CHAPTER IV
COMPUTATION OF TOTAL INCOME
Heads of income
Heads of income.
14. 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.
A.—Salaries
77[R2] 15. The
following income shall be chargeable to income-tax under the head “Salaries”—
(a) any salary due from an employer 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 a former 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 an employer or a former employer, if not charged to
income-tax for any earlier previous year.
78-79[R3] Explanation :
For the removal of doubts, it is hereby declared that where any salary paid in
advance is included in the total income of any person for any previous year it
shall not be included again in the total income of the person when the salary
becomes due.
Deductions
from salaries.
16. The income chargeable under
the head “Salaries” shall be computed after making the following deductions,
namely:—
80[R4] [(i) 81[R5] [a
deduction of] 82[R6] [83[R7] [a
sum equal to thirty-three and one-third per cent of the salary or twelve
thousand rupees, whichever is less]]:
85[R9] [Explanation 86[R10] [***]: For the removal of doubts, it is hereby
declared that where, in the case of an assessee,
salary is due from, or paid or allowed by, more than one employer, the deduction
under this clause shall be computed with reference to the aggregate salary due,
paid or allowed to the assessee and shall in no case
exceed the amount specified under this clause;]
(ii) 88[R12] [ a
deduction] in respect of any allowance in the nature of an entertainment
allowance specifically 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 to one-fifth of his salary (exclusive of any allowance,
benefit or other perquisite) or five thousand rupees, whichever is less; and
(b) in the case
of any other assessee who is in receipt of such
entertainment allowance and has been continuously in receipt of such
entertainment allowance regularly from his present employer from a date before
the 1st day of April, 1955, the amount of such entertainment allowance
regularly received by the assessee from his present
employer in any previous year ending before the 1st day of April, 1955, or a
sum equal to one-fifth of his salary (exclusive of any allowance, benefit or
other perquisite) or seven thousand five hundred rupees, whichever is the least;
89[R13] [(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.]
Salary”, “perquisite” and
“profits in lieu of salary” defined.
92[R16] 17. 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;
93[R17] [(va)any payment
received by an employee in respect of any period of leave not availed of by
him;]
(vi) the annual
accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is
chargeable to tax under rule 6 of Part A of the Fourth Schedule; and
(vii) the
aggregate of all sums that are comprised in the transferred balance as referred
to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee
participating in a recognised provident fund, to the
extent to which it is chargeable to tax under sub-rule (4) thereof;
94[R18] (2) “perquisite” includes—
95[R19] (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 rate in 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 of
paragraphs (a) and (b) of this sub-clause do not apply and whose income 96[R20] [under the head “Salaries” (whether due
from, or paid or allowed by, one or more employers), exclusive of the value of
all benefits or amenities not provided for by way of monetary payment, exceeds
twenty-four thousand rupees.]
97[R21] [Explanation: For the removal of doubts, it is hereby declared that the
use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of
work, or from such office or place to his residence, shall not be regarded as
a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause;]
(iv) any sum paid by the employer in respect of any obligation
which, but for such payment, would have been payable by the assessee;
and
(v) any sum
payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation
fund 98[R22] [or a Deposit-linked Insurance Fund
established under section 3G of the Coal Mines Provident Fund and Miscellaneous
Provisions 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 on the life of the assessee
or to effect a contract for an annuity;
1[R24] (3) “profits in lieu of
salary” includes—
(i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in
connection with the termination of his employment or the modification of the
terms and conditions relating thereto;
(ii) any payment
(other than any payment referred to in clause (10) 2[R25] [, clause (10A) 3[R26] [, clause (10B)], clause (11), 4[R27] [clause (12) 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 (not being an approved
superannuation fund), to the extent to which it does not consist of contributions
by the assessee or interest on such contributions.
C.—Income from house property
Income from house
property.
6[R29] 22. The annual value of property consisting
of any building or lands appurtenant thereto of which the assessee
is the owner, other than such portions of such property as he may occupy for
the purposes of any business or profession carried on by him the profits of
which are chargeable to income-tax, shall be chargeable to income-tax under
the head “Income from house property.”
Annual value how
determined.
23. (1) 7[R30] [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
respect thereof is in excess of the sum referred to in clause (a), the amount
so received or receivable:]
8[R31] [Provided that where the property is in the occupation of a
tenant, the taxes levied by any local authority in respect of the property
shall, to the extent such taxes are borne by the owner, be deducted
(irrespective of the previous year in which the liability to pay such taxes was
incurred by the owner according to the method of accounting regularly employed
by him) in determining the annual value of the property of that previous year
in which such taxes are actually paid by him;]
9[R32] [Provided further that the annual value as determined under this
sub-section shall,—
(a) in the case of a building comprising one or more residential
units, the erection of which is begun after the 1st day of April, 1961, and
completed before the 1st day of April, 1970, for a period of three years 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 six hundred rupees, the
amount of such annual value;
(ii) in respect of any residential unit whose annual value as so
determined exceed six hundred rupees, an amount of six hundred rupees;
(b) in the case
of a building comprising one or more residential units, the erection of which
is begun after the 1st day of April, 1961, and completed after the 31st day of
March, 1970, 10[R33] [but before the 1st day of April, 1978,]
for a period of five years, 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 one thousand two hundred
rupees, the amount of such annual value;
(ii) in respect of any residential unit whose annual value as so
determined exceeds one thousand two hundred rupees, an amount of one thousand
two hundred rupees;
11[R34] [(c) in the case of a building comprising one or more residential units,
the erection of which is 12[R35] [completed after the 31st day of March,
1978, but before the 1st day of April, 1982], for a period of five years 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 two thousand four hundred
rupees, the amount of such annual value;
(ii) in respect of any residential unit whose annual value as so
determined exceeds two thousand four hundred rupees, an amount of two thousand
four hundred rupees;]
13[R36] [(d) in the case of a building comprising one or more residential units,
the erection of which is completed after the 31st day of March, 1982, for a
period of five years 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 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 thousand six hundred rupees, an amount of three
thousand six hundred rupees.
15[R38] [Explanation 16[R39] [1] : For the
purposes of this sub-section, “annual rent” means—
(a) in a case where
the property is let throughout the previous year, the actual rent received or
receivable by the owner in respect of such year; and
(b) in any other case, the amount which bears the same
proportion to the amount of the actual rent received or receivable by the
owner for the period for which the property is let, as the period of twelve
months bears to such period.]
17[R40] [Explanation 2 : For the removal of doubts, it is hereby declared that
where a deduction in respect of any taxes referred to in the first proviso to
this sub-section is allowed in determining the annual value of the property in
respect of any previous year (being a previous year relevant to the assessment
year commencing on the 1st day of April, 1984 or any earlier assessment year),
no deduction shall be allowed under the first proviso in determining the annual
value of the property in respect of the previous year in which such taxes are
actually paid by the owner.]
18[R41] [(2) Where the property
consists of—
(a) a house or part of a house in the occupation of the owner
for the purposes of his own residence,—
(i) which is not actually let during any part of the previous
year and no other benefit there from 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 the previous year, that part of the annual
value (annual value being determined in the same manner as if the property had
been let) which is proportionate to the period during which the property is in
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 part which was occupied by the owner for his
own residence, which is proportionate to the period during which such part is
wholly occupied by him for his own residence shall be deducted in determining
the annual value.
Explanation:
The deduction under this sub-clause shall be made irrespective of whether the
period during which the property or, as the case may be, part of the property
was used for the residence 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 assessee may, 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
of his own residence, the annual value of the house or houses, other than the
house in respect of which the assessee has exercised
an option under clause (b), shall be determined under sub-section (1) as if
such house or houses had been left.
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, nothing contained in that proviso shall apply in computing the
annual value of that residential unit.]
20[R43] [(3) Where the property
referred to in sub-section (2) consists of one residential house only and it
cannot 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 a building 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 there from is derived by the owner.]
Deductions from income from house property.
21[R44] 24.(1) Income chargeable under the
head “Income from house property” shall subject to the provisions of
sub-section (2), be computed after making the following deductions, namely:—
(i) In respect of repairs,—
(a) Where the
property is in the occupation of the owner, or where the property is let to a
tenant and the owner has undertaken to bear the cost of repairs, a sum equal
to one-sixth of the annual value;
(b) Where the
property is in the occupation of a tenant who has undertaken to bear the cost
of repairs,—
(i) the excess of the annual value over
the amount of rent payable for a year by the tenant; or
(ii) a sum equal to one-sixth of the annual value, whichever is
less;(ii) the amount of any premium paid to ensure the property against risk of
damage or destruction;
(iv) where the property is subject to an annual charge 23[R46] [(not being a charge created by the assessee 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 with borrowed capital, the amount of any interest
payable on such capital.
24[R47] [Explanation : Where the property has been
acquired or constructed with borrowed capital, the interest, if any, payable
on such capital for the period prior to the previous year in which the property
has been acquired or constructed, as reduced by any part thereof allowed as a
deduction under any other provision of this Act, shall be deducted under this
clause in equal instalments for the said previous
year and for each of the four immediately succeeding previous years;]
(vii) any sums paid on account of land revenue 25[R48] [or any other tax levied by the State
Government] in respect of the property;
(viii) any sums spent to collect the rent from the property, not
exceeding six per cent of the annual value of the property;
(ix) where the
property is let and was vacant during a part of the year, that part of the
annual value 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 vacant part, which is proportionate to the
period during which such part is wholly unoccupied 26[R49] [***].
27[R50] [Explanation: The deduction under this clause shall be made irrespective
of whether the period during which the property or, as the case may be, part of
the property was vacant precedes or follows the period during which it is let;]
28[R51] (x) subject to such rules as
may be made in this behalf, the amount in respect of rent from property let to
a tenant which the assessee
cannot realise.
29[R52] [(2) No deduction shall be
allowed under sub-section (1) in respect of property of the nature referred 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 five thousand rupees in respect
of the property of the nature referred to in sub-clause (i)
of clause (a) of sub-section (2) of section 23.
(3) The total
amount deductible under sub-section (1) in respect of property of the nature
referred to in sub-clause (ii) of clause (a) of sub-section (2) of section 23
shall not exceed the annual value of the property as determined under that
section.]
Amounts
not deductible from income from house property.
25. Notwithstanding anything
contained in section 24, any annual charge or interest chargeable under this
Act which is payable outside India (not being interest 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 in respect of which there is no
person in India who may be treated as an agent under section 163 shall not be
deducted in computing the income chargeable under the head “Income from house
property”.
30[R53] [Special provision for cases where unrealised rent allowed as deduction is realised
subsequently.
25A. Where a deduction has been
made under clause (x) of sub-section (1) of section 24 in the assessment for
any year in respect of rent from property let to a tenant which the assessee cannot realise and
subsequently during any previous year the assessee
has realised any amount in respect of such rent, the
amount so realised shall be deemed to be income
chargeable under the head “Income from house property” and accordingly charged
to income-tax (without making any deduction 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.]
Property owned by
co-owners.
31[R54] 26. Where property consisting of buildings or
buildings and lands appurtenant thereto is owned by two or more persons and
their respective shares are definite and ascertainable, such persons shall not
in respect of such property be assessed as an association of persons, but the
share of each such person in the income from the property as computed in
accordance with sections 22 to 25 shall be included in his total income.
32[R55] [Explanation : For the purposes of this section, in applying the
provisions of sub-section (2) of section 23 for computing the share of each
such person as is referred to in this section, such share shall be computed, as
if each such person is individually entitled to the relief provided in that
sub-section.]
“Owner of house
property”, “annual charge”, etc., defined.
27. For the purposes of sections
22 to 26—
(i) an individual who transfers otherwise than for adequate
consideration any house property to his or her spouse, not being a transfer in
connection with an agreement to live apart, or to a minor child not being a
married daughter, shall be deemed to be the owner of the house property so
transferred;
(ii) The holder
of an importable estate shall be deemed to be the individual owner of all the
properties comprised in the estate;
33[R56] [(iii) a member of a co-operative society, company or other association
of persons to whom a building or part thereof is allotted or leased under a
house building 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 or part thereof in part performance of a contract of the nature
referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882),
shall be deemed to be the owner of that building or part thereof;
(iiib) a person who acquires any rights (excluding any rights by way of
a lease from month to month or for a period not exceeding one year) in or with
respect to any building or part thereof, by virtue of any such transaction as
is referred to in clause (f) of section 269UA, shall be deemed to be the owner
of that building or part thereof;]
(iv) “Annual
charge” means a charge to secure an annual liability, but does not include any
tax in respect of property or income from property imposed by a local
authority, or the Central or a State Government;
(v) “Capital
charge” means a charge to secure the discharge of a liability of a capital
nature;
(vi) Taxes levied by a local authority in
respect of any property shall be deemed to include service taxes levied by the
local authority in respect of the property.
D.—Profits and gains of business or profession
Profits
and gains of business or profession.
34[R57] 28. The following income shall be chargeable
to income-tax under the head “Profits and gains of business or profession”,—
(i) The profits and gains of any business or profession which
was carried on by the assessee at any time during the
previous year;
(ii) Any
compensation or other payment due to or received by,—
(a) Any person,
by whatever name called, managing the whole or substantially the whole of the
affairs of an Indian company, at or in connection with the termination of his
management or the modification of the terms and conditions relating thereto;
(b) any person, by whatever name called, managing the whole or
substantially the whole of the affairs in
(c) any person,
by whatever name called, holding an agency in India for any part of the
activities relating to the business of any other for any person, at or in
connection with the termination of the agency or the modification of the terms
and conditions relating thereto;
35[R58] [(d) any person, for or in
connection with the vesting in the Government, or in any corporation owned or
controlled by the Government, under any law for the time being in force, of the
management of any property or business;]
(iii) income derived by a trade, professional or similar
association from specific services performed for its members;
35a[R59] [(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);]
35b[R60] [(iiib) cash assistance (by whatever name called) received or
receivable by any person against exports under any scheme of the Government of
India;]
35c[R61] [(iiic) any duty of customs or excise re-paid or re-payable
as drawback to any person against exports under the Customs and Central Excise
Duties Drawbacks Rules, 1971;]
36[R62] [(iv) the
value of any benefit or perquisite, whether convertible into money or not,
arising from business or the exercise of a profession.]
(v) [Omitted by
the Direct Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Original clause was inserted by the Direct Tax Laws (Amendment) Act,
1987 with effect from the same date.]
Explanation 1: 37[R63] [Omitted by the Direct Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989.]
Explanation
2 : Where speculative transactions carried on by an assessee are of such a nature as to constitute a business,
the business (hereinafter referred to as “speculation business”) shall be
deemed to be distinct and separate from any other business.
Income from profits
and gains of business or profession, how computed.
38[R64] 29. The income referred to in section 28 shall
be computed in accordance with the provisions contained in sections 30 to 39[R65] [43C].
Rent, rates, taxes,
repairs and insurance for buildings.
30. In respect of rent, rates,
taxes, repairs and insurance for premises, used for the purposes of the business
or profession, the following deductions shall be allowed—
(a) where the premises are occupied by the assessee—
(i) as a tenant, the rent paid for such
premises; and further if he has undertaken to bear the cost of repairs to the
premises, the amount paid on account of such repairs;
(ii) otherwise than as a tenant, the amount paid by him on
account of current repairs 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 of damage or destruction of the premises.
Repairs
and insurance of machinery, plant and furniture.
40[R66] 31. In respect of repairs and insurance of
machinery, plant or furniture used for the purposes of the business or
profession, the following deductions shall be allowed—
(i) the amount paid on account of
current repairs thereto;
(ii) the amount of any premium paid in respect of insurance
against risk of damage or destruction thereof.
