, and any subsequent assessment year,an order of fresh assessment under section 146 or in pursuance of an order under section 250,section 254, section 263 or section 264, setting aside or cancelling an assessment, may be madeat any time before the expiry of two years from the end of the financial year in which the orderunder section 146 cancelling the assessment is passed by the Assessing Officer or the order undersection 250 or section 254 is received by the Chief Commissioner or Commissioner or as thecase may be, the order under section 263 or section 264 is passed by the Chief Commissioner.

(3) The provisions of sub-sections (1) and (2) shall not apply to the following classes ofassessments, reassessments and recomputations which may, Subject to the provisions of sub-section (2A) be completed at any time - (i) Where a fresh assessment is made under section 146;


(ii) Where the assessment, reassessment or recomputation is made on the assessee or any personin consequence of or to give effect to any finding or direction contained in an order, undersections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwisethan by way of appeal or reference under this Act;

(iii) Where, in the case of a firm, an assessment is made on a partner of the firm in consequenceof an assessment made on the firm under section 147.

Explanation 1 : In computing the period of limitation for the purposes of this section - (i) Thetime taken in reopening the whole or any part of the proceeding or in giving an opportunity to theassessee to be reheard under the proviso to section 129, or

(ii) The period during which the assessment proceeding is stayed by an order or injunction of anycourt, or

(iii) The period commencing from the date on which the Assessing Officer directs the assessee toget his accounts audited under sub-section (2A) of section 142 and ending with the last date onwhich the assessee is required to furnish a report of such audit under that sub-section.

(iva) The period (not exceeding sixty days) commencing from the date on which the AssessingOfficer received the declaration under sub-section (1) of section 158A and ending with the dateon which the order under sub-section (3) of that section is made by him,

(v) In a case where an application made before the Income-tax Settlement Commission undersection 245C is rejected by it or is not allowed to be proceeded with by it, the periodcommencing from the date on which such application is made and ending with the date on whichthe order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded :

Provided that where immediately after the exclusion of the aforesaid time or period, the period oflimitation referred to in sub-sections (1), (2) and (2A) available to the Assessing Officer formaking an order of assessment, reassessment or recomputation, as the case may be, is less thansixty days, such remaining period shall be extended to sixty days and the aforesaid period oflimitation shall be deemed to be extended accordingly.

Explanation 2 : Where, by an order referred to in clause (ii) of sub-section (3), any income isexcluded from the total income of the assessee for an assessment year, then, an assessment ofsuch income for another assessment year shall, for the purposes of section 150 and this section,be deemed to be one made in consequence of or to give effect to any finding or directioncontained in the said order.

Explanation 3 : Where, by an order referred to in clause (ii) of sub-section (3), any income isexcluded from the total income of one person and held to be the income of another person, then,an assessment of such income on such other person shall, for the purposes of section 150 and thissection, be deemed to be one made in consequence of or to give effect to any finding or direction


contained in the said order, provided such other person was given an opportunity of being heardbefore the said order was passed.

329. Rectification of Mistake.

§ 329. Rectification of Mistake.

Section 154

RECTIFICATION OF MISTAKE.

(1) With a view to rectifying any mistake apparent from the record 1542 an income-tax authorityreferred to in section 116 may, - (a) Amend any order passed by it under the provisions of thisAct;

(b) Amend any intimation or deemed intimation under sub-section (1) of section 143.

(1A) Where any matter has been considered and decided in any proceeding by way of appeal orrevision relating to an order referred to in sub-section (1), the authority passing such order may,notwithstanding anything contained in any law for the time being in force, amend the order underthat sub-section in relation to any matter other than the matter which has been so considered anddecided.

(2) Subject to the other provisions of this section, the authority concerned - (a) May make anamendment under sub-section (1) of its own motion, and

(b) Shall make such amendment for rectifying any such mistake which has been brought to itsnotice by the assessee, and where the authority concerned is the Commissioner (Appeals), by theAssessing Officer also.

(3) An amendment, which has the effect of enhancing an assessment or reducing a refund orotherwise increasing the liability of the assessee, shall not be made under this section unless theauthority concerned has given notice to the assessee of its intention so to do and has allowed theassessee a reasonable opportunity of being heard.

(4) Where an amendment is made under this section, an order shall be passed in writing by theincome-tax authority concerned.

(5) Subject to the provisions of section 241, where any such amendment has the effect ofreducing the assessment, the Assessing Officer shall make any refund which may be due to suchassessee.


(6) Where any such amendment has the effect of enhancing the assessment or reducing a refundalready made, the Assessing Officer shall serve on the assessee a notice of demand in theprescribed form specifying the sum payable, and such notice of demand shall be deemed to beissued under section 156 and the provisions of this Act shall apply accordingly.

(7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendmentunder this section shall be made after the expiry of four years from the end of the financial yearin which the order sought to be amended was passed.

330. Other Amendments.

§330.Other Amendments.

Section 155

OTHER AMENDMENTS.

(1) Where, in respect of any completed assessment of a partner in a firm for the assessment yearcommencing on the 1st day of April, 1992, or any earlier assessmentyear, it is found - (a) on theassessment or reassessment of the firm, or

(b) On any reduction or enhancement made in the income of the firm under this section, section154, section 250, section 254, section 260, section 262, section 263 or section 264.

(c) On any order passed under sub-section (4) of section 245D on the application made by thefirm, that the share of the partner in the income of the firm has not been included in theassessment of the partner or, if included, is not correct, the Assessing Officer may amend theorder of assessment of the partner with a view to the inclusion of the share in the assessment orthe correction thereof, as the case may be; and the provisions of section 154 shall, so far as maybe, apply thereto, theperiod of four years specified in sub-section (7) of that section beingreckoned from the end of the financial year in which the final order was passed in the case of thefirm.

(1A) Where in respect of any completed assessment of a firm it is found - (a) On the assessmentor reassessment of the firm, or

(b) On any reduction or enhancement made in the income of the firm under this section, section154, section 250, section 254, section 260, section 262, section 263 or section 264, or

(c) On any order passed under sub-section (4) of section 245D on the application made by thefirm, that any remuneration to any partner is not deductible under clause (b) of section 40, theAssessing Officer may amend the order of assessment of the partner with a view to adjusting theincome of the partner to the extent of the amount not so deductible; and the provisions of section


154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) ofthat section being reckoned from the end of the financial year in which the final order was passedin the case of the firm.

(2) Where in respect of any completed assessment of a member of an association of persons or ofa body of individuals it is found - (a) On the assessment or reassessment of the association orbody, or

(b) On any reduction or enhancement made in the income of the association, or body under thissection, section 154, section 250, section 254, section 260, section 262, section 263 or section264,

(c) On any order passed under sub-section (4) of section 245D on the application made by theassociation or body, that the share of the member in the income of the association or body, as thecase may be, has not been included in the assessment of the member or, if included, is notcorrect, the Assessing Officer may amend the order of assessment of the member with a view tothe inclusion of the share in the assessment or the correction thereof, as the case may be; and theprovisions of section 154 shall, so far as may be, apply thereto, the period of four years specifiedin sub-section (7) of that section being reckoned from the end of the financial year in which thefinal order was passed in the case of the association or body, as the case may be.

(4) Where as a result of proceedings initiated under section 147, a loss or depreciation has beenrecomputed and in consequence thereof it is necessary to recompute the total income of theassessee for the succeeding year or years to which the loss or depreciation allowance has beencarried forward and set off under the provisions of sub-section (1) of section 72, or sub-section(2) of section 73, or sub-section (1) or sub-section (3) of section 74, or sub-section (3) of section74A, the Assessing Officer may proceed to recompute the total income in respect of such year oryears and make the necessary amendment; and the provisions of section 154 shall, so far as maybe, apply thereto, the period of four years specified in sub-section (7) of that section beingreckoned from the end of the financial year in which the order was passed under section 147.

(4A) Where an allowance by way of investment allowance has been made wholly or partly to anassessee in respect of a ship or an aircraft or any machinery or plant in any assessment yearunder section 32A and subsequently - (a) at any time before the expiry of eight years from theend of the previous year in which the ship or aircraft was acquired or the machinery or plant wasinstalled, the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee toany person other than the Government, a local authority, a corporation established by a Central,State or Provincial Act or a Government company as defined in section 617 of the CompaniesAct, 1956 (1 of 1956), or in connection with any amalgamation or succession referred to in sub-section (6) or sub-section (7) of section 32A; or

(b) At any time before the expiry of ten years from the end of the previous year in which the shipor aircraft was acquired or the machinery or plant was installed, the assessee does not utilise theamount credited to the reserve account under sub-section (4) of section 32A for the purposes of


acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plantof the nature referred to in clauses (a), (b) and (d) of the second proviso to sub-section (1) ofsection 32A for the purposes of the business of the undertaking; or

(c) At any time before the expiry of the ten years referred to in clause (b), the assessee utilisesthe amount credited to the reserve account under sub-section (4) of section 32A - (i) Fordistribution by way of dividends or profits, or

(ii) For remittance outside India as profits or for the creation of any asset outside India; or

(iii) For any other purpose which is not a purpose of the business of the undertaking, theinvestment allowance originally allowed shall be deemed to have been wrongly allowed, and theAssessing Officer may, notwithstanding anything contained in this Act, recompute the totalincome of the assessee for the relevant previous year and make the necessary amendment; andthe provisions of section 154 shall, so far as may be, apply thereto, the period of four yearsspecified in sub-section (7) of that section being reckoned, - (i) in a case referred to in clause (a),from the end of the previous year in which the sale or other transfer took place;

(ii) In a case referred to in clause (b), from the end of the ten years referred to in that clause;

(iii) In a case referred to in clause (c), from the end of the previous year in which the amount wasutilised.

Explanation : For the purposes of clause (b), "new ship" or "new aircraft" or "new machinery orplant" shall have the same meanings as in the Explanation below sub-section (2) of section 32A.

(5) Where an allowance by way of development rebate has been made wholly or partly to anassessee in respect of a ship, machinery or plant installed after the 31st day of December, 1957,in any assessment year under section 33 or under the corresponding provisions of the IndianIncome-tax Act, 1922 (11 of 1922), and subsequently -

(i) At any time before the expiry of eight years from the end of the previous year in which theship was acquired or the machinery or plant was installed, the ship, machinery or plant is sold orotherwise transferred by the assessee to any person other than the Government, local authority, acorporation established by a Central, State or Provincial Act, or a Government company asdefined in section 617 of the Companies Act, 1956 (1 of 1956), or in connection with anyamalgamation or succession referred to in sub-section (3) or sub-section (4) of section 33; or

(ii) At any time before the expiry of the eight years referred to in sub-section (3) of section 34,the assessee utilises the amount credited to the reserve account under clause (a) of that sub-section - (a) for distribution by way of dividends or profits; or

(b) For remittance outside India as profits or for the creation of any asset outside India; or

(c) For any other purpose which is not a purpose of the business of the undertaking, the


development rebate originally allowed shall be deemed to have been wrongly allowed, and theAssessing Officer may, notwithstanding anything contained in this Act, recompute the totalincome of the assessee for the relevant previous year and make the necessary amendment; andthe provisions of section 154 shall, so far as may be, apply thereto, the period of four yearsspecified in sub-section (7) of that section being reckoned from the end of the previous year inwhich the sale or transfer took place or the money was so utilised.

(5A) Where an allowance by way of development allowance has been made wholly or partly toan assessee in respect of the cost of planting in any area in any assessment year under section33A and subsequently - (i) At any time before the expiry of eight years from the end of theprevious year in which such allowance was made, the land is sold or otherwise transferred by theassessee to any person other than the Government, a local authority, a corporation established bya Central, State or Provincial Act or a Government company as defined in section 617 of theCompanies Act, 1956 (1 of 1956), or in connection with any amalgamation or successionreferred to in sub-section (5) or sub-section (6) of section 33A; or

(ii) At any time before the expiry of the eight years referred to in sub-section (3) of section 33A,the assessee utilises the amount credited to the reserve account under clause (ii) of that sub-section - (a) for distribution by way of dividends or profits; or

(b) For remittance outside India as profits or for the creation of any asset outside India; or

(c) For any other purpose which is not a purpose of the business of the undertaking, thedevelopment allowance originally allowed shall be deemed to have been wrongly allowed, andthe Assessing Officer may, notwithstanding anything contained in this Act, recompute the totalincome of the assessee for the relevant previous year and make the necessary amendment; andthe provisions of section 154 shall, so far as may be, apply thereto, the period of four yearsspecified in sub-section (7) of that section being reckoned from the end of the previous year inwhich the sale or transfer took place or the money was so utilised.

Explanation : For the purposes of this sub-section, where an assessee having any leasehold orother right of occupancy in any land transfers such right, he shall be deemed to have sold orotherwise transferred such land.

(5B) Where any deduction in respect of any expenditure on scientific research has been made inany assessment year under sub-section (2B) of section 35 and the assessee fails to furnish acertificate of completion of the programme obtained from the prescribed authority within oneyear of the period allowed for its completion by such authority, the deduction originally made inexcess of the expenditure actually incurred shall be deemed to have been wrongly made, and theAssessing Officer may, notwithstanding anything contained in this Act, recompute the totalincome of the assessee for the relevant previous year and make the necessary amendment, andthe provisions of section 154 shall, so far as may be, apply thereto, the period of four yearsspecified in sub-section (7) of that section being reckoned from the end of the previous year inwhich the period allowed for the completion of the programme by the prescribed authority


expired.

(7) Where as a result of any proceeding under this Act, in the assessment for any year of acompany in whose case an order under section 104 has been made for that year, it is necessary torecompute the distributable income of that company, the Assessing Officer may proceed torecompute the distributable income and determine the tax payable on the basis of suchrecomputation and make the necessary amendment, and the provisions of section 154 shall, sofar as may be, apply thereto, the period of four years specified in sub-section (7) of that sectionbeing reckoned from the end of the financial year in which the final order was passed in the caseof the company in respect of that proceeding.

(7B) Where in the assessment for any year, the capital gain arising from the transfer of a capitalasset is not charged under section 45 by virtue of the provisions of clause (iv) or, as the case maybe, clause (v) of section 47, but is deemed under section 47A to be income chargeable under thehead "Capital gains" of the previous year in which the transfer took place by reason of - (i) suchcapital asset being converted by the transferee company into, or being treated by it as, stock-in-trade of its business; or

(ii) The parent company or its nominees or, as the case may be, the holding company ceasing tohold the whole of the share capital of the subsidiary company, at any time before the expiry ofthe period of eight years from the date of such transfer the Assessing Officer may,notwithstanding anything contained in this Act, recompute the total income of the transferorcompany for the relevant previous year and make the necessary amendment, and the provisionsof section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the capitalasset was so converted or treated or in which the parent company or its nominees or, as the casemay be, the holding company ceased to hold the whole of the share capital of the subsidiarycompany.

(10A) Where in the assessment for any year, a capital gain arising from the transfer of a long-term capital asset, is charged to tax and within a period of six months after the date of suchtransfer, the assessee has made any investment or deposit in any specified asset within themeaning of Explanation 1 to sub-section (1) of section 54E, the Assessing Officer shall amendthe order of assessment so as to exclude the amount of the capital gain not chargeable to taxunder the provisions of sub-section (1) of section 54E; and the provisions of section 154 shall, sofar as may be, apply thereto, the period of four years specified in sub-section (7) of that sectionbeing [ 1586 reckoned from the end of the financial year in which the assessment was made.

(11) Where in the assessment for any year, a capital gain arising from the transfer of any originalasset as is referred to in section 54H is charged to tax and within the period extended under thatsection the assessee acquires the new asset referred to in that section or, as the case may be,deposits or invests the amount of such capital gain within the period so extended, the AssessingOfficer shall amend the order of assessment so as to exclude the amount of the capital gain notchargeable to tax under any of the sections referred to in section 54H; and the provisions ofsection 154 shall, so far as may be, apply thereto, the period of four years specified in sub-


section (7) of section 154 being reckoned from the end of the previous year in which thecompensation was received by the assessee.

(12) Where in the assessment for any year commencing before the 1st day of April, 1988, thededuction under the section 80-O in respect of any income, being the whole or any part ofincome by way of royalty, commission, fees or any similar payment as is referred to in thatsection, has not been allowed on the ground that such income has not been received inconvertible foreign exchange in India, or having been received in convertible foreign exchangeoutside India, or having been converted into convertible foreign exchange outside India, has notbeen brought into India, by or on behalf of the assessee in accordance with any law for the timebeing in force for regulating payments and dealings in foreign exchange and subsequently suchincome or part thereof has been or is received in, or brought into, India in the manner aforesaid,the Assessing Officer shall amend the order of assessment so as to allow deduction under section80-O in respect of such income or part thereof as is so received in, or brought into, India; and theprovisions of section 154 shall, so far as may be, apply thereto, the period of four years specifiedin sub-section

(7) Of that section being reckoned from the end of the previous year in which such income is soreceived in, or brought into, India; so, however, that the period from the 1st day of April, 1988 tothe 30th day of September, 1991 shall be excluded in computing the period of four years.

(13) Where in the assessment for any year, the deduction under section 80HHB or section80HHC or section 80HHD or section 80HHE or section 80-O or section 80R or section 80RR orsection 80RRA has not been allowed on the ground that such income has not been received inconvertible foreign exchange in India, or having been received in convertible foreign exchangeoutside India, or having been converted into convertible foreign exchange outside India, has notbeen brought into India, by or on behalf of the assessee with the approval of the Reserve Bank ofIndia or such other authority as is authorised under any law for the time being in force forregulating payments and dealings in foreign exchange and subsequently such income or partthereof has been or is received in, or brought into, India in the manner aforesaid, the AssessingOfficer shall amend the order of assessment so as to allow deduction under section 80HHB orsection 80HHC or section 80HHD or section 80HHE or section 80-O or section 80R or section80RR or section 80RRA, as the case may be, in respect of such income or part thereof as is soreceived in, or brought into, India; and the provisions of section 154 shall, so far as may be,apply thereto, and the period of four years shall be reckoned from the end of the previous year inwhich such income is so received in, or brought into India.

Explanation : For the purposes of this section, - (a) "additional compensation" shall have themeaning assigned to it in clause (1) of the Explanation to sub-section (2) of section 54;

(b) "Additional consideration", in relation to the transfer of any capital asset the consideration forwhich was determined or approved by the Central Government or the Reserve Bank of India,means the difference between the amount of consideration for such transfer as enhanced by anycourt, tribunal or other authority and the amount of consideration which would have been


payable if such enhancement had not been made.

331. Notice of Demand.

§331.Notice of Demand.

Section 156

NOTICE OF DEMAND.

When any tax, interest, penalty, fine or any other sum is payable in consequence of any orderpassed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand1596b in the prescribed form 1597 specifying the sum so payable.

332. Intimation of loss.

§ 332. Intimation of loss.Section 157

INTIMATION OF LOSS.

When, in the course of the assessment of the total income of any assessee, it is established that aloss has taken place which the assessee in entitled to have carried forward and set off under theprovisions of sub-section (1) of section 72, sub-section (2) of section 73, Sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A, the Assessing Officer shall notify tothe assessee by an order in writing the amount of the loss as computed by him for the purposes ofsub-section (1) of section 72, sub-section (2) of section 73, sub-section (1) or sub-section (3) ofsection 74 or sub-section (3) of section 74A.

333. Intimation of Assessment of firm.

§ 333. Intimation of Assessment of firm.Section 158

INTIMATION OF ASSESSMENT OF FIRM.

Whenever, in respect of the assessment year commencing on the 1st day of April, 1992, or anyearlier assessment year, a registered firm is assessed, or an unregistered firm is assessed underthe provisions of clause (b) of section 183, the Assessing Officer shall notify to the firm by anorder in writing the amount of its total income assessed and the apportionment thereof between


the several partners.

334. Procedure when assessee claims identical question lawis pending before High Court or Supreme Court.

§ 334. Procedure when assessee claims identical question law is pending before High Court orSupreme Court.Section 158A

PROCEDURE WHEN ASSESSEE CLAIMS IDENTICAL QUESTION OF LAW IS PENDINGBEFORE HIGH COURT OR SUPREME COURT.

(1) Notwithstanding anything contained in this Act, where an assessee claims that any questionof law arising in his case for an assessment year which is pending before the Assessing Officer orany appellate authority (such case being hereafter in this section referred to as the relevant case)is identical with a question of law arising in his case for another assessment year which ispending before the High Court on a reference under section 256 or before the Supreme Court ona reference under section 257 or in appeal under section 261 (such case being hereafter in thissection referred to as the other case), he may furnish to the Assessing Officer or the appellateauthority, as the case may be, a declaration in the prescribed form and verified in the prescribedmanner 1601, that if the Assessing Officer or the appellate authority, as the case may be, agreesto apply in the relevant case the final decision on the question of law in the other case, he shallnot raise such question of law in the relevant case in appeal before any appellate authority, or fora reference before the High Court under section 256 or the Supreme Court under section 257 orin appeal before the Supreme Court under section 261.

(2) Where a declaration under sub-section (1) Is furnished to any appellate authority, theappellate authority shall call for a report from the Assessing Officer on the correctness of theclaim made by the assessee and where the Assessing Officer makes a request to the appellateauthority to give him an opportunity of being heard in the matter, the appellate authority shallallow him such opportunity.

(3) The Assessing Officer or the appellate authority, as the case may be, may, by order inwriting, - (i) Admit the claim of the assessee if he or it is satisfied that the question of lawarising in the relevant case is identical with the question of law in the other case; or

(ii) Reject the claim if he or it is not so satisfied.

(4) Where a claim is admitted under sub-section (3), - (a) the Assessing Officer or, as the casemay be, the appellate authority may make an order disposing of the relevant case withoutawaiting the final decision on the question of law in the other case; and

(b) The assessee shall not be entitled to raise, in relation to the relevant case, such question of


law in appeal before any appellate authority or for a reference before the High Court undersection 256 or the Supreme Court under section 257 or in appeal before the Supreme Court undersection 261.

(5) When the decision on the question of law in the other case becomes final, it shall be appliedto the relevant case and the Assessing Officer or the appellate authority, as the case may be,shall, if necessary, amend the order referred to in clause (a) of sub-section (4) conformably tosuch decision.

(6) An order under sub-section (3) shall be final and shall not be called in question in anyproceeding by way of appeal, reference or revision under this Act.

Explanation : In this section, - (a) "Appellate authority" means the Deputy Commissioner(Appeals) or the Commissioner (Appeals) or the Appellate Tribunal;

(b) "Case", in relation to an assessee, means any proceeding under this Act for the assessment ofthe total income of the assessee or for the imposition of any penalty or fine on him.

335. Definitions.

§ 335. Definitions.Section 158B

DEFINITIONS.

In this Chapter, unless the context otherwise requires, - (a) "Block period" means the previousyears relevant to ten assessment years preceding the previous year in which the search wasconducted under section 132 or any requisition was made under section 132A, and includes, inthe previous year in which such search was conducted or requisition made, the period up to thedate of the commencement of such search or, as the case may be, the date of such requisition;

(b) "Undisclosed income" includes any money, bullion, jewellery or other valuable article orthing or any income based on any entry in the books of account or other documents ortransactions, where such money, bullion, jewellery, valuable article, thing, entry in the books ofaccount or other document or transaction represents wholly or partly income or property whichhas not been or would not have been disclosed for the purposes of this Act.

336. Assessment of undisclosed Income as a result to search.

§ 336. Assessment of undisclosed Income as a result to search.Section 158BA


ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH.

(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30thday of June, 1995 a search is initiated under section 132 or books of account, other documents orany assets are requisitioned under section 132A in the case of any person, then, the AssessingOfficer shall proceed to assess the undisclosed income in accordance with the provisions of thisChapter.

(2) The total undisclosed income relating to the block period shall be charged to tax, at the ratespecified in section 113, as income of the block period irrespective of the previous year or yearsto which such income relates and irrespective of the fact whether regular assessment for any oneor more of the relevant assessment years is pending or not.

Explanation : For the removal of doubts, it is hereby declared that - (a) The assessment madeunder this Chapter shall be in addition to the regular assessment in respect of each previous yearincluded in the block period;

(b) The total undisclosed income relating to the block period shall not include the incomeassessed in any regular assessment as incomes of such block period;

(c) The income assessed in this Chapter shall not be included in the regular assessment of everyprevious year included in the block period.

(3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of incomereferred to in sub-section (1) relates to an assessment year for which the previous year has notended or the date of filing the return of income under sub-section (1) of section 139 for anyprevious year has not expired, and such income or the transactions relating to such income arerecorded on or before the date of the search or requisition in the books of account or otherdocuments maintained in the normal course relating to such previous years, the said income shallnot be included in the block period.

337. Computation of undisclosed Income of the block period.

§ 337. Computation of undisclosed Income of the block period.Section 158BB

COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD.

(1) The undisclosed income of the block period shall be the aggregate of the total income of theprevious years falling within the block period computed, in accordance with the provisions ofChapter IV, on the basis of evidence found as a result of search or requisition of books ofaccount or documents and such other materials or information as are available with AssessingOfficer, as reduced by the aggregate of the total income, or as the case may be, as increased bythe aggregate of the losses of such previous years, determined, -


(a) Where assessments under section 143 or section 144 or section 147 have been concluded, onthe basis of such assessments;

(b) Where returns of income have been filed under section 139 or section 147 but assessmentshave not been made till the date of search or requisition, on the basis of the income disclosed insuch returns;

(c) Where the due date for filing a return of income has expired but no return of income has beenfiled, as nil;

(d) Where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income ortransactions as recorded in the books of account and other documents maintained in the normalcourse on or before the date of the search or requisition relating to such previous years;

(e) Where any order of settlement has been made under sub-section (4) of section 245D, on thebasis of such order;

(f) Where an assessment of undisclosed income had been made earlier under clause (c) of section158BC, on the basis of such assessment.

Explanation : For the purposes of determination of undisclosed income, - (a) the total income orloss of each previous year shall, for the purpose of aggregation, be taken as the total income orloss computed in accordance with the provisions of Chapter IV without giving effect to set off ofbrought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) ofsection 32;

(b) Of a firm, returned income and total income assessed for each of the previous years fallingwithin the block period shall be the income determined before allowing deduction of salary,interest, commission, bonus or remuneration by whatever name called to any partner not being aworking partner:

Provided that undisclosed income of the firm so determined shall not be chargeable to tax in thehands of the partners, whether on allocation or on account of enhancement;

(c) Assessment under section 143 includes determination ofincome under sub-section (1) or sub-section (1B) of section143.

(2) In computing the undisclosed income of the block period, the provisions of sections 68, 69,69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in thosesections shall be construed as references to the relevant previous year falling in the block periodincluding the previous year ending with the date of search or of the requisition.


(3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosedincome had already been disclosed in any return of income filed by the assessee before thecommencement of search or of the requisition, as the case may be, shall be on the assessee.

(4) For the purpose of assessment under this Chapter, losses brought forward from the previousyear under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall notbe set off against the undisclosed income determined in the block assessment under this Chapter,but may be carried forward for being set off in the regular assessments.

338. Procedure for block assessment.

§ 338. Procedure for block assessment.Section 158BC

PROCEDURE FOR BLOCK ASSESSMENT.

Where any search has been conducted under section 132 or books of account, other documents orassets are requisitioned under section 132A, in the case of any person, then, -

(a) The Assessing Officer shall,

(i) In respect of search initiated or books of account or other documents or any assetsrequisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997 serve anotice to such person requiring him to furnish within such time not being less than fifteen days;

(ii) In respect of search initiated or books of account or other documents or any assetsrequisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring himto furnish within such time not being less than fifteen days but not more than forty-five days, asmay be specified in the notice a return in the prescribed form and verified in the same manner asa return under clause (i) of sub-section (1) of section 142, setting forth his total income includingthe undisclosed income for the block period :

Provided that no notice under section 148 is required to be issued for the purpose of proceedingunder this Chapter : Provided further that a person who has furnished a return under this clauseshall not be entitled to file a revised return;

(b) The Assessing Officer shall proceed to determine the undisclosed income of the block periodin the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and(3) of section 143 and section 144 shall, so far as may be, apply;

(c) The Assessing Officer, on determination of the undisclosed income of the block period inaccordance with this Chapter, shall pass an order of assessment and determine the tax payable byhim on the basis of such assessment;


(d) The assets seized under section 132 or requisitioned under section 132A shall be retained tothe extent necessary and the provisions of section 132B shall apply subject to such modificationsas may be necessary and the references to "regular assessment" or "reassessment" in section132B shall be construed as references to "block assessment".

339. Undisclosed Income of any other person.

§339.Undisclosed Income of any other person.

Section 158BD

UNDISCLOSED INCOME OF ANY OTHER PERSON.

Where the Assessing Officer is satisfied that any undisclosed income belongs to any person,other than the person with respect to whom search was made under section 132 or whose booksof account or other documents or any assets were requisitioned under section 132A then, thebooks of account, other documents or assets seized or requisitioned shall be handed over to theAssessing Officer having jurisdiction over such other person and that Assessing Officer shallproceed against such other person and the provisions of this Chapter shall apply accordingly.

340. Time limit for completion of Block assessment.

§ 340. Time limit for completion of Block assessment.Section 158BE

TIME LIMIT FOR COMPLETION OF BLOCK ASSESSMENT.

(1) The order under section 158BC shall be passed - (a) Within one year from the end of themonth in which the last of the authorisations for search under section 132 or for requisition undersection 132A, as the case may be, was executed in cases where a search is initiated or books ofaccount or other documents or any assets are requisitioned after the 30th day of June, 1995 butbefore the 1st day of January, 1997;

(b) Within two years from the end of the month in which the last of the authorisations for searchunder section 132 or for requisition under section 132A, as the case may be, was executed incases where a search is initiated or books of account or other documents or any assets arerequisitioned on or after the 1st day of January, 1997.

(2) The period of limitation for completion of block assessment in the case of the other personreferred to in section 158BD shall be - (a) One year from the end of the month in which thenotice under this Chapter was served on such other person in respect of search initiated or books


of account or other documents or any assets requisitioned after the 30th day of June, 1995 butbefore the 1st day of January, 1997; and

(b) Two years from the end of the month in which notice under this Chapter was served on suchother person in respect of search initiated or books of account or other documents or any assetsare requisitioned on or after the 1st day of January, 1997.

Explanation : In computing the period of limitation for the purposes of this section, the period - (i) During which the assessment proceeding is stayed by an order or injunction of any court, or

(ii) Commencing from the day on which the Assessing Officer directs the assessee to get hisaccounts audited under sub-section (2A) of section 142 and ending on the day on which theassessee is required to furnish a report of such audit under that sub-section, shall be excluded.

Explanation 2 : For the removal of doubts, it is hereby declared that the authorisation referred toin sub-section (1) shall be deemed to have been executed, - (a) In the case of search, on theconclusion of search as recorded in the last panchnama drawn in relation to any person in whosecase the warrant of authorisation has been issued;

(b) In the case of requisition under section 132A, on the actual receipts of the books of accountor other documents or assets by the Authorised Officer.

341. Certain interests and penalties not to be levied orimposed.

§ 341. Certain interests and penalties not to be levied or imposed.Section 158BF

CERTAIN INTERESTS AND PENALTIES NOT TO BE LEVIED OR IMPOSED.

No interest under the provisions of sections 234A, 234B or 234C or penalty under the provisionsof clause (c) of sub-section (1) of section 271 or section 271A or section 271B shall be levied orimposed upon the assessee in respect of the undisclosed income determined in the blockassessment.

342. Levy of Interest and Penalty in certain cases.

§ 342. Levy of Interest and Penalty in certain cases.Section 158BFA

LEVY OF INTEREST AND PENALTY IN CERTAIN CASES.


(1) Where the return of total income including undisclosed income for the block period, inrespect of search initiated under section 132 or books of account, other document or any assetsrequisitioned under section 132A on or after the 1st day of January, 1997 as required by a noticeunder clause (a) of section 158BC, is furnished after the expiry of the period specified in suchnotice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two percent of the tax on undisclosed income, determined under clause (c) of section 158BC, for everymonth or part of a month comprised in the period commencing on the day immediately followingthe expiry of the time specified in the notice, and - (a) where the return is furnished after theexpiry of the time aforesaid, ending on the date of furnishing the return; or

(b) Where no return has been furnished, on the date of completion of assessment under clause (c)of section 158BC.

(2) The Assessing Officer or the Commissioner (Appeals), in the course of any proceedingsunder this Chapter, may direct that a person shall pay by way of penalty a sum which shall not beless than the amount of tax leviable but which shall not exceed three times the amount of tax soleviable in respect of the undisclosed income determined by the Assessing Officer under clause(c) of section 158BC :

Provided that no order imposing penalty shall be made in respect of a person if - (i) such personhas furnished a return under clause (a) of section 158BC;

(ii) The tax payable on the basis of such return has been paid or, if the assets seized consist ofmoney, the assessee offers the money so seized to be adjusted against the tax payable;

(iii) Evidence of tax paid is furnished along with the return; and

(iv) An appeal is not filed against the assessment of that part of income which is shown in thereturn :

Provided further that the provisions of the preceding proviso shall not apply where theundisclosed income determined by the Assessing Officer is in excess of the income shown in thereturn and in such cases the penalty shall be imposed on that portion of undisclosed incomedetermined which is in excess of the amount of undisclosed income shown in the return.

(3) No order imposing a penalty under sub-section (2) shall be made - (a) Unless an assessee hasbeen given a reasonable opportunity of being heard;

(b) By the Assistant Commissioner or Deputy Commissioner or the Assistant Director or DeputyDirector, as the case may be, where the amount of penalty exceeds twenty thousand rupeesexcept with the previous approval of the Joint Commissioner or the Joint Director, as the casemay be;

(c) In a case where the assessment is the subject-matter of an appeal to the Commissioner(Appeals) under section 246 or an appeal to the Appellate Tribunal under section 253, after the


expiry of the financial year in which the proceedings, in the course of which action for theimposition of penalty has been initiated, are completed, or six months from the end of the monthin which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunalis received by the Chief Commissioner or the Commissioner, whichever period expires later;

(d) In a case where the assessment is the subject matter of revision under section 263, after theexpiry of six months from the end of the month in which such order of revision is passed;

(e) In any case other than those mentioned in clauses (c) and (d), after the expiry of the financialyear in which the proceedings in the course of which action for the imposition of penalty hasbeen initiated, are completed, or six months from the end of the month in which action forimposition of penalty is initiated, whichever period expires later;

(f) In respect of search initiated under section 132 or books of account, other documents or anyassets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st dayof January, 1997.

Explanation : In computing the period of limitation for the purpose of this section, - (i) the timetaken in giving an opportunity to the assessee to be reheard under the proviso to section 129;

(ii) The period during which the immunity granted under section 245H remained in force; and

(iii) The period during which the proceedings under sub-section (2) are stayed by an order orinjunction of any court, shall be excluded.

(4) An income-tax authority on making an order under sub-section (2) imposing a penalty, unlesshe is himself an Assessing Officer, shall forthwith send a copy of such order to the AssessingOfficer.

343. Authority competent to make block assessment.

§ 343. Authority competent to make block assessment.Section 158BG

AUTHORITY COMPETENT TO MAKE BLOCK ASSESSMENT.

The order of assessment for the block period shall be passed by an Assessing Officer not belowthe rank of an Assistant Commissioner or Deputy Commissioner 44c or an Assistant DirectorDeputy Director, as the case may be :

Provided that no such order shall be passed without the previous approval of - (a) TheCommissioner or Director, as the case may be, in respect of search initiated under section 132 orbooks of account, other documents or any assets requisitioned under section 132A, after the 30th


day of June, 1995 but before the 1st day of January, 1997;

(b) The Joint Commissioner or the Joint Director, as the case may be, in respect of searchinitiated under section 132 or books of account, other documents or any assets requisitionedunder section 132A, on or after the 1st day of January, 1997.

344. Application of other provisions of this Act.

§ 344. Application of other provisions of this Act.Section 158BH

APPLICATION OF OTHER PROVISIONS OF THIS ACT.

Save as otherwise provided in this Chapter, all other provisions of this Act shall apply toassessment made under this Chapter.

345. Legal Representatives.

§ 345. Legal Representatives.Section 159

LEGAL REPRESENTATIVES.

(1) Where a person dies, his legal representatives shall be liable to pay any sum which thedeceased would have been liable to pay if he had not died, in the like manner and to the sameextent as the deceased.

(2) For the purpose of making an assessment (including an assessment, reassessment orrecomputation under section 147) of the income of the deceased and for the purpose of levyingany sum in the hands of the legal representative in accordance with the provisions of sub-section(1), - (a) any proceeding taken against the deceased before his death shall be deemed to havebeen taken against the legal representative and may be continued against the legal representativefrom the stage at which it stood on the date of the death of the deceased;

(b) Any proceeding which could have been taken against the deceased if he had survived, may betaken against the legal representative; and

(c) All the provisions of this Act shall apply accordingly.

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to bean assessee.


(4) Every legal representative shall be personally liable for any tax payable by him in hiscapacity as legal representative if, while his liability for tax remains undischarged, he creates acharge on or disposes of or parts with any assets of the estate of the deceased, which are in, ormay come into, his possession, but such liability shall be limited to the value of the asset socharged, disposed of or parted with.

(5) The provisions of sub-section (2) of section 161, section 162 and section 167, shall, so far asmay be and to the extent to which they are not inconsistent with the provisions of this section,apply in relation to a legal representative.

(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meetingthe liability.

346. Representative Assessee.

§ 346. Representative Assessee.

Section 160

REPRESENTATIVE ASSESSEE.

(1) For the purposes of this Act, "representative assessee" means - (i) In respect of the income ofa non-resident specified in sub-section (1) of section 9, the agent of the non-resident, including aperson who is treated as an agent under section 163;

(ii) In respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitledto receive or is in receipt of such income on behalf of such minor, lunatic or idiot;

(iii) In respect of income which the Court of Wards, the Administrator-General, the OfficialTrustee or any receiver or manager (including any person, whatever his designation, who in factmanages property on behalf of another) appointed by or under any order of a court, receives or isentitled to receive, on behalf or for the benefit of any person, such Court of Wards,Administrator-General, Official Trustee, receiver or manager;

(iv) In respect of income which a trustee appointed under a trust declared by a duly executedinstrument in writing whether testamentary or otherwise [including any wakf deed which is validunder the Mussalman Wakf Validating Act, 1913 (6 of 1913)], receives or is entitled to receiveon behalf or for the benefit of any person, such trustee or trustees;

(v) In respect of income which a trustee appointed under an oral trust receives or is entitled toreceive on behalf or for the benefit of any person, such trustee or trustees.


Explanation 1 : A trust which is not declared by a duly executed instrument in writing [includingany wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)] shallbe deemed, for the purposes of clause

(iv), to be a trust declared by a duly executed instrument in writing if a statement in writing,signed by the trustee or trustees, setting out the purpose or purposes of the trust, particulars as tothe trustee or trustees, the beneficiary or beneficiaries and the trust property, is forwarded to the [1603a Assessing Officer 1603a ], - (i) where the trust has been declared before the 1st day ofJune, 1981, within a period of three months from that day; and

(ii) in any other case, within three months from the date of declaration of the trust.

Explanation 2 : For the purposes of clause (v), "oral trust" means a trust which is not declared bya duly executed instrument in writing [including any wakf deed which is valid under theMussalman Wakf Validating Act, 1913 (6 of 1913)] and which is not deemed under Explanation1 to be a trust declared by a duly executed instrument in writing. 1603 ]

(2) Every representative assessee shall be deemed to be an assessee for the purposes of this Act.

347. Liability of representative assessee.

§347.Liability of representative assessee.

Section 161

LIABILITY OF REPRESENTATIVE ASSESSEE.

(1) Every representative assessee, as regards the income in respect of which he is a representativeassessee, shall be subject to the same duties, responsibilities and liabilities as if the income wereincome received by or accruing to or in favour of him beneficially, and shall be liable toassessment in his own name in respect of that income; but any such assessment shall be deemedto be made upon him in his representative capacity only, and the tax shall, subject to the otherprovisions contained in this Chapter, be levied upon and recovered from him in like manner andto the same extent as it would be leviable upon and recoverable from the person represented byhim.

(1A) Notwithstanding anything contained in sub-section (1) where any income in respect ofwhich the person mentioned in clause (iv) of sub-section (1) of section 160 is liable asrepresentative assessee consists of, or includes, profits and gains of business, tax shall be chargedon the whole of the income in respect of which such person is so liable at the maximum marginalrate :


Provided that the provisions of this sub-section shall not apply where such profits and gains arereceivable under a trust declared by any person by will exclusively for the benefit of any relativedependent on him for support and maintenance, and such trust is the only trust so declared byhim.

(2) Where any person is, in respect of any income, assessable under this Chapter in the capacityof a representative assessee, he shall not, in respect of that income, be assessed under any otherprovision of this Act.

348. Right of representative assessee to recover tax paid.

§ 348. Right of representative assessee to recover tax paid.Section 162

RIGHT OF REPRESENTATIVE ASSESSEE TO RECOVER TAX PAID.

(1) Every representative assessee who, as such, pays any sum under this Act, shall be entitled torecover the sum so paid from the person on whose behalf it is paid, or to retain out of anymoneys that may be in his possession or may come to him in his representative capacity, anamount equal to the sum so paid.

(2) Any representative assessee, or any person who apprehends that he may be assessed as arepresentative assessee, may retain out of any money payable by him to the person on whosebehalf he is liable to pay tax (hereinafter in this section referred to as the principal), a sum equalto his estimated liability under this Chapter, and in the event of any disagreement between theprincipal and such representative assessee or person as to the amount to be so retained suchrepresentative assessee or person may secure from the Assessing Officer a certificate stating theamount to be so retained pending final settlement of the liability, and the certificate so obtainedshall be his warrant for retaining that amount.

(3) The amount recoverable from such representative assessee or person at the time of finalsettlement shall not exceed the amount specified in such certificate, except to the extent to whichsuch representative assessee or person may at such time have in his hands additional assets of theprincipal.

349. Who may be regarded as agent.

§ 349. Who may be regarded as agent.

Section 163


WHO MAY BE REGARDED AS AGENT.

(1) For the purposes of this Act, "agent", in relation to a non-resident, includes any person inIndia -

(a) Who is employed by or on behalf of the non-resident; or

(b) Who has any business connection with the non-resident; or

(c) From or through whom the non-resident is in receipt of any income, whether directly orindirectly; or

(d) Who is the trustee of the non-resident; and includes also any other person who, whether aresident or non-resident, has acquired by means of a transfer, a capital asset in India :

Provided that a broker in India who, in respect of any transactions, does not deal directly with oron behalf of a non-resident principal but deals with or through a non-resident broker shall not bedeemed to be an agent under this section in respect of such transactions, if the followingconditions are fulfilled, namely :- (i) the transactions are carried on in the ordinary course ofbusiness through the first-mentioned broker; and

(ii) The non-resident broker is carrying on such transactions in the ordinary course of hisbusiness and not as a principal.

(2) No person shall be treated as the agent of a non-resident unless he has had an opportunity ofbeing heard by the Assessing Officer as to his liability to be treated as such.

350. Charge of Tax where share of beneficiaries unknown.

§ 350. Charge of Tax where share of beneficiaries unknown.Section 164

CHARGE OF TAX WHERE SHARE OF BENEFICIARIES UNKNOWN.

(1) Subject to the provisions of sub-sections (2) and (3), where any income in respect of whichthe persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable asrepresentative assessees or any part thereof is not specifically receivable on behalf or for thebenefit of any one person or where the individual shares of the persons on whose behalf or forwhose benefit such income or such part thereof is receivable are indeterminate or unknown (suchincome, such part of the income and such persons being hereafter in this section referred to as"relevant income", "part of relevant income" and "beneficiaries", respectively), tax shall becharged on the relevant income or part of relevant income at the maximum marginal rate :

Provided that in a case where - (i) None of the beneficiaries has any other income chargeable


under this Act exceeding the maximum amount not chargeable to tax in the case of anassociation of persons or is a beneficiary under any other trust; or

(ii) The relevant income or part of relevant income is receivable under a trust declared by anyperson by will and such trust is the only trust so declared by him; or

(iii) The relevant income or part of relevant income is receivable under a trust created before the1st day of March, 1970 by a non-testamentary instrument and the Assessing Officer is satisfied,having regard to all the circumstances existing at the relevant time, that the trust was createdbona fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hinduundivided family, exclusively for the benefit of the members of such family, in circumstanceswhere such relatives or members were mainly dependent on the settlor for their support andmaintenance; or

(iv) The relevant income is receivable by the trustees on behalf of a provident fund,superannuation fund, gratuity fund, pension fund or any other fund, created bona fide by a personcarrying on a business or profession exclusively for the benefit of persons employed in suchbusiness or profession, tax shall be charged on the relevant income or part of relevant income asif it were the total income of an association of persons :

Provided further that where any income in respect of which the person mentioned in clause (iv)of sub-section (1) of section 160 is liable as representative assessee consists of, or includes,profits and gains of business, the preceding proviso shall apply only if such profits and gains arereceivable under a trust declared by any person by will exclusively for the benefit of any relativedependent on him for support and maintenance, and such trust is the only trust so declared byhim.

(2) In the case of relevant income which is derived from property held under trust wholly forcharitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause(24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shallbe charged on so much of the relevant income as is not exempt under section 11 or section 12, asif the relevant income not so exempt were the income of an association of persons :

Provided that in a case where the whole or any part of the relevant income is not exempt undersection 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant incomeat the maximum marginal rate.

(3) In a case where the relevant income is derived from property held under trust in part only forcharitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) ofsection 2, or is of the nature referred to in sub-section (4A) of section 11, and either the relevantincome applicable to purposes other than charitable or religious purposes (or any part thereof) isnot specifically receivable on behalf or for the benefit of any one person or the individual sharesof the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable


on the relevant income shall be the aggregate of - (a) The tax which would be chargeable on thatpart of the relevant income which is applicable to charitable or religious purposes (as reduced bythe income, if any, which is exempt under section 11) as if such part (or such part as so reduced)were the total income of an association of persons; and

(b) The tax on that part of the relevant income which is applicable to purposes other thancharitable or religious purposes, and which is either not specifically receivable on behalf or forthe benefit of any one person or in respect of which the shares of the beneficiaries areindeterminate or unknown, at the maximum marginal rate :

Provided that in a case where - (i) None of the beneficiaries in respect of the part of the relevantincome which is not applicable to charitable or religious purposes has any other incomechargeable under this Act exceeding the maximum amount not chargeable to tax in the case of anassociation of persons or is a beneficiary under any other trust; or

(ii) The relevant income is receivable under a trust declared by any person by will and such trustis the only trust so declared by him; or

(iii) The relevant income is receivable under a trust created before the 1st day of March, 1970, bya non-testamentary instrument and the Assessing Officer is satisfied, having regard to all thecircumstances existing at the relevant time, that the trust, to the extent it is not for charitable orreligious purposes, was created bona fide exclusively for the benefit of the relatives of the settlor,or where the settlor is a Hindu undivided family, exclusively for the benefit of the members ofsuch family in circumstances where such relatives or members were mainly dependent on thesettlor for their support and maintenance, tax shall be charged on the relevant income as if therelevant income (as reduced by the income, if any, which is exempt under section 11) were thetotal income of an association of persons :

Provided further that where the relevant income consists of, or includes, profits and gains ofbusiness, the preceding proviso shall apply only if the income is receivable under a trust declaredby any person by will exclusively for the benefit of any relative dependent on him for supportand maintenance, and such trust is the only trust so declared by him :

Provided also that in a case where the whole or any part of the relevant income is not exemptunder section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) ofsub-section (1) of section 13, tax shall be charged on the relevant income or part of relevantincome at the maximum marginal rate.

Explanation 1 : For the purposes of this section, - (i) any income in respect of which the personsmentioned in clause (iii) and clause (iv) of sub-section (1) of section 160 are liable asrepresentative assessee or any part thereof shall be deemed as being not specifically receivableon behalf or for the benefit of any one person unless the person on whose behalf or for whosebenefit such income or such part thereof is receivable during the previous year is expressly statedin the order of the court or the instrument of trust or wakf deed, as the case may be, andisidentifiable as such on the date of such order, instrument or deed;


(ii) The individual shares of the persons on whose behalf or for whose benefit such income orsuch part thereof is received shall be deemed to be indeterminate or unknown unless theindividual shares of the persons on whose behalf or for whose benefit such income or such partthereof is receivable, are expressly stated in the order of the court or the instrument of trust orwakf deed, as the case may be, and are ascertainable as such on the date of such order,instrument or deed.

351. Charge of tax in case of oral trust.

§ 351. Charge of tax in case of oral trust.Section 164A

CHARGE OF TAX IN CASE OF ORAL TRUST.

Where a trustee receives or is entitled to receive any income on behalf or for the benefit of anyperson under an oral trust, then, notwithstanding anything contained in any other provision ofthis Act, tax shall be charged on such income at the maximum marginal rate.

Explanation : For the purposes of this section, - "oral trust" shall have the meaning assigned to itin Explanation 2 below sub-section (1) of section 160.

352. Case where part of trust Income is chargeable.

§ 352. Case where part of trust Income is chargeable.Section 165

CASE WHERE PART OF TRUST INCOME IS CHARGEABLE.

Where part only of the income of a trust is chargeable under this Act, that proportion only of theincome receivable by a beneficiary from the trust which the part so chargeable bears to the wholeincome of the trust shall be deemed to have been derived from that part.

353. Direct Assessment or recovery not barred.

§353.Direct Assessment or recovery not barred.Section 166

DIRECT ASSESSMENT OR RECOVERY NOT BARRED.

Nothing in the foregoing sections in this Chapter shall prevent either the


direct assessment of the person on whose behalf or for whose benefit incometherein referred to is receivable, or the recovery from such person of the taxpayable in respect of such income.

354. Remedies against property in cases ofrepresentative assessees.

§354.Remedies against property in cases of representative assessees.Section 167

REMEDIES AGAINST PROPERTY IN CASES OF REPRESENTATIVE ASSESSEES.

The Assessing Officer shall have the same remedies against all property of anykind vested in or under the control or management of any representativeassessee as he would have against the property of any person liable to pay anytax, and in as full and ample a manner, whether the demand is raised againstthe representative assessee or against the beneficiary direct.

355. Charge of tax in the case of a firm.

§355.Charge of tax in the case of a firm.Section 167A

CHARGE OF TAX IN THE CASE OF A FIRM.

In the case of a firm which is assessable as a firm, tax shall be charged onits total income at the rate as specified in the Finance Act of the relevantyear.

356. Charge of Tax where shares of members inassociation of persons or body of individualsunknown, etc.

§356.Charge of Tax where shares of members in association of persons or bodyof individuals unknown, etc.Section 167B

CHARGE OF TAX WHERE SHARES OF MEMBERS IN ASSOCIATION OF PERSONS OR BODY OFINDIVIDUALS UNKNOWN, ETC.


(1) Where the individual shares of the members of an association of persons orbody of individuals (other than a company or a co-operative society or asociety registered under the Societies Registration Act, 1860 (21 of 1860) orunder any law corresponding to that Act in force in any part of India) in thewhole or any part of the income of such association or body are indeterminateor unknown, tax shall be charged on the total income of the association orbody at the maximum marginal rate :

Provided that, where the total income of any member of such association orbody is chargeable to tax at a rate which is higher than the maximum marginalrate, tax shall be charged on the total income of the association or body atsuch higher rate.

(2) Where, in the case of an association of persons or body of individuals asaforesaid [not being a case falling under sub-section (1)], - (i) the totalincome of any member thereof for the previous year (excluding his share fromsuch association or body) exceeds the maximum amount which is not chargeableto tax in the case of that member under the Finance Act of the relevant year,tax shall be charged on the total income of the association or body at themaximum marginal rate;

(ii) Any member or members thereof is or are chargeable to tax at a rate orrates which is or are higher than the maximum marginal rate, tax shall becharged on that portion or portions of the total income of the association orbody which is or are relatable to the share or shares of such member ormembers at such higher rate or rates, as the case may be, and the balance ofthe total income of the association or body shall be taxed at the maximummarginal rate.

Explanation : For the purposes of this section, the individual shares of themembers of an association of persons or body of individuals in the whole orany part of the income of such association or body shall be deemed to beindeterminate or unknown if such shares (in relation to the whole or any partof income) are indeterminate or unknown on the date of formation of suchassociation or body or at any time thereafter.

357. Executors.

§357.Executors.

Section 168

EXECUTORS.


(1) Subject as hereinafter provided, the income of the estate of a deceasedperson shall be chargeable to tax in the hands of the executor, -

(a) If there is only one executor, then, as if the executor were anindividual; or

(b) If there are more executors than one, then, as if the executors were anassociation of persons; and for the purposes of this Act, the executor shallbe deemed to be resident or non-resident according as the deceased person wasa resident or non-resident during the previous year in which his death tookplace.

(2) The assessment of an executor under this section shall be made separatelyfrom any assessment that may be made on him in respect of his own income.

(3) Separate assessments shall be made under this section on the total incomeof each completed previous year or part thereof as is included in the periodfrom the date of the death to the date of complete distribution to thebeneficiaries of the estate according to their several interests.

(4) In computing the total income of any previous year under this section, anyincome of the estate of that previous year distributed to, or applied to thebenefit of, any specific legatee of the estate during that previous year shallbe excluded; but the income so excluded shall be included in the total incomeof the previous year of such specific legatee.

Explanation : In this section, "executor" includes an administrator or otherperson administering the estate of a deceased person.

358. Right of Executor to recover Tax paid.

§358.Right of Executor to recover Tax paid.Section 169

RIGHT OF EXECUTOR TO RECOVER TAX PAID.

The provisions of section 162 shall, so far as may be, apply in the case of anexecutor in respect of tax paid or payable by him as they apply in the case ofa representative assessee.


359. Succession to Business otherwise than on death.

§359.Succession to Business otherwise than on death.Section 170

SUCCESSION TO BUSINESS OTHERWISE THAN ON DEATH.

(1) Where a person carrying on any business or profession (such personhereinafter in this section being referred to as the predecessor) has beensucceeded therein by any other person (hereinafter in this section referred toas the successor) who continues to carry on that business or profession, -

(a) The predecessor shall be assessed in respect of the income of the previousyear in which the succession took place up to the date of succession;

(b) The successor shall be assessed in respect of the income of the previousyear after the date of succession.

(2) Notwithstanding anything contained in sub-section (1), when thepredecessor cannot be found, the assessment of the income of the previous yearin which the succession took place up to the date of succession and of theprevious year preceding that year shall be made on the successor in likemanner and to the same extent as it would have been made on the predecessor,and all the provisions of this Act shall, so far as may be, apply accordingly.

(3) When any sum payable under this section in respect of the income of suchbusiness or profession for the previous year in which the succession tookplace upto the date of succession or for the previous year preceding thatyear, assessed on the predecessor, cannot be recovered from him, the AssessingOfficer shall record a finding to that effect and the sum payable by thepredecessor shall thereafter be payable by and recoverable from the successor,and the successor shall be entitled to recover from the predecessor any sum sopaid.

(4) Where any business or profession carried on by a Hindu undivided family issucceeded to, and simultaneously with the succession or after the successionthere has been a partition of the joint family property between the members orgroups of members, the tax due in respect of the income of the business orprofession succeeded to, up to the date of succession, shall be assessed andrecovered in the manner provided in section 171, but without prejudice to theprovisions of this section.

Explanation : For the purposes of this section, "income" includes any gainaccruing from the transfer, in any manner whatsoever, of the business or


profession as a result of the succession.

360. Assessment after partition of a Hindu undividedfamily.

§360.Assessment after partition of a Hindu undivided family.Section 171

ASSESSMENT AFTER PARTITION OF A HINDU UNDIVIDED FAMILY.

(1) A Hindu family hitherto assessed as undivided shall be deemed for thepurposes of this Act to continue to be a Hindu undivided family, except whereand in so far as a finding of partition has been given under this section inrespect of the Hindu undivided family.

(2) Where, at the time of making an assessment under section 143 or section144, it is claimed by or on behalf of any member of a Hindu family assessed asundivided that a partition, whether total or partial, has taken place amongthe members of such family, the [ 1630b Assessing Officer 1630b ] shall makean inquiry there into after giving notice of the inquiry to all the members ofthe family.

(3) On the completion of the inquiry, the [ 1630c Assessing Officer 1630c ]shall record a finding as to whether there has been a total or partialpartition of the joint family property, and, if there has been such apartition, the date on which it has taken place.

(4) Where a finding of total or partial partition has been recorded by the [1630d Assessing Officer 1630d ] under this section, and the partition tookplace during the previous year, - (a) the total income of the joint family inrespect of the period up to the date of partition shall be assessed as if nopartition had taken place; and

(b) each member or group of members shall, in addition to any tax for which heor it may be separately liable and notwithstanding anything contained inclause (2) of section 10, be jointly and severally liable for the tax on theincome so assessed.

(5) Where a finding of total or partial partition has been recorded by the [1630e Assessing Officer 1630e ] under this section, and the partition tookplace after the expiry of the previous year, the total income of the previousyear of the joint family shall be assessed as if no partition had taken place;and the provisions of clause (b) of sub-section (4), shall, so far as may be,


apply to the case.

(6) Notwithstanding anything contained in this section, if the AssessingOfficer finds after completion of the assessment of a Hindu undivided familythat the family has already effected a partition, whether total or partial,the Assessing Officer shall proceed to recover the tax from every person whowas a member of the family before the partition, and every such person shallbe jointly and severally liable for the tax on the income so assessed.

(7) For the purposes of this section, the several liability of any member orgroup of members thereunder shall be computed according to the portion of thejoint family property allotted to him or it at the partition, whether total orpartial.

(8) The provisions of this section shall, so far as may be, apply in relationto the levy and collection of any penalty, interest, fine or other sum inrespect of any period up to date of the partition, whether total or partial,of a Hindu undivided family as they apply in relation to the levy andcollection of tax in respect of any such period.

(9) Notwithstanding anything contained in the foregoing provisions of thissection, where a partial partition has taken place after the 31st day ofDecember, 1978 among the members of a Hindu undivided family hitherto assessedas undivided, - (a) no claim that such partial partition has taken place shallbe inquired into under sub-section (2) and no finding shall be recorded undersub-section (3) that such partial partition had taken place and any findingrecorded under sub-section (3) to that effect whether before or after the 18thday of June, 1980, being the date of introduction of the Finance (No. 2) Bill,1980, shall be null and void;

(b) Such family shall continue to be liable to be assessed under this Act asif no such partial partition had taken place;

(c) Each member or group of members of such family immediately before suchpartial partition and the family shall be jointly and severally liable for anytax, penalty, interest, fine or other sum payable under this Act by the familyin respect of any period, whether before or after such partial partition;

(d) The several liability of any member or group of members aforesaid shall becomputed according to the portion of the joint family property allotted to himor it at such partial partition, and the provisions of this Act shall applyaccordingly.

Explanation : In this section, -


(a) "Partition" means - (i) Where the property admits of a physical division,a physical division of the property, but a physical division of the incomewithout a physical division of the property producing the income shall not bedeemed to be a partition; or

(ii) Where the property does not admit of a physical division, then suchdivision as the property admits of, but a mere severance of status shall notbe deemed to be a partition;

(b) "Partial partition" means a partition which is partial as regards thepersons constituting the Hindu undivided family, or the properties belongingto the Hindu undivided family, or both.

361. Shipping Business of Non-Residents.

§361.Shipping Business of Non-Residents.

Section 172

SHIPPING BUSINESS OF NON-RESIDENTS.

(1) The provisions of this section shall, notwithstanding anything contained in the otherprovisions of this Act, apply for the purpose of the levy and recovery of tax in the case of anyship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail orgoods shipped at a port in India.

(2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India,seven and a half per cent of the amount paid or payable on account of such carriage to the owneror the charterer or to any person on his behalf, whether that amount is paid or payable in or out ofIndia, shall be deemed to be income accruing in India to the owner or charterer on account ofsuch carriage.

(3) Before the departure from any port in India of any such ship, the master of the ship shallprepare and furnish to the Assessing Officer a return of the full amount paid or payable to theowner or charterer or any person on his behalf, on account of the carriage of all passengers,livestock, mail or goods shipped at that port since the last arrival of the ship thereat : Providedthat where the Assessing Officer is satisfied that it is not possible for the master of the ship tofurnish the return required by this sub-section before the departure of the ship from the port andprovided the master of the ship has made satisfactory arrangements for the filing of the returnand payment of the tax by any other person on his behalf, the Assessing Officer may, if thereturn is filed within thirty days of the departure of the ship, deem the filing of the return by theperson so authorised by the master as sufficient compliance with this sub-section.


(4) On receipt of the return, the Assessing Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates in force applicable tothe total income of a company which has not made the arrangement referred to in section 194and such sum shall be payable by the master of the ship.

(5) For the purpose of determining the tax payable under sub-section (4), the Assessing Officermay call for such account or documents as he may require.

(6) A port clearance shall not be granted to the ship until the Collector of Customs, or otherOfficer duly authorised to grant the same, is satisfied that the tax assessable under this sectionhas been duly paid or that satisfactory arrangements have been made for the payment thereof.

(7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship fromclaiming before the expiry of the assessment year relevant to the previous year in which the dateof departure of the ship from the Indian port falls, that an assessment be made of his total incomeof the previous year and the tax payable on the basis thereof be determined in accordance withthe other provisions of this Act, and if he so claims, any payment made under this section inrespect of the passengers, livestock, mail or goods shipped at Indian ports during that previousyear shall be treated as a payment in advance of the tax leviable for that assessment year, and thedifference between the sum so paid and the amount of tax found payable by him on suchassessment shall be paid by him or refunded to him, as the case may be.

(8) For the purposes of this section, the amount referred to in sub-section (2) shall include theamount paid or payable by way of demurrage charge or handling charge or any other amount ofsimilar nature.

362. Recovery of Tax in respect of Non-Resident from hisassets.

§ 362. Recovery of Tax in respect of Non-Resident from his assets.Section 173

RECOVERY OF TAX IN RESPECT OF NON-RESIDENT FROM HIS ASSETS.

Without prejudice to the provisions of sub-section (1) of section 161 or of section 167, where theperson entitled to the income referred to in clause (i) of sub-section (1) of section 9 is a non-resident, the tax chargeable thereon, whether in his name or in the name of his agent who isliable as a representative assessee, may be recovered by deduction under any of the provisions ofChapter XVII-B and any arrears of tax may be recovered also in accordance with the provisionsof this Act from any assets of the non-resident which are, or may at any time come, within India.


363. Assessment of persons leaving India.

§ 363. Assessment of persons leaving India.Section 174

ASSESSMENT OF PERSONS LEAVING INDIA.

(1) Notwithstanding anything contained in section 4, when it appears to the Assessing Officerthat any individual may leave India during the current assessment year or shortly after its expiryand that he has no present intention of returning to India, the total income of such individual forthe period from the expiry of the previous year for that assessment year up to the probable dateof his departure from India shall be chargeable to tax in that assessment year.

(2) The total income of each completed previous year or part of any previous year included insuch period shall be chargeable to tax at the rate or rates in force in that assessment year, andseparate assessments shall be made in respect of each completed previous year or part of anyprevious year.

(3) The Assessing Officer may estimate the income of such individual for such period or any partthereof, where it cannot be readily determined in the manner provided in this Act.

(4) For the purpose of making an assessment under sub-section (1), the Assessing Officer mayserve a notice upon such individual requiring him to furnish within such time, not being less thanseven days, as may be specified in the notice, a return in the same form and verified in the samemanner as a return under clause (i) of sub-section (1) of section 142, setting forth his totalincome for each completed previous year comprised in the period referred to in sub-section (1)and his estimated total income for any part of the previous year comprised in that period; and theprovisions of this Act shall, so far as may be, and subject to the provisions of this section, applyas if the notice were a notice issued under clause (i) of sub-section (1) of section 142.