Depreciation.
41[R67] 32. (1) In respect of depreciation of
buildings, machinery, plant or furniture owned by the assessee
and used for the purposes of the business or profession, the following
deductions shall, subject to the provisions of section 34, be allowed—
(ii) 43[R69] [in the case of any block of assets, such
percentage on the written down value thereof as may be prescribed44[R70] ] :
45[R71] [Provided that where the actual cost
of any machinery or plant does not exceed 46[R72] [five thousand] rupees, the actual cost
thereof shall be allowed as a deduction in respect of the previous year in
which such machinery or plant is first put to use by the assessee
for the purposes of his business or profession:]
47[R73] [Provided further that no deduction
shall be allowed under this clause 48[R74] [***] in respect of any motor car
manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, and is used
otherwise than in a business of running it on hire for tourists.]
49[R75] [Explanation 1 : Where the business or profession of the assessee is carried on in a building not owned by him but
in respect of which the assessee hold a lease or
other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on
the construction of any structure or doing of any work in or in relation to,
and by way of renovation or extension of, or improvement to, the building, then
the provision of this clause shall apply as if the said structure or work is a
‘building owned by the assessee.
Explanation 2: For the purposes of
this clause “written down value of the block of assets” shall have the same
meaning as in clause *[R76] (c) of sub-section †[R77] (6) of section 43;]
(2) Where, in
the assessment of the assessee 56[R84] [(or, if the assessee
is a registered firm or an unregistered firm assessed as a registered firm, in
the assessment of its partners)] full effect cannot be given to any allowance 57[R85] [under clause (ii) of sub-section (1)] in
any previous year, owing to the profits or gains chargeable for that previous
year, or owing to there being no profits or gains chargeable being less than
the allowance, then, subject to the provisions of sub-section (2) of section 72
and sub-section (3) of section 73, the allowance or part of the allowance to
which effect has not been given, as the case may be, shall be added to the
amount of the allowance for depreciation for the following previous year and
deemed to be part of that allowance, or if there is no such allowance for that
previous year, be deemed to be the allowance for that previous year, and so on
for the succeeding previous years.
58[R86] [Investment allowance.
59[R87] 32A.(1) In respect of a ship or an aircraft or machinery or plant
specified in sub-section (2), which is owned 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 a deduction, in respect of the previous year in which the ship or
aircraft was acquired or the machinery or plant was installed or, if the ship,
aircraft, machinery or plant is first put to use in the immediately succeeding
previous year, then, in respect of that previous year, of a sum by way of
investment, allowance equal to twenty-five per cent of the actual cost of the
ship, aircraft, machinery or plant to the assessee:
60[R88] [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 60[R89] [further] that no deduction shall
be allowed under this section in respect of—
(a) Any
machinery or plant installed in any office premises or any residential accommodation,
including any 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
rebate is allowable under section 33; and
(d) Any
machinery of 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 the head “Profits and gains of business or profession” of any
previous year.
60[R90] [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
been met 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 an assessee 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 the purposes of business of
generation or distribution of electricity or any other form of power; or
61[R91] [(ii) in a small-scale
industrial undertaking for the purposes of business of manufacture or
production of any article or thing; or
(iii) in any
other industrial undertaking for the purposes of business of construction,
manufacture or production of any article or thing, not being an article or
thing specified in the list in the Eleventh Schedule:]
62[R92] [Provided that nothing contained in clauses (a) and (b) shall
apply in relation to,—
(i) a new ship or new aircraft
acquired, or
(ii) any new
machinery or plant installed,after
the 31st day of March, 1987 but before the 1st day of April, 1988, unless such
ship or aircraft is acquired or such machinery or plant is installed in the
circumstances specified in clause (a) of sub-section (8B) and the assessee furnishes evidence to the satisfaction of the
Assessing Officer as specified in that clause;]
63[R93] [(c) any new machinery or
plant installed after the 31st day of March, 1983, but before the 64[R94] [1st day of April, 1987], for the purposes
of business of repairs to ocean-going vessels or other powered craft if the
business is carried on by an Indian company and the business so carried on is
for the time being approved for the purposes of this clause by the Central
Government.]
Explanation:
For the purposes of this sub-section and 65[R95] [sub-sections (2B) 66[R96] [, (2C)] and (4)],—
67[R97] [(1)(a) “new ship” or
“new aircraft” includes a ship or aircraft which before the date of acquisition
by the assessee was used by any other person, if it
was not at any time previous to the date of such acquisition owned by any
person resident in India;
(b) “New machinery
or plant” includes machinery or plant which before its installation by the assessee was used outside
(i) Such machinery or plant was not, at any time previous to the date
of such installation by the assessee, used in
(ii) Such machinery or
plant is imported into
(iii) no deduction on account of depreciation in respect of
such machinery or 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 prior to the date of the installation
of the machinery or plant by the assessee,]
(2) an
industrial undertaking shall be deemed to be a small-scale industrial
undertaking, if the aggregate value of the machinery and plant (other than
tools, jigs, dies and moulds) installed, as on the last day of the previous
year, for the purposes of the business of the undertaking 68[R98] [does not exceed,—
69[R99] [(i) in
a case where the previous year ends after 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 18th day 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 the assessee; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the
owner of such machinery or plant.
70[R100] [2A) The
deduction under sub-section (1) shall not be denied in respect of any machinery
or plant installed and used mainly for the purposes of business of
construction, manufacture or production of any article or thing, not being an
article or thing specified in the list in the Eleventh Schedule, by reason only
that such machinery or plant is also used for the purposes of business of
construction, manufacture or production of any article or thing specified in
the said list.]
70[R101] [(2B) Where any new machinery or
plant is installed after the 30th day of June, 1977, but before the 1st day of
April, 71[R102] [1987], for
the purposes of business of manufacture or production of any article 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 a laboratory owned by a public sector company or
a University or by an institution recognised in this
behalf by the prescribed authority,72[R103] 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, if the following conditions are fulfilled, namely
:—
(i) the right to use such technology
(including any process) or other know-how or to manufacture or produce such
article or thing has been acquired from the owner of such laboratory or any
person deriving title from such owner;
(ii) the assessee furnishes, along with his return of income for the
assessment year for which the deduction is claimed, a certificate from the
prescribed authority73[R104] to the effect
that such article or thing is manufactured or produced by using such technology
(including any process) or other know-how developed in such laboratory or is in
article or thing invented in such laboratory; and
(iii) the machinery or plant is not used for the purpose of
business of manufacture or production of any article or thing specified in the
list in the Eleventh Schedule.
Explanation :
For the purposes of this sub-section,—
(a) “laboratory financed by the Government” means a laboratory
owned by any body [including a society registered under the Societies
Registration Act, 1860 (21 of 1860)], and financed wholly or mainly by the
Government;
(c) “University”
means a University established or incorporated by or under a Central, State or
Provincial Act and includes an institution declared under section 3 of the
University Grants Commission Act, 1956 (3 of 1956), to be a University for the
purposes of that Act.]
75[R106] [(2C) Where any new machinery or
plant, being machinery or plant which would assist in control of pollution or
protection of environment and which has been notified76[R107] in this
behalf by the Central Government in the Official Gazette, is installed after
the 31st day of May, 1983, 77[R108] [but before
the 1st day of April, 1987], in any industrial undertaking referred to in
sub-clause (i) or sub-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 the previous 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 this purpose being
computed after deduction of the allowances under section 33 and section 33A, but
without making any deduction under sub-section (1) of this section or any
deduction under Chapter VI-A) is nil or is less than the full amount of the
investment allowance,—
(i) the sum to be allowed by way of investment allowance for
that assessment year under sub-section (1) shall be 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 as aforesaid,
shall be carried forward to the following assessment year, and the investment
allowance to 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 manner aforesaid, to nil,
and the balance of the investment allowance, if any, still outstanding shall be
carried forward to the following assessment year and so on, so, however, that
no portion of the investment allowance shall be carried forward for more than
eight assessment years immediately succeeding the assessment year relevant to
the previous 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.
Explanation
: Where for any assessment year, investment allowance is to be allowed in
accordance with the provisions of this sub-section in respect of any ship or
aircraft acquired or any machinery or plant installed in more than one previous
year, and the total income of the assessee assessable
for that assessment year (the total income for this purpose being computed
after deduction of the allowances under section 33 and section 33A, but without
making any deduction under sub-section (1) of this section or any deduction
under Chapter VI-A) is less than the aggregate of the amounts due to be
allowed in respect of the assets aforesaid for that assessment year, the
following procedure shall be followed, namely:—
(a) the allowance under clause (ii) shall be made before any
allowance under clause (i) is made; and
(b) where an allowance has to be made under clause (ii) in
respect of amounts carried forward from more than one assessment year, the
amount carried forward from an earlier assessment year shall be allowed 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 are fulfilled, namely:—
(i) the particulars prescribed in this
behalf have been furnished by the assessee 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
allowed is debited to the profit and loss account of 77a[R109] [any previous
year in respect of which the deduction is to be allowed under sub-section (3)
or any earlier previous year (being a previous year not earlier than the year
in which the ship or aircraft was acquired or the machinery or plant was
installed or the ship, aircraft, machinery or plant was first put to use)] and
credited to a reserve account (to be called the “Investment Allowance Reserve
Account”) to be utilised—
(a) for the
purposes of acquiring, before the expiry of a period of ten years next
following the previous year in which the ship or aircraft was acquired or the
machinery or plant was installed, a new ship or a new aircraft or new machinery
or plant [other than machinery or plant of the nature referred to in clauses
(a), (b) and (d) of the 78[R110] [second]
proviso to sub-section (1)] for the purposes of the business of 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 of dividends or profits or for remittance outside India as
profits or for the creation of any asset outside 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 the
Investment Allowance Reserve Account under this sub-section is not less than
the amount required to be so credited on the basis of the amount of deduction
in respect of investment allowance claimed in the return made by the assessee under section 139, but a higher deduction in
respect of the investment allowance is admissible on the basis of the total
income as proposed to be computed by the 79[R111] [Assessing]
Officer under section 143, the 79[R112] [Assessing]
Officer shall, by notice in writing in this behalf, allow the assessee an opportunity to credit within the time specified
in the notice or within such further time as the 79[R113] [Assessing]
Officer may allow, a further amount to the Investment Allowance Reserve Account
out of the profits and gains of the previous year in which such notice is
served on the assessee or of the immediately preceding
previous year, if the accounts for that year have not been made up; and, if the
assessee credits any further amount to such account
within the time aforesaid, the amount so credited shall be deemed to have been
credited to the Investment Allowance Reserve Account of the previous year in
which the deduction is admissible and such amount shall not be taken into
account in determining the adequacy of the reserve required to be created by
the assessee in respect of the previous year in which
such further credit is made :
Provided that such opportunity shall not be
allowed by the 80[R114] [Assessing]
Officer in a case where the difference in the total income as proposed to be
computed by him and the total income as returned 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 fully and truly.
(5) Any
allowance made under this section in respect of any ship, aircraft, machinery or
plant shall 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 time before the expiry of
eight years from the end of the previous year in which it was acquired or
installed; or
(b) if at any
time before the expiry of ten years from the end of the previous year in which
the ship or aircraft was acquired or the machinery or plant as installed, the assessee does not utilize the amount credited to the
reserve account under sub-section (4) for the purposes of acquiring a new ship
or a new aircraft or new machinery or plant [other than machinery or plant of
the nature referred to in clauses (a), (b) and (d) of the 81[R115] [second] proviso
to sub-section (1)] for the purposes of the business of the undertaking; or
(c) if at any
time before the expiry of the ten years aforesaid, the assessee
utilises the amount credited to the reserve account
under sub-section (4) for distribution by way of dividends or profits or for
remittance outside India as profits or for the creation of any assets outside
India or for any other purpose which is not a purpose of the business of the undertaking,and the provisions 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 plant is sold or
otherwise transferred by the assessee to the
Government, a local authority, a corporation established by a Central, State or
Provincial Act or a 82[R116] Government
company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) Where the
sale or transfer of the ship, aircraft, machinery or plant is made in
connection with the 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 transfers
to the amalgamated company any ship, aircraft, machinery or plant, in respect
of which investment 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 period within which such ship,
aircraft, machinery or plant shall not be sold or otherwise transferred and in
default of any of these conditions, the provisions of sub-section (4A) of
section 155 shall apply to the amalgamated company as they would have applied
to the amalgamating company had it committed the default; and
(b) the balance
of investment allowance, if any, still outstanding to the amalgamating company
in respect of such ship, aircraft, machinery or plant, shall be allowed to the
amalgamated company in accordance with the provisions of sub-section (3), so,
however, that the total period for which the balance of investment allowance
shall be carried forward in the assessments of the amalgamating 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 in respect 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 of
which 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 firm and the company.
Explanation:
The provisions of this sub-section shall apply only where—
(i) all the property of the firm
relating to the business immediately before the succession becomes the property
of the company;
(ii) all the liabilities of the firm relating to the business
immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the
firm immediately before the succession.
(8) The Central
Government, if it considers necessary or expedient so to do, may, by
notification83[R117] in the
Official Gazette, direct that the deduction allowable under this section shall
not be allowed in respect of any ship or aircraft acquired or any machinery or
plant installed after such date 84[R118] [***] as may
be specified therein.
85[R119] [(8A) The Central Government, if it
considers necessary or expedient or expedient so to do, may, by notification in
the Official Gazette, omit any article or thing from the list of articles or
things specified in the Eleventh Schedule.]
86[R120] [(8B) notwithstanding anything
contained in sub-section (8) or the notification of the Government of India in
the Ministry of Finance (Department of Revenue) No.
GSR 870(E), dated the 12th June, 1986, issued thereunder,
the provisions of this section shall apply in respect of,—
(a) (i) a new ship or
new aircraft acquired after the 31st day of March, 1987 but before the 1st day
of April, 1988, if the assessee furnishes evidence to
the satisfaction of the Assessing Officer that he had, before the 12th day of
June, 1986, entered into a contract for the purchase of such 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 1st day of
April, 1988, if the assessee furnishes evidence to
the satisfaction of the Assessing Officer that before the 12th day of June,
1986, he had purchased such machinery or plant or had entered into a contract
for the purchase of such machinery or plant with the manufacturer or owner of,
or a dealer in, such machinery or plant, or had, here such machinery or plant
has been manufactured in an undertaking owned by the assessee,
taken steps for the manufacture of such machinery 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 year except 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 31st day of March, 1988, but before such date as the
Central Government, if it considers necessary or expedient so to do, may, by
notification in the Official Gazette, specify in this behalf.
(8C) Subject to the
provisions of clause (ii) of sub-section (3), where a deduction has been
allowed to an assessee under sub-section (1) in any
assessment year, no deduction shall be allowed to the assessee
under section 32AB in the said assessment year (hereinafter referred to as the
initial assessment year) and a block of further period of four years beginning
with the assessment year immediately succeeding the initial assessment year.]
86a[R121] (9) [Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]
87[R122] [Investment deposit
account.
32AB. (1) Subject to the other provisions of this section, where an assessee, whose total income includes 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 section referred to as deposit
account) maintained by him with the Development Bank before the expiry of 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 88[R123] (hereafter in
this section referred to as the scheme) to be framed by the Central Government,
or if the assessee is carrying on the business of
growing and manufacturing tea in India, to be approved in this behalf by the
Tea Board, the assessee shall be allowed a deduction 89[R124] [(such
deduction being allowed before the loss, if any, brought forward from earlier
years is set off under section 72)] of—
(i) a sum equal to the 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 90a[R125] [eligible]
business or profession as computed in the accounts of the assessee
audited in accordance with sub-section (5),whichever is less :
89[R126] [Provided that where such assessee is a firm, or any association of persons or any
body of individuals, 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 or body of individuals.]
90[R127] [Provided further that no such
deduction shall be allowed in relation to the assessment year commencing on the
1st day of April, 1991, or any subsequent assessment year.]
(2) For the
purposes of this section,—
90a[R128] [(i)“eligible
business or profession”shall mean business or
profession, other than—
(a) the business
of construction, manufacture or production of any article or thing specified in
the list in the Eleventh Schedule carried on by an industrial undertaking,
which is not a small-scale industrial undertaking as defined in section 80HHA;
(b) the business
of leasing or hiring of machinery or plant to an industrial undertaking, other
than a small-scale industrial undertaking as defined in section 80HHA, engaged
in the business of construction, manufacture or production of any article or
thing specified in the list in the Eleventh Schedule;]
91[R129] [(ii) “new ship” or “new aircraft” includes a ship or aircraft which
before the date of acquisition by the assessee was
used by any other person, if it was not at any 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 the assessee was used
outside
(a) such machinery or plant was not, at any time previous to the
date of such installation by the assessee, used in
(b) such machinery or plant is imported into
(c) no deduction on account of depreciation in respect of such
machinery or plant has been allowed or is allowable under this Act in computing
the total income of any person for any period 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 of
1953).]
(3) 92[R130] [ The profits of eligible business or
profession of an assessee for the purposes of
sub-section (1) shall,—
(a) in a case
where separate accounts in respect of such eligible business or profession are
maintained,] be an amount arrived at after deducting an amount equal to the
depreciation computed in accordance with the provisions of sub-section (1) of
section 32 from the amounts of profits computed in accordance with the
requirements of Parts II and III of the 93[R131] [Sixth Schedule]
to the Companies Act, 1956 (1 of 1956) 94[R132] [as increased
by the aggregate of—
(i) the amount of depreciation;
(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 of 1964);
(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 than ascertained 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, if such amounts are credited to the
profit and loss account; 95[R133] [and]]
95[R134] [(b) in
a case where such separate accounts are not maintained or are not available, be
such amount which bears to the total profits of the business or profession of
the assessee after allowing depreciation in
accordance with the provisions of sub-section (1) of section 32, the same
proportion as the total sales, turnover or gross receipts of the eligible
business or profession bear to the total sales, turnover or gross receipt of
the business or profession carried on by the assessee.]
(4) No deduction
under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of—
(a) any machinery or plant to be installed in any office
premises or residential accommodation, 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 the head “Profits and gains of
business or profession” of any one previous year.
The following clause
(e) shall be inserted by the Finance Act, 1989, w.e.f.
1-4-1991 :
(e) any new machinery or plant to be installed in an industrial
undertaking other than a small-scale industrial undertaking, as defined in
section 80HHA, for the purposes of business of construction, manufacture or
production of any article or thing specified in the list in the Eleventh
Schedule.
(5) The
deduction under sub-section (1) shall not be admissible unless the accounts of
the business or profession of the assessee for the
previous year relevant to the assessment year for which the deduction is
claimed 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 such audit in the
prescribed form96[R135] 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 his
accounts audited, it shall be sufficient compliance with the provisions of this
sub-section if such assessee gets the accounts of
such business or profession audited under such law and furnishes the report of
the audit as required under such other law and a further report in the form
prescribed under this sub-section.
97[R136] (5A) Any
amount standing to the credit of the assessee in the
deposit account shall not be allowed to be withdrawn before the expiry of a
period of five years from the date of deposit except for the purposes specified
in the scheme 98[R137] 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.]
99[R138] 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)
in relation to any withdrawals made from the deposit account either before or
after the expiry of a period of five years from the date of deposit.]
99[R139] (5AA) Where any amount, standing to
the credit of the assessee in the deposit account, is
withdrawn during any previous year by the assessee in
the circumstance specified in clause (a) or clause (d) of sub-section (5A), the
whole of such amount shall be deemed to be the profits and gains of business or
profession of the previous year and shall accordingly be chargeable to
income-tax as the income of that previous year, as if the business had not
closed or, as the case may be, the firm had not been dissolved.]
1[R140] (5B) Where any amount standing to the credit of the assessee
in the deposit account is utilised by the assessee for the purposes of any expenditure in connection
with the 2[R141] eligible]
business or profession in accordance with the scheme, such expenditure shall
not be allowed in computing the income chargeable 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, released during any previous year by the Development Bank for
being utilised by the assessee
for the purposes specified in the scheme or at the closure of the account 3[R142] [[in
circumstances other than the circumstances specified in clauses (b), (c) and
(e) of sub-section (5A)]], is not utilised in
accordance with 3a[R143] and within the
time specified in,] the scheme, either wholly or in part, 4[R144] [* * *] the
whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be the profits and gains of
business or profession of that previous year and shall accordingly 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
in any previous year by the assessee to any person
at any time before the expiry of eight years from the end of the previous year
in which it was acquired, such part of the cost of such asset as is relatable
to the deductions allowed under sub-section (1) shall be deemed to be the
profits and gains of business or profession of the previous year in which the
asset is sold or otherwise transferred 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 otherwise transferred by the assessee to Government, a local authority, a corporation
established by or under a Central, State or 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 asset is made in connection with the succession of a
firm by a company in the business or profession carried on by the firm as a
result of which the firm sells or otherwise transfers to the company any asset
and the scheme continues to 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 the properties of the firm
relating to the business or profession immediately before the succession become
the properties of the company;
(ii) all the liabilities of the firm relating to the business or
profession immediately before the succession become the liabilities of the
company; and
(iii) all the shareholders of the company were partners of the
firm immediately before the succession.
(8) The Central
Government may, if it considers necessary or expedient so to do, by
notification in the Official Gazette, omit any article or thing from the list
of articles or things specified in the Eleventh Schedule.
(9) The Central
Government may, after making such inquiry as it may think fit, direct, by
notification in the Official Gazette, that the
provisions of this section shall not apply to any class of assessees, with
effect from such date as it may specify in the notification.
5[R145] (10) Where
a deduction has been allowed to an assessee under
this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said
assessment year (hereinafter referred to as the initial assessment year) and a
block of further period of four years beginning with the assessment year
immediately succeeding the initial assessment year].]
Explanation: In this section,—
(a) “Computers”
does not include calculating machines and calculating devices;
(b) “Development
Bank” means—
(i) in the case of an assessee
carrying on business of growing and manufacturing tea in India, the National
Bank for Agriculture and Rural Development established 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
the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes
such bank or institution as may be specified in the scheme in this behalf.
33.6[R146] [(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 the business carried on by him, there
shall, in accordance with and subject to the provisions of this section and of
section 34, be allowed a deduction, in respect of the previous year in which
the ship was acquired or the machinery or plant was installed or, if the ship,
machinery or plant is first put to use in the immediately succeeding previous
year, then, in respect of that previous year, 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 the actual cost
thereof to the assessee;
(B) in the case of machinery or plant,—
(i) where the machinery or plant is installed for the purposes of
business or construction, manufacture or production of any one or more of the
articles 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 is installed 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 assessee being an Indian company in premises used by it as
a hotel and such hotel is for the time being approved in this behalf by the
Central Government,—
(a) thirty-five
per cent of the actual cost of the machinery or plant to the assessee, where it is installed 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;
(iii) where the
machinery or plant is installed after the 31st day of March, 1967, being an
asset representing expenditure of a capital nature on scientific research
related to the business carried on by the assessee,—
(a) thirty-five
per cent of the actual cost of the machinery or plant to the assessee, where it is installed 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;
(iv) in
any other case,—
(a) twenty per
cent of the actual cost of the machinery or plant to the assessee,
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.]
7[R147] [8[R148] (1A)(a) An assessee who, after the
31st day of March, 1964, acquires any ship which before the date of acquisition
by him was used by any other person shall, subject to the provisions of section
34, also be allowed as a deduction a sum by way of development rebate at such
rate or rates 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 person resident in
(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.
(b) An assessee who installs any
machinery or plant (other than office appliances or road transport vehicles)
which before such installation by the assessee was
used outside India by any other person shall, subject to the provisions of
section 34, also be allowed as a deduction a sum by way of development rebate
at such rate or rates as may be prescribed, provided that the following
conditions are fulfilled, namely:—
(i) such machinery or plant was not used in
(ii) it is imported in
(iii) no deduction on
account of depreciation or development rebate in respect of such machinery or
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 prior to 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 the assessee; and
(v) such
other conditions as may be prescribed.
(c) The development rebate under this sub-section shall be
allowed as a deduction in respect of the previous year in which the ship was
acquired or the machinery or plant was installed or, if the ship, machinery or
plant is first put to use in the immediately succeeding previous year, then,
in respect 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 the previous year in which the
ship was acquired or the machinery or plant installed or the immediately
succeeding previous year, as the case may be (the total income for this
purpose being computed without making any allowance under sub-section (1) 9[R149] [or
sub-section (1A)] 10[R150] [of this
section or sub-section (1) of section 33A] 11[R151] [or any
deduction under Chapter VI-A 12[R152] [* * *]]) is nil
or is less than the full amount of the development rebate calculated at the
rate applicable thereto under 13[R153] [sub-section
(1) or sub-section (1A), as the case may be],—
(i) The sum to be allowed by way of development rebate for that
assessment year under sub-section (1) 9[R154] [or
sub-section (1A)] shall be only 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 as
aforesaid, shall be carried forward to the following assessment year, and the
development rebate to 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 manner aforesaid, to nil, and the balance of the development rebate, if
any, still outstanding shall be carried forward to the following assessment
year and so on, so however that no portion of the development rebate shall be
carried forward for more than eight assessment years immediately succeeding the
assessment year relevant to the previous year in which the ship was acquired or
the machinery or plant installed or the immediately succeeding previous year,
as the case may be.
Explanation : Where for any assessment year development rebate is to be
allowed in accordance with the provisions of sub-section (2) in respect of
ships acquired or machinery or plant installed in more than one previous year,
and the total income of the assessee assessable for
that assessment year (the total income for this purpose being computed without
making any allowance under sub-section (1) 14[R155] [or
sub-section
(1A) 15[R156] [of this
section or sub-section (1) of section 33A] 16[R157] [or any
deduction under Chapter VI-A 17[R158] [* * *]]) is
less than the aggregate of the amounts due to be allowed in respect of the
assets aforesaid for that assessment year, the following procedure shall be
followed, namely:—
(i) the allowance under clause (ii) of sub-section (2) 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) in respect of
amounts carried forward from more than one assessment year, the amount carried
forward from an earlier assessment year shall be allowed before any amount carried
forward from a later assessment year.
18[R159] [(3) Where, in a scheme of amalgamation, the amalgamating company sells
or otherwise transfers to the amalgamated company any ship, machinery or plant
in respect of which development rebate has been allowed to the amalgamating
company under sub-section (1) or sub-section (1A),—
(a) the
amalgamated company shall continue to fulfill the conditions mentioned in
sub-section (3) of section 34 in respect of the reserve created by the
amalgamating company and in respect of the period within which such ship,
machinery or plant shall not be sold or otherwise transferred and in default of
any of these conditions, the provisions of sub-section (5) of section 155 shall
apply to the amalgamated company as they would have applied to the amalgamating
company had it committed the default; and
(b) the balance of
development rebate, if any, still outstanding to the amalgamating company in
respect of such ship, machinery or plant 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 of development rebate shall be carried
forward in the assessments of the amalgamating company and the amalgamated
company shall not exceed the period of eight years specified in sub-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 of
which the firm sells or otherwise transfers to the company any ship, machinery
or plant, the provisions of clauses (a) and (b) of sub-section (3) shall, so
far as may be, apply to the firm and the 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 the company;
(ii) All the
liabilities of the firm relating to the business immediately before the
succession become the liabilities of the company; and
(iii) All the
shareholders of the company were partners of the firm immediately before the
succession.
19[R160] [(5) The Central Government, if it
considers necessary or expedient so to do, may, by notification20[R161] in the
Official Gazette, direct that the deduction allowable under this section shall
not be allowed in respect of a ship acquired or machinery or plant installed
after such date, not being earlier than three years from the date of such
notification, as may be specified therein.]
21[R162] [(6) Notwithstanding anything
contained in the foregoing provisions of this section, no deduction by way of
development rebate shall be allowed in respect of any machinery or plant
installed after the 31st day of March, 1965, in any office premises or any
residential accommodation, including any accommodation in the nature of a
guest-house :]
22[R163] [Provided that the provisions
of this sub-section shall not apply in the case of an assessee
being an Indian company, in respect of any machinery or plant installed by it
in premises used by it as a hotel, where the hotel is for the time being
approved in this behalf by the Central Government.]
23[R164] [Development allowance.
24[R165] 33A.(1) In respect of planting of
tea bushes on any land in India owned by an assessee
who carries on business of growing and manufacturing tea in India, a sum by way
of development allowance equivalent to—
(i) Where tea bushes have been planted on any land not planted
at any time with tea bushes or on any land which had been previously abandoned,
25[R166] [fifty] per
cent of the actual cost of planting; and
(ii) Where tea
bushes are planted in replacement of tea bushes that have died or have become
permanently useless on any land already planted, 26[R167] [thirty] per
cent of the actual cost of planting,Shall, subject to
the provisions of this section, be allowed as a deduction 27[R168] [in the manner
specified hereunder, namely:—
(a) the amount
of the development allowance shall, in the first instance, be computed with
reference to that portion of the actual cost of planting which is incurred
during the previous year in which the land is prepared for planting or
replanting, as the case may be, and in the previous year next following, and
the amount so computed shall be allowed as a deduction in respect of such
previous year next following; and
(b) thereafter,
the development allowance shall again be computed with reference to the actual
cost of planting, and if the sum so computed exceeds the amount allowed as a
deduction under clause (a), the amount of the excess shall be allowed as a
deduction in respect of the third succeeding previous year next following the
previous year in which the land had been prepared for planting or replanting,
as the case may be:]
27a[R169] [Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after
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 has commenced 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 28[R170] [the previous
year in respect of which the deduction is required to be allowed under
sub-section (1)] 29[R171] [(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 making any deduction under sub-section (1) of this
section or any deduction under Chapter VI-A 30[R172] [* * *])] is
nil or is less than the full amount of the development allowance calculated at
the rates 31[R173] [and in the
manner] specified in sub-section (1)—
(i) the sum to be allowed by way of development allowance for
that assessment year under sub-section (1) shall be only such amount as is
sufficient 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 as
aforesaid, shall be carried forward to the following assessment year, and the
development allowance to 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 manner aforesaid, to nil, and the balance of the development allowance, if
any, still outstanding shall be carried forward to the following assessment
year and so on, so, however, that no portion of the development allowance shall
be carried forward for more than eight assessment years immediately succeeding
the assessment year in which the deduction was first allowable.
Explanation
: Where for any assessment year development allowance is to be allowed in
accordance with the provisions of sub-section (2) in respect of more than one
previous year, and the total income of the assessee
assessable for that assessment year 32[R174] [(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 making any deduction under sub-section (1) of this
section or any deduction under Chapter VI-A 33[R175] [* * *])] is
less than the amount of the development 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) of this
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
in respect of amounts carried forward from more than one assessment year, the
amount carried forward from an earlier assessment year shall be allowed before
any amount carried forward from a later assessment year.
34[R176] (3) the
deduction under sub-section (1) shall be allowed only if the following
conditions are fulfilled, namely:—
(i) The particulars prescribed in this behalf have been
furnished by the assessee;
(ii) an amount
equal to seventy-five per cent of the development allowance to be actually
allowed is debited to the profit and loss account of the relevant previous year
and credited to a reserve account to be utilised by
the assessee during a period of eight years next
following for the purposes of the business of the undertaking, other than—
(a) For
distribution by way of dividends or profits; or
(b) For
remittance outside
(iii) Such other conditions as may be
prescribed.