(5) The tax chargeable under this section shall be in addition to the tax, if any, chargeable underany other provision of this Act.

(6) Where the provisions of sub-section (1) are applicable, any notice issued by the [AssessingOfficer] under [clause (i) of sub-section (1) of section 142] section 148 in respect of any taxchargeable under any other provision of this Act may, notwithstanding anything contained in[clause (i) of sub-section (1) of section 142] section 148, as the case may be, require thefurnishing of return by such individual within such period, not being less than seven days, as the[Assessing Officer] may think proper.

364. Assessment of persons likely to transfer property toavoid tax.


§ 364. Assessment of persons likely to transfer property to avoid tax.Section 175

ASSESSMENT OF PERSONS LIKELY TO TRANSFER PROPERTY TO AVOID TAX.

Notwithstanding anything contained in section 4, if it appears to the Assessing Officer duringany current assessment year that any person is likely to charge, sell, transfer, dispose of orotherwise part with any of his assets with a view to avoiding payment of any liability, under theprovisions of this Act, the total income of such person for the period from the expiry of theprevious year for that assessment year to the date when the Assessing Officer commencesproceedings under this section shall be chargeable to tax in that assessment year, and theprovisions of sub-sections (2), (3), (4), (5) and (6) of section 174 shall, so far as may be, apply toany proceedings in the case of any such person as they apply in the case of persons leaving India.

365. Discontinued Business.

§ 365. Discontinued Business.Section 176

DISCONTINUED BUSINESS.

(1) Notwithstanding anything contained in section 4, where any business or profession isdiscontinued in any assessment year, the income of the period from the expiry of the previousyear for that assessment year up to the date of such discontinuance may, at the discretion of theAssessing Officer be charged to tax in that assessment year.

(2) The total income of each completed previous year or part of any previous year included insuch period shall be chargeable to tax at the rate or rates in force in that assessment year, andseparate assessments shall be made in respect of each such completed previous year or part ofany previous year.

(3) Any person discontinuing any business or profession shall give to the Assessing Officernotice of such discontinuance within fifteen days thereof.

(3A) Where any business is discontinued in any year, any sum received after the discontinuanceshall be deemed to be the income of the recipient and charged to tax accordingly in the year ofreceipt, if such sum would have been included in the total income of the person who carried onthe business had such sum been received before such discontinuance.

(4) Where any profession is discontinued in any year on account of the cessation of theprofession by, or the retirement or death of, the person carrying on the profession, any sumreceived after the discontinuance shall be deemed to be the income of the recipient and charged


to tax accordingly in the year of receipt, if such sum would have been included in the totalincome of the aforesaid person had it been received before such discontinuance.

(5) Where an assessment is to be made under the provisions of this section, the Assessing Officermay serve on the person whose income is to be assessed or, in the case of a firm, on any personwho was a partner of such firm at the time of its discontinuance or, in the case of a company, onthe principal officer thereof, a notice containing all or any of the requirements which may beincluded in a notice under clause (i) of sub-section (1) of section 142 and the provisions of thisAct shall, so far as may be, apply accordingly as if the notice were a notice issued under clause(i) of sub-section (1) of section 142.

(6) The tax chargeable under this section shall be in addition to the tax, if any, chargeable underany other provision of this Act.

(7) Where the provisions of sub-section (1) are applicable, any notice issued by the AssessingOfficer under clause (i) of sub-section (1) of section 142 or section 148 in respect of any taxchargeable under any other provisions of this Act may, notwithstanding anything contained inclause (i) of sub-section (1) of section 142 or section 148, as the case may be, require thefurnishing of the return by the person to whom the aforesaid notices are issued within suchperiod, not being less than seven days, as the Assessing Officer may think proper.

366. Association dissolved or business discontinued.

§ 366. Association dissolved or business discontinued.Section 177

ASSOCIATION DISSOLVED OR BUSINESS DISCONTINUED.

(1) Where any business or profession carried on by an association of persons has beendiscontinued or where an association of persons is dissolved, the Assessing Officer shall make anassessment of the total income of the association of persons as if no such discontinuance ordissolution had taken place, and all the provisions of this Act, including the provisions relating tothe levy of a penalty or any other sum chargeable under any provisions of this Act, shall apply,so far as may be, to such assessment.

(2) Without prejudice to the generality of the foregoing sub-section, if the Assessing Officer orthe Commissioner (Appeals) in the course of any proceeding under this Act in respect of anysuch association of persons as is referred to in that sub-section is satisfied that the association ofpersons was guilty of any of the acts specified in Chapter XXI, he may impose or direct theimposition of a penalty in accordance with the provisions of that Chapter.

(3) Every person who was at the time of such discontinuance or dissolution a member of theassociation of persons, and the legal representative of any such person who is deceased, shall bejointly and severally liable for the amount of tax, penalty or other sum payable, and all the


provisions of this Act, so far as may be, shall apply to any such assessment or imposition ofpenalty or other sum.

(4) Where such discontinuance or dissolution takes place after any proceedings in respect of anassessment year have commenced, the proceedings may be continued against the personsreferred to in sub-section (3) from the stage at which the proceedings stood at the time of suchdiscontinuance or dissolution, and all the provisions of this Act shall, so far as may be, applyaccordingly.

(5) Nothing in this section shall affect the provisions of sub-section (6) of section 159.

367. Company in Liquidation.

§367.Company in Liquidation.Section 178

COMPANY IN LIQUIDATION.

(1) Every person -

(a) Who is the liquidator of any company which is being wound up, whetherunder the orders of a court or otherwise; or

(b) Who has been appointed the receiver of any assets of a company,(hereinafter referred to as the liquidator) shall, within thirty days after hehas become such liquidator, give notice of his appointment as such to theAssessing Officer who is entitled to assess the income of the company.

(2) The Assessing Officer shall, after making such inquiries or calling forsuch information as he may deem fit, notify to the liquidator within threemonths from the date on which he receives notice of the appointment of theliquidator the amount which, in the opinion of the Assessing Officer, would besufficient to provide for any tax which is then, or is likely thereafter tobecome, payable by the company.

(3) The liquidator -

(a) Shall not, without the leave of the Chief Commissioner or Commissioner,part with any of the assets of the company or the properties in his handsuntil he has been notified by the Assessing Officer under sub-section (2); and

(b) On being so notified, shall set aside an amount equal to the amountnotified and, until he so sets aside such amount, shall not part with any of


the assets of the company or the properties in his hands :

Provided that nothing contained in this sub-section shall debar the liquidatorfrom parting with such assets or properties for the purpose of the payment ofthe tax payable by the company or for making any payment to secured creditorswhose debts are entitled under law to priority of payment over debts due toGovernment on the date of liquidation or for meeting such costs and expensesof the winding up of the company as are in the opinion of the ChiefCommissioner or Commissioner reasonable.

(4) If the liquidator fails to give the notice in accordance with sub-section(1) or fails to set aside the amount as required by sub-section (3) or partswith any of the assets of the company or the properties in his hands incontravention of the provisions of that sub-section, he shall be personallyliable for the payment of the tax which the company would be liable to pay :

Provided that if the amount of any tax payable by the company is notifiedunder sub-section (2), the personal liability of the liquidator under thissub-section shall be to the extent of such amount.

(5) Where there are more liquidators than one, the obligations and liabilitiesattached to the liquidator under this section shall attach to all theliquidators jointly and severally.

(6) The provisions of this section shall have effect notwithstanding anythingto the contrary contained in any other law for the time being in force.

368. Liability of Directors of Private Company inLiquidation.

§368.Liability of Directors of Private Company in Liquidation.Section 179

LIABILITY OF DIRECTORS OF PRIVATE COMPANY IN LIQUIDATION.

(1) Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956),where any tax due from a private company in respect of any income of anyprevious year or from any other company in respect of any income of anyprevious year during which such other company was a private company cannot berecovered, then, every person who was a director of the private company at anytime during the relevant previous year shall be jointly and severally liablefor the payment of such tax unless he proves that the non-recovery cannot beattributed to any gross neglect, misfeasance or breach of duty on his part in


relation to the affairs of the company.

(2) Where a private company is converted into a public company and the taxassessed in respect of any income of any previous year during which suchcompany was a private company cannot be recovered, then, nothing contained insub-section (1) shall apply to any person who was a director of such privatecompany in relation to any tax due in respect of any income of such privatecompany assessable for any assessment year commencing before the 1st day ofApril, 1962.

369. Royalties or Copyright Fees for literary orartistic work.

§369.Royalties or Copyright Fees for literary or artistic work.Section 180

ROYALTIES OR COPYRIGHT FEES FOR LITERARY OR ARTISTIC WORK.

Where the time taken by the author of a literary or artistic work in themaking thereof is more than twelve months, the amount received or receivableby him during any previous year on account of any lump sum consideration forthe assignment or grant of any of his interests in the copyright of that workor of royalties or copyright fees (whether receivable in lump sum orotherwise), in respect of that work shall, if he so claims, be allocated forpurposes of assessment in such manner and to such period as may be prescribed1646 .

Provided that nothing contained in this section shall apply in relation to theprevious year relevant to the assessment year commencing on or after the 1stday of April, 2000.

Explanation : For the purposes of this section, the expression "author"includes a joint author, and the expression "lump sum", in regard to royaltiesor copyright fees, includes an advance payment on account of such royalties orcopyright fees which is not returnable.

370. Consideration for Know-How.

§370.Consideration for Know-How.Section 180A

CONSIDERATION FOR KNOW-HOW.


Where the time taken by an individual, who is resident in India, fordeveloping any know-how is more than twelve months, he may elect that thegross amount of any lump sum consideration received or receivable by himduring the previous year relevant to the assessment year commencing on the 1stday of April, 2000 or earlier assessment years for allowing use of such know-how shall be treated for the purposes of charging income-tax for that year andfor each of the two immediately preceding previous years as if one-thirdthereof were included in his income chargeable to tax for each of those yearsrespectively and if he so elects, notwithstanding anything contained in anyother provision of this Act, -

(a) Such gross amount shall be so treated, and

(b) The assessments for each of the two preceding previous years shall, ifmade, be accordingly rectified under section 154, the period of four yearsspecified in sub-section (7) of that section being reckoned from the end ofthe financial year in which the assessment relating to the previous year inwhich the amount was received or receivable by such individual is made.

Explanation : For the purposes of this section, the expression "know-how" hasthe meaning assigned to it in section 35AB.

371. Omitted.


181 OMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4-1989

372. Omitted.


ASSESSMENT OF REGISTERED FIRMS.

182 OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-4-1993

373. Omitted.

§373.Omitted.


Section 183

ASSESSMENT OF UNREGISTERED FIRMS.


374. Assessment as a firm.

§374.Assessment as a firm.Section 184

ASSESSMENT AS A FIRM.

(1) A firm shall be assessed as a firm for the purposes of this Act, if -

(i) The partnership is evidenced by an instrument; and

(ii) The individual shares of the partners are specified in that instrument.

(2) A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the return of income of the firm of the previousyear relevant to the assessment year commencing on or after the 1st day ofApril, 1993, in respect of which assessment as a firm is first sought.

Explanation : For the purposes of this sub-section, the copy of the instrumentof partnership shall be certified in writing by all the partners (not beingminors) or, where the return is made after the dissolution of the firm, by allpersons (not being minors) who were partners in the firm immediately beforeits dissolution and by the legal representative of any such partner who isdeceased.

(3) Where a firm is assessed as such for any assessment year, it shall beassessed in the same capacity for every subsequent year if there is no changein the constitution of the firm or the shares of the partners as evidenced bythe instrument of partnership on the basis of which the assessment as a firmwas first sought.

(4) Where any such change had taken place in the previous year, the firm shallfurnish a certified copy of the revised instrument of partnership along withthe return of income for the assessment year relevant to such previous yearand all the provisions of this section shall apply accordingly.

(5) Notwithstanding anything contained in the foregoing provisions of this


section, where, in respect of any assessment year, there is on the part of afirm any such failure as is mentioned in section 144, the firm shall not beassessed as such for the said assessment year and, thereupon, the firm shallbe assessed in the same manner as an association of persons, and all theprovisions of this Act shall apply accordingly.

375. Assessment when section 184 not complied with.

§375.Assessment when section 184 not complied with.Section 185

ASSESSMENT WHEN SECTION 184 NOT COMPLIED WITH.

Where a firm does not comply with the provisions of section 184 for anyassessment year, the firm shall be assessed for that assessment year in thesame manner as an association of persons, and all the provisions of this Actshall apply accordingly.

376. Change in Constitution of a Firm.

§376.Change in Constitution of a Firm.

Section 187

CHANGE IN CONSTITUTION OF A FIRM.

(1) Where at the time of making an assessment under section 143 or section 144it is found that a change has occurred in the constitution of a firm, theassessment shall be made on the firm as constituted at the time of making theassessment :

(2) For the purposes of this section, there is a change in the constitution ofthe firm - (a) If one or more of the partners cease to be partners or one ormore new partners are admitted, in such circumstances that one or more of thepersons who were partners of the firm before the change continue as partner orpartners after the change; or

(b) Where all the partners continue with a change in their respective sharesor in the shares of some of them :

Provided that nothing contained in clause (a) shall apply to a case where the


firm is dissolved on the death of any of its partners.

377. Succession of one firm by another firm.

§377.Succession of one firm by another firm.Section 188

SUCCESSION OF ONE FIRM BY ANOTHER FIRM.

Where a firm carrying on a business or profession is succeeded by anotherfirm, and the case is not one covered by section 187, separate assessmentsshall be made on the predecessor firm and the successor firm in accordancewith the provisions of section 170.

378. Joint and Several Liability of Partners for Taxpayable by firm.

§378.Joint and Several Liability of Partners for Tax payable by firm.Section 188A

JOINT AND SEVERAL LIABILITY OF PARTNERS FOR TAX PAYABLE BY FIRM.

Every person who was, during the previous year, a partner of a firm, and thelegal representative of any such person who is deceased, shall be jointly andseverally liable along with the firm for the amount of tax, penalty or othersum payable by the firm for the assessment year to which such previous year isrelevant, and all the provisions of this Act, so far as may be, shall apply tothe assessment of such tax or imposition or levy of such penalty or other sum.

379. Firm Dissolved or Business Discontinued.

§379.Firm Dissolved or Business Discontinued.

Section 189

FIRM DISSOLVED OR BUSINESS DISCONTINUED.

(1) Where any business or profession carried on by a firm has beendiscontinued or where a firm is dissolved, the Assessing Officer shall make anassessment of the total income of the firm as if no such discontinuance or


dissolution had taken place, and all the provisions of this Act, including theprovisions relating to the levy of a penalty or any other sum chargeable underany provision of this Act, shall apply, so far as may be, to such assessment.

(2) Without prejudice to the generality of the foregoing sub-section, if theAssessing Officer or the Commissioner (Appeals) in the course of anyproceeding under this Act in respect of any such firm as is referred to inthat sub-section is satisfied that the firm was guilty of any of the actsspecified in Chapter XXI, he may impose or direct the imposition of a penaltyin accordance with the provisions of that Chapter.

(3) Every person who was at the time of such discontinuance or dissolution apartner of the firm, and the legal representative of any such person who isdeceased, shall be jointly and severally liable for the amount of tax, penaltyor other sum payable, and all the provisions of this Act, so far as may be,shall apply to any such assessment or imposition of penalty or other sum.

(4) Where such discontinuance or dissolution takes place after any proceedingsin respect of an assessment year have commenced, the proceedings may becontinued against the persons referred to in sub-section (3) from the stageatwhich the proceedings stood at the time of such discontinuance ordissolution, and all the provisions of this Act shall, so far as may be, applyaccordingly.

(5) Nothing in this section shall affect the provisions of sub-section (6) ofsection 159.

380. Provisions applicable to past assessments offirms.

§380.Provisions applicable to past assessments of firms.Section 189A

PROVISIONS APPLICABLE TO PAST ASSESSMENTS OF FIRMS.

In relation to the assessment of any firm and its partners for the assessmentyear commencing on the 1st day of April, 1992, or any earlier assessment year,the provisions of this Chapter as they stood immediately before the 1st day ofApril, 1993, shall continue to apply.

381. Deduction at source and advance payment.


§381.Deduction at source and advance payment.Section 190

DEDUCTION AT SOURCE AND ADVANCE PAYMENT.

(1) Notwithstanding that the regular assessment in respect of any income is tobe made in later assessment year, the tax on such income shall be payable bydeduction or collection at source or by advance payment, as the case may be,in accordance with the provisions of this Chapter.

(2) Nothing in this section shall prejudice the charge of tax on such incomeunder the provisions of sub-section (1) of section 4.

382. Direct Payment.

§382.Direct Payment.Section 191

DIRECT PAYMENT.

In the case of income in respect of which provision is not made under thisChapter for deducting income-tax 1673 at the time of payment, and in any casewhere income-tax has not been deducted in accordance with the provisions ofthis Chapter, income-tax shall be payable by the assessee direct.

383. Salary.

§383.Salary.

Section 192

SALARY.

(1) Any person responsible for paying any income chargeable under the head"Salaries" 1676 shall, at the time of payment, deduct income-tax on the amountpayable at the average rate of income-tax computed on the basis of the ratesin force for the financial year in which the payment is made on the estimatedincome of the assessee under this head for that financial year.

(2) 1681 Where, during the financial year, an assessee is employedsimultaneously under more than one employer, or where he has held successively


employment under more than one employer, he may furnish to the personresponsible for making the payment referred to in sub-section (1) (being oneof the said employers as the assessee may, having regard to the circumstancesof his case, choose), such details of the income under the head "Salaries" dueor received by him from the other employer or employers, the tax deducted atsource therefrom and such other particulars, in such form and verified in suchmanner as may be prescribed, and thereupon the person responsible for makingthe payment referred to above shall take into account the details so furnishedfor the purposes of making the deduction under sub-section (1).

(2A) Where the assessee, being a Government servant or an employee in acompany, co-operative society, local authority, university, institution,association or body, is entitled to the relief under sub-section (1) ofsection 89, he may furnish to the person responsible for making the paymentreferred to in sub-section (1), such particulars, in such form and verified insuch manner as may be prescribed 1683 , and thereupon the person responsibleas aforesaid shall compute the relief on the basis of such particulars andtake it into account in making the deduction under sub-section (1).

Explanation : For the purposes of this sub-section, "University" means aUniversity established or incorporated by or under a Central, State orProvincial Act, and includes an institution declared under section 3 of theUniversity Grants Commission Act, 1956 (3 of 1956), to be a university for thepurposes of that Act.

(2B) Where an assessee who receives any income chargeable under the head"Salaries" has, in addition, any income chargeable under any other head ofincome (not being a loss under any such head other than the loss under thehead "income from house property") for the same financial year, he may send tothe person responsible for making the payment referred to in sub-section (1)or particulars of - (a) Such other income and of any tax deducted thereonunder any other provision of this Chapter;

(b) The loss, if any, under the head "Income from house property," in suchform and verified in such manner as may be prescribed, and thereupon theperson responsible as aforesaid shall take -

(i) Such other income and tax, if any, deducted thereon; and

(ii) The loss, if any, under the head "Income from house property", also intoaccount for the purposes of making the deduction under sub-section (1) :

Provided that this sub-section shall not in any case have the effect ofreducing the tax deductible except where the loss under the head "Income fromhouse property" has been taken into account, from income under the head


"Salaries" below the amount that would be so deductible if the other incomeand the tax deducted thereon had not been taken into account.

(3) The person responsible for making the payment referred to in sub-section(1) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at thetime of making any deduction, increase or reduce the amount to be deductedunder this section for the purpose of adjusting any excess or deficiencyarising out of any previous deduction or failure to deduct during thefinancial year.

(4) The trustees of a recognised provident fund, or any person authorised bythe regulations of the fund to make payment of accumulated balances due toemployees, shall, in cases where sub-rule (1) of rule 9 of Part A of theFourth Schedule applies, at the time an accumulated balance due to an employeeis paid, make therefrom the deduction provided in rule 10 of Part A of theFourth Schedule.

(5) Where any contribution made by an employer, including interest on suchcontributions, if any, in an approved superannuation fund is paid to theemployee, tax on the amount so paid shall be deducted by the trustees of thefund to the extent provided in rule 6 of Part B of the Fourth Schedule.

(6) For the purposes of deduction of tax on salary payable in foreigncurrency, the value in rupees of such salary shall be calculated at theprescribed rate of exchange.

384. Interest on Securities.

§384.Interest on Securities.Section 193

INTEREST ON SECURITIES.

The person responsible for paying any income by way of interest on securitiesshall, at the time of credit of such income to the account of the payee or atthe time of payment thereof in cash or by issue of a cheque or draft or by anyother mode, whichever is earlier, deduct income-tax at the rates in force onthe amount of the interest payable :

Provided that no tax shall be deducted from - (i) Any interest payable on 4-1/4 per cent National Defence Bonds, 1972, where the bonds are held by anindividual, not being a non-resident; or


(ia) Any interest payable to an individual on 4-1/4 per cent National DefenceLoan, 1968 or 4-3/4 per cent. National Defence Loan, 1972; or

(ib) any interest payable on National Development Bonds; or

(iia) Any interest payable on 7-Year National Savings Certificates (IV Issue);or

(iib) Any interest payable on such debentures, issued by any institution orauthority, or any public sector company, or any co-operative society(including a co-operative land mortgage bank or a co-operative landdevelopment bank), as the Central Government may, by notification in theOfficial Gazette, specify in this behalf;

(iii) Any interest payable on 6-1/2 per cent Gold Bonds, 1977 or 7 per centGold Bonds, 1980, where the bonds are held by an individual not being a non-resident, and the holder thereof makes a declaration in writing before theperson responsible for paying the interest that the total nominal value of the6-1/2 per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent GoldBonds, 1980 held by him (including such bonds, if any, held on his behalf byany other person) did not in either case exceed ten thousand rupees at anytime during the period to which the interest relates;

(iv) Any interest payable on any security of the Central Government or a StateGovernment.

(v) Any interest payable to an individual, who is resident in India, ondebentures issued by a company in which the public are substantiallyinterested, being debentures listed on a recognised stock exchange in India inaccordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956),and any rules made thereunder, if -

(a) The interest is paid by the company by an account payee cheque; and

(b) The amount of such interest or, as the case may be, the aggregate of theamounts of such interest paid or likely to be paid during the financial yearby the company to such individual does not exceed two thousand and fivehundred rupees.

Explanation: For the purposes of this section, where any income by way ofinterest on securities is credited to any account, whether called "Interestpayable account" or "Suspense account" or by any other name, in the books ofaccount of the person liable to pay such income, such crediting shall bedeemed to be credit of such income to the account of the payee and theprovisions of this section shall apply accordingly.


385. Dividends.

§385.Dividends.

Section 194

DIVIDENDS.

The principal officer of an Indian company or a company which has made theprescribed arrangements for declaration and payment of dividends (includingdividends on preference shares) within India, shall, before making any paymentin cash or before issuing any cheque or warrant in respect of any dividend orbefore making any distribution or payment to a shareholder who is resident inIndia, of any dividend within the meaning of sub-clause (a) or sub-clause (b)or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) ofsection 2, deduct from the amount of such dividend, income-tax at the rates inforce:

Provided that no such deduction shall be made in the case of a shareholder,being an individual, of a company in which the public are substantiallyinterested, if - (a) The dividend is paid by such company by an account payeecheque; and

(b) The amount of such dividend or, as the case may be, the aggregate of theamounts of such dividend distributed or paid or likely to be distributed orpaid during the financial year by the company to the shareholder, does notexceed two thousand five hundred rupees.

Provided further that no such deduction shall be made in respect of anydividends referred to in section 115-O.

386. Interest other than "Interest on Securities".

§386.Interest other than "Interest on Securities".

Section 194A

INTEREST OTHER THAN "INTEREST ON SECURITIES".


(1) Any person, not being an individual or a Hindu undivided family, who is responsible forpaying to a resident any income by way of interest other than income by way of interest onsecurities, shall, at the time of credit of such income to the account of the payee or at the time ofpayment thereof in cash or by issue of a cheque or draft or by any other mode, whichever isearlier, deduct income-tax thereon at the rates in force :

Explanation : For the purposes of this section, where any income by way of interest as aforesaidis credited to any account, whether called "Interest payable account" or "Suspense account" or byany other name, in the books of account of the person liable to pay such income, such creditingshall be deemed to be credit of such income to the account of the payee and the provisions of thissection shall apply accordingly.

(3) The provisions of sub-section (1) shall not apply -

(i) Where the amount of such income or, as the case may be, the aggregate of the amounts ofsuch income credited or paid or likely to be credited or paid during the financial year by theperson referred to in sub-section (1) To the account of, or to, the payee, does not exceed twothousand five hundred rupees:

Provided that in respect of the income credited or paid in respect of - (a) Time deposits with abanking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (includingany bank or banking institution referred to in section 51 of that Act); or

(b) Time deposits with a co-operative society engaged in carrying on the business of banking;

(c) Deposits with a public company which is formed and registered in India with the main objectof carrying on the business of providing long-term finance for construction or purchase of housesin India for residential purposes and which is for the time being approved by the CentralGovernment for the purpose of clause (viii) of sub-section (1) of section 36 the provisions of thisclause shall have effect as if for the words "two thousand five hundred rupees", the words "tenthousand rupees" had been substituted and the aforesaid amount shall be computed withreference to the income credited or paid by a branch of the banking company or the co-operativesociety or the public company, as the case may be;

(ii) To such income credited or paid before the 1st day of October, 1967;

(iii) To such income credited or paid to - (a) Any banking company to which the BankingRegulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying onthe business of banking (including a co-operative land mortgage bank), or

(b) Any financial corporation established by or under a Central, State or Provincial Act, or

(c) The Life Insurance Corporation of India established under the Life Insurance CorporationAct, 1956 (31 of 1956), or


(d) The Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or

(e) Any company or co-operative society carrying on the business of insurance, or

(f) Such other institution, association or body or class of institutions, associations or bodieswhich the Central Government may, for reasons to be recorded in writing, notify in this behalf inthe Official Gazette;

(iv) To such income credited or paid by a firm to a partner of the firm;

(v) To such income credited or paid by a co-operative society to a member thereof or to anyother co-operative society;

(vi) To such income credited or paid in respect of deposits under any scheme framed by theCentral Government and notified by it in this behalf in the Official Gazette;

(vii) To such income credited or paid in respect of deposits (other than time deposits made on orafter the 1st day of July, 1995) with a banking company to which the Banking Regulation Act,1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 ofthat Act);

(viia) To such income credited or paid in respect of, - (a) Deposits with a primary agriculturalcredit society or a primary credit society or a co-operative land mortgage bank or a co-operativeland development bank;

(b) Deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engagedin carrying on the business of banking;

(viii) To such income credited or paid by the Central Government under any provisions of thisAct, or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953),or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the SuperProfits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), orthe Interest-tax Act, 1974 (45 of 1974).

Explanation : For the purposes of clauses (i), (vii) and (viia), "time deposits" means deposits(excluding recurring deposits) repayable on the expiry of fixed periods.

(4) The person responsible for making the payment referred to in sub-section (1) may, at the timeof making any deduction, increase or reduce the amount to be deducted under this section for thepurpose of adjusting any excess or deficiency arising out of any previous deduction or failure todeduct during the financial year.


387. Winnings from lottery or crossword puzzle.

§ 387. Winnings from lottery or crossword puzzle.Section 194B

WINNINGS FROM LOTTERY OR CROSSWORD PUZZLE.

The person responsible for paying to any person any income by way of winnings from anylottery or crossword puzzle in an amount exceeding five thousand rupees shall, at the time ofpayment thereof, deduct income-tax thereon at the rates in force :

Provided that no deduction shall be made under this section from any payment made before the1st day of June, 1972;

Provided further that in a case where the winnings are wholly in kind or partly in cash and partlyin kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect ofwhole of the winnings, the person responsible for paying shall, before releasing the winnings,ensure that tax has been paid in respect of the winnings.

388. Winnings From Horse Race.

§ 388. Winnings From Horse Race.Section 194BB

WINNINGS FROM HORSE RACE.

Any person, being a bookmaker or a person to whom a licence has been granted by theGovernment under any law for the time being in force for horse racing in any race course or forarranging for wagering or betting in any race course, who is responsible for paying to any personany income by way of winnings from any horse race in an amount exceeding two thousand fivehundred rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates inforce :

Provided that no deduction shall be made under this section from any payment made before the1st day of June, 1978;

389. Payments to contractors and Sub-Contractors.

§ 389. Payments to contractors and Sub-Contractors.Section 194C

PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS.


(1) Any person responsible for paying any sum to any resident (hereafter in this section referredto as the contractor) for carrying out any work (including supply of labour for carrying out anywork) in pursuance of a contract between the contractor and -

(a) The Central Government or any State Government; or

(b) Any local authority; or

(c) Any corporation established by or under a Central, State or Provincial Act; or

(d) Any company; or

(e) Any co-operative society; or

(f) Any authority, constituted in India by or under any law, engaged either for the purpose ofdealing with and satisfying the need for housing accommodation or for the purpose of planning,development or improvement of cities, towns and villages, or for both; or

(g) Any society registered under the Societies Registration Act, 1860 (21 of 1860) or under anylaw corresponding to that Act in force in any part of India; or

(h) Any trust; or

(i) Any University established or incorporated by or under a Central, State or Provincial Act andan institution declared to be a University under section 3 of the University Grants CommissionAct, 1956 (3 of 1956); or

(j) Any firm, shall, at the time of credit of such sum to the account of the contractor or at thetime of payment thereof in cash or by issue of a cheque or draft or by any other mode, whicheveris earlier, deduct an amount equal to - (i) One per cent in case of advertising,

(ii) In any other case two per cent, of such sum as Income-tax on income comprised therein.

(2) Any person (being a contractor and not being an individual or a Hindu undivided family),responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supplyof labour for carrying out, the whole or any part of the work undertaken by the contractor or forsupplying whether wholly or partly any labour which the contractor has undertaken to supplyshall, at the time of credit of such sum to the account of the sub-contractor or at the time ofpayment thereof in cash or by issue of a cheque or draft or by any other mode, whichever isearlier, deduct an amount equal to one per cent of such sum as income-tax on income comprisedtherein.

Explanation I : For the purposes of sub-section (2), the expression "contractor" shall also include


a contractor who is carrying out any work (including supply of labour for carrying out any work)in pursuance of a contract between the contractor and the Government of a foreign State or aforeign enterprise or any association or body established outside India.

Explanation II : For the purposes of this section, where any sum referred to in sub-section (1) orsub-section (2) is credited to any account, whether called "Suspense account" or by any othername, in the books of account of the person liable to pay such income, such crediting shall bedeemed to be credit of such income to the account of the payee and the provisions of this sectionshall apply accordingly.

Explanation III : For the purposes of this section, the expression "work" shall also include - (a)Advertising;

(b) Broadcasting and telecasting including production of programmes for such broadcasting ortelecasting;

(c) Carriage of goods and passengers by any mode of transport other than by railways;

(d) Catering.

(3) No deduction shall be made under sub-section (1) or sub-section (2) from -

(i) Any sum credited or paid in pursuance of any contract the consideration for which does notexceed twenty thousand rupees; or

(ii) Any sum credited or paid before the 1st day of June, 1972; or

(iii) Any sum credited or paid before the 1st day of June 1973, in pursuance of a contractbetween the contractor and a co-operative society or in pursuance of a contract between suchcontractor and the sub-contractor in relation to any work (including supply of labour for carryingout any work) undertaken by the contractor for the co-operative society.

(4) Where the Assessing Officer is satisfied that the total income of the contractor or the sub-contractor justifies the deduction of income-tax at any lower rate or no deduction of income-tax,as the case may be, the Assessing Officer shall, on an application 1742 made by the contractor orthe sub-contractor in this behalf, give to him such certificate as may be appropriate.

(5) Where any such certificate is given, the person responsible for paying the sum referred to insub-section (1) or sub-section (2) shall, until such certificate is cancelled by the AssessingOfficer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the casemay be.

390. Insurance Commission.


§390.Insurance Commission.Section 194D

INSURANCE COMMISSION.

Any person responsible for paying to a resident any income by way ofremuneration or reward, whether by way of commission or otherwise, forsoliciting or procuring insurance business (including business relating to thecontinuance, renewal or revival of policies of insurance) shall, at the timeof credit of such income to the account of the payee or at the time of paymentthereof in cash or by issue of a cheque or draft or by any other mode,whichever is earlier, deduct income-tax thereon at the rates in force :

Provided that no deduction shall be made under this section from any suchincome credited or paid before the 1st day of June, 1973 :

Provided further that no deduction shall be made under this section in a casewhere the amount of such income or, as the case may be, the aggregate of theamounts of such income credited or paid or likely to be credited or paidduring the financial year to the account of, or to, the payee, does not exceedfive thousand rupees.

391. Payments to Non-Resident Sportsmen or SportsAssociations.

§391.Payments to Non-Resident Sportsmen or Sports Associations.Section 194E

PAYMENTS TO NON-RESIDENT SPORTSMEN OR SPORTS ASSOCIATIONS.

Where any income referred to in section 115BBA is payable to a non-residentsportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for makingthe payment shall, at the time of credit of such income to the account of thepayee or at the time of payment thereof in cash or by issue of a cheque ordraft or by any other mode, whichever is earlier, deduct income-tax thereon atthe rate of ten per cent.

392. Payments in respect of deposits under NationalSavings Scheme, etc.


§392.Payments in respect of deposits under National Savings Scheme, etc.Section 194EE

PAYMENTS IN RESPECT OF DEPOSITS UNDER NATIONAL SAVINGS SCHEME, ETC.

The person responsible for paying to any person any amount referred to inclause (a) of sub-section (2) of section 80CCA shall, at the time of paymentthereof, deduct income-tax thereon at the rate of twenty per cent :

Provided that no deduction shall be made under this section where the amountof such payment or, as the case may be, the aggregate amount of such paymentsto the payee during the financial year is less than two thousand five hundredrupees :

Provided further that nothing contained in this section shall apply to thepayment of the said amount to the heirs of the assessee.

393. Payments on Account of Repurchase of units byMutual Fund or Unit Trust Of India.

§393.Payments on Account of Repurchase of units by Mutual Fund or Unit TrustOf India.Section 194F

PAYMENTS ON ACCOUNT OF REPURCHASE OF UNITS BY MUTUAL FUND OR UNIT TRUST OFINDIA.

The person responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall, at the time of payment thereof, deductincome-tax thereon at the rate of twenty per cent.

394. Commission, etc., on the sale of lotterytickets.

§394.Commission, etc., on the sale of lottery tickets.Section 194G

COMMISSION, ETC., ON THE SALE OF LOTTERY TICKETS.

(1) Any person who is responsible for paying, on or after the 1st day ofOctober, 1991 to any person, who is or has been stocking, distributing,


purchasing or selling lottery tickets, any income by way of commission,remuneration or prize (by whatever name called) on such tickets in an amountexceeding one thousand rupees, shall, at the time of credit of such income tothe account of the payee or at the time of payment of such income in cash orby the issue of a cheque or draft or by any other mode, whichever is earlier,deduct income-tax thereon at the rate of ten per cent

(2) Where the Assessing Officer is satisfied that the total income of anyperson who is or has been stocking, distributing, purchasing or sellinglottery tickets justifies the deduction of income-tax at any lower rate or nodeduction of income-tax, as the case may be, the Assessing Officer shall, onan application made by such person in this behalf, give to him suchcertificate as may be appropriate.

(3) Where any such certificate is given, the person responsible for paying theincome referred to in sub-section (1) shall, until such certificate iscancelled by the Assessing Officer, deduct income-tax at the rates specifiedin such certificate or deduct no tax, as the case may be.

Explanation : For the purposes of this section, where any income is creditedto any account, whether called "Suspense account" or by any other name, in thebooks of account of the person liable to pay such income, such crediting shallbe deemed to be credit of such income to the account of the payee and theprovisions of this section shall apply accordingly.

395. Commission, Brokerage, etc.

§395.Commission, Brokerage, etc.Section 194H

COMMISSION, BROKERAGE, ETC.

(1) Any person, not being an individual or a Hindu undivided family, who isresponsible for paying, on or after the 1st day of October, 1991 but beforethe 1st day of June, 1992, to a resident, any income by way of commission (notbeing insurance commission referred to in section 194D) or brokerage, shall,at the time of credit of such income to the account of the payee or at thetime of payment of such income in cash or by the issue of a cheque or draft orby any other mode, whichever is earlier, deduct income-tax thereon at the rateof ten per cent.

(2) The provisions of sub-section (1) shall not apply - (a) To such persons orclass or classes of persons as the Central Government may, having regard tothe extent of inconvenience caused or likely to be caused to them and being


satisfied that it will not be prejudicial to the interests of the revenue, bynotification in the Official Gazette 1747e , specify in this behalf;

(b) Where the amount of such income or, as the case may be, the aggregate ofthe amounts of such income credited or paid or likely to be credited or paidduring the financial year by the person referred to in sub-section (1) to theaccount of, or to, the payee, does not exceed two thousand five hundredrupees.

Explanation : For the purposes of this section, - (i) "Commission orbrokerage" includes any payment received or receivable, directly orindirectly, by a person acting on behalf of another person for servicesrendered (not being professional services) or for any services in the courseof buying or selling of goods or in relation to any transaction relating toany asset, valuable article or thing;

(ii) "Professional services" means services rendered by a person in the courseof carrying on a legal, medical, engineering or architectural profession orthe profession of accountancy or technical consultancy or interior decorationor such other profession as is notified by the Board for the purposes ofsection 44AA;

(iii) Where any income is credited to any account, whether called "Suspenseaccount" or by any other name, in the books of account of the person liable topay such income, such crediting shall be deemed to be credit of such income tothe account of the payee and the provisions of this section shall applyaccordingly.

396. Rent.

§396.Rent.Section 194-I

RENT.

Any person, not being an individual or a Hindu undivided family, who isresponsible for paying to any person any income by way of rent, shall, at thetime of credit of such income to the account of the payee or at the time ofpayment thereof in cash or by the issue of a cheque or draft or by any othermode, whichever is earlier, deduct income-tax thereon at the rate of -

(a) Fifteen per cent if the payee is an individual or a Hindu undividedfamily; and


(b) Twenty per cent in other cases :

Provided that no deduction shall be made under this section 1747gg where theamount of such income or, as the case may be, the aggregate of the amounts ofsuch income credited or paid or likely to be credited or paid during thefinancial year by the aforesaid person to the account of, or to, the payee,does not exceed one hundred and twenty thousand rupees.

Explanation : For the purposes of this section, - (i) "Rent" means anypayment, by whatever name called, under any lease, sub-lease, tenancy or anyother agreement or arrangement for the use of any land or any building(including factory building), together with furniture, fittings and the landappurtenant thereto, whether or not such building is owned by the payee;

(ii) Where any income is credited to any account, whether called "Suspenseaccount" or by any other name, in the books of account of the person liable topay such income, such crediting shall be deemed to be credit of such income tothe account of the payee and the provisions of this section shall applyaccordingly.

397. Fees for Professional or Technical services.

§397.Fees for Professional or Technical services.Section 194J

FEES FOR PROFESSIONAL OR TECHNICAL SERVICES.

(1) Any person, not being an individual or a Hindu undivided family, who isresponsible for paying to a resident any sum by way of -

(a) Fees for professional services, or

(b) Fees for technical services, shall, at the time of credit of such sum tothe account of the payee or at the time of payment thereof in cash or by issueof a cheque or draft or by any other mode, whichever is earlier, deduct anamount equal to five per cent of such sum as income-tax on income comprisedtherein :

Provided that no deduction shall be made under this section - (A) Fom any sumsas aforesaid credited or paid before the 1st day of July, 1995; or

(B) Where the amount of such sum or, as the case may be, the aggregate of theamounts of such sums credited or paid or likely to be credited or paid during


the financial year by the aforesaid person to the account of, or to, thepayee, does not exceed -

(i) Twenty thousand rupees, in the case of fees for professional servicesreferred to in clause (a), or

(ii) Twenty thousand rupees, in the case of fees for technical servicesreferred to in clause (b).

(2) Where the Assessing Officer is satisfied that the total income of anyperson in receipt of the sum referred to in sub-section (1) justifies thededuction of income-tax at any lower rate or no deduction of income-tax, asthe case may be, the Assessing Officer shall, on an application made by thatperson in this behalf, give to him such certificate as may be appropriate.

(3) Where any such certificate is given, the person responsible for paying thesum referred to in sub-section (1) shall, until such certificate is cancelledby the Assessing Officer, deduct income-tax at the rates specified in suchcertificate or deduct no tax, as the case may be.

Explanation : For the purposes of this section, - (a) "Professional services"means services rendered by a person in the course of carrying on legal,medical, engineering or architectural profession or the profession ofaccountancy or technical consultancy or interior decoration or advertising orsuch other profession as is notified by the Board for the purposes of section44AA or of this section;

(b) "Fees for technical services" shall have the same meaning as inExplanation 2 to clause (vii) of sub-section (1) of section 9;

(c) Where any sum referred to in sub-section (1) is credited to any account,whether called "Suspense account" or by any other name, in the books ofaccount of the person liable to pay such sum, such crediting shall be deemedto be credit of such sum to the account of the payee and the provisions ofthis section shall apply accordingly.

398. Income in Respect of Units.

§398.Income in Respect of Units.Section 194K

INCOME IN RESPECT OF UNITS.

(1) Where any income is payable to a resident in respect of units of a Mutual


Fund specified under clause (23D) of section 10 or of the Unit Trust of Indiathe person responsible for making the payment shall, at the time of credit ofsuch income to the account of the payee or at the time of payment thereof incash or by issue of a cheque or draft or by any other mode, whichever isearlier, deduct income-tax thereon at the rate of, - (a) twenty per cent, ifthe payee is a company, and

(b) Fifteen per cent in the case of other payees.

Provided that no deduction shall be made under this sub-section from any suchincome credited or paid on or after the 1st day of June, 1999.

(2) The provisions of sub-section (1) shall not apply - (i) Where the amountof such income or, as the case may be, the aggregate of the amounts of suchincome credited or paid or likely to be credited or paid during the financialyear by the person responsible for making the payment to the account of, orto, the payee does not exceed ten thousand rupees :

Provided that the amount of ten thousand rupees shall be computed withreference to the income credited or paid, -

(a) In respect of a branch office of the Mutual Fund or of the Unit Trust ofIndia, as the case may be, and

(b) Under a particular scheme under which the units have been issued;

(ii) To such income credited or paid before the 1st day of July, 1995;

(iii) To such income credited or paid in respect of units issued under suchscheme already in operation of the Mutual Fund or of the Unit Trust of India,as the Central Government may, by notification in the Official Gazette,specify in this behalf having regard to the plan of payment of incomethereunder to the unit-holders; and

(iv) To such income credited or paid in respect of units issued under anyscheme of the Unit Trust of India to any institution or fund where such incomeis not liable to inclusion in its total income under the provisions ofsections 11 and 12 or clause (22) or clause (22A) or clause (23) or clause(23AA) or clause (23C) of section 10.

Explanation : For the purposes of this section, - (a) "Unit Trust of India"means the Unit Trust of India established under the Unit Trust of India Act,1963 (52 of 1963);


(b) Where any income as aforesaid is credited to any account, whether called"Suspense account" or by any other name, in the books of account of the personliable to pay such income, such crediting shall be deemed to be credit of suchincome to the account of the payee and the provisions of this section shallapply accordingly.

399. Payment of Compensation on Acquisition ofCapital Asset.

§399.Payment of Compensation on Acquisition of Capital Asset.Section 194L

PAYMENT OF COMPENSATION ON ACQUISITION OF CAPITAL ASSET.

Any person responsible for paying to a resident any sum being in the nature ofcompensation or the enhanced compensation or the consideration or the enhancedconsideration on account of compulsory acquisition, under any law for the timebeing in force, of any capital asset shall, at the time of payment of such sumin cash or by issue of a cheque or draft or by any other mode, whichever isearlier, deduct an amount equal to ten per cent of such sum as income-tax onincome comprised therein :

Provided that no deduction shall be made under this section where the amountof such payment or, as the case may be, the aggregate amount of such paymentsto a resident during the financial year does not exceed one hundred thousandrupees.

400. Other Sums.

§400.Other Sums.Section 195

OTHER SUMS.

(1) Any person responsible for paying to a non-resident, not being a company,or to a foreign company, any interest (not being interest on securities) orany other sum chargeable under the provisions of this Act (not being incomechargeable under the head "Salaries" shall, at the time of credit of suchincome to the account of the payee or at the time of payment thereof in cashor by the issue of a cheque or draft or by any other mode, whichever isearlier, deduct income-tax thereon at the rates in force :


Provided that in the case of interest payable by the Government or a publicsector bank within the meaning of clause (23D) of section 10 or a publicfinancial institution within the meaning of that clause, deduction of taxshall be made only at the time of payment thereof in cash or by the issue of acheque or draft or by any other mode :

Provided further that no such deduction shall be made in respect of anydividends referred to in section 115-O.

Explanation : For the purposes of this section, where any interest or othersum as aforesaid is credited to any account, whether called "Interest payableaccount" or "Suspense account" or by any other name, in the books of accountof the person liable to pay such income, such crediting shall be deemed to becredit of such income to the account of the payee and the provisions of thissection shall apply accordingly.

(2) Where the person responsible for paying any such sum chargeable under thisAct other than interest on securities, and salary to a non-resident considersthat the whole of such sum would not be income chargeable in the case of therecipient, he may make an application to the Assessing Officer to determine,by general or special order, the appropriate proportion of such sum sochargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable :

(3) Subject to rules 1754a made under sub-section (5), any person entitled toreceive any interest or other sum on which income-tax has to be deducted undersub-section (1) may make an application in the prescribed form 1754a to theAssessing Officer for the grant of a certificate authorising him to receivesuch interest or other sum without deduction of tax under that sub-section,and where any such certificate 1754a is granted, every person responsible forpaying such interest or other sum to the person to whom such certificate isgranted shall, so long as the certificate is in force, make payment of suchinterest or other sum without deducting tax thereon under sub-section (1).

(4) A certificate granted under sub-section (3) shall remain in force till theexpiry of period specified therein or, if it is cancelled by the AssessingOfficer before the expiry of such period, till such cancellation.

(5) The Board may, having regard to the convenience of assessees and theinterests of revenue, by notification in the Official Gazette, make rulesspecifying the cases in which, and the circumstances under which, anapplication may be made for the grant of a certificate under sub-section (3)and the conditions subject to which such certificate may be granted andproviding for all other matters connected therewith.


401. Income Payable "Net of Tax".

§401.Income Payable "Net of Tax".

Section 195A

INCOME PAYABLE "NET OF TAX".

Where, under an agreement or other arrangement, the tax chargeable on anyincome referred to in the foregoing provisions of this Chapter is to be borneby the person by whom the income is payable, then, for the purposes ofdeduction of tax under those provisions such income shall be increased to suchamount as would, after deduction of tax thereon at the rates in force for thefinancial year in which such income is payable, be equal to the net amountpayable under such agreement or arrangement.

402. Interest or Dividend or other sums payable toGovernment, Reserve Bank or Certain Corporations.

§402.Interest or Dividend or other sums payable to Government, Reserve Bankor Certain Corporations.Section 196

INTEREST OR DIVIDEND OR OTHER SUMS PAYABLE TO GOVERNMENT, RESERVE BANK ORCERTAIN CORPORATIONS.

Notwithstanding anything contained in the foregoing provisions of thisChapter, no deduction of tax shall be made by any person from any sums payableto-

(i) The Government, or

(ii) The Reserve Bank of India, or

(iii) A corporation established by or under a Central Act which is, under anylaw for the time being in force, exempt from income-tax on its income, or

(iv) A Mutual Fund specified under clause (23D) of section 10, where such sumis payable to it by way of interest or dividend in respect of any securitiesor shares owned by it or in which it has full beneficial interest, or anyother income accruing or arising to it.


403. Income in respect of Units of Non-Residents.

§403.Income in respect of Units of Non-Residents.Section 196A

INCOME IN RESPECT OF UNITS OF NON-RESIDENTS.

(1) Any person responsible for paying to a non-resident, not being a company,or to a foreign company, any income in respect of units of a Mutual Fundspecified under clause (23D) of section 10 or of the Unit Trust of Indiashall, at the time of credit of such income to the account of the payee or atthe time of payment thereof in cash or by the issue of a cheque or draft or byany other mode, whichever is earlier, deduct income-tax thereon at the rate oftwenty per cent

Provided that no deduction shall be made under this sub-section from any suchincome credited or paid on or after the 1st day of June, 1999.

(2) Notwithstanding anything contained in sub-section (1), no deduction of taxshall be made from any income payable in respect of units of the Unit Trust ofIndia to a non-resident Indian or a non-resident Hindu undivided family, wherethe units have been acquired from the Unit Trust of India out of the funds ina Non-resident (External) Account maintained with any bank in India or byremittance of funds in foreign currency, in accordance, in either case, withthe provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), andthe rules made thereunder.

Explanation : For the purposes of this section - (a) "Foreign currency" shallhave the meaning assigned to it in the Foreign Exchange Regulation Act, 1973(46 of 1973);

(b) "Non-resident Indian" shall have the meaning assigned to it in clause (e)of section 115C; .

(c) "Unit Trust of India" means the Unit Trust of India established under theUnit Trust of India Act, 1963 (52 of 1963);

(d) Where any income as aforesaid is credited to any account, whether called"Suspense account" or by any other name, in the books of account of the personliable to pay such income, such crediting shall be deemed to be credit of suchincome to the account of the payee and the provisions of this section shallapply accordingly.


404. Income from Units.

§404.Income from Units.Section 196B

INCOME FROM UNITS.

Where any income in respect of units referred to in section 115AB or by way oflong-term capital gains arising from the transfer of such units is payable toan Offshore Fund, the person responsible for making the payment shall, at thetime of credit of such income to the account of the payee or at the time ofpayment thereof in cash or by the issue of a cheque or draft or by any othermode, whichever is earlier, deduct income-tax thereon at the rate of ten percent.

405. Income from Foreign Currency bonds or shares ofIndian Company.

§405.Income from Foreign Currency bonds or shares of Indian Company.Section 196C

INCOME FROM FOREIGN CURRENCY BONDS OR SHARES OF INDIAN COMPANY.

Where any income by way of interest or dividends in respect of bonds or sharesreferred to in section 115AC or by way of long-term capital gains arising fromthe transfer of such bonds or shares is payable to a non-resident, the personresponsible for making the payment shall, at the time of credit of such incometo the account of the payee or at the time of payment thereof in cash or bythe issue of a cheque or draft or by any other mode, whichever is earlier,deduct income-tax thereon at the rate of ten per cent.

Provided that no such deduction shall be made in respect of any dividendsreferred to in section 115-O.

406. Income of Foreign Institutional Investors fromsecurities.

§406.Income of Foreign Institutional Investors from securities.Section 196D


INCOME OF FOREIGN INSTITUTIONAL INVESTORS FROM SECURITIES.

(1) Where any income in respect of securities referred to in clause (a) ofsub-section (1) of section 115AD is payable to a Foreign InstitutionalInvestor, the person responsible for making the payment shall, at the time ofcredit of such income to the account of the payee or at the time of paymentthereof in cash or by issue of a cheque or draft or by any other mode,whichever is earlier, deduct income-tax thereon at the rate of twenty per cent

Provided that no such deduction shall be made in respect of any dividendsreferred to in section 115-O.

(2) No deduction of tax shall be made from any income, by way of capital gainsarising from the transfer of securities referred to in section 115AD, payableto a Foreign Institutional Investor.

407. Certificate for Deduction at Lower Rate.

§407.Certificate for Deduction at Lower Rate.Section 197

CERTIFICATE FOR DEDUCTION AT LOWER RATE.

(1) Subject to rules made under sub-section (2A), where, in the case of anyincome of any person, income-tax is required to be deducted at the time ofcredit or, as the case may be, at the time of payment at the rates in forceunder the provisions of section 192, 193, 194, 194A, 194D, 194-I, 194K, 194Land 195, the Assessing Officer is satisfied that the total income of therecipient justifies the deduction of income-tax at any lower rates or nodeduction of income-tax, as the case may be, the Assessing Officer shall, onan application made by the assessee in this behalf, give to him suchcertificate as may be appropriate.

(2) Where any such certificate is given, the person responsible for paying theincome shall, until such certificate is cancelled by the Assessing Officer,deduct income-tax at the rates specified in such certificate or deduct no tax,as the case may be.

(2A) The Board may, having regard to the convenience of assessees and theinterests of revenue, by notification in the Official Gazette, make rulesspecifying the cases in which, and the circumstances under which, anapplication may be made for the grant of a certificate under sub-section (1)and the conditions subject to which such certificate may be granted andproviding for all other matters connected therewith.


408. No Deduction to be made in certain cases.

§408.No Deduction to be made in certain cases.Section 197A

NO DEDUCTION TO BE MADE IN CERTAIN CASES.

(1) Notwithstanding anything contained in section 194 or section no deductionof tax shall be made under any of the said sections in the case of anindividual, who is resident in India, if such individual furnishes to theperson responsible for paying any income of the nature referred to in section194 or, as the case may be, section 194EE, a declaration in writing induplicate in the prescribed form and verified in the prescribed manner 1770bto the effect that the tax on his estimated total income of the previous yearin which such income is to be included in computing his total income will benil.

(1A) Notwithstanding anything contained in section 193 or section 194A orsection 194K, no deduction of tax shall be made under any of the said sectionsin the case of a person (not being a company or a firm),if such personfurnishes to the person responsible for paying any income of the naturereferred to in section 193 or section 194A or section 194K, as the case maybe, a declaration in writing in duplicate in the prescribed form and verifiedin the prescribed manner to the effect that the tax on his estimated totalincome of the previous year in which such income is to be included incomputing his total income will be nil.

(2) The person responsible for paying any income of the nature referred to insub-section (1) or sub-section (1A) shall deliver or cause to be delivered tothe Chief Commissioner or Commissioner one copy of the declaration referred toin sub-section (1) or sub-section (1A) on or before the seventh day of themonth next following the month in which the declaration is furnished to him.

409. Tax deducted is Income received.

§409.Tax deducted is Income received.Section 198

TAX DEDUCTED IS INCOME RECEIVED.


All sums deducted in accordance with provisions of sections 192 to 194,section 194A, section 194B, section 194BB, section 194C, section 194D, section194E, section 194EE, section 194F, section 194G, section 194H, section 194-I,section 194J and section 194K, 194L section 195, section 196A, section 196B,section 196C and section 196D shall, for the purpose of computing the incomeof an assessee, be deemed to be income received.

410. Credit for Deducted.

§410.Credit for Deducted.Section 199

CREDIT FOR TAX DEDUCTED.

Any deduction made in accordance with the provisions of sections 192 to 194,section 194A, section 194B, section 194BB, section 194C, section 194D section194E, section 194EE, section 194F, section 194G, section 194H, section 194-I,section 194J and section 194K, 194L section 195, section 196A, section 196B,section 196C and section 196D and paid to the Central Government, shall betreated as a payment of tax on behalf of the person from whose income thededuction was made, or of the owner of the security, or depositor or owner ofproperty or of unit-holder or the shareholder, as the case may be, and creditshall be given to him for the amount so deducted on the production of thecertificate furnished under section 203 in the assessment, made under this Actfor the assessment year for which such income is assessable:

Provided that - (i) In a case where such person or [Owner or depositor orunit-holder] or shareholder is a person, whose income is included under theprovisions of section 60, section 61, section 64, section 93 or section 94 inthe total income of another person, the payment shall be deemed to have beenmade on behalf of, and the credit shall be given to, such other person;

(ii) In any other case, where the dividend on any share is assessable as theincome of a person other than the shareholder, the payment shall be deemed tohave been made on behalf of, and the credit shall be given to, such otherperson in such circumstances as may be prescribed:

Provided further that where any property, deposit, security, unit or share isowned jointly by two or more persons not constituting a partnership, thepayment shall be deemed to have been made on behalf of, and credit shall begiven to, each such person in the same proportion in which rent, interest ondeposit or on security or income in respect of unit or dividend on share isassessable as his income.


411. Duty of person deducting tax.

§411.Duty of person deducting tax.

Section 200

DUTY OF PERSON DEDUCTING TAX.

Any person deducting any sum in accordance with the provisions of sections 192to 194, section 194A, section 194B, section 194BB, section 194C, section 194D,section 194E, section 194EE, section 194F, section 194G, section 194H, section194-I, section 194J and section 194K, 194L section 195, section 196A, section196B, section 196C and section 196D shall pay within the prescribed time, thesum so deducted to the credit of the Central Government or as the Boarddirects.

412. Consequences of failure to deduct or pay.

§412.Consequences of failure to deduct or pay.Section 201

CONSEQUENCES OF FAILURE TO DEDUCT OR PAY.

(1) If any such person and in the cases referred to in section 194, theprincipal officer and the company of which he is the principal officer doesnot deduct or after deducting fails to pay the tax as required by or underthis Act, he or it shall, without prejudice to any other consequences which heor it may incur, be deemed to be an assessee in default in respect of the tax:

Provided that no penalty shall be charged under section 221 from such person,principal officer or company unless the Assessing Officer is satisfied thatsuch person or principal officer or company, as the case may be, has withoutgood and sufficient reasons failed to deduct and pay the tax.

(1A) Without prejudice to the provisions of sub-section (1), if any suchperson, principal officer or company as is referred to in that sub-sectiondoes not deduct or after deducting fails to pay the tax as required by orunder this Act, he or it shall be liable to pay simple interest at eighteenper cent per annum on the amount of such tax from the date on which such taxwas deductible to the date on which such tax is actually paid.


(2) Where the tax has not been paid as aforesaid after it is deducted, theamount of the tax together with the amount of simple interest thereon referredto in sub-section (1A) shall be a charge upon all the assets of the person, orthe company, as the case may be, referred to in sub-section (1).

413. Deduction only one Mode of recovery.

§413.Deduction only one Mode of recovery.Section 202

DEDUCTION ONLY ONE MODE OF RECOVERY.

The power to recover tax by deduction under sections 192 to 194, section 194A,section 194B, section 194BB, section 194C, section 194D, section 194E, section194EE, section 194F, section 194G, section 194H, section 194-I, section 194Jand section 194K, 194L section 195, section 196A, section 196B, section 196Cand section 196D shall be without prejudice to any other mode of recovery.

414. Certificate for Tax deducted.

§414.Certificate for Tax deducted.Section 203

CERTIFICATE FOR TAX DEDUCTED.

Every person deducting tax in accordance with the provisions of sections 192to 194, section 194A, section 194B, section 194BB, section 194C, section 194D,section 194E, section 194EE, section 194F, section 194G, section 194H, section194-I, section 194J and section 194K, 194L section 195, section 196A, section196B, section 196C and section 196D, shall, within such period as may beprescribed from the time of credit or payment of the sum, or, as the case maybe, from the time of issue of a cheque or warrant for payment of any dividendto a shareholder, furnish to the person to whose account such credit is givenor to whom such payment is made or the cheque or warrant is issued, acertificate to the effect that tax has been deducted, and specifying theamount so deducted, the rate at which the tax has been deducted, and suchother particulars as may be prescribed.

415. Tax deduction account number.

§415.Tax deduction account number.


Section 203A

TAX DEDUCTION ACCOUNT NUMBER.

(1) Every person deducting tax in accordance with the provisions of sections192 to 194, section 194A, section 194B, section 194BB, section 194C, section194D section 194E, section 194EE, section 194F, section 194G, section 194H,section 194-I, section 194J and section 194K, 194L section 195, section 196A,section 196B, section 196C and section 196D, if he has not been allotted anytax-deduction account number, shall, within such time as may be prescribed,apply to the Assessing Officer for the allotment of tax-deduction accountnumber.

(2) Where a tax-deduction account number has been allotted to a person, suchperson shall quote such number, - (a) In all challans for the payment of anysum in accordance with the provisions of section 200;

(b) In all certificates issued in accordance with the provisions of section203;

(c) In all the returns delivered in accordance with the provisions of sections206, 206A and 206B to any income-tax authority; and

(d) In all other documents pertaining to such transactions as may beprescribed in the interests of revenue.

416. Meaning of "Person Responsible for Paying".

§416.Meaning of "Person Responsible for Paying".Section 204

MEANING OF "PERSON RESPONSIBLE FOR PAYING".

For the purposes of sections 192 to 194, section 194A, section 194B, section194BB, section 194C, section 194D, section 194E, section 194EE, section 194F,section 194G, section 194H, section 194-I, section 194J and section 194K,194L sections 195 to 203 and section 285, the expression "person responsiblefor paying" means - (i) In the case of payment of income chargeable under thehead "Salaries" other than payments by the Central Government or theGovernment of a State, the employer himself or, if the employer is a company,the company itself, including the principal officer thereof;

(ii) In the case of payments of income chargeable under the head "Interest on


securities" other than payments made by or on behalf of the Central Governmentor the Government of a State, the local authority, corporation or company,including the principal officer thereof;

(iia) In the case of any sum payable to a non-resident Indian, being any sumrepresenting consideration for the transfer by him of any foreign exchangeasset, which is not a short-term capital asset, the authorised dealerresponsible for remitting such sum to the non-resident Indian or for creditingsuch sum to his Non-resident (External) Account maintained in accordance withthe Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules madethereunder;

(iii) In the case of credit, or, as the case may be, payment of any other sumchargeable under the provisions of this Act, the payer himself, or, if thepayer is a company, the company itself including the principal officerthereof.

Explanation : For the purposes of this section, - (a) "Non-resident Indian"and "foreign exchange asset" shall have the meanings assigned to them inChapter XII-A;

(b) "Authorised dealer" shall have the meaning assigned to it in clause (b) ofsection 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973).

417. Bar Against Direct Demand on Assessee.

§417.Bar Against Direct Demand on Assessee.Section 205

BAR AGAINST DIRECT DEMAND ON ASSESSEE.

Where tax is deductible at the source under sections 192 to 194, section 194A,section 194B, section 194BB, section 194C, section 194D section 194E, section194EE, section 194F, section 194G, section 194H, section 194-I, section 194Jand section 194K, 194L section 195, section 196A, section 196B, section 196Cand section 196D, the assessee shall not be called upon to pay tax himself tothe extent to which tax has been deducted from that income.

418. Persons deducting Tax to furnish prescribedreturns.

§418.Persons deducting Tax to furnish prescribed returns.


Section 206

PERSONS DEDUCTING TAX TO FURNISH PRESCRIBED RETURNS.

(1) The prescribed person in the case of every office of Government, theprincipal officer in the case of every company, the prescribed person in thecase of every local authority or other public body or association, everyprivate employer and every other person responsible for deducting tax underthe foregoing provisions of this Chapter shall, within the prescribed timeafter the end of each financial year, prepare and deliver or cause to bedelivered to the prescribed income-tax authority, such returns in such formand verified in such manner and setting forth such particulars as may beprescribed.

(2) Notwithstanding anything contained in any other law for the time being inforce, a return filed on a floppy, diskette, magnetic cartridge tape, CD-ROMor any other computer readable media as may be specified by the Board(hereinafter referred to as the computer media) shall be deemed to be a returnfor the purposes of this section and the rules made thereunder and shall beadmissible in any proceedings thereunder, without further proof of productionof the original, as evidence of any contents of the original or of any factstated therein.

(3) A return filed under sub-section (2) Shall fulfil the followingconditions, namely :- (a) While receiving returns on computer media, necessarychecks by scanning the documents filed on computer media will be carried outand the media will be duly authenticated by the Assessing Officer; and

(b) the Assessing Officer shall also take due care to preserve the computermedia by duplicating, transferring, mastering or storage without loss of data.

419. Omitted.


PERSON PAYING INTEREST TO RESIDENTS WITHOUT DEDUCTION OF TAX, TO FURNISHPRESCRIBED RETRUN.