(4) If any such
land is sold or otherwise transferred by the assessee
to any person at any time before the expiry of eight years from the end of the
previous year in which the deduction under sub-section (1) was allowed, any
allowance under this section shall be deemed to have been wrongly made for the
purposes of this Act, and the provisions of sub-section (5A) of section 155
shall apply accordingly:
Provided that this sub-section shall
not apply—
35[R177] (i) where the land is sold or otherwise
transferred by the assessee to 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 Companies Act,
1956 (1 of 1956); or
(ii) Where the
sale or transfer of the land is made in connection with the amalgamation or
succession referred to in sub-section (5) or sub-section (6).
36[R178] [(5) Where, in a scheme of amalgamation, the amalgamating company sells
or otherwise transfers to the amalgamated company any land in respect of which
development allowance has been allowed to the amalgamating company under
sub-section (1),—
(a) the
amalgamated company shall continue to fulfill the conditions mentioned in
sub-section (3) in respect of the reserve created by the amalgamating company
and in respect of the period within which such land shall not be sold or
otherwise transferred and in default of any of these conditions, the provisions
of sub-section (5A) of section 155 shall apply to the amalgamated company as
they would have applied to the amalgamating company had it committed the
default; and
(b) the balance
of development allowance, if any, still outstanding to the amalgamating company
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 of development allowance shall be carried forward
in the assessments of the amalgamating company and the amalgamated company
shall not exceed the period of eight years specified in sub-section (2) and the
amalgamated company shall be treated as the assessee
in respect of such land 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 of
which the firm sells or otherwise transfers to the company any land on which
development allowance has been allowed, the provisions of clauses (a) and (b)
of sub-section (5) shall, so far as may be, apply to the firm and the company.
Explanation:
The provisions of this sub-section shall apply if the conditions laid down in
the Explanation 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) the cost 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 the
three successive previous years next following such previous year,Reduced by that portion of the cost, if any, as has
been met directly or indirectly by any other person or authority:
37[R179] [Provided that where such cost
exceeds—
(i) forty thousand rupees per hectare in
respect of land situate 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 in an 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 of Darjeeling as on
the 28th day of February, 1981, being the date of introduction of the Finance
Bill, 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 38[R180] hilly areas
for the purposes of this section and such order shall not be questioned before
any court of law or any other authority.
39[R181] [Explanation : For the purposes of
this section, an assessee having a leasehold or other
right of occupancy in any land shall be deemed to own such land and where the assessee transfers such right, he shall be deemed to have
sold or otherwise transferred such land.]
40[R182] [Tea development account.
33AB. (1) Where an assessee
carrying on business of growing and manufacturing tea in India has, during the
previous year, deposited with the National Bank any amount or amounts in an
account (hereafter in this section referred to as the special account)
maintained by the assessee with that Bank in
accordance with a scheme (hereafter in this section referred to as the scheme)
approved in this behalf by the Tea Board, the assessee
shall, subject to the provisions of this section, be allowed a deduction of—
(a) a sum equal to the amount or the aggregate of the amounts so
deposited during the previous year, 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.Explanation: In this section,—
(a) “National
Bank” means the National Bank for Agriculture and Rural Development established
under section 3 of the National Bank for Agriculture and Rural Development Act,
1981 (61 of 1981);
(b) “Tea Board”
means the Tea Board established under section 4 of the Tea Act, 1953 (29 of
1953).
(2) Where the
amount or the aggregate of the amounts deposited by the assessee
in the special account during the previous year exceeds the sum allowable as
deduction under sub-section (1), the excess shall be treated, for the purposes
of that sub-section, as a deposit made by the assessee
in the next following previous year.
(3) Where any
amount standing to the credit of the assessee in the
special account is utilised by the assessee for the purposes of the business referred to in
sub-section (1) in accordance with the scheme,—
(a) for
acquiring any asset being building, machinery, plant or furniture, the actual
cost of such asset as determined under clause (1) of section 43 shall, for the
purposes of this Act, be reduced by the amount so utilised;
(b) for incurring any expenditure for the purposes of such
business, such expenditure shall be reduced by the amount so utilised and the resultant sum, if any, shall be taken into
account for the purposes of this Act.
(4) Where any
amount, standing to the credit of the assessee in the
special account, which is released during any previous year by the National
Bank for being utilised by the assessee
for the purposes of the business referred to in sub-section (1) in accordance
with the scheme is not so utilised, either wholly or
in part, within that previous year, the whole of such amount or, as the case
may be, part thereof which is not so utilised shall
be deemed to be profits and gains of business and accordingly chargeable to
income-tax as the income of that previous year.
(5) The
provisions of this section shall apply in relation to the 41[R183] [assessment
years commencing on the 1st day of April, 1986, and the 1st day of April,
1987].]
The
following section 33AB shall be substituted for existing section 33AB by the
Finance Act, 1990, w.e.f. 1-4-1991
:
Tea Development Account.
33AB. (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
return of his income, whichever is earlier, deposited with the National Bank
any amount or amounts in an account (hereafter in this section referred to as
the special account) maintained by 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, the assessee shall, subject to the
provisions of this section, be allowed a deduction (such deduction being
allowed before the loss, if any, brought forward from earlier years is set off
under section 72) of—
(a) a sum equal to the amount or the aggregate 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 of individuals, 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 or body of individuals:
Provided
further that where
any deduction, in respect of any amount deposited in the special account, has
been allowed under this sub-section in any previous year, 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
such business of the assessee for the previous year
relevant to the assessment year for which the deduction is claimed 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 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 his
accounts audited, it shall be sufficient compliance with the provisions of this
sub-section if such assessee gets the accounts of
such business audited under such law and furnishes the report of the audit 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 shall not be allowed to be withdrawn except 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.
(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 or plant to be installed in any office premises or residential
accommodation, including any accommodation in the nature of a guest-house,
(b) Any office
appliances (not being computers);
(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 the head “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 of business of construction, manufacture or
production of any article or thing specified in the list in the Eleventh
Schedule.
(5) Where any
amount, standing to the credit of the assessee in the
special account, is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or
clause (d) of sub-section (3), the whole of such amount shall be deemed to be
the profits and gains of business or profession of that previous year and shall
accordingly be chargeable to income-tax as the income of that previous year, as
if the business had not closed or, 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 is utilised by the assessee for the purposes of any expenditure in connection
with such business in accordance with the scheme, such expenditure shall not 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, which is released during any previous year by the National
Bank for being utilised by the assessee
for the purposes of such business in accordance with the scheme is not so utilised, either wholly or in part, within that previous
year, the whole of such amount or, as the case may be, part thereof which is
not so utilised shall be deemed to be profits and
gains of business 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 any previous 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 is sold or otherwise transferred
in any previous year by the assessee to any person
at any time before the expiry of eight years from the end of the previous year
in which it was acquired, such part of the cost of such asset as is relatable
to the deduction allowed under sub-section (1) shall be deemed to be the
profits and gains of business or profession of the previous year in which the
asset is sold or otherwise transferred 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 otherwise transferred by the assessee to Government, a local authority, a corporation
established by or under a Central, State or 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 asset is made in connection with the succession of a
firm by a company in the business or profession carried on by the firm as a
result of which the firm sells or otherwise transfers to the company any asset
and the scheme continues to 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 the properties of the firm
relating to the business or profession immediately before the succession become
the properties of the company;
(ii) all the liabilities of the firm relating to the business or
profession immediately before the succession become the liabilities of the
company; and
(iii) all the shareholders of the company were partners of the
firm immediately before the succession.
(9) The Central
Government, if it considers necessary or expedient so to do, may, by
notification in 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 and Rural Development established
under section 3 of the National Bank for Agriculture and Rural Development Act,
1981 (61 of 1981).
(b) “Tea Board”
means the Tea Board established under section 4 of the Tea Act, 1953 (29 of
1953).
42[R184] [eserves
for shipping business.
33AC. (1) In the case of an assessee, being a
public company formed and registered in India with the main object of carrying
on the business of operation of ships, there shall, in accordance with and
subject to the provisions of this section, be allowed a deduction of an amount,
not exceeding the total income (computed before making any deduction under this
section and Chapter VI-A), as is debited to the profit and loss account of the
previous year in respect of which the deduction is to be allowed and credited to
a reserve account to be utilised in the manner laid
down in sub-section (2) :
Provided
that where the aggregate of the amounts carried to such reserve account from
time to time exceeds twice the amount of the paid-up share capital (excluding
the amounts capitalised from reserves) of the assessee, no allowance under this sub-section shall be made
in respect of such excess.
(2) The amount credited to the reserve account under
sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next
following the previous year in which the amount was credited—
(a) For
acquiring a new ship for the purposes of the business of the assessee; and
(b) until the
acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or
profits or for remittance outside India as profits or for the creation of any
asset outside India.
(3) Where any amount credited to the reserve account under
sub-section (1),—
(a) has been utilised for any purpose other than the 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 not so 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 by the assessee to any person at any time
before the expiry of eight years from the end of the previous year in which it
was acquired, the amount so utilised in acquiring the
ship,
Shall be deemed to be the profits,—
(i) In a case referred to in clause (a), in the year in which
the amount was so utilised; or
(ii) in a case
referred to in clause (b), in the year immediately following the period of
eight years specified 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,And shall be charged to tax
accordingly.
Explanation:
For the purposes of this section,—
(a) “Public
company” shall have the meaning assigned to it in section 3 of the Companies
Act, 1956 (1 of 1956);
(b) “New ship”
shall have the same meaning as in clause (ii) of sub-section (2) of section
32AB.]
43[R185] [ehabilitation
allowance.
33B. Where the business of any
industrial undertaking carried on in India is discontinued in any previous year
by reason of extensive damage to, or destruction of, any building, machinery,
plant or furniture owned by the assessee and used for
the purposes of such business as a direct 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 or without a
declaration of war),and, thereafter, at any time before the expiry of three
years from the end of such previous year, the business is re-established,
reconstructed or revived by the assessee, he shall,
in respect of the previous year in which the business is so re-established,
reconstructed or revived, be allowed a deduction of a sum by way of
rehabilitation allowance equivalent to sixty per cent of the amount of the
deduction allowable to him under clause (iii) of sub-section (1) of section 32
in respect of the building, machinery, plant or furniture so damaged or
destroyed:
44[R186] [Provided that no deduction under
this section shall be allowed in relation to the assessment year commencing on
the 1st day of April, 1985, or any subsequent assessment year.]
Explanation: In this section, “industrial undertaking” means
any undertaking which is mainly engaged in the business of generation or distribution
of electricity or any other form of power or in the construction of ships or
in the manufacture or processing of goods or in mining.]
Conditions for
depreciation allowance and development rebate.
(3)(a) The deduction referred
to in section 33 shall not be allowed unless an amount equal to seventy-five
per cent of the development rebate to be actually allowed is debited to the
profit and loss account of 47[R189] [any previous year
in respect of which the deduction is to be allowed under sub-section (2) of
that section or any earlier previous year (being a previous year not earlier
than the year in which the ship was acquired or the machinery or plant was
installed or the ship, machinery or plant was first put to use)] and credited
to a reserve account to be utilised by the assessee during a period of eight years next following for
the purposes of the business of the undertaking, other than—
(i) for distribution by way of dividends
or profits; or
(ii) for remittance outside
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 (54 of 1948), or where the ship has been acquired or the machinery or
plant has been installed before the 1st day of January, 1958:
48[R190] [Provided further that where a ship
has been acquired after the 28th day of February, 1966, this clause shall have
effect in respect of such ship as if for the words “seventy-five”, the word
“fifty” had been substituted.]
Explanation:
49[R191] [Omitted by
the Finance Act, 1990, w.r.e.f. 1-4-1962. Earlier, it
was inserted by the Finance Act, 1966, w.r.e.f.
1-4-1962.]
(b) If any ship,
machinery or plant is sold or otherwise transferred by the assessee
to any person at any time before the expiry of eight years from the end of the
previous year in which it was acquired or installed, any allowance made under
section 33 or under the corresponding provisions of the Indian Income-tax Act,
1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed
to have been wrongly made for the purposes of this Act, and the provisions of
sub-section (5) of section 155 shall apply accordingly:
Provided that this clause shall not
apply—
(i) Where the ship has been acquired or the machinery or plant
has been installed before the 1st day of January, 1958; or
49a[R192] (ii) where
the ship, machinery or plant is sold or otherwise transferred by the assessee to 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 Companies Act, 1956 (1 of 1956); or
(iii) Where the
sale or transfer of the ship, machinery or plant is made in connection with the
amalgamation or succession, referred to in sub-section (3) or sub-section (4)
of section 33.
50[R193] [Expenditure on scientific research.
51[R194] 35. (1) In respect of expenditure on
scientific research, the following deductions shall be allowed—
(i) Any expenditure (not being in the nature of capital
expenditure) laid out or expended on scientific research related to the
business.
52[R195] [Explanation : Where any such
expenditure has been laid out or expended before the commencement of the
business (not being expenditure laid out or expended before the 1st day of
April, 1973) on payment of any salary (as defined in Explanation 2 below sub-section
(5) of section 40A) to an employee engaged in such scientific research or on
the purchase of materials used in such scientific research, the aggregate of
the expenditure so laid out or expended within the three years immediately
preceding the commencement of the business shall, to the extent it is certified
by the prescribed authority53[R196] to have been
laid out or expended on such scientific research, be deemed to have been laid
out or expended in the previous year in which the business is commenced;]
54[R197] (ii) any
sum paid to a scientific research association which has as its object the
undertaking of scientific research or to a university, college or other
institution to be used for scientific research:
Provided
that such association, university, college or institution is for the time
being approved for the purposes of this clause by the prescribed53[R198] authority 55[R199] [by
notification in the Official Gazette];
56[R200] [(iii) any sum paid to a university,
college or other institution to be used for research in social science or
statistical research related to the class of business carried on, being a
university, college or institution which is for the time being approved for the
purposes of this clause by the prescribed53[R201] authority 55[R202] [by
notification in the Official Gazette];
(iv) In
respect of any
expenditure of a capital nature on scientific research related to the business carried
on by the assessee, such deduction as may be
admissible under the provisions of sub-section (2).
57[R203] [Provided that the scientific
research association, university, college or other institution referred to in
clause (ii) or clause (iii) shall make an application in the prescribed form
and manner to the prescribed authority for the purpose of grant of approval, or
continuance thereof, under clause (ii) or, as the case may be, clause (iii) :
Provided
further that the prescribed authority may, before granting approval under
clause (ii) or clause (iii), call for such documents (including audited annual
accounts) or information from the scientific research association, university,
college or other institution as it thinks necessary in order to satisfy itself
about the genuineness of the activities of the scientific research
association, university, college or other institution and that authority may
also make such inquiries as it may deem necessary in this behalf:
Provided
also that any notification issued by the prescribed authority under clause (ii)
or clause (iii) shall, at any one time, have effect for such assessment year or
years, not exceeding three assessment years (including an assessment year or
years commencing before the date on which such notification is issued) as may
be specified in the notification.]
(2) For the
purposes of clause (iv) of sub-section (1),—
58[R204] [(i) in a case where such capital expenditure is
incurred before the 1st day of April, 1967, one-fifth of the capital
expenditure incurred in any previous year shall be deducted for that previous
year; and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding
previous years;
(ia) in a case where such capital expenditure is incurred after the
31st day of March, 1967, the whole of such capital expenditure incurred in any
previous year shall be deducted for that previous year:]
59[R205] [Provided that no deduction shall be
admissible under this clause in respect of any expenditure incurred on the
acquisition of any land, whether the land is acquired as such or as part of any
property, after the 29th day of February, 1984.]
Explanation
60[R206] [1]: Where any
capital expenditure has been incurred before the commencement of the business,
the aggregate of the expenditure so incurred within the three years immediately
preceding the commencement of the business shall be deemed to have been
incurred in the previous year in which the business is commenced.
59[R207] [Explanation 2: For the purposes of
this clause,—
(a) “Land” includes any interest in land;
and
(b) the
acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of
such land to him has been registered under the Registration Act, 1908 (16 of
1908), or where he has taken or retained the possession of such land or any
part thereof in part performance of a contract of the nature referred to in
section 53A of the Transfer of Property Act, 1882 (4 of 1882), the date on
which he has so taken or retained possession of such land or part;]
(ii) notwithstanding
anything contained in clause (i), where an asset
representing expenditure of a capital nature 61[R208] [incurred
before the 1st day of April, 1967,] ceases to be used in a previous year for
scientific research related to the business and the value of the asset at the
time of the cessation, together with the aggregate of deductions already
allowed under clause (i) falls short of the said
expenditure, then—
(a) there shall be allowed a deduction for that previous year of
an amount equal to such deficiency, and
(b) no deduction shall be allowed under that clause for that
previous year or for any subsequent previous year;
(iii) if the
asset mentioned in clause (ii) is sold, without having been used for other
purposes, in the year of cessation, the sale price shall be taken to be the
value of the asset at the time of the cessation; and if the asset is sold,
without having been used for other purposes, in a previous year subsequent to
the year of cessation, and the sale price falls short of the value of the asset
taken into account at the time of cessation, an amount equal to the deficiency
shall be allowed as a deduction for the previous year in which the sale took
place;
(iv) where a
deduction is allowed for any previous year under the section in respect of
expenditure represented wholly or partly by an asset, no deduction shall be
allowed under 62[R209] [clause (ii)
of sub-section (1)] of section 32 for the same 63[R210] [or any other]
previous year in respect of that asset;
(v) where the
asset 64[R211] [mentioned in
clause (ii)] is used in the business after it ceases to be used for scientific
research related to that business, depreciation shall be admissible under 65[R212] [clause (ii)
of sub-section (1)] of section 32.
66[R213] [(2A) 67[R214] Where 68[R215] [, before the
1st day of March, 1984,] the assessee pays any sum 69[R216] [(being any sum
paid with a specific direction that the sum shall not be used for the
acquisition of any land or building or construction of any building)] to a
scientific research association or university or college or other institution
referred to in clause (ii) of sub-section (1) 70[R217] [or to a
public sector company] to be used for scientific research undertaken under a programme approved in this behalf by the prescribed
authority71[R218] having regard
to the social, economic and industrial needs of India, then,—
(a) there shall
be allowed a deduction of a sum equal to one and one-third times the sum so
paid; and
(b) no
deduction in respect of such sum shall be allowed under clause (ii) of
sub-section (1) for the same or any other assessment year.]
70[R219] [Explanation: For the purposes of
this sub-section, “public sector company” shall have the same meaning as in
clause (b) of the Explanation below sub-section (2B) of section 32A.]
72[R220] 2B)(a) Where 73[R221] [, before the
1st day of March, 1984,] an assessee has incurred any
expenditure (not being in the nature of capital expenditure incurred on the
acquisition of any land or building or construction of any building) on
scientific research undertaken under a programme
approved in this behalf by the prescribed authority71[R222] having regard
to the social, economic and industrial needs of India, he shall, subject to the
provisions of this sub-section, be allowed a deduction of a sum equal to one
and one-fourth times the amount of the expenditure certified by the prescribed
authority to have been so incurred during the previous year.
(b) Where a
deduction has been allowed under clause (a) for any previous year in respect of
any expenditure, no deduction in respect of such expenditure shall be allowed
under clause (i) of sub-section (1) or clause (IA) of
sub-section (2) for the same or any other previous year.
(c) Where a
deduction is allowed for any previous year under this sub-section in respect of
expenditure represented wholly or partly by an asset, no deduction shall be
allowed in respect of that asset under 74[R223] [clause (ii)
of sub-section (1)] of section 32 for the same or any subsequent previous year.
(d) Any deduction
made under this sub-section in respect of any expenditure on scientific
research in excess of the expenditure actually incurred shall be deemed to have
been wrongly made for the purposes of this Act if the assessee
fails to furnish within one year of the period allowed by the prescribed
authority for completion of the programme, a
certificate of its completion obtained from that authority, and the provisions
of sub-section (5B) of section 155 shall apply accordingly.]
(3) If any
question arises under this section as to whether, and if so, to what extent,
any activity constitutes or constituted, or any asset is or was being used for,
scientific research, the Board shall refer the question to the prescribed
authority75[R224] , whose
decision shall be final.
(4) The
provisions of sub-section (2) of section 32 shall apply in relation to
deductions allowable under clause (iv) of sub-section
(1) as they apply in relation to deductions allowable in respect of
depreciation.
76[R225] [(5) Where,
in a scheme of amalgamation, the amalgamating company sells or otherwise
transfers to the amalgamated company (being an Indian company) any asset
representing expenditure of a capital nature on scientific research,—
(i) the amalgamating company shall not
be allowed the deduction under clause (ii) or clause (iii) of sub-section (2);
and
(ii) the
provisions of this section shall, as far as may be, apply to the amalgamated
company as they would have applied to the amalgamating company if the latter
had not so sold or otherwise transferred the asset.]]
77[R226] [Expenditure on
acquisition of patent rights or copyrights.
35A. (1) In respect of any expenditure of a capital nature incurred after
the 28th day of February, 1966, 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 allowed for each of the relevant previous years, a deduction
equal to the appropriate fraction of the amount of such expenditure.
Explanation: For the purposes of
this section,—
(i) “relevant previous years” means the fourteen previous years
beginning with the previous year in which such expenditure is incurred or,
where such expenditure is incurred before the commencement of the business, the
fourteen previous years beginning with the previous year in which the business
commenced :
Provided
that where the rights commenced, that is to say, became effective, in any year
prior to the previous year in which expenditure on the acquisition thereof was
incurred by the assessee, this clause shall have
effect with the substitution for the reference to fourteen years of a reference
to fourteen years less the number of complete years which, when the rights are
acquired by the assessee, have elapsed since the
commencement thereof, and if fourteen years have elapsed as aforesaid, of a
reference to one year;
(ii) “Appropriate
fraction” means the fraction the numerator of which is one and the denominator
of which is the number of the relevant previous years.
(2) Where the
rights come to an end without being subsequently revived or where 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 of acquisition thereof
remaining unallowed, no deduction under sub-section
(1) shall be allowed in respect of the previous year in which the rights come
to an end or, as the case may be, the whole or any part of the rights is sold
or in respect of any subsequent previous years.
(3) Where the
rights either come to an end without being subsequently revived or are sold in
their entirety and the proceeds of the sale (so far as they consist of capital
sums) are less than the cost of acquisition thereof remaining unallowed, a deduction equal to such cost remaining unallowed, or, as the case may be, such cost remaining unallowed as reduced by the proceeds of the sale, shall be
allowed in respect of the previous year in which the rights come 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 the sale (so far as
they consist of capital sums) exceed the amount of the cost of acquisition
thereof remaining unallowed, so much of the excess as
does not exceed the difference between the cost of acquisition of the rights
and the amount of such cost remaining unallowed shall
be chargeable to income-tax as income 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 previous year in which
the business is no longer in existence, the provisions of this sub-section
shall apply as if the business is in existence in that previous year.
(5) Where a part
of the rights is sold and sub-section (4) does not apply, the amount of the
deduction to be allowed under sub-section (1) shall be arrived at by—
(a) Subtracting the
proceeds of the sale (so far as they consist of capital sums) from the amount
of the cost of acquisition of the rights remaining unallowed;
and
(b) Dividing the
remainder by the number of relevant previous years which have not expired at
the beginning of the previous year during which the rights are sold.]
78[R227] [(6) Where,
in a scheme of amalgamation, the amalgamating company sells or otherwise
transfers the rights to the amalgamated company (being an Indian company),—
(i) the provisions of sub-sections (3)
and (4) shall not apply in the case of the amalgamating company; and
(ii) the
provisions of this section shall, as far as may be, apply to the amalgamated
company as they would have applied to the amalgamating company if the latter
had not so sold or otherwise transferred the rights.]
79[R228] [Expenditure on
know-how.
35AB. (1) Subject to the provisions of sub-section (2), where the assessee has paid in any previous year any lump sum
consideration for acquiring any know-how for use for the purposes of his business,
one-sixth of the amount so paid shall be deducted in computing the profits and
gains of the business for that previous year, and the balance amount shall be
deducted in equal instalments for each of the five
immediately succeeding previous years.
(2) Where the know-how referred to in sub-section (1) is
developed in a laboratory, university or institution referred to in sub-section
(2B) of section 32A, one-third of the said lump sum consideration paid in the previous
year by the assessee shall be deducted in computing
the profits and gains of the business for that year, and the balance amount
shall be deducted in equal instalments for each of
the two immediately succeeding previous years.
Explanation
: For the purposes of this section, “know-how” means any industrial information
or technique likely to assist in the manufacture or processing of goods or in
the working of a mine, oil well or other sources of mineral deposits (including
the searching for, discovery or testing of deposits or the winning of access
thereto).]
Export markets
development allowance.
80[R229] 35B. [Omitted by the
Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws
(Amendment) Act, 1989, w.e.f. 1-4-1989.
Original section 35B was inserted by the Finance Act, 1968, w.e.f.
1-4-1968].
Agricultural
development allowance.
81[R230] 35C. [Omitted by the
Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws
(Amendment) Act, 1989, w.e.f. 1-4-1989.
Original section 35C was inserted by the Finance Act, 1968, w.e.f.
1-4-1968].
Rural
development allowance.
82[R231] 35CC. s[Omitted by the Direct Tax
Laws (Amendment) act, 1987, as amended by the Direct Tax Laws (Amendment) Act,
1989, w.e.f.1-4-1989. Original section 35CC was inserted by the Finance (No. 2)
Act, 1977, w.e.f. 1-9-1977.]
83[R232] [Expenditure by way of
payment to associations and institutions for carrying out rural development programmes.
35CCA. 84[R233] [(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 undertaking of any programme of rural development, to be used for carrying out
any programme of rural development approved by the
prescribed authority85[R234] ; or
(b) to an association or institution, which has as its object
the training of persons for implementing programmes
of rural development; 86[R235] [or]
86[R236] [(c) to a rural development fund set up and notified by the Central
Government in this behalf,]
The assessee shall, subject to the provisions of sub-section
(2), be allowed a deduction of the amount of such expenditure incurred during
the previous year.]
87[R237] [(2) The deduction under clause (a) of sub-section (1) shall not be
allowed in respect of expenditure by way of payment of any sum to any
association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or
institution to the effect that—
(a) the programme of rural development
had been approved by the prescribed authority before the 1st day of March,
1983; and
(b) where such payment
is made after the 28th day of February, 1983, such programme
involves work by way of construction of any building or other structure
(whether for use as a dispensary, school, training or welfare centre, workshop
or for any other purpose) or the laying of any road or the construction or
boring of a well or tube-well or the installation of any plant or machinery,
and such work has commenced before the 1st day of March, 1983.]
88[R238] [(2A) The deduction under clause (b)
of sub-section (1) shall not be allowed in respect of expenditure by way of
payment of any sum to any association or institution unless the assessee furnishes a certificate from such association or
institution to the effect that—
(a) the prescribed authority had approved the association or
institution before the 1st day of March, 1983 ; and
(b) the training of persons for implementing any programme of rural development had been started by the
association or institution before the 1st day of March, 1983.]
88[R239] [(2B) No certificate of the nature
referred to in sub-section (2) or sub-section (2A) shall be issued by any
association on institution unless such association or institution has obtained
from the prescribed authority authorisation in
writing to issue certificates of such nature.]
Explanation:
For the purposes of this section, “programme of rural
development” shall have the meaning assigned to it in the Explanation to
sub-section (1) of section 35CC.
(3) Where a
deduction under this section is claimed and allowed for any assessment year in
respect of any expenditure referred to in sub-section (1), deduction shall not
be allowed in respect of such expenditure under section 35C or section 35CC or
section 80G or any other provision of this Act for the same or any other
assessment year.]
89-90[R240] [Expenditure by way of
payment to associations and institutions for carrying out programmes
of conservation of natural resources.
35CCB. (1) Where an assessee incurs any expenditure
by way of payment of any sum to an association or institution, which has as its
object the undertaking of any programme of
conversation of natural resources, to be used for carrying out any programme of conservation of natural resources approved91[R241] by the
prescribed authority, 92[R242] the assessee shall, subject to the provisions of sub-section
(2), be allowed a deduction of the amount of such expenditure incurred during
the previous year.
The
following sub-section (1) shall be substituted by the Finance Act, 1990, w.e.f. 1-4-1991:
(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 undertaking of any programme of conservation of natural resources or of afforestation, to be used for carrying out any programme of conservation of natural resources or afforestation approved by the prescribed authority; or
(b) to such fund or afforestation as
may be notified by the Central Government,the assessee shall, subject to the provisions of sub-section
(2), be allowed a deduction of the amount of such expenditure incurred during
the previous year.
(2) The
deduction under 92a[R243] [clause (a)
of] sub-section (1) shall not be allowed with respect to expenditure by way of
payment of any sum to any association or institution, unless such association
or institution is for the time being approved in this behalf by the prescribed
authority:92b[R244]
Provided that the prescribed authority92b[R245] shall not
grant such approval for more than three years at a time.
(3) where a
deduction under this section is claimed and allowed for any assessment year in
respect of any expenditure referred to in sub-section (1), deduction shall not
be allowed in respect of such expenditure under any other provision of this Act
for the same or any other assessment year.]
93[R246] [Amortisation
of certain preliminary expenses.
35D. (1) Where an assessee, being an Indian company or a person (other than a
company) who is resident in India, incurs, after the 31st day of March, 1970,
any expenditure specified in sub-section (2),—
(i) Before the commencement of his business, or
(ii) After the
commencement of his business, in connection with the extension of his
industrial undertaking or in connection with his setting up a new industrial unit,the assessee shall, in
accordance with and subject to the provisions of this section, be allowed a
deduction of an amount equal to one-tenth of such expenditure for each of the
ten successive previous years beginning with the previous year in which the business
commences or, as the case may be, the previous year in which the extension of
the industrial undertaking is completed or the new industrial unit commences
production or operation.
(2) The expenditure
referred to in sub-section (1) shall be the expenditure specified in any one or
more of the following clauses, namely:—
94[R247] (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 business of the assessee;
(iv) engineering services relating
to the business of the assessee:
Provided
that the work in connection with the preparation of the feasibility report or
the project report or the conducting of market survey or of any other survey or
the engineering services referred to in this clause is carried out by the assessee himself or by a concern which is for the time
being approved in this behalf by the Board;
(b) legal charges for drafting any agreement between the assessee and any other person for any purpose relating to
the setting up or conduct of the business of the assessee;
(c) where
the assessee is a company, also expenditure—
(i) by
way of legal charges for drafting the Memorandum and Articles of Association of
the company;
(ii) on printing of the Memorandum
and Articles of Association;
(iii) by way of fees for
registering the company under the provisions of the Companies Act, 1956 (1 of
1956);
(iv) in connection with the issue,
for public subscription, of shares in or debentures of the company, being
underwriting commission, brokerage and charges for drafting, typing, printing
and advertisement of the prospectus;
(d) such other items of expenditure
(not being expenditure eligible for any allowance or deduction under any other
provision of this Act) as may be prescribed.