420. Omitted.



PERSON PAYING DIVIDEND TO CERTAIN RESIDENTS WITHOUT DEDUCTION OF TAX TOFURNISH PRESCRIBED RETURN.


421. Profits and Gains from the Business of tradingin Alcoholic Liquor, Forest Produce, Scrap, Etc.

§421.Profits and Gains from the Business of trading in Alcoholic Liquor,Forest Produce, Scrap, Etc.Section 206C

PROFITS AND GAINS FROM THE BUSINESS OF TRADING IN ALCOHOLIC LIQUOR, FORESTPRODUCE, SCRAP, ETC.

(1) Every person, being seller shall, at the time of debiting of the amountpayable by the buyer to the account of the buyer or at the time of receipt ofsuch amount from the said buyer in cash or by the issue of a cheque or draftor by any other mode, whichever is earlier, collect from the buyer of anygoods of the nature specified in column (2) of the Table below, a sum equal tothe percentage specified in the corresponding entry in column (3) of the saidTable, of such amount as income-tax :

[ 1829b TABLE

Provided that where the Assessing Officer, on an application made by thebuyer, gives a certificate in the prescribed form 1829a that to the best ofhis belief any of the goods referred to in the aforesaid Table are to beutilised for the purposes of manufacturing, processing or producing articlesor things and not for trading purposes, the provisions of this sub-sectionshall not apply so long as the certificate is in force.

(2) The power to recover tax by collection under sub-section (1) shall bewithout prejudice to any other mode of recovery.

(3) Any person collecting any amount under sub-section (1) shall pay withinseven days the amount so collected to the credit of the Central Government oras the Board directs.


(4) Any amount collected in accordance with the provisions of this section andpaid under sub-section (3) shall be deemed as payment of tax on behalf of theperson from whom the amount has been collected and credit shall be given tohim for the amount so collected on the production of the certificate furnishedunder sub-section (5) in the assessment made under this Act for the assessmentyear for which such income is assessable.

(5) Every person collecting tax in accordance with the provisions of thissection shall within ten days from the date of debit or receipt of the amountfurnish to the buyer to whose account such amount is debited or from whom suchpayment is received, a certificate to the effect that tax has been collected,and specifying the sum so collected, the rate at which the tax has beencollected and such other particulars as may be prescribed 1830 .

(5A) Every person collecting tax in accordance with the provisions of thissection shall prepare half-yearly returns for the period ending on 30thSeptember and 31st March in each financial year, and deliver or cause to bedelivered to the prescribed 1832 income-tax authority such returns in suchform and verified in such manner and setting forth such particulars and withinsuch time as may be prescribed.

(5B) Notwithstanding anything contained in any other law for the time being inforce, a return filed on a floppy, diskette, magnetic cartridge tape, CD-ROMor any other computer readable media as may be specified by the Board(hereinafter referred to as the computer media) shall be deemed to be a returnfor the purposes of sub-section (5A) and the rules made thereunder and shallbe admissible in any proceedings thereunder, without further proof ofproduction of the original, as evidence of any contents of the original or ofany fact stated therein.

(5C) A return filed under sub-section (5B) shall fulfil the followingconditions, namely :- (a) While receiving returns on computer media,necessary checks by scanning the documents filed on computer media will becarried out and the media will be duly authenticated by the Assessing Officer;and

(b) The Assessing Officer shall also take due care to preserve the computermedia by duplicating, transferring, mastering or storage without loss ofdata.;

(6) Any person responsible for collecting the tax who fails to collect the taxin accordance with the provisions of this section, shall, notwithstanding suchfailure, be liable to pay the tax to the credit of the Central Government inaccordance with the provisions of sub-section (3).


(7) Without prejudice to the provisions of sub-section (6), if the seller doesnot collect the tax or after collecting the tax fails to pay it as requiredunder this section, he shall be liable to pay simple interest at the rate oftwo per cent per month or part thereof on the amount of such tax from the dateon which such tax was collectible to the date on which the tax was actuallypaid.

(8) Where the tax has not been paid as aforesaid, after it is collected, theamount of the tax together with the amount of simple interest thereon referredto in sub-section (7) shall be a charge upon all the assets of the seller.

(9) Where the Assessing Officer is satisfied that the total income of thebuyer justifies the collection of the tax at any lower rate than the relevantrate specified in sub-section (1), the Assessing Officer shall, on anapplication made by the buyer in this behalf, give to him a certificate forcollection of tax at such lower rate than the relevant rate specified in sub-section (1).

(10) Where a certificate under sub-section (9) is given, the personresponsible for collecting the tax shall, until such certificate is cancelledby the Assessing Officer, collect the tax at the rates specified in suchcertificate.

(11) The Board may, having regard to the convenience of assessees and theinterests of revenue, by notification in the Official Gazette, make rulesspecifying the cases in which, and the circumstances under which, anapplication may be made for the grant of a certificate under sub-section (9)and the conditions subject to which such certificate may be granted andproviding for all other matters connected therewith.

Explanation : For the purposes of this section, - (a) "Buyer" means a personwho obtains in any sale, by way of auction, tender or any other mode, goods ofthe nature specified in the Table in sub-section (1) or the right to receiveany such goods but does not include, -

(i) A public sector company,

(ii) A buyer in the further sale of such goods obtained in pursuance of suchsale, or

(iii) A buyer where the goods are not obtained by him by way of auction andwhere the sale price of such goods to be sold by the buyer is fixed by orunder any State Act;


(b) "Seller" means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.

422. Liability for Payment of Advance Tax.

§422.Liability for Payment of Advance Tax.Section 207

LIABILITY FOR PAYMENT OF ADVANCE TAX.

Tax shall be payable in advance during any financial year, in accordance withthe provisions of sections 208 to 219 (both inclusive), in respect of thetotal income of the assessee which would be chargeable to tax for theassessment year immediately following that financial year, such income beinghereafter in this Chapter referred to as "current income".

423. Conditions of Liability to Pay Advance Tax.

§423.Conditions of Liability to Pay Advance Tax.Section 208

CONDITIONS OF LIABILITY TO PAY ADVANCE TAX.

Advance tax shall be payable during a financial year in every case where theamount of such tax payable by the assessee during that year, as computed inaccordance with the provisions of this Chapter, is five thousand rupees ormore.

424. Computation of Advance Tax.

§424.Computation of Advance Tax.Section 209

COMPUTATION OF ADVANCE TAX.

(1) The amount of advance tax payable by an assessee in the financial yearshall, subject to the provisions of sub-sections (2) and (3), be computed asfollows, namely :- (a) where the calculation is made by the assessee for thepurposes of payment of advance tax under sub-section (1) or sub-section (2) orsub-section (5) or sub-section (6) of section 210, he shall first estimate his


current income and income-tax thereon shall be calculated at the rates inforce in the financial year;

(b) Where the calculation is made by the Assessing Officer for the purpose ofmaking an order under sub-section (3) of section 210, the total income of thelatest previous year in respect of which the assessee has been assessed by wayof regular assessment or the total income returned by the assessee in anyreturn of income furnished by him for any subsequent previous year, whicheveris higher, shall be taken and income-tax thereon shall be calculated at therates in force in the financial year;

(c) Where the calculation is made by the Assessing Officer for the purpose ofmaking an amended order under sub-section (4) of section 210, the total incomedeclared in the return furnished by the assessee for the later previous year,or, as the case may be, the total income in respect of which the regularassessment, referred to in that sub-section has been made, shall be taken andincome-tax thereon shall be calculated at the rates in force in the financialyear;

(d) The income-tax calculated under clause (a) or clause (b) or clause (c)shall, in each case, be reduced by the amount of income-tax which would bedeductible or collectible at source during the said financial year under anyprovision of this Act from any income (as computed before allowing anydeductions admissible under this Act) which has been taken into account incomputing the current income or, as the case may be, the total incomeaforesaid; and the amount of income-tax as so reduced shall be the advance taxpayable.

(2) Where the Finance Act of the relevant year provides that, in the case ofany class of assessees, net agricultural income (as defined in that Act) shallbe taken into account for the purposes of computing advance tax, then, the netagricultural income to be taken into account in the case of any assesseefalling in that class, shall be -

(a) In cases where the Assessing Officer makes an order under sub-section (3)or sub-section (4) of section 210, - (i) If the total income of the latestprevious year in respect of which the assessee has been assessed by way ofregular assessment forms the basis of computation of advance tax payable byhim, the net agricultural income which has been taken into account for thepurposes of charging income-tax for the assessment year relevant to thatprevious year; or

(ii) If the total income declared by the assessee for the later previous yearreferred to in sub-section (4) of section 210 forms the basis of computationof advance tax, the net agricultural income as returned by the assessee in the


return of income for the assessment year relevant to such later previous year;

(b) In cases where the advance tax is paid by the assessee on the basis of hisestimate of his current income under sub-section (1) or sub-section (2) orsub-section (5) or sub-section (6) of section 210, the net agriculturalincome, as estimated by him, of the period which would be the previous yearfor the immediately following assessment year.

(3) Where the Finance Act of the relevant year specifies any separate rate orrates for the purposes of computing advance tax in the case of every Hinduundivided family which has at least one member whose total income of theprevious year exceeds the maximum amount not chargeable to income-tax in hiscase, then, the Assessing Officer shall, for making an order under sub-section(3) or sub-section (4) of section 210 in the case of any such Hindu undividedfamily, compute (subject to the provisions of section 164) the advance tax atsuch rate or rates -

(a) In a case where the total income of the latest previous year in respect ofwhich the Hindu undivided family has been assessed by way of regularassessment forms the basis of computation of advance tax, if the total incomeof any member of the family for the assessment year relevant to such latestprevious year exceeds the maximum amount not chargeable to income-tax in hiscase;

(b) In a case where the total income of the previous year in respect of whicha return of income is furnished by the Hindu undivided family under section139 or in response to a notice under sub-section (1) of section 142 forms thebasis of computation of advance tax, if the total income of any member of thefamily for the assessment year relevant to such previous year exceeds themaximum amount not chargeable to income-tax in his case.

425. Omitted.


COMPUTATION AND PAYMENT OF ADVANCE TAX BY ASSESSEE.


426. Payment of Advance Tax by the Assessee of hisown accord or in pursuance of order of Assessing


Officer.

§426.Payment of Advance Tax by the Assessee of his own accord or in pursuanceof order of Assessing Officer.Section 210

PAYMENT OF ADVANCE TAX BY THE ASSESSEE OF HIS OWN ACCORD OR IN PURSUANCE OFORDER OF ASSESSING OFFICER.

(1) Every person who is liable to pay advance tax under section 208 (whetheror not he has been previously assessed by way of regular assessment) shall, ofhis own accord, pay, on or before each of the due dates specified in section211, the appropriate percentage, specified in that section, of the advance taxon his current income, calculated in the manner laid down in section 209.

(2) A person who pays any instalment or instalments of advance tax under sub-section (1), may increase or reduce the amount of advance tax payable in theremaining instalment or instalments to accord with his estimate of his currentincome and the advance tax payable thereon, and make payment of the saidamount in the remaining instalment or instalments accordingly.

(3) In the case of a person who has been already assessed by way of regularassessment in respect of the total income of any previous year and who has notpaid any advance tax under sub-section (1), the Assessing Officer, if he is ofopinion that such person is liable to pay advance tax, may, at any time duringthe financial year but not later than the last day of February, by order inwriting, require such person to pay advance tax calculated in the manner laiddown in section 209, and issue to such person a notice of demand 1841a undersection 156 specifying the instalment or instalments in which such tax is tobe paid.

(4) If, after the making of an order by the Assessing Officer under sub-section (3) and at any time before the 1st day of March, a return of income isfurnished by the assessee under section 139 or in response to a notice undersub-section (1) of section 142, or a regular assessment of the assessee ismade in respect of a previous year later than that referred to in sub-section(3), the Assessing Officer may make an amended order and issue to suchassessee a notice of demand 1841aa under section 156 requiring the assessee topay, on or before the due date or each of the due dates specified in section211 falling after the date of the amended order, the appropriate percentage,specified in section 211, of the advance tax computed on the basis of thetotal income declared in such return or in respect of which the regularassessment aforesaid has been made.


(5) A person who is served with an order of the Assessing Officer under sub-section (3) or an amended order under sub-section (4) may, if in hisestimation the advance tax payable on his current income would be less thanthe amount of the advance tax specified in such order or amended order, sendan intimation in the prescribed form 1842 to the Assessing Officer to thateffect and pay such advance tax as accords with his estimate, calculated inthe manner laid down in section 209, at the appropriate percentage thereofspecified in section 211, on or before the due date or each of due datesspecified in section 211 falling after the date of such intimation.

(6) A person who is served with an order of the Assessing Officer under sub-section (3) or amended order under sub-section (4) shall, if in his estimationthe advance tax payable on his current income would exceed the amount ofadvance tax specified in such order or amended order or intimated by him undersub-section (5), pay on or before the due date of the last instalmentspecified in section 211, the appropriate part or, as the case may be, thewhole of such higher amount of advance tax as accords with his estimate,calculated in the manner laid down in section 209.

427. Instalments of Advance Tax and Due Dates.

§427.Instalments of Advance Tax and Due Dates.Section 211

INSTALMENTS OF ADVANCE TAX AND DUE DATES.

(1) Advance tax on the current income calculated in the manner laid down insection 209 shall be payable by - (a) All the companies, who are liable to paythe same, in four instalments during each financial year and the due date1843b of each instalment and the amount of such instalment shall be asspecified in below :

Provided that any amount paid by way of advance tax on or before the 31st dayof March shall also be treated as advance tax paid during the financial yearending on that day for all the purposes of this Act.

(2) If the notice of demand issued under section 156 in pursuance of an orderof the Assessing Officer under sub-section (3) or sub-section (4) of section210 is served after any of the due datesspecified in sub-section (1), theappropriate part or, as the case may be, the whole of the amount of theadvance tax specified in such notice shall be payable on or before each ofsuch of those dates as fall after the date of service of the notice of demand.


428. Omitted.


ESTIMATE BY ASSESSEE.


429. Omitted.


COMMISSION RECEIPTS.


430. Interest Payable by Government.

§430.Interest Payable by Government.Section 214

INTEREST PAYABLE BY GOVERNMENT.

(1) The Central Government shall pay simple interest at fifteen per cent perannum on the amount by which the aggregate sum of any instalments of advancetax paid during any financial year in which they are payable under sections207 to 213 exceeds the amount of the assessed tax from the 1st day of Aprilnext following the said financial year to the date of the regular assessmentfor the assessment year immediately following the said financial year, andwhere any such instalment is paid after the expiry of the financial year,during which it is payable by reason of the provisions of section 213,interest as aforesaid shall also be payable on that instalment from the dateof its payment to the date of regular assessment :

Provided that in respect of any amount refunded on a provisional assessmentunder section 141A, no interest shall be paid for any period after the date ofsuch provisional assessment.

(1A) Where as a result of an order under section 147 or section 154 or section155 or section 250 or section 254 or section 260 or section 262 or section 263


or section 264 or an order of the Settlement Commission under sub-section (4)of section 245D 1850 ], the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interestshall be increased or reduced accordingly, and in a case where the interest isreduced, the Assessing Officer shall serve on the assessee, a notice of demandin the prescribed form specifying the amount of the excess interest payableand requiring him to pay such amount; and such notice of demand shall bedeemed to be a notice under section 156 and the provisions of this Act shallapply accordingly.

(2) On any portion of such amount which is refunded under this Chapter,interest shall be payable only upto the date on which the refund was made.

(3) This section and sections 215, 216 and 217 shall not apply in respect ofany assessment for the assessment year commencing on the 1st day of April,1989 or any subsequent assessment year and, in the application of the saidsections to the assessment for any earlier assessment year, references therein[except in sub-section (1A) and sub-section (3) of section 215] to the otherprovisions of this Act shall be construed as references to those provisions asfor the time being in force and applicable to the relevant assessment year.

Explanation 1 : In this section, "assessed tax" shall have the same meaning asin sub-section (5) of section 215.

Explanation 2 : Where, in relation to an assessment year, an assessment ismade for the first time under section 147, the assessment so made shall beregarded as a regular assessment for the purposes of this section.

431. Interest payable by Assessee.

§431.Interest payable by Assessee.

Section 215

INTEREST PAYABLE BY ASSESSEE.

(1) Where, in any financial year, an assessee has paid advance tax undersection 209A or section 212 on the basis of his own estimate (includingrevised estimate), and the advance tax so paid is less than seventy-five percent of the assessed tax, simple interest at the rate of fifteen per cent perannum from the 1st day of April next following the said financial year uptothe date of the regular assessment shall be payable by the assessee upon theamount by which the advance tax so paid falls short of the assessed tax :


Provided that in the case of an assessee, being a company, the provisions ofthis sub-section shall have effect as if for the words "seventy-five percent", the words "eighty-three and one-third per cent" had been substituted.

(2) Where before the date of completion of a regular assessment, tax is paidby the assessee under section 140A or otherwise 1857a , -

(i) Interest shall be calculated in accordance with the foregoing provisionupto the date on which the tax is so paid; and

(ii) Thereafter, interest shall be calculated at the rate aforesaid on theamount by which the tax as so paid (in so far as it relates to income subjectto advance tax) falls short of the assessed tax.

(3) Where as a result of an order under section 147 or section 154 or section155 or section 250 or section 254 or section 260 or section 262 or section 263or section 264 or an order of the Settlement Commission under sub-section (4)of section 245D 1859 ], the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interestshall be increased or reduced accordingly, and - (i) In a case where theinterest is increased, the Assessing Officer shall serve on the assessee, anotice of demand in the prescribed form specifying the sum payable, and suchnotice of demand shall be deemed to be a notice under section 156 and theprovisions of this Act shall apply accordingly;

(ii) In a case where the interest is reduced, the excess interest paid, ifany, shall be refunded.

(4) In such cases and under such circumstances as may be prescribed 1860 , theAssessing Officer may reduce or waive the interest payable by the assesseeunder this section.

(5) In this section and sections 217 and 273, "assessed tax" means the taxdetermined on the basis of the regular assessment (reduced by the amount oftax deductible in accordance with the provisions of sections 192 to 194,section 194A, section 194C section 194D, section 195 and section 196A), so faras such tax relates to income subject to advance tax and so far as it is notdue to variations in the rates of tax made by the Finance Act enacted for theyear for which the regular assessment is made.

(6) Where, in relation to an assessment year, an assessment is made for thefirst time under section 147, the assessment so made shall be regarded as aregular assessment for the purposes of this section and sections 216, 217 and


273.

432. Interest Payable by Assessee in case ofUnderstimate, Etc.

§432.Interest Payable by Assessee in case of Understimate, Etc.

Section 216

INTEREST PAYABLE BY ASSESSEE IN CASE OF UNDERESTIMATE, ETC.

Where, on making the regular assessment, the Assessing Officer finds that anyassessee has - (a) Under section 209A or section 212 underestimated theadvance tax payable by him and thereby reduced the amount payable in either ofthe first two instalments; or

(b) Under section 213 wrongly deferred the payment of advance tax on a part ofhis income, he may direct that the assessee shall pay simple interest atfifteen per cent per annum - (i) In the case referred to in clause (a), forthe period during which the payment was deficient, on the difference betweenthe amount paid in each such instalment and the amount which should have beenpaid, having regard to the aggregate advance tax actually paid during theyear; and

(ii) In the case referred to in clause (b), for the period during which thepayment of advance tax was so deferred.

Explanation : For the purposes of this section, any instalment due before theexpiry of six months from the commencement of the previous year in respect ofwhich it is to be paid shall be deemed to have become due fifteen days afterthe expiry of the said six months.

433. Interest Payable by Assesee when no EstimateMade.

§433.Interest Payable by Assesee when no Estimate Made.Section 217

INTEREST PAYABLE BY ASSESSEE WHEN NO ESTIMATE MADE .


(1) Where, on making the regular assessment, the Assessing Officer finds - (a)That any such person as is referred to in clause (a) of sub-section (1) ofsection 209A has not sent the statement referred to in that clause or theestimate in lieu of such statement referred to in sub-section (2) of thatsection; or

(b) That any such person as is referred to in clause (b) of sub-section (1) ofsection 209A has not sent the estimate referred to in that clause, simpleinterest at the rate of fifteen per cent per annum, from the 1st day of Aprilnext following the financial year in which the advance tax was payable inaccordance with the said sub-section (1) or sub-section (2) upto the date ofthe regular assessment shall be payable by the assessee upon the amount equalto the assessed tax as defined in sub-section (5) of section 215.

(1A) Where, on making the regular assessment, the Assessing Officer finds thatany person who is required to send an estimate under sub-section (4) ofsection 209A or any such person as is referred to in sub-section (3A) ofsection 212 has not sent the estimate referred to therein, simple interest atthe rate of fifteen per cent per annum from the 1st day of April nextfollowing the financial year in which the advance tax was payable inaccordance with [ 1876b the said sub-section (4), or, as the case may be, sub-section (3A) upto the date of the regular assessment shall be payable by theassessee upon the amount by which the advance tax paid by him falls short ofthe assessed tax as defined in sub-section (5) of section 215.

(2) The provisions of sub-sections (2), (3) and (4) of section 215 shall applyto interest payable under this section as they apply to interest payable underthat section.

434. When Assessee Deemed to be in Default.

§434.When Assessee Deemed to be in Default.Section 218

WHEN ASSESSEE DEEMED TO BE IN DEFAULT.

If any assessee does not pay on the date specified in sub-section (1) ofsection 211, any instalment of advance tax that he is required to pay by anorder of the Assessing Officer under sub-section (3) or sub-section (4) ofsection 210 and does not, on or before the date on which any such instalmentas is not paid becomes due, send to the Assessing Officer an intimation undersub-section (5) of section 210 or does not pay on the basis of his estimate ofhis current income the advance tax payable by him under sub-section (6) ofsection 210, he shall be deemed to be an assessee in default in respect of


such instalment or instalments.

435. Credit For Advance Tax.

§435.Credit For Advance Tax.Section 219

CREDIT FOR ADVANCE TAX.

Any sum, other than a penalty or interest, paid by or recovered from anassessee as advance tax in pursuance of this Chapter shall be treated as apayment of tax in respect of the income of the period which would be theprevious year for an assessment for the assessment year next following thefinancial year in which it was payable, and credit therefor shall be given tothe assessee in the regular assessment :

436. When Tax Payable and When Assessee Deemed inDefault.

§436.When Tax Payable and When Assessee Deemed in Default.

Section 220

WHEN TAX PAYABLE AND WHEN ASSESSEE DEEMED IN DEFAULT.

(1) Any amount, otherwise than by way of advance tax, specified as payable ina notice of demand under section 156 shall be paid within thirty days of theservice of the notice at the place and to the person mentioned in the notice :

Provided that, where the Assessing Officer has any reason to believe that itwill be detrimental to revenue if the full period of thirty days aforesaid isallowed, he may, with the previous approval of the Joint Commissioner, directthat the sum specified in the notice of demand shall be paid within suchperiod being a period less than the period of thirty days aforesaid, as may bespecified by him in the notice of demand.

(2) If the amount specified in any notice of demand under section 156 is notpaid within the period limited under sub-section (1), the assessee shall beliable to pay simple interest at one and one half per cent for every month orpart of a month comprised in the period commencing from the day immediatelyfollowing the end of the period mentioned in sub-section (1) and ending with


the day on which the amount is paid :

Provided that, where as a result of an order under section 154, or section155, or section 250, or section 254, or section 260, or section 262, orsection 264, or an order of the Settlement Commission under sub-section (4) ofsection 245D, the amount on which interest was payable under this section hadbeen reduced, the interest shall be reduced accordingly and the excessinterest paid, if any, shall be refunded :

Provided further that in respect of any period commencing on or before the31st day of March, 1989 and ending after that date, such interest shall, inrespect of so much of such period as falls after that date, be calculated atthe rate of one and one-half per cent. for every month or part of a month.

(2A) Notwithstanding anything contained in sub-section (2), the ChiefCommissioner or Commissioner may reduce or waive the amount of interest paidor payable by an assessee under the said sub-section if he is satisfied that -(i) Payment of such amount has caused or would cause genuine hardship to theassessee;

(ii) Default in the payment of the amount on which interest has been paid orwas payable under the said sub-section was due to circumstances beyond thecontrol of the assessee; and

(iii) The assessee has co-operated in any inquiry relating to the assessmentor any proceeding for the recovery of any amount due from him.

(3) Without prejudice to the provisions contained in sub-section (2), on anapplication made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allowpayment by instalments, subject to such conditions as he may think fit toimpose in the circumstances of the case.

(4) If the amount is not paid within the time limited under sub-section (1) orextended under sub-section (3), as the case may be, at the place and to theperson mentioned in the said notice the assessee shall be deemed to be indefault.

(5) If, in a case where payment by instalments is allowed under sub-section(3), the assessee commits default in paying any one of the instalments withinthe time fixed under that sub-section, the assessee shall be deemed to be indefault as to the whole of the amount then outstanding, and the otherinstalment or instalments shall be deemed to have been due on the same date asthe instalment actually in default.


(6) Where an assessee has presented an appeal under section 246 the AssessingOfficer may, in his discretion, and subject to such conditions as he may thinkfit to impose in the circumstances of the case, treat the assessee as notbeing in default in respect of the amount in dispute in the appeal, eventhough the time for payment has expired, as long as such appeal remainsundisposed of.

(7) Where an assessee has been assessed in respect of income arising outsideIndia in a country the laws of which prohibit or restrict the remittance ofmoney to India, the Assessing Officer shall not treat the assessee as indefault in respect of that part of the tax which is due in respect of thatamount of his income which, by reason of such prohibition or restriction,cannot be brought into India, and shall continue to treat the assessee as notin default in respect of such part of the tax until the prohibition orrestriction is removed.

Explanation : For the purposes of this section, income shall be deemed to havebeen brought into India if it has been utilised or could have been utilisedfor the purposes of any expenditure actually incurred by the assessee outsideIndia or if the income, whether capitalised or not, has been brought intoIndia in any form.

437. Penalty Payable When Tax in Default.

§437.Penalty Payable When Tax in Default.

Section 221

PENALTY PAYABLE WHEN TAX IN DEFAULT.

(1) When an assessee is in default or is deemed to be in default 1892 inmaking a payment of tax, he shall, in addition to the amount of the arrearsand the amount of interest payable under sub-section (2) of section 220, beliable, by way of penalty, to pay such amount as the Assessing Officer maydirect, and in the case of a continuing default, such further amount oramounts as the Assessing Officer may, from time to time, direct, so, however,that the total amount of penalty does not exceed the amount of tax in arrears:

Provided that before levying any such penalty, the assessee shall be given areasonable opportunity of being heard :


Provided further that where the assessee proves to the satisfaction of theAssessing Officer that the default was for good and sufficient reasons, nopenalty shall be levied under this section.

Explanation : For the removal of doubt, it is hereby declared that an assesseeshall not cease to be liable to any penalty under this sub-section merely byreason of the fact that before the levy of such penalty he has paid the tax.

(2) Where as a result of any final order the amount of tax, with respect tothe default in the payment of which the penalty was levied, has been whollyreduced, the penalty levied shall be cancelled and the amount of penalty paidshall be refunded.

438. Certificate by Tax Recovery Officer.

§438.Certificate by Tax Recovery Officer.

Section 222

CERTIFICATE BY TAX RECOVERY OFFICER.

(1) When an assessee is in default or is deemed to be in default in making apayment of tax, the Tax Recovery Officer may draw up under his signature astatement in the prescribed form specifying the amount of arrears due from theassessee (such statement being hereafter in this Chapter and in the SecondSchedule referred to as "certificate") and shall proceed to recover from suchassessee the amount specified in the certificate by one or more of the modesmentioned below, in accordance with the rules laid down in the Second Schedule-

(a) Attachment and sale of the assessee"s movable property;

(b) Attachment and sale of the assessee"s immovable property;

(c) Arrest of the assessee and his detention in prison;

(d) Appointing a receiver for the management of the assessee"s movable andimmovable properties.

Explanation : For the purposes of this sub-section, the assessee"s movable orimmovable property shall include any property which has been transferred,directly or indirectly on or after the 1st day of June, 1973, by the assesseeto his spouse or minor child or son"s wife or son"s minor child, otherwise


than for adequate consideration, and which is held by, or stands in the nameof, any of the persons aforesaid; and so far as the movable or immovableproperty so transferred to his minor child or his son"s minor child isconcerned, it shall, even after the date of attainment of majority by suchminor child or son"s minor child, as the case may be, continue to be includedin the assessee"s movable or immovable property for recovering any arrears duefrom the assessee in respect of any period prior to such date.

(2) The Tax Recovery Officer may take action under sub-section (1),notwithstanding that proceedings for recovery of the arrears by any other modehave been taken.

439. Tax Recovery Officer by Whom Recovery is to beEffected.

§439.Tax Recovery Officer by Whom Recovery is to be Effected.

Section 223

TAX RECOVERY OFFICER BY WHOM RECOVERY IS TO BE EFFECTED.

(1) The Tax Recovery Officer competent to take action under section 222 shallbe -

(a) The Tax Recovery Officer within whose jurisdiction the assessee carries onhis business or profession or within whose jurisdiction the principal place ofhis business or profession is situate, or

(b) The Tax Recovery Officer within whose jurisdiction the assessee resides orany movable or immovable property of the assessee is situate, the jurisdictionfor this purpose being the jurisdiction assigned to the Tax Recovery Officerunder the orders or directions issued by the Board, or by the ChiefCommissioner or Commissioner who is authorised in this behalf by the Board inpursuance of section 120.

(2) Where an assessee has property within the jurisdiction of more than oneTax Recovery Officer and the Tax Recovery Officer by whom the certificate isdrawn up - (a) Is not able to recover the entire amount by sale of theproperty, movable or immovable, within his jurisdiction, or

(b) Is of the opinion that, for the purpose of expediting or securing therecovery of the whole or any part of the amount under this Chapter, it is


necessary so to do, he may send the certificate or, where only a part of theamount is to be recovered, a copy of the certificate certified in theprescribed manner and specifying the amount to be recovered to a Tax RecoveryOfficer within whose jurisdiction the assessee resides or has property and,thereupon, that Tax Recovery Officer shall also proceed to recover the amountunder this Chapter as if the certificate or copy thereof had been drawn up byhim.

440. Validity of Certificate and Cancellation orAmendment thereof.

§440.Validity of Certificate and Cancellation or Amendment thereof.Section 224

VALIDITY OF CERTIFICATE AND CANCELLATION OR AMENDMENT THEREOF.

It shall not be open to the assessee to dispute the correctness of anycertificate drawn up by the Tax Recovery Officer on any ground whatsoever, butit shall be lawful for the Tax Recovery Officer to cancel the certificate if,for any reason, he thinks it necessary so to do, or to correct any clerical orarithmetical mistake therein.

441. Stay of Proceedings in Pursuance of certificaeand amendment or cancellation thereof.

§441.Stay of Proceedings in Pursuance of certificae and amendment orcancellation thereof.Section 225

STAY OF PROCEEDINGS IN PURSUANCE OF CERTIFICATE AND AMENDMENT OR CANCELLATIONTHEREOF.

(1) It shall be lawful for the Tax Recovery Officer to grant time for thepayment of any tax and when he does so, he shall stay the proceedings for therecovery of such tax until the expiry of the time so granted.

(2) Where the order giving rise to a demand of tax for which a certificate hasbeen drawn up is modified in appeal or other proceeding under this Act, and,as a consequence thereof, the demand is reduced but the order is the subject-matter of further proceeding under this Act, the Tax Recovery Officer shallstay the recovery of such part of the amount specified in the certificate as


pertains to the said reduction for the period for which the appeal or otherproceeding remains pending.

(3) Where a certificate has been drawn up and subsequently the amount of theoutstanding demand is reduced as a result of an appeal or other proceedingunder this Act, the Tax Recovery Officer shall, when the order which was thesubject-matter of such appeal or other proceeding has become final andconclusive, amend the certificate, or cancel it, as the case may be.

442. Other Modes of Recovery.

§442.Other Modes of Recovery.Section 226

OTHER MODES OF RECOVERY.

(1) Where no certificate has been drawn up under section 222, the AssessingOfficer may recover the tax by any one or more of the modes provided in thissection.

(1A) Where a certificate has been drawn up under section 222, the Tax RecoveryOfficer may, without prejudice to the modes of recovery specified in thatsection, recover the tax by any one or more of the modes provided in thissection.

(2) If any assessee is in receipt of any income chargeable under the head"Salaries", the Assessing Officer or the Tax Recovery Officer may require anyperson paying the same to deduct from any payment subsequent to the date ofsuch requisition any arrears of tax due from such assessee, and such personshall comply with any such requisition and shall pay the sum so deducted tothe credit of the Central Government or as the Board directs :

Provided that any part of the salary exempt from attachment in execution of adecree of a civil court, under section 60 of the Code of Civil Procedure, 1908(5 of 1908) shall be exempt from any requisition made under this sub-section.

(3)(i) The Assessing Officer or Tax Recovery Officer may, at any time or fromtime to time, by notice in writing require any person from whom money is dueor may become due to the assessee or any person who holds or may subsequentlyhold money for or on account of the assessee, to pay to the Assessing Officeror Tax Recovery Officer either forthwith upon the money becoming due or beingheld or at or within the time specified in the notice (not being before themoney becomes due or is held) so much of the money as is sufficient to pay theamount due by the assessee in respect of arrears or the whole of the money


when it is equal to or less than that amount.

(ii) A notice under this sub-section may be issued to any person who holds ormay subsequently hold any money for or on account of the assessee jointly withany other person and for the purposes of this sub-section, the shares of thejoint holders in such account shall be presumed, until the contrary is proved,to be equal.

(iii) A copy of the notice shall be forwarded to the assessee at his lastaddress known to the Assessing Officer or Tax Recovery Officer and in the caseof a joint account to all the joint holders at their last addresses known tothe Assessing Officer or Tax Recovery Officer.

(iv) Save as otherwise provided in this sub-section, every person to whom anotice is issued under this sub-section shall be bound to comply with suchnotice, and, in particular, where any such notice is issued to a post office,banking company or an insurer, it shall not be necessary for any pass book,deposit receipt, policy, or any other document to be produced for the purposeof any entry, endorsement or the like being made before payment is made,notwithstanding any rule, practice or requirement to the contrary.

(v) Any claim respecting any property in relation to which a notice under thissub-section has been issued arising after the date of the notice shall be voidas against any demand contained in the notice.

(vi) Where a person to whom a notice under this sub-section is sent objects toit by a statement on oath that the sum demanded or any part thereof is not dueto the assessee or that he does not hold any money for or on account of theassessee, then, nothing contained in this sub-section shall be deemed torequire such person to pay any such sum or part thereof, as the case may be,but if it is discovered that such statement was false in any materialparticular, such person shall be personally liable to the Assessing Officer orTax Recovery Officer to the extent of his own liability to the assessee on thedate of the notice, or to the extent of the assessee"s liability for any sumdue under this Act, whichever is less.

(vii) The Assessing Officer or Tax Recovery Officer may, at any time or fromtime to time, amend or revoke any notice issued under this sub-section orextend the time for making any payment in pursuance of such notice.

(viii) The Assessing Officer or Tax Recovery Officer shall grant a receiptfor any amount paid in compliance with a notice issued under this sub-section,and the person so paying shall be fully discharged from his liability to theassessee to the extent of the amount so paid.


(ix) Any person discharging any liability to the assessee after receipt of anotice under this sub-section shall be personally liable to the AssessingOfficer or Tax Recovery Officer to the extent of his own liability to theassessee so discharged or to the extent of the assessee"s liability for anysum due under this Act, whichever is less.

(x) If the person to whom a notice under this sub-section is sent fails tomake payment in pursuance thereof to the Assessing Officer or Tax RecoveryOfficer he shall be deemed to be an assessee in default in respect of theamount specified in the notice and further proceedings may be taken againsthim for the realisation of the amount as if it were an arrear of tax due fromhim, in the manner provided in sections 222 to 225 and the notice shall havethe same effect as an attachment of a debt by the Tax Recovery Officer inexercise of his powers under section 222.

(4) The Assessing Officer or Tax Recovery Officer may apply to the court inwhose custody there is money belonging to the assessee for payment to him ofthe entire amount of such money, or, if it is more than the tax due, an amountsufficient to discharge the tax.

(5) The Assessing Officer or Tax Recovery Officer may, if so authorised by theChief Commissioner or Commissioner by general or special order, recover anyarrears of tax due from an assessee by distraint and sale of his movableproperty in the manner laid down in the Third Schedule.

443. Recovery Through State Government.

§443.Recovery Through State Government.

Section 227

RECOVERY THROUGH STATE GOVERNMENT.

If the recovery of tax in any area has been entrusted to a State Governmentunder clause (1) of article 258 of the Constitution, the State Government maydirect, with respect to that area or any part thereof, that tax shall berecovered therein with, and as an addition to, any municipal tax or localrate, by the same person and in the same manner as the municipal tax or localrate is recovered.

444. Omitted.



RECOVERY OF INDIAN TAX IN PAKISTAN AND PAKISTAN TAX IN INDIA.


445. Recovery of Tax in Pursuance of Agreement withForeign Countries.

§445.Recovery of Tax in Pursuance of Agreement with Foreign Countries.Section 228A

RECOVERY OF TAX IN PURSUANCE OF AGREEMENTS WITH FOREIGN COUNTRIES.

(1) Where an agreement is entered into by the Central Government with theGovernment of any country outside India for recovery of income-tax under thisAct and the corresponding law in force in that country and the Government ofthat country or any authority under that Government which is specified in thisbehalf in such agreement sends to the Board a certificate for the recovery ofany tax due under such corresponding law from a person having any property inIndia, the Board may forward such certificate to any Tax Recovery Officerwithin whose jurisdiction such property is situated and thereupon such TaxRecovery Officer shall -

(a) Proceed to recover the amount specified in the certificate in the mannerin which he would proceed to recover the amount specified in a certificatedrawn up by him under section;

(b) Remit any sum so recovered by him to the Board after deducting hisexpenses in connection with the recovery proceedings.

(2) Where an assessee is in default or is deemed to be in default in making apayment of tax, the Tax Recovery Officer may, if the assessee has property ina country outside India (being a country with which the Central Government hasentered into an agreement for the recovery of income-tax under this Act andthe corresponding law in force in that country), forward to the Board acertificate drawn up by him under section 222 and the Board may take suchaction thereon as it may deem appropriate having regard to the terms of theagreement with such country.


446. Recovery of Penalties, Fine, Interest and OtherSums.

§446.Recovery of Penalties, Fine, Interest and Other Sums.Section 229

RECOVERY OF PENALTIES, FINE, INTEREST AND OTHER SUMS.

Any sum imposed by way of interest, fine, penalty, or any other sum payableunder the provisions of this Act, shall be recoverable in the manner providedin this Chapter for the recovery of arrears of tax.

447. Tax Clearance Certificate.

§447.Tax Clearance Certificate.Section 230

TAX CLEARANCE CERTIFICATE.

(1) Subject to such exceptions as the Central Government may, by notificationin the Official Gazette, specify in this behalf, no person -

(a) Who is not domiciled in India; or

(b) Who is domiciled in India at the time of his departure, but - (i) Intendsto leave India as an emigrant; or

(ii) Intends to proceed to another country on a work permit with the object oftaking up any employment or other occupation in that country; or

(iii) In respect of whom circumstances exist which in the opinion of anincome-tax authority, render it necessary for him to obtain a certificateunder this section, shall leave the territory of India, by land, sea or airunless he first obtains from such authority as may be appointed by the CentralGovernment in this behalf (hereinafter in this section referred to as the"competent authority") a certificate stating that he has no liabilities underthis Act, the Excess Profits Tax Act, 1940 (15 of 1940), the Business ProfitsTax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of 1922), theWealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1957 (29 of 1957),or the Gift-tax Act, 1958 (18 of 1958), or that satisfactory arrangements havebeen made for the payment of all or any of such taxes which are or may becomepayable by that person :


Provided that in the case of a person not domiciled in India the competentauthority may, if it is satisfied that such person intends to return to India,issue an exemption certificate either in respect of a single journey or inrespect of all journeys to be undertaken by that person within such period asmay be specified in the certificate.

(2) If the owner or charterer of any ship or aircraft carrying persons fromany place in the territory of India to any place outside India allows anyperson to whom sub-section (1) applies to travel by such ship or aircraftwithout first satisfying himself that such person is in possession of acertificate as required by that sub-section, he shall be personally liable topay the whole or any part of the amount of tax, if any, payable by such personas the Assessing Officer may, having regard to thecircumstances of the case,determine.

(3) In respect of any sum payable by the owner or charterer of any ship oraircraft under sub-section (2), the owner or charterer, as the case may be,shall be deemed to be an assessee in default for such sum, and such sum shallbe recoverable from him in the manner provided in this Chapter as if it werean arrear of tax.

(4) The Board may make rules 1910b for regulating any matter necessary for, orincidental to, the purpose of carrying out the provisions of this section.

Explanation : For the purposes of this section, the expressions "owner" and"charterer" include any representative, agent or employee empowered by theowner or charterer to allow persons to travel by the ship or aircraft.

448. Restrictions on Registration of Transfers ofImmovable property in certain cases.

§448.Restrictions on Registration of Transfers of Immovable property incertain cases.Section 230A

RESTRICTIONS ON REGISTRATION OF TRANSFERS OF IMMOVABLE PROPERTY IN CERTAINCASES.

(1) Notwithstanding anything contained in any other law for the time being inforce, where any document required to be registered under the provisions ofclause (a) to clause (e) of sub-section (1) of section 17 of the IndianRegistration Act, 1908 (16 of 1908), purports to transfer, assign, limit orextinguish the right, title or interest of any person to or in any property


valued at more than five lakh rupees, no registering officer appointed underthat Act shall register any such document, unless the Assessing Officercertifies that - (a) Such person has either paid or made satisfactoryprovision for payment of all existing liabilities under this Act, the ExcessProfits Tax Act, 1940, (15 of 1940), the Business Profits Tax Act, 1947 (21 of1947), the Indian Income-tax Act, 1922 (11 of 1922), the Wealth-tax Act, 1957(27 of 1957), the Expenditure-tax Act, 1957 (29 of 1957), the Gift-tax Act,1958 (18 of 1958), the Super Profits Tax Act, 1963 (14 of 1963), and theCompanies (Profits) Surtax Act, 1964 (7 of 1964), or (b) the registration ofthe document will not prejudicially affect the recovery of any existingliability under any of the aforesaid Acts.

(2) The application for the certificate required under sub-section (1) shallbe made by the person referred to in that sub-section and shall be in suchform and shall contain such particulars as may be prescribed.

(3) The provisions of sub-section (1) shall not apply in a case where theperson referred to in that sub-section is any such institution, association orbody, or belongs to any such class of institutions, associations or bodies, asthe Board may, for reasons to be recorded in writing, notify in this behalf inthe Official Gazette.

449. Omitted.

§449.Omitted.

Section 231

PERIOD FOR COMMENCING RECOVERY PROCEEDINGS.


450. Recovery by suit or under other law ntoaffected.

§450.Recovery by suit or under other law nto affected.Section 232

RECOVERY BY SUIT OR UNDER OTHER LAW NOT AFFECTED.

The several modes of recovery specified in this Chapter shall not affect in


any way - (a) Any other law for the time being in force relating to therecovery of debts due to Government; or

(b) The right of the Government to institute a suit for the recovery of thearrears due from the assessee; and it shall be lawful for the AssessingOfficer or the Government, as the case may be, to have recourse to any suchlaw or suit, notwithstanding that the tax due is being recovered from theassessee by any mode specified in this Chapter.

451. Omitted.


RECOVERY OF TAX DEDUCTION UNDER PROVISIONAL ASSESSMENT.

OMITTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970, W.E.F. 1-4-1971

452. Omitted.


TAX PAID BY DEDUCTION OR ADVANCE PAYMENT.


453. Interest for defaults in furnishing return ofIncome.

§453.Interest for defaults in furnishing return of Income.Section 234A

INTEREST FOR DEFAULTS IN FURNISHING RETURN OF INCOME.

(1) Where the return of income for any assessment year under sub-section (1)or sub-section (4) of section 139, in response to a notice under sub-section(1) of section 142, is furnished after the due date, or is not furnished, theassessee shall be liable to pay simple interest at the rate of one and one-half per cent. for every month or part of a month comprised in the periodcommencing on the date immediately following the due date, and, -


(a) Where the return is furnished after the due date, ending on the date offurnishing of the return; or

(b) Where no return has been furnished, ending on the date of completion ofthe assessment under section 144, on the amount of the tax on the total incomeas determined under sub-section (1) of section 143 or on regular assessment asreduced by the advance tax, if any, paid and any tax deducted or collected atsource.

Explanation 1 : In this section, "due date" means the date specified in sub-section (1) of section 139 as applicable in the case of the assessee.

Explanation 2 : In this sub-section, "tax on the total income as determinedunder sub-section (1) of section 143" shall not include the additional income-tax, if any, payable under section 143.


Explanation 4 : In this sub-section, "tax on the total income as determinedunder sub-section (1) of section 143 or on regular assessment" shall, for thepurposes of computing the interest payable under section 140A, be deemed to betax on total income as declared in the return.

(2) The interest payable under sub-section (1) shall be reduced by theinterest, if any, paid under section 140A towards the interest chargeableunder this section.

(3) Where the return of income for any assessment year, required by a noticeunder section 148 issued after the determination of income under sub-section(1) of section 143 or after the completion of an assessment under sub-section(3) of section 143 or section 144 or section 147, is furnished after theexpiry of the time allowed under such notice, or is not furnished, theassessee shall be liable to pay simple interest at the rate of[ 1920a one andone-half per cent{1920a ], for every month or part of a month comprised in theperiod commencing on the day immediately following the expiry of the timeallowed as aforesaid, and, - (a) Where the return is furnished after theexpiry of the time aforesaid, ending on the date of furnishing the return; or

(b) where no return has been furnished, ending on the date of completion ofthe reassessment or recomputation under section 147, on the amount by whichthe tax on the total income determined on the basis of such reassessment or


recomputation exceeds the tax on the total income determined under sub-section(1) of section 143 or on the basis of the earlier assessment aforesaid.

(4) Where, as a result of an order under section 154 or section 155 or section250 or section 254 or section 260 or section 262 or section 263 or section 264or an order of the Settlement Commission under sub-section (4) of section245D, the amount of tax on which interest was payable under sub-section (1) orsub-section (3) of this section has been increased or reduced, as the case maybe, the interest shall be increased or reduced, accordingly, and - (i) In acase where the interest is increased, the Assessing Officer shall serve on theassessee a notice of demand in the prescribed form specifying the sum payable,and such notice of demand shall be deemed to be a notice under section 156 andthe provisions of this Act shall apply accordingly;


(5) The provisions of this section shall apply in respect of assessments forthe assessment year commencing on the 1st day of April, 1989 and subsequentassessment years 1920.

454. Interest for defaults in Payament of AdvanceTax.

§454.Interest for defaults in Payament of Advance Tax.

Section 234B

INTEREST FOR DEFAULTS IN PAYMENT OF ADVANCE TAX.

(1) Subject to the other provisions of this section, where, in any financialyear, an assessee who is liable to pay advance tax under section 208 hasfailed to pay such tax or, where the advance tax paid by such assessee underthe provisions of section 210 is less than ninety per cent of the assessedtax, the assessee shall be liable to pay simple interest at the rate of oneand one half per cent for every month or part of a month comprised in theperiod from the 1st day of April next following such financial year 1927 tothe date of determination of total income under sub-section (1) of section 143and where a regular assessment is made, to the date of such regularassessment, on an amount equal to the assessed tax or, as the case may be, onthe amount by which the advance tax paid as aforesaid falls short of theassessed tax.


Explanation 1 : In this section, "assessed tax" means, - (a) For the purposesof computing the interest payable under section 140A, the tax on the totalincome as declared in the return referred to in that section;

(b) In any other case, the tax on the total income determined under sub-section (1) of section 143 or on regular assessment, as reduced by the amountof tax deducted or collected at source in accordance with the provisions ofChapter XVII on any income which is subject to such deduction or collectionand which is taken into account in computing such total income 1928.


Explanation 3 : In Explanation 1 and in sub-section (3), "tax on the totalincome determined under sub-section (1) of section 143" shall not include theadditional income-tax, if any, payable under section 143.

(2) Where, before the date of determination of total income under sub-section(1) of section 143 or 1929 completion of a regular assessment, tax is paid bythe assessee under section 140A or otherwise, - (i) interest shall becalculated in accordance with the foregoing provisions of this section up tothe date on which the tax is so paid, and reduced by the interest, if any,paid under section 140A towards the interest chargeable under this section;

(ii) Thereafter, interest shall be calculated at the rate aforesaid on theamount by which the tax so paid together with the advance tax paid falls shortof the assessed tax.

(3) Where, as a result of an order of reassessment or recomputation undersection 147, the amount on which interest was payable under sub-section (1) isincreased, the assessee shall be liable to pay simple interest at the rate ofone and one half per cent for every month or part of a month comprised in theperiod commencing on the day following 1930 the date of determination of totalincome under sub-section (1) of section 143 1930 and where a regularassessment is made as is referred to in sub-section (1) following the date ofsuch regular assessment and ending on the date of the reassessment orrecomputation under section 147, on the amount by which the tax on the totalincome determined on the basis of the reassessment or recomputation exceedsthe tax on the total income determined under sub-section (1) of section 143 oron the basis of the regular assessment aforesaid.

(4) Where, as a result of an order under section 154 or section 155 or section250 or section 254 or section 260 or section 262 or section 263 or section 264


or an order of the Settlement Commission under sub-section (4) of section245D, the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interestshall be increased or reduced accordingly, and -

(i) In a case where the interest is increased, the Assessing Officer shallserve on the assessee a notice of demand in the prescribed form specifying thesum payable and such notice of demand shall be deemed to be a notice undersection 156 and the provisions of this Act shall apply accordingly;


(5) The provisions of this section shall apply in respect of assessments forthe assessment year commencing on the 1st day of April, 1989 and subsequentassessment years.

455. Interest for Deferment of Advance Tax.

§455.Interest for Deferment of Advance Tax.

Section 234C

INTEREST FOR DEFERMENT OF ADVANCE TAX.

(1) Where in any financial year, - (a) The company which is liable to payadvance tax under section 208 has failed to pay such tax or -

(i) The advance tax paid by the company on its current income on or before the15th day of June is less than fifteen per cent of the tax due on the returnedincome or the amount of such advance tax paid on or before the 15th day ofSeptember is less than forty-five per cent. of the tax due on the returnedincome or the amount of such advance tax paid on or before the 15th day ofDecember is less than seventy-five per cent of the tax due on the returnedincome, then, the company shall be liable to pay simple interest at the rateof one and one-half per cent per month for a period of three months on theamount of the shortfall from fifteen per cent or forty-five per cent. orseventy-five per cent, as the case may be, of the tax due on the returnedincome;

(ii) The advance tax paid by the company on its current income on or beforethe 15th day of March is less than the tax due on the returned income, then,


the company shall be liable to pay simple interest at the rate of one and one-half per cent on the amount of the shortfall from the tax due on the returnedincome :

Provided that if the advance tax paid by the company on its current income onor before the 15th day of June or the 15th day of September, is not less thantwelve per cent or, as the case may be, thirty-six per cent of the tax due onthe returned income, then, it shall not be liable to pay any interest on theamount of the shortfall on those dates;

(b) The assessee, other than a company, who is liable to pay advance tax undersection 208 has failed to pay such tax or, - (i) The advance tax paid by theassessee on his current income on or before the 15th day of September is lessthan thirty per cent of the tax due on the returned income or the amount ofsuch advance tax paid on or before the 15th day of December is less than sixtyper cent. of the tax due on the returned income, then, the assessee shall beliable to pay simple interest at the rate of one and one-half per cent. permonth for a period of three months on the amount of the shortfall from thirtyper cent or, as the case may be, sixty per cent. of the tax due on thereturned income;

(ii) The advance tax paid by the assessee on his current income on or beforethe 15th day of March is less than the tax due on the returned income, then,the assessee shall be liable to pay simple interest at the rate of one andone-half per cent on the amount of the shortfall from the tax due on thereturned income :

Provided that nothing contained in this sub-section shall apply to anyshortfall in the payment of the tax due on the returned income where suchshortfall is on account of under-estimate or failure to estimate - (a) Theamount of capital gains; or

(b) Income of the nature referred to in sub-clause (ix) of clause (24) ofsection 2, and the assessee has paid the whole of the amount of tax payable inrespect of income referred to in clause (a) or clause (b), as the case may be,had such income been a part of the total income, as part of the remaininginstalments of advance tax which are due or where no such instalments are due,by the 31st day of March of the financial year 1933.

Explanation : In this section, "tax due on the returned income" means the taxchargeable on the total income declared in the return of income furnished bythe assessee for the assessment year commencing on the 1st day of Aprilimmediately following the financial year in which the advance tax is paid orpayable, as reduced by the amount of tax deductible or collectible at sourcein accordance with the provisions of Chapter XVII on any income which is


subject to such deduction or collection and which is taken into account incomputing such total income.

(2) The provisions of this section shall apply in respect of assessments forthe assessment year commencing on the 1st day of April, 1989 and subsequentassessment years.

456. Omitted.

§456.Omitted.

Section 235

RELIEF TO SHAREHOLDERS IN RESPECT OF AGRICULTURAL INCOME-TAXATTRIBUTABLE TO DIVIDENDS.


457. Relief to Company in Respect of dividend paid out ofpast taxed profits.

§ 457. Relief to Company in Respect of dividend paid out of past taxed profits.Section 236

RELIEF TO COMPANY IN RESPECT OF DIVIDEND PAID OUT OF PAST TAXEDPROFITS.

(1) 1937 Where in respect of any previous year relevant to the assessment year commencing afterthe 31st day of March, 1960, an Indian company or a company which has made the prescribedarrangements for the declaration and payment of dividends within India, pays any dividendwholly or partly out of its profits and gains actually charged to income-tax for any assessmentyear ending before the 1st day of April, 1960 and deducts tax therefrom in accordance with theprovisions of Chapter XVII-B, credit shall be given to the company against the income-tax, ifany, payable by it on the profits and gains of the previous year during which the dividend is paid,of a sum calculated in accordance with the provisions of sub-section (2), and, where the amountof credit so calculated exceeds the income-tax payable by the company as aforesaid, the excessshall be refunded.

(2) The amount of income-tax to be given as credit under sub-section (1) shall be a sum equal toten per cent of so much of the dividends referred to in sub-section (1) as are paid out of theprofits and gains actually charged to income-tax for any assessment year ending before the 1st


day of April, 1960.

Explanation 1 : For the purposes of this section, the aggregate of the dividends declared by acompany in respect of any previous year shall be deemed first to have come out of thedistributable income of that previous year and the balance, if any, out of the undistributed part ofthe distributable income of one or more previous years immediately preceding that previous yearas would be just sufficient to cover the amount of such balance and as has not likewise beentaken into account for covering such balance of any other previous year.

Explanation 2 : The expression "distributable income of any previous year" shall mean the totalincome (as computed before making any deduction under Chapter VIA) assessed for that year1938 as reduced by - (i) The amount of tax payable by the company in respect of its totalincome;

(ii) The amount of any other tax levied under any law for the time being in force on the companyby the Government or by a local authority in excess of the amount, if any, which has beenallowed in computing the total income;

(iii) Any sum with reference to which a deduction is allowable to the company under theprovisions of section 80G;

(iv) In the case of a banking company, the amount actually transferred to a reserve fund undersection 17 of the Banking Companies Act, 1949 (10 of 1949), and as increased by - (a) Anyprofits and gains or receipts of the company, not included in its total income (as computed beforemaking any deduction under Chapter VIA); and

(b) Any amount attributable to any allowance made in computing the profits and gains of thecompany for purposes of assessment, which the company has not taken into account in its profitand loss account.

458. Relief to certain charitable institutions or funds inrespect of certain dividends.

§ 458. Relief to certain charitable institutions or funds in respect of certain dividends.Section 236A

RELIEF TO CERTAIN CHARITABLE INSTITUTIONS OR FUNDS IN RESPECT OFCERTAIN DIVIDENDS.

(1) Where seventy-five per cent. of the share capital of any company is throughout the previousyear beneficially held by an institution or fund established in India for a charitable purpose theincome from dividend whereof is exempt under section 11, 1943 ] credit shall be given to theinstitution or fund against the tax, if any, payable by it, of a sum calculated in accordance with


the provisions of sub-section (2), in respect of its income from dividends (other than dividendson preference shares) declared or distributed during the previous year relevant to any assessmentyear beginning on or after the first day of April, 1966, by such a company and where theamount of credit so calculated exceeds the tax, if any, payable by the said institution or fund, theexcess shall be refunded.

(2) The amount to be given as credit, under sub-section (1) shall be a sum which bears to theamount of the tax payable by the company under the provisions of the annual Finance Act withreference to the relevant amount of distributions of dividends by it the same proportion as theamount of the dividends (other than dividends on preference shares) received by the institution orfund from the company bears to the total amount of dividends (other than dividends onpreference shares) declared or distributed by the company during the previous year.

Explanation : In sub-section (2) of this section and in section 280ZB, the expression "the relevantamount of distributions of dividends" has the meaning assigned to it in the Finance Act of therelevant year 1946.

459. Refunds.

§ 459. Refunds.Section 237

REFUNDS.

If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalfor treated as paid by him or on his behalf for any assessment year exceeds the amount withwhich he is properly chargeable under this Act for that year, he shall be entitled to a refund of theexcess.

460. Person Entitled to claim refund in certain special cases.

§ 460. Person Entitled to claim refund in certain special cases.

Section 238

PERSON ENTITLED TO CLAIM REFUND IN CERTAIN SPECIAL CASES.

(1) Where the income of one person is included under any provision of this Act in the totalincome of any other person, the latter alone shall be entitled to a refund under this Chapter inrespect of such income.


(2) Where through death, incapacity, insolvency, liquidation or other cause, a person is unable toclaim or receive any refund due to him, his legal representative or the trustee or guardian orreceiver, as the case may be, shall be entitled to claim or receive such refund for the benefit ofsuch person or his estate.

461. Form of claim for refund and limitation.

§ 461. Form of claim for refund and limitation.Section 239

FORM OF CLAIM FOR REFUND AND LIMITATION.

(1) Every claim for refund under this Chapter shall be made in the prescribed form and verifiedin the prescribed manner.

(2) No such claim shall be allowed, unless it is made within the period specified hereunder,namely :- (a) Where the claim is in respect of income which is assessable for any assessmentyear commencing on or before the 1st day of April, 1967, four years from the last day of suchassessment year;

(b) where the claim is in respect of income which is assessable for the assessment yearcommencing on the 1st day of April, 1968, three years from the last day of the assessment year;

(c) Where the claim is in respect of income which is assessable for any other assessment year,one year from the last day of such assessment year.

462. Refund on Appeal, Etc.

§ 462. Refund on Appeal, Etc.Section 240

REFUND ON APPEAL, ETC.

Where, as a result of any order passed in appeal or other proceeding under this Act, refund of anyamount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided inthis Act, refund the amount to the assessee without his having to make any claim in that behalf :

Provided that where, by the order aforesaid, - (a) An assessment is set aside or cancelled and anorder of fresh assessment is directed to be made, the refund, if any, shall become due only on themaking of such fresh assessment;

(b) The assessment is annulled, the refund shall become due only of the amount, if any, of the tax


paid in excess of the tax chargeable on the total income returned by the assessee.

463. Power to withhold refund in certain cases.

§ 463. Power to withhold refund in certain cases.Section 241

POWER TO WITHHOLD REFUND IN CERTAIN CASES.

Where refund of any amount becomes due to the assessee as a result of an order under this Act orunder the provisions of sub-section (1) of section 143 after a return has been made under section139 or in response to a notice under sub-section (1) of section 142 and the Assessing Officer is ofthe opinion, having regard to the fact that - (i) A notice has been issued, or is likely to be issued,under sub-section (2) of section 143 in respect of the said return; or

(ii) The order is the subject-matter of an appeal or further proceeding; or

(iii) Any other proceeding under this Act is pending, that the grant of the refund is likely toadversely affect the revenue, the Assessing Officer may, with the previous approval of the ChiefCommissioner or Commissioner, withhold the refund till such time as the Chief Commissioneror Commissioner may determine.

464. Correctness of Assessment not to be Questioned.

§ 464. Correctness of Assessment not to be Questioned.Section 242

CORRECTNESS OF ASSESSMENT NOT TO BE QUESTIONED.

In a claim under this Chapter, it shall not be open to the assessee to question the correctness ofany assessment or other matter decided which has become final and conclusive or ask for areview of the same, and the assessee shall not be entitled to any relief on such claim exceptrefund of tax wrongly paid or paid in excess.

465. Interest on Delayed Refunds.

§ 465. Interest on Delayed Refunds.Section 243

INTEREST ON DELAYED REFUNDS.


(1) If the Assessing Officer does not grant the refund, - (a) In any case where the total income ofthe assessee does not consist solely of income from interest on securities or dividends, withinthree months from the end of the month in which the total income is determined under this Act,and

(b) In any other case, within three months from the end of the month in which the claim forrefund is made under this Chapter, the Central Government shall pay the assessee simple interestat fifteen per cent per annum on the amount directed to be refunded from the date immediatelyfollowing the expiry of the period of three months aforesaid to the date of the order granting therefund.

Explanation : If the delay in granting the refund within the period of three months aforesaid isattributable to the assessee, whether wholly or in part, the period of the delay attributable to himshall be excluded from the period for which interest is payable.

(2) Where any question arises as to the period to be excluded for the purposes of calculation ofinterest under the provisions of this section, such question shall be determined by the ChiefCommissioner or Commissioner whose decision shall be final.

(3) The provisions of this section shall not apply in respect of any assessment for the assessmentyear commencing on the 1st day of April, 1989 or any subsequent assessment years.

466. Interest on Refund where no claim is needed.

§ 466. Interest on Refund where no claim is needed.

Section 244

INTEREST ON REFUND WHERE NO CLAIM IS NEEDED.

(1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 andthe Assessing Officer does not grant the refund within a period of three months from the end ofthe month in which such order is passed, the Central Government shall pay to the assessee simpleinterest at fifteen per cent per annum on the amount of refund due from the date immediatelyfollowing the expiry of the period of three months aforesaid to the date on which the refund isgranted.

(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to theassessee, as a result of any amount having been paid by him after the 31st day of March, 1975, inpursuance of any order of assessment or penalty and such amount or any part thereof havingbeen found in appeal or other proceeding under this Act to be in excess of the amount whichsuch assessee is liable to pay as tax or penalty, as the case may be, under this Act, the CentralGovernment shall pay to such assessee simple interest at the rate specified in sub-section (1) on


the amount so found to be in excess from the date on which such amount was paid to the date onwhich the refund is granted :

Provided that where the amount so found to be in excess was paid in instalments, such interestshall be payable on the amount of each such instalment or any part of such instalment, which wasin excess, from the date on which such instalment was paid to the date on which the refund isgranted :

Provided further that no interest under this sub-section shall be payable for a period of one monthfrom the date of the passing of the order in appeal or other proceeding :

Provided also that where any interest is payable to an assessee under this sub-section, no interestunder sub-section (1) shall be payable to him in respect of the amount so found to be in excess.

(2) Where a refund is withheld under the provisions of section 241, the Central Government shallpay interest at the aforesaid rate on the amount of refund ultimately determined to be due as aresult of the appeal or further proceeding for the period commencing after the expiry of threemonths from the end of the month in which the order referred to in section 241 is passed to thedate the refund is granted.

(3) The provisions of this section shall not apply in respect of any assessment for the assessmentyear commencing on the 1st day of April, 1989 or any subsequent assessment years.