(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, of the capital employed in the business
of the company,the excess shall be ignored for the
purpose of computing the deduction allowable under sub-section (1).
Explanation :
In this sub-section—
(a) “cost of the project” means—
(i) in a case referred to in clause (i)
of sub-section (1), the actual cost of the fixed assets, being land, buildings,
leaseholds, plant, machinery, furniture, fittings and railway sidings
(including expenditure on development of land and buildings), which are shown
in the books of the assessee as on the last day of
the 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 cost of the fixed assets,
being land, buildings, leaseholds, plant, machinery, furniture, fittings and
railway sidings (including expenditure on development of land and buildings),
which are shown in the books of the assessee as on
the last day of the previous year in which the extension of the industrial
undertaking is completed or, as the case may be, the new industrial unit
commences production or operation, in so far as such fixed assets have been
acquired or developed in connection with the extension of the industrial
undertaking 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 case referred to in clause (i)
of sub-section (1), the aggregate of the issued share capital, debentures and
long-term borrowings as on the last day of the previous year in which the
business of the company commences;
(ii) in a case
referred to in clause (ii) of sub-section (1), the aggregate of the issued
share capital, debentures and long-term borrowings as on the last day of the
previous year in which the extension of the industrial undertaking is
completed, or, as the case may be, the new industrial unit commences production
or operation, in so far as such capital, debentures and long-term borrowings
have been issued or obtained in connection with the extension of the industrial
undertaking or the setting up of the new industrial unit of the company;
(c) “long-term
borrowings” means—
(i) any moneys borrowed by the company from Government or the
Industrial Finance Corporation of India or the Industrial Credit and Investment
Corporation of India or any other financial institution which is for the time
being approved by the Central Government for the purposes of clause (viii) of
sub-section (1) of section 36 or any banking institution (not being a financial
institution referred to above), or
(ii) any moneys
borrowed or debt incurred by it in a foreign country in respect of the purchase
outside India of capital plant and machinery, where the terms under which such
moneys are borrowed or the debt is incurred provide for the repayment thereof
during a period of not less than seven years.
95[R248] (4) Where
the assessee is a person other than a company or a
co-operative society, no deduction shall be admissible under sub-section (1)
unless the accounts of the assessee for the year or
years in which the expenditure specified in sub-section (2) is incurred 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 for the first year in which the deduction under
this section is claimed, the report of such audit in the prescribed form duly
signed and verified by such accountant and setting forth such particulars as
may be prescribed.
(5) Where the
undertaking of an Indian company which is entitled to the deduction under
sub-section (1) is transferred, before the expiry of the period of ten years specified
in sub-section (1), to another Indian company in a scheme of amalgamation,—
(i) no deduction shall be admissible
under sub-section (1) in the case of the amalgamating company for the previous
year in which the amalgamation takes place; and
(ii) the provisions of this section shall, as far as may be,
apply to the amalgamated company as they would have applied to the amalgamating
company if the amalgamation 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 qualify for deduction under
any other provision of this Act for the same or any other assessment year.]
96[R249] [Deduction for
expenditure on prospecting, etc., for certain minerals.
35E.(1) Where an assessee, being an Indian company
or a person (other than a company) who is resident in India, is engaged in any
operations relating to prospecting for, or extraction or production of, any
mineral and incurs, after the 31st day of March, 1970, any expenditure
specified in sub-section (2), the assessee shall, in
accordance with and subject to the provisions of this section, be allowed for
each one of the relevant previous years a deduction of an amount equal to
one-tenth of the amount of such expenditure.
(2) The expenditure
referred to in sub-section (1) is that incurred by the assessee
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 years immediately
preceding that year, wholly and exclusively on any operations relating to
prospecting for any mineral or group of associated minerals specified in Part A
or Part B, respectively, of the Seventh Schedule or on the development of a
mine or other natural deposit of any such mineral or group of associated
minerals:
Provided
that there shall be excluded from such expenditure any portion thereof which is
met directly or indirectly by any other person or authority and any sale,
salvage, compensation or insurance moneys realised
by the assessee in respect of any property or rights
brought into existence as a result of the expenditure.
(3) Any expenditure—
(i) on the acquisition of the site of the source of any mineral
or group of associated minerals referred to in sub-section (2) or of any rights
in or over such site;
(ii) on the acquisition of the deposits of such mineral or group
of associated minerals or of any rights in or over such deposits; or
(iii) of a capital nature in respect of any building, machinery,
plant or furniture for which allowance by way of depreciation is admissible
under section 32,shall not be deemed to be expenditure incurred by the assessee for any of the purposes specified in sub-section
(2).
(4) The
deduction to be allowed under sub-section (1) for any relevant previous year
shall be—
(a) an amount equal to one-tenth of the expenditure specified
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 computed before making the
deduction under this section) of that previous year arising from the
commercial exploitation [whether or not such commercial exploitation is 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 of the minerals
in a group of associated minerals as aforesaid in respect of which the
expenditure was incurred,whichever amount is less:
Provided
that the amount of the instalment relating to any
relevant previous year, to the extent to which it remains unallowed,
shall be carried forward and added to the instalment
relating to the previous year next following and deemed to be part of that instalment, and so on, for succeeding previous years, so,
however, that no part of any instalment shall be
carried forward beyond the tenth previous year as reckoned from the year of commercial
production.
(5) For the
purposes of this section,—
(a) “operation
relating to prospecting” means any operation undertaken for the purpose of
exploring, locating or proving deposits of any mineral, and includes any such
operation which proves to be in fructuous or abortive;
(b) “year of
commercial production” means the previous year in which as a result of any
operation relating to prospecting, commercial production of any mineral or any
one or more of the minerals in a group of associated minerals specified in Part
A or Part B, respectively, of the Seventh Schedule, commences;
(c) “Relevant
previous years” means the ten previous years beginning with the year of
commercial production.
97[R250] (6) Where
the assessee is a person other than a company or a
co-operative society, no deduction shall be admissible under sub-section (1)
unless the accounts of the assessee for the year or
years in which the expenditure specified in sub-section (2) is incurred 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 for the first year in which the deduction under
this section is claimed, the report of such audit in the prescribed form duly
signed and verified by such accountant and setting forth such particulars as
may be prescribed.
(7) Where the
undertaking of an Indian company which is entitled to the deduction under
sub-section (1) is transferred, before the expiry of the period of ten years
specified in sub-section (1), to another Indian company in a scheme of
amalgamation—
(i) no deduction shall be admissible
under sub-section (1) in the case of the amalgamating company for the previous
year in which the amalgamation takes place; and
(ii) the provisions of this section shall, as far as may be,
apply to the amalgamated company as they would have applied to the amalgamating
company if the amalgamation had not taken place.
(8) 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 qualify for deduction under
any other provision of this Act for the same or any other assessment year.]
Other
deductions.
98[R251] 36. (1)The deductions provided for in
the following clauses shall be allowed in respect of the matters dealt with
therein, in computing the income referred to in section 28—
(i) the amount of any premium paid in
respect of insurance against risk of damage or destruction of stocks or stores
used for the purposes of the business or profession;
99[R252] [(ia) the amount of any premium paid by a federal
milk co-operative society to effect or to keep in force an insurance on the
life of the cattle owned by a member of a co-operative society, being a primary
society engaged in supplying milk raised by its members to such federal milk
co-operative society;]
1[R253] [(ib) the amount of any premium paid by cheque by the assessee as an
employer to effect or to keep in force an insurance on the health of his
employees under a scheme framed in this behalf by the General Insurance
Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the
Central Government;]
(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 it had not been paid as bonus or commission:
4[R256] [(iia) a sum equal to one and one-third times the
amount of the expenditure incurred on payment of any salary 5[R257] [for any period
of employment before the 1st day 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 to
engage in a gainful employment or occupation:
Provided
that the assessee produces before the 6[R258] [Assessing]
Officer, in respect of the first assessment year for which deduction is
claimed in relation to each 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 medical
practitioner being an oculist; and
(ii) in a case referred to in sub-clause (b), a certificate as to
the permanent physical disability referred to in the said-sub-clause from a
registered medical practitioner:
Provided
further that nothing contained in this clause shall apply in the case of 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,
bonus or commission payable monthly or otherwise.
Explanation
2 : For the removal of doubts, it is hereby declared that where a deduction
under this clause is allowed for any assessment year in respect of any
expenditure, deduction shall not be allowed in respect of such expenditure
under any other provision of this Act for the same or any other assessment
year;]
(iii) the amount of the interest paid in respect of capital
borrowed for the purposes of the business or profession.
Explanation
: Recurring subscriptions paid periodically by shareholders, or subscribers in
Mutual Benefit Societies which fulfill such conditions as may be prescribed,
shall be deemed to be capital borrowed within the meaning of this clause;
7[R259] (iv) any
sum paid by the assessee as an employer by way of
contribution towards a recognised provident fund or
an approved superannuation fund, subject to such limits as may be prescribed
for the purpose of recognising the provident fund or
approving the superannuation fund, as the case may be; and subject to such 8[R260] conditions as
the Board may think fit to specify in cases where the contributions are not in
the nature of annual contributions of fixed amounts or annual contributions
fixed on some definite basis by reference to the income chargeable under the
head “Salaries” or to the contributions or to the number of members of the
fund;
9[R261] (v) any
sum paid by the assessee as an employer by way of
contribution towards an approved gratuity fund created by him for the exclusive
benefit of his employees under an irrevocable trust;
10[R262] [(va) any
sum received by the assessee from any of his
employees to which the provisions of sub-clause (x) of clause (24) of section 2
apply, if such sum is credited by the assessee to the
employee’s account in the relevant fund or funds on or before the due date.
Explanation
: For the purposes this clause, “due date” means the date by which the assessee is required as an employer to credit an employee’s
contribution to the employee’s account in the relevant fund under any Act,
rule, order or notification issued there under or under any standing order,
award, contract of service or otherwise;]
(vi) in respect
of animals which have been used for the purposes of the business or profession
otherwise than as stock-in-trade and have died or become permanently useless
for such purposes, the difference between the actual cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals;
(vii) Subject to
the provisions of sub-section (2), the amount of 11[R263] [any bad debt
or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]:
12[R264] [Provided that in the case of a bank
to which clause (viia) applies, the amount of the
deduction relating to any such debt or part thereof shall be limited to the
amount by which such debt or part thereof exceeds the credit balance in the
provision for bad and doubtful debts account made under that clause;]
13[R265] [(viia) 14[R266] [15[R267] in respect of
any provision for bad and doubtful debts made by—
(a) a scheduled
bank [not being a bank approved by the Central Government for the purposes of
clause (viiia) or a bank incorporated by or under the
laws of a country outside India] or a non-scheduled bank, an amount not
exceeding five per cent of the total income (computed before making any
deduction under this clause and Chapter VI-A) and an amount not exceeding two
per cent of the aggregate average advances made by the rural branches of such
bank computed in the prescribed manner;
(b) a bank, being a bank incorporated by or under the laws of a
country outside
Explanation: For the purposes of
this clause,—
16[R268] [(i)
“non-scheduled bank” means a 17[R269] banking
company as defined in clause (c) of section 5 of the Banking Regulation Act,
1949 (10 of 1949), which is not a scheduled bank;]
18[R270] [(ia)]
“rural branch” means a branch of a scheduled bank 19[R271] [or a
non-scheduled bank] situated in a place which has a population of not more than
ten thousand according to the last preceding census of which the relevant
figures have been published before the first day of the previous year;
20[R272] [(ii) “scheduled bank” means the State Bank of India constituted under
the State Bank of India Act, 1955 (23 of 1955), a subsidiary 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
(Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), 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 the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a
co-operative bank;]
(viii) 21[R273] [in respect of
any special reserve created by a financial corporation which is engaged in
providing long-term finance for industrial or 22[R274] [agricultural
development in India or by a public company formed and registered in India with
the main object of carrying on the business or providing long-term finance for
construction or purchase of houses in India for residential purposes, an amount
not exceeding forty per cent of the total income (computed before making any
deduction under 23[R275] [this clause
and] Chapter VI-A) carried to such reserve account:]]
Provided
that the corporation 24[R276] [or, as the
case may be, the company] is for the time being approved25[R277] by the
Central Government for the purposes of this clause:
Provided
further that where the aggregate of the amounts carried to such reserve account
from time to time exceeds 26[R278] [twice the
amount of] the paid-up share capital (excluding the amounts capitalised
from reserves) of the corporation 24[R279] [or, as the
case may be, the company], no allowance under this clause shall be made in
respect of such excess.
27[R280] [Explanation: In this clause, 28[R281] "public company”
shall have the meaning assigned to it in section 3 of the Companies Act, 1956
(1 of 1956);]
29[R282] [(viiia)
in respect of any special reserve created by a scheduled bank (other than a
bank incorporated by or under the laws of a country outside India) which is
engaged in banking operations outside India, an amount not exceeding forty per
cent of the total income (computed before making any deduction under 30[R283] [this clause
and] Chapter VI-A) carried to such reserve account:
31[R284] Provided that, having regard to its
capital structure, the extent of its banking operations outside India, its need
for resources for such operations outside India and other relevant factors, the
bank is, for the time being, approved by the Central Government for the
purposes of this clause.
Explanation:
For the purposes of this clause, “scheduled bank” has the same meaning as in
clause (ii) of the Explanation to clause (viia);]
32[R285] [(ix) any expenditure bona fide
incurred by a company for the purpose of promoting family planning amongst it
employees:
Provided
that where such expenditure or any part thereof is of a capital nature,
one-fifth of such expenditure shall be deducted for the previous year in 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 and of
sub-section (2) of section 72 shall apply in relation to deductions allowable
under this clause as they apply in relation to deductions allowable in respect
of depreciation:
Provided
further that the provisions of clauses (ii), (iii), (iv) and (v) of sub-section
(2) 33[R286] [and
sub-section (5)] of section 35, of sub-section (3) of section 41 and of
Explanation 1 to clause (1) of section 43 shall, so far as may be, apply in
relation to an asset representing expenditure of a capital nature for the
purposes of promoting family planning as they apply in relation to an asset
representing expenditure of a capital nature on scientific research.]
34[R287] [(x) any sum paid by a public
financial institution by way of contribution towards any funds 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).]
(2) In making
any deduction for a bad debt or part thereof, the following provisions shall
apply—
35[R288] [(i) no such deduction shall be allowed unless
such debt or part thereof has been taken into account in computing the income
of the assessee of the previous year in which the
amount of such debt or part thereof is written off or of an earlier previous
year, or represents money lent in the ordinary course of the business of
banking of money-lending which is carried on by the assessee;]
(ii) if the amount ultimately recovered on any such debt or part
of debt is less 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
ultimate recovery is made.
(iii) any such
debt or part of debt may be deducted if it has already been written off as
irrecoverable in the accounts of an earlier previous year 36[R289] [(being a
previous year relevant to the assessment year commencing on the 1st day of
April, 1988, or any earlier assessment year)], but the 37[R290] [Assessing]
Officer had not allowed it to be deducted on the ground that it had not been
established to have become a bad debt in that year;
(iv) where any
such debt or part of debt is written off as irrecoverable in the accounts of
the previous year 38[R291] [(being a
previous year relevant to the assessment year commencing on the 1st day of
April, 1988, or any earlier assessment year)] and the 39[R292] [Assessing]
Officer is satisfied that such debt or part became a bad debt in any earlier
previous year not falling beyond a period of four previous years immediately
preceding the previous year in which such debt or part is written off, the
provisions of sub-section (6) of section 155 shall apply;
40[R293] [(v) where
such debt or part of debt relates to advances made by a bank to which clause (viia) of sub-section (1) applies, no such deduction shall
be allowed unless the bank has debited the amount of such debt or part of debt
in that previous year to the provision for bad and doubtful debts account made
under that clause.]
41[R294] 37.42[R295] (1) Any expenditure (not being
expenditure of the nature described in sections 30 to 36 43[R296] [***] and not being in the nature of
capital expenditure or personal expenses of the assessee),
laid out or expended wholly and exclusively for the purposes of the business or
profession shall be allowed in computing the income chargeable under the head
“Profits and gains of the business or profession”.
44[R297] (2) Notwithstanding
anything contained in sub-section (1), no expenditure in the nature of
entertainment expenditure shall be allowed in the case of a company, which
exceeds the aggregate amount computed as hereunder:—
|
(i)
on the first Rs. 10,00,000 of the profits and gains
of the business (computed before making any allowance under section 3345[R298] [or
section33A] or in respect of entertainment expenditure) |
at the rate of 1 per cent
or Rs. 5,000, whichever is higher; |
|
(ii) on the next Rs. 40,00,000 of the profits and gains of the business
(computed in the manner aforesaid) |
|
|
(iii) on the next Rs. 1,20,00,000 of the profits and gains of the business
(computed in the manner aforesaid) |
|
|
(iv) on the balance of the
profits and gains of the business (computed in the manner aforesaid) |
nil. |
48[R301] [(2A)Notwithstanding anything contained
in sub-section (1) or sub-section (2), no allowance shall be made in respect of
so much of the expenditure in the nature of entertainment expenditure incurred by
any assessee during any previous year which expires
after the 30th day of September, 1967, as in excess of the aggregate amount
computed as hereunder :—
|
(i)
on the first Rs. 10,00,000 of the profit and gains
of the business or profession (computed before making any allowance under 49[R302] [section32A or] section 33 or section
33A or in respect of entertainment expenditure) |
at the rate of ½ per cent
or Rs. 5,000 whichever is higher; |
|
(ii) on the next Rs. 40,00,000 of the profits and gains of the business or
profession (computed in the manner aforesaid) |
at the rate of ¼ per
cent; |
|
50[R303] [(iii) on the balance of the profits
and gains of the business or profession (computed in the manner aforesaid) |
at the rate of 1/8 per
cent, |
So, however, that the
allowance shall in no case exceeds Rs. 50,000:]
Provided that where the
previous year of any assessee falls partly before and
partly after the 30th day of September, 1967, the allowance in respect of such
expenditure incurred during the previous year shall not exceed—
(a) In the case of a company—
(i) in respect
of such expenditure incurred before the 1st day of October, 1967, the sum which
bears to the aggregate amount computed at the rate or rates specified in
sub-section (2), the same proportion as the number of days comprised in the
period commencing on the 1st day of such previous year and ending with the 30th
day of September, 1967, bears to the total number of days in the previous year;
(ii) in respect of such expenditure incurred
after the 30th day of September, 1967, the sum which bears to the aggregate
amount computed at the rate or rates specified in this sub-section, the same
proportion as the number of days comprised in the period commencing on the 1st
day of October, 1967, and ending with the last day of the previous year bears
to the total number of days in the previous year;
(b) In any other case—
(i) In respect
of such expenditure incurred before the 1st day of October, 1967, the amount
admissible under sub-sections (1);
(ii) in respect of such expenditure incurred
after the 30th day of September, 1967, the sum which bears to the aggregate
amount computed at the rate or rates specified in this sub-section, the same
proportion as the number of days comprised in the period commencing on the 1st
day of October, 1967, and ending with the last day of the previous year bears
to the total number of days in the previous year.]
51[R304] [52[R305] [Explanation 1] :
For the purposes of this sub-section 53[R306] [***], “entertainment expenditure”
includes—
(i) the amount of any allowance in the nature of entertainment
allowance paid by the assessee to any employee or
other person after the 29th day of February, 1968;
(ii) the amount of any expenditure in the
nature of entertainment expenditure [not being expenditure incurred out of an
allowance of the nature referred to in clause (i)]
incurred after the 29th day of February, 1968, for the purposes of the business
or profession of the assessee by any employee or
other person.]
54[R307] [Explanation 2 : For the removal of
doubts, it is hereby declared that for the purposes of this sub-section and
sub-section (2B), as it stood before the 1st day if April, 1977, “entertainment
expenditure” includes expenditure on provision of hospitality of every kind by
the assessee to any person, whether by way of
provision of food or beverages or in any other manner whatsoever and whether or
not such provisions is made by reason of any express or implied contract or
custom or usage of trade, but does not include expenditure on food or beverages
provided by the assessee to his employees in office,
factory or other place of their work.]
55[R308] [(2B) Notwithstanding anything contained
in sub-section (1), no allowance shall be made in respect of expenditure incurred
by an assessee on advertisement in any souvenir,
brochure, tract, pamphlet or the like published by a political party.]
56[R309] [57[R310] (3) 58[R311] Notwithstanding anything contained in
sub-section (1), any expenditure incurred by an assessee
after the 31st day of March, 1964, on advertisement or on maintenance of any
residential accommodation including any accommodation in the nature of a
guest-house or in connection with travelling by an
employee or any other person (including hotel expenses or allowances paid in
connection with such travelling) shall be allowed
only to the extent, and subject to such conditions, if any, may be prescribed.]
63[R316] [(4) notwithstanding anything contained in
sub-section (1) or sub-section (3),—
(i) no
allowance shall be made in respect of any expenditure incurred by the assessee after the 28th day of February 1970, on the
maintenance of any residential accommodation in the nature of a guest-house
(such residential accommodation being hereafter in this sub-section referred to
as “guest-house”);
(ii) in relation to
the assessment year commencing on the 1st day of April, 1971, or any subsequent
assessment year, no allowance shall be made in respect of depreciation of any
building used as a guest-house or deprecation of any assets in a guest-house:
Provided that the aggregate
of the expenditure referred to in clause (i) and the
amount of any depreciation referred to in clause (ii) shall, for the purposes
of this sub-section, be reduced by the amount, if any, and received from
persons using the guest-house:
Provided further that
nothing in this sub-section shall apply in relation to any guest-house
maintained as a holiday home if such guest-house—
(a) is maintained by an assessee
who has throughout the previous year employed not less than one hundred
whole-time employees in a business or profession carried on by him; and
(b) is intended for
the exclusive use of such employees while on leave.
Explanation: For the purposes of this sub-section,—
(i) residential
accommodation in the nature of a guest-house shall include accommodation hired
or reserved by the assessee in a hotel for a period
exceeding one hundred and eighty-two days during the previous year; and
(ii) The expenditure incurred on the
maintenance of a guest-house shall, in a case where the residential
accommodation has been hired by the assessee, include
also the rent paid in respect of such accommodation.]
64[R317] [(5) For
the removal of doubts, it is hereby declared that any accommodation, by
whatever name called, maintained, hired, reserved or otherwise arranged by the
assessee for the purpose of providing lodging or
boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder
of any other office in, the company), on tour or visit to the place at which
such accommodation is situated, is accommodation in the nature of a guest-house
within the meaning of sub-section (4).]
Building, etc., partly used for business, etc., or not exclusively
so used.
38.(1) Where
a part of any premises is used as dwelling house by the assessee,—
(a) the
deduction under sub-clause (i) of clause (a) of
section 30, in the case of rent, shall be such amount as the 65[R318] [Assessing]
Officer may determine having regard to the proportionate annual value of the
part used 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 or profession;
(b) The
deduction under clause (b) of section 30 shall be such sum as the 65[R319] [Assessing]
Officer may determine having regard to the part so used.
(2) Where any
building, machinery; plant or furniture is not exclusively sued for the
purposes of the business or profession, the deductions under sub-clause (ii)
of clause (a) and clause (c) of section 30, clauses (i)
and (ii) of section 31 and 66[R320] [clause (ii)
of sub-section (1)] of section 32 shall be restricted to a fair proportionate
part thereof which the 65[R321] [Assessing]
Officer may determine, having regard to the user of such building, machinery,
plant or furniture for the purposes of the business or profession.
Managing
agency commission.
67[R322] 39. [Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.]
68[R323] Amounts not deductible.
40. Notwithstanding anything to
the contrary in section 30 to 69[R324] [38], the following
amounts shall not be deducted in computing the income chargeable under the head
“Profits and gains of business or profession”—
(a) in the case of any assessee—
70[R325] [(i) any interest (not being interest on a loan
issued for public subscription before the 1st day of April, 1938), royalty,
fees for technical services or other sum chargeable under this Act, which is
payable outside India, on which tax has not been paid or deducted under Chapter
XVII-B:
Provided
that where in respect of any such sum, tax has been paid or deducted under
Chapter XVII-B in any subsequent year, such sum shall be allowed as a deduction
in computing the income 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 meaning as 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 or profession or assessed at a proportion of, or otherwise on the
basis of, any such profits or gains;
71[R326] [(iia) any
sum paid on account of wealth-tax.
Explanation:
For the purposes of this sub-clause, “wealth-tax” means wealth-tax chargeable
under the Wealth-tax Act, 1957(27 of 1957), or any tax of a similar character
chargeable under any law in force in any country outside India or any tax
chargeable under such law with reference to the value of the assets of, or the
capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or
profession are allowed as a deduction in computing the amount with reference to
which such tax is charged, but does not include any tax chargeable with
reference to the value of any particular asset of the business or profession;]
(iii) any payment which is chargeable under the head “Salaries”,
if it is payable outside
(iv) any payment
to a provident or other fund established for the benefit of employees of the assessee, unless the assessee has
made effective arrangement to secure that tax shall be deducted at source from
any payments made from the fund which are chargeable to tax under the head
“Salaries”;
73[R328] [(b) in the case of any firm, any
payment of interest, salary, bonus, commission or remuneration made by the firm
to any partner of the firm.]
74[R329] [Explanation 1 :
Where interest is paid by a firm to any partner of the firm who has also paid
interest to the firm, the amount of interest to be disallowed under this clause
shall be limited to the amount by which the payment of interest by the firm to
the partner exceeds the payment of interest by the partner to the firm.
Explanation
2 : Where an individual is a partner in a firm on
behalf, or for the benefit, of any other person (such partner and the other
person being hereinafter referred to as “partner in a representative capacity”
and “person so represented” respectively),—
(i) Interest paid by the firm to such individual or by such
individual to the firm otherwise than as partner in a representative capacity,
shall not be taken into account for the purposes of this clause;
(ii) Interest
paid by the firm to such individual or by such individual to the firm as
partner in a representative capacity and interest paid by the firm to the
person so represented or by the person so represented to the firm, shall be
taken into account for the purposes of this clause.
Explanation
3 : Where an individual is a partner in a firm otherwise than as partner in a
representative capacity, interest paid by the firm to such individual shall not
be taken into account for the purposes of this clause, if such interest is
received by him on behalf, or for the benefit, of any other person;]]
75[R330] [(ba) in
the case of an association of persons or body of individuals (other than a
company or a co-operative society or a 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), any payment of interest, salary, bonus,
commission or remuneration, by whatever name called, made by such association
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 has also paid interest to the association or body,
the amount of interest to be disallowed under this clause shall be limited to
the amount by which the payment of interest by the association or body to 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 the benefit, 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) Interest paid by the association or body to such individual
or by such individual to the association or body otherwise than as member in a
representative capacity, shall not be taken into account for the purposes of
this clause;
(ii) Interest
paid by the association or body to such individual or by such individual to the
association or body as member in a representative capacity and interest paid by
the association or body 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 as
member in a representative capacity, interest paid by the association or body
to such individual shall not be taken into account for the purposes of this
clause, if such interest is received by him on behalf, or for the benefit, of
any other person.]
76[R331] (c) [Omitted
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.]
77(d) [Omitted
by the Finance Act, 1988, w.e.f. 1-4-1989.]
78[R332] [Expenses
or payments not deductible in certain circumstances.
79[R333] 40A.(1) The
provisions of this section shall have effect notwithstanding anything to the contrary
contained 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 to be made to
any person referred to in clause (b) of this sub-section, and the 80[R334] [Assessing] Officer is of opinion that
such expenditure is excessive or unreasonable having regard to the fair market
value of 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 there from, so much of the expenditure
as is so considered by him to be excessive or unreasonable shall not be allowed
as a deduction:
(b) The
persons referred to in clause (a) are the following, namely:—
(i) where the assessee
is an individualany relative of the assessee ;
(ii) where
the assessee is a company, firm, association of
persons or Hindu undivided familyany director of the
company, partner of the firm, or member of the association or family, or any
relative of such director, partner or member ;
(iii) Any individual who has a substantial
interest in the business or profession of the assessee,
or any relative of such individual;
(iv) a company, firm, association of persons
or Hindu undivided family having a substantial interest in the business or
profession of the assessee or any director, partner
or member of such company, 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 of the assessee ; or any director, partner or member of such
company, firm, association or family or any relative of such director, partner
or member;
(vi) Any person who carries on a business or
profession,—
(A) Where the assessee
being an individual, or any relative of such assessee,
has a substantial interest in the business or profession of that person; or
(B) Where the assessee
being a company, firm, association of persons or Hindu undivided family, or any
director of such company, partner of such firm or member of the association or
family, or any relative of such director, partner or member, has a substantial
interest in the business or profession of that person.
Explanation: For the
purpose of this sub-section, a person shall be deemed to have a substantial interest
in a business or profession, if,—
(a) in a case where the business or
profession is carried on by a company, such person is, at any time during the
previous year, the beneficial owner of shares (not being shares entitled to a fixed
rate of dividend whether with or without a right to participate 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 to not less than twenty per cent of the profits of such business or
profession.
82[R336] (3) Where
the assessee incurs any expenditure in respect of
which payment is made, after such date (not being later than the 31st day of
March, 1969) as may be specified in this behalf by the Central Government by
notification in the Official Gazette, in a sum exceeding 83[R337] [ten thousand] rupees otherwise than by a
crossed cheque drawn on a bank or by a crossed bank
draft, 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 an assessment
year commencing prior to the 1st day of April, 1969, in respect of any
liability incurred by the assessee for any
expenditure and subsequently during the previous year the assessee
makes any payment in respect thereof in a sum exceeding 83[R338] [ten thousand] rupees otherwise than by a
crossed cheque drawn on a bank or by a crossed bank
draft, the allowance originally made shall be deemed to have been wrongly made
and the 84[R339] [Assessing] Officer may recompute the total income of the assessee
for the previous year in which such liability was incurred and make the
necessary amendment, and the provisions of 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 assessment year next following the
previous year in which the payment was so made:
85[R340] Provided further that no disallowance
under this sub-section shall be made where any payment in a sum exceeding 85a[R341] [ten thousand] rupees is made otherwise
than by a crossed cheque drawn on a bank or by a
crossed bank draft, in such cases and under such circumstances as may be
prescribed, having regard to the nature and extent of banking facilities
available, considerations of business expediency and other relevant factors.]
86[R342] [(4) Notwithstanding
anything contained in any other law for the time being in force or in any
contract, where any payment in respect of any expenditure has to be made by a
crossed cheque drawn on a bank or by a crossed bank
draft in order that such expenditure may not be disallowed as 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 or other proceeding, a plea based on the ground
that the payment was not made or tendered in cash or in any other manner.]
87[R343] [(5) [Omitted
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Original
sub-section (5) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.]
88[R344] (6) [Omitted
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Original
sub-section (6) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.]