467. Interest on Refunds.

§467.Interest on Refunds.

Section 244A

INTEREST ON REFUNDS.

(1) Where refund of any amount becomes due to the assessee under this Act 1963 ], he shall,subject to the provisions of this section, be entitled to receive, in addition to the said amount,simple interest thereon calculated in the following manner, namely :- (a) Where the refund is outof any tax collected at source under section 206C or 1964 paid by way of advance tax or treatedas paid under section 199, during the financial year immediately preceding the assessment year,such interest shall be calculated at the rate of one per cent for every month or part of a monthcomprised in the period from the 1st day of April of the assessment year to the date on which therefund is granted :

Provided that no interest shall be payable if the amount of refund is less than ten per cent of thetax as determined under sub-section (1) of section 143 or on regular assessment;


(b) In any other case, such interest shall be calculated at the rate of one per cent for every monthor part of a month comprised in the period or periods from the date or, as the case may be, datesof payment of the tax or penalty to the date on which the refund is granted.

Explanation : For the purposes of this clause, "date of payment of tax or penalty" means the dateon and from which the amount of tax or penalty specified in the notice of demand issued undersection 156 is paid in excess of such demand.

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee,whether wholly or in part, the period of the delay so attributable to him shall be excluded fromthe period for which interest is payable, and where any question arises as to the period to beexcluded, it shall be decided by the Chief Commissioner or Commissioner whose decisionthereon shall be final.

(3) Where, as a result of an order under sub-section (3) of section 143 or section 144 or section147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 orsection 263 or section 264 or an order of the Settlement Commission under sub-section (4) ofsection 245D, the amount on which interest was payable under sub-section (1) has beenincreased or reduced, as the case may be, the interest shall be increased or reduced accordingly,and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee anotice of demand in the prescribed form specifying the amount of the excess interest paid andrequiring him to pay such amount; and such notice of demand shall be deemed to be a noticeunder section 156 and the provisions of this Act shall apply accordingly.

(4) The provisions of this section shall apply in respect of assessments for the assessment yearcommencing on the 1st day of April, 1989, and subsequent assessment years 1962.

468. Set off of Refunds Against Tax Remaining Payable.

§ 468. Set off of Refunds Against Tax Remaining Payable.Section 245

SET OFF OF REFUNDS AGAINST TAX REMAINING PAYABLE.

Where under any of the provisions of this Act, a refund is found to be due to any person, theAssessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or ChiefCommissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, setoff the amount to be refunded or any part of that amount, against the sum, if any, remainingpayable under this Act by the person to whom the refund is due, after giving an intimation inwriting to such person of the action proposed to be taken under this section.


469. Definitions.

§ 469. Definitions.

Section 245A

DEFINITIONS.

In this Chapter, unless the context otherwise requires, - (a) "Bench" means a Bench of theSettlement Commission;

(b) "Case" means any proceeding under this Act for the assessment or reassessment of anyperson in respect of any year or years, or by way of appeal or revision in connection with suchassessment or reassessment, which may be pending before an income-tax authority on the dateon which an application under sub-section (1) of section 245C is made :

Provided that where any appeal or application for revision has been preferred after the expiry ofthe period specified for the filing of such appeal or application for revision under this Act andwhich has not been admitted, such appeal or revision shall not be deemed to be a proceedingpending within the meaning of this clause;

(c) "Chairman" means the Chairman of the Settlement Commission;

(d) "Income-tax authority" means an income-tax authority specified in section 116;

(e) "Member" means a Member of the Settlement Commission, and includes the Chairman and aVice-Chairman;

(f) "Settlement Commission" means the Income-tax Settlement Commission constituted undersection 245B;

(g) "Vice-Chairman" means a Vice-Chairman of the Settlement Commission.

470. Income-Tax Settlement Commission.

§ 470. Income-Tax Settlement Commission.Section 245B

INCOME-TAX SETTLEMENT COMMISSION.

(1) The Central Government shall constitute a Commission to be called the Income-taxSettlement Commission for the settlement of cases under this Chapter.


(2) The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen andother members as the Central Government thinks fit and shall function within the Department ofthe Central Government dealing with direct taxes.

(3) The Chairman, Vice-Chairman and other members of the Settlement Commission shall beappointed by the Central Government from amongst persons of integrity and outstanding ability,having special knowledge of, and experience in, problems relating to direct taxes and businessaccounts :

Provided that, where a member of the Board is appointed as the Chairman, Vice-Chairman or asa member of the Settlement Commission, he shall cease to be a member of the Board.

471. Jurisdiction and Powers of settlement commission.

§ 471. Jurisdiction and Powers of settlement commission.Section 245BA

JURISDICTION AND POWERS OF SETTLEMENT COMMISSION.

(1) Subject to the other provisions of this Chapter, the jurisdiction, powers and authority of theSettlement Commission may be exercised by Benches thereof.

(2) Subject to the other provisions of this section, a Bench shall be presided over by theChairman or a Vice-Chairman and shall consist of two other Members.

(3) The Bench for which the Chairman is the Presiding Officer shall be the principal Bench andthe other Benches shall be known as additional Benches.

(4) Notwithstanding anything contained in sub-sections (1) and (2), the Chairman may authorisethe Vice-Chairman or other Member appointed to one Bench to discharge also the functions ofthe Vice-Chairman or, as the case may be, other Member of another Bench.

(5) Notwithstanding anything contained in the foregoing provisions of this section, and subject toany rules that may be made in this behalf, when one of the persons constituting a Bench (whethersuch person be the Presiding Officer or other Member of the Bench) is unable to discharge hisfunctions owing to absence, illness or any other cause or in the event of the occurrence of anyvacancy either in the office of the Presiding Officer or in the office of one or the other Membersof the Bench, the remaining two persons may function as the Bench and if the Presiding Officerof the Bench is not one of the remaining two persons, the senior among the remaining personsshall act as the Presiding Officer of the Bench :

Provided that if at any stage of the hearing of any such case or matter, it appears to the PresidingOfficer that the case or matter is of such a nature that it ought to be heard of by a Bench


consisting of three Members, the case or matter may be referred by the Presiding Officer of suchBench to the Chairman for transfer to such Bench as the Chairman may deem fit.

(5A) Notwithstanding anything contained in the foregoing provisions of this section, theChairman may, for the disposal of any particular case, constitute a Special Bench consisting ofmore than three Members.

(6) Subject to the other provisions of this Chapter, the places at which the principal Bench andthe additional Benches shall ordinarily sit shall be such as the Central Government may, bynotification in the Official Gazette, specify and the Special Bench shall sit at a place to be fixedby the Chairman.

472. Vice-Chairman to Act as Chairman or to discharge hisfunctions in certain circumstances.

§ 472. Vice-Chairman to Act as Chairman or to discharge his functions in certain circumstances.Section 245BB

VICE-CHAIRMAN TO ACT AS CHAIRMAN OR TO DISCHARGE HIS FUNCTIONS INCERTAIN CIRCUMSTANCES.

(1) In the event of the occurrence of any vacancy in the office of the Chairman by reason of hisdeath, resignation or otherwise, the Vice-Chairman or, as the case may be, such one of the Vice-Chairmen as the Central Government may, by notification in the Official Gazette, authorise inthis behalf, shall act as the Chairman until the date on which a new Chairman, appointed inaccordance with the provisions of this Chapter to fill such vacancy, enters upon his office.

(2) When the Chairman is unable to discharge his functions owing to absence, illness or anyother cause, the Vice-Chairman or, as the case may be, such one of the Vice-Chairmen as theCentral Government may, by notification in the Official Gazette, authorise in this behalf, shalldischarge the functions of the Chairman until the date on which the Chairman resumes his duties.

473. Power of Chairman to Transfer cases from one bench toanother.

§ 473. Power of Chairman to Transfer cases from one bench to another.Section 245BC

POWER OF CHAIRMAN TO TRANSFER CASES FROM ONE BENCH TO ANOTHER.

On the application of the assessee or the Chief Commissioner or Commissioner and after notice


to them, and after hearing such of them as he may desire to be heard, or on his own motionwithout such notice, the Chairman may transfer any case pending before one Bench, for disposal,to another Bench.

474. Decision to be by Majority.

§ 474. Decision to be by Majority.Section 245BD

DECISION TO BE BY MAJORITY.

If the Members of a Bench differ in opinion on any point, the point shall be decided according tothe opinion of the majority, if there is a majority, but if the Members are equally divided, theyshall state the point or points on which they differ, and make a reference to the Chairman whoshall either hear the point or points himself or refer the case for hearing on such point or pointsby one or more of the other Members of the Settlement Commission and such point or pointsshall be decided according to the opinion of the majority of the Members of the SettlementCommission who have heard the case, including those who first heard it.

475. Application for settlement of cases.

§ 475. Application for settlement of cases.Section 245C

APPLICATION FOR SETTLEMENT OF CASES.

(1) An assessee may, at any stage of a case relating to him, make an application in such form andin such manner as may be prescribed, and containing a full and true disclosure of his incomewhich has not been disclosed before the Assessing Officer, the manner in which such income hasbeen derived, the additional amount of income-tax payable on such income and such otherparticulars as may be prescribed, to the Settlement Commission to have the case settled and anysuch application shall be disposed of in the manner hereinafter provided :

Provided that no such application shall be made unless, -

(a) The assessee has furnished the return of income which he is or was required to furnish underany of the provisions of this Act; and

(b) The additional amount of income-tax payable on the income disclosed in the applicationexceeds one hundred thousand rupees.

(1A) For the purposes of sub-section (1) of this section and sub-sections (2A) to (2D) of section


245D, the additional amount of income-tax payable in respect of income disclosed in anapplication made under sub-section (1) of this section shall be the amount calculated inaccordance with the provisions of sub-sections (1B) to (1D).

(1B) Where the income disclosed in the application relates to only one previous year, - (i) If theapplicant has not furnished a return in respect of the total income of that year (whether or not anassessment has been made in respect of the total income of that year), then, except in a casecovered by clause (iii), tax shall be calculated on the income disclosed in the application as ifsuch income were the total income;

(ii) If the applicant has furnished a return in respect of the total income of that year (whether ornot an assessment has been made in pursuance of such return), tax shall be calculated on theaggregate of the total income returned and the income disclosed in the application as if suchaggregate were the total income;

(iii) If the proceeding pending before the income-tax authority is in the nature of a proceeding forreassessment of the applicant under section 147 or by way of appeal or revision in connectionwith such reassessment, and the applicant has not furnished a return in respect of the total incomeof that year in the course of such proceeding for reassessment, tax shall be calculated on theaggregate of the total income as assessed in the earlier proceeding for assessment under section143 or section 144 or section 147 and the income disclosed in the application as if such aggregatewere the total income.

(1C) The additional amount of income-tax payable in respect of the income disclosed in theapplication relating to the previous year referred to in sub-section (1B) shall be, - (a) In a casereferred to in clause (i) of that sub-section, the amount of tax calculated under that clause;

(b) In a case referred to in clause (ii) of that sub-section, the amount of tax calculated under thatclause as reduced by the amount of tax calculated on the total income returned for that year;

(c) In a case referred to in clause (iii) of that sub-section, the amount of tax calculated under thatclause as reduced by the amount of tax calculated on the total income assessed in the earlierproceeding for assessment under section 143 or section 144 or section 147.

(1D) Where the income disclosed in the application relates to more than one previous year, theadditional amount of income-tax payable in respect of the income disclosed for each of the yearsshall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and theaggregate of the amount so arrived at in respect of each of the years for which the application hasbeen made under sub-section (1) shall be the additional amount of income-tax payable in respectof the income disclosed in the application.

(1E) Where any books of account, other documents, money, bullion, jewellery or other valuablearticle or thing belonging to an assessee are seized under section 132, the assessee shall not beentitled to make an application under sub-section (1) before the expiry of one hundred andtwenty days from the date of the seizure.


(2) Every application made under sub-section (1) shall be accompanied by such fees as may beprescribed.

(3) An application made under sub-section (1) shall not be allowed to be withdrawn by theapplicant.

476. Procedure on receipt of an application undersection 245C.

§476.Procedure on receipt of an application under section 245C.Section 245D

PROCEDURE ON RECEIPT OF AN APPLICATION UNDER SECTION 245C.

(1) On receipt of any application under section 245C, the SettlementCommission shall call for a report from the Commissioner and on the basis ofthe materials contained in such report and having regard to the nature andcircumstances of the case or the complexity of the investigation involvedtherein, the Settlement Commission may, by order, allow the application to beproceeded with or reject the application :

Provided that an application shall not be rejected under this sub-sectionunless an opportunity has been given to the applicant of being heard :

Provided further that the Commissioner shall furnish the report within aperiod of forty-five days of the receipt of communication from the SettlementCommission in case of all applications made under section 245C on or after the1st day of July, 1995 and if the Commissioner fails to furnish the reportwithin the said period, the Settlement Commission may make the order withoutsuch report.

(2) A copy of every order under sub-section (1) shall be sent to the applicantand to the Commissioner.

(2A) Subject to the provisions of sub-section (2B), the assessee shall, withinthirty-five days of the receipt of a copy of the order under sub-section (1)allowing the application to be proceeded with 1985, pay the additional amountof income-tax payable on the income disclosed in the application and shallfurnish proof of such payment to the Settlement Commission.

(2B) If the Settlement Commission is satisfied, on an application made in thisbehalf by the assessee, that he is unable for good and sufficient reasons to


pay the additional amount of income-tax referred to in sub-section (2A) withinthe time specified in that sub-section, it may extend the time for payment ofthe amount which remains unpaid or allow payment thereof by instalments if theassessee furnishes adequate security for the payment thereof.

(2C) Where the additional amount of income-tax is not paid within the timespecified under sub-section (2A), then, whether or not the SettlementCommission has extended the time for payment of the amount which remainsunpaid or has allowed payment thereof by instalments under sub-section (2B),the assessee shall be liable to pay simple interest at fifteen per cent perannum on the amount remaining unpaid from the date of expiry of the period ofthirty-five days referred to in sub-section (2A).

(2D) Where the additional amount of income-tax referred to in sub-section (2A)is not paid by the assessee within the time specified under that sub-sectionor extended under sub-section (2B), as the case may be, the SettlementCommission may direct that the amount of income-tax remaining unpaid, togetherwith any interest payable thereon under sub-section (2C), be recovered and anypenalty for default in making payment of such additional amount may be imposedand recovered, in accordance with the provisions of Chapter XVII, by theAssessing Officer having jurisdiction over the assessee.

(3) Where an application is allowed to be proceeded with under sub-section(1), the Settlement Commission may call for the relevant records from theCommissioner and after examination of such records, if the SettlementCommission is of the opinion that any further enquiry or investigation in thematter is necessary, it may direct the Commissioner to make or cause to bemade such further enquiry or investigation and furnish a report on the matterscovered by the application and any other matter relating to the case.

(4) After examination of the records and the report of the Commissioner,received under sub-section (1), and the report, if any, of the Commissionerreceived under sub-section (3), and after giving an opportunity to theapplicant and to the Commissioner to be heard, either in person or through arepresentative duly authorised in this behalf, and after examining suchfurther evidence as may be placed before it or obtained by it, the SettlementCommission may, in accordance with the provisions of this Act, pass such orderas it thinks fit on the matters covered by the application and any othermatter relating to the case not covered by the application, but referred to inthe report of the Commissioner under sub-section (1) or sub-section (3).

(5) Subject to the provisions of section 245BA, the materials brought onrecord before the Settlement Commission shall be considered by the Members ofthe concerned Bench before passing any order under sub-section (4) and, in


relation to the passing of such order, the provisions of section 245BD shallapply.

(6) Every order passed under sub-section (4) shall provide for the terms ofsettlement including any demand by way of tax, penalty or interest, the mannerin which any sum due under the settlement shall be paid and all other mattersto make the settlement effective and shall also provide that the settlementshall be void if it is subsequently found by the Settlement Commission that ithas been obtained by fraud or misrepresentation of facts.

(6A) Where any tax payable in pursuance of an order under sub-section (4) isnot paid by the assessee within thirty-five days of the receipt of a copy ofthe order by him, then whether or not the Settlement Commission has extendedthe time for payment of such tax or has allowed payment thereof byinstalments, the assessee shall be liable to pay simple interest at fifteenper cent per annum on the amount remaining unpaid from the date of expiry ofthe period of thirty-five days aforesaid.

(7) Where a settlement becomes void as provided under sub-section (6), theproceedings with respect to the matters covered by the settlement shall bedeemed to have been revived from the stage at which the application wasallowed to be proceeded with by the Settlement Commission and the Income-taxauthority concerned, may, notwithstanding anything contained in any otherprovision of this Act, complete such proceedings at any time before the expiryof two years from the end of the financial year in which the settlement becamevoid.

(8) For the removal of doubts, it is hereby declared that nothing contained insection 153 shall apply to any order passed under sub-section (4) or to anyorder of assessment, reassessment or recomputation required to be made by theAssessing Officer in pursuance of any directions contained in such orderpassed by the Settlement Commission and nothing contained in the proviso tosub-section (1) of section 186 shall apply to the cancellation of theregistration of a firm required to be made in pursuance of any such directionsas aforesaid.

477. Power of settlement commission to orderprovisional attachment to protect revenue.

§477.Power of settlement commission to order provisional attachment toprotect revenue.Section 245DD


POWER OF SETTLEMENT COMMISSION TO ORDER PROVISIONAL ATTACHMENT TO PROTECTREVENUE.

(1) Where, during the pendency of any proceeding before it, the SettlementCommission is of the opinion that for the purpose of protecting the interestsof the revenue it is necessary so to do, it may, by order, attachprovisionally any property belonging to the applicant in the manner providedin the Second Schedule :

Provided that where a provisional attachment made under section 281B ispending immediately before an application is made under section 245C, an orderunder this sub-section shall continue such provisional attachment up to theperiod up to which an order made under section 281B would have continued ifsuch application had not been made :

Provided further that where the Settlement Commission passes an order underthis sub-section after the expiry of the period referred to in the precedingproviso, the provisions of sub-section (2) shall apply to such order as if thesaid order had originally been passed by the Settlement Commission.

(2) Every provisional attachment made by the Settlement Commission under sub-section (1) shall cease to have effect after the expiry of a period of sixmonths from the date of the order made under sub-section (1) :

Provided that the Settlement Commission may, for reasons to be recorded inwriting, extend the aforesaid period by such further period or periods as itthinks fit, so, however, that the total period of extension shall not in anycase exceed two years.

478. Power of settlement commission to reopencompleted proceedings.

§478.Power of settlement commission to reopen completed proceedings.Section 245E

POWER OF SETTLEMENT COMMISSION TO REOPEN COMPLETED PROCEEDINGS.

If the Settlement Commission is of the opinion (the reason for such opinion tobe recorded by it in writing) that, for the proper disposal of the casepending before it, it is necessary or expedient to reopen any proceedingconnected with the case but which has been completed under this Act by anyincome-tax authority before the application under section 245C was made, itmay, with the concurrence of the applicant, reopen such proceeding and pass


such order thereon as it thinks fit, as if the case inrelation to which theapplication for settlement had been made by the applicant under that sectioncovered such proceeding also :

Provided that no proceeding shall be reopened by the Settlement Commissionunder this section if the period between the end of the assessment year towhich such a proceeding relates and the date of application for settlementunder section 245C exceeds nine years.

479. Powers and Procedure of settlement commission.

§479.Powers and Procedure of settlement commission.Section 245F

POWERS AND PROCEDURE OF SETTLEMENT COMMISSION.

(1) In addition to the powers conferred on the Settlement Commission underthis Chapter, it shall have all the powers which are vested in an income-taxauthority under this Act.

(2) Where an application made under section 245C has been allowed to beproceeded with under section 245D, the Settlement Commission shall, until anorder is passed under sub-section (4) of section 245D, have, subject to theprovisions of sub-section (3) of that section, exclusive jurisdiction toexercise the powers and perform the functions of an income-tax authority underthis Act in relation to the case.

(3) Notwithstanding anything contained in sub-section (2) and in the absenceof any express direction to the contrary by the Settlement Commission, nothingcontained in this section shall affect the operation of any other provision ofthis Act requiring the applicant to pay tax on the basis of self-assessment inrelation to the matters before the Settlement Commission.

(4) For the removal of doubt, it is hereby declared that, in the absence ofany express direction by the Settlement Commission to the contrary, nothing inthis Chapter shall affect the operation of the provisions of this Act in sofar as they relate to any matters other than those before the SettlementCommission.

(7) The Settlement Commission shall, subject to the provisions of thisChapter, have power to regulate its own procedure and the procedure of Benchesthereof in all matters arising out of the exercise of its powers or of thedischarge of its functions, including the places at which the Benches shallhold their sittings.


480. Inspection, Etc., of Reports.

§480.Inspection, Etc., of Reports.Section 245G

INSPECTION, ETC., OF REPORTS.

No person shall be entitled to inspect, or obtain copies of, any reports madeby any income-tax authority to the Settlement Commission; but the SettlementCommission may, in its discretion, furnish copies thereof to any such personon an application made to it in this behalf and on payment of the prescribedfee:

Provided that, for the purpose of enabling any person whose case is underconsideration to rebut any evidence brought on record against him in any suchreport, the Settlement Commission shall, on an application made in thisbehalf, and on payment of the prescribed fee by such person, furnish him witha certified copy of any such report or part thereof relevant for the purpose.

481. Power of settlement commission to grantimmunity from Prosecution and Penalty.

§481.Power of settlement commission to grant immunity from Prosecution andPenalty.Section 245H

POWER OF SETTLEMENT COMMISSION TO GRANT IMMUNITY FROM PROSECUTION AND PENALTY.

(1) The Settlement Commission may, if it is satisfied that any person who madethe application for settlement under section 245C has co-operated with theSettlement Commission in the proceedings before it and has made a full andtrue disclosure of his income and the manner in which such income has beenderived, grant to such person, subject to such conditions as it may think fitto impose, immunity from prosecution for any offence under this Act or underthe Indian Penal Code (45 of 1860) or under any other Central Act for the timebeing in force and also (either wholly or in part) from the imposition of anypenalty under this Act, with respect to the case covered by the settlement :

Provided that no such immunity shall be granted by the Settlement Commissionin cases where the proceedings for the prosecution for any such offence havebeen instituted before the date of receipt of the application under section


245C.

(1A) An immunity granted to a person under sub-section (1) shall standwithdrawn if such person fails to pay any sum specified in the order ofsettlement passed under sub-section (4) of section 245D within the timespecified in such order or within such further time as may be allowed by theSettlement Commission, or fails to comply with any other condition subject towhich the immunity was granted and thereupon the provisions of this Act shallapply as if such immunity had not been granted.

(2) An immunity granted to a person under sub-section (1) may, at any time, bewithdrawn by the Settlement Commission, if it is satisfied that such personhad, in the course of the settlement proceedings, concealed any particularsmaterial to the settlement or had given false evidence, and thereupon suchperson may be tried for the offence with respect to which immunity was grantedor for any other offence of which he appears to have been guilty in connectionwith the settlement and shall also become liable to the imposition of anypenalty under this Act to which such person would have been liable, had notsuch immunity been granted.

482. Power of settlement commission to send a caseback to the assessing oficer if the assessee doesnot Co-Operate.

§482.Power of settlement commission to send a case back to the assessingoficer if the assessee does not Co-Operate.Section 245HA

POWER OF SETTLEMENT COMMISSION TO SEND A CASE BACK TO THE ASSESSING OFFICER IFTHE ASSESSEE DOES NOT CO-OPERATE.

(1) The Settlement Commission may, if it is of opinion that any person whomade an application for settlement under section 245C has not co-operated withthe Settlement Commission in the proceedings before it, send the case back tothe Assessing Officer who shall thereupon dispose of the case in accordancewith the provisions of this Act as if no application under section 245C hadbeen made.

(2) For the purposes of sub-section (1), the Assessing Officer shall beentitled to use all the materials and other information produced by theassessee before the Settlement Commission or the results of the inquiry heldor evidence recorded by the Settlement Commission in the course of the


proceedings before it as if such materials, information, inquiry and evidencehad been produced before the Assessing Officer or held or recorded by him inthe course of the proceedings before him.

(3) For the purposes of the time-limit under sections 149, 153, 154, 155 and231 and for the purposes of payment of interest under sections 243 and 244, ina case referred to in sub-section (1), the period commencing on and from thedate of the application to the Settlement Commission under section 245C andending with the date of receipt by the Assessing Officer of the order of theSettlement Commission sending the case back to the Assessing Officer shall beexcluded; and where the assessee is a firm, for the purposes of the time-limitfor cancellation of registration of the firm under sub-section (1) of section186, the period aforesaid shall, likewise, be excluded.

483. Order of settlement to be conclusive.

§483.Order of settlement to be conclusive.Section 245-I

ORDER OF SETTLEMENT TO BE CONCLUSIVE.

Every order of settlement passed under sub-section (4) of section 245D shallbe conclusive as to the matters stated therein and no matter covered by suchorder shall, save as otherwise provided in this Chapter, be reopened in anyproceeding under this Act or under any other law for the time being in force.

484. Recovery of sums due under order of settlement.

§484.Recovery of sums due under order of settlement.Section 245J

RECOVERY OF SUMS DUE UNDER ORDER OF SETTLEMENT.

Any sum specified in an order of settlement passed under sub-section (4) ofsection 245D may, subject to such conditions, if any, as may be specifiedtherein, be recovered, and any penalty for default in making payment of suchsum may be imposed and recovered in accordance with the provisions of ChapterXVII, by the Assessing Officer having jurisdiction over the person who madethe application for settlement under section 245C.

485. Bar on Subsequent Application for settlement in


certain cases.

§485.Bar on Subsequent Application for settlement in certain cases.Section 245K

BAR ON SUBSEQUENT APPLICATION FOR SETTLEMENT IN CERTAIN CASES.

Where, -

(i) An order of settlement passed under sub-section (4) of section 245Dprovides for the imposition of a penalty on the person who made theapplication under section 245C for settlement, on the ground of concealment ofparticulars of his income; or

(ii) After the passing of an order of settlement under the said sub-section(4) in relation to a case, such person is convicted of any offence underChapter XXII in relation to that case;

(iii) The case of such person is sent back to the Assessing Officer by theSettlement Commission under section 245HA, then, he shall not be entitled toapply for settlement under section 245C in relation to any other matter.

486. Proceedings before settlement commission to bejudicial proceedings.

§486.Proceedings before settlement commission to be judicial proceedings.Section 245L

PROCEEDINGS BEFORE SETTLEMENT COMMISSION TO BE JUDICIAL PROCEEDINGS.

Any proceeding under this Chapter before the Settlement Commission shall bedeemed to be a judicial proceeding within the meaning of sections 193 and 228,and for the purposes of section 196, of the Indian Penal Code, 1860 (45 of1860).

487. Omitted.

§487.Omitted.Section 245M

CERTAIN PERSONS WHO HAVE FILED APPEALS TO THE APPELLATE TRIBUNAL ENTITLED TO


MAKE APPLICATIONS TO THE SETTLEMENT COMMISSION.


488. Definitions.

§488.Definitions.Section 245N

DEFINITIONS.

In this Chapter, unless the context otherwise requires, - (a) "Advance ruling"means - (i) A determination by the Authority in relation to a transactionwhich has been undertaken or is proposed to be undertaken by a non-residentapplicant and such determination shall include the determination of anyquestion of law or of fact specified in the application;

(ii) A decision by the Authority in relation to an assessment which is pendingbefore any of the Income-tax authority or the Tribunal in case of an applicantwho is a resident in India and such decision shall include the decision onquestion of law or fact arising out of the orders of assessment in respect ofwhich an application has been made by a resident applicant;

(b) "Applicant" means any person who - (i) Is a non-resident; or

(ii) Is a resident falling within any such class or category of persons as theCentral Government may, by notification in the Official Gazette, specify inthis behalf;

(iii) Makes an application under sub-section (1) of section 245Q;

(c) "Application" means an application made to the Authority under sub-section(1) of section 245Q;

(d) "Authority" means the Authority for the Advance Rulings constituted undersection 245-O;

(e) "Chairman" means the Chairman of the Authority;

(f) "Member" means a Member of the Authority and includes the Chairman.

489. Authority for Advance Rulings.


§489.Authority for Advance Rulings.Section 245-O

AUTHORITY FOR ADVANCE RULINGS.

(1) The Central Government shall constitute an Authority for giving advancerulings, to be known as "Authority for Advance Rulings".

(2) The Authority shall consist of the following Members appointed by theCentral Government, namely :- (a) A Chairman, who is a retired Judge of theSupreme Court;

(b) An officer of the Indian Revenue Service who is qualified to be a memberof the Central Board of Direct Taxes;

(c) An officer of the Indian Legal Service who is, or is qualified to be, anAdditional Secretary to the Government of India.

(3) The salaries and allowances payable to, and the terms and conditions ofservice of, the Members shall be such as may be prescribed.

(4) The Central Government shall provide the Authority with such officers andstaff as may be necessary for the efficient exercise of the powers of theAuthority under this Act.

(5) The office of the Authority shall be located in Delhi.

490. Vacancies, Etc., not to invalidate proceedings.

§490.Vacancies, Etc., not to invalidate proceedings.Section 245P

VACANCIES, ETC., NOT TO INVALIDATE PROCEEDINGS.

No proceeding before, or pronouncement of advance ruling by, the Authorityshall be questioned or shall be invalid on the ground merely of the existenceof any vacancy or defect in the constitution of the Authority.

491. Application for Advance Ruling.

§491.Application for Advance Ruling.Section 245Q


APPLICATION FOR ADVANCE RULING.

(1) An applicant desirous of obtaining an advance ruling under this Chaptermay make an application in such form and in such manner as may be prescribed,stating the question on which the advance ruling is sought.

(2) The application shall be made in quadruplicate and be accompanied by a feeof two thousand five hundred rupees.

(3) An applicant may withdraw an application within thirty days from the dateof the application.

492. Procedure on Receipt of Application.

§492.Procedure on Receipt of Application.Section 245R

PROCEDURE ON RECEIPT OF APPLICATION.

(1) On receipt of an application, the Authority shall cause a copy thereof tobe forwarded to the Commissioner and, if necessary, call upon him to furnishthe relevant records :

Provided that where any records have been called for by the Authority in anycase, such records shall, as soon as possible, be returned to theCommissioner.

(2) The Authority may, after examining the application and the records calledfor, by order, either allow or reject the application :

Provided that the Authority shall not allow the application except in the caseof a resident applicant where the question raised in the application, -

(a) Is already pending in applicants case before any income-tax authority, theAppellate Tribunal or any court;

(b) Involves determination of fair market value of any property;

(c) Relates to a transaction which is designed prima facie for the avoidanceof income-tax :

Provided further that no application shall be rejected under this sub-sectionunless an opportunity has been given to the applicant of being heard :


Provided also that where the application is rejected, reasons for suchrejection shall be given in the order.

(3) A copy of every order made under sub-section (2) shall be sent to theapplicant and to the Commissioner.

(4) Where an application is allowed under sub-section (2), the Authorityshall, after examining such further material as may be placed before it by theapplicant or obtained by the Authority, pronounce its advance ruling on thequestion specified in the application.

(5) On a request received from the applicant, the Authority shall, beforepronouncing its advance ruling, provide an opportunity to the applicant ofbeing heard, either in person or through a duly authorised representative.

Explanation : For the purposes of this sub-section, "authorisedrepresentative" shall have the meaning assigned to it in sub-section (2) ofsection 288, as if the applicant were an assessee.

(6) The Authority shall pronounce its advance ruling in writing within sixmonths of the receipt of application.

(7) A copy of the advance ruling pronounced by the Authority, duly signed bythe Members and certified in the prescribed manner shall be sent to theapplicant and to the Commissioner, as soon as may be, after suchpronouncement.

493. Appellate Authority not to proceed in certaincases.

§493.Appellate Authority not to proceed in certain cases.Section 245RR

APPELLATE AUTHORITY NOT TO PROCEED IN CERTAIN CASES.

No income-tax authority or the Appellate Tribunal shall proceed to decide anyissue in respect to which an application has been made by an applicant, beinga resident, under sub-section (1) of section 245R.

494. Applicability of Advance Ruling.


§494.Applicability of Advance Ruling.Section 245S

APPLICABILITY OF ADVANCE RULING.

(1) The advance ruling pronounced by the Authority under section 245R shall bebinding only - (a) On the applicant who had sought it;

(b) In respect of the transaction in relation to which the ruling had beensought; and

(c) On the Commissioner, and the income-tax authorities subordinate to him, inrespect of the applicant and the said transaction.

(2) The advance ruling referred to in sub-section (1) shall be binding asaforesaid unless there is a change in law or facts on the basis of which theadvance ruling has been pronounced.

495. Advance Ruling to be void in certaincircumstances.

§495.Advance Ruling to be void in certain circumstances.Section 245T

ADVANCE RULING TO BE VOID IN CERTAIN CIRCUMSTANCES.

(1) Where the Authority finds, on a representation made to it by theCommissioner or otherwise, that an advance ruling pronounced by it under sub-section (6) of section 245R has been obtained by the applicant by fraud ormisrepresentation of facts, it may, by order, declare such ruling to be voidab initio and thereupon all the provisions of this Act shall apply (afterexcluding the period beginning with the date of such advance ruling and endingwith the date of order under this sub-section) to the applicant as if suchadvance ruling had never been made.

(2) A copy of the order made under sub-section (1) shall be sent to theapplicant and the Commissioner.

496. Powers of the Authority.

§496.Powers of the Authority.Section 245U


POWERS OF THE AUTHORITY.

(1) The Authority shall, for the purpose of exercising its powers, have allthe powers of a Civil Court under the Code of Civil Procedure, 1908 (5 of1908) as are referred to in section 131 of this Act.

(2) The Authority shall be deemed to be a Civil Court for the purposes ofsection 195, but not for the purposes of Chapter XXVI, of the Code of CriminalProcedure, 1973 (2 of 1974) and every proceeding before the Authority shall bedeemed to be a judicial proceeding within the meaning of sections 193 and 228,and for the purpose of section 196, of the Indian Penal Code (45 of 1860).

497. Procedure of Authority.

§497.Procedure of Authority.Section 245V

PROCEDURE OF AUTHORITY.

The Authority shall, subject to the provisions of this Chapter, have power toregulate its own procedure in all the matters arising out of the exercise ofits powers under this Act.

498. Appealable Orders.

§498.Appealable Orders.Section 246

APPEALABLE ORDERS.

(1) Subject to the provisions of sub-section (2), any assessee aggrieved byany of the following orders of an Assessing Officer (other than the DeputyCommissioner) may appeal to the Deputy Commissioner (Appeals) against suchorder -

(a) An order against the assessee, where the assessee denies his liability tobe assessed under this Act or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making ofadjustments, or any order of assessment under sub-section (3) of section 143or section 144, where the assessee objects to the amount of income assessed,or to the amount of tax determined, or to the amount of loss computed, or tothe status under which he is assessed;


(b) Aan order of assessment, reassessment or recomputation under section 147or section 150;

(c) An order under section 154 or section 155 having the effect of enhancingthe assessment or reducing a refund or an order refusing to allow the claimmade by the assessee under either of the said sections;

(d) An order under section 163 treating the assessee as the agent of a non-resident;

(e) An order under sub-section (2) or sub-section (3) of section 170;

(f) An order under section 171;

(g) Any order under clause (b) of sub-section (1) or under sub-section (2) orsub-section (3) or sub-section (5) of section 185 in respect of any assessmentfor the assessment year commencing on or before the 1st day of April, 1992;

(h) An order cancelling the registration of a firm under sub-section (1) orunder sub-section (2) of section 186 in respect of any assessment for theassessment year commencing on or before the 1st day of April, 1992;

(i) An order under section 201;

(j) An order under section 216 in respect of any assessment for the assessmentyear commencing on the 1st day of April, 1988 or any earlier assessment year;

(k) An order under section 237;

(l) An order imposing a penalty under - (i) Section 221, or

(ii) Section 271, section 271A, section 271B, section 272A, section 272AA orsection 272BB;

(iii) Section 272, section 272B, or section 273, as they stood immediatelybefore the 1st day of April, 1989, in respect of any assessment for theassessment year commencing on the 1st day of April, 1988 or any earlierassessment years.

(2) Notwithstanding anything contained in sub-section (1), any assesseeaggrieved by any of the following orders (whether made before or after theappointed day) may appeal to the Commissioner (Appeals) against such order -


(a) An intimation or order specified in sub-section (1) where such intimationis sent or such order is made by the Deputy Commissioner in exercise of thepowers or functions conferred on or assigned to him under section 120 orsection 124;

(b) An order specified in clauses (a) to (e) (both inclusive) and clauses (i)to (l) (both inclusive) of sub-section (1) an order under section 104, as itstood immediately before the 1st day of April, 1988 in respect of anyassessment for the assessment year commencing on the 1st day of April, 1987,or any earlier assessment year, made against the assessee, being a company;

(c) An order of assessment made after the 30th day of September, 1984 on thebasis of the directions issued by the Deputy Commissioner under section 144A;

(d) An order made by the Deputy Commissioner under section 154;

(da) An order of assessment made by an Assessing Officer under clause (c) ofsection 158BC, in respect of search initiated under section 132 or books ofaccount, other documents or any assets requisitioned under section 132A, on orafter the 1st day of January, 1997;

(db) An order imposing a penalty under sub-section (2) of section 158BFA;

(e) An order imposing a penalty under section 271B section 271BB;

(ee) An order made by a Deputy Commissioner imposing a penalty under section271C, section 271D or section 271E;

(f) An order made by a Deputy Commissioner or a Deputy Director imposing apenalty under section 272A;

(ff) An order made by a Deputy Commissioner imposing a penalty under section272AA;

(g) An order imposing a penalty under Chapter XXI by the Income-tax Officer orthe Assistant Commissioner, where such penalty has been imposed with theprevious approval of the Deputy Commissioner under sub-section (2) of section274;

(h) An order made by an Assessing Officer (other than Deputy Commissioner)under the provisions of this Act in the case of such persons or classes ofpersons as the Board may, having regard to the nature of the cases, thecomplexities involved and other relevant considerations, direct.

(3) Notwithstanding anything contained in sub-section (1), the Board or the


Director General, or Chief Commissioner or Commissioner if so authorised bythe Board, may, by order in writing, transfer any appeal which is pendingbefore a Deputy Commissioner (Appeals) and any matter arising out of orconnected with such appeal and which is so pending, to the Commissioner(Appeals) if the Board or, as the case may be, the Director General or ChiefCommissioner or Commissioner (at the request of the appellant or otherwise) issatisfied that it is necessary or expedient so to do having regard to thenature of the case, the complexities involved and other relevantconsiderations and the Commissioner (Appeals) may proceed with such appeal ormatter, from the stage at which it was before it was so transferred :

Provided that the appellant may demand that before proceeding further with theappeal or matter, the previous proceeding or any part thereof be reopened orthat he be reheard.

Explanation : For the purposes of this section, - (a) "Appointed day" meansthe 10th day of July, 1978 being the day appointed under section 39 of theFinance (No. 2) Act, 1977 (29 of 1977);

(b) "Status" means the category under which the assessee is assessed as"individual", "Hindu undivided family" and so on.

499. Appealable orders before Commissioner(Appeals).

§499.Appealable orders before Commissioner (Appeals).Section 246A

APPEALABLE ORDERS BEFORE COMMISSIONER (APPEALS)

(1) Any assessee aggrieved by any of the following orders (whether made beforeor after the appointed day) may appeal to the Commissioner (Appeals) against -

(a) An order against the assessee where the assessee denies his liability tobe assessed under this Act or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making ofadjustments, or any order of assessment under sub-section (3) of section 143or section 144, to the income assessed, or to the amount of tax determined, orto the amount of loss computed, or to the status under which he is assessed;

(b) An order of assessment, reassessment or recomputation under section 147 or


section 150;

(c) An order made under section 154 or section 155 having the effect ofenhancing the assessment or reducing a refund or an order refusing to allowthe claim made by the assessee under either of the said sections;

(d) An order made under section 163 treating the assessee as the agent of anon-resident;

(e) An order made under sub-section (2) or sub-section (3) of section 170;

(f) An order made under section 171;

(g) An order made under clause (B) of sub-section (1) or under sub-section (2)or sub-section (3) or sub-section (5) of section 185 in respect of anassessment for the assessment year commencing on or before the 1st day ofApril, 1992;

(h) An order cancelling the registration of a firm under sub-section (1) orunder sub-section (2) of section 186 in respect of any assessment for theassessment year commencing on or before the 1st day of April, 1992 or anyearlier assessment year;

(i) An order made under section 237;

(j) An order imposing a penalty under -

(A) Section 221; or

(B) Section 271, section 271A, section 271F, section 271AA or section section272BB;

(C) Section 272, section 272B or section 273, as the stood immediately beforethe 1st day of April, 1989, in respect of an assessment for the assessmentyear commencing on the 1st day of April, 1988, or any earlier assessmentyears;

(k) An order of assessment made by an Assessing Officer under clause (c) ofsection 158BC, in respect of search initiated under section 132 or books ofaccount, other documents or any assets requisitioned under section 132A on orafter the 1st day of January, 1997;

(l) An order imposing a penalty under sub-section (2) of section 158BFA;


(m) An order imposing penalty under section 271B or section 271BB;

(n) An order made by a Deputy Commissioner imposing a penalty under section271C, section 271D or section 271E;

(o) An order made by a Deputy Commissioner or a Deputy Director imposing apenalty under section 272A;

(p) An order made by a Deputy Commissioner imposing a penalty under section272AA;

(q) An order imposing a penalty under Chapter XXI;

(r) An order made by an Assessing Officer other than a Deputy Commissionerunder the provisions of this Act in the case of such person or classes ofperson as the Board may, having regard to the nature of the cases, thecomplexities involved and other relevant considerations direct.

Explanation : For the purposes of this sub-section, where on or after the 1stday of October, 1998, the post of Deputy Commissioner has been redesignated asJoint Commissioner and the post of Deputy Director has been redesignated asJoint Director, the references in this sub-section for "Deputy Commissioner"and "Deputy Director" shall be substituted by Joint Commissioner" and "JointDirector" respectively.

(2) Notwithstanding anything contained in sub-section (1) of section 246,every appeal under this Act which is pending immediately before the appointedday before the Deputy commissioner (Appeals) and any matter arising out of orconnected with such appeals and which is so pending shall stand transferred onthat date to the Commissioner (Appeals) and the Commissioner (Appeals) mayproceed with such appeal or matter from the stage at which it was on that day:

Provided that the appellant may demand that before proceeding further withappeal or matter, the previous proceeding or any part thereof be reopened orthat he be reheard.

Explanation : For the purposes of this section, "appointed day" means the dayappointed by the Central Government by notification in the Official Gazette.

500. Omitted.



APPEAL BY PARTNER.


501. Appeal by Person denying liability to deductTax.

§501.Appeal by Person denying liability to deduct Tax.Section 248

APPEAL BY PERSON DENYING LIABILITY TO DEDUCT TAX.

Any person having in accordance with the provisions of sections 195 and 200deducted and paid tax in respect of any sum chargeable under this Act, otherthan interest, who denies his liability to make such deduction, may appeal tothe the Commissioner (Appeals) to be declared not liable to make suchdeduction.

502. Form of Appeal and Limitation.

§502.Form of Appeal and Limitation.Section 249

FORM OF APPEAL AND LIMITATION.

(1) Every appeal under this Chapter shall be in the prescribed form and shallbe verified in the prescribed manner and shall, in case of an appeal made tothe Commissioner (appeals) on or after the 1st day of October, 1998,irrespective of the date of initiation of the assessment proceedings relatingthereto be accompanied by a fee of, -

(i) Where the total income of the assessee as computed by the AssessingOfficer in the case to which the appeal relates is one hundred thousand rupeesor less, two hundred fifty rupees;

(ii) Where the total income of the assessee, computed as aforesaid, in thecase to which the appeal relates is more than one hundred thousand rupees butnot more than two hundred thousand rupees, five hundred rupees;

(iii) Where the total income of the assessee, computed as aforesaid, in thecase to which the appeal is more than two hundred thousand rupees, one


thousand rupees.

(iv) Where the subject matter of an appeal is not covered under clauses (i),(ii) and (iii), two hundred fifty rupees.

(2) The appeal shall be presented within thirty days of the following date,that is to say, - (a) Where the appeal relates to any tax deducted under sub-section (1) of section 195, the date of payment of the tax, or

(b) Where the appeal relates to any assessment or penalty, the date of serviceof the notice of demand relating to the assessment or penalty : Provided that,where an application has been made under section 146 for reopening anassessment, the period from the date on which the application is made to thedate on which the order passed on the application is served on the assesseeshall be excluded, or

(c) In any other case, the date on which intimation of the order sought to beappealed against is served.

(3) The Commissioner (Appeals) may admit an appeal after the expiration of thesaid period if he is satisfied that the appellant had sufficient cause for notpresenting it within that period.

(4) No appeal under this Chapter shall be admitted unless at the time offiling of the appeal, - (a) Where a return has been filed by the assessee, theassessee has paid the tax due on the income returned by him; or

(b) Where no return has been filed by the assessee, the assessee has paid anamount equal to the amount of advance tax which was payable by him :

Provided that in a case falling under clause (b) and on an application made bythe appellant in this behalf, the Commissioner (Appeals) may, for any good andsufficient reason to be recorded in writing, exempt him from the operation ofthe provisions of that clause.

503. Procedure in Appeal.

§503.Procedure in Appeal.Section 250

PROCEDURE IN APPEAL.

(1) The Commissioner (Appeals) shall fix a day and place for the hearing of


the appeal, and shall give notice of the same to the appellant and to theAssessing Officer against whose order the appeal is preferred.

(2) The following shall have the right to be heard at the hearing of theappeal - (a) The appellant, either in person or by an authorisedrepresentative;

(b) The Assessing Officer, either in person or by a representative.

(3) The Commissioner (Appeals) shall have the power to adjourn the hearing ofthe appeal from time to time.

(4) The Commissioner (Appeals) may, before disposing of any appeal, make suchfurther inquiry as he thinks fit, or may direct the Assessing Officer to makefurther inquiry and report the result of the same to the Commissioner(Appeals).

(5) The Commissioner (Appeals) may, at the hearing of an appeal, allow theappellant to go into any ground of appeal not specified in the grounds ofappeal, if the Commissioner (Appeals) is satisfied that the omission of thatground from the form of appeal was not wilful or unreasonable.

(6) The order of the Commissioner (Appeals) disposing of the appeal shall bein writing and shall state points for determination, the decisionthereon andthe reason for the decision.

(6A) In every appeal, the Commissioner (Appeals), where it is possible, mayhear and decide such appeal within a period of one year from the end of thefinancial year in which such appeal is filed before him under sub-section (1)of section 246A.

(7) On the disposal of the appeal, the Commissioner (Appeals) shallcommunicate the order passed by him to the assessee and to the ChiefCommissioner or Commissioner.

504. Powers of the Commissioner (Appeals).

§504.Powers of the Commissioner (Appeals).Section 251

POWERS OF THE COMMISSIONER (APPEALS)

(1) In disposing of an appeal, the Commissioner (Appeals) shall have thefollowing powers -


(a) In an appeal against an order of assessment he may confirm, reduce,enhance or annul the assessment, or he may set aside the assessment and referthe case back to the Assessing Officer for making a fresh assessment inaccordance with the directions given by the Commissioner (Appeals) and aftermaking such further inquiry as may be necessary, and the Assessing Officershall thereupon proceed to make such fresh assessment and determine, wherenecessary, the amount of tax payable on the basis of such fresh assessment;

(b) In an appeal against an order imposing a penalty, he may confirm or cancelsuch order or vary it so as either to enhance or to reduce the penalty;

(c) In any other case, he may pass such orders in the appeal as he thinks fit.

(2) The Commissioner (Appeals) shall not enhance an assessment or a penalty orreduce the amount of refund unless the appellant has had a reasonableopportunity of showing cause against such enhancement or reduction.

Explanation : In disposing of an appeal, the Commissioner (Appeals) mayconsider and decide any matter arising out of the proceedings in which theorder appealed against was passed, notwithstanding that such matter was notraised before the Commissioner (Appeals) by the appellant.

505. Appellate Tribunal.

§505.Appellate Tribunal.

Section 252

APPELLATE TRIBUNAL.

(1) The Central Government shall constitute an Appellate Tribunal consistingof as many judicial and accountant members as it thinks fit to exercise thepowers and discharge the functions conferred on the Appellate Tribunal by thisAct.

(2) A judicial member shall be a person who has for at least ten years held ajudicial office in the territory of India or who has been a member of theIndian Legal Service and has held a post in Grade II of that Service or anyequivalent or higher post for at least three years or who has been an advocatefor at least ten years.


Explanation : For the purposes of this sub-section, - (i) In computing theperiod during which a person has held judicial office in the territory ofIndia, there shall be included any period, after he has held any judicialoffice, during which the person has been an advocate or has held the office ofa member of a Tribunal or any post, under the Union or a State, requiringspecial knowledge of law;

(ii) In computing the period during which a person has been an advocate, thereshall be included any period during which the person has held judicial officeor the office of a member of a Tribunal or any post, under the Union or aState, requiring special knowledge of law after he became an advocate.

(2A) An accountant member shall be a person who has for at least ten yearsbeen in the practice of accountancy as a chartered accountant under theChartered Accountants Act, 1949 (38 of 1949), or as a registered accountantunder any law formerly in force or partly as a registered accountant andpartly as a chartered accountant, or who has been a member of the IndianIncome-tax Service, Group A and has held the post of Additional Commissionerof Income-tax or any equivalent or higher post for at least three years.

(3) The Central Government shall ordinarily appoint a judicial member of theAppellate Tribunal to be the President thereof.

(4) The Central Government may appoint one or more members of the AppellateTribunal to be the Vice-President or, as the case may be, Vice-Presidentsthereof.

(4A) The Central Government may appoint one of the Vice-Presidents of theAppellate Tribunal to be the Senior Vice-President thereof.

(5) The Senior Vice-President or a Vice-President shall exercise such of thepowers and perform such of the functions of the President as may be delegatedto him by the President by a general or special order in writing.

506. Appeals to the Appellate Tribunal.

§506.Appeals to the Appellate Tribunal.Section 253

APPEALS TO THE APPELLATE TRIBUNAL.

(1) Any assessee aggrieved by any of the following orders may appeal to theAppellate Tribunal against such order - (a) An order passed by a DeputyCommissioner (Appeals) before the 1st day of October, as the case may be, a


Commissioner (Appeals) under section 154, section 250, section 271, section271A or section 272A; or

(b) An order passed by an Assessing Officer under clause (c) of section 158BC,in respect of search initiated under section 132 or books of account, otherdocuments or any assets requisitioned under section 132A, after the 30th dayof June, 1995, but before the 1st day of January, 1997;

(c) An order passed by a Commissioner under section 12AA or under section 263or under section 272A or an order passed by him under section 154 amendinghis order under section 263 or an order passed by a Chief Commissioner or aDirector-General or a Director under section 272A.

(2) The Commissioner may, if he objects to any order passed by a DeputyCommissioner (Appeals) before the 1st day of October, 1998 as the case maybe, a Commissioner (Appeals) under section 154 or section 250, direct theAssessing Officer to appeal to the Appellate Tribunal against the order.

(3) Every appeal under sub-section (1) or sub-section (2) shall be filedwithin sixty days of the date on which the order sought to be appealed againstis communicated to the assessee or to the Commissioner, as the case may be :

Provided that in respect of any appeal under clause (b) of sub-section (1),this sub-section shall have effect as if for the words "sixty days", the words"thirty days" had been substituted.

(4) The Assessing Officer or the assessee, as the case may be, on receipt ofnotice that an appeal against the order of the Deputy Commissioner (Appeals)[or, as the case may be, the Commissioner (Appeals)] has been preferred undersub-section (1) or sub-section (2) by the other party, may, notwithstandingthat he may not have appealed against such order or any part thereof, withinthirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the orderof the Deputy Commissioner (Appeals) as the case may be, the Commissioner(Appeals), and such memorandum shall be disposed of by the Appellate Tribunalas if it were an appeal presented within the time specified in sub-section(3).

(5) The Appellate Tribunal may admit an appeal or permit the filing of amemorandum of cross-objections after the expiry of the relevant periodreferred to in sub-section (3) or sub-section (4) if it is satisfied thatthere was sufficient cause for not presenting it within that period.

(6) An appeal to the Appellate Tribunal shall be in the prescribed form and


shall be verified in the prescribed manner and shall, in the case of an appealmade, on or after the 1st day of October, 1998,m irrespective of the date ofinitiation of the assessment proceedings relating thereto, be accompanied byfee of, - (a) Where the total income of the assessee as computed by theAssessing Officer, in the case to which the appeal relates, is one hundredthousand rupees or less, five hundred rupees,

(b) Where the total income of the assessee, computed as aforesaid, in the caseto which the appeal relates is more than one hundred thousand rupees but notmore than two hundred thousand rupees, one thousand five hundred rupees,

(c) Where the total income of the assessee, computed as aforesaid, in the caseto which the appeal relates is more than two hundred thousand rupees, one percent of the assessed income, subject to a maximum of ten thousand rupees :

(d) Where the subject matter of an appeal relates to any matter, other thanthose specified in clauses (a), (b) and (c), five hundred rupees.

Provided that no such fee shall be payable in the case of an appeal referredto in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4).

(7) An application for stay of demand shall be accompanied by a fee of fivehundred rupees.

507. Orders of Appellate Tribunal.

§507.Orders of Appellate Tribunal.

Section 254

ORDERS OF APPELLATE TRIBUNAL.

(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity ofbeing heard, pass such orders thereon as it thinks fit.

(2) The Appellate Tribunal may, at any time within four years from the date of the order, with aview to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendment if the mistake is brought to its notice by the assesseeor the Assessing Officer :

Provided that an amendment which has the effect of enhancing an assessment or reducing arefund or otherwise increasing the liability of the assessee, shall not be made under this sub-


section unless the Appellate Tribunal has given notice to the assessee of its intention to do so andhas allowed the assessee a reasonable opportunity of being heard :

Provided further that any application filed by the assessee in this sub-section on or after the 1stday of October, 1998, shall be accompanied by a fee of fifty rupees.

(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide suchappeal within a period of four years from the end of the financial year in which such appeal isfiled under sub- section (1) of section 253.

(2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal.

(3) The Appellate Tribunal shall send a copy of any orders passed under this section to theassessee and to the Commissioner.

(4) Save as provided in section 256 or section 260A, orders passed by the Appellate Tribunal onappeal shall be final.

508. Procedure of Appellate Tribunal.

§ 508. Procedure of Appellate Tribunal.Section 255

PROCEDURE OF APPELLATE TRIBUNAL.

(1) The powers and functions of the Appellate Tribunal may be exercised and discharged byBenches constituted by the President of the Appellate Tribunal from among the members thereof.

(2) Subject to the provisions contained in sub-section (3), a Bench shall consist of one judicialmember and one accountant member.

(3) The President or any other member of the Appellate Tribunal authorised in this behalf by theCentral Government may, sitting singly dispose of any case which has been allotted to the Benchof which he is a member and which pertains to an assessee whose total income as computed bythe Assessing Officer in the case does not exceed five hundred thousand rupees, and thePresident may, for the disposal of any particular case, constitute a Special Bench consisting ofthree or more members, one of whom shall necessarily be judicial member and one anaccountant member.

(4) If the members of a Bench differ in opinion on any point, the point shall be decided accordingto the opinion of the majority, if there is a majority, but if the members are equally divided, theyshall state the point or points on which they differ, and the case shall be referred by the Presidentof the Appellate Tribunal for hearing on such point or points by one or more of the other


members of the Appellate Tribunal, and such point or points shall be decided according to theopinion of the majority of the members of the Appellate Tribunal who have heard the case,including those who first heard it.

(5) Subject to the provisions of this Act, the Appellate Tribunal shall have powers to regulate itsown procedure and the procedure of Benches thereof in all matters arising out of the exercise ofits powers or of the discharge of its functions, including the places at which the Benches shallhold their sittings.

(6) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powerswhich are vested in the Income-tax authorities referred to in section 131, and any proceedingbefore the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning ofsections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860),and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898).

509. Statement of case to the High Court.

§ 509. Statement of case to the High Court.Section 256

STATEMENT OF CASE TO THE HIGH COURT.

(1) 2047 The assessee or the Commissioner may, within sixty days of the date upon which he isserved with notice of an order passed on or before the 1st day of October, 1998, under section254, by application in the prescribed form, accompanied where the application is made by theassessee by a fee of two hundred rupees, require the Appellate Tribunal to refer to the HighCourt any question of law arising out of such order and, subject to the other provisions containedin this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt ofsuch application, draw up a statement of the case and refer it to the High Court :

Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented bysufficient cause from presenting the application within the period hereinbefore specified, allow itto be presented within a further period not exceeding thirty days.

(2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state thecase on the ground that no question of law arises, the assessee or the Commissioner, as the casemay be, may, within six months from the date on which he is served with notice of such refusal,apply to the High Court, and the High Court may, if it is not satisfied with the correctness of thedecision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it,and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer itaccordingly.

(3) Where in the exercise of its powers under sub-section (2), the Appellate Tribunal refuses to


state a case which it has been required by the assessee to state, the assessee may, within thirtydays from the date on which he receives notice of such refusal, withdraw his application, and, ifhe does so, the fee paid shall be refunded.

510. Statement of case to supreme Court in certain cases.

§ 510. Statement of case to supreme Court in certain cases.

Section 257

STATEMENT OF CASE TO SUPREME COURT IN CERTAIN CASES.

If, on an application made against an order made under section 254 on or before the 1st day ofOctober, 1998 under section 256 the Appellate Tribunal is of the opinion that, on account of aconflict in the decisions of the High Courts in respect of any particular question of law, it isexpedient that a reference should be made direct to the Supreme Court, the Appellate Tribunalmay draw up a statement of the case and refer it through its President direct to the SupremeCourt.

511. Power of High Court or Supreme Court to RequireStatement to be Amended.

§ 511. Power of High Court or Supreme Court to Require Statement to be Amended.Section 258

POWER OF HIGH COURT OR SUPREME COURT TO REQUIRE STATEMENT TO BEAMENDED.

If the High Court or the Supreme Court is not satisfied that the statements in a case referred to itare sufficient to enable it to determine the questions raised thereby, the Court may refer the caseback to the Appellate Tribunal for the purpose of making such additions thereto or alterationstherein as it may direct in that behalf.

512. Case before High Court to be heard by not less than twojudges.

§ 512. Case before High Court to be heard by not less than two judges.Section 259


CASE BEFORE HIGH COURT TO BE HEARD BY NOT LESS THAN TWO JUDGES. (1)When any case has been referred to the High Court under section 256, it shall be heard by aBench of not less than two judges of the High Court, and shall be decided in accordance with theopinion of such judges or of the majority, if any, of such judges.

(2) Where there is no such majority, the judges shall state the point of law upon which theydiffer, and the case shall then be heard upon that point only by one or more of the other judges ofthe High Court, and such point shall be decided according to the opinion of the majority of thejudges who have heard the case including those who first heard it.

513. Decision of High Court or Supreme Court on the casestated.

§ 513. Decision of High Court or Supreme Court on the case stated.Section 260

DECISION OF HIGH COURT OR SUPREME COURT ON THE CASE STATED.

(1) The High Court or the Supreme Court upon hearing any such case shall decide the questionsof law raised therein, and shall deliver its judgment thereon containing the grounds on whichsuch decision is founded, and a copy of the judgment shall be sent under the seal of the Courtand the signature of the Registrar to the Appellate Tribunal which shall pass such orders as arenecessary to dispose of the case conformably to such judgment.

(1A) Where the High Court delivers a judgment in an appeal filed before it under section 260A,effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of acertified copy of judgment.

(2) The costs of any reference to the High Court or the Supreme Court which shall not includethe fee for making the reference shall be in the discretion of the Court.

514. Appeal to High Court.

§514.Appeal to High Court.Section 260A

APPEAL TO HIGH COURT

(1) An appeal shall lie to the High Court from every order passed in appeal bythe Appellate Tribunal, if the High Court is satisfied that the case involvesa substantial question of law.


(2) The Chief Commissioner or the Commissioner or an assessee aggrieved by anyorder passed by the Appellate Tribunal may file an appeal to the High Courtand such appeal under this sub- section shall be a filed within one hundredand twenty days from the date on which the order appealed against is receivedby the assessee or the Chief Commissioner or Commissioner.

(c) In the form of a memorandum of appeal precisely stating therein thesubstantial question of law involved.

(3) Where the High Court is satisfied that a substantial question of law isinvolved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and therespondents shall at the hearing of the appeal, be allowed to argue that thecase does not involve such question :

Provided that nothing in this sub-section shall be deemed to take away orabridge the power of the Court to hear, for reasons to be recorded, the appealon any other substantial question of law not formulated by it, if it issatisfied that the case involves such question.

(5) The High Court shall decide the question of law so formulated and deliversuch judgment thereon containing the grounds on which such decision is foundedand may award such cost as it deems fit.

(6) The High Court may determine any issue which - (a) Has not been determinedby the Appellate Tribunal : or

(b) Has been wrongly determined by the Appellate Tribunal, by reason of adecision on such question of law as is referred to in sub-section (1)

(7) Save as otherwise provided in this Act, the provisions of the Code ofCivil Procedure, 1908 (5 of 1908), relating to appeals to the High Courtshall, as far as may be, apply in the case of appeals under this section.

515. Case before High Court to be heard by not lessthan two judges.

§515.Case before High Court to be heard by not less than two judges.Section 260B

CASE BEFORE HIGH COURT TO BE HEARD BY NOT LESS THAN TWO JUDGES


(1) When an appeal has been filed before the High Court under section 260A, itshall be heard by a bench of not less than two Judges of the High Court, andshall be decided in accordance with the opinion of such Judges or of themajority, if nay, of such Judges.

(2) Where there is no such majority, the Judges shall state the point of lawupon which they differ and the case shall then be heard upon that point onlyby one or more of the other Judges of the High Court and such point shall bedecided according to the opinion of the majority of the Judges who have heardthe case including those who first heard it.

516. Appeal to Supreme Court.

§516.Appeal to Supreme Court.Section 261

APPEAL TO SUPREME COURT.

An appeal shall lie to the Supreme Court from any judgment of the High Courtdelivered on a reference made under section 256 against an order made undersection 254 before the 1st day of October, 1998 or an appeal made to the HighCourt in respect of an order passed under section 254 on or after that date inany case which the High Court certifies to be a fit one for appeal to theSupreme Court.

517. Hearing before Supreme Court.

§517.Hearing before Supreme Court.

Section 262

HEARING BEFORE SUPREME COURT.

(1) The provisions of the Code of Civil Procedure, 1908 (5 of 1908), relatingto appeals to the Supreme Court shall, so far as may be, apply in the case ofappeals under section 261 as they apply in the case of appeals from decrees ofa High Court :

Provided that nothing in this section shall be deemed to affect the provisionsof sub-section (1) of section 260 or section 265.


(2) The costs of the appeal shall be in the discretion of the Supreme Court.

(3) Where the judgment of the High Court is varied or reversed in the appeal,effect shall be given to the order of the Supreme Court in the manner providedin section 260 in the case of a judgment of the High Court.

518. Revision of orders prejudicial to revenue.

§518.Revision of orders prejudicial to revenue.Section 263

REVISION OF ORDERS PREJUDICIAL TO REVENUE.

(1) The Commissioner may call for and examine the record of any proceedingunder this Act, and if he considers that any order passed therein by theAssessing Officer is erroneous in so far as it is prejudicial to the interestof the revenue, he may, after giving the assessee an opportunity of beingheard and after making or causing to be made such inquiry as he deemsnecessary, pass such order thereon as the circumstances of the case justify,including an order enhancing or modifying the assessment, or cancelling theassessment and directing a fresh assessment.

Explanation : For the removal of doubts, it is hereby declared that, for thepurposes of this sub-section, - (a) An order passed on or before or after the1st day of June, 1988 by the Assessing Officer shall include - (i) An order ofassessment made by the Assistant Commissioner or Joint Commissioner or theIncome-tax Officer on the basis of the directions issued by the DeputyCommissioner under section 144A;

(ii) An order made by the Joint Commissioner in exercise of the powers or inthe performance of the functions of an Assessing Officer conferred on, orassigned to, him under the orders or directions issued by the Board or by theChief Commissioner or Director General or Commissioner authorised by the Boardin this behalf under section 120;

(b) "Record" shall include and shall be deemed always to have included allrecords relating to any proceeding under this Act available at the time ofexamination by the Commissioner;

(c) Where any order referred to in this sub-section and passed by theAssessing Officer had been the subject matter of any appeal filed on or beforeor after the 1st day of June, 1988, the powers of the Commissioner under thissub-section shall extend and shall be deemed always to have extended to suchmatters as had not been considered and decided in such appeal.


(2) No order shall be made under sub-section (1) after the expiry of two yearsfrom the end of the financial year in which the order sought to be revised waspassed.

(3) Notwithstanding anything contained in sub-section (2), an order inrevision under this section may be passed at any time in the case of an orderwhich has been passed in consequence of, or to give effect to, any finding ordirection contained in an order of the Appellate Tribunal, the High Court orthe Supreme Court.

Explanation : In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to bereheard under the proviso of section 129 and any period during which anyproceeding under this section is stayed by an order or injunction of any courtshall be excluded.

519. Revision of other orders.

§519.Revision of other orders.

Section 264

REVISION OF OTHER ORDERS.

(1) In the case of any order other than an order to which section 263 appliespassed by an authority subordinate to him, the Commissioner may, either of hisown motion or on an application by the assessee for revision, call for therecord of any proceeding under this Act in which any such order has beenpassed and may make such inquiry or cause such inquiry to be made and, subjectto the provisions of this Act, may pass such order thereon, not being an orderprejudicial to the assessee, as he thinks fit.

(2) The Commissioner shall not of his own motion revise any order under thissection if the order has been made more than one year previously.

(3) In the case of an application for revision under this section by theassessee, the application must be made within one year from the date on whichthe order in question was communicated to him or the date on which heotherwise came to know of it, whichever is earlier :

Provided that the Commissioner may, if he is satisfied that the assessee was


prevented by sufficient cause from making the application within that period,admit an application made after the expiry of that period.

(4) The Commissioner shall not revise any order under this section in thefollowing cases - (a) Where an appeal against the order lies to the DeputyCommissioner (Appeals) or to the Commissioner (Appeals) or to the AppellateTribunal but has not been made and the time within which such appeal may bemade has not expired, or, in the case of an appeal to the Commissioner(Appeals) or to the Appellate Tribunal, the assessee has not waived his rightof appeal; or

(b) Where the order is pending on an appeal before the Deputy Commissioner(Appeals); or

(c) Where the order has been made the subject of an appeal to the Commissioner(Appeals) or to the Appellate Tribunal.

(5) Every application by an assessee for revision under this section shall beaccompanied by a fee of twenty-five rupees.

(6) On every application by an assessee for revision under this sub-section,made on or after the 1st day of October, 1998, an order shall be passed withinone year from the end of the financial year in which such application is madeby the assessee for revision :

Explanation 1 : An order by the Commissioner declining to interfere shall, forthe purposes of this section, be deemed not to be an order prejudicial to theassessee.

Explanation 2 : For the purposes of this section, the

Deputy Commissioner (Appeals) shall be deemed to be an authority subordinateto the Commissioner.

Provided that where an order on an application for revision is not passed by aCommissioner within the period mentioned in this sub-section, then, it shallbe presumed as if the application for revision has been allowed and all theconsequences shall follow accordingly.

Explanation : In computing the period of limitation for the purposes of thissub-section, the time taken in giving an opportunity to the assessee to bereheard under the proviso to section 129 and any period during which anyproceeding under this section is stayed by an order or injunction of any Courtshall be excluded.


(7) Notwithstanding anything contained in sub-section (6), an order inrevision under sub-section (6) may be passed at any time in the consequence ofor to give effect to any finding or direction contained in an order of theAppellate Tribunal, High Court or the Supreme Court.

Explanation 1. An order by the Commissioner declining to interfere shall, forthe purposes of this section, be deemed not to be an order prejudicial to theassessee.

Explanation 2. For the purposes of this section, the Deputy Commissioner(Appeals) shall be deemed to be an authority subordinate to the Commissioner.

520. Tax to be paid notwithstanding reference, etc.

§520.Tax to be paid notwithstanding reference, etc.Section 265

TAX TO BE PAID NOTWITHSTANDING REFERENCE, ETC.

Notwithstanding that a reference has been made to the High Court or theSupreme Court or an appeal has been preferred to the Supreme Court, tax shallbe payable in accordance with the assessment in the case.

521. Execution for costs awarded by the SupremeCourt.

§521.Execution for costs awarded by the Supreme Court.Section 266

EXECUTION FOR COSTS AWARDED BY THE SUPREME COURT.

The High Court may, on petition made for the execution of the order of theSupreme Court in respect of any costs awarded thereby, transmit the order forexecution to any court subordinate to the High Court.

522. Amendment of Assessment on Appeal.

§522.Amendment of Assessment on Appeal.Section 267

AMENDMENT OF ASSESSMENT ON APPEAL.


Where as a result of an appeal under section 246 or section 253, any change ismade in the assessment of a body of individuals or an association of personsor a new assessment of a body of individuals or an association of persons isordered to be made, the Commissioner (Appeals) or the Appellate Tribunal, asthe case may be, shall pass an order authorising the Assessing Officer eitherto amend the assessment made on any member of the body or association or makea fresh assessment on any member of the body or association.

523. Exclusion of time taken for copy.

§523.Exclusion of time taken for copy.Section 268

EXCLUSION OF TIME TAKEN FOR COPY.

In computing the period of limitation prescribed for an appeal or anapplication under this Act, the day on which the order complained of wasserved and, if the assessee was not furnished with a copy of the order whenthe notice of the order was served upon him, the time requisite for obtaininga copy of such order, shall be excluded.

524. Definition of "High Court".

§524.Definition of "High Court".Section 269

DEFINITION OF "HIGH COURT".

In this Chapter, - "High Court" means, - (i) In relation to any State, theHigh Court for that State;

(ii) In relation to the Union territory of Delhi, the High Court of Delhi;

(iii) Omitted

(iv) In relation to the Union territory of the Andaman and Nicobar Islands,the High Court at Calcutta;

(v) In relation to the Union territory of Lakshadweep, the High Court ofKerala;


(va) In relation to the Union territory of Chandigarh, the High Court ofPunjab and Haryana;

(vi) In relation to the Union territories of Dadra and Nagar Haveli and Damanand Diu, the High Court at Bombay; and

(vii) In relation to the Union territory of Pondicherry, the High Court atMadras.

525. Definitions.

§525.Definitions.Section 269A

DEFINITIONS.

In this Chapter, unless the context otherwise requires, - (a) "Apparentconsideration", -

(1) In relation to any immovable property transferred, being immovableproperty of the nature referred to in sub-clause (i) of clause (e), means, -

(i) If the transfer is by way of sale, the consideration for such transfer asspecified in the instrument of transfer;

(ii) If the transfer is by way of exchange, - (A) In a case where theconsideration for the transfer consists of a thing or things only, the pricethat such thing or things would ordinarily fetch on sale in the open market onthe date of execution of the instrument of transfer;

(B) In a case where the consideration for the transfer consists of a thing orthings and a sum of money, the aggregate of the price that such thing orthings would ordinarily fetch on sale in the open market on the date ofexecution of the instrument of transfer and such sum;

(iii) If the transfer is by way of lease, - (A) In a case where theconsideration for the transfer consists of premium only, the amount of premiumas specified in the instrument of transfer;

(B) In a case where the consideration for the transfer consists of rent only,the aggregate of the moneys (if any) payable by way of rent and the amountsfor the service or things forming part of or constituting the rent, asspecified in the instrument of transfer;


(C) In a case where the consideration for the transfer consists of premium andrent, the aggregate of the amount of the premium, the moneys (if any) payableby way of rent and the amounts for the service or things forming part of orconstituting the rent, as specified in the instrument of transfer, and wherethe whole or any part of the consideration for such transfer is payable on anydate or dates falling after the date of such transfer the value of theconsideration payable after such date shall be deemed to be the discountedvalue of such consideration, as on the date of such transfer, determined byadopting the rate of interest at eight per cent per annum;

(2) In relation to any immovable property transferred, being immovableproperty of the nature referred to in sub-clause (ii) of clause (e), means, -(i) In a case where the consideration for the transfer consists of a sum ofmoney only, such sum;

(ii) In a case where the consideration for the transfer consists of a thing orthings only, the price that such thing or things would ordinarily fetch onsale in the open market on the date of the transfer;

(iii) In a case where the consideration for the transfer consists of a thingor things and a sum of money, the aggregate of the price that such thing orthings would ordinarily fetch on sale in the open market on the date of thetransfer and such sum, and where the whole or any part of the considerationfor such transfer is payable on any date or dates falling after the date ofsuch transfer, the value of the consideration payable after such date shall bedeemed to be the discounted value of such consideration, as on the date ofsuch transfer, determined by adopting the rate of interest at eight per centper annum;

(b) "Competent authority" means Joint Commissioner authorised by the CentralGovernment under section 269B to perform the functions of a competentauthority under this Chapter;

(c) "Court" means a principal civil court of original jurisdiction unless theCentral Government has appointed (as it is hereby authorised to do) anyspecial judicial officer within any specified local limits to perform thefunctions of the court under this Chapter;

(d) "Fair market value", - (i) In relation to any immovable propertytransferred by way of sale or exchange, being immovable property of the naturereferred to in sub-clause (i) of clause (e), means the price that theimmovable property would ordinarily fetch on sale in the open market on thedate of execution of the instrument of transfer of such property;


(ii) In relation to any immovable property transferred by way of lease, beingimmovable property of the nature referred to in sub-clause (i) of clause (e),means the premium that such transfer would ordinarily fetch in the open marketon the date of execution of the instrument of transfer of such property, ifthe consideration for such transfer had been by way of premium only;

(iii) In relation to any immovable property transferred, being immovableproperty of the nature referred to in sub-clause (ii) of clause (e), means theconsideration in the form of money that such transfer would ordinarily fetchin the open market on the date of the transfer, if such transfer had been madeonly for consideration in money;

(e) "Immovable property" means, - (i) Any land or any building 2070 ] or partof a building, and includes, where any land or any building or part of abuilding is transferred together with any machinery, plant, furniture,fittings or other things, such machinery, plant, furniture, fittings or otherthings also.

Explanation : For the purposes of this sub-clause, land, building, part of abuilding, machinery, plant, furniture, fittings and other things include anyrights therein;

(ii) Any rights of the nature referred to in clause (b) of sub-section (1) ofsection 269AB;

(f) "Instrument of transfer" means the instrument of transfer registered underthe Registration Act, 1908 (16 of 1908), or, as the case may be, the statementregistered under section 269AB with the competent authority;

(g) "Person interested", in relation to any immovable property, includes allpersons claiming, or entitled to claim, an interest in the compensationpayable on account of the acquisition of that property under this Chapter;

(h) "Transfer", - (i) In relation to any immovable property referred to insub-clause (i) of clause (e), means transfer of such property by way of saleor exchange or lease for a term of not less than twelve years, and includesallowing the possession of such property to be taken or retained in partperformance of a contract of the nature referred to in section 53A of theTransfer of Property Act, 1882 (4 of 1882).

Explanation : For the purposes of this sub-clause, a lease which provides forthe extension of the term thereof by a further term or terms shall be deemedto be a lease for a term of not less than twelve years if the aggregate of theterm for which such lease has been granted and the further term or terms forwhich it can be so extended is not less than twelve years;


(ii) In relation to any immovable property of the nature referred to in sub-clause (ii) of clause (e), means the doing of anything (whether by way oftransfer of shares in a co-operative society or company or by way of anyagreement or arrangement or in any other manner whatsoever) which has theeffect of transferring, or enabling the enjoyment of, such property.

526. Registration of Certain Transactions.

§526.Registration of Certain Transactions.Section 269AB

REGISTRATION OF CERTAIN TRANSACTIONS.

(1) The following transactions, that is to say, - (a) every transactioninvolving the allowing of the possession of any immovable property to be takenor retained in part performance of a contract of the nature referred to insection 53A of the Transfer of Property Act, 1882 (4 of 1882), and

(b) Every transaction (whether by way of becoming a member of, or acquiringshares in, a co-operative society, company or other association of persons orby way of any agreement or any arrangement of whatever nature) whereby aperson acquires any rights in or with respect to any building or part of abuilding (whether or not including any machinery, plant, furniture, fittingsor other things therein) which has been constructed or which is to beconstructed [not being a transaction by way of sale, exchange or lease of suchbuilding or part of a building which is required to be registered under theRegistration Act, 1908 (16 of 1908)], shall be reduced to writing in the formof a statement by each of the parties to such transaction or by any of theparties to such transaction acting on behalf of himself and on behalf of theother parties.

(2) Every statement in respect of a transaction referred to in sub-section (1)shall - (a) Be in the prescribed form;

(b) Set forth such particulars as may be prescribed; and

(c) Be verified in the prescribed manner, and registered with the competentauthority, in such manner and within such time as may be prescribed, by eachof the parties to such transaction or by any of the parties to suchtransaction acting on behalf of himself and on behalf of the other parties.


527. Competent Authority.

§527.Competent Authority.Section 269B

COMPETENT AUTHORITY.

(1) The Central Government may, by general or special order published in theOfficial Gazette, - (a) Authorise as many Joint Commissioners, as it thinksfit, to perform the functions of a competent authority under this Chapter; and

(b) Define the local limits within which the competent authorities shallperform their functions under this Chapter.

(2) In respect of any function to be performed by a competent authority underany provision of this Chapter in relation to any immovable property, referredto in section 269C, the competent authority referred to therein shall, - (a)In a case where such property is situate within the local limits ofjurisdiction of only one competent authority, be such competent authority;

(b) In a case where such property is situate within the local limits of thejurisdiction of two or more competent authorities, be the competent authorityempowered to perform such functions in relation to such property in accordancewith rules 2078 made in this behalf by the Board under section 295.

Explanation : For the purposes of this sub-section, immovable property, beingrights of the nature referred to in clause (b) of sub-section (1) of section269AB in, or with respect to, any building or part of a building which hasbeen constructed or which is to be constructed shall be deemed to be situateat the place where the building has been constructed or is to be constructed.

(3) No person shall be entitled to call in question the jurisdiction of acompetent authority in respect of any immovable property after the expiry ofthirty days from the date on which such competent authority initiatesproceedings under section 269D for the acquisition of such property.

(4) Subject to the provisions of sub-section (3), where the jurisdiction of acompetent authority is questioned, the competent authority shall, if satisfiedwith the correctness of the claim, by order in writing, determine the questionaccordingly and if he is not so satisfied, he shall refer the question to theBoard and the Board shall, by order in writing, determine the question.

528. Immovable property in respect of which


proceedings for Acquisition may be taken.

§528.Immovable property in respect of which proceedings for Acquisition maybe taken.Section 269C

IMMOVABLE PROPERTY IN RESPECT OF WHICH PROCEEDINGS FOR ACQUISITION MAY BETAKEN.

(1) Where the competent authority has reason to believe that any immovableproperty of a fair market value exceeding one hundred thousand rupees has beentransferred by a person (hereafter in this Chapter referred to as thetransferor) to another person (hereafter in this Chapter referred to as thetransferee) for an apparent consideration which is less than the fair marketvalue of the property and that the consideration 2081 for such transfer asagreed to between the parties has not been truly stated in the instrument oftransfer with the object of - (a) Facilitating the reduction or evasion of theliability of the transferor to pay tax, under this Act in respect of anyincome arising from the transfer; or

(b) Facilitating the concealment of any income or any moneys or other assetswhich have not been or which ought to be disclosed by the transferee for thepurposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act or theWealth-tax Act, 1957 (27 of 1957), the competent authority may, subject to theprovisions of this Chapter, initiate proceedings for the acquisition of suchproperty under this Chapter :

Provided that before initiating such proceedings, the competent authorityshall record his reasons for doing so :

Provided further that no such proceedings shall be initiated unless thecompetent authority has reason to believe that the fair market value of theproperty exceeds the apparent consideration therefor by more than fifteen percent of such apparent consideration.

(2) In any proceedings under this Chapter in respect of any immovableproperty, - (a) Where the fair market value of such property exceeds theapparent consideration therefor by more than twenty-five per cent of suchapparent consideration, it shall be conclusive proof that the considerationfor such transfer as agreed to between the parties has not been truly statedin the instrument of transfer;

(b) Where the property has been transferred for an apparentconsideration whichis less than its fair market value, it shall be presumed, unless the contrary


is proved, that the consideration for such transfer as agreed to between theparties has not been truly stated in the instrument of transfer with suchobject as is referred to in clause (a) or clause (b) of sub-section (1).

529. Preliminary Notice.

§529.Preliminary Notice.Section 269D

PRELIMINARY NOTICE.

(1) 2082 The competent authority shall initiate proceedings for theacquisition, under this Chapter, of any immovable property referred to insection 269C by notice to that effect published in the Official Gazette :

Provided that no such proceedings shall be initiated in respect of anyimmovable property after the expiration of a period of nine months from theend of the month in which the instrument of transfer in respect of suchproperty is registered under the Registration Act, 1908 (16 of 1908), as thecase may be, section 269AB:

Provided further that - (a) In a case where it is determined under sub-section(4) of section 269B by the competent authority who has initiated proceedingsfor the acquisition of any immovable property under this Chapter or by theBoard that such competent authority has no jurisdiction to initiate suchproceedings the competent authority having jurisdiction may initiate suchproceedings within -

(i) The period of nine months specified in the foregoing proviso; or

(ii) A period of thirty days from the date of such determination, whicheverperiod expires later;

(b) In a case where proceedings for the acquisition of any immovable propertyunder this Chapter could not be initiated during any period of time by reasonof any injunction or order of any court prohibiting the initiation of suchproceedings or preventing the examination of documents or other materialsrequired to be examined for the purpose of determining whether suchproceedings should be initiated, the time of the continuance of the injunctionor order, the day on which it was issued or made and the day on which it waswithdrawn shall be excluded in computing the period during which suchproceedings may be initiated under this sub-section.

(2) The competent authority shall - (a) Cause a notice under sub-section (1)


in respect of any immovable property to be served on the transferor, thetransferee, the person in occupation of the property, if the transferee is notin occupation thereof, and on every person whom the competent authority knowsto be interested in the property;

(b) Cause such notice to be published - (i) In his office by affixing a copythereof to a conspicuous place;

(ii) In the locality in which the immovable property to which it relates issituate, by affixing a copy thereof to a conspicuous part of the property andalso by making known in such manner as may be prescribed the substance of suchnotice at convenient places in the said locality.

Explanation : The provisions of the Explanation to sub-section (2) of section269B shall apply for the purposes of this sub-section as they apply for thepurposes of that sub-section.

530. Objections.

§530.Objections.Section 269E

OBJECTIONS.

(1) Objections against the acquisition of the immovable property in respect ofwhich a notice has been published in the Official Gazette under sub-section(1) of section 269D may be made -

(a) By the transferor or the transferee or any other person referred to inclause (a) of sub-section (2) of that section within a period of forty-fivedays from the date of such publication or a period of thirty days from thedate of service of notice on such person under the said clause, whicheverperiod expires later;

(b) By any other person interested in such immovable property, within forty-five days from the date of such publication.

(2) Every objection under sub-section (1) shall be made to the competentauthority in writing.

(3) For the removal of doubts, it is hereby declared that objection may bemade under sub-section (1) that the provisions of clause (a) of sub-section(2) of section 269C do not apply in relation to any immovable property on the


ground that the fair market value of such property does not exceed theapparent consideration therefor by more than twenty-five per cent of suchapparent consideration.

531. Hearing of Objections.

§531.Hearing of Objections.Section 269F

HEARING OF OBJECTIONS.

(1) The competent authority shall fix a day and place for the hearing of theobjections made under section 269E against the acquisition under this Chapterof any immovable property, and shall give notice of the same to every personwho has made such objection :

Provided that such notice shall also be given to the transferee of suchproperty even if he has not made any such objection.

(2) Every person to whom a notice is given under sub-section (1) shall havethe right to be heard at the hearing of the objections.

(3) The competent authority shall have the power to adjourn the hearing of theobjections from time to time.

(4) The competent authority may, before disposing of the objections, make suchfurther inquiry as he thinks fit.

(5) The decision of the competent authority in respect of the objections heardshall be in writing and shall state the reasons for the decisions with respectto each objection.

(6) If after hearing the objections, if any, and after taking into account allthe relevant material on record, the competent authority is satisfied that, -(a) The immovable property to which the proceedings relate is of a fair marketvalue exceeding one hundred thousand rupees;

(b) The fair market value of such property exceeds the apparent considerationtherefor by more than fifteen per cent of such apparent consideration; and

(c) The consideration for such transfer as agreed to between the parties hasnot been truly stated in the instrument of transfer with such object as isreferred to in clause (a) or clause (b) of sub-section (1) of section 269C, hemay, after obtaining the approval of the Commissioner, make an order for the


acquisition of the property under this Chapter.

Explanation : In this sub-section, Commissioner, in relation to a competentauthority, means such Commissioner as the Board may, by general or specialorder in writing, specify in this behalf.

(7) If the competent authority is not satisfied as provided in sub-section(6), he shall, by order in writing, declare that the property will not beacquired under this Chapter.

(8) The competent authority shall serve a copy of his order under sub-section(6) or sub-section (7), as the case may be, on the transferor, the transfereeand on every person who has made objections against such acquisition undersection 269E.

(9) In any proceedings under this Chapter in respect of any immovableproperty, no objection shall be entertained on the ground that although theapparent consideration for the property is less than fair market value of theproperty on the date of the execution of the instrument of transfer or wheresuch property is of the nature referred to in sub-clause (ii) of clause (e) ofsection 269A on the date of the transfer, the consideration as agreed tobetween the parties has been truly stated in the instrument of transferbecause such consideration was agreed to having regard to the price that suchproperty would have ordinarily fetched on such transfer in the open market onthe date of the conclusion of the agreement to transfer the property, exceptwhere such agreement has been registered under the Registration Act, 1908 (16of 1908).

532. Appeal Against order for Acquisition.

§532.Appeal Against order for Acquisition.Section 269G

APPEAL AGAINST ORDER FOR ACQUISITION.

(1) An appeal may be preferred to the Appellate Tribunal against the order forthe acquisition of any immovable property made by the competent authorityunder section 269F, -

(a) By the transferor or the transferee or any other person referred to insub-section (8) of that section, within a period of forty-five days from thedate of such order or a period of thirty days from the date of service of acopy of the order on such person under the said sub-section, whichever period


expires later;

(b) By any other person interested in such immovable property, within forty-five days from the date of such order :

Provided that the Appellate Tribunal may, on an application made in thisbehalf before the expiry of the said period of forty-five days or, as the casemay be, thirty days, permit, by order, the appeal to be presented within suchfurther period as may be specified therein if the applicant satisfies theAppellate Tribunal that he has sufficient cause for not being able to presentthe appeal within the said period of forty-five days or, as the case may be,thirty days.

(2) Every appeal under this section shall be in the prescribed form 2088a andshall be verified in the prescribed manner and shall be accompanied by a feeof two hundred rupees.

(3) The Appellate Tribunal shall fix a day and place for the hearing of theappeal and shall give notice of the same to the appellant and to the competentauthority.

(4) The Appellate Tribunal may, after giving the appellant and the competentauthority an opportunity of being heard, pass such orders thereon as it thinksfit.

(5) The Appellate Tribunal may, at any time within thirty days from the dateof the order, with a view to rectifying any mistake apparent from the record,amend any order passed by it under sub-section (4) and shall make suchamendment if the mistake is brought to its notice by the appellant or thecompetent authority :

Provided that if any such amendment is likely to affect any personprejudicially, it shall not be made without giving to such person a reasonableopportunity of being heard.

(6) The Appellate Tribunal shall send a copy of any orders passed under thissection to the appellant and to the Commissioner.

(7) Save as provided in section 269H, orders passed by the Appellate Tribunalon appeal shall be final.

(8) Every appeal under this section shall be disposed of as expeditiously aspossible and endeavour shall be made to dispose of every such appeal withinninety days from the date on which it is presented.


(9) The provisions of section 255 [except sub-section (3) thereof] shall, sofar as may be, apply in relation to the powers, functions and proceedings ofthe Appellate Tribunal under this section as they apply in relation to thepowers, functions and proceedings of the Appellate Tribunal under Chapter XX.

533. Appeal to High Court.

§533.Appeal to High Court.Section 269H

APPEAL TO HIGH COURT.

(1) The Commissioner or any person aggrieved by any order of the AppellateTribunal under section 269G may, within sixty days of the date on which he isserved with notice of such order under that section, prefer an appeal againstsuch order to the High Court on any question of law :

Provided that the High Court may, on an application made in this behalf beforethe expiry of the said period of sixty days, permit, by order, the appeal tobe presented within such further period as may be specified therein, if theapplicant satisfies the High Court that he has sufficient cause for not beingable to present the appeal within the said period of sixty days.

(2) An appeal under sub-section (1) shall be heard by a Bench of not less thantwo Judges of the High Court and the provisions of section 259 shall apply inrelation to any such appeal as they apply in relation to a case referred tothe High Court under section 256.

(3) The costs of the appeal shall be in the discretion of the High Court.

534. Vesting of property in Central Government.

§534.Vesting of property in Central Government.Section 269-I

VESTING OF PROPERTY IN CENTRAL GOVERNMENT.

(1) As soon as may be after the order for acquisition of any immovableproperty made under sub-section (6) of section 269F becomes final, thecompetent authority may, by notice in writing, order any person who may be inpossession of the immovable property to surrender or deliver possessionthereof to the competent authority or any other person duly authorised in


writing by the competent authority in this behalf, within thirty days of thedate of the service of the notice.

Explanation : For the purposes of this sub-section, an order for theacquisition of any immovable property (hereafter in this Explanation referredto as the order for acquisition) made under sub-section (6) of section 269Fbecomes final, -

(a) In a case where the order for acquisition is not made the subject of anappeal to the Appellate Tribunal under section 269G, upon the expiry of theperiod during which such appeal may be presented under that section;

(b) In a case where the order for acquisition is made the subject of an appealto the Appellate Tribunal under section 269G, - (i) If the order foracquisition is confirmed by the Appellate Tribunal and the order of theAppellate Tribunal is not made the subject of an appeal of the High Courtunder section 269H, upon the expiry of the period during which such appeal maybe presented under that section to the High Court;

(ii) If the order of the Appellate Tribunal is made the subject of an appealto the High Court under section 269H, upon the confirmation of the order foracquisition by the High Court.

(2) If any person refuses or fails to comply with the notice under sub-section(1), the competent authority or other person duly authorised by the competentauthority under that sub-section may take possession of the immovable propertyand may, for that purpose, use such force as may be necessary.

(3) Notwithstanding anything contained in sub-section (2), the competentauthority may, for the purpose of taking possession of any property referredto in sub-section (1), requisition the services of any police officer toassist him and it shall be the duty of such officer to comply withsuchrequisition.

(4) When the possession of the immovable property is surrendered or deliveredunder sub-section (1) to the competent authority or a person duly authorisedby him in that behalf or, as the case may be, when the possession thereof istaken under sub-section (2) or sub-section (3) by such authority or person,the property shall vest absolutely in the Central Government free from allencumbrances :

Provided that nothing in this sub-section shall operate to discharge thetransferee or any other person (not being the Central Government) fromliability in respect of such encumbrances and, notwithstanding anythingcontained in any other law, such liability may be enforced against the


transferee or such other person by a suit for damages.

(5) Notwithstanding anything contained in sub-section (4) or any other law orany instrument or any agreement for the time being in force, where an orderfor acquisition of any immovable property, being rights of the nature referredto in clause (b) of sub-section (1) of section 269AB, in or with respect toany building or part of a building which has been constructed or which is tobe constructed, has become final, then, such order shall, by its own force,have the effect of - (a) Vesting such rights in the Central Government, and

(b) Placing the Central Government in the same position in relation to suchrights as the person in whom such rights would have continued to vest if suchorder had not become final, and the competent authority may issue suchdirections as he may deem fit to any person concerned for taking the necessarysteps for compliance with the provisions of clause (a) and (b).

(6) In the case of any immovable property, being rights of the nature referredto in clause (b) of sub-section (1) of section 269AB, in or with respect toany building or part of a building, the provisions of sub-sections (1), (2)and (3) shall have effect as if the references to immovable property thereinwere a reference to such building or, as the case may be, part of suchbuilding.

535. Compensation.

§535.Compensation.Section 269J

COMPENSATION.

(1) Where any immovable property is acquired under this Chapter, the CentralGovernment shall pay for such acquisition compensation which shall be a sumequal to the aggregate of the amount of the apparent consideration for itstransfer and fifteen per cent of the said amount :

Provided that in a case where, under the agreement between the partiesconcerned, the whole or any part of the consideration for the transfer of suchimmovable property is payable on any date or dates falling after the date onwhich such property is acquired, the compensation payable by the CentralGovernment shall be the aggregate of the following amounts, namely :- (i) Anamount equal to fifteen per cent of the apparent consideration;

(ii) The amount, if any, that has become payable in accordance with such


agreement on or before the date on which such property is acquired under thisChapter; and

(iii) The amount payable after the date on which such property is acquiredunder this Chapter.

(2) Notwithstanding anything contained in sub-section (1), - (a) Where, afterthe transfer to the transferee of the property referred to in that sub-sectionbut before the vesting of the property in the Central Government, the propertyhas been damaged (otherwise than as a result of normal wear and tear), thecompensation payable under that sub-section shall be reduced by such amount asthe competent authority and the persons entitled to the compensation may agreewithin fifteen days of the vesting of the property in the Central Governmentor in default of such agreement as the court may, on a reference made to it inthis behalf by the competent authority or by any person duly authorised forthe purpose by the competent authority, determine to be the amount that mayhave to be expended for restoring the property to the condition in which itwas at the time of such transfer;

(b) Where, after the transfer of such property to the transferee but beforethe date of publication in the Official Gazette of the notice in respect ofsuch property under sub-section (1) of section 269D, any improvements havebeen made to the property, whether by way of addition or alteration or in anyother manner, the compensation payable in respect of such property under sub-section (1) shall be increased by such amount as the competent authority andthe persons entitled to the compensation may agree within fifteen days of thevesting of the property in the Central Government or in default of suchagreement as the court may, on a reference made to it in this behalf by thecompetent authority or by any person duly authorised for the purpose by thecompetent authority, determine to be the amount spent for making suchimprovements.

(3) Every reference under clause (a) or clause (b) of sub-section (2) shall bemade within thirty days of the date on which the immovable property to whichit relates becomes vested in the Central Government or within such furtherperiod as the court may, on an application made in this behalf before theexpiry of the said period and on being satisfied that there is sufficientcause for doing so, allow and such reference shall state clearly thecompensation payable under sub-section (1) in respect of the immovableproperty and the amount by which, according to the estimate of the competentauthority, such compensation shall be reduced under clause (a) or, as the casemay be, increased under clause (b), of sub-section (2).

(4) The amount by which the compensation payable under sub-section (1) inrespect of any immovable property acquired under this Chapter falls short of


the amount which would have been payable as compensation if that property hadbeen acquired under the Land Acquisition Act, 1894 (1 of 1894), after theissue of a preliminary notice under section 4 of that Act on the date ofpublication in the Official Gazette of the notice in respect of the propertyunder sub-section (1) of section 269D, shall be deemed to have been realisedby the Central Government as a penalty from the transferee for being a partyto a transfer with such object as is referred to in clause (a) or clause (b)of sub-section (1) of section 269C, and no penalty shall be levied for anyassessment year on the transferee -

(a) Under clause (iii) of sub-section (1) of section 271, for concealing theparticulars or furnishing inaccurate particulars of so much of his income asis utilised by him for paying to the transferor, by way of consideration forthe property, any amount in excess of the apparent consideration for theproperty, notwithstanding that such amount is included in the income of thetransferee;

(b) Under clause (iii) of sub-section (1) of section 18 of the Wealth-tax Act,1957 (27 of 1957), for concealing the particulars or furnishing inaccurateparticulars of so much of his assets as are utilised by him for paying to thetransferor, by way of consideration for the property, any amount in excess ofthe apparent consideration for the property, notwithstanding that such assetsare included in the net wealth of the transferee.

536. Payment or Deposit of Compensation.

§536.Payment or Deposit of Compensation.Section 269K

PAYMENT OR DEPOSIT OF COMPENSATION.

(1) The amount of compensation payable in accordance with the provisions ofsection 269J for the acquisition of any immovable property shall be tenderedto the person or persons entitled thereto, as soon as may be, after theproperty becomes vested in the Central Government under sub-section (4) ofsection 269-I :

Provided that in a case falling under the proviso to sub-section (1) ofsection 269J, the amounts referred to in clause (i) and clause (ii) of thatproviso shall be tendered to the person or persons entitled thereto, as soonas may be, after the property becomes vested in the Central Government undersection 269-I, and the amount referred to in clause (iii) of the said provisoshall be tendered on the date on which it would be payable in accordance with


the agreement between the parties concerned, and where such amount is payablein instalments on different dates, then in such instalments on those dates :

Provided further that in any case where a reference is or has to be made undersub-section (2) of section 269J to the court for the determination of theamount by which the compensation payable under sub-section (1) of that sectionshall be reduced or increased, the amount of such compensation as reduced orincreased by the amount estimated in that behalf by the competent authorityfor the purposes of such reference shall be tendered as aforesaid.

(2) Notwithstanding anything contained in sub-section (1), if any disputearises as to the apportionment of the compensation amongst persons claiming tobe entitled thereto, the Central Government shall deposit in the court thecompensation required to be tendered under sub-section (1) and refer suchdispute for the decision of the court and the decision of the court thereonshall be final.

(3) Notwithstanding anything contained in sub-section (1), if the personsentitled to compensation do not consent to receive it, or if there is noperson competent to alienate the immovable property, or if there is anydispute as to the title to receive the compensation, the Central Governmentshall deposit in the court the compensation required to be tendered under sub-section (1) and refer the matter for the decision of the court :

Provided that nothing herein contained shall affect the liability of anyperson who may receive the whole or any part of the compensation for anyimmovable property acquired under this Chapter to pay the same to the personlawfully entitled thereto.

(4) If the Central Government fails to tender under sub-section (1) or depositunder sub-section (2) or sub-section (3) the whole or any part of thecompensation required to be tendered or deposited thereunder within thirtydays of the date on which the immovable property to which the compensationrelates becomes vested in the Central Government under sub-section (4) ofsection 269-I, the Central Government shall be liable to pay simple interestat the rate of fifteen per cent per annum reckoned from the day immediatelyfollowing the date of expiry of the said period up to the date on which it sotenders or deposits such compensation or, as the case may be, such part of thecompensation.

(5) Where any amount of compensation (including interest, if any, thereon) hasbeen deposited in the court under this section, the court may, either of itsown motion or on an application made by or on behalf of any party interestedor claiming to be interested in such amount, order the same to be invested insuch Government or other securities as it may think proper, and may direct the


interest or other proceeds of any such investment to be accumulated and paidin such manner as will, in its opinion, give the parties interested thereinthe same benefit therefrom as they might have had from the immovable propertyin respect whereof such amount has been deposited or as near thereto as maybe.

537. Assistance by Valuation Officers.

§537.Assistance by Valuation Officers.Section 269L

ASSISTANCE BY VALUATION OFFICERS.

(1) The competent authority may, - (a) For the purpose of initiatingproceedings for the acquisition of any immovable property under section 269Cor for the purpose of making an order under section 269F in respect of anyimmovable property, require a Valuation Officer to determine the fair marketvalue of such property and report the same to him;

(b) For the purpose of estimating the amount by which the compensation payableunder sub-section (1) of section 269J in respect of any immovable property maybe reduced or, as the case may be, increased under clause (a) or clause (b) ofsub-section (2) of that section, require the Valuation Officer to make suchestimate and report the same to him.

(2) The Valuation Officer to whom a reference is made under clause (a) orclause (b) of sub-section (1) shall, for the purpose of dealing with suchreference, have all the powers that he has under section 38A of the Wealth-taxAct, 1957 (27 of 1957).

(3) If in an appeal under section 269G against the order for acquisition ofany immovable property, the fair market value of such property is in dispute,the Appellate Tribunal shall, on a request being made in this behalf by thecompetent authority, give an opportunity of being heard to any ValuationOfficer nominated for the purpose by the competent authority.

Explanation : In this section, "Valuation Officer" has the same meaning as inclause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

538. Powers of Competent Authority.

§538.Powers of Competent Authority.


Section 269M

POWERS OF COMPETENT AUTHORITY.

The competent authority shall have, for the purposes of this Chapter, all thepowers that a Commissioner has, for the purposes of this Act, under section131.

539. Rectification of Mistakes.

§539.Rectification of Mistakes.Section 269N

RECTIFICATION OF MISTAKES.

With a view to rectifying any mistake apparent from the record, the competentauthority may amend any order made by him under this Chapter at any timebefore the time for presenting an appeal against such order has expired,either on his own motion or on the mistake being brought to his notice by anyperson affected by the order :

Provided that if any such amendment is likely to affect any personprejudicially, it shall not be made without giving to such person a reasonableopportunity of being heard.

540. Appearance by Authorised Representative orRegistered Valuer.

§540.Appearance by Authorised Representative or Registered Valuer.Section 269-O

APPEARANCE BY AUTHORISED REPRESENTATIVE OR REGISTERED VALUER.

Any person who is entitled or required to attend before a competent authorityor the Appellate Tribunal in any proceeding under this Chapter, otherwise thanwhen required to attend personally for examination on oath or affirmation, mayattend -

(a) By any authorised representative in connection with any matter;

(b) By a registered valuer in connection with any matter relating to thevaluation of any immovable property for the purposes of this Chapter or the


estimation of the amount by which the compensation payable under sub-section(1) of section 269J for the acquisition of any immovable property may bereduced or, as the case may be, increased in accordance with the provisions ofclause (a) or clause (b) of sub-section (2) of that section.

Explanation : In this section, - (i) "Authorised representative" has the samemeaning as in section 288;

(ii) "Registered valuer" has the same meaning as in clause (oaa) of section 2of the Wealth-tax Act, 1957 (27 of 1957).

541. Statement to be furnished in respect oftransfers of immovable property.

§541.Statement to be furnished in respect of transfers of immovable property.Section 269P

STATEMENT TO BE FURNISHED IN RESPECT OF TRANSFERS OF IMMOVABLE PROPERTY.

(1) Notwithstanding anything contained in any other law for the time being inforce, no registering officer appointed under the Registration Act, 1908 (16of 1908), shall register any document which purports to transfer any immovableproperty belonging to any person unless a statement in duplicate in respect ofsuch transfer, in the prescribed form and verified in the prescribed mannerand setting forth such particulars as may be prescribed 2094 , is furnished tohim along with the instrument of transfer :

Provided that the provisions of this sub-section shall not apply in relationto any document which purports to transfer any immovable property for anapparent consideration not exceeding fifty thousand rupees.

Explanation : For the purposes of this proviso, "apparent consideration" shallhave the meaning assigned to it in clause (a) of section 269A subject to themodifications that for the expressions "immovable property transferred" and"instrument of transfer" occurring in that clause, the expressions "immovableproperty purported to be transferred" and "document purporting to transfersuch immovable property" shall, respectively, be substituted.

(2) The registering officer shall, at the end of every fortnight, forward tothe competent authority, - (a) One set of the statements received by him undersub-section (1) during the fortnight; and


(b) A return in the prescribed form and verified in the prescribed manner 2097and setting forth such particulars as may be prescribed in respect ofdocuments of the nature referred to in sub-section (1) which have beenregistered by him during the fortnight.

542. Chapter not to apply to transfers to relatives.

§542.Chapter not to apply to transfers to relatives.Section 269Q

CHAPTER NOT TO APPLY TO TRANSFERS TO RELATIVES.

The provisions of this Chapter shall not apply to or in relation to anytransfer of immovable property made by a person to his relative on account ofnatural love and affection for a consideration which is less than its fairmarket value if a recital to that effect is made in the instrument oftransfer.

543. Properties liable for Acquisition under thisChapter not to be Acquired under other Laws.

§543.Properties liable for Acquisition under this Chapter not to be Acquiredunder other Laws.Section 269R

PROPERTIES LIABLE FOR ACQUISITION UNDER THIS CHAPTER NOT TO BE ACQUIRED UNDEROTHER LAWS.

Notwithstanding anything contained in the Land Acquisition Act, 1894 (1 of1894), or any corresponding law for the time being in force, no immovableproperty referred to in section 269C shall be acquired for any purpose of theUnion under that Act or such law unless the time for initiation of proceedingsfor the acquisition of such property under this Chapter has expired withoutsuch proceedings having been initiated or unless the competent authority hasdeclared that such property will not be acquired under this Chapter.

544. Chapter not to apply where transfer ofimmovable property made after a certain date.

§544.Chapter not to apply where transfer of immovable property made after a


certain date.Section 269RR

CHAPTER NOT TO APPLY WHERE TRANSFER OF IMMOVABLE PROPERTY MADE AFTER A CERTAINDATE.

The provisions of this Chapter shall not apply to or in relation to thetransfer of any immovable property made after the 30th day of September, 1986.

545. Chapter not to extend to state of Jammu andKashmir.

§545.Chapter not to extend to state of Jammu and Kashmir.Section 269S

CHAPTER NOT TO EXTEND TO STATE OF JAMMU AND KASHMIR.

The provisions of this Chapter shall not extend to the State of Jammu andKashmir.

546. Mode of taking or accepting certain loans anddeposits.

§546.Mode of taking or accepting certain loans and deposits.Section 269SS

MODE OF TAKING OR ACCEPTING CERTAIN LOANS AND DEPOSITS.

No person shall, after the 30th day of June, 1984, take or accept from anyother person (hereafter in this section referred to as the depositor) any loanor deposit otherwise than by an account payee cheque or account payee bankdraft if, -

(a) The amount of such loan or deposit or the aggregate amount of such loanand deposit; or

(b) On the date of taking or accepting such loan or deposit, any loan ordeposit taken or accepted earlier by such person from the depositor isremaining unpaid (whether repayment has fallen due or not), the amount or theaggregate amount remaining unpaid; or


(c) The amount or the aggregate amount referred to in clause (a) together withthe amount or the aggregate amount referred to in clause (b), is twentythousand rupees or more :

Provided that the provisions of this section shall not apply to any loan ordeposit taken or accepted from, or any loan or deposit taken or accepted by, -

(a) Government;

(b) Any banking company, post office savings bank or co-operative bank;

(c) Any corporation established by a Central, State or Provincial Act;

(d) Any Government company as defined in section 617 of the Companies Act,1956 (1 of 1956);

(e) Such other institution, association or body or class of institutions,associations or bodies which the Central Government may, for reasons to berecorded in writing, notify in this behalf in the Official Gazette :

Provided further that the provisions of this section shall not apply to anyloan or deposit where the person from whom the loan or deposit is taken oraccepted and the person by whom the loan or deposit is taken or accepted areboth having agricultural income and neither of them has any income chargeableto tax under this Act.

Explanation : For the purposes of this section, - (i) "Banking company" meansa company to which the Banking Regulation Act, 1949 (10 of 1949) applies andincludes any bank or banking institution referred to in section 51 of thatAct;

(ii) "Co-operative bank" shall have the meaning assigned to it in Part V ofthe Banking Regulation Act, 1949 (10 of 1949);

(iii) "Loan or deposit" means loan or deposit of money.

547. Mode of Repayment of certain deposits.

§547.Mode of Repayment of certain deposits.Section 269T

MODE OF REPAYMENT OF CERTAIN DEPOSITS.

(1) No company (including a banking company), co-operative society or firm


shall repay to any person any deposit otherwise than by an account payeecheque or account payee bank draft where the amount of the deposit, or wherethe amount of the deposit is to be repaid together with any interest, theaggregate of the amount of the deposit and such interest, is ten thousandrupees or more :

Provided that where the repayment is by a banking company or co-operativebank, such repayment may also be made by crediting the amount of such depositto the account (if any) with such company or bank of the person to whom suchdeposit has to be repaid :

Provided further that nothing in this sub-section shall apply to or inrelation to the repayment of any deposit on or after the date on which theIncome-tax (Second Amendment) Act, 1981, receives the assent of the President.

(2) No branch of a banking company or a co-operative bank and no other companyor co-operative society and no firm or other person shall repay any depositmade with it otherwise than by an account payee cheque or account payee bankdraft drawn in the name of the person who has made the deposit if - (a) Theamount of the deposit together with interest, if any, payable thereon, or

(b) The aggregate amount of the deposits held by such person with the branchof the banking company or co-operative bank or, as the case may be, the othercompany or co-operative society or the firm, either in his own name or jointlywith any other person on the date of such repayment together with theinterest, if any, payable on such deposits, is twenty thousand rupees or more:

Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount ofsuch deposit to the savings bank account or the current account (if any) withsuch branch of the person to whom such deposit has to be repaid :

Provided further that nothing in this sub-section shall apply to or inrelation to the repayment of any deposit before the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President.

Explanation : For the purposes of this section, - (i) "Banking company" shallhave the meaning assigned to it in clause (i) of the Explanation to section269SS;

(ia) "Co-operative bank" shall have the meaning assigned to it in Part V ofthe Banking Regulation Act, 1949 (10 of 1949);


(ii) "Deposit" 2109a means any deposit of money which is repayable afternotice or repayable after a period and, in the case of a person other than acompany, includes deposit of any nature.

548. Mode of Repayment of Special Bearer Bonds,1991.

§548.Mode of Repayment of Special Bearer Bonds, 1991.Section 269TT

MODE OF REPAYMENT OF SPECIAL BEARER BONDS, 1991.

Notwithstanding anything contained in any other law for the time being inforce, the amount payable on redemption of Special Bearer Bonds, 1991, shallbe paid only by an account payee cheque or account payee bank draft drawn inthe name of the person to whom such payment is to be made.

549. Commencement of Chapter.

§549.Commencement of Chapter.Section 269U

COMMENCEMENT OF CHAPTER.

The provisions of this Chapter shall come into force on such date as theCentral Government may, by notification 2112 in the Official Gazette, appoint,and different dates may be appointed for different areas.

550. Definitions.

§550.Definitions.Section 269UA

DEFINITIONS.

In this Chapter, unless the context otherwise requires, - (a) "Agreement fortransfer" means an agreement, whether registered under the Registration Act,1908 (16 of 1908), or not, for the transfer of any immovable property;

(b) "Apparent consideration", - (1) In relation to any immovable property inrespect of which an agreement for transfer is made, being immovable property


of the nature referred to in sub-clause (i) of clause (d), means, - (i) If theimmovable property is to be transferred by way of sale, the consideration forsuch transfer as specified in the agreement for transfer;

(ii) If the immovable property is to be transferred by way of exchange, -

(A) in a case where the consideration for the transfer consists of a thing orthings only, the price that such thing or things would ordinarily fetch onsale in the open market on the date on which the agreement for transfer ismade;

(B) In a case where the consideration for the transfer consists of a thing orthings and a sum of money, the aggregate of the price that such thing orthings would ordinarily fetch on sale in the open market on the date on whichthe agreement for transfer is made, and such sum;

(iii) If the immovable property is to be transferred by way of lease, - (A) Ina case where the consideration for the transfer consists of premium only, theamount of premium as specified in the agreement for transfer;

(B) In a case where the consideration for the transfer consists of rent only,the aggregate of the moneys (if any) payable by way of rent and the amountsfor the service or things forming part of or constituting the rent, asspecified in the agreement for transfer;

(C) In a case where the consideration for the transfer consists of premium andrent, the aggregate of the amount of the premium, the moneys (if any) payableby way of rent andthe amounts for the service or things forming part of orconstituting the rent, as specified in the agreement for transfer, and wherethe whole or any part of the consideration for such transfer is payable on anydate or dates falling after the date of such agreement for transfer, the valueof the consideration payable after such date shall be deemed to be thediscounted value of such consideration, as on the date of such agreement fortransfer, determined by adopting such rate of interest as may be prescribed inthis behalf;

(2) In relation to any immovable property in respect of which an agreement fortransfer is made, being immovable property of the nature referred to in sub-clause (ii) of clause (d), means, - (i) In a case where the consideration forthe transfer consists of a sum of money only, such sum;

(ii) In a case where the consideration for the transfer consists of a thing orthings only, the price that such thing or things would ordinarily fetch onsale in the open market on the date on which the agreement for transfer ismade;


(iii) In a case where the consideration for the transfer consists of a thingor things and a sum of money, the aggregate of the price that such thing orthings would ordinarily fetch on sale in the open market on the date on whichthe agreement for transfer is made, and such sum, and where the whole or anypart of the consideration for such transfer is payable on any date or datesfalling after the date of such agreement for transfer, the value of theconsideration payable after such date shall be deemed to be the discountedvalue 2113 of such consideration, as on the date of such agreement fortransfer, determined by adopting such rate of interest as may be prescribed inthis behalf;

(c) "Appropriate authority" means an authority constituted under section269UB to perform the functions of an appropriate authority under this Chapter;

(d) "Immovable property" means - (i) Any land or any building or part of abuilding, and includes, where any land or any building or part of a buildingis to be transferred together with any machinery, plant, furniture, fittingsor other things, such machinery, plant, furniture, fittings or other thingsalso.

Explanation : For the purposes of this sub-clause, "land, building, part of abuilding, machinery, plant, furniture, fittings and other things" include anyrights therein;

(ii) Any rights in or with respect to any land or any building or a part of abuilding (whether or not including any machinery, plant, furniture, fittingsor other things therein) which has been constructed or which is to beconstructed, accruing or arising from any transaction (whether by way ofbecoming a member of, or acquiring shares in, a co-operative society, companyor other association of persons or by way of any agreement or any arrangementof whatever nature), not being a transaction by way of a sale, exchange orlease of such land, building or part of a building;

(e) "Person interested", in relation to any immovable property includes allpersons claiming, or entitled to claim, an interest in the considerationpayable on account of the vesting of that property in the Central Governmentunder this Chapter;

(f) "Transfer", - (i) In relation to any immovable property referred to insub-clause (i) of clause (d), means transfer of such property by way of saleor exchange or lease for a term of not less than twelve years, and includesallowing the possession of such property to be taken or retained in partperformance of a contract of the nature referred to in section 53A of the


Transfer of Property Act, 1882 (4 of 1882).

Explanation : For the purposes of this sub-clause, a lease which provides forthe extension of the term thereof by a further term or terms shall be deemedto be a lease for a term of not less than twelve years, if the aggregate ofthe term for which such lease is to be granted and the further term or termsfor which it can be so extended is not less than twelve years;

(ii) In relation to any immovable property of the nature referred to in sub-clause (ii) of clause (d), means the doing of anything (whether by way ofadmitting as a member of or by way of transfer of shares in a co-operativesociety or company or other association of persons or by way of any agreementor arrangement or in any other manner whatsoever) which has the effect oftransferring or enabling the enjoyment of, such property.

551. Appropriate Authority.

§551.Appropriate Authority.

Section 269UB

APPROPRIATE AUTHORITY.

(1) The Central Government may, by order, published in the Official Gazette, -(a) Constitute as many appropriate authorities, as it thinks fit, to performthe functions of an appropriate authority under this Chapter; and

(b) Define the local limits within which the appropriate authorities shallperform their functions under this Chapter.

(2) An appropriate authority shall consist of three persons, two of whom shallbe members of the Indian Income-tax Service, Group A, holding the post ofCommissioner of Income-tax or any equivalent or higher post, and one shall bea member of the Central Engineering Service, Group A, holding the post ofChief Engineer or any equivalent or higher post.

(3) In respect of any function to be performed by an appropriate authorityunder any provision of this Chapter in relation to any immovable propertyreferred to in section 269UC, the appropriate authority referred to thereinshall, -

(a) In a case where such property is situate within the local limits of thejurisdiction of only one appropriate authority, be such appropriate authority;


(b) In a case where such property is situate within the local limits of thejurisdiction of two or more appropriate authorities, be the appropriateauthority empowered to perform such functions in relation to such property inaccordance with the rules made in this behalf by the Board under section 295.

Explanation : For the purposes of this sub-section, immovable property beingrights of the nature referred to in sub-clause (ii) of clause (d) of section269UA in, or with respect to, any land or any building or part of a buildingwhich has been constructed or which is to be constructed shall be deemed to besituate at the place where the land is situate or, as the case may be, wherethe building has been constructed or is to be constructed.

552. Restrictions on Transfer of Immovable Property.

§552.Restrictions on Transfer of Immovable Property.Section 269UC

RESTRICTIONS ON TRANSFER OF IMMOVABLE PROPERTY.

(1) Notwithstanding anything contained in the Transfer of Property Act, 1882(4 of 1882) or in any other law for the time being in force, no transfer ofany immovable property in such area and of such value exceeding five lakhrupees as may be prescribed, shall be effected except after an agreement fortransfer is entered into between the person who intends transferring theimmovable property (hereinafter referred to as the transferor) and the personto whom it is proposed to be transferred (hereinafter referred to as thetransferee) in accordance with the provisions of sub-section (2) at least fourmonths before the intended date of transfer.

(2) The agreement referred to in sub-section (1) shall be reduced to writingin the form of a statement by each of the parties to such transfer or by anyof the parties to such transfer acting on behalf of himself and on behalf ofthe other parties.

(3) Every statement referred to in sub-section (2) shall, - (i) Be in theprescribed form;

(ii) Set forth such particulars as may be prescribed; and

(iii) Be verified in the prescribed manner, and shall be furnished to theappropriate authority in such manner and within such time as may beprescribed, by each of the parties to such transaction or by any of the


parties to such transaction acting on behalf of himself and on behalf of theother parties.

(4) Where it is found that the statement referred to in sub-section (2) isdefective, the appropriate authority may intimate the defect to the partiesconcerned and give them an opportunity to rectify the defect within a periodof fifteen days from the date of such intimation or within such further periodwhich, on an application made in this behalf, the appropriate authority may,in its discretion, allow and if the defect is not rectified within the saidperiod of fifteen days or, as the case may be, the further period so allowed,then, notwithstanding anything contained in any other provision of thisChapter, the statement shall be deemed never to have been furnished.

553. Order by Appropriate Authority for Purchase byCentral Government of Immovable property.

§553.Order by Appropriate Authority for Purchase by Central Government ofImmovable property.

Section 269UD

ORDER BY APPROPRIATE AUTHORITY FOR PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLEPROPERTY.

(1) Subject to the provisions of sub-sections (1A) and (1B), the appropriateauthority 2116a ], after the receipt of the statement under sub-section (3) ofsection 269UC in respect of any immovable property, may, notwithstandinganything contained in any other law or any instrument or any agreement for thetime being in force, make an order for the purchase by the Central Governmentof such immovable property at any amount equal to the amount of apparentconsideration :

Provided that no such order shall be made in respect of any immovable propertyafter the expiration of a period of two months from the end of the month inwhich the statement referred to in section 269UC in respect of such propertyis received by the appropriate authority :

Provided further that where the statement referred to in section 269UC inrespect of any immovable property is received by the appropriate authority onor after the 1st day of June, 1993, the provisions of the first proviso shallhave effect as if for the words "two months", the words "three months" hadbeen substituted :


Provided also that the period of limitation referred to in the second provisoshall be reckoned, where any defect as referred to in sub-section (4) ofsection 269UC has been intimated, with reference to the date of receipt of therectified statement by the appropriate authority :

Provided also that in a case where the statement referred to in section 269UCin respect of the immovable property concerned is given to an appropriateauthority, other than the appropriate authority having jurisdiction inaccordance with the provisions of section 269UB to make the order referred toin this sub-section in relation to the immovable property concerned, theperiod of limitation referred to in the first and second provisos shall bereckoned with reference to the date of receipt of the statement by theappropriate authority having jurisdiction to make the order under this sub-section.

Provided also that the period of limitation referred to in the second provisoshall be reckoned, where any stay has been granted by any court against thepassing of an order for the purchase of the immovable property under thisChapter, with reference to the date of vacation of the said stay.

(1A) Before making an order under sub-section (1), the appropriate authorityshall give a reasonable opportunity of being heard to the transferor, theperson in occupation of the immovable property if the transferor is not inoccupation of the property, the transferee and to every other person whom theappropriate authority knows to be interested in the property.

(1B) Every order made by the appropriate authority under sub-section (1) shallspecify the grounds on which it is made.

(2) The appropriate authority shall cause a copy of its order under sub-section (1) in respect of any immovable property to be served on thetransferor, the person in occupation of the immovable property if thetransferor is not in occupation thereof, the transferee, and on every otherperson whom the appropriate authority knows to be interested in the property.

554. Vesting of property in Central Government.

§554.Vesting of property in Central Government.

Section 269UE

VESTING OF PROPERTY IN CENTRAL GOVERNMENT.


(1) Where an order under sub-section (1) of section 269UD is made by the appropiate authorityin respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269UA,such property shall, on the date of such order, vest in the Central Government in terms of theagreement for transfer referred to in sub-section (1) of section 269UC

Provided that where the appropriate authority, after giving an opportunity of being heard to thetransferor, the transferee or other persons interested in the said property, under sub-section (1A)of section 269UD, is of the opinion that any encumbrance on the property or leasehold interestspecified in the aforesaid agreement for transfer is so specified with a view to defeat theprovisions of this Chapter, it may, by order, declare such encumbrance or leasehold interest to bevoid and thereupon the aforesaid property shall vest in the Central Government free from suchencumbrance or leasehold interest.

(2) The transferor or any other person who may be in possession of the immovable property inrespect of which an order under sub-section (1) of section 269UD is made, shall surrender ordeliver possession thereof to the appropriate authority or any other person duly authorised by theappropriate authority in this behalf within fifteen days of the service of such order on him :

Provided that the provisions of this sub-section and sub-sections (3) and (4) shall not applywhere the person in possession of the immovable property, in respect of which an order undersub-section (1) of section 269UD is made, is a bona fide holder of any encumbrance on suchproperty or a bona fide lessee of such property, if the said encumbrance or lease has not beendeclared void under the proviso to sub-section (1) and such person is eligible to continue inpossession of such property even after the transfer in terms of the aforesaid agreement fortransfer.

(3) If any person refuses or fails to comply with the provisions of sub-section (2), the appropriateauthority or other person duly authorised by it under that sub-section may take possession of theimmovable property and may, for that purpose, use such force as may be necessary.

(4) Notwithstanding anything contained in sub-section (2), the appropriate authority may, for thepurpose of taking possession of any property referred to in sub-section (1), requisition theservices of any police officer to assist him and it shall be the duty of such officer to comply withsuch requisition.

(5) For the removal of doubts, it is hereby declared that nothing in this section shall operate todischarge the transferor or any other person (not being the Central Government) from liability inrespect of any encumbrances on the property and, notwithstanding anything contained in anyother law for the time being in force, such liability may be enforced against the transferor or suchother person.

(6) Where an order under sub-section (1) of section 269UD is made in respect of an immovableproperty, being rights of the nature referred to in sub-clause (ii) of clause (d) of section 269UA,


such order shall have the effect of - (a) Vesting such right in the Central Government; and

(b) Placing the Central Government in the same position in relation to such rights as the personin whom such a right would have continued to vest if such order had not been made.

(7) Where any rights in respect of any immovable property, being rights in, or with respect to,any land or any building or part of a building which has been constructed or which is to beconstructed, have been vested in the Central Government under sub-section (6), the provisions ofsub-sections (1), (2), (3) and (4) shall, so far as may be, have effect as if the references toimmovable property therein were references to such land or building or part thereof, as the casemay be.

555. Consideration for purchase of Immovable property byCentral Government.

§ 555. Consideration for purchase of Immovable property by Central Government.

Section 269UF

CONSIDERATION FOR PURCHASE OF IMMOVABLE PROPERTY BY CENTRALGOVERNMENT.

(1) Where an order for the purchase of any immovable property by the Central Government ismade under sub-section (1) of section 269UD, the Central Government shall pay, by way ofconsideration for such purchase, an amount equal to the amount of the apparent consideration.

(2) Notwithstanding anything contained in sub-section (1), where, after the agreement for thetransfer of the immovable property referred to in that sub-section has been made but before theproperty vests in the Central Government under section 269UE, the property has been damaged(otherwise than as a result of normal wear and tear), the amount of the consideration payableunder that sub-section shall be reduced by such sum as the appropriate authority, for reasons tobe recorded in writing, may by order determine.

556. Payment or Deposit of Consideration.

§ 556. Payment or Deposit of Consideration.Section 269UG

PAYMENT OR DEPOSIT OF CONSIDERATION.

(1) The amount of consideration payable in accordance with the provisions of section 269UF


shall be tendered to the person or persons entitled thereto, within a period of one month from theend of the month in which the immovable property concerned becomes vested in the Central Government under sub-section (1), or, as the case may be, sub-section (6), of section 269UE :

Provided that if any liability for any tax or any other sum remaining payable under this Act, theWealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Estate Duty Act,1953 (34 of 1953), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), by any personentitled to the consideration payable under section 269UF, the appropriate authority may, in lieuof the payment of the amount of consideration, set off the amount of consideration or any partthereof against such liability or sum, after giving an intimation in this behalf to the personentitled to the consideration.

(2) Notwithstanding anything contained in sub-section (1), if any dispute arises as to theapportionment of the amount of consideration amongst persons claiming to be entitled thereto,the Central Government shall deposit with the appropriate authority the amount of considerationrequired to be tendered under sub-section (1) within the period specified therein.

(3) Notwithstanding anything contained in sub-section (1), if the person entitled to the amount ofconsideration does not consent to receive it, or if there is any dispute as to the title to receive theamount of consideration, the Central Government shall deposit with the appropriate authority theamount of consideration required to be tendered under sub-section (1) within the period specifiedtherein :

Provided that nothing herein contained shall affect the liability of any person who may receivethe whole or any part of the amount of consideration for any immovable property vested in theCentral Government under this Chapter to pay the same to the person lawfully entitled thereto.

(4) Where any amount of consideration has been deposited with the appropriate authority underthis section, the appropriate authority may, either of its own motion or on an application made byor on behalf of any person interested or claiming to be interested in such amount, order the sameto be invested in such Government or other securities as it may think proper, and may direct theinterest or other proceeds of any such investment to be accumulated and paid in such manner aswill, in its opinion give the parties interested therein the same benefits therefrom as they mighthave had from the immovable property in respect whereof such amount has been deposited or asnear thereto as may be.

557. Re-Vesting of property in the transferor on failure ofpayment or deposit of consideration.

§ 557. Re-Vesting of property in the transferor on failure of payment or deposit of consideration.Section 269UH

RE-VESTING OF PROPERTY IN THE TRANSFEROR ON FAILURE OF PAYMENT OR


DEPOSIT OF CONSIDERATION.

(1) If the Central Government fails to tender under sub-section (1) of section 269UG or depositunder sub-section (2) or sub-section (3) of the said section, the whole or any part of the amountof consideration required to be tendered or deposited thereunder within the period specifiedtherein in respect of any immovable property which has vested in the Central Government undersub-section (1) or, as the case may be, sub-section (6) of section 269UE, the order to purchasethe immovable property by the Central Government made under sub-section (1) of section269UD shall stand abrogated and the immovable property shall stand re-vested in the transferorafter the expiry of the aforesaid period :

Provided that where any dispute referred to in sub-section (2) or sub-section (3) of section269UG is pending in any court for decision, the time taken by the court to pass a final orderunder the said sub-sections shall be excluded in computing the said period.

(2) Where an order made under sub-section (1) of section 269UD is abrogated and theimmovable property re-vested in the transferor under sub-section (1), the appropriate authorityshall make, as soon as may be, a declaration in writing to this effect and shall - (a) Deliver acopy of the declaration to the persons mentioned in sub-section (2) of section 269UD; and

(b) Deliver or cause to be delivered possession of the immovable property back to the transferoror, as the case may be, to such other person as was in possession of the property at the time of itsvesting in the Central Government under section 269UE.

558. Powers of the Appropriate Authority.

§ 558. Powers of the Appropriate Authority.Section 269U-I

POWERS OF THE APPROPRIATE AUTHORITY.

The appropriate authority shall have, for the purposes of this Chapter, all the powers that a ChiefCommissioner or Commissioner of Income-tax has for the purposes of this Act under section131.

559. Rectification of Mistakes.

§ 559. Rectification of Mistakes.Section 269UJ

RECTIFICATION OF MISTAKES.


With a view to rectifying any mistake apparent from the record, the appropriate authority mayamend any order made by it under this Chapter, either on its own motion or on the mistake beingbrought to its notice by any person affected by the order :

Provided that if any such amendment is likely to affect any person prejudicially, it shall not bemade without giving to such person a reasonable opportunity of being heard :

Provided further that no amendment shall be made under this section after the expiry of sixmonths from the end of the month in which the order sought to be amended was made.

560. Restrictions on Revocation or Alteration of certainagreements for the transfer of immovable property or ontransfer of certain immovable property.

§ 560. Restrictions on Revocation or Alteration of certain agreements for the transfer ofimmovable property or on transfer of certain immovable property.Section 269UK

RESTRICTIONS ON REVOCATION OR ALTERATION OF CERTAIN AGREEMENTS FORTHE TRANSFER OF IMMOVABLE PROPERTY OR ON TRANSFER OF CERTAINIMMOVABLE PROPERTY.

(1) Notwithstanding anything contained in any other law for the time being in force, no personshall revoke or alter an agreement for the transfer of an immovable property or transfer suchproperty in respect of which a statement has been furnished under section 269UC unless, - (a)The appropriate authority has not made an order for the purchase of the immovable property bythe Central Government under section 269UD and the period specified for the making of suchorder has expired; or

(b) In a case where an order for the purchase of the immovable property by the CentralGovernment has been made under sub-section (1) of section 269UD, the order stands abrogatedunder sub-section (1) of section 269UH.

(2) Any transfer of any immovable property made in contravention of the provisions of sub-section (1) shall be void.

561. Restrictions on Registration, Etc., of Documents inrespect of transfer of Immovable property.

§ 561. Restrictions on Registration, Etc., of Documents in respect of transfer of Immovableproperty.


Section 269UL

RESTRICTIONS ON REGISTRATION, ETC., OF DOCUMENTS IN RESPECT OFTRANSFER OF IMMOVABLE PROPERTY.

(1) Notwithstanding anything contained in any other law for the time being in force, noregistering officer appointed under the Registration Act, 1908 (16 of 1908) shall register anydocument which purports to transfer immovable property exceeding the value prescribed undersection 269UC unless a certificate from the appropriate authority that it has no objection to thetransfer of such property for an amount equal to the apparent consideration therefor as stated inthe agreement for transfer of the immovable property in respect of which it has received astatement under sub-section (3) of section 269UC, is furnished along with such document.

(2) Notwithstanding anything contained in any other law for the time being in force, no personshall do anything or omit to do anything which will have the effect of transfer of any immovableproperty unless the appropriate authority certifies that it has no objection to the transfer of suchproperty for an amount equal to the apparent consideration therefor as stated in the agreement fortransfer of the immovable property in respect of which it has received a statement under sub-section (3) of section 269UC.

(3) In a case where the appropriate authority does not make an order under sub-section (1) ofsection 269UD for the purchase by the Central Government of an immovable property, or wherethe order made under sub-section (1) of section 269UD stands abrogated under sub-section (1) ofsection 269UH, the appropriate authority shall issue a certificate of no objection referred to insub-section (1) or, as the case may be, sub-section (2) and deliver copies thereof to the transferorand the transferee.

562. Immunity to Transferor against claims oftransferee for transfer.

§562.Immunity to Transferor against claims of transferee for transfer.

Section 269UM

IMMUNITY TO TRANSFEROR AGAINST CLAIMS OF TRANSFEREE FOR TRANSFER.

Notwithstanding anything contained in any other law or in any instrument or any agreement forthe time being in force, when an order for the purchase of any immovable property by theCentral Government is made under this Chapter, no claim by the transferee shall lie against thetransferor by reason of such transfer being not in accordance with the agreement for the transferof the immovable property entered into between the transferor and the transferee :


Provided that nothing contained in this section shall apply if the order for the purchase of theimmovable property by the Central Government is abrogated under sub-section (1) of section269UH.

563. Order of Appropriate Authority to be final andconclusive.

§ 563. Order of Appropriate Authority to be final and conclusive.Section 269UN

ORDER OF APPROPRIATE AUTHORITY TO BE FINAL AND CONCLUSIVE.

Save as otherwise provided in this Chapter, any order made under sub-section (1) of section269UD or any order made under sub-section (2) of section 269UF shall be final and conclusiveand shall not be called in question in any proceeding under this Act or under any other law forthe time being in force.

564. Chapter not to apply to certain transfers.

§ 564. Chapter not to apply to certain transfers.Section 269U-O

CHAPTER NOT TO APPLY TO CERTAIN TRANSFERS.

The provisions of this Chapter shall not apply to or in relation to any immovable property wherethe agreement for transfer of such property is made by a person to his relative on account ofnatural love and affection, if a recital to that effect is made in the agreement for transfer.

565. Omitted.


FAILURE TO FURNISH INFORMATION REGARDING SECURITIES, ETC.


566. Failure to furnish returns, comply with notices,Concealment of Income, etc.


§ 566. Failure to furnish returns, comply with notices, Concealment of Income, etc.Section 271

FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OFINCOME, ETC.

(1) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedingsunder this Act, is satisfied that any person -

(a) Omitted

(b) Has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) ofsection 143 or fails to comply with a direction issued under sub-section (2A) of section 142; or

(c) Has concealed the particulars of his income or furnished inaccurate particulars of suchincome, he may direct that such person shall pay by way of penalty, -

(i) Omitted

(ii) In the cases referred to in clause (b), in addition to any tax payable by him, a sum which shallnot be less than one thousand rupees but which may extend to twenty-five thousand rupees foreach such failure;

(iii) In the cases referred to in clause (c), in addition to any tax payable by him, a sum whichshall not be less than but which shall not exceed three times the amount of tax sought to beevaded by reason of the concealment of particulars of his income or the furnishing of inaccurateparticulars of such income :

Explanation 1 : Where in respect of any facts material to the computation of the total income ofany person under this Act, -

(A) Such person fails to offer an explanation or offers an explanation which is found by theAssessing Officer or the Commissioner (Appeals) to be false, or

(B) Such person offers an explanation which he is not able to substantiate and fails to prove thatsuch explanation is bona fide and that all the facts relating to the same and material to thecomputation of his total income have been disclosed by him, then, the amount added ordisallowed in computing the total income of such person as a result thereof shall, for thepurposes of clause (c) of this sub-section be deemed to represent the income in respect of whichparticulars have been concealed.

Explanation 2 : Where the source of any receipt, deposit, outgoing or investment in anyassessment year is claimed by any person to be an amount which had been added in computingthe income or deducted in computing the loss in the assessment of such person for any earlier


assessment year or years but in respect of which no penalty under clause (iii) of this sub-sectionhad been levied, that part of the amount so added or deducted in such earlier assessment yearimmediately preceding the year in which the receipt, deposit, outgoing or investment appears(such earlier assessment year hereafter in this Explanation referred to as the first preceding year)which is sufficient to cover the amount represented by such receipt, deposit or outgoing or valueof such investment (such amount or value hereafter in this Explanation referred to as the utilisedamount) shall be treated as the income of the assessee, particulars of which had been concealedor inaccurate particulars of which had been furnished for the first preceding year; and where theamount so added or deducted in the first preceding year is not sufficient to cover the utilisedamount, that part of the amount so added or deducted in the year immediately preceding the firstpreceding year which is sufficient to cover such part of the utilised amount as is not so coveredshall be treated to be the income of the assessee, particulars of which had been concealed orinaccurate particulars of which had been furnished for the year immediately preceding the firstpreceding year and so on, until the entire utilised amount is covered by the amounts so added ordeducted in such earlier assessment years.

Explanation 3 : Where any person who has not previously been assessed under this Act, fails,without reasonable cause, to furnish within the period specified in sub-section (1) of section 153a return of his income which he is required to furnish under section 139 in respect of anyassessment year commencing on or after the 1st day of April, 1989, and, until the expiry of theperiod aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that inrespect of such assessment year such person has taxable income, then, such person shall, for thepurposes of clause (c) of this sub-section, be deemed to have concealed the particulars of hisincome in respect of such assessment year, notwithstanding that such person furnishes a return ofhis income at any time after the expiry of the period aforesaid in pursuance of a notice undersection 148.

Explanation 4 : For the purpose of clause (iii) of this sub-section, the expression "the amount oftax sought to be evaded", - (a) In any case where the amount of income in respect of whichparticulars have been concealed or inaccurate particulars have been furnished exceeds the totalincome assessed, means the tax that would have been chargeable on the income in respect ofwhich particulars have been concealed or inaccurate particulars have been furnished had suchincome been the total income;

(b) In any case to which Explanation 3 applies, means the tax on the total income assessed;

(c) In any other case, means the difference between the tax on the total income assessed and thetax that would have been chargeable had such total income been reduced by the amount ofincome in respect of which particulars have been concealed or inaccurate particulars have been furnished.

Explanation 5 : Where in the course of a search under section 132, the assessee is found to be theowner of any money, bullion, jewellery or other valuable article or thing (hereafter in thisExplanation referred to as assets) and the assessee claims that such assets have been acquired by


him by utilising (wholly or in part) his income, - (a) For any previous year which has endedbefore the date of the search, but the return of income for such year has not been furnished beforethe said date, or, where such return has been furnished before the said date, such income has notbeen declared therein; or (b) for any previous year which is to end on or after the date of thesearch, then, notwithstanding that such income is declared by him in any return of incomefurnished on or after the date of the search, he shall, for the purposes of imposition of a penaltyunder clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars ofhis income or furnished inaccurate particulars of such income,

Unless, - (1) Such income is, or the transactions resulting in such income are recorded, - (i) Ina case falling under clause (a), before the date of the search; and

(ii) In a case falling under clause (b), on or before such date, in the books of account, if any,maintained by him for any source of income or such income is otherwise disclosed to the ChiefCommissioner or Commissioner before the said date; or

(2) He, in the course of the search, makes a statement under sub-section (4) of section 132 thatany money, bullion, jewellery or other valuable article or thing found in his possession or underhis control, has been acquired out of his income which has not been disclosed so far in his returnof income to be furnished before the expiry of time specified in sub-section (1) of section 139,and also specifies in the statement the manner in which such income has been derived and paysthe tax together with interest, if any, in respect of such income.

Explanation 6 : Where any adjustment is made in the income or loss declared in the return underthe proviso to clause (a) of sub-section (1) of section 143 and additional tax charged under thatsection, the provisions of this sub-section shall not apply in relation to the adjustment so made.

(1A) Where any penalty is imposable by virtue of Explanation 2 to sub-section (1), proceedingsfor the imposition of such penalty may be initiated notwithstanding that any proceedings underthis Act in the course of which such penalty proceedings could have been initiated under sub-section (1) have been completed.

(2) When the person liable to penalty is a registered firm or an unregistered firm which has beenassessed under clause (b) of section 183, then, notwithstanding anything contained in the otherprovisions of this Act, the penalty imposable under sub-section (1) shall be the same amount aswould be imposable on that firm if that firm were an unregistered firm.

(4) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedingsunder this Act is satisfied that the profits of a registered firm have been distributed otherwisethan in accordance with the shares of the partners as shown in the instrument of partnership onthe basis on which the firm has been registered under this Act, and that any partner has therebyreturned his income below its real amount, he may direct that such partner shall, in addition tothe tax, if any, payable by him, pay by way of penalty a sum not exceeding one and a half timesthe amount of tax which has been avoided, or would have been avoided if the income returned by


such partner had been accepted as his correct income; and no refund or other adjustment shall beclaimable by any other partner by reason of such direction.

(5) The provisions of this section as they stood immediately before their amendment by theDirect Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for theassessment year commencing on the 1st day of April, 1988, or any earlier assessment year andreferences in this section to the other provisions of this Act shall be construed as references tothose provisions as for the time being in force and applicable to the relevant assessment year.

567. Failure to keep, maintain or retain books of account,documents, etc.

§ 567. Failure to keep, maintain or retain books of account, documents, etc.Section 271A

FAILURE TO KEEP, MAINTAIN OR RETAIN BOOKS OF ACCOUNT, DOCUMENTS,ETC.

Without prejudice to the provisions of section 271, if any person fails to keep and maintain anysuch books of account and other documents as required by section 44AA or the rules madethereunder, in respect of any previous year or to retain such books of account and otherdocuments for the period specified in the said rules, the Assessing Officer or the Commissioner(Appeals) may direct that such person shall pay, by way of penalty, a sum which shall not be lessthan two thousand rupees but which may extend to one hundred thousand rupees.

568. Failure to get accounts audited.

§ 568. Failure to get accounts audited.

Section 271B

FAILURE TO GET ACCOUNTS AUDITED.

If any person fails to get his accounts audited in respect of any previous year or years relevant toan assessment year or furnish a report of such audit as required under s. 44AB, the AssessingOfficer may direct that such person shall pay, by way of penalty, a sum equal to one-half per centof the total sales, turnover or gross receipts, as the case may be, in business, or of the grossreceipts in profession, in such previous year or years or a sum of one hundred thousand rupees,whichever is less.


569. Failure to subscribe to the eligible issue ofcapital.

§569.Failure to subscribe to the eligible issue of capital.Section 271BB

FAILURE TO SUBSCRIBE TO THE ELIGIBLE ISSUE OF CAPITAL.

Whoever fails to subscribe any amount of subscription to the units issuedunder any scheme referred to in sub-section (1) of section 88A to the eligibleissue of capital under that sub-section within the period of six monthsspecified therein, may be directed by the Joint Commissioner to pay, by way ofpenalty, a sum equal to twenty per cent of such amount.

570. Penalty for Failure to Deduct Tax at Source.

§570.Penalty for Failure to Deduct Tax at Source.Section 271C

PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE.

(1) If any person fails to - (a) Deduct the whole or any part of the tax asrequired by or under the provisions of Chapter XVII-B; or

(b) Pay the whole or any part of the tax as required by or under, - (i) Sub-section (2) of section 115-O; or

(ii) Second proviso to section 194B, then, such person shall be liable to pay,by way of penalty, a sum equal to the amount of tax which such person failedto deduct or pay as aforesaid.

(2) Any penalty imposable under sub-section (1) shall be imposed by the JointCommissioner.

571. Penalty for Failure to Comply with theprovisions of section 269SS.

§571.Penalty for Failure to Comply with the provisions of section 269SS.


Section 271D

PENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS.

(1) If a person takes or accepts any loan or deposit in contravention of theprovisions of section 269SS, he shall be liable to pay, by way of penalty, asum equal to the amount of the loan or deposit so taken or accepted.


572. Penalty for Failure to Comply with theprovisions of section 269T.

§572.Penalty for Failure to Comply with the provisions of section 269T.Section 271E

PENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269T.

(1) If a person repays any deposit referred to in section 269T otherwise thanin accordance with the provisions of that section, he shall be liable to pay,by way of penalty, a sum equal to the amount of the deposit so repaid.


573. Penalty for Failure to furnish return ofIncome.

§573.Penalty for Failure to furnish return of Income.Section 271F

PENALTY FOR FAILURE TO FURNISH RETURN OF INCOME.

If a person who is required to furnish a return of his income, as requiredunder sub-section (1) of section 139, fails to furnish such return before theend of the relevant assessment year, he shall be liable to pay, by way ofpenalty, a sum of one thousand rupees :

Provided that a person who is required to furnish a return of his income, asrequired by the proviso to sub-section (1) of section 139, fails to furnish


such return on or before the due date, he shall be liable to pay, by way ofpenalty, a sum of five hundred rupees.

574. Omitted.


FAILURE TO GIVE NOTICE OF DISCONTINUANCE.


575. Penalty for failure to Answer Questions, SignStatements, Furnish Information, Returns orStatements, Allow Inspections, etc.

§575.Penalty for failure to Answer Questions, Sign Statements, FurnishInformation, Returns or Statements, Allow Inspections, etc.Section 272A

PENALTY FOR FAILURE TO ANSWER QUESTIONS, SIGN STATEMENTS, FURNISH INFORMATION,RETURNS OR STATEMENTS, ALLOW INSPECTIONS, ETC.

(1) If any person, - (a) Being legally bound to state the truth of any mattertouching the subject of his assessment, refuses to answer any question put tohim by an income-tax authority in the exercise of its powers under this Act;or

(b) Refuses to sign any statement made by him in the course of any proceedingsunder this Act, which an income-tax authority may legally require him to sign;or

(c) To whom a summons is issued under sub-section (1) of section 131 either toattend to give evidence or produce books of account or other documents at acertain place and time omits to attend or produce books of account ordocuments at the place or time; or

(d) Fails to comply with the provisions of section 139A, he shall pay, by wayof penalty, a sum which shall not be less than five hundred rupees but whichmay extend to ten thousand rupees for each such default or failure.


(2) If any person fails - (a) To comply with a notice issued under sub-section(6) of section 94; or

(b) To give the notice of discontinuance of his business or profession asrequired by sub-section (3) of section 176; or

(c) To furnish in due time any of the returns, statements or particularsmentioned in section 133 or section 206 section 206C or section 285B; or

(d) To allow inspection of any register referred to in section 134 or of anyentry in such register or to allow copies of such register or of any entrytherein to be taken; or

(e) To furnish the return of income which he is required to furnish under sub-section (4A) of section 139 or to furnish it within the time allowed and inthe manner required under that sub-section; or

(f) To deliver or cause to be delivered in due time a copy of the declarationmentioned in section 197A; or

(g) To furnish a certificate as required by section 203 or section 206C; or

(h) To deduct and pay tax as required by sub-section (2) of section 226; heshall pay, by way of penalty, a sum one hundred rupees, for every day duringwhich the failure continues :

Provided that the amount of penalty for failures in relation to a declarationmentioned in section 197A, a certificate as required by section 203 andreturns under sections 206 and 206C shall not exceed the amount of taxdeductible or collectible, as the case may be.

(3) Any penalty imposable under sub-section (1) or sub-section (2) shall beimposed - (a) In a case where the contravention, failure or default in respectof which such penalty is imposable occurs in the course of any proceedingbefore an income-tax authority not lower in rank than Deputy Director or aJoint Commissioner, by such income-tax authority;

(b) In a case falling under clause (f) of sub-section (2), by the ChiefCommissioner or Commissioner; and (c) in any other case, by the Joint Directoror the Joint Commissioner.

(4) No order under this section shall be passed by any income-tax authorityreferred to in sub-section (3) unless the person on whom the penalty isproposed to be imposed is given an opportunity of being heard in the matter bysuch authority.


Explanation : In this section, "income-tax authority" includes a DirectorGeneral, Director, Joint Director and an Assistant Director or Deputy Directorwhile exercising the powers vested in a court under the Code of CivilProcedure, 1908 (5 of 1908) when trying a suit in respect of the mattersspecified in sub-section (1) of section 131.

576. Penalty for Failure to comply with theprovisions of section 133B.

§576.Penalty for Failure to comply with the provisions of section 133B.Section 272AA

PENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 133B.

(1) If a person fails to comply with the provisions of section 133B, he shall,on an order passed by the Joint Commissioner, Assistant Director or DeputyDirector or the Assessing Officer, as the case may be, pay, by way of penalty,a sum which may extend to one thousand rupees.

(2) No order under sub-section (1) shall be passed unless the person on whomthe penalty is proposed to be imposed is given an opportunity of being heardin the matter.

577. Omitted.


PANALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 139A.


578. Penalty for Failure to comply with theprovisions of section 203A.

§578.Penalty for Failure to comply with the provisions of section 203A.Section 272BB

PENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 203A.


(1) If a person fails to comply with the provisions of section 203A, he shall,on an order passed by the Assessing Officer pay, by way of penalty, a sumwhich may extend to five thousand rupees.

(2) No order under sub-section (1) shall be passed unless the person on whomthe penalty is proposed to be imposed is given an opportunity of being heardin the matter.

579. False Estimate of, or Failure to Pay, AdvanceTax.

§579.False Estimate of, or Failure to Pay, Advance Tax.Section 273

FALSE ESTIMATE OF, OR FAILURE TO PAY, ADVANCE TAX.

(1) If the Assessing Officer, in the course of any proceedings in connectionwith the regular assessment for any assessment year, is satisfied that anyassessee - (a) Has furnished under clause (a) of sub-section (1) of section209A a statement of the advance tax payable by him which he knew or had reasonto believe to be untrue, or

(b) Has failed to furnish a statement of the advance tax payable by him inaccordance with the provisions of clause (a) of sub-section (1) of section209A, he may direct that such person shall, in addition to the amount of tax,if any, payable by him, pay by way of penalty a sum - (i) Which, in the casereferred to in clause (a), shall not be less than ten per cent, but shall notexceed one and a half times the amount by which the tax actually paid duringthe financial year immediately preceding the assessment year under theprovisions of Chapter XVII-C falls short of - (1) Seventy-five per cent of theassessed tax as defined in sub-section (5) of section 215, or

(2) The amount which would have been payable by way of advance tax if theassessee had furnished a correct and complete statement in accordance with theprovisions of clause (a) of sub-section (1) of section 209A, whichever isless;

(ii) Which, in the case referred to in clause (b), shall not be less than tenper cent but shall not exceed one and a half times of seventy-five per cent ofthe assessed tax as defined in sub-section (5) of section 215:

Provided that in the case of an assessee, being a company, the provisions of


this sub-section shall have effect as if for the words "seventy-five percent", at both the places wherever they occur, the words "eighty-three andone-third per cent" had been substituted.

(2) If the Assessing Officer, in the course of any proceedings in connectionwith the regular assessment for the assessment year commencing on the 1st dayof April, 1970, or any subsequent assessment year, is satisfied that anyassessee - (a) Has furnished under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) of section 209A, or under sub-section (1) orsub-section (2) of section 212, an estimate of the advance tax payable by himwhich he knew or had reason to believe to be untrue, or

(aa) Has furnished under sub-section (4) of section 209A or under sub-section(3A) of section 212 an estimate of the advance tax payable by him which heknew or had reason to believe to be untrue, or

(b) Has failed to furnish an estimate of the advance tax payable by him inaccordance with the provisions of clause (b) of sub-section (1) of section209A, or

(c) Has failed to furnish an estimate of the advance tax payable by him inaccordance with the provisions of sub-section (4) of section 209A or sub-section (3A) of section 212, he may direct that such person shall, in additionto the amount of tax, if any, payable by him, pay by way of penalty a sum -

(i) Which, in the case referred to in clause (a) shall not be less than tenper cent but shall not exceed one and a half times the amount by which the taxactually paid during the financial year immediately preceding the assessmentyear under the provisions of Chapter XVII-C falls short of - (1) Seventy-fiveper cent of the assessed tax as defined in sub-section (5) of section 215, or

(2) Where a statement under clause (a) of sub-section (1) of section 209A wasfurnished by the assessee or where a notice under section 210 was issued tothe assessee, the amount payable under such statement or, as the case may be,such notice, whichever is less;

(ia) Which, in the case referred to in clause (aa), shall not be less than tenper cent but shall not exceed one and a half times the amount by which the taxactually paid during the financial year immediately preceding the assessmentyear under the provisions of Chapter XVII-C falls short of seventy-five percent of the assessed tax as defined in sub-section (5) of section 215;

(ii) Which, in the case referred to in clause (b), shall not be less than tenper cent but shall not exceed one and a half-times of seventy-five per cent ofthe assessed tax as defined in sub-section (5) of section 215; and


(iii) Which, in the case referred to in clause (c), shall not be less than tenper cent but shall not exceed one and a half times the amount by which -

(a) Where the assessee has sent a statement under clause (a), or an estimateunder clause (b), of sub-section (1) of section 209A, or an estimate in lieuof a statement under sub-section (2) of that section, the tax payable inaccordance with the statement or estimate; or

(b) Where the assessee was required to pay advance tax in accordance with thenotice issued to him under section 210, the tax payable under such notice,falls short of seventy-five per cent of the assessed tax as defined in sub-section (5) of section 215 :

Provided that in the case of an assessee, being a company, the provisions ofthis sub-section shall have effect as if for the words "seventy-five percent", wherever they occur, the words "eighty-three and one third per cent"had been substituted.

Explanation : For the purposes of clause (ia), the amount paid by the assesseeon or before the date extended by the Chief Commissioner or Commissioner underthe first proviso to sub-section (4) of section 209A or, as the case may be,first proviso to sub-section (3A) of section 212 shall, where the date soextended falls beyond the financial year immediately preceding the assessmentyear, also be regarded as tax actually paid during that financial year.

Explanation 2 : When the person liable to penalty is a registered firm or anunregistered firm which has been assessed under clause (b) of section 183,then, notwithstanding anything contained in the other provisions of this Act,the penalty imposable under this section shall be the same amount as would beimposable on that firm if that firm were an unregistered firm.

(3) The provisions of this section shall apply to and in relation to anyassessment for the assessment year commencing on the 1st day of April, 1988,or any earlier assessment year, and references in this section to the otherprovisions of this Act shall be construed as references to those provisions asfor the time being in force and applicable to the relevant assessment year.

580. Power to reduce or waive penalty, etc., incertain cases.

§580.Power to reduce or waive penalty, etc., in certain cases.


Section 273A

POWER TO REDUCE OR WAIVE PENALTY, ETC., IN CERTAIN CASES.

(1) Notwithstanding anything contained in this Act, the Commissioner may, in his discretion,whether on his own motion or otherwise, -

(ii) Reduce or waive the amount of penalty imposed or imposable on a person under clause (iii)of sub-section (1) of section 271; or if he is satisfied that such person - (b) In the case referredto in clause (ii), has, prior to the detection by the Assessing Officer, of the concealment ofparticulars of income or of the inaccuracy of particulars furnished in respect of such income,voluntarily and in good faith, made full and true disclosure of such particulars; and also has, inthe case referred to in clause

(b) Co-operated in any enquiry relating to the assessment of his income and has either paid ormade satisfactory arrangements for the payment of any tax or interest payable in consequence ofan order passed under this Act in respect of the relevant assessment year.

Explanation : For the purposes of this sub-section, a person shall be deemed to have made fulland true disclosure of his income or of the particulars relating thereto, in any case where theexcess of income assessed over the income returned is of such a nature as not to attract theprovisions of clause (c) of sub-section (1) of section 271.

Explanation 2 : (2) Notwithstanding anything contained in sub-section (1), -

(b) If in a case falling under clause (c) of sub-s. (1) of s. 271, the amount of income in respect ofwhich the penalty is imposed or imposable for the relevant assessment year, or where suchdisclosure relates to more than one assessment year, the aggregate amount of such income forthose years, exceeds a sum of five hundred thousand rupees, no order reducing or waiving thepenalty under sub-section (1) shall be made by the Commissioner except with the previousapproval of the Chief Commissioner or Director-General, as the case may be.

(3) Where an order has been made under sub-section (1) in favour of any person, whether suchorder relates to one or more assessment years, he shall not be entitled to any relief under thissection in relation to any other assessment year at any time after the making of such order.

Provided that where an order has been made in favour of any person under sub-section (1) on orbefore the 24th day of July, 1991, such person shall be entitled to further relief only once inrelation to other assessment year or years if he makes an application to the income-tax authorityreferred to in sub-section (4) at any time before the 1st day of April, 1992.

(4) Without prejudice to the powers conferred on him by any other provision of this Act, theCommissioner may, on an application made in this behalf by an assessee, and after recording hisreasons for so doing, reduce or waive the amount of any penalty payable by the assessee under


this Act or stay or compound any proceeding for the recovery of any such amount, if he issatisfied that - (i) To do otherwise would cause genuine hardship to the assessee, having regardto the circumstances of the case; and

(ii) The assessee has co-operated in any enquiry relating to the assessment or any proceeding forthe recovery of any amount due from him :

Provided that where the amount of any penalty payable under this Act or, where such applicationrelates to more than one penalty, the aggregate amount of such penalties exceeds one hundredthousand rupees, no order reducing or waiving the amount or compounding any proceeding forits recovery under this sub-section shall be made by the Commissioner except with the previousapproval of the Chief Commissioner or Director-General, as the case may be.

(5) Every order made under this section shall be final and shall not be called into question by anycourt or any other authority.

(6) The provisions of this section as they stood immediately before their amendment by theDirect Tax Laws (Amendment) Act, 1989 shall apply to and in relation to any assessment for theassessment year commencing on the 1st day of April, 1988, or any earlier assessment year, andreferences in this section to the other provisions of this Act shall be construed as references tothose provisions as for the time being in force and applicable to the relevant assessment year.

(7) Notwithstanding anything contained in sub-section (6), the provisions of sub-section (1), sub-section (2) or, as the case may be, sub-section (4) [as they stood immediately before theiramendment by the Direct Tax Laws (Amendment) Act, 1989 (3 of 1989)], shall apply in the caseof reduction or waiver of penalty or interest in relation to any assessment for the assessment yearcommencing on the 1st day of April, 1988 or any earlier assessment year, with the modificationsthat the power under the said sub-section (1) shall be exercisable only by the Commissioner andinstead of the previous approval of the Board, the Commissioner shall obtain the previousapproval of the Chief Commissioner or Director General, as the case may be, while dealing withsuch case.

581. Penalty not to be imposed in certain cases.

§ 581. Penalty not to be imposed in certain cases.Section 273B

PENALTY NOT TO BE IMPOSED IN CERTAIN CASES.

Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E,section 271F clause (c) or clause (d) of sub-section (1), or sub-section (2) of section 272A, sub-section (1) of section 272AA, or sub-section (1) of section 272BB or clause (b) of sub-section (1)


or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on theperson or the assessee, as the case may be, for any failure referred to in the said provisions if heproves that there was reasonable cause for the said failure.

582. Procedure.

§ 582. Procedure.Section 274

PROCEDURE.

(1) No order imposing a penalty under this Chapter shall be made unless the assessee has beenheard, or has been given a reasonable opportunity of being heard.

(2) No order imposing a penalty under this Chapter shall be made - (a) By the Income-taxofficer, where the penalty exceeds ten thousand rupees;

(b) by the Assistant Commissioner or Deputy Commissioner where the penalty exceeds twentythousand rupees, except with the prior approval of the Joint Commissioner.

(3) An income-tax authority on making an order under this Chapter imposing a penalty, unless heis himself the Assessing Officer, shall forthwith send a copy of such order to the AssessingOfficer.

583. Bar of Limitation for Imposing Penalties.

§ 583. Bar of Limitation for Imposing Penalties.

Section 275

BAR OF LIMITATION FOR IMPOSING PENALTIES.

(1) No order imposing a penalty under this Chapter shall be passed - (a) In a case where therelevant assessment or other order is the subject-matter of an appeal to the Commissioner(Appeals) under section 246 or an appeal to the Appellate Tribunal under section 253, after theexpiry of the financial year in which the proceedings, in the course of which action for theimposition of penalty has been initiated, are completed, or six months from the end of the monthin which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunalis received by the Chief Commissioner or Commissioner, whichever period expires later;

(b) In a case, where the relevant assessment or other order is the subject-matter of revision under


section 263, after the expiry of six months from the end of the month in which such order ofrevision is passed;

(c) In any other case, after the expiry of the financial year in which the proceedings, in the courseof which action for the imposition of penalty has been initiated, are completed, or six monthsfrom the end of the month in which action for imposition of penalty is initiated, whichever periodexpires later.

(2) The provisions of this section as they stood immediately before their amendment by theDirect Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any actioninitiated for the imposition of penalty on or before the 31st day of March, 1989.

Explanation : In computing the period of limitation for the purposes of this section, - (i) The timetaken in giving an opportunity to the assessee to be reheard under the proviso to section 129;

(ii) Any period during which the immunity granted under section 245H remained in force; and

(iii) Any period during which a proceeding under this Chapter for the levy of penalty is stayed byan order or injunction of any court, shall be excluded.

584. Contravention of order made under Sub-Section (3) ofSection 132.

§ 584. Contravention of order made under Sub-Section (3) of Section 132.

Section 275A

CONTRAVENTION OF ORDER MADE UNDER SUB-SECTION (3) OF SECTION 132.

Whoever contravenes any order referred to in the second proviso to sub-section (1) or sub-section (3) of section 132 shall be punishable with rigorous imprisonment which may extend totwo years and shall also be liable to fine.

585. Removal, Concealment, Transfer or Delivery ofproperty to thwart Tax recovery.

§ 585. Removal, Concealment, Transfer or Delivery of property to thwart Tax recovery.Section 276

REMOVAL, CONCEALMENT, TRANSFER OR DELIVERY OF PROPERTY TO THWART


TAX RECOVERY.

Whoever fraudulently removes, conceals, transfers or delivers to any person any property or anyinterest therein, intending thereby to prevent that property or interest therein from being taken inexecution of a certificate under the provisions of the Second Schedule shall be punishable withrigorous imprisonment for a term which may extend to two years and shall also be liable to fine.

586. Failure to comply with the provisions of Sub-Sections(1) and (3) of Section 178.

§ 586. Failure to comply with the provisions of Sub-Sections (1) and (3) of Section 178.Section 276A

FAILURE TO COMPLY WITH THE PROVISIONS OF SUB-SECTIONS (1) AND (3) OFSECTION 178.

If a person - (i) Fails to give the notice in accordance with sub-section (1) of section 178; or

(ii) Fails to set aside the amount as required by sub-section (3) of that section; or

(iii) Parts with any of the assets of the company or the properties in his hands in contravention ofthe provisions of the aforesaid sub-section, he shall be punishable with rigorous imprisonmentfor a term which may extend to two years :

Provided that in the absence of special and adequate reasons to the contrary to be recorded in thejudgment of the court, such imprisonment shall not be for less than six months.

587. Omitted.

§ 587. Omitted.

Section 276AA

FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269AB OR SECTION 269-I.


588. Failure to comply with the provisions of sections


269UC, 269UE and 269UL.

§ 588. Failure to comply with the provisions of sections 269UC, 269UE and 269UL.Section 276AB

FAILURE TO COMPLY WITH THE PROVISIONS OF SECTIONS 269UC, 269UE AND269UL.

Whoever fails to comply with the provisions of section 269UC or fails to surrender or deliverpossession of the property under sub-section (2) of section 269UE, or contravenes the provisionsof sub-section (2) of section 269UL shall be punishable with rigorous imprisonment for a termwhich may extend to two years and shall also be liable to fine :

Provided that in the absence of special and adequate reasons to the contrary to be recorded in thejudgment of the court, such imprisonment shall not be for less than six months.

589. Failure to pay tax to the credit of CentralGovernment under chapter XII-D or XVII-B.

§589.Failure to pay tax to the credit of Central Government under chapterXII-D or XVII-B.Section 276B

FAILURE TO PAY TAX TO THE CREDIT OF CENTRAL GOVERNMENT UNDER CHAPTER XII-D ORXVII-B.

If a person fails to pay to the credit of the Central Government, - (a) Thetax deducted at source by him as required by or under the provisions ofChapter XVII-B; or

(b) The tax payable by him, as required by or under, - (i) Sub-section (2) ofsection 115-O; or

(ii) Second proviso to section 194B, he shall be punishable with rigorousimprisonment for a term which shall not be less than three months but whichmay extend to seven years and with fine.

590. Failure to pay the Tax collected at source.

§590.Failure to pay the Tax collected at source.


Section 276BB

FAILURE TO PAY THE TAX COLLECTED AT SOURCE.

If a person fails to pay to the credit of the Central Government, the taxcollected by him as required under the provisions of section 206C, he shall bepunishable with rigorous imprisonment for a term which shall not be less thanthree months but which may extend to seven years and with fine.

591. Wilful Attempt to Evade Tax, Etc.

§591.Wilful Attempt to Evade Tax, Etc.Section 276C

WILFUL ATTEMPT TO EVADE TAX, ETC.

(1) If a person wilfully attempts in any manner whatsoever to evade any tax,penalty or interest chargeable or imposable under this Act, he shall, withoutprejudice to any penalty that may be imposable on him under any otherprovision of this Act, be punishable, - (i) in a case where the amount soughtto be evaded exceeds one hundred thousand rupees, with rigorous imprisonmentfor a term which shall not be less than six months but which may extend toseven years and with fine;

(ii) in any other case, with rigorous imprisonment for a term which shall notbe less than three months but which may extend to three years and with fine.

(2) If a person wilfully attempts in any manner whatsoever to evade thepayment of any tax, penalty or interest under this Act, he shall, withoutprejudice to any penalty that may be imposable on him under any otherprovision of this Act, be punishable with rigorous imprisonment for a termwhich shall not be less than three months but which may extend to three yearsand shall, in the discretion of the court, also be liable to fine.

Explanation : For the purposes of this section, a wilful attempt to evade anytax, penalty or interest chargeable or imposable under this Act or the paymentthereof shall include a case where any person - (i) Has in his possession orcontrol any books of account or other documents (being books of account orother documents relevant to any proceeding under this Act) containing a falseentry or statement; or

(ii) Makes or causes to be made any false entry or statement in such books ofaccount or other documents; or


(iii) Wilfully omits or causes to be omitted any relevant entry or statementin such books of account or other documents; or

(iv) Causes any other circumstance to exist which will have the effect ofenabling such person to evade any tax, penalty or interest chargeable orimposable under this Act or the payment thereof.

592. Failure to Furnish Returns of Income.

§592.Failure to Furnish Returns of Income.

Section 276CC

FAILURE TO FURNISH RETURNS OF INCOME.

If a person wilfully fails to furnish in due time the return of income whichhe is required to furnish under sub-section (1) of section 139 or by noticegiven under clause (i) of sub-section (1) of section 142 or section 148, heshall be punishable, - (i) In a case where the amount of tax, which would havebeen evaded if the failure had not been discovered, exceeds one hundredthousand rupees, with rigorous imprisonment for a term which shall not be lessthan six months but which may extend to seven years and with fine;

(ii) In any other case, with imprisonment for a term which shall not be lessthan three months but which may extend to three years and with fine :

Provided that a person shall not be proceeded against under this section forfailure to furnish in due time the return of income under sub-section (1) ofsection 139 - (i) For any assessment year commencing prior to the 1st day ofApril, 1975; or

(ii) For any assessment year commencing on or after the 1st day of April,1975, if - (a) The return is furnished by him before the expiry of theassessment year; or

(b) The tax payable by him on the total income determined on regularassessment, as reduced by the advance tax, if any, paid and any tax deductedat source, does not exceed three thousand rupees.

593. Failure to Furnish Return of Income in Search


Cases.

§593.Failure to Furnish Return of Income in Search Cases.Section 276CCC

FAILURE TO FURNISH RETURN OF INCOME IN SEARCH CASES.

If a person wilfully fails to furnish in due time the return of total incomewhich he is required to furnish by notice given under clause (a) of section158BC, he shall be punishable with imprisonment for a term which shall not beless than three months but which may extend to three years and with fine :

Provided that no person shall be punishable for any failure under this sectionin respect of search initiated under section 132 or books of account, otherdocuments or any assets requisitioned under section 132A, after the 30th dayof June, 1995 but before the 1st day of January, 1997.

594. Failure to Produce Accounts and Documents.

§594.Failure to Produce Accounts and Documents.Section 276D

FAILURE TO PRODUCE ACCOUNTS AND DOCUMENTS.

If a person wilfully fails to produce, or cause to be produced, on or beforethe date specified in any notice served on him under sub-section (1) ofsection 142, such accounts and documents as are referred to in the notice orwilfully fails to comply with a direction issued to him under sub-section (2A)of that section, he shall be punishable with rigorous imprisonment for a termwhich may extend to one year or with fine equal to a sum calculated at a ratewhich shall not be less than four rupees or more than ten rupees for every dayduring which the default continues, or with both.

595. Omitted.

§595.Omitted.Section 276DD

FAILURE TO COMPLY WITH THE PROVISINS OF SECTION 269SS.



596. Omitted.

§596.Omitted.Section 276EFAILURE TO COMPLY WITH THE PROVISINS OF SECTION 269T.


597. False Statement in Verification, Etc.

§597.False Statement in Verification, Etc.Section 277

FALSE STATEMENT IN VERIFICATION, ETC.

If a person makes a statement in any verification under this Act or under anyrule made thereunder, or delivers an account or statement which is false, andwhich he either knows or believes to be false, or does not believe to be true,he shall be punishable, - (i) In a case where the amount of tax, which wouldhave been evaded if the statement or account had been accepted as true,exceeds one hundred thousand rupees, with rigorous imprisonment for a termwhich shall not be less than six months but which may extend to seven yearsand with fine;

(ii) In any other case, with rigorous imprisonment for a term which shall notbe less than three months but which may extend to three years and with fine.

598. Abetment of false return, etc.

§598.Abetment of false return, etc.Section 278ABETMENT OF FALSE RETURN, ETC.

If a person abets or induces in any manner another person to make and deliveran account or a statement or declaration relating to any income chargeable totax which is false and which he either knows to be false or does not believeto be true or to commit an offence under sub-section (1) of section 276C, heshall be punishable, -

(i) In a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statementhad been accepted as true, or which is wilfully attempted to be evaded, exceeds one hundred thousand rupees, with rigorousimprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;


(ii) In any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend tothree years and with fine.

599. Punishment for Second and Subsequent Offences.

§599.Punishment for Second and Subsequent Offences.Section 278APUNISHMENT FOR SECOND AND SUBSEQUENT OFFENCES.

If any person convicted of an offence under section 276B or sub-section (1) ofsection 276C or section 276CC or section 276DD or section 276E or section 277or section 278 is again convicted of an offence under any of the aforesaidprovisions, he shall be punishable for the second and for every subsequentoffence with rigorous imprisonment for a term which shall not be less than sixmonths but which may extend to seven years and with fine.

600. Punishment not to be imposed in certain cases.

§600.Punishment not to be imposed in certain cases.Section 278AAPUNISHMENT NOT TO BE IMPOSED IN CERTAIN CASES.

Notwithstanding anything contained in the provisions of section 276A, section276AB, or section 276B, no person shall be punishable for any failure referredto in the said provisions if he proves that there was reasonable cause forsuch failure.

601. Offences by Companies.

§601.Offences by Companies.Section 278BOFFENCES BY COMPANIES.

(1) Where an offence under this Act has been committed by a company, everyperson who, at the time the offence was committed, was in charge of, and wasresponsible to, the company for the conduct of the business of the company aswell as the company shall be deemed to be guilty of the offence and shall beliable to be proceeded against and punished accordingly :

Provided that nothing contained in this sub-section shall render any suchperson liable to any punishment if he proves that the offence was committedwithout his knowledge or that he had exercised all due diligence to prevent


the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offenceunder this Act has been committed by a company and it is proved that theoffence has been committed with the consent or connivance of, or isattributable to any neglect on the part of, any director, manager, secretaryor other officer, of the company, such director, manager, secretary or otherofficer shall also be deemed to be guilty of that offence and shall be liableto be proceeded against and punished accordingly.

Explanation : For the purposes of this section, - (a) "Company" means a bodycorporate, and includes - (i) A firm; and

(ii) An association of persons or a body of individuals whether incorporatedor not; and

(b) "Director", in relation to -

(i) A firm, means a partner in the firm;

(ii) Any association of persons or a body of individuals, means any membercontrolling the affairs thereof.

602. Offences by hindu Undivided Families.

§602.Offences by hindu Undivided Families.Section 278COFFENCES BY HINDU UNDIVIDED FAMILIES.

(1) Where an offence under this Act has been committed by a Hindu undividedfamily, the Karta thereof shall be deemed to be guilty of the offence andshall be liable to be proceeded against and punished accordingly :

Provided that nothing contained in this sub-section shall render the Kartaliable to any punishment if he proves that the offence was committed withouthis knowledge or that he had exercised all due diligence to prevent thecommission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offenceunder this Act has been committed by a Hindu undivided family and it is provedthat the offence has been committed with the consent or connivance of, or isattributable to any neglect on the part of, any member of the Hindu undividedfamily, such member shall also be deemed to be guilty of that offence andshall be liable to be proceeded against and punished accordingly.


603. Presumption as to Assets, Books of Account,Etc., in certain cases.

§603.Presumption as to Assets, Books of Account, Etc., in certain cases.

Section 278DPRESUMPTION AS TO ASSETS, BOOKS OF ACCOUNT, ETC., IN CERTAIN CASES.

(1) Where during the course of any search made under section 132, any money,bullion, jewellery or other valuable article or thing (hereafter in thissection referred to as the assets) or any books of account or other documentshas or have been found in the possession or control of any person and suchassets or books of account or other documents are tendered by the prosecutionin evidence against such person or against such person and the person referredto in section 278 for an offence under this Act, the provisions of sub-section(4A) of section 132 shall, so far as may be, apply in relation to such assetsor books of account or other documents.

(2) Where any assets or books of account or other documents taken intocustody, from the possession or control of any person, by the officer orauthorityreferred to in clause (a) or clause (b) or clause (c), as the case may be, ofsub-section (1) of section 132A are delivered to the requisitioning officerunder sub-section (2) of that section and such assets, books of account orother documents are tendered by the prosecution in evidence against suchperson or against such persons and the person referred to in section 278 foran offence under this Act, the provisions of sub-section (4A) of section 132shall, so far as may be, apply in relation to such assets or books of accountor other documents.

604. Presemption as to culpable mental state.

§604.Presemption as to culpable mental state.

Section 278EPRESUMPTION AS TO CULPABLE MENTAL STATE.

(1) In any prosecution for any offence under this Act which requires a culpable mental state onthe part of the accused, the court shall presume the existence of such mental state but it shall be adefence for the accused to prove the fact that he had no such mental state with respect to the actcharged as an offence in that prosecution.


Explanation : In this sub-section, "culpable mental state" includes intention, motive orknowledge of a fact or belief in, or reason to believe, a fact.

(2) For the purposes of this section, a fact is said to be proved only when the court believes it toexist beyond reasonable doubt and not merely when its existence is established by apreponderance of probability.

605. Prosecution to be at Instance of Chief Commissioner orCommissioner.

§ 605. Prosecution to be at Instance of Chief Commissioner or Commissioner.Section 279PROSECUTION TO BE AT INSTANCE OF CHIEF COMMISSIONER OR COMMISSIONER

(1) A person shall not be proceeded against for an offence under section 275A, section 276,section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section277 or section 278 except with the previous sanction of the Commissioner Commissioner(Appeals) or the appropriate authority :

Provided that the Chief Commissioner or, as the case may be, Director General may issue suchinstructions or directions to the aforesaid income-tax authorities as he may deem fit forinstitution of proceedings under this sub-section.

Explanation : For the purposes of this section, "appropriate authority" shall have the samemeaning as in clause (c) of section 269UA.

(1A) A person shall not be proceeded against for an offence under section 276C or section 277 inrelation to the assessment for an assessment year in respect of which the penalty imposed orimposable on him under clause (iii) of sub-section (1) of section 271 has been reduced or waivedby an order under section 273A.

(2) Any offence under this Chapter may, either before or after the institution of proceedings, becompounded by the Board or a Chief Commissioner or a Director General.

(3) Where any proceeding has been taken against any person under sub-section (1), anystatement made or account or other document produced by such person before any of theincome-tax authorities specified in clauses (a) to (g) of section 116 shall not be inadmissible asevidence for the purpose of such proceedings merely on the ground that such statement wasmade or such account or other document was produced in the belief that the penalty imposablewould be reduced or waived under section 273A or that the offence in respect of which suchproceeding was taken would be compounded.


Explanation : For the removal of doubts, it is hereby declared that the power of the Board toissue orders, instructions or directions under this Act shall include and shall be deemed always tohave included the power to issue instructions or directions (including instructions or directions toobtain the previous approval of the Board) to other income-tax authorities for the propercomposition of offences under this section.

606. Certain Offences to be Non-Cognizable.

§ 606. Certain Offences to be Non-Cognizable.Section 279ACERTAIN OFFENCES TO BE NON-COGNIZABLE.

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), anoffence punishable under section 276B or section 276C or section 276CC or section 277 orsection 278 shall be deemed to be non-cognizable within the meaning of that Code.

607. Proof of Entries in records or documents.

§ 607. Proof of Entries in records or documents.Section 279BPROOF OF ENTRIES IN RECORDS OR DOCUMENTS.

Entries in the records or other documents in the custody of an income-tax authority shall beadmitted in evidence in any proceedings for the prosecution of any person for an offence underthis Chapter, and all such entries may be proved either by the production of the records or otherdocuments in the custody of the income-tax authority containing such entries, or by theproduction of a copy of the entries certified by the income-tax authority having custody of therecords or other documents under its signature and stating that it is a true copy of the originalentries and that such original entries are contained in therecords or other documents in its custody.

608. Disclosure of Particulars by Public Servants.

§ 608. Disclosure of Particulars by Public Servants.Section 280DISCLOSURE OF PARTICULARS BY PUBLIC SERVANTS.

(1) If a public servant furnishes any information or produces any document in contravention ofthe provisions of sub-section (2) of section 138, he shall be punishable with imprisonmentwhich may extend to six months, and shall also be liable to fine.

(2) No prosecution shall be instituted under this section except with the previous sanction of the


Central Government.

609. Omitted.

§ 609. Omitted.Section 280A-280XOMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4-1988

610. Omitted.

§ 610. Omitted.Section 280Y

DEFINITIONS


611. Omitted.

§ 611. Omitted.Section 280Z

TAX CREDIT CERTIFICATES TO CERTAIN EQUITY SHAREHOLDERS.


612. Omitted.

§ 612. Omitted.Section 280ZATAX CREDIT CERTIFICATES FOR SHIFTING OF INDUSTRIAL UNDERTAKING FROMURBAN AREA.


613. Omitted.

§ 613. Omitted.Section 280ZBTAX CREDIT CERTIFICATE TO CERTAIN MANUFACTURING COMPANIES IN


CERTAIN CASES.


614. Omitted.

§ 614. Omitted.Section 280ZCTAX CREDIT CERTIFICATE IN RELATION TO EXPORTS.


615. Omitted.

§ 615. Omitted.Section 280ZDTAX CREDIT CERTIFICATES IN RELATION TO INCREASED PRODICTION OFCERTAIN GOODS.


616. Omitted.

§ 616. Omitted.Section 280ZETAX CREDIT CERTIFICATE SCHEME.


617. Certain Transfers to be void.

§ 617. Certain Transfers to be void.Section 281CERTAIN TRANSFERS TO BE VOID.

(1) Where, during the pendency of any proceedings under this Act or after the completionthereof, but before the service of notice under rule 2 of the Second Schedule, any assesseecreates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or anyother mode of transfer whatsoever) of, any of his assets in favour of any other person, suchcharge or transfer shall be void as against any claim in respect of any tax or any other sumpayable by the assessee as a result of the completion of the said proceeding or otherwise :


Provided that such charge or transfer shall not be void if it is made - (i) For adequateconsideration and without notice of the pendency of such proceeding or, as the case may be,without notice of such tax or other sum payable by the assessee; or

(ii) With the previous permission of the Assessing Officer.

(2) This section applies to cases where the amount of tax or other sum payable or likely to bepayable exceeds five thousand rupees and the assets charged or transferred exceed ten thousandrupees in value.

Explanation : In this section, "assets" means land, building, machinery, plant, shares, securitiesand fixed deposits in banks, to the extent to which any of the assets aforesaid does not form partof the stock-in-trade of the business of the assessee.

618. Repealed by the Benami Transactions (Prohibition) Act,1988.

§ 618. Repealed by the Benami Transactions (Prohibition) Act, 1988.Section 281A[REPEALED BY THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988, W.E.F. 19-5-1988]

619. Provisional attachment to protect revenue in certaincases.

§ 619. Provisional attachment to protect revenue in certain cases.Section 281BPROVISIONAL ATTACHMENT TO PROTECT REVENUE IN CERTAIN CASES.

(1) Where, during the pendency of any proceeding for the assessment of any income or for theassessment or reassessment of any income which has escaped assessment, the Assessing Officeris of the opinion that for the purpose of protecting the interests of the revenue it is necessary so todo, he may, with the previous approval of the Chief Commissioner, Commissioner, Director-General or Director, by order in writing, attach provisionally any property belonging to theassessee in the manner provided in the Second Schedule.

Explanation : For the purposes of this sub-section, proceedings under sub-section (5) of section132 shall be deemed to be proceedings for the assessment of any income or for the assessment orreassessment of any income which has escaped assessment.

(2) Every such provisional attachment shall cease to have effect after the expiry of a period of sixmonths from the date of the order made under sub-section (1) :


Provided that the Chief Commissioner, Commissioner, Director-General or Director may, forreasons to be recorded in writing, extend the aforesaid period by such further period or periods ashe thinks fit, so, however, that the total period of extension shall not in any case exceed twoyears :

Provided further that where an application for settlement under section 245C is made, the periodcommencing from the date on which such application is made and ending with the date on whichan order under sub-section (1) of section 245D is made shall be excluded from the periodspecified in the preceding proviso.

620. Service of notice Generally.

§ 620. Service of notice Generally.Section 282SERVICE OF NOTICE GENERALLY.

(1) A notice or requisition under this Act may be served on the person therein named either bypost or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of1908).

(2) Any such notice or requisition may be addressed - (a) In the case of firm or a Hinduundivided family, to any member of the firm or to the manager or any adult member of thefamily;

(b) In the case of a local authority or company, to the principal officer thereof;

(c) In the case of any other association or body of individuals, to the principal officer or anymember thereof;

(d) In the case of any other person (not being an individual), to the person who manages orcontrols his affairs.

621. Service of notice when family is disrupted or firm, etc.,is dissolved.

§ 621. Service of notice when family is disrupted or firm, etc., is dissolved.Section 283SERVICE OF NOTICE WHEN FAMILY IS DISRUPTED OR FIRM, ETC., IS DISSOLVED.

(1) After a finding of total partition has been recorded by the Assessing Officer under section171 in respect of any Hindu family, notices under this Act in respect of the income of the Hindufamily shall be served on the person who was the last manager of the Hindu family, or, if such


person is dead, then on all adults who were members of the Hindu family immediately before thepartition.

(2) Where a firm or other association of persons is dissolved, notices under this Act in respect ofthe income of the firm or association may be served on any person who was a partner (not beinga minor) or member of the association, as the case may be, immediately before its dissolution.

622. Service of notice in the case of discontinued business.

§ 622. Service of notice in the case of discontinued business.Section 284SERVICE OF NOTICE IN THE CASE OF DISCONTINUED BUSINESS.

Where an assessment is to be made under section 176, the Assessing Officer may serve on theperson whose income is to be assessed, or, in the case of a firm or an association of persons, onany person who was a member of such firm or association at the time of its discontinuance or, inthe case of a company, on the principal officer thereof, a notice containing all or any of therequirements which may be included in a notice under sub-section (2) of section 139, and theprovisions of this Act shall, so far as may be, apply accordingly as if the notice were issuedunder that section.

623. Omitted.

§ 623. Omitted.Section 285INFORMATION BY PERSONS RESPONSIBLE FOR PAYING INTEREST.


624. Omitted.

§ 624. Omitted.Section 285AINFORMATION BY CONTRACTORS IN CERTAIN CASES.


625. Submission of Statements by Producers ofCinematograph Films.


§ 625. Submission of Statements by Producers of Cinematograph Films.Section 285BSUBMISSION OF STATEMENTS BY PRODUCERS OF CINEMATOGRAPH FILMS.

Any person carrying on the production of a cinematograph film during the whole or any part ofany financial year shall, in respect of the period during which such production is carried on byhim in such financial year, prepare and deliver or cause to be delivered to the Assessing Officer,within thirty days from the end of such financial year or within thirty days from the date of thecompletion of the production of the film, whichever is earlier, a statement in the prescribed form2243b containing particulars of all payments of over twenty-five thousand rupees in theaggregate made by him or due from him to each such person as is engaged by him in suchproduction.

626. Omitted

§ 626. OmittedSection 286INFORMATION BY COMPANIES RESPECTING SHAREHOLDERS TO WHOMDIVIDENDS HAVE BEEN PAID.


627. Publication of Information respecting assesseesin certain cases.

§627.Publication of Information respecting assessees in certain cases.Section 287PUBLICATION OF INFORMATION RESPECTING ASSESSEES IN CERTAIN CASES.

(1) If the Central Government is of opinion that it is necessary or expedientin the public interest to publish the names of any assessees and any otherparticulars relating to any proceedings or prosecutions under this Act inrespect of such assessees, it may cause to be published such names andparticulars in such manner as it thinks fit.

(2) No publication under this section shall be made in relation to any penalty imposed under this Act until the time for presentingan appeal to the Commissioner (Appeals) has expired without any appeal having been presented or the appeal, if presented, hasbeen disposed of.

Explanation : In the case of a firm, company or other association of persons, the names of the partners of the firm, directors,managing agents, secretaries and treasurers, or managers of the company, or the members of the association, as the case may be,may also be published if, in the opinion of the Central Government, the circumstances of the case justify it.


628. Appearance by Registered valuer in certainmatters.

§628.Appearance by Registered valuer in certain matters.Section 287AAPPEARANCE BY REGISTERED VALUER IN CERTAIN MATTERS.

Any assessee who is entitled or required to attend before any income-taxauthority or the Appellate Tribunal in connection with any matter relating tothe valuation of any asset, otherwise than when required under section 131 toattend personally for examination on oath or affirmation, may attend by aregistered valuer.

Explanation : In this section, "registered valuer" has the same meaning as inclause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

629. Appearance by Authorised Representative.

§629.Appearance by Authorised Representative.Section 288APPEARANCE BY AUTHORISED REPRESENTATIVE.

(1) 2252 Any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceedingunder this Act otherwise than when required under section 131 to attendpersonally for examination on oath or affirmation, may, subject to the otherprovisions of this section, attend by an authorised representative.

(2) For the purposes of this section, "authorised representative" means aperson authorised by the assessee in writing to appear on his behalf, being -

(i) A person related to the assessee in any manner, or a person regularlyemployed by the assessee; or

(ii) Any officer of a Scheduled Bank with which the assessee maintains acurrent account or has other regular dealings; or

(iii) Any legal practitioner who is entitled to practise in any civil court inIndia; or

(iv) An accountant; or

(v) Any person who has passed any accountancy examination recognised in thisbehalf by the Board; or


(vi) Any person who has acquired such educational qualifications as the Boardmay prescribe for this purpose; or

(via) Any person who, before the coming into force of this Act in the Unionterritory of Dadra and Nagar Haveli, Goa, Daman and Diu, or Pondicherry,attended before an income-tax authority in the said territory on behalf of anyassessee otherwise than in the capacity of an employee or relative of thatassessee; or

(vii) Any other person who, immediately before the commencement of this Act,was an income-tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Income-tax Act, 1922 (11 of 1922), andwas actually practising as such.

Explanation : In this section, "accountant" means a chartered accountant 2254within the meaning of the Chartered Accountants Act, 1949 (38 of 1949), andincludes, in relation to any State, any person who by virtue of the provisionsof sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), isentitled to be appointed to act as an auditor of companies registered in thatState.

(4) No person - (a) Who has been dismissed or removed from Government serviceafter the 1st day of April, 1938; or

(b) Who has been convicted of an offence connected with any income-taxproceeding or on whom a penalty has been imposed under this Act, other than apenalty imposed on him under clause (ii) of sub-section (1) of section 271; or

(c) Who has become an insolvent, shall be qualified to represent an assesseeunder sub-section (1), for all times in the case of a person referred to insub-clause (a), for such time as the Chief Commissioner or Commissioner may byorder determine in the case of a person referred to in sub-clause (b), and forthe period during which the insolvency continues in the case of a personreferred to in sub-clause (c).

(5) If any person - (a) Who is a legal practitioner or an accountant is foundguilty of misconduct in his professional capacity by any authority entitled toinstitute disciplinary proceedings against him, an order passed by thatauthority shall have effect in relation to his right to attend before anincome-tax authority as it has in relation to his right to practise as a legalpractitioner or accountant, as the case may be;

(b) Who is not a legal practitioner or an accountant, is found guilty ofmisconduct in connection with any income-tax proceedings by the prescribedauthority, the prescribed authority may direct that he shall henceforth be


disqualified to represent as assessee under sub-section (1).

(6) Any order or direction under clause (b) of sub-section (4) or clause (b)of sub-section (5) shall be subject to the following conditions, namely :-

(a) No such order or direction shall be made in respect of any person unlesshe has been given a reasonable opportunity of being heard;

(b) Any person against whom any such order or direction is made may, withinone month of the making of the order or direction, appeal to the Board to havethe order or direction cancelled; and

(c) No such order or direction shall take effect until the expiration of onemonth from the making thereof, or, where an appeal has been preferred, untilthe disposal of the appeal.

(7) A person disqualified to represent an assessee by virtue of the provisionsof sub-section (3) of section 61 of the Indian Income-tax Act, 1922 (11 of1922), shall be disqualified to represent an assessee under sub-section (1).

630. Rounding off of Income.

§630.Rounding off of Income.Section 288AROUNDING OFF OF INCOME.

The amount of total income computed in accordance with the foregoingprovisions of this Act shall be rounded off to the nearest multiple of tenrupees and for this purpose any part of a rupee consisting of paise shall beignored and thereafter if such amount is not a multiple of ten, then, if thelast figure in that amount is five or more, the amount shall be increased tothe next higher amount which is a multiple of ten and if the last figure isless than five, the amount shall be reduced to the next lower amount which isa multiple of ten; and the amount so rounded off shall be deemed to be thetotal income of the assessee for the purposes of this Act.

631. Rounding off of Tax, etc.

§631.Rounding off of Tax, etc.Section 288BROUNDING OFF OF TAX, ETC.

The amount of tax (including tax deductible at source or payable in advance),


interest, penalty, fine or any other sum payable, and the amount of refunddue, under the provisions of this Act shall be rounded off to the nearestrupee and, for this purpose, where such amount contains a part of a rupeeconsisting of paise, then, if such part is fifty paise or more, it shall beincreased to one rupee and if such part is less than fifty paise, it shall beignored.

632. Receipt to be given.

§632.Receipt to be given.Section 289RECEIPT TO BE GIVEN.

A receipt shall be given for any money paid or recovered under this Act.

633. Indemnity.

§633.Indemnity.Section 290INDEMNITY.

Every person deducting, retaining, or paying any tax in pursuance of this Actin respect of income belonging to another person is hereby indemnified for thededuction, retention or payment thereof.

634. Power to tender immunity from prosecution.

§634.Power to tender immunity from prosecution.Section 291POWER TO TENDER IMMUNITY FROM PROSECUTION.

(1) The Central Government may, if it is of opinion (the reasons for suchopinion being recorded in writing) that with a view to obtaining the evidenceof any person appearing to have been directly or indirectly concerned in orprivy to the concealment of income or to the evasion of payment of tax onincome it is necessary or expedient so to do, tender to such person immunityfrom prosecution for any offence under this Act or under the Indian Penal Code(45 of 1860), or under any other Central Act for the time being in force andalso from the imposition of any penalty under this Act on condition of hismaking a full and true disclosure of the whole circumstances relating to theconcealment of income or evasion of payment of tax on income.


(2) A tender of immunity made to, and accepted by, the person concerned,shall, to the extent to which the immunity extends, render him immune fromprosecution for any offence in respect of which the tender was made or fromthe imposition of any penalty under this Act.

(3) If it appears to the Central Government that any person to whom immunityhas been tendered under this section has not complied with the condition onwhich the tender was made or is wilfully concealing anything or is givingfalse evidence, the Central Government may record a finding to that effect,and thereupon the immunity shall be deemed to have been withdrawn, and anysuch person may be tried for the offence in respect of which the tender ofimmunity was made or for any other offence of which he appears to have beenguilty in connection with the same matter and shall also become liable to theimposition of any penalty under this Act to which he would otherwise have beenliable.

635. Cognizance of offences.

§635.Cognizance of offences.Section 292COGNIZANCE OF OFFENCES.

No court inferior to that of a presidency magistrate or a magistrate of thefirst class shall try any offence under this Act.

636. Section 360 of the code of criminal procedure,1973, and the probation of Offenders Act, 1958, Notto Apply.

§636.Section 360 of the code of criminal procedure, 1973, and the probationof Offenders Act, 1958, Not to Apply.Section 292ASECTION 360 OF THE CODE OF CRIMINAL PROCEDURE, 1973, AND THE PROBATION OFOFFENDERS ACT, 1958, NOT TO APPLY.

Nothing contained in section 360 of Code of Criminal Procedure, 1973 (2 of1974), or in the Probation of Offenders Act, 1958 (2 of 1958), shall apply toa person convicted of an offence under this Act unless that person is undereighteen years of age.

637. Return of Income, Etc., nto to be invalid on


certain grounds.

§637.Return of Income, Etc., nto to be invalid on certain grounds.Section 292BRETURN OF INCOME, ETC., NOT TO BE INVALID ON CERTAIN GROUNDS.

No return of income, assessment, notice, summons or other proceedings,furnished or made or issued or taken or purported to have been furnished ormade or issued or taken in pursuance of any of the provisions of this Actshall be invalid or shall be deemed to be invalid merely by reason of anymistake, defect or omission in such return of income, assessment, notice,summons or other proceeding if such return of income, assessment, notice,summons or other proceeding is in substance and effect in conformity with oraccording to the intent and purpose of this Act.

638. Bar of Suits in Civil Courts.

§638.Bar of Suits in Civil Courts.Section 293BAR OF SUITS IN CIVIL COURTS.

No suit shall be brought in any civil court to set aside or modify anyproceeding taken or order made under this Act, and no prosecution, suit orother proceeding shall lie against the Government or any officer of theGovernment for anything in good faith done or intended to be done under thisAct.

639. Power to make exemption, etc., in relation toparticipation in the business prospecting for,extraction, etc., of mineral oils.

§639.Power to make exemption, etc., in relation to participation in thebusiness prospecting for, extraction, etc., of mineral oils.Section 293APOWER TO MAKE EXEMPTION, ETC., IN RELATION TO PARTICIPATION IN THE BUSINESS OFPROSPECTING FOR, EXTRACTION, ETC., OF MINERAL OILS.

(1) If the Central Government is satisfied that it is necessary or expedientso to do in the public interest, it may, by notification in the OfficialGazette, make an exemption, reduction in rate or other modification in respectof income-tax in favour of any class of persons specified in sub-section (2)


or in regard to the whole or any part of the income of such class of personsor in regard to the status in which such class of persons or the membersthereof are to be assessed on their income from the business referred to inclause (a) of sub-section (2) :

Provided that the notification for modification in respect of the status maybe given effect from an assessment year beginning on or after the 1st day ofApril, 1993.

(2) The persons referred to in sub-section (1) are the following, namely :-(a) Persons with whom the Central Government has entered into agreements forthe association or participation of that Government or any person authorisedby that Government in any business consisting of the prospecting for orextraction or production of mineral oils;

(b) Persons providing any services or facilities or supplying any ship,aircraft, machinery, or plant (whether by way of sale or hire) in connectionwith any business consisting of the prospecting for or extraction orproduction of mineral oils carried on by that Government or any personspecified by that Government in this behalf by notification in the OfficialGazette; and

(c) Employees of the persons referred to in clause (a) or clause (b).

(3) Every notification issued under this section shall be laid before eachHouse of Parliament.

Explanation : For the purposes of this section, - (a) "Mineral oil" includespetroleum and natural gas;

(b) "Status" means the category under which the assessee is assessed as"individual", "Hindu undivided family" and so on.

640. Power of Central Government or Board to condonedelays in obtaining approval.

§640.Power of Central Government or Board to condone delays in obtainingapproval.Section 293BPOWER OF CENTRAL GOVERNMENT OR BOARD TO CONDONE DELAYS IN OBTAINING APPROVAL.

Where, under any provision of this Act, the approval of the CentralGovernment, or the Board is required to be obtained before a specified date,it shall be open to the Central Government or, as the case may be, the Board


to condone, for sufficient cause, any delay in obtaining such approval.

641. 294 Act to have effect peinding legislativeprovision for charge of Tax.

§641.294 Act to have effect peinding legislative provision for charge of Tax.Section 294294 ACT TO HAVE EFFECT PENDING LEGISLATIVE PROVISION FOR CHARGE OF TAX.

If on the 1st day of April in any assessment year provision has not yet beenmade by a Central Act for the charging of income-tax for that assessment year,this Act shall nevertheless have effect until such provision is so made as ifthe provision in force in the preceding assessment year or the provisionproposed in the Bill then before Parliament, whichever is more favourable tothe assessee, were actually in force.

642. Power to make exemption, etc., in relation tocertain union territories.

§642.Power to make exemption, etc., in relation to certain union territories.Section 294APOWER TO MAKE EXEMPTION, ETC., IN RELATION TO CERTAIN UNION TERRITORIES.

If the Central Government considers it necessary or expedient so to do foravoiding any hardship or anomaly or removing any difficulty that may arise asa result of the application of this Act to the Union territories of Dadra andNagar Haveli, Goa, Daman and Diu, and Pondicherry, or in the case of the Unionterritory of Pondicherry, for implementing any provision of the Treaty ofCession concluded between France and India on the 28th day of May, 1956, thatGovernment may, by general or special order, make an exemption, reduction inrate or other modification in respect of income-tax or super-tax in favour ofany assessee or class of assessees or in regard to the whole or any part ofthe income of any assessee or class of assessees :

Provided that the power conferred by this section shall not be exercisableafter the 31st day of March, 1967, except for the purpose of rescinding anexemption, reduction or modification already made.

643. Power to make rules.

§643.Power to make rules.


Section 295POWER TO MAKE RULES.

(1) The Board may, subject to the control of the Central Government, bynotification in the Gazette of India, make rules for the whole or any part ofIndia for carrying out of the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoingpower, such rules may provide for all or any of the following matters :-

(a) The ascertainment and determination of any class of income;

(b) The manner in which and the procedure by which the income shall be arrivedat in the case of - (i) Income derived in part from agriculture and in partfrom business;

(ii) Persons residing outside India :

(iii) An individual who is liable to be assessed under the provisions of sub-section (2) of section 64;

(c) The determination of the value of any perquisite chargeable to tax underthis Act in such manner and on such basis as appears to the Board to be properand reasonable;

(d) The percentage on the written down value which may be allowed asdepreciation in respect of buildings, machinery, plant or furniture;

(dd) The extent to which, and the conditions subject to which, any expenditurereferred to in sub-section (3) of section 37 may be allowed;

(dda) The matters specified in sub-sections (2) and (3) of section 44AA;

(e) The percentage or the amount to be prescribed under clause (i) of sub-section (4) of section 80C;

(ee) The conditions or limitations subject to which any payment of rent madeby an assessee shall be deducted under section 80GG;

(eea) The cases, the nature and value of assets, the limits and heads ofexpenditure and the outgoings, which are required to be prescribed under sub-section (6) of section 139;

(eeb) The time within which any person may apply for the allotment of apermanent account number, the form and the manner in which such applicationmay be made and the particulars which such application shall contain and thetransactions with respect to which permanent account numbers shall be quoted


on documents relating to such transactions under section 139A;

(eec) The form of the report of audit and the particulars which such reportshall contain under sub-section (2A) of section 142;

(f) The manner in which and the period to which any such income as is referredto in section 180 may be allocated;

(g) The authority to be prescribed for any of the purposes of this Act;

(h) The procedure for giving effect to the terms of any agreement for thegranting of relief in respect of double taxation or for the avoidance ofdouble taxation which may be entered into by the Central Government under thisAct;

(i) The form and manner in which any application, claim, return or informationmay be made or furnished and the fees that may be levied in respect of anyapplication or claim;

(j) The manner in which any document required to be filed under this Act maybe verified;

(k) The procedure to be followed on applications for refunds;

(kk) The procedure to be followed in calculating interest payable by assesseesor interest payable by Government to assessees under any provision of thisAct, including the rounding off of the period for which such interest is to becalculated in cases where such period includes a fraction of a month, andspecifying the circumstances in which and the extent to which petty amounts ofinterest payable by assessees may be ignored;

(l) The regulation of any matter for which provision is made in section 230;

(m) The form and manner in which any appeal or cross-objection may be filedunder this Act, the fee payable in respect thereof and the manner in whichintimation of any such order as is referred to in clause (c) of sub-section(2) of section 249 may be served;

(mm) The circumstances in which, the conditions subject to which and themanner in which, the Commissioner (Appeals) may permit an appellant to produceevidence which he did not produce or which he was not allowed to producebefore the Assessing Officer;

(mma) The form in which the statement under section 285B shall be delivered tothe Assessing Officer;

(n) The maintenance of a register of persons other than legal practitioners or


accountants as defined in sub-section (2) of section 288 practising beforeincome-tax authorities and for the constitution of and the procedure to befollowed by the authority referred to in sub-section (5) of that section;

(o) The issue of certificate verifying the payment of tax by assessees;

(p) Any other matter which by this Act is to be, or may be, prescribed.

(3) In cases coming under clause (b) of sub-section (2), where the incomeliable to tax cannot be definitely ascertained, or can be ascertained onlywith an amount of trouble and expense to the assessee which in the opinion ofthe Board is unreasonable, the rules made under this section may -

(a) Prescribe methods by which an estimate of such income may be made; and

(b) In cases coming under sub-clause (i) of clause (b) of sub-section (2)specify the proportion of the income which shall be deemed to be income liableto tax; and an assessment based on such estimate or proportion shall be deemedto be duly made in accordance with the provisions of this Act.

(4) The power to make rules conferred by this section shall include the powerto give retrospective effect, from a date not earlier than the date ofcommencement of this Act, to the rules or any of them and, unless the contraryis permitted (whether expressly or by necessary implication), no retrospectiveeffect shall be given to any rule so as to prejudicially affect the interestsof assessees.

644. Rules and certain notifications to be placedbefore parliament.

§644.Rules and certain notifications to be placed before parliament.Section 296RULES AND CERTAIN NOTIFICATIONS TO BE PLACED BEFORE PARLIAMENT.

The Central Government shall cause every rule made under this Act the rules ofprocedure framed by the Settlement Commission under sub-section (7) of section245F, the Authority for Advance Rulings under section 245V and the AppellateTribunal under sub-section (5) of section 255 and every notification issuedunder sub-clause (iv) of clause (23C) of section 10 to be laid as soon as maybe after the rule is made or the notification is issued before each House ofParliament while it is in session for a total period of thirty days, which maybe comprised in one session or in two or more successive sessions, and if,before the expiry of the session immediately following the session or thesuccessive sessions aforesaid, both Houses agree in making any modification in


the rule or notification or both Houses agree that the rule or notificationshould not be made or issued, that rule or notification shall thereafter haveeffect, only in such modified form or be of no effect, as the case may be; so,however, that any such modification or annulment shall be without prejudice tothe validity of anything previously done under that rule or notification.

645. Repeals and Savings.

§645.Repeals and Savings.Section 297REPEALS AND SAVINGS.

(1) The Indian Income-tax Act, 1922 (11 of 1922), is hereby repealed.

(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of1922), (hereinafter referred to as the repealed Act), -

(a) Where a return of income has been filed before the commencement of thisAct by any person for any assessment year, proceedings for the assessment ofthat person for that year may be taken and continued as if this Act had notbeen passed;

(b) Where a return of income is filed after the commencement of this Actotherwise than in pursuance of a notice under section 34 of the repealed Actby any person for the assessment year ending on the 31st day of March, 1962,or any earlier year, the assessment of that person for that year shall be madein accordance with the procedure specified in this Act;

(c) Any proceeding pending on the commencement of this Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal,reference or revision shall be continued and disposed of as if this Act hadnot been passed;

(d) Where in respect of any assessment year after the year ending on the 31stday of March, 1940, -

(i) A notice under section 34 of the repealed Act had been issued before thecommencement of this Act, the proceedings in pursuance of such notice may becontinued and disposed of as if this Act had not been passed;

(ii) Any income chargeable to tax had escaped assessment within the meaning ofthat expression in section 147 and no proceedings under section 34 of therepealed Act in respect of any such income are pending at the commencement ofthis Act, a notice under section 148 may, subject to the provisions containedin section 149 or section 150, be issued with respect to that assessment year


and all the provisions of this Act shall apply accordingly;

(e) Subject to the provisions of clause (g) and clause (j) of this sub-section, section 23A of the repealed Act shall continue to have effect inrelation to theassessment of any company or its shareholders for the assessment year endingon the 31st day of March, 1962, or any earlier year, and the provisions of therepealed Act shall apply to all matters arising out of such assessment asfully and effectually as if this Act had not been passed;

(f) Any proceeding for the imposition of a penalty in respect of anyassessment completed before the 1st day of April, 1962, may be initiated andany such penalty may be imposed as if this Act had not been passed;

(g) Any proceeding for the imposition of a penalty in respect of anyassessment for the year ending on the 31st day of March, 1962, or any earlieryear which is completed on or after the 1st day of April, 1962, may beinitiated and any such penalty may be imposed under this Act;

(h) Any election or declaration made or option exercised by an assessee underany provision of the repealed Act and in force immediately before thecommencement of this Act shall be deemed to have been an election ordeclaration made or option exercised under the corresponding provision of this

Act;

(i) Where, in respect of any assessment completed before the commencement ofthis Act, a refund falls due after such commencement or default is made aftersuch commencement in the payment of any sum due under such completedassessment, the provisions of this Act relating to interest payable by theCentral Government on refunds and interest payable by the assessee for defaultshall apply;

(j) Any sum payable by way of income-tax, super-tax, interest, penalty orotherwise under the repealed Act may be recovered under this Act, but withoutprejudice to any action already taken for the recovery of such sum under therepealed Act;

(k) Any agreement entered into, appointment made, approval given, recognitiongranted, direction, instruction, notification, order or rule issued under anyprovision of the repealed Act shall, so far as it is not inconsistent with thecorresponding provision of this Act, be deemed to have been entered into,made, granted, given or issued under the corresponding provision aforesaid andshall continue in force accordingly;

(l) Any notification issued under sub-section (1) of section 60 or section 60A


of the repealed Act and in force immediately before the commencement of thisAct shall, to the extent to which provision has not been made under this Act,continue in force:

Provided that the Central Government may rescind any such notification oramend it so as to rescind any exemption, reduction in rate or othermodification made thereunder;

(m) Where the period prescribed for any application, appeal, reference orrevision under the repealed Act had expired on or before the commencement ofthis Act, nothing in this Act shall be construed as enabling any suchapplication, appeal, reference or revision to be be made under this Act byreason only of the fact that a longer period therefor is prescribed orprovision is made for extension of time in suitable cases by the appropriateauthority.

646. Power to remove difficulties.

§646.Power to remove difficulties.Section 298POWER TO REMOVE DIFFICULTIES.

(1) If any difficulty arises in giving effect to the provisions of this Actthe Central Government may, by general or special order, do anything notinconsistent with such provisions which appears to it to be necessary orexpedient for the purpose of removing the difficulty.

(2) In particular, and without prejudice to the generality of the foregoingpower, any such order may provide for the adaptations or modifications subjectto which the repealed Act shall apply in relation to the assessments for theassessment year ending on the 31st day of March, 1962, or any earlier year.

(3) If any difficulty arises in giving effect to the provisions of this Act asamended by the Direct Tax Laws (Amendment) Act, 1987, the Central Governmentmay, by order, do anything not inconsistent with such provisions for thepurpose of removing the difficulty :

Provided that no such order shall be made after the expiration of three yearsfrom the 1st day of April, 1988.

(4) Every order made under sub-section (3) shall be laid before each House ofParliament.


647. A Life Insurance Business profits of LifeInsurance Business to be Computed Separately.

§647.A Life Insurance Business profits of Life Insurance Business to beComputed Separately.THE FIRST SCHEDULE(See section 44)A LIFE INSURANCE BUSINESS PROFITS OF LIFE INSURANCE BUSINESS TO BE COMPUTEDSEPARATELY.

In the case of a person who carries on or at any time in the previous yearscarried on life insurance business, the profits and gains of such person fromthat business shall be computed separately from his profits and gains from anyother business.

648. Insurance Business A Life Insurance BusinessComputation of profits of Life Insurance Business.

§648.Insurance Business A Life Insurance Business Computation of profits ofLife Insurance Business.Sch. I Part A Rule 2I INSURANCE BUSINESS A LIFE INSURANCE BUSINESS COMPUTATION OF PROFITS OF LIFEINSURANCE BUSINESS.

The profits and gains of life insurance business shall be taken to be theannual average of the surplus arrived at by adjusting the surplus or deficitdisclosed by the actuarial valuation made in accordance with the InsuranceAct, 1938 (4 of 1938), in respect of the last inter-valuation period endingbefore the commencement of the assessment year, so as to exclude from it anysurplus or deficit included therein which was made in any earlier inter-valuation period.

649. Omitted.

§649.Omitted.Sch. I Part A Rule 3A LIFE INSURANCE BUSINESS

[OMITTED BY THE FINANCE ACT, 1976, W.E.F. 1-4-1977]


650. Adjustment of Tax paid by deduction at source.

§650.Adjustment of Tax paid by deduction at source.Sch. I Part A Rule 4ADJUSTMENT OF TAX PAID BY DEDUCTION AT SOURCE.

Where for any year an assessment of the profits of life insurance business ismade in accordance with the annual average of a surplus disclosed by avaluation for an inter-valuation period exceeding twelve months, then, incomputing the income-tax payable for that year, credit shall not be given inaccordance with section 199 for the income-tax paid in the previous year, butcredit shall be given for the annual average of the income-tax paid bydeduction at source from interest on securities or otherwise during suchperiod.

651. Computation of profits and gains of otherInsurance Business.

§651.Computation of profits and gains of other Insurance Business.Sch. I Part B Rule 5COMPUTATION OF PROFITS AND GAINS OF OTHER INSURANCE BUSINESS.

The profits and gains of any business of insurance other than life insuranceshall be taken to be the balance of the profits disclosed by the annualaccounts, copies of which are required under the Insurance Act, 1938 (4 of1938), to be furnished to the Controller of Insurance, subject to thefollowing adjustments:

(a) Subject to the other provisions of this rule, any expenditure or allowanceinclulding any amount debited to the profit and loss account either by way ofa provision for any tax, dividend, reserve or any other provision as may beprescribed which is not admissible under the provisions of sections 30 to 43Bin computing the profits and gains of a business shall be added back;

(b) Such amount carried over to a reserve for unexpired risks as may beprescribed in this behalf shall be allowed as a deduction.

652. Profits and Gains of Non-Resident person.

§652.Profits and Gains of Non-Resident person.Sch. I Part C Rule 6PROFITS AND GAINS OF NON-RESIDENT PERSON.


(1) The profits and gains of the branches in India of a person not resident inIndia and carrying on any business of insurance, may, in the absence of morereliable data, be deemed to be that proportion of the world income of suchperson which corresponds to the proportion which his premium income derivedfrom India bears to his total premium income.

(2) For the purposes of this rule, the world income in relation to life insurance business of a person not resident in India shall becomputed in the manner laid down in this Act for the computation of the profits and gains of life insurance business carried on inIndia.

653. Interpretation.

§653.Interpretation.Sch. I Part C Rule 7INTERPRETATION.

(1) For the purposes of these rules - (i) "investments" includes securities,stocks and shares;

(ii) 2291aa "life insurance business" means life insurance business as definedin clause (11) of section 2 of the Insurance Act, 1938 (4 of 1938);

(iii) "rule" means a rule contained in this Schedule.

(2) References in these rules to the Insurance Act, 1938 (4 of 1938), or anyprovision thereof, shall, in relation to the Life Insurance Corporation ofIndia, be construed as references to that Act or provision as read withsection 43 of the Life Insurance Corporation Act, 1956 (31 of 1956).

654. Definitions.

§654.Definitions.Sch. II Part I Rule 1DEFINITIONS.

In this Schedule, unless the context otherwise requires, - (a) "Certificate",except in rules 7, 44, 65 and sub-rule (2) of rule 66, means the certificatedrawn up by the Tax Recovery Officer under section 222 in respect of anyassessee referred to in that section;

(b) "Defaulter" means the assessee mentioned in the certificate;

(c) "Execution", in relation to a certificate, means recovery of arrears inpursuance of the certificate;


(d) "Movable property" includes growing crops;

(e) "Officer" means a person authorised to make an attachment or sale underthis Schedule;

(f) "Rule" means a rule contained in this Schedule; and

(g) "Share in a corporation" includes stock, debenture-stock, debentures or bonds.

655. Issue of Notice.

§655.Issue of Notice.Sch. II Part I Rule 2ISSUE OF NOTICE.

When a certificate has been drawn up by the Tax Recovery Officer for therecovery of arrears under this Schedule, the Tax Recovery Officer shall causeto be served upon the defaulter a notice requiring the defaulter to pay theamount specified in the certificate within fifteen days from the date ofservice of the notice and intimating that in default steps would be taken torealise the amount under this Schedule.

656. When certificate may be executed.

§656.When certificate may be executed.Sch. II Part I Rule 3WHEN CERTIFICATE MAY BE EXECUTED.

No step in execution of a certificate shall be taken until the period offifteen days has elapsed since the date of the service of the notice requiredby the preceding rule :

Provided that, if the Tax Recovery Officer is satisfied that the defaulter islikely to conceal, remove or dispose of the whole or any part of such of hismovable property as would be liable to attachment in execution of a decree ofa civil court and that the realisation of the amount of the certificate wouldin consequence be delayed or obstructed, he may at any time direct, forreasons to be recorded in writing, an attachment of the whole or any part ofsuch property :

Provided further that if the defaulter whose property has been so attachedfurnishes security to the satisfaction of the Tax Recovery Officer, suchattachment shall be cancelled from the date on which such security is accepted


by the Tax Recovery Officer.

657. Mode of Recovery.

§657.Mode of Recovery.Sch. II Part I Rule 4MODE OF RECOVERY.

If the amount mentioned in the notice is not paid within the time specifiedtherein or within such further time as the Tax Recovery Officer may grant inhis discretion, the Tax Recovery Officer shall proceed to realise the amountby one or more of the following modes :- (a) By attachment and sale of thedefaulter"s movableproperty;

(b) By attachment and sale of the defaulter"s immovable property;

(c) By arrest of the defaulter and his detention in prison;

(d) By appointing a receiver for the management of the defaulter"s movable andimmovable properties.

658. Interest, Costs and Charges Recoverable.

§658.Interest, Costs and Charges Recoverable.Sch. II Part I Rule 5INTEREST, COSTS AND CHARGES RECOVERABLE.

There shall be recoverable, in the proceedings in execution of everycertificate, -

(a) Such interest upon the amount of tax or penalty or other sum to which thecertificate relates as is payable in accordance with sub-section (2)of section 220, and

(b) All charges incurred in respect of - (i) The service of notice upon the defaulter to pay the arrears, and of warrants and otherprocesses, and

(ii) All other proceedings taken for realising the arrears.

659. Purchaser"s Title.

§659.Purchaser"s Title.


Sch. II Part I Rule 6PURCHASER"S TITLE.

(1) Where property is sold in execution of a certificate, there shall vest inthe purchaser merely the right, title and interest of the defaulterat the time of the sale, even though the property itself be specified.

(2) Where immovable property is sold in execution of a certificate and suchsale has become absolute, the purchaser"s right, title and interest shall bedeemed to have vested in him from the time when the property is sold, and notfrom the time when the sale becomes absolute.

660. Suit against pruchaser nto maintainable onground of purchase being made on behalf ofplaintiff.

§660.Suit against pruchaser nto maintainable on ground of purchase being madeon behalf of plaintiff.Sch. II Part I Rule 7SUIT AGAINST PURCHASER NOT MAINTAINABLE ON GROUND OF PURCHASE BEING MADE ONBEHALF OF PLAINTIFF.

(1) No suit shall be maintained against any person claiming title under apurchase certified by the Tax Recovery Officer in the manner laid down in thisSchedule, on the ground that the purchase was made on behalf of the plaintiffor on behalf of someone through whom the plaintiff claims.

(2) Nothing in this section shall bar a suit to obtain a declaration that thename of any purchaser certified as aforesaid was inserted in the certificatefraudulently or without the consent of the real purchaser, or interfere withthe right of a third person to proceed against that property, thoughostensibly sold to the certified purchaser, on the ground that it is liable tosatisfy a claim of such third person against the real owner.

661. Disposal of Proceeds of execution.

§661.Disposal of Proceeds of execution.Sch. II Part I Rule 8DISPOSAL OF PROCEEDS OF EXECUTION.

(1) Whenever assets are realised by sale or otherwise in execution of acertificate, the proceeds shall be disposed of in the following manner, namely


:-

(a) they shall first be adjusted towards the amount due under the certificatein execution of which the assets were realised and the costs incurred inthe course of such execution;

(b) If there remains a balance after the adjustment referred to in clause (a), the same shall be utilised for satisfaction of any otheramount recoverablefrom the assessee under this Act which may be due on the date on which assets were realised; and

(c) The balance, if any, remaining after the adjustments under clauses (a) and (b) shall be paid to the defaulter.

(2) If the defaulter disputes any adjustment under clause (b) of sub-rule (1), the Tax Recovery Officer shall determine thedispute.

662. General Bar to jurisdiction of Civil Court,save where fraud alleged.

§662.General Bar to jurisdiction of Civil Court, save where fraud alleged.Sch. II Part I Rule 9GENERAL BAR TO JURISDICTION OF CIVIL COURTS, SAVE WHERE FRAUD ALLEGED.

Except as otherwise expressly provided in this Act, every question arisingbetween the Tax Recovery Officer and the defaulter or their representatives,relating to the execution, discharge or satisfaction of a certificate, orrelating to the confirmation or setting aside by an order under this Act of asale held in execution of such certificate, shall be determined, not by suit,but by order of the Tax Recovery Officer before whom such question arises :

Provided that a suit may be brought in a civil court in respect of any suchquestion upon the ground of fraud.

663. Property exempt from attachment.

§663.Property exempt from attachment.Sch. II Part I Rule 10PROPERTY EXEMPT FROM ATTACHMENT.

(1) All such property as is by the Code of Civil Procedure, 1908 (5 of 1908),exempted from attachement and sale in execution of a decree of acivil court shall be exempt from attachment and sale under this Schedule.

(2) The Tax Recovery Officer"s decision as to what property is so entitled to exemption shall be conclusive.


664. Investigation by Tax recovery officer.

§664.Investigation by Tax recovery officer.Sch. II Part I Rule 11INVESTIGATION BY TAX RECOVERY OFFICER.

(1) Where any claim is preferred to, or any objection is made to theattachment or sale of, any property in execution of a certificate, on theground that such property is not liable to such attachment or sale, the TaxRecovery Officer shall proceed to investigate the claim or objection :

Provided that no such investigation shall be made where the Tax RecoveryOfficer considers that the claim or objection was designedly or unnecessarilydelayed.

(2) Where the property to which the claim or objection applies has beenadvertised for sale, the Tax Recovery Officer ordering the sale may postponeit pending the investigation of the claim or objection, upon such terms as tosecurity or otherwise as the Tax Recovery Officer shall deem fit.

(3) The claimant or objector must adduce evidence to show that - (a) In thecase of immovable property at the date of the service of the notice issuedunder this Schedule to pay the arrears, or

(b) In the case of movable property at the date of the attachment, he had someinterest in, or was possessed of, the property in question.

(4) Where, upon the said investigation, the Tax Recovery Officer is satisfiedthat, for the reason stated in the claim or objection, such property was not,at the said date in the possession of the defaulter or of some person in trustfor him or in the occupancy of a tenant or other person paying rent to him, orthat, being in the possession of the defaulter at the said date, it was so inhis possession, not on his own account or as his own property, but on accountof or in trust for some other person, or partly on his own account and partlyon account of some other person, the Tax Recovery Officer shall make an orderreleasing the property, wholly or to such extent as he thinks fit, fromattachment or sale.

(5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as hisown property and not on account of any other person, or was in the possession of some other person in trust for him, or in theoccupancy of tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim.

(6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court toestablish the right which he claims to the property in dispute; but, subject to the result of such suit (if any) the order of the TaxRecovery Officer shall be conclusive.


665. Removal of attachment on satisfaction orcancellation of certificate.

§665.Removal of attachment on satisfaction or cancellation of certificate.Sch. II Part I Rule 12REMOVAL OF ATTACHMENT ON SATISFACTION OR CANCELLATION OF CERTIFICATE.

Where - (a) The amount due, with costs and all charges and expenses resultingfrom the attachment of any property or incurred in order to hold a sale, arepaid to the Tax Recovery Officer, or

(b) The certificate is cancelled, the attachment shall be deemed to bewithdrawn and, in the case of immovable property, the withdrawal shall, if thedefaulter so desires, be proclaimed at his expense, and a copy of theproclamation shall be affixed in the manner provided by this Schedule for aproclamation of sale of immovable property.

666. Officer Entitled to Attach and Sell.

§666.Officer Entitled to Attach and Sell.Sch. II Part I Rule 13OFFICER ENTITLED TO ATTACH AND SELL.

The attachment and sale of movable property and the attachment and sale ofimmovable property may be made by such persons as the Tax Recovery Officer mayfrom time to time direct.

667. Defaulting pruchaser answerable for loss onresale.

§667.Defaulting pruchaser answerable for loss on resale.Sch. II Part I Rule 14DEFAULTING PURCHASER ANSWERABLE FOR LOSS ON RESALE.

Any deficiency of price which may happen on a resale by reason of thepurchaser"s default, and all expenses attending such resale, shall becertified tothe Tax Recovery Officer by the officer holding the sale, and shall, at theinstance of either the Tax Recovery Officer or the defaulter, be recoverablefrom the defaulting purchaser under the procedure provided by this Schedule :

Provided that no such application shall be entertained unless filed within


fifteen days from the date of resale.

668. Adjournment or Stoppage of sale.

§668.Adjournment or Stoppage of sale.Sch. II Part I Rule 15ADJOURNMENT OR STOPPAGE OF SALE.

(1) The Tax Recovery Officer may, in his discretion, adjourn any salehereunder to a specified day and hour; and the officer conducting any suchsale may,in his discretion, adjourn the sale, recording his reasons for suchadjournment :

Provided that, where the sale is made in, or within the precincts of, theoffice of the Tax Recovery Officer, no such adjournment shall be made withoutthe leave of the Tax Recovery Officer.

(2) Where a sale of immovable property is adjourned under sub-rule (1) for alonger period than one calendar month, a fresh proclamation of sale under thisSchedule shall be made unless the defaulter consents to waive it.

(3) Every sale shall be stopped if, before the lot is knocked down, thearrears and costs (including the costs of the sale) are tendered to theofficer conducting the sale, or proof is given to his satisfaction that theamount of such arrears and costs has been paid to the Tax Recovery Officer whoordered the sale.

669. Private Alienation to be void in certain cases.

§669.Private Alienation to be void in certain cases.Sch. II Part I Rule 16PRIVATE ALIENATION TO BE VOID IN CERTAIN CASES.

(1) Where a notice has been served on a defaulter under rule 2, the defaulteror his representative in interest shall not be competent to mortgage, charge,lease or otherwise deal with any property belonging to him except with thepermission of the Tax Recovery Officer, nor shall any civil court issue anyprocess against such property in execution of a decree for the payment ofmoney.

(2) Where an attachment had been made under this Schedule, any privatetransfer or delivery of the property attached or of any interest therein and


any payment to the defaulter of any debt, dividend or other moneys contrary tosuch attachment, shall be void as against all claims enforceable under theattachment.

670. Prohibition against bidding or purchase byofficer.

§670.Prohibition against bidding or purchase by officer.Sch. II Part I Rule 17PROHIBITION AGAINST BIDDING OR PURCHASE BY OFFICER.

No officer or other person having any duty to perform in connection with anysale under this Schedule shall, either directly or indirectly, bid for,acquire or attempt to acquire any interest in the property sold.

671. Prohibition against Sale on Holidays.

§671.Prohibition against Sale on Holidays.Sch. II Part I Rule 18PROHIBITION AGAINST SALE ON HOLIDAYS.

No sale under this Schedule shall take place on a Sunday or other generalholiday recognised by the State Government or on any day which has beennotified by the State Government to be local holiday for the area in which thesale is to take place.

672. Assistance by Police.

§672.Assistance by Police.Sch. II Part I Rule 19ASSISTANCE BY POLICE.

Any officer authorised to attach or sell any property or to arrest thedefaulter or charged with any duty to be performed under this Schedule, mayapply to the officer-in-charge of the nearest police station for suchassistance as may be necessary in the discharge of his duties, and theauthority to whom such application is made shall depute a sufficient number ofpolice officers for furnishing such assistance.

673. Entrustment of certain functions by tax


recovery officer.

§673.Entrustment of certain functions by tax recovery officer.Sch. II Part I Rule 19AENTRUSTMENT OF CERTAIN FUNCTIONS BY TAX RECOVERY OFFICER.

A Tax Recovery Officer may, with the previous approval of the JointCommissioner, entrust any of his functions as the Tax Recovery Officer to anyother officer lower than him in rank (not being lower in rank than anInspector of Income-tax) and such officer shall, in relation to the functionsso entrusted to him, be deemed to be a Tax Recovery Officer.

674. Arrant.

§674.Arrant.Sch. II Part II Rule 20ARRANT.

Except as otherwise provided in this Schedule, when any movable property is tobe attached, the officer shall be furnished by the Tax Recovery Officer (orother officer empowered by him in that behalf) a warrant in writing and signedwith his name specifying the name of the defaulter and the amount to berealised.

675. Service of copy of warrant.

§675.Service of copy of warrant.Sch. II Part II Rule 21SERVICE OF COPY OF WARRANT.

The officer shall cause a copy of the warrant to be served on the defaulter.

676. Attachment.

§676.Attachment.Sch. II Part II Rule 22ATTACHMENT.

If, after service of the copy of the warrant, the amount is not paidforthwith, the officer shall proceed to attach the movable property of thedefaulter.


677. Property in defaulter"s possession.

§677.Property in defaulter"s possession.Sch. II Part II Rule 23PROPERTY IN DEFAULTER"S POSSESSION.

Where the property to be attached is movable property (other than agricultural produce) in the possession of the defaulter, the attachment shall be made byactual seizure, and the officer shall keep the property in his own custody orthe custody of one of his subordinates and shall be responsible for duecustody thereof :

Provided that when the property seized is subject to speedy and natural decayor when the expense of keeping it in custody is likely to exceed its value,the officer may sell it at once.

678. Agricultural Produce.

§678.Agricultural Produce.Sch. II Part II Rule 24AGRICULTURAL PRODUCE.

Where the property to be attached is agricultural produce, the attachmentshall be made by affixing a copy of the warrant of attachment -

(a) Where such produce is growing crop - on the land on which such crop has grown, or

(b) where such produce has been cut or gathered - on the threshing floor or place for treading out grain or the like, or fodder-stack, on or in which it is deposited, and another copy on the outer door or on some other conspicuous part of the house inwhich the defaulter ordinarily resides, or with the leave of the Tax Recovery Officer, on the outer door or on some otherconspicuous part of the house in which he carries on business or personally works for gain, or in which he is known to have lastresided or carried on business or personally worked for gain. The produce shall, thereupon, be deemed to have passed into thepossession of the Tax Recovery Officer.

679. Provisions as to Agricultural produce underattachment.

§679.Provisions as to Agricultural produce under attachment.Sch. II Part II Rule 25PROVISIONS AS TO AGRICULTURAL PRODUCE UNDER ATTACHMENT.

(1) Where agricultural produce is attached, the Tax Recovery Officer shallmake such arrangements for the custody, watching, tending, cutting and


gathering thereof as he may deem sufficient; and he shall have power to defraythe cost of such arrangements.

(2) Subject to such conditions as may be imposed by the Tax Recovery Officerin this behalf, either in the order of attachment or in any subsequent order,the defaulter may tend, cut, gather and store the produce and do any other actnecessary for maturing or preserving it; and, if the defaulter fails to do allor any of such acts, any person appointed by the Tax Recovery Officer in thisbehalf may, subject to the like conditions, do all or any of such acts, andthe costs incurred by such person shall be recoverable from the defaulter asif they were included in the certificate.

(3) Agricultural produce attached as a growing crop shall not be deemed tohave ceased to be under attachment or to require re-attachment merely becauseit has been severed from the soil.

(4) Where an order for the attachment of a growing crop has been made at a considerable time before the crop is likely to be fitto be cut or gathered, the Tax Recovery Officer may suspend the execution of the order for such time as he thinks fit, and may, inhis discretion, make a further order prohibiting the removal of the crop pending the execution of the order of attachment.

(5) A growing crop which from its nature does not admit of being stored shall not be attached under this rule at any time lessthan twenty days before the time at which it is likely to be fit to be cut or gathered.

680. Debts and Shares, etc.

§680.Debts and Shares, etc.Sch. II Part II Rule 26DEBTS AND SHARES, ETC.

(1) In the case of - (a) A debt not secured by a negotiable instrument,

(b) A share in a corporation, or

(c) Other movable property not in the possession of the defaulter exceptproperty deposited in, or in the custody of, any court, the attachment shallbe made by a written order prohibiting, -

(i) In the case of the debt - the creditor from recovering the debt and thedebtor from making payment thereof until the further order of the Tax RecoveryOfficer;

(ii) In the case of the share - the person in whose name the share may bestanding from transferring the same or receiving any dividend thereon;

(iii) Iin the case of the other movable property (except as aforesaid) - Theperson in possession of the same from giving it over to the defaulter.


(2) A copy of such order shall be affixed on some conspicuous part of theoffice of the Tax Recovery Officer, and another copy shall be sent, in thecase of debt, to the debtor, in the case of the share, to the proper officerof the corporation, and in the case of the other movable property (except asaforesaid), to the person in possession of the same.

(3) A debtor prohibited under clause (i) of sub-rule (1) may pay the amount ofhis debt to the Tax Recovery Officer, and such payment shall discharge him aseffectually as payment to the party entitled to receive the same.

681. Attachment of Decree.

§681.Attachment of Decree.Sch. II Part II Rule 27ATTACHMENT OF DECREE.

(1) The attachment of a decree of a civil court for the payment of money orfor sale in enforcement of a mortgage or charge shall be made by the issue tothe civil court of a notice requesting the civil court to stay the executionof the decree unless and until -

(i) The Tax Recovery Officer cancels the notice, or

(ii) The Tax Recovery Officer or the defaulter applies to the court receivingsuch notice to execute the decree.

(2) Where a civil court receives an application under clause (ii) of sub-rule(1), it shall, on the application of the Tax Recovery Officer or the defaulterand subject to the provisions of the Code of Civil Procedure, 1908 (5 of1908), proceed to execute the attached decree and apply the net proceeds insatisfaction of the certificate.

(3) The Tax Recovery Officer shall be deemed to be the representative of theholder of the attached decree, and to be entitled to execute such attacheddecree in any manner lawful for the holder thereof.

682. Share in Movable Property.

§682.Share in Movable Property.Sch. II Part II Rule 28SHARE IN MOVABLE PROPERTY.

Where the property to be attached consists of the share or interest of the


defaulter in movable property belonging to him and another as co-owners, theattachment shall be made by a notice to the defaulter prohibiting him fromtransferring the share or interest or charging it in any way.

683. Salary of Government Servants.

§683.Salary of Government Servants.Sch. II Part II Rule 29SALARY OF GOVERNMENT SERVANTS.

Attachment of the salary or allowances of servants of the Government or alocal authority may be made in the manner provided by rule 48 of Order 21 ofthe First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), and theprovisions of the said rule shall, for the purposes of this rule, applysubject to such modifications as may be necessary.

684. Attachment of Negotiable Instrument.

§684.Attachment of Negotiable Instrument.Sch. II Part II Rule 30ATTACHMENT OF NEGOTIABLE INSTRUMENT.

Where the property is a negotiable instrument not deposited in a court nor inthe custody of a public officer, the attachment shall be made by actualseizure, and the instrument shall be brought before the Tax Recovery Officerand held subject to his orders.

685. Attachment of property in custody of Court orpublic officer.

§685.Attachment of property in custody of Court or public officer.Sch. II Part II Rule 31ATTACHMENT OF PROPERTY IN CUSTODY OF COURT OR PUBLIC OFFICER.

Where the property to be attached is in the custody of any court or publicofficer, the attachment shall be made by a notice to such court or officer,requesting that such property, and any interest or dividend becoming payablethereon, may be held subject to the further orders of the Tax RecoveryOfficer by whom the notice is issued :

Provided that, where such property is in the custody of a court, any questionof title or priority arising between the Tax Recovery Officer and any other


person, not being the defaulter, claiming to be interested in such property byvirtue of any assignment, attachment or otherwise, shall be determined by suchcourt.

686. Attachment of partnership property.

§686.Attachment of partnership property.Sch. II Part II Rule 32ATTACHMENT OF PARTNERSHIP PROPERTY.

(1) Where the property to be attached consists of an interest of thedefaulter, being a partner, in the partnership property, the Tax RecoveryOfficer may make an order charging the share of such partner in thepartnership property and profits with payment of the amount due under thecertificate, and may, by the same or subsequent order, appoint a receiver ofthe share of such partner in the profits, whether already declared or accruingand of any other money which may become due to him in respect of thepartnership, and direct accounts and enquiries and make an order for the saleof such interest or such other order as the circumstances of the case mayrequire.

(2) The other persons shall be at liberty at any time to redeem the interestcharged or, in the case of a sale being directed, to purchase the same.

687. Inventory.

§687.Inventory.Sch. II Part II Rule 33INVENTORY.

In the case of attachment of a movable property by actual seizure, the officershall, after attachment of the property, prepare an inventory of all theproperty attached, specifying in it the place where it is lodged or kept, andshall forward the same to the Tax Recovery Officer and a copy of the inventoryshall be delivered by the officer to the defaulter.

688. Attachment not to be excessive.

§688.Attachment not to be excessive.Sch. II Part II Rule 34ATTACHMENT NOT TO BE EXCESSIVE.


The attachment by seizure shall not be excessive, that is to say, the property attached shall be as nearly as possible proportionate to the amount specifiedin the warrant.

689. Seizure between sunrise and sunset.

§689.Seizure between sunrise and sunset.Sch. II Part II Rule 35SEIZURE BETWEEN SUNRISE AND SUNSET.

Attachment by seizure shall be made after sunrise and before sunset and nototherwise.

690. Power to break open doors, etc.

§690.Power to break open doors, etc.Sch. II Part II Rule 36POWER TO BREAK OPEN DOORS, ETC.

The officer may break open any inner or outer door or window of any buildingand enter any building in order to seize any movable property if the officerhas reasonable grounds to believe that such building contains movable propertyliable to seizure under the warrant and the officer has notified hisauthority, and intention of breaking open if admission is not given. He shall,however, give all reasonable opportunity to women to withdraw.

691. Sale.

§691.Sale.Sch. II Part II Rule 37SALE.

The Tax Recovery Officer may direct that any movable property attached underthis Schedule or such portion thereof as may seem necessary to satisfy thecertificate shall be sold.

692. Issue of proclamation.

§692.Issue of proclamation.Sch. II Part II Rule 38ISSUE OF PROCLAMATION.


When any sale of movable property is ordered by the Tax Recovery Officer, theTax Recovery Officer shall issue a proclamation in the language of thedistrict, of the intended sale, specifying the time and place of sale andwhether the sale is subject to confirmation or not.

693. Proclamation How Made.

§693.Proclamation How Made.Sch. II Part II Rule 39PROCLAMATION HOW MADE.

(1) Such proclamation shall be made by beat of drum or other customary mode, -

(a) In the case of property attached by actual seizure - (i) in the village inwhich the property was seized, or, if the property was seized in a town orcity, then, in the locality in which it was seized; and

(ii) At such other places as the Tax Recovery Officer may direct;

(b) In the case of property attached otherwise than by actual seizure, in suchplaces, if any, as the Tax Recovery Officer may direct.

(2) A copy of the proclamation shall also be affixed in a conspicuous part ofthe office of the Tax Recovery Officer.

694. Sale after fifteen days.

§694.Sale after fifteen days.Sch. II Part II Rule 40SALE AFTER FIFTEEN DAYS.

Except where the property is subject to speedy and natural decay or when theexpense of keeping it in custody is likely to exceed its value, no sale ofmovable property under this Schedule shall, without the consent in writing ofthe defaulter, take place until after the expiry of at least fifteen dayscalculated from the date on which a copy of the sale proclamation was affixedin the office of the Tax Recovery Officer.

695. Sale of Agricultural Produce.

§695.Sale of Agricultural Produce.


Sch. II Part II Rule 41SALE OF AGRICULTURAL PRODUCE.

(1) Where the property to be sold is agricultural produce, the sale shall beheld, - (a) If such produce is a growing crop - on or near the land on whichsuchcrop has grown, or

(b) If such produce has been cut or gathered - at or near the threshing flooror place for treading out grain or the like, or fodder-stack, on or in whichit is deposited :

Provided that the Tax Recovery Officer may direct the sale to be held at thenearest place of public resort, if he is of opinion that the produce isthereby likely to sell to greater advantage.

(2) Where, on the produce being put up for sale, - (a) A fair price, in theestimation of the person holding the sale, is not offered for it, and

(b) The owner of the produce, or a person authorised to act on his behalf, applies to have the sale postponed till the next day or,if a market is held at the place of sale, the next market day, the sale shall be postponed accordingly, and shall be then completed,whatever price may be offered for the produce.

696. Special Provisions relating to growing crops.

§696.Special Provisions relating to growing crops.Sch. II Part II Rule 42SPECIAL PROVISIONS RELATING TO GROWING CROPS.

(1) Where the property to be sold is a growing crop and the crop from itsnature admits of being stored but has not yet been stored, the day of the saleshall be so fixed as to admit of the crop being made ready for storing beforethe arrival of such day, and the sale shall not be held until the crop hasbeen cut or gathered and is ready for storing.

(2) Where the crop from its nature does not admit of being stored or can besold to a greater advantage in an unripe stage (e.g. as green wheat), it maybe sold before it is cut and gathered, and the purchaser shall be entitled toenter on the land, and to do all that is necessary for the purpose of tendingor cutting or gathering the crop.

697. Sale to be by Auction.

§697.Sale to be by Auction.


Sch. II Part II Rule 43SALE TO BE BY AUCTION.

The property shall be sold by public auction in one or more lots as theofficer may consider advisable, and if the amount to be realised by sale issatisfied by the sale of a portion of the property, the sale shall beimmediately stopped with respect to the remainder of the lots.

698. Sale by Public Auction.

§698.Sale by Public Auction.Sch. II Part II Rule 44SALE BY PUBLIC AUCTION.

(1) Where movable property is sold by public auction, the price of each lotshall be paid at the time of sale or as soon after as the officer holding thesale directs and in default of payment, the property shall forthwithbe resold.

(2) On payment of the purchase-money, the officer holding the sale shall granta certificate specifying the property purchased, the price paid andthe name of the purchaser, and the sale shall become absolute.

(3) Where the movable property to be sold is a share in goods belonging to thedefaulter and a co-owner, and two or more persons, of whom one is such co-owner, respectively bid the same sum for such property or for any lot, thebidding shall be deemed to be the bidding of the co-owner.

699. Irregularity not to vitiate sale, but anyperson injured may sue.

§699.Irregularity not to vitiate sale, but any person injured may sue.Sch. II Part II Rule 45IRREGULARITY NOT TO VITIATE SALE, BUT ANY PERSON INJURED MAY SUE.

No irregularity in publishing or conducting the sale of movable property shallvitiate the sale, but any person sustaining substantial injury by reason ofsuch irregularity at the hand of any other person may institute a suit in acivil court against him for compensation, or (if such other person is thepurchaser) for the recovery of the specific property and for compensation indefault of such recovery.


700. Negotiable Instruments and Shares in aCorporation.

§700.Negotiable Instruments and Shares in a Corporation.Sch. II Part II Rule 46NEGOTIABLE INSTRUMENTS AND SHARES IN A CORPORATION.

Notwithstanding anything contained in this Schedule, where the property to besold is a negotiable instrument or a share in a corporation, the Tax RecoveryOfficer may, instead of directing the sale to be made by public auction,authorise the sale of such instrument or share through a broker.

701. Order for Payment of Coin or Currency notes tothe Assessing Officer.

§701.Order for Payment of Coin or Currency notes to the Assessing Officer.Sch. II Part II Rule 47ORDER FOR PAYMENT OF COIN OR CURRENCY NOTES TO THE ASSESSING OFFICER

Where the property attached is current coin or currency notes, the TaxRecovery Officer may, at any time during the continuance of the attachment,direct that such coins or notes shall be credited to the Central Governmentand the amount so credited shall be dealt with in the manner specified in rule8.

702. Attachment.

§702.Attachment.Sch. II Part III Rule 48ATTACHMENT.

Attachment of the immovable property of the defaulter shall be made by anorder prohibiting the defaulter from transferring or charging the property inany way and prohibiting all persons from taking any benefit under suchtransfer or charge.

703. Service of notice of attachment.

§703.Service of notice of attachment.Sch. II Part III Rule 49


SERVICE OF NOTICE OF ATTACHMENT.

A copy of the order of attachment shall be served on the defaulter.

704. Proclamation of Attachment.

§704.Proclamation of Attachment.Sch. II Part III Rule 50PROCLAMATION OF ATTACHMENT.

The order of attachment shall be proclaimed at some place on or adjacent tothe property attached by beat of drum or other customary mode, and a copy ofthe order shall be affixed on a conspicuous part of the property and on thenotice board of the office of the Tax Recovery Officer.

705. Attachment to relate back from the date ofservice of notice.

§705.Attachment to relate back from the date of service of notice.Sch. II Part III Rule 51ATTACHMENT TO RELATE BACK FROM THE DATE OF SERVICE OF NOTICE.

Where any immovable property is attached under this Schedule, the attachmentshall relate back to, and take effect from, the date on which the notice topay the arrears, issued under this Schedule, was served upon the defaulter.

706. Sale and Proclamation of Sale.

§706.Sale and Proclamation of Sale.Sch. II Part III Rule 52SALE AND PROCLAMATION OF SALE.

(1) The Tax Recovery Officer may direct that any immovable property which hasbeen attached, or such portion thereof as may seem necessary to satisfy thecertificate, shall be sold.

(2) Where any immovable property is ordered to be sold, the Tax RecoveryOfficer shall cause a proclamation of the intended sale to be made in thelanguage of the district.


707. Contents of Proclamation.

§707.Contents of Proclamation.Sch. II Part III Rule 53CONTENTS OF PROCLAMATION.

A proclamation of sale of immovable property shall be drawn up after notice tothe defaulter, and shall state the time and place of sale, and shall specify,as fairly and accurately as possible, - (a) The property to be sold;

(b) The revenue, if any, assessed upon the property or any part thereof;

(c) The amount for the recovery of which the sale is ordered;

(cc) The reserve price, if any, below which the property may not be sold; and

(d) Any other thing which the Tax Recovery Officer considers it material for apurchaser to know in order to judge the nature and value of the property.

708. Made of making proclamation.

§708.Made of making proclamation.Sch. II Part III Rule 54MODE OF MAKING PROCLAMATION.

(1) Every proclamation for the sale of immovable property shall be made atsome place on or near such property by beat of drum or other customary mode,and a copy of the proclamation shall be affixed on a conspicuous part of theproperty and also upon a conspicuous part of the office of the Tax RecoveryOfficer.

(2) Where the Tax Recovery Officer so directs, such proclamation shall also bepublished in the Official Gazette or in a local newspaper, or in both; and thecost of such publication shall be deemed to be costs of the sale.

(3) Where the property is divided into lots for the purpose of being sold separately, it shall not be necessary to make a separate proclamation for each lot, unless proper notice of the sale cannot, in the opinion of the TaxRecovery Officer, otherwise be given.

709. Time of Sale.

§709.Time of Sale.Sch. II Part III Rule 55


TIME OF SALE.

No sale of immovable property under this Schedule shall, without the consentin writing of the defaulter, take place until after the expiration of at leastthirty days calculated from the date on which a copy of the proclamation ofsale has been affixed on the property or in the office of the Tax RecoveryOfficer, whichever is later.

710. Sale to be by Auction.

§710.Sale to be by Auction.Sch. II Part III Rule 56SALE TO BE BY AUCTION.

The sale shall be by public auction to the highest bidder and shall be subjectto confirmation by the Tax Recovery Officer :

Provided that no sale under this rule shall be made if the amount bid by the highest bidder is less than the reserve price, if any,specified under clause (cc) of rule 53.

711. Deposit by purchaser and resale in default.

§711.Deposit by purchaser and resale in default.Sch. II Part III Rule 57DEPOSIT BY PURCHASER AND RESALE IN DEFAULT.

(1) On every sale of immovable property, the person declared to be thepurchaser shall pay, immediately after such declaration, a deposit of twenty-five per cent. of the amount of his purchase money, to the officer conductingthe sale; and, in default of such deposit, the property shall forthwith beresold.

(2) The full amount of purchase money payable shall be paid by the purchaserto the Tax Recovery Officer on or before the fifteenth day from the date ofthe sale of the property.

712. Procedure in default of payment.

§712.Procedure in default of payment.Sch. II Part III Rule 58PROCEDURE IN DEFAULT OF PAYMENT.


In default of payment within the period mentioned in the preceding rule, thedeposit may, if the Tax Recovery Officer thinks fit, after defraying theexpenses of the sale, be forfeited to the Government, and the property shallbe resold, and the defaulting purchaser shall forfeit all claims to theproperty or to any part of the sum for which it may subsequently be sold.

713. Authority to Bid.

§713.Authority to Bid.Sch. II Part III Rule 59AUTHORITY TO BID.

(1) Where the sale of a property, for which a reserve price has been specifiedunder clause (cc) of rule 53, has been postponed for want of a bid of anamount not less than such reserve price, it shall be lawful for an AssessingOfficer, if so authorised by the Chief Commissioner or Commissioner in thisbehalf, to bid for the property on behalf of the Central Government at anysubsequent sale.

(2) All persons bidding at the sale shall be required to declare if they arebidding on their own behalf or on behalf of their principals.

In the latter case, they shall be required to deposit their authority, and in default their bids shall be rejected.

(3) Where the Assessing Officer referred to in sub-rule (1) is declared to be the purchaser of the property at any subsequent sale,nothing contained in rule 57 shall apply to the case and the amount of the purchase price shall be adjusted towards the amountspecified in the certificate.

714. Application to set aside sale of immovableproperty on deposit.

§714.Application to set aside sale of immovable property on deposit.Sch. II Part III Rule 60APPLICATION TO SET ASIDE SALE OF IMMOVABLE PROPERTY ON DEPOSIT.

(1) Where immovable property has been sold in execution of a certificate, thedefaulter, or any person whose interests are affected by the sale, may, at anytime within thirty days from the date of the sale, apply to the Tax RecoveryOfficer to set aside the sale, on his depositing - (a) The amount specified inthe proclamation of sale as that for the recovery of which the sale wasordered with interest thereon at the rate of fifteen per cent per annum,calculated from the date of the proclamation of sale to the date when thedeposit is made; and


(b) For payment to the purchaser as penalty, a sum equal to five per cent. ofthe purchase money, but not less than one rupee.

(2) Where a person makes an application under rule 61 for setting aside thesale of his immovable property, he shall not, unless he withdraws thatapplication, be entitled to make or prosecute an application under this rule.

715. Application to set aside sale of immovableproperty on ground of Non-Service of notice orIrregularity.

§715.Application to set aside sale of immovable property on ground of Non-Service of notice or Irregularity.Sch. II Part III Rule 61APPLICATION TO SET ASIDE SALE OF IMMOVABLE PROPERTY ON GROUND OF NON-SERVICEOF NOTICE OR IRREGULARITY.

Where immovable property has been sold in execution of a certificate, such Income-tax Officer as may be authorised by the Chief Commissioner orCommissioner in this behalf, the defaulter, or any person whose interests areaffected by the sale, may, at any time within thirty days from the date of thesale, apply to the Tax Recovery Officer to set aside the sale of the immovableproperty on the ground that notice was not served on the defaulter to pay thearrears as required by this Schedule or on the ground of a materialirregularity in publishing or conducting the sale :

Provided that - (a) No sale be set aside on any such ground unless the Tax Recovery Officer is satisfied that the applicant hassustained substantial injury by reason of the non-service or irregularity; and

(b) An application made by defaulter under this rule shall be disallowed unless the applicant deposits the amount recoverablefrom him in execution of the certificate.

716. Setting aside sale where defaulter has nosaleable interest

§716.Setting aside sale where defaulter has no saleable interestSch. II Part III Rule 62SETTING ASIDE SALE WHERE DEFAULTER HAS NO SALEABLE INTEREST.

At any time within thirty days of the sale, the purchaser may apply to the TaxRecovery Officer to set aside the sale on the ground that the defaulter had nosaleable interest in the property sold.


717. Confirmation of Sale.

§717.Confirmation of Sale.Sch. II Part III Rule 63CONFIRMATION OF SALE.

(1) Where no application is made for setting aside the sale under theforegoing rules or where such an application is made and disallowed by theTax Recovery Officer, the Tax Recovery Officer shall (if the full amount ofthe purchase money has been paid) make an order confirming the sale, andthereupon, the sale shall become absolute.

(2) Where such application is made and allowed, and where, in the case of anapplication made to set aside the sale on deposit of the amount and penaltyand charges, the deposit is made within thirty days from the date of the sale,the Tax Recovery Officer shall make an order setting aside the sale :

Provided that no order shall be made unless notice of the application has beengiven to the persons affected thereby.

718. Return of purchase money in certain cases.

§718.Return of purchase money in certain cases.

719. Sale certificate.

§719.Sale certificate.Sch. II Part III Rule 65SALE CERTIFICATE.

(1) Where a sale of immovable property has become absolute, the Tax RecoveryOfficer shall grant a certificate specifying the property sold, and the nameof the person who at the time of sale is declared to be the purchaser.

(2) Such certificate shall state the date on which the sale became absolute.

720. Postponement of sale to enable defaulter toraise amount due under certificate.

§720.Postponement of sale to enable defaulter to raise amount due under


certificate.Sch. II Part III Rule 66POSTPONEMENT OF SALE TO ENABLE DEFAULTER TO RAISE AMOUNT DUE UNDERCERTIFICATE.

(1) Where an order for the sale of immovable property has been made, if thedefaulter can satisfy the Tax Recovery Officer that there is reason to believethat the amount of the certificate may be raised by the mortgage or lease orprivate sale of such property, or some part thereof, or of any other immovableproperty of the defaulter, the Tax Recovery Officer may, on his applicationpostpone the sale of the property comprised in the order for sale, on suchterms and for such period as he thinks proper, to enable him to raise theamount.

(2) In such case, the Tax Recovery Officer shall grant a certificate to thedefaulter, authorising him, within a period to be mentioned therein, andnotwithstanding anything contained in this Schedule, to make the proposedmortgage, lease or sale :

Provided that all moneys payable under such mortgage, lease or sale shall bepaid, not to the defaulter, but to the Tax Recovery Officer :

Provided also that no mortgage, lease or sale under this rule shall becomeabsolute until it has been confirmed by the Tax Recovery Officer.

721. Fresh proclamation before Re-Sale.

§721.Fresh proclamation before Re-Sale.Sch. II Part III Rule 67FRESH PROCLAMATION BEFORE RE-SALE.

Every resale of immovable property, in default of payment of the purchasemoney within the period allowed for such payment, shall be made after theissue of a fresh proclamation in the manner and for the period hereinbeforeprovided for the sale.

722. Bid of Co-Sharer to have preference.

§722.Bid of Co-Sharer to have preference.Sch. II Part III Rule 68BID OF CO-SHARER TO HAVE PREFERENCE.

Property sold is a share of undivided immovable property, and two or more


persons, of whom one is a co-sharer, respectively bid the same sum for suchproperty or for any lot, the bid shall be deemed to be the bid of the co-sharer.

723. Acceptance of property in satisfaction ofamount due from the defaulter.

§723.Acceptance of property in satisfaction of amount due from the defaulter.Sch. II Part III Rule 68AACCEPTANCE OF PROPERTY IN SATISFACTION OF AMOUNT DUE FROM THE DEFAULTER.

(1) Without prejudice to the provisions contained in this Part, an AssessingOfficer duly authorised by the Chief Commissioner or Commissioner in thisbehalf, may accept in satisfaction of the whole or any part of the amount duefrom the defaulter the property, the sale of which has been postponed for thereason mentioned in sub-rule (1) of rule 59, at such price as may be agreedupon between the Assessing Officer and the defaulter.

(2) Where any property is accepted under sub-rule (1), the defaulter shalldeliver possession of such property to the Assessing Officer and on the datethe possession of the property is delivered to the Assessing Officer theproperty shall vest in the Central Government and the Central Governmentshall, where necessary, intimate the concerned Registering Officer appointedunder the Registration Act, 1908 (16 of 1908), accordingly.

(3) Where the price of the property agreed upon under sub-rule (1) exceeds theamount due from the defaulter, such excess shall be paid by the AssessingOfficer to the defaulter within a period of three months from the date ofdelivery of possession of the property and where the Assessing Officer failsto pay such excess within the period aforesaid, the Central Government shall,for the period commencing on the expiry of such period and ending with thedate of payment of the amount remaining unpaid, pay simple interest at twelveper cent. per annum to the defaulter on such amount.

724. Time-Limit for sale of attached immovableproperty.

§724.Time-Limit for sale of attached immovable property.Sch. II Part III Rule 68BTIME-LIMIT FOR SALE OF ATTACHED IMMOVABLE PROPERTY.

(1) No sale of immovable property shall be made under this Part after the


expiry of three years from the end of the financial year in which the ordergiving rise to a demand of any tax, interest, fine, penalty or any other sum,for the recovery of which the immovable property has been attached, has becomeconclusive under the provisions of section 245-I or, as the case may be, finalin terms of the provisions of Chapter XX :

Provided that where the immovable property is required to be resold due to theamount of highest bid being less than the reserve price or under thecircumstances mentioned in rule 57 or rule 58 or where the sale is set asideunder rule 61, the aforesaid period of limitation for the sale of theimmovable property shall stand extended by one year.

(2) In computing the period of limitation under sub-rule (1), the period - (i) During which the levy of the aforesaid tax, interest,fine, penalty or any other sum is stayed by an order or injunction of any court; or

(ii) During which the proceedings of attachment or sale of the immovable property are stayed by an order or injunction of anycourt; or

(iii) Commencing from the date of the presentation of any appeal against the order passed by the Tax Recovery Officer underthis Schedule and ending on the day the appeal is decided, shall be excluded :

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation for the sale of theimmovable property is less than 180 days, such remaining period shall be extended to 180 days and the aforesaid period oflimitation shall be deemed to be extended accordingly.

(3) Where any immovable property has been attached under this Part before the 1st day of June, 1992, and the order giving riseto a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has beenattached, has also become conclusive or final before the said date, that date shall be deemed to be the date on which the saidorder has become conclusive or, as the case may be, final.

(4) Where the sale of immovable property is not made in accordance with the provisions of sub-rule (1), the attachment order inrelation to the said property shall be deemed to have been vacated on the expiry of the time of limitation specified under thisrule.

725. Appointment of receiver for business.

§725.Appointment of receiver for business.Sch. II Part IV Rule 69APPOINTMENT OF RECEIVER FOR BUSINESS.

(1) Where the property of a defaulter consists of a business, the Tax Recovery Officer may attach the business and appoint a person as receiver to manage the business.

(2) Attachment of a business under this rule shall be made by an orderprohibiting the defaulter from transferring or charging the business in anyway and prohibiting all persons from taking any benefit under such transfer orcharge, and intimating that the business has been attached under this rule. Acopy of the order of attachment shall be served on the defaulter, and another


copy shall be affixed on a conspicuous part of the premises in which thebusiness is carried on and on the notice board of the office of the TaxRecovery Officer.

726. Appointment of receiver for immovable property.

§726.Appointment of receiver for immovable property.Sch. II Part IV Rule 70APPOINTMENT OF RECEIVER FOR IMMOVABLE PROPERTY.

Where immovable property is attached, the Tax Recovery Officer may, instead ofdirecting a sale of the property appoint a person as receiver to manage suchproperty.

727. Powers of receiver.

§727.Powers of receiver.Sch. II Part IV Rule 71POWERS OF RECEIVER.

(1) Where any business or other property is attached and taken undermanagement under the foregoing rules, the receiver shall, subject to thecontrol of the Tax Recovery Officer, have such powers as may be necessary forthe proper management of the property and the realisation of the profits, orrents and profits thereof.

(2) The profits, or rents and profits, of such business or other property,shall, after defraying the expenses of management, be adjusted towardsdischarge of the arrears, and the balance, if any, shall be paid to thedefaulter.

728. Withdrawal of Management.

§728.Withdrawal of Management.Sch. II Part IV Rule 72WITHDRAWAL OF MANAGEMENT.

The attachment and management under the foregoing rules may be withdrawn atany time at the discretion of the Tax Recovery Officer, or if the arrears aredischarged by receipt of such profits and rents or are otherwise paid.


729. Notice to show cause.

§729.Notice to show cause.Sch. II Part V Rule 73NOTICE TO SHOW CAUSE.

(1) No order for the arrest and detention in civil prison of a defaulter shallbe made unless the Tax Recovery Officer has issued and served a notice uponthe defaulter calling upon him to appear before him on the date specified inthe notice and to show cause why he should not be committed to the civilprison, and unless the Tax Recovery Officer for reasons recorded in writing issatisfied - (a) That the defaulter, with the object or effect of obstructingthe execution of the certificate, has, after the drawing up of the certificateby the Tax Recovery Officer, dishonestly transferred, concealed or removed anypart of his property; or

(b) That the defaulter has, or has had since the drawing up of the certificateby the Tax Recovery Officer, the means to pay the arrears or some substantialpart thereof and refuses or neglects or has refused or neglected to pay thesame.

(2) Notwithstanding anything contained in sub-rule (1), a warrant for thearrest of the defaulter may be issued by the Tax Recovery Officer if the TaxRecovery Officer is satisfied, by affidavit or otherwise, that with the objector effect of delaying the execution of the certificate the defaulter is likelyto abscond or leave the local limits of the jurisdiction of the Tax RecoveryOfficer.

(3) Where appearance is not made in obedience to a notice issued and servedunder sub-rule (1), the Tax Recovery Officer may issue a warrant for thearrest of the defaulter.

(3A) A warrant of arrest issued by a Tax Recovery Officer under sub-rule (2)or sub-rule (3) may also be executed by any other Tax Recovery Officer withinwhose jurisdiction the defaulter may for the time being be found.

(4) Every person arrested in pursuance of a warrant of arrest under this rule shall be brought before the Tax Recovery Officerissuingthe warrant as soon as practicable and in any event within twenty-four hours of his arrest (exclusive of the time required for thejourney) :

Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officerarresting him, such officer shall at once release him.

Explanation : For the purposes of this rule, where the defaulter is a Hindu undivided family, the Karta thereof shall be deemed tobe the defaulter.


730. Hearing.

§730.Hearing.Sch. II Part V Rule 74HEARING.

When a defaulter appears before the Tax Recovery Officer in obedience to anotice to show cause or is brought before the Tax Recovery Officer under rule73, the Tax Recovery Officer shall give the defaulter an opportunity ofshowing cause why he should not be committed to the civil prison.

731. Custody pending hearing.

§731.Custody pending hearing.Sch. II Part V Rule 75CUSTODY PENDING HEARING.

Pending the conclusion of the inquiry, the Tax Recovery Officer may, in hisdiscretion, order the defaulter to be detained in the custody of such officeras the Tax Recovery Officer may think fit or release him on his furnishingsecurity to the satisfaction of the Tax Recovery Officer for his appearancewhen required.

732. Order of detention.

§732.Order of detention.Sch. II Part V Rule 76ORDER OF DETENTION.

(1) Upon the conclusion of the inquiry, the Tax Recovery Officer may make anorder for the detention of the defaulter in the civil prison and shall in thatevent cause him to be arrested if he is not already under arrest :

Provided that in order to give the defaulter an opportunity of satisfying thearrears, the Tax Recovery Officer may, before making the order of detention,leave the defaulter in the custody of the officer arresting him or of anyother officer for a specified period not exceeding 15 days, or release him onhis furnishing security to the satisfaction of the Tax Recovery Officer forhis appearance at the expiration of the specified period if the arrears arenot so satisfied.

(2) When the Tax Recovery Officer does not make an order of detention under


sub-rule (1) he shall, if the defaulter is under arrest, direct his release.

733. Detention in and release from prison.

§733.Detention in and release from prison.Sch. II Part V Rule 77DETENTION IN AND RELEASE FROM PRISON.

(1) Every person detained in the civil prison in execution of a certificatemay be so detained, - (a) Where the certificate is for a demand of an amountexceeding two hundred and fifty rupees - for a period of six months; and

(b) In any other case - for a period of six weeks :

Provided that he shall be released from such detention - (i) On the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison, or

(ii) On the request of the Tax Recovery Officer on any ground other than the grounds mentioned in rules 78 and 79.

(2) A defaulter released from detention under this rule shall not, merely by reason of his release, be discharged from his liabilityfor the arrears; but he shall not be liable to be rearrested under the certificate in execution of which he was detained in the civilprison.

734. Release.

§734.Release.Sch. II Part V Rule 78RELEASE.

(1) The Tax Recovery Officer may order the release of a defaulter who has beenarrested in execution of a certificate upon being satisfied that he hasdisclosed the whole of his property and has placed it at the disposal of theTax Recovery Officer and that he has not committed any act of bad faith.

(2) If the Tax Recovery Officer has ground for believing the disclosure madeby a defaulter under sub-rule (1) to have been untrue, he may order therearrest of the defaulter in execution of the certificate, but the period ofhis detention in the civil prison shall not in the aggregate exceed thatauthorised by rule 77.

735. Release on ground of illness.

§735.Release on ground of illness.Sch. II Part V Rule 79


RELEASE ON GROUND OF ILLNESS.

(1) At any time after a warrant for the arrest of a defaulter has been issued,the Tax Recovery Officer may cancel it on the ground of his serious illness.

(2) Where a defaulter has been arrested, the Tax Recovery Officer may releasehim if, in the opinion of the Tax Recovery Officer, he is not in a fit stateof health to be detained in the civil prison.

(3) Where a defaulter has been committed to the civil prison, he may bereleased therefrom, by the Tax Recovery Officer on the ground of the existenceof any infectious or contagious disease, or on the ground of his sufferingfrom any serious illness.

(4) A defaulter released under this rule may be rearrested, but the period ofhis detention in the civil prison shall not in the aggregate exceed thatauthorised by rule 77.

736. Entry into dwelling house.

§736.Entry into dwelling house.Sch. II Part V Rule 80ENTRY INTO DWELLING HOUSE.

For the purpose of making an arrest under this Schedule - (a) No dwellinghouse shall be entered after sunset and before sunrise;

(b) No outer door of a dwelling house shall be broken open unless such dwelling house or a portion thereof is in the occupancyof the defaulter and he or other occupant of the house refuses or in any way prevents access thereto; but, when the personexecuting any such warrant had duly gained access to any dwelling house, he may break open the door of any room or apartment if he has reason to believe that the defaulter is likely to be found there;

(c) No room, which is in the actual occupancy of a woman who, according to the customs of the country, does not appear inpublic, shall be entered into unless the officer authorised to make the arrest has given notice to her that she is at liberty towithdraw and has given her reasonable time and facility for withdrawing.

737. Prohibition against arrest of women or minors,etc.

§737.Prohibition against arrest of women or minors, etc.Sch. II Part V Rule 81PROHIBITION AGAINST ARREST OF WOMEN OR MINORS, ETC.

The Tax Recovery Officer shall not order the arrest and detention in the civil prison of - (a) A woman, or


(b) Any person who, in his opinion, is a minor or of unsound mind.

738. Officers deemed to be acting judicially.

§738.Officers deemed to be acting judicially.Sch. II Part VI Rule 82OFFICERS DEEMED TO BE ACTING JUDICIALLY.

Every Chief Commissioner or Commissioner, Tax Recovery Officer or otherofficer acting under this Schedule shall, in the discharge of his functionsunder this Schedule, be deemed to be acting judicially within the meaning ofthe Judicial Officers Protection Act, 1850 (18 of 1850).

739. Power to take evidence.

§739.Power to take evidence.Sch. II Part VI Rule 83POWER TO TAKE EVIDENCE.

Every Chief Commissioner or Commissioner, Tax Recovery Officer or otherofficer acting under the provisions of this Schedule shall have the powers ofa civil court while trying a suit for the purpose of receiving evidence,administering oaths, enforcing the attendance of witnesses and compelling theproduction of documents.

740. Continuance of certificate.

§740.Continuance of certificate.Sch. II Part VI Rule 84CONTINUANCE OF CERTIFICATE.

No certificate shall cease to be in force by reason of the death of thedefaulter.

741. Procedure on death of defaulter.

§741.Procedure on death of defaulter.Sch. II Part VI Rule 85PROCEDURE ON DEATH OF DEFAULTER.


If at any time after the certificate is drawn up by the Tax Recovery Officerthe defaulter dies, the proceedings under this Schedule (except arrest anddetention) may be continued against the legal representative of the defaulter,and the provisions of this Schedule shall apply as if the legal representativewere the defaulter.

742. Appeals.

§742.Appeals.Sch. II Part VI Rule 86APPEALS.

(1) An appeal from any original order passed by the Tax Recovery Officer underthis Schedule, not being an order which is conclusive, shall lie to the ChiefCommissioner or Commissioner.

(2) Every appeal under this rule must be presented within thirty days from thedate of the order appealed against.

(3) Pending the decision of any appeal, execution of the certificate may be stayed if the appellate authority so directs, but nototherwise.

(4) Notwithstanding anything contained in sub-rule (1), where a Chief Commissioner or Commissioner is authorised to exercisepowers as such in respect of any area, then, all appeals against the orders passed before the date of such authorisation by anyTax Recovery Officer authorised to exercise powers as such in respect of that area, or an area which is included in that area,shall lie to such Chief Commissioner or Commissioner.

743. Review.

§743.Review.Sch. II Part VI Rule 87REVIEW.

Any order passed under this Schedule may, after notice to all personsinterested, be reviewed by the Chief Commissioner or Commissioner, TaxRecovery Officer or other officer who made the order, or by his successor inoffice, on account of any mistake apparent from the record.

744. Recovery from surety.

§744.Recovery from surety.Sch. II Part VI Rule 88RECOVERY FROM SURETY.


Where any person has under this Schedule become surety for the amount due bythe defaulter, he may be proceeded against under this Schedule as if he werethe defaulter.

745. Omitted.

§745.Omitted.Sch. II Part VI Rule 89MISCELLANEOUS

[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1989]

746. Subsistenace allowance.

§746.Subsistenace allowance.Sch. II Part VI Rule 90SUBSISTENCE ALLOWANCE.

(1) When a defaulter is arrested or detained in the civil prison, the sumpayable for the subsistence of the defaulter from the time of arrest until heis released shall be borne by the Tax Recovery Officer.

(2) Such sum shall be calculated on the scale fixed by the State Governmentfor the subsistence of judgment-debtors arrested in execution of a decree of acivil court.

(3) Sums payable under this rule shall be deemed to be costs in the proceeding:

Provided that the defaulter shall not be detained in the civil prison orarrested on account of any sum so payable.

747. Forms.

§747.Forms.Sch. II Part VI Rule 91FORMS.

The Board may prescribe the form to be used for any order, notice, warrant orcertificate to be issued under this Schedule.


748. Power to make rules.

§748.Power to make rules.Sch. II Part VI Rule 92POWER TO MAKE RULES.

(1) The Board may make rules, consistent with the provisions of this Act,regulating the procedure to be followed by Chief Commissioners, Commissioners,Tax Recovery Officers and other officers acting under this Schedule.

(2) In particular, and without prejudice to the generality of the powerconferred by sub-rule (1), such rules may provide for all or any of thefollowing matters, namely :- (a) The area within which Chief Commissioners,Commissioners or Tax Recovery Officers may exercise jurisdiction;

(b) The manner in which any property sold under this Schedule may bedelivered;

(c) The execution of a document of the endorsement of a negotiable instrumentor a share in corporation, by or on behalf of the Tax Recovery Officer, wheresuch execution or endorsement is required to transfer such negotiableinstrument or share to a person who has purchased it under a sale under thisSchedule;

(d) The procedure for dealing with resistance or obstruction offered by anyperson to a purchaser of any immovable property sold under this Schedule, inobtaining possession of the property;

(e) The fees to be charged for any process issued under this Schedule;

(f) The scale of charges to be recovered in respect of any other proceedingtaken under this Schedule;

(g) Recovery of poundage fee;

(h) The maintenance and custody, while under attachment, of livestock or other movable property, the fees to be charged forsuch maintenance and custody, the sale of such livestock or property, and the disposal of proceeds of such sale;

(i) The mode of attachment of business.

749. Saving Regarding Charge.

§749.Saving Regarding Charge.Sch. II Part VI Rule 93SAVING REGARDING CHARGE.


Nothing in this Schedule shall affect any provision of this Act whereunder thetax is a first charge upon any asset.

750. Continuance of certain pending proceedings andpower to remove difficulties.

§750.Continuance of certain pending proceedings and power to removedifficulties.Sch. II Part VI Rule 94CONTINUANCE OF CERTAIN PENDING PROCEEDINGS AND POWER TO REMOVE DIFFICULTIES.

All proceedings for the recovery of tax pending immediately before the cominginto force of the amendments to this Schedule by the Direct Tax Laws(Amendment) Act, 1987, shall be continued under this Schedule as amended bythat Act from the stage they had reached, and, for this purpose, everycertificate, issued by the Assessing Officer under section 222 before suchamendment shall be deemed to be a certificate drawn up by the Tax RecoveryOfficer under that section after such amendment, and, if any difficultyarises in continuing the said proceedings, the Board may issue (whether by wayof modification, not affecting the substance of any rule in this Schedule orotherwise) general or special orders which appear to it to be necessary orexpedient for the purpose of removing the difficulty.

751. Distraint and Sale.

§751.Distraint and Sale.Sch. IIIDISTRAINT AND SALE.

Where any distraint and sale of movable property are to be effected by anyAssessing Officer or Tax Recovery Officer authorised for the purpose, suchdistraint and sale shall be made, as far as may be, in the same manner asattachment and sale of any movable property attachable by actual seizure, andthe provisions of the Second Schedule relating to attachment and sale shall,so far as may be, apply in respect of such distraint and sale.

752. Application of part.

§752.Application of part.Sch. IV Part A Rule 1APPLICATION OF PART.


This part shall not apply to any provident fund to which the Provident FundsAct, 1925 (19 of 1925), applies.

753. Definitions.

§753.Definitions.Sch. IV Part A Rule 2DEFINITIONS.

In this part, unless the context otherwise requires, - (a) "Employer" meansany person who maintains a provident fund for the benefit of his or itsemployees, being - (i) A Hindu undivided family, company, firm or otherassociation of persons, or

(ii) An individual engaged in a business or profession the profits and gainswhereof are assessable to income-tax under the head "Profits and gains ofbusiness or profession";

(b) "Employee" means an employee participating in a provident fund, but doesnot include a personal or domestic servant;

(c) "Contribution" means any sum credited by or on behalf of any employee out of his salary, or by an employer out of his ownmoneys, to the individual account of an employee, but does not include any sum credited as interest;

(d) "Balance to the credit of an employee" means the total amount to the credit of his individual account in a provident fund atany time;

(e) "Annual accretion", in relation to the balance to the credit of an employee, means the increase to such balance in any year,arising from contributions and interest;

(f) "Accumulated balance due to an employee" means the balance to his credit, or such portion thereof as may be claimable byhim under the regulations of the fund, on the day he ceases to be an employee of the employer maintaining the fund;

(g) "Regulations of a fund" means the special body of regulations governing the constitution and administration of a particularprovident fund; and

(h) "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances andperquisites.

754. According and withdrawal of recognition.

§754.According and withdrawal of recognition.Sch. IV Part A Rule 3ACCORDING AND WITHDRAWAL OF RECOGNITION.

(1) The Chief Commissioner or Commissioner may accord recognition to any


provident fund which, in his opinion, satisfies the conditions prescribed inrule 4 and the rules made by the Board in this behalf, and may, at any time,withdraw such recognition if, in his opinion, the provident fund contravenesany of those conditions.

(2) An order according recognition shall take effect on such date as the ChiefCommissioner or Commissioner may fix in accordance with any rules the Boardmay make in this behalf, such date not being later than the last day of thefinancial year in which the order is made.

(3) An order withdrawing recognition shall take effect from the date on whichit is made.

(4) An order according recognition to a provident fund shall not, unless theChief Commissioner or Commissioner otherwise directs, be affected by the factthat the fund is subsequently amalgamated with another provident fund on theoccurrence of an amalgamation of the undertakings in connection with which thetwo funds are maintained, or that it subsequently absorbs the whole or a partof another provident fund belonging to an undertaking which is wholly or inpart transferred to or merged in the undertaking of the employer maintainingthe first mentioned fund.

755. Conditions to be satisfied by recognisedProvident Funds.

§755.Conditions to be satisfied by recognised Provident Funds.Sch. IV Part A Rule 4CONDITIONS TO BE SATISFIED BY RECOGNISED PROVIDENT FUNDS.

In order that a provident fund may receive and retain recognition, it shall,subject to the provisions of rule 5, satisfy the conditions set out below andany other conditions which the Board may, by rules, specify - (a) Allemployees shall be employed in India, or shall be employed by an employerwhose principal place of business is in India;

(b) The contributions of an employee in any year shall be a definiteproportion of his salary for that year, and shall be deducted by the employerfrom the employee"s salary in that proportion, at each periodical payment ofsuch salary in that year, and credited to the employee"s individual account inthe fund;

(c) The contributions of an employer to the individual account of an employeein any year shall not exceed the amount of the contributions of the employeein that year, and shall be credited to the employee"s individual account at


intervals not exceeding one year;

(d) The fund shall be vested in two or more trustees or in the Official Trustee under a trust which shall not be revocable, savewith the consent of all the beneficiaries;

(e) The fund shall consist of contributions as above specified, received by the trustees, of accumulations thereof, and of interestcredited in respect of such contributions and accumulations, and of securities purchased therewith and of any capital gainsarising from the transfer of capital assets of the fund, and of no other sums;

(f) The employer shall not be entitled to recover any sum whatsoever from the fund, save in cases where the employee isdismissed for misconduct or voluntarily leaves his employment otherwise than on account of ill-health or other unavoidablecause before the expiration of the terms of service specified in this behalf in the regulations of the fund :

Provided that in such cases the recoveries made by the employer shall be limited to the contributions made by him to theindividual account of the employee, and to interest credited in respect of such contributions in accordance with the regulations ofthe fund and the accumulations thereof;

(g) The accumulated balance due to an employee shall be payable on the day he ceases to be an employee of the employermaintaining the fund;

(h) Save as provided in clause (g) or in accordance with such conditions and restrictions as the Board may, by rules, specify, noportion of the balance to the credit of an employee shall be payable to him.

756. Relaxation of conditions.

§756.Relaxation of conditions.Sch. IV Part A Rule 5RELAXATION OF CONDITIONS.

(1) Notwithstanding anything contained in clause (a) of rule 4, the Chief Commissioner or Commissioner may, if he thinks fit and subject to suchconditions, if any, as he thinks proper to attach to the recognition, accordrecognition to a fund maintained by an employer whose principal place ofbusiness is not in India, provided the proportion of employees employedoutside India does not exceed ten per cent.

(2) Notwithstanding anything contained in clause (b) of rule 4, an employee who retains his employment while serving in thearmed forces of the Union or when taken into or employed in the national service under any law for the time being in force,may, whether he receives from the employer any salary or not, contribute to the fund during his service in the armed forces ofthe Union or while so taken into or employed in the national service a sum not exceeding the amount he would have contributedhad he continued to serve the employer.

(3) Notwithstanding anything contained in clause (e) or clause (g) of rule 4, - (a) At the request made in writing by the employeewho ceases to be an employee of the employer maintaining the fund, the trustees of the fund may consent to retain the whole orany part of the accumulated balance due to the employee to be drawn by him at any time on demand;

(b) Where the accumulated balance due to an employee who has ceased to be an employee is retained in the fund in accordancewith the preceding clause, the fund may consist also of interest in respect of such accumulated balance;

(c) The fund may also consist of any amount transferred from the individual account of an employee in any recognised providentfund maintained by his former employer and the interest in respect thereof.


(4) Subject to any rules 2340 which the Board may make in this behalf, the Chief Commissioner or Commissioner may, inrespect of any particular fund, relax the provisions of clause (c) of rule 4, -

(a) So as to permit the payment of larger contributions by an employer to the individual accounts of employees whose salaries donot in each case exceed five hundred rupees per mensem; and

(b) So as to permit the crediting by employers to the individual accounts of employees of periodical bonuses or othercontributions of a contingent nature, where the calculation and payment of such bonuses or other contributions is provided foron definite principles by the regulations of the fund.

(5) Notwithstanding anything contained in clause (h) of rule 4, in order to enable an employee to pay the amount of tax assessedon his total income as determined under sub-rule (4) of rule 11, he shall be entitled to withdraw from the balance to his credit inthe recognised provident fund a sum not exceeding the difference between such amount and the amount to which he would havebeen assessed if the transferred balance referred to in sub-rule (2) of rule 11 had not been included in his total income.

757. Employer"s annual contributions, when deemed tobe Income received by Employee.

§757.Employer"s annual contributions, when deemed to be Income received byEmployee.Sch. IV Part A Rule 6EMPLOYER"S ANNUAL CONTRIBUTIONS, WHEN DEEMED TO BE INCOME RECEIVED BYEMPLOYEE.

That portion of the annual accretion in any previous year to the balance atthe credit of an employee participating in a recognised provident fund asconsists of - (a) Contributions made by the employer in excess of twelve percent. of the salary of the employee, and

(b) Interest credited on the balance to the credit of the employee in so far as it is allowed at a rate exceeding such rate as may befixed by the Central Government in this behalf by notification 2340b in the Official Gazette, shall be deemed to have beenreceived by the employee in that previous year and shall be included in his total income for that previous year, and shall beliable to income-tax.

758. Exemption for employee"s contributions.

§758.Exemption for employee"s contributions.Sch. IV Part A Rule 7EXEMPTION FOR EMPLOYEE"S CONTRIBUTIONS.

An employee participating in a recognised provident fund shall, in respect ofhis own contributions to his individual account in the fund in the previousyear, be entitled to a deduction in the computation of his total income of anamount determined in accordance with section 80C.


759. Exclusion from total Income of Accumulatedbalance.

§759.Exclusion from total Income of Accumulated balance.Sch. IV Part A Rule 8EXCLUSION FROM TOTAL INCOME OF ACCUMULATED BALANCE.

The accumulated balance due and becoming payable to an employee participatingin a recognised provident fund shall be excluded from the computation of histotal income - (i) If he has rendered continuous service with his employer fora period of five years or more, or

(ii) If, though he has not rendered such continuous service, the service has been terminated by reason of the employee"s ill healthor by the contraction,or discontinuance of the employer"s business or other cause beyond the control of the employee, or

(iii) If, on the cessation of his employment, the employee obtains employment with any other employer, to the extent theaccumulated balance due and becoming payable to him is transferred to his individual account in any recognised provident fundmaintained by such other employer.

Explanation : Where the accumulated balance due and becoming payable to an employee participating in a recognised providentfund maintained by his employer includes any amount transferred from his individual account in any other recognised providentfund or funds maintained by his former employer or employers, then, in computing the period of continuous service for thepurposes of clause (i) or clause (ii) the period or periods for which such employee rendered continuous service under his formeremployer or employers shall be included.

760. Tax on Accumulated balance.

§760.Tax on Accumulated balance.Sch. IV Part A Rule 9TAX ON ACCUMULATED BALANCE.

(1) Where the accumulated balance due to an employee participating in arecognised provident fund is included in his total income owing to theprovisions of rule 8 not being applicable, the Assessing Officer shallcalculate the total of the various sums of tax which would have been payableby the employee in respect of his total income for each of the years concernedif the fund had not been a recognised provident fund, and the amount by whichsuch total exceeds the total of all sums paid by or on behalf of such employeeby way of tax for such years shall be payable by the employee in addition toany other tax for which he may be liable for the previous year in which theaccumulated balance due to him becomes payable.

(2) Where the accumulated balance due to an employee participating in arecognised provident fund which is not included in his total income under theprovisions of rule 8 becomes payable, an amount equal to the aggregate of the


amounts of super-tax on annual accretions that would have been payable undersection 58E of the Indian Income-tax Act, 1922 (11 of 1922), for anyassessment year upto and including the assessment year 1932-33, if the IndianIncome-tax (Second Amendment) Act, 1933 (18 of 1933) had come into force onthe 15th day of March, 1930, shall be payable by the employee in addition toany other tax payable by him for the previous year in which such balancebecomes payable.

761. Deduction at source of Tax payable onaccumulated balance.

§761.Deduction at source of Tax payable on accumulated balance.Sch. IV Part A Rule 10DEDUCTION AT SOURCE OF TAX PAYABLE ON ACCUMULATED BALANCE.

The trustees of a recognised provident fund, or any person authorised by theregulations of the fund to make payment of accumulated balance due toemployees, shall, in cases where sub-rule (1) of rule 9 applies, at the timean accumulated balance due to an employee is paid, deduct therefrom the amountpayable under that rule and all the provisions of Chapter XVII-B shall applyas if the accumulated balance were income chargeable under the head"Salaries".

762. Treatment of Balance in newly recognisedprovident fund.

§762.Treatment of Balance in newly recognised provident fund.Sch. IV Part A Rule 11TREATMENT OF BALANCE IN NEWLY RECOGNISED PROVIDENT FUND.

(1) Where recognition is accorded to a provident fund with existing balances,an account shall be made of the fund upto the day immediately preceding theday on which the recognition takes effect, showing the balance to the creditof each employee on such day, and containing such further particulars as theBoard may prescribe. 2346

(2) The account shall also show in respect of the balance to the credit ofeach employee the amount thereof which is to be transferred to that employee"saccount in the recognised provident fund, and such amount (hereinafter calledhis transferred balance) shall be shown as the balance to his credit in therecognised provident fund on the date on which the recognition of the fundtakes effect, and sub-rule (4) of this rule and sub-rule (5) of rule 5 shall


apply thereto.

(3) Any portion of the balance to the credit of an employee in the existingfund which is not transferred to the recognised fund shall be excluded fromthe accounts of the recognised fund and shall be liable to income-tax inaccordance with the provisions of thisAct, other than this Part.

(4) Subject to such rules as the Board may make in this behalf, the AssessingOfficer shall make a calculation of the aggregate of all sums comprised in atransferred balance which would have been liable to income-tax if this Parthad been in force from the date of theinstitution of the fund without regardto any tax which may have been paid on any sum, and such aggregate (if any)shall be deemed to be income received by the employee in the previous year inwhich the recognition of the fund takes effect and shall be included in theemployee"s total income for that previous year, and, for the purposes ofassessment, the remainder of the transferred balance shall be disregarded, butno other exemption or relief, by way of refund or otherwise, shall be grantedin respect of any sum comprised in such transferred balance :

Provided that, in cases of serious accounting difficulty, the ChiefCommissioner or Commissioner may, subject to the said rules, make a summarycalculation of such aggregate.

(5) Nothing in this rule shall affect the rights of the persons, administeringan unrecognised provident fund or dealing with it, or with the balance to thecredit of any individual employee before recognition is accorded, in anymanner which may be lawful.

763. Accounts of recognised provident funds.

§763.Accounts of recognised provident funds.Sch. IV Part A Rule 12ACCOUNTS OF RECOGNISED PROVIDENT FUNDS.

(1) The accounts of a recognised provident fund shall be maintained by the trustees of the fund and shall be in such form and forsuch periods, and shall contain such particulars, as the Board may prescribe 2348 .

(2) The accounts shall be open to inspection at all reasonable times by income-tax authorities, and the trustees shall furnish to theAssessing Officer such abstracts thereof as the Board may prescribe.

764. Appeals.

§764.Appeals.Sch. IV Part A Rule 13


APPEALS.

(1) An employer objecting to an order of the Chief Commissioner orCommissioner refusing to recognise or an order withdrawing recognition from aprovident fund may appeal, within sixty days of such order, to the Board.

(2) The appeal shall be in such form and shall be verified in such manner andshall be subject to the payment of such fee as the Board may prescribe 2349 .

765. Treatment of fund transferred by employer totrustee.

§765.Treatment of fund transferred by employer to trustee.Sch. IV Part A Rule 14TREATMENT OF FUND TRANSFERRED BY EMPLOYER TO TRUSTEE.

(1) Where an employer, who maintains a provident fund (whether recognised ornot) for the benefit of his employees and has not transferred the fund or anyportion of it, transfers such fund or portion to trustees in trust for theemployees participating in the fund, the amount so transferred shall be deemedto be of the nature of capital expenditure.

(2) When an employee participating in such fund is paid the accumulatedbalance due to him therefrom, any portion of such balance as represents hisshare in the amount so transferred to the trustees (without addition ofinterest, and exclusive of the employee"s contribution and interest thereon)shall, if the employer had made effective arrangements to secure that taxshall be deducted at source from the amount of such share whenpaid to theemployee, be deemed to be an expenditure by the employer within the meaning ofsection 37, incurred in the previous year in which the accumulated balance dueto the employee is paid.

766. Provisions relating to rules.

§766.Provisions relating to rules.Sch. IV Part A Rule 15PROVISIONS RELATING TO RULES.

(1) In addition to any power conferred by this Part, the Board may make rules- (a) Prescribing the statements and other information to be submitted alongwith an application for recognition;

(b) Limiting the contributions to a recognised provident fund by employees of


a company who are shareholders in the company;

(bb) Regulating the investment or deposit of the moneys of a recognisedprovident fund :

Provided that no rule made under this clause shall require the investment ofmore than fifty per cent. of the moneys of such fund in Government securitiesas defined in section 2 of the Public Debt Act, 1944 (18 of 1944);

(c) Providing for the assessment by way of penalty of any consideration received by an employee for an assignment of, orcreation of a charge upon his beneficial interest in a recognised provident fund;

(d) Determining the extent to and the manner in which exemption from payment of tax may be granted in respect of contributionand interest credited to the individual accounts of employees in a provident fund from which recognition has been withdrawn;and

(e) Generally, to carry out the purpose of this Part and to secure such further control over the recognition of provident funds andthe administration of recognised provident funds as it may deem requisite.

(2) All rules made under this Part shall be subject to the provisions of section 296.

767. Definitions.

§767.Definitions.Sch. IV Part B Rule 1DEFINITIONS. In this Part, unless the context otherwise requires, "employer","employee", "contribution" and "salary" have, in relation to superannuationfunds, the meanings assigned to those expressions in rule 2 of Part A inrelation to provident funds.

768. Approval and Withdrawal of approval.

§768.Approval and Withdrawal of approval.Sch. IV Part B Rule 2

APPROVAL AND WITHDRAWAL OF APPROVAL. (1) The Chief Commissioner orCommissioner may accord approval to any superannuation fund or any part of asuperannuation fund which, in his opinion, complies with the requirements ofrule 3, and may at any time withdraw such approval, if, in his opinion, thecircumstances of the fund or part cease to warrant the continuance of theapproval.

(2) The Chief Commissioner or Commissioner shall communicate in writing to thetrustees of the fund the grant of approval with the date on which the approvalis to take effect, and, where the approval is granted subject to conditions,


those conditions.

(3) The Chief Commissioner or Commissioner shall communicate in writing to thetrustees of the fund any withdrawal of approval with the reasons for suchwithdrawal and the date on which the withdrawal is to take effect.

(4) The Chief Commissioner or Commissioner shall neither refuse nor withdrawapproval to any superannuation fund or any part of a superannuation fundunless he has given the trustees of that fund a reasonable opportunity ofbeing heard in the matter.

769. Conditions for approval.

§769.Conditions for approval.Sch. IV Part B Rule 3

CONDITIONS FOR APPROVAL.

In order that a superannuation fund may receive and retain approval, it shallsatisfy the conditions set out below and any other conditions which the Boardmay, by rules, prescribe - (a) The fund shall be a fund established under anirrevocable trust in connection with a trade or undertaking carried on inIndia, and not less than ninety per cent. of the employees shall be employedin India;

(b) The fund shall have for its sole purpose the provision of annuities foremployees in the trade or undertaking on their retirement at or after aspecified age or on their becoming incapacitated prior to such retirement, orfor the widows, children or dependants of persons who are or have been suchemployees on the death of those persons;

(c) The employer in the trade or undertaking shall be a contributor to thefund; and

(d) All annuities, pensions and other benefits granted from the fund shall bepayable only in India.

770. Application for approval.

§770.Application for approval.Sch. IV Part B Rule 4

APPLICATION FOR APPROVAL.


(1) An application for approval of a superannuation fund or part of asuperannuation fund shall be made in writing by the trustees of the fund tothe Assessing Officer by whom the employer is assessable, and shall beaccompanied by a copy of the instrument under which the fund is establishedand by two copies of the rules and, where the fund has been in existenceduring any year or years prior to the financial year in which the applicationfor approval is made, also two copies of the accounts of the fund relating tosuch prior year or years (not being more than three years immediatelypreceding the year in which the said application is made) for which such accounts have been made up, but the Chief Commissioner or Commissioner mayrequire such further information to be supplied as he thinks proper.

(2) If any alteration in the rules, constitution, objects or conditions of thefund is made at any time after the date of the application for approval, thetrustees of the fund shall forthwith communicate such alteration to theAssessing Officer mentioned in sub-rule (1), and in default of suchcommunication any approval given shall, unless the Chief Commissioner orCommissioner otherwise orders, be deemed to have been withdrawn from the dateon which the alteration took effect.

771. Contributions by employer when deemed to beIncome of employer.

§771.Contributions by employer when deemed to be Income of employer.Sch. IV Part B Rule 5

CONTRIBUTIONS BY EMPLOYER WHEN DEEMED TO BE INCOME OF EMPLOYER. Where any contributions by anemployer (including the interest thereon, if any,) are repaid to the employer, the amount so repaid shall be deemed for thepurpose of income-tax to be the income of the employer of the previous year in which it is so repaid.

772. Deduction of tax on contributions paid to anemployee.

§772.Deduction of tax on contributions paid to an employee.Sch. IV Part B Rule 6

DEDUCTION OF TAX ON CONTRIBUTIONS PAID TO AN EMPLOYEE. Where any contributionsmade by an employer, including interest on contributions, if any, are paid toany employee during his lifetime, in circumstances other than those referredto in clause (3) of section 10, tax on the amounts so paid shall be deductedat the average rate of tax at which the employee was liable to tax during thepreceding three years or during the period, if less than three years, when he


was a member of the fund, and shall be paid by the trustees to the credit ofthe Central Government within the prescribed time and in such manner as theBoard may direct.

773. Deduction from pay of and contributions onbehalf of employee to be included in return.

§773.Deduction from pay of and contributions on behalf of employee to beincluded in return.Sch. IV Part B Rule 7

DEDUCTION FROM PAY OF AND CONTRIBUTIONS ON BEHALF OF EMPLOYEE TO BE INCLUDEDIN RETURN. Where an employer deducts from the emoluments paid to an employeeor pays on his behalf any contributions of that employee to an approvedsuperannuation fund, he shall include all such deductions or payments in thereturn which he is required to furnish under section 206.

774. Appeals.

§774.Appeals.Sch. IV Part B Rule 8

APPEALS. (1) An employer objecting to an order of the Chief Commissioner orCommissioner refusing to accord approval to a superannuation fund or an orderwithdrawing such approval may appeal, within sixty days of such order, to theBoard.

(2) The appeal shall be in such form and shall be verified in such manner andshall be subject to the payment of such fee as may be prescribed 2362 .

775. Liability of trustees on cessation of approval.

§775.Liability of trustees on cessation of approval.Sch. IV Part B Rule 9

LIABILITY OF TRUSTEES ON CESSATION OF APPROVAL. If a fund or a part of a fundfor any reason ceases to be an approved superannuation fund, the trustees ofthe fund shall nevertheless remain liable to tax on any sum paid on account ofreturned contributions (including interest on contributions, if any), in sofar as the sum so paid is in respect of contributions, made before the fund orpart of the fund ceased to be an approved superannuation fund under theprovisions of this Part.


776. Particulars to be furnished in respect ofsuperannuation funds.

§776.Particulars to be furnished in respect of superannuation funds.Sch. IV Part B Rule 10PARTICULARS TO BE FURNISHED IN RESPECT OF SUPERANNUATION FUNDS.

The trustees of an approved superannuation fund and any employer whocontributes to an approved superannuation fund shall, when required by noticefrom the Assessing Officer within such period, not being less than twenty-onedays from the date of the notice, as may be specified in the notice, furnishsuch return, statement, particulars or information, as the Assessing Officermay require.


§777.Provisions relating to rules.Sch. IV Part B Rule 11

PROVISIONS RELATING TO RULES .

(1) In addition to any power conferred by this Part, the Board may make rules- (a) Prescribing the statements and other information to be submitted alongwith an application for approval;

(b) Prescribing the returns, statements, particulars, or information which theAssessing Officer may require from the trustees of an approved superannuationfund or from the employer;

(c) Limiting the ordinary annual contribution and any other contributions toan approved superannuation fund by an employer;

(cc) Regulating the investment or deposit of the moneys of an approvedsuperannuation fund :


(d) Providing for the assessment by way of penalty of any considerationreceived by an employee for an assignment of, or creation of a charge upon,his beneficial interest in an approved superannuation fund;


(e) Determining the extent to, and the manner in, which exemption from paymentof tax may be granted in respect of any payment made from a superannuationfund from which approval has been withdrawn;

(f) Providing for the withdrawal of approval in the case of a fund whichceases to satisfy the requirements of this Part or of the rules madethereunder; and

(g) Generally, to carry out the purposes of this Part and to secure suchfurther control over the approval of superannuation funds and theadministration of approved superannuation funds as it may deem requisite.

(2) All rules made under this Part shall be subject to the provisions ofsection 296.

778. Definitions.

§778.Definitions.Sch. IV Part C Rule 1

DEFINITIONS. In this Part, unless the context otherwise requires, "employer","employee", "contribution" and "salary" have, in relation to gratuity funds,the meanings assigned to those expressions in rule 2 of Part A in relation toprovident funds.

779. Approval and withdrawal of approval.

§779.Approval and withdrawal of approval.Sch. IV Part C Rule 2

APPROVAL AND WITHDRAWAL OF APPROVAL. (1) The Chief Commissioner orCommissioner may accord approval to any gratuity fund which, in his opinion,complies with the requirements of rule 3 and may at any time withdraw suchapproval if, in his opinion, the circumstances of the fund cease to warrantthe continuance of the approval.

(2) The Chief Commissioner or Commissioner shall communicate in writing to thetrustees of the fund the grant of approval with the date on which the approvalis to take effect and where the approval is granted subject to conditions,those conditions.

(3) The Chief Commissioner or Commissioner shall communicate in writing to thetrustees of the fund any withdrawal of approval with the reasons for such


withdrawal and the date on which the withdrawal is to take effect.

(4) The Chief Commissioner or Commissioner shall neither refuse nor withdrawapproval to any gratuity fund unless he has given the trustees of that fund areasonable opportunity of being heard in the matter.

780. Conditions from approval.

§780.Conditions from approval.Sch. IV Part C Rule 3

CONDITIONS FOR APPROVAL .

In order that a gratuity fund may receive and retain approval, it shallsatisfy the conditions set out below and any other conditions which the Boardmay, by rules, prescribe - (a) The fund shall be a fund established under anirrevocable trust, in connection with a trade or undertaking carried on inIndia, and not less than ninety per cent. of the employees shall be employedin India;

(b) The fund shall have for its sole purpose the provision of a gratuity toemployees in the trade or undertaking on their retirement at or after aspecified age or on their becoming incapacitated prior to such retirement oron termination of their employment after a minimum period of service specifiedin the rules of the fund or to the widows, children or dependants of suchemployees on their death;

(c) The employer in the trade or undertaking shall be a contributor to thefund; and

(d) All benefits granted by the fund shall be payable only in India.

781. Application for approval.

§781.Application for approval.Sch. IV Part C Rule 4

APPLICATION FOR APPROVAL.

(1) An application for approval of a gratuity fund shall be made in writing bythe trustees of the fund to the Assessing Officer by whom the employer isassessable and shall be accompanied by a copy of the instrument under whichthe fund is established and by two copies of the rules and, where the fund hasbeen in existence during any year or years prior to the financial year in


which the application for approval is made, also two copies of the accounts ofthe fund relating to such prior year or years (not being more than threeyears immediately preceding the year in which the said application is made)for which such accounts have been made up, but the Chief Commissioner orCommissioner may require such further information to be supplied as he thinksproper.

(2) If any alteration in the rules, constitution, objects or conditions of thefund is made at any time after the date of the application for approval, thetrustees of the fund shall forthwith communicate such alterations to theAssessing Officer mentioned in sub-rule (1), and in default of suchcommunication, any approval given shall, unless the Chief Commissioner orCommissioner otherwise orders, be deemed to have been withdrawn from the dateon which the alteration took effect.

782. Gratuity deemed to be salary.

§782.Gratuity deemed to be salary.Sch. IV Part C Rule 5

GRATUITY DEEMED TO BE SALARY.

Where any gratuity is paid to an employee during his lifetime, the gratuityshall be treated as salary paid to the employee for the purposes of this Act.

783. Liability of trustees on cessation of approval.

§783.Liability of trustees on cessation of approval.Sch. IV Part C Rule 6

LIABILITY OF TRUSTEES ON CESSATION OF APPROVAL.

If a gratuity fund for any reason ceases to be an approved gratuity fund, thetrustees of the fund shall nevertheless remain liable to tax on any gratuitypaid to any employee.

784. Contributions by employer, when deemed to beIncome of employer.

§784.Contributions by employer, when deemed to be Income of employer.Sch. IV Part C Rule 7


CONTRIBUTIONS BY EMPLOYER, WHEN DEEMED TO BE INCOME OF EMPLOYER.

Where any contributions by an employer (including the interest thereon, ifany), are repaid to the employer, the amount so repaid shall be deemed for thepurposes of income-tax to be the income of the employer of the previous yearin which they are so repaid.

785. Appeals.

§785.Appeals.Sch. IV Part C Rule 8

APPEALS.

(1) An employer objecting to an order of the Chief Commissioner orCommissioner refusing to accord approval to a gratuity fund or an orderwithdrawing such approval may appeal, within sixty days of such order, to theBoard.

(2) The appeal shall be in such form and shall be verified in such manner andshall be subject to the payment of such fee as may be prescribed 2368 .

786. Particulars to be Furnished in respect ofGratuity Funds.

§786.Particulars to be Furnished in respect of Gratuity Funds.Sch. IV Part C Rule 8A

PARTICULARS TO BE FURNISHED IN RESPECT OF GRATUITY FUNDS.

The trustees of an approved gratuity fund and any employer who contributes toan approved gratuity fund shall, when required by notice from the Assessing Officer, furnish within such period, not being less than twenty-one days fromthe date of the notice, as may be specified in the notice, such return,statement, particulars or information, as the Assessing Officer may require.


§787.Provisions relating to rules.Sch. IV Part C Rule 9

PROVISIONS RELATING TO RULES.


(1) "In addition to any power conferred in this Part, the Board may make rules- (a) Prescribing the statements and other information to be submitted alongwith an application for approval;

(b) Limiting the ordinary annual and other contributions of an employer to thefund;

(bb) Regulating the investment or deposit of the moneys of an approvedgratuity fund :


(c) Providing for the assessment by way of penalty of any considerationreceived by an employee for an assignment of, or the creation of a chargeupon, his beneficial interest in an approved gratuity fund;

(d) Providing for the withdrawal of the approval in the case of a fund whichceases to satisfy the requirements of this Part or the rules made thereunder;and

(e) Generally, to carry out the purposes of this Part and to secure such further control over the approval of gratuity funds and the administration ofgratuity funds as it may deem requisite.

(2) All rules made under this Part shall be subject to the provisions ofsection 296.

788. List of Articles and Things.

§788.List of Articles and Things.Sch. VLIST OF ARTICLES AND THINGS

(1) Iron and steel (metal), ferro-alloys and special steels.

(2) Aluminium, copper, lead and zinc (metals).

(3) Coal, lignite, iron ore, bauxite, manganese ore, dolomite, limestone, magnesite and mineral oil.

(4) Industrial machinery specified under the heading "8. Industrial machinery", sub-heading "A. Major items of specialisedequipment used in specific industries", of the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of1951).

(5) Boilers and steam generating plants, steam engines and turbines and internal combustion engines.


(6) Flame and drip proof motors.

(7) Equipment for the generation and transmission of electricity, including transformers, cables and transmission towers.

(8) Machine tools and precision tools (including their attachments and accessories, cutting tools and small tools), dies and jigs.

(9) Tractors, earth-moving machinery and agricultural implements.

(10) Motor trucks and buses.

(11) Steel castings and forgings and malleable iron and steel castings.

(12) Cement and refractories.

(13) Fertilisers, namely, ammonium sulphate, ammonium sulphate nitrate (double salt), ammonium nitrate, calcium ammoniumnitrate (nitrolime stone), ammonium chloride, superphosphate, urea and complex fertilisers of synthetic origin containing bothnitrogen and phosphorus, such as ammonium phosphates, ammonium sulphate phosphate and ammonium nitro-phosphate.

(14) Soda ash.

(15) Pesticides.

(16) Paper and pulp including newsprint.

(17) Electronic equipment, namely, radar equipment, computers, electronic accounting and business machines, electroniccommunication equipment, electronic control instruments and basic components, such as valves, transistors, resistors, condensers, coils, magnetic materials and microwave components.

(18) Petrochemicals including corresponding products manufactured from other basic raw materials like calcium carbide, ethylalcohol or hydrocarbonsfrom other sources.

(19) Ships.

(20) Automobile ancillaries.

(21) Seamless tubes.

(22) Gears.

(23) Ball, roller and tapered bearings.

(24) Component parts of the articles mentioned in items Nos. (4), (5), (7) and (9), that is to say, such parts as are essential for theworking of the machinery referred to in the items aforesaid and have been given for that purpose some special shape or qualitywhich would not be essential for their use for any other purpose and are in complete finished form and ready for fitment.

(25) Cotton seed oil.

(26) Tea.

(27) Printing machinery.

(28) Processed seeds.

(29) Processed concentrates for cattle and poultry feed.


(30) Processed (including frozen) fish and fish products.

(31) Vegetable oils and oil-cakes manufactured by the solvent extraction process from seeds other than cotton seed.

(32) Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn,hosiery and rope.

(33) Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of jute, including jute twine and juterope.

789. Omitted.

§789.Omitted.Sch. VI[OMITTED BY THE FINANCE ACT, 1972, W.E.F. 1-4-1973]

790. Minerals.

§790.Minerals.Sch. VII Part AMINERALS

1. Aluminium ores.

2. Apatite and phosphatic ores.

3. Beryl.

4. Chrome ore.

5. Coal and lignite.

6. Columbite, Samarskite and other minerals of the "rare earths" group.

7. Copper.

8. Gold.

9. Gypsum.

10. Iron ore.

11. Lead.

12. Manganese ore.


13. Molybdenum.

14. Nickel ores.

15. Platinum and other precious metals and their ores.

16. Pitchblende and other uranium ores.

17. Precious stones.

18. Rutile.

19. Silver.

20. Sulphur and its ores.

21. Tin.

22. Tungsten ores.

23. Uraniferous allanite, monazite and other thorium minerals.

24. Uranium bearing tailings left over from ores after extraction of copperand gold, ilmenite and other titanium ores.

25. Vanadium ores.

26. Zinc.

27. Zircon.

791. Groups of Associated minerals.

§791.Groups of Associated minerals.Sch. VII Part BGROUPS OF ASSOCIATED MINERALS

1. Apatite, Beryl, Cassiterite, Columbite, Emerald, Felspar, Lepidolite, Mica,Pitchblende, Quartz, Samarskite, Scheelite, Topaz, Tantalite, Tourmaline.

2. Iron, Manganese, Titanium, Vanadium and Nickel minerals.

3. Lead, Zinc, Copper, Cadmium, Arsenic, Antimony, Bismuth, Cobalt, Nickel,Molybdenum, and Uranium minerals, and Gold and Silver, Arsinopyrite,Chalcopyrite, Pyrite, Pyphrotite and Pentalandite.


4. Chromium, Osmiridium, Platinum and Nickel minerals.

5. Kyanite, Sillimanite, Corrundum, Dumortierite and Topaz.

6. Gold, Silver, Tellurium, Selenium and Pyrite.

7. Barytes, Fluorite, Chalcocite, Selenium and minerals of Zinc, Lead andSilver.

8. Tin and Tungsten minerals.

9. Limestone, Dolomite and Magnesite.

10. Ilmenite, Monazite, Zircon, Rutile, Garnet and Sillimanite.

11. Sulphides of Copper and Iron.

12. Coal, Fireclay and Shale.

13. Magnetite and Apatite.

14. Magnesite and Chromite.

15. Talc (Soapstone and Steatite) and Dolomite.

16. Bauxite, Laterite, Aluminous Clays, Lithomorge, Titanium, Vanadium,Gallium and Columbium minerals.

792. List of Industrially backward States and UnionTerritories.

§792.List of Industrially backward States and Union Territories.Sch. VIIILIST OF INDUSTRIALLY BACKWARD STATES AND UNION TERRITORIES

(1) Arunachal Pradesh

(2) Assam

(3) Goa

(4) Himachal Pradesh

(5) Jammu and Kashmir


(6) Manipur

(7) Meghalaya

(8) Mizoram

(9) Nagaland

(10) Sikkim

(11) Tripura

(12) Andaman and Nicobar Islands

(13) Dadra and Nagar Haveli

(14) Daman and Diu

(15) Lakshadweep

(16) Pondicherry.

793. Omitted.

§793.Omitted.Sch. IX[OMITTED BY TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986,W.E.F. 1-4-1988]

794. Modifications subject to which the provisionsof this act shall apply in case where the previousyear in relation to the assessment year commencingon the first april, 1989.

§794.Modifications subject to which the provisions of this act shall apply incase where the previous year in relation to the assessment year commencing onthe first april, 1989.Sch. XMODIFICATIONS SUBJECT TO WHICH THE PROVISIONS OF THIS ACT SHALL APPLY IN CASESWHERE THE PREVIOUS YEAR IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THEFIRST APRIL, 1989

In this Schedule, "transitional previous year" means the period reckoned as


the previous year for the assessment year commencing on the 1st day of April,1989, in the manner specified in sub-section (2) of section 3 and, in a casewhere the first proviso or the third proviso to that sub-section applies, thelonger or, as the case may be, the longest of the periods reckoned in themanner laid down in the said first proviso or, as the case may be, the saidthird proviso.

2 SPECIAL PROVISIONS IN A CASE WHERE THE TRANSITIONAL PREVIOUS YEAR IS LONGERTHAN TWELVE MONTHS.

In a case where the transitional previous year is longer than twelve months, the provisions of this Act and the Finance Act of therelevant year shall apply subject to the modifications specified in rules 3, 4, 5 and 6 of this Schedule.

3 MODIFICATIONS PERTAINING TO MONETARY LIMITS, ETC.

The provisions of this Act specified in column (1) of the Table below shall be subject to the modification that the referencetherein to the amount or amounts specified in the corresponding entry in column (2) of the said Table, shall be construed as areference to the said amount or amounts as increased by multiplying each such amount by a fraction of which the numerator isthe number of months in the transitional previous year and the denominator is twelve :

Provided that for the purposes of this rule and rules 5 and 6, where the transitional previous year includes a part of a month, then,if such part is fifteen days or more, it shall be increased to one complete month and if such part is less than fifteen days, it shall beignored :

Provided further that the amount of ten thousand rupees, specified in column (2) of the said Table against sub-section (2) ofsection 48, shall be increased during the transitional previous year only where the long-term capital gain arises as a result of twoor more transfers of long-term capital assets and at least one of the said transfers is made during the initial period of twelvemonths comprised within the transitional previous year and the remaining transfer or transfers is or are made during the periodbeyond the said period of twelve months comprised within the transitional previous year :

Provided also that where more than one period in respect of different sources of income are included in the transitional previousyear under the first proviso or the third proviso to sub-section (2) of section 3, then the amount or amounts specified in column(2) of the said Table shall be increased to such extent and in such manner as the Board may, having regard to, -

(a) length of the period or periods included in the transitional previous year in respect of different sources of income;

(b) length of the transitional previous year; and

(c) other relevant factors; prescribe in this behalf.

TABLE

---------------------------------------------------------------------Provision of the Act Amount(1) (2)---------------------------------------------------------------------Rs.Section 10(3) 5,000Section 12A(b) 25,000Section 13(2)(g) 1,000Section 16(i) 12,000Section 16(i), proviso 1,000Section 16(ii) 5,000 and 7,500Section 23(1)(d)(ii) 3,600Section 24(2), proviso 5,000


Section 33A(7), proviso 40,000, 35,000 and 30,000Section 35A 1/14th of the amount ofthe capital expenditureSection 35AB 1/6th or 1/3rd of the amountpaid as lumpsum considerationSection 35D 1/10th of the amount ofcertain preliminary expensesSection 37(2A) 5,000 and 50,000Section 40A(12) 10,000Section 44AA(2)(i) and (ii) 25,000 and 2,50,000Section 44AB 40,00,000 and 10,00,000Section 48(2) 10,000Section 80C(1) 6,000, 9,000 and 12,000Section 80C(3) 1/10th of the actual capitalsum assuredSection 80C(4) 60,000 and 40,000Section 80C(7)(c) 10,000Section 80CC(2) 20,000Section 80CCA(1) 30,000Section 80D(1) 3,000Section 80L(1) 7,000 (occurring in two places)Section 80L(1), 1st proviso 3,000Section 80L(1), 2nd proviso 3,000Section 80P(2)(c) 40,000 and 20,000Section 80P(2)(f) 20,000Section 80U 15,000Section 139A(2) 50,000 2386 ]---------------------------------------------------------------------

#

4 MODIFICATION IN SECTION 6.

Where the transitional previous year comprises a period of eighteen months or more, then sub-section (1) of section 6 shall besubject to the modification that references therein to the periods of one hundred and eighty-two days, ninety days and sixtydays shall be construed as references, respectively, tothe periods of two hundred and seventy-three days, one hundred and thirty-five days and ninety days.

5 MODIFICATION IN RESPECT OF DEPRECIATION ALLOWANCE.

Where the assessee"s income under the head "Profits and gains of business or profession" or under the head "Income from othersources" for a periodof thirteen months or more is included in his total income for the transitional previous year, the allowance under clause (ii) ofsub-section (1) of section 32 or, as the case may be, under clause (ii) of section 57 in respect of depreciation on block of assetscalculated in the manner stated in clause (ii) of sub-section (1) of section 32, shall be increased by multiplying it by a fractionof which the numerator is the number of months in the transitional previous year and the denominator is twelve :

Provided that where more than one period in respect of income under the head "Profits and gains of business or profession" orunder the head "Income from other sources" are included in the transitional previous year under the first proviso or the thirdproviso to sub-section (2) of section 3, the allowance in respect of depreciation on block of assets shall be calculated separatelyfor each such period included in the transitional previous year in the manner stated in clause (ii) of sub-section (1) of section 32and increased, where necessary, by multiplying it by a fraction of which the numerator is the number of months in such period(after excluding the number of months relatable to the period in relation to which depreciation on block of assets has beenallowed or is allowable in the previous year relevant to the assessment year commencing on the 1st day of April, 1988) and the denominator is twelve.


6 MODIFICATION IN RESPECT OF RATE OF TAX.

The tax chargeable on the total income of the transitional previous year shall be calculated at the average rate of tax on theamount obtained by multiplying such total income by a fraction of which the numerator is twelve and the denominator is thenumber of months in the transitional previous year, as if the resultant amount were the total income :

Provided that where more than one period in respect of different sources of income are included in the transitional previous yearunder the first proviso or the third proviso to sub-section (2) of section (3), then the tax shall be chargeable at the average rate oftax, calculated in accordance with the provisions of this rule, on the total income of the transitional previous year after excludingfrom such total income the income relatable to any such period or periods which has already been included or is includible inthe total income of the previous year or previous years relevant to the assessment year commencing on the 1st day of April,1988.

7 POWER OF BOARD TO GRANT RELIEF IN CASE OF HARDSHIP.

The Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship, by general or special order, grantappropriate relief in any case or class of cases where the transitional previous year is longer than twelve months.

795. List of Articles or Things.

§795.List of Articles or Things.Sch. XILIST OF ARTICLES OR THINGS

1. Beer, wine and other alcoholic spirits.

2. Tobacco and tobacco preparations, such as, cigars and cheroots, cigarettes, biris, smoking mixtures for pipes and cigarettes,chewing tobacco and snuff.

3. Cosmetics and toilet preparations.

4. Tooth paste, dental cream, tooth powder and soap.

5. Aerated waters in the manufacture of which blended flavouring concentrates in any form are used.

Explanation : "Blended flavouring concentrates" shall include, and shall be deemed always to have included, synthetic essencesin any form.

6. Confectionary and chocolates.

7. Gramophones, including record-players, and gramophone records.

8. [ 2394 * * * 2394 ]

9. [ 2395 Projectors 2395 ].

10. Photographic apparatus and goods.

11 to 21. [ 2395a * * * 2395a ].

22. Office machines and apparatus such as typewriters, calculating machines, cash registering machines, cheque writingmachines, intercom machines and


teleprinters.

Explanation : The expression "Office machines and apparatus" includes all machines and apparatus used in offices, shops,factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and [ 2396 for dataprocessing (not being computers within the meaning of section 32AB) 2396 ].

23. Steel furniture, whether made partly or wholly of steel.

24. Safes, strong boxes, cash and deed boxes and strong room doors.

25. Latex foam sponge and polyurethane foam.

26. [ 2397 * * * * 2397 ].

27. Crown corks or other fittings of cork, rubber, polyethylene or any other material.

28. Pilfer-proof caps for packaging or other fittings of cork, rubber, polyethylene or any other material.

29. [ 2398 * * * * 2398 ]

796. Processed Minerals and Ores.

§796.Processed Minerals and Ores.Sch. XIIPROCESSED MINERALS AND ORES

(i) Pulverised or micronised - barytes, calcite, steatite, pyrophylite,wollastonite, zircon, bentonite, red or yellow oxide, red or yellow ochre,talc, quartz, feldspar, silica powder, garnet, silliminite, fireclay,ballclay, manganese dioxide ore.

(ii) Processed or activated - bentonite, diatomious earth, fullers earth.

(iii) Processed - kaolin (china clay), whiting, calcium carbonate.

(iv) Beneficated - chromite, flourspar, graphite, vermiculite, ilminite, brown ilminite (lencoxene) rutile, monazite and othermineral concentrates.

(v) Mica blocks, mica splittings, mica condenser films, mica powder, micanite, silvered mica, punched mica, mica paper, micatapes, mica flakes.

(vi) Exfoliated - vermiculite, calcined kyanite, magnesite, calcined magnesite, calcined alumina.

(vii) Sized iron ore processed by mechanical screening or crushing and screening through dry process or mechanical crushing,screening, washing and classification through wet process.

(viii) Iron ore concentrates processed through crushing, grinding or magnetic separation.

(ix) Agglomerated iron ore.

(x) Cut and polished minerals and rocks including cut and polished granite.


Explanation : For the purposes of this Schedule, "processed", in relation to any mineral or ore, means - (a) Dressing throughmechanical means to obtain concentrates after removal of gangue and unwanted deleterous substances or through other meanswithout altering the minerological identity;

(b) Pulverisation, calcination or micronisation;

(c) Agglomeration from fines;

(d) Cutting and polishing;

(e) Washing and levigation;

(f) Benefication by mechanical crushing and screening through dry process;

(g) Sizing by crushing, screening, washing and classification through wet process;

(h) Other upgrading techniques such as removal of impurities through chemical treatment, refining by gravity separation,bleaching, floatation or filtration.

§739.Power to take evidence.

§747.Forms.

§754.According and withdrawal of recognition.

§755.Conditions to be satisfied by recognised Provident Funds.

§757.Employer"s annual contributions, when deemed to be Income received byEmployee.

§769.Conditions for approval.

Sch. XII


PROCESSED MINERALS AND ORES

(i) Pulverised or micronised - barytes, calcite, steatite, pyrophylite, wollastonite, zircon, bentonite, red or yellow oxide, red oryellow ochre, talc, quartz, feldspar, silica powder, garnet, silliminite, fireclay, ballclay, manganese dioxide ore.

(ii) Processed or activated - bentonite, diatomious earth, fullers earth.

(iii) Processed - kaolin (china clay), whiting, calcium carbonate.

(iv) Beneficated - chromite, flourspar, graphite, vermiculite, ilminite, brown ilminite (lencoxene) rutile, monazite and othermineral concentrates.

(v) Mica blocks, mica splittings, mica condenser films, mica powder, micanite, silvered mica, punched mica, mica paper, micatapes, mica flakes.

(vi) Exfoliated - vermiculite, calcined kyanite, magnesite, calcined magnesite, calcined alumina.

(vii) Sized iron ore processed by mechanical screening or crushing and screening through dry process or mechanical crushing,screening, washing and classification through wet process.

(viii) Iron ore concentrates processed through crushing, grinding or magnetic separation.

(ix) Agglomerated iron ore.

(x) Cut and polished minerals and rocks including cut and polished granite.

Explanation : For the purposes of this Schedule, "processed", in relation to any mineral or ore, means - (a) Dressing throughmechanical means to obtain concentrates after removal of gangue and unwanted deleterous substances or through other meanswithout altering the minerological identity;

(b) Pulverisation, calcination or micronisation;

(c) Agglomeration from fines;

(d) Cutting and polishing;

(e) Washing and levigation;

(f) Benefication by mechanical crushing and screening through dry process;

(g) Sizing by crushing, screening, washing and classification through wet process;

(h) Other upgrading techniques such as removal of impurities through chemical treatment, refining by gravity separation,bleaching, floatation or filtration.

The Income Tax Act, 1961 - mofcom.gov.cnimages.policy.mofcom.gov.cn › flaw › 201411 ›...

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Transcript of The Income Tax Act, 1961 - mofcom.gov.cnimages.policy.mofcom.gov.cn › flaw › 201411 ›...