89[R345] [(7)(a) Subject
to the provisions of clause (b), no deduction shall be allowed in respect of
any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on
their retirement or on termination of their employment for any reason.
(b) Nothing in clause (a) shall apply in relation
to—
(i) any
provision made by the assessee for the 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
year commencing on or after the 1st day of April, 1973, but before the 1st day
of April, 1976, to the extent the amount of such provision does not exceed the
admissible amount, if the following conditions are fulfilled, namely:—
(1) the provision
is made in accordance with an actuarial valuation of the ascertainable
liability of 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 employees
under an irrevocable trust, the application for the approval of the fund having
been made before the 1st day of January, 1976; and
(3) a sum equal to at least fifty per cent
of the admissible amount, or where any amount has been utilised
out of such provision for the purpose of payment of any gratuity before the
creation of the approved gratuity fund, a sum equal to at least fifty per cent
of the admissible amount as reduced by the amount so utilised,
is paid by the assessee by way of contribution to the
approved gratuity fund before the 1st day of April, 1976, and the balance of
the admissible amount or, as the case may be, the balance of the admissible
amount as reduced by the amount so utilised, is paid
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, “admissible
amount” means the amount of the provision made by the assessee
for the payment of gratuity to his employees on their retirement or on
termination of their employment for any reason, to the extent such amount does
not exceed an amount calculated at the rate of eight and one-third per cent of
the salary [as defined in clause (h) of rule 2 of Part A of the Fourth
Schedule] of each employee entitled to the payment of such gratuity for each
year of his service in respect of which such provision is made.
Explanation 2: For the
removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on
their retirement or on termination of their employment for any reason has been
allowed as a deduction in computing the income of the assessee
for any assessment year, any sum paid out of such provision by way of
contribution towards an approved gratuity fund or by way of gratuity to any
employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.]
91[R347] [(9) No
deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or information
of, or as contribution to, any fund, trust, company, association of persons,
body of individuals, society registered under the Societies Registration Act,
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.
91[R348] [(10) Notwithstanding
anything contained in sub-section (9), where the 92[R349] [Assessing] Officer is satisfied that the
fund, trust, company, association of persons, body of individuals, society or
other institution referred to in that sub-section has, before the 1st day of
March, 1984, bona fide laid out or expended any expenditure (not being in the
nature of capital expenditure) wholly and exclusively for the welfare of the
employees of the assessee referred to in sub-section
(9) out of the sum referred to in that sub-section, the amount of such
expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other
provisions 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 such expenditure had
been laid out or expended by the assessee.]
93[R350] [(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 in sub-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 out or expended by
such fund, trust, company, association of persons, body of individuals, society
or other institution (such amount being hereinafter referred to as the unutilised amount) be repaid to him, 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 or constructed by the fund,
trust, company, association of persons, body of individuals, society or other
institution out of the sum paid by the assessee, be
transferred to him, and where any claim is so made, such asset shall be
transferred, as soon as may be, to him.]
94[R351] [(12) No
deduction shall be allowed in excess of ten thousand rupees for any assessment
year in respect of any expenditure incurred by the assessee
by way of fees or other remuneration paid to any person (other than an employee
of the assessee),—
(a) for services (not being services by way
of preparation of return of income) in connection with any proceeding under
this Act before any income-tax authority or the Commission constituted under
section 245B or a competent authority within the meaning of clause (b) of section
269A or the Appellate Tribunal or any court;
(b) for services in connection with any
proceeding before any court, being a proceeding relating to tax, penalty,
interest or any other matter under this Act; and
(c) for any advice
in connection with tax, penalty, interest or any other matter under this Act.]
41.(1)
Where an allowance or deduction has been made in the assessment for any year in
respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other
manner whatsoever, any amount in respect of such loss or expenditure or some
benefit in respect of such trading liability by way of remission or cessation
thereof, the amount obtained by him or the value of benefit accruing to him,
shall be deemed to be profits and gains of business or profession and
accordingly chargeable to income-tax as the income of that previous year,
whether the business or profession in respect of which the allowance or
deduction has been made is in existence in that year or not.
(3) Where an asset
representing expenditure of a capital nature on scientific research within the meaning
of clause (iv) sub-section (1), 97[R354] or clause (c)
of sub-section (2B),] of section 35, read with clause (4) of section 43, is
sold, without having been used for other purposes, and the proceeds of the sale
together with the total amount of the deductions made under clause (i) 98[R355] or, as the
case may be, the amount of the deduction under clause (ia)]
of sub-section (2), 97[R356] or clause (c)
of sub-section (2B),] of section 35 exceed the amount of the capital expenditure,
the excess or the amount of the deductions so made, whichever is the less,
shall be chargeable to income-tax as income 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-section become due in a previous year in which the business is no longer in
existence, the provisions of this 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 the provisions
of clause (vii) of sub-section (1) of section 36, then, if the amount
subsequently recovered on any such debt or part is greater than the difference
between the debt or part of debt and the amount so allowed, the excess shall be
deemed to be profits and gains of business or profession, and accordingly
chargeable to income-tax as the income of the previous year in which it is
recovered, whether the business or profession in respect of which the
deduction has been allowed is in existence in that year or not.
99[R357] Explanation: For the purposes of
sub-section (3),—
(1) “Moneys
payable” in respect of any building, machinery, plant or furniture includes—
(a) any insurance, salvage or compensation moneys 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 such motor car
shall be taken to be a sum which bears to the amount for which the motor car is
sold or, as the case may be, the amount of any insurance, salvage or
compensation moneys payable in respect thereof (including the amount of scrap
value, if any) the same proportion as the amount of twenty-five thousand rupees
bears to the actual cost of the motor car to the assessee
as it would have been computed before applying the said proviso;
(2) “sold” includes a transfer by way of exchange or a compulsory
acquisition any law for the time being in force but does not include a
transfer, in a scheme of amalgamation, of any asset by the amalgamating company
to the amalgamated company where the amalgamated company is an Indian company.]
(5) Where the
business or profession referred to in this section is no longer in existence
and there is income chargeable to tax under sub-section (1), 1[R358] [***]
sub-section (3) or sub-section (4) in respect of that business or profession,
any loss, not being a loss sustained in speculation business 2[R359] [***], 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 far as may be, be set off against the income chargeable
to tax under the sub-sections aforesaid.
3[R360] (6) References
in sub-section (3) to any other provision of this Act which has been amended or
omitted by the Direct Tax Laws (Amendment) Act, 1987 shall, notwithstanding
such amendment or omission, be construed, for the purposes of that sub-section,
as if such amendment or omission had not been made.]
Special
provision for deductions in the case of business for prospecting, etc., for
mineral oil.
42. For the purpose of computing
the profits or gains of any business consisting of the prospecting for or
extraction or production of mineral oils in relation to which the Central
Government has entered into an agreement with any person for the association or
participation 4[R361] [of the
Central Government or any person authorised by it in
such business] (which agreement has been laid on the Table of each House of
Parliament), there shall be made in lieu of, or in addition to, the allowances
admissible under this Act, such allowances as are specified in the agreement in
relation—
(a) to expenditure by way of in fructuous or abortive
exploration expenses in respect of 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 exploration activities or services or in
respect of physical assets used in that connection, except assets on which
allowance for depreciation is admissible under section 32:
6[R363] [Provided that in relation to
any agreement entered into after the 31st day of March, 1981, this clause shall
have effect subject to the modification that the words and figures “except
assets on which alliance for depreciation is admissible under section 32” had
been omitted; and]
(c) to the
depletion of mineral oil in the mining area in respect of the assessment year
relevant to the previous year in which commercial production is begun and for
such succeeding year or years as may be specified in the agreement;and such allowances shall be computed and made in the
manner specified in the agreement, the other provisions of this Act being
deemed for this purpose to have been modified to extent necessary to give
effect to the terms of the agreement.
7[R364] [Explanation: For the purposes of this
section, “mineral oil” includes petroleum and natural gas.]
Definitions of certain
terms relevant to income from profits and gains of business or profession
43. In sections 28 to 41 and in
this section, unless the context otherwise requires—
8[R365] (1) “actual
cost” means the actual cost of the assets to the assessee,
reduced by that portion of the cost thereof, if any, as has been met directly
or indirectly by any other person or authority:
9[R366] [Provided that where the
actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, 10[R367] [but before
the 1st day of March, 1975,] and is used otherwise than in a business of
running it on hire for tourists, exceeds twenty-five thousand rupees, the excess
of the actual cost over such amount shall be ignored, and the actual cost
thereof 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
scientific research related to that business and a deduction has to be made
under 11[R368] [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 the actual 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-tax Act, 1922 (11 of 1922).
12[R369] [Explanation 2 : Where an asset is
acquired by the assessee by way of gift or
inheritance, the actual cost of the asset to the assessee
shall be the actual cost to the previous owner, as reduced by—
(a) The amount
of depreciation actually allowed under this Act and the corresponding
provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any
previous year relevant 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 any assessment year commencing on or after the 1st day of April, 1988, as
if the asset was the only asset in the relevant block of assets.]
Explanation
3 : Where, before the date of acquisition by the assessee,
the assets were at any time used by any other person for the purposes of his
business or profession and the 13[R370] [Assessing]
Officer is satisfied that the main purpose of the transfer of such assets,
directly or indirectly to the assessee, was the
reduction of a liability to income-tax (by claiming depreciation with reference
to an enhanced cost), the actual cost to the assessee
shall be such an amount as the 13a[R371] [Assessing]
Officer may, with the previous approval of the 14[R372] [Deputy]
Commissioner, determine having regard to all the circumstances of the case.
15[R373] [Explanation 4 : Where any asset which
had once belonged to the assessee and had been used
by him for the purposes of his business or profession and thereafter ceased to
be his property by reason 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 of depreciation actually allowed to him under
this Act or under the corresponding provisions of the Indian Income-tax Act,
1922 (11 of 1922), in respect of any previous year relevant 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 any assessment year commencing on or after the 1st day of April, 1988, as
if the asset was the only asset in the relevant block of assets; or
(ii) The actual
price for which the asset is re-acquired by him,Whichever is less.]
Explanation
5: Where a building previously the property of the assessee
is brought into use for the purpose of the business or profession after the
28th day of February, 1946, the actual cost to the assessee
shall be the actual cost of the building to the assessee,
as reduced by an amount equal to the depreciation calculated at the rate in
force on that date that would have been allowable had the building been used
for the aforesaid purposes since the date of its acquisition by the assessee.
16[R374] [Explanation 6 : When any capital
asset is transferred by a holding company to its subsidiary company 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
the transferred capital asset to the transferee-company shall be taken to be
the same as it would have been if the transferor-company had continued to hold
the capital asset the purpose of its business.]
17[R375] [Explanation 7 :
Where, in a scheme of amalgamation, any capital asset is transferred by the
amalgamating company to the amalgamated company and the amalgamated company is
an Indian company, the actual cost of the transferred capital asset to the
amalgamated company shall be taken to be the same as it would have been if the
amalgamating company had continued to hold the capital asset for the purposes
of its own business.]
18[R376] [Explanation 8 :
For the removal of doubts, it is hereby declared that where any amount is paid
or is payable as interest in connection with the acquisition of an asset, so
much of such amount as is relatable to any period after such asset is first put
to use shall not be included, and shall be deemed never to have been included,
in the actual cost of such asset;]
(2) “Paid” means
actually paid or incurred according to the method of accounting upon the basis
of the which the profits or gains are computed under the head “Profits and
gains of business or profession”;
(3) “Plant”
includes ships, vehicles, books, scientific apparatus and surgical equipment
used for the purposes of the business or profession;
(4) 19[R377] [(i) “scientific research” mean any activities for the
extension of knowledge in the fields of natural or applied science including
agriculture, animal husbandry or fisheries;]
(ii) references
to expenditure incurred on scientific research include all expenditure incurred
for the prosecution, or the provision of facilities for the prosecution, of
scientific research, but do not include any expenditure incurred in the acquisition
of rights in, or arising out of, scientific research;
(iii) References
to scientific research related to a business or class of business include—
(a) any scientific research which may lead to or facilitate an
extension of that business or, as the case may be, all businesses of that
class;
(b) any scientific research of a medical nature which has a
special relation to the welfare of workers employed in that business or, as the
case may be, all businesses of that class;
20[R378] (5) “speculative
transaction” means a transaction in which a contract for the purchase or sale
of any commodity, including stocks and shares, is periodically or ultimately
settled otherwise than by the actually delivery or transfer of the commodity
or scrips:
Provided that for the purposes of this
clause—
(a) a contract
in respect of raw materials or merchandise entered into by a person in the
course of his manufacturing or merchanting business
to guard against loss through future price fluctuations in respect of his
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 guard against 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 of any transaction in the nature of jobbing or
arbitrage to guard against loss which may arise in the ordinary course of his
business as such member;shall not be deemed to be a
speculative transaction.
(6) “written down value” means—
(a) in the case of assets acquired in the previous year, the
actual cost to the assessee;
(b) in the case
of assets acquired before the previous year, the actual cost to the assessee less all depreciation 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 the Indian
Income-tax Act, 1886 (2 of 1886), was in force:
21[R379] [Provided that in determining
the written down value in respect of buildings, machinery or plant for 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 such depreciation was not deductible
in determining the written down value for the purposes of the said clause
(vi);]
22[R380] [(c) in
the case of any block of assets,—
(i) in respect of any previous year relevant to the assessment
year commencing on the 1st day of April, 1988, the aggregate of the written
down values of all the assets falling within that block of assets at the
beginning of the previous year and adjusted,—
(A) by the increase by the actual cost of any asset falling
within that block, acquired 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 the amount of the scrap value, if any, so, however, that the
amount of such reduction does not exceed the written down value as so
increased; and
(ii) in respect
of any previous year relevant to the assessment year commencing on or after
the 1st day of April, 1989, the written down value of that block of assets in
the immediately preceding previous year as reduced by the depreciation
actually allowed in respect of that block of assets in relation to the said preceding
previous year and as further adjusted by the increase or the reduction referred
to in item (i).]
Explanation
1 : When in a case of succession in business or
profession, an assessment is made on the successor under sub-section (2) of
section 170 the written down value of 23[R381] [any asset or
any block of assets] shall be the amount which would have been taken as its
written down value if the assessment had been made directly on the person
succeeded to.
24[R382] [Explanation 2 :
Where in any previous year, any block of assets is transferred,—
(a) by a holding
company to its subsidiary company or by a subsidiary company to its holding
company and 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 contained in clause (1), the actual cost of the block
of assets in the case of the transferee-company or the amalgamated 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 immediately
preceding previous year as reduced by the amount of depreciation actually
allowed in relation to the said preceding previous year.]
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”.
25[R383] [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.]
26[R384] [Special provisions
consequential to changes in rate of exchange of currency.
27[R385] 43A. (1)
Notwithstanding anything contained in any other provision of this Act, where an
assessee has acquired any asset from a country
outside India for the purposes of his business or profession and, in
consequence of a change in the rate of exchange at any time after the
acquisition of such asset, there is an increase or reduction in the liability
of the assessee as expressed in Indian currency for
making payment towards the whole or a part of the cost of the asset or for
repayment 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 in either case the liability existing immediately
before the date on which the change in the rate of exchange takes effect), the
amount by which the liability aforesaid is so increased or reduced during the
previous year shall be added to, or, as the case may be, deducted from, the
actual cost of the asset as defined in clause (1) of section 43 or the amount
of expenditure of a capital nature referred to 28[R386] [in clause
(iv) of sub-section (1) of section 35 or in section 35A] or in clause (ix) of
sub-section (1) of section 36, or, in the case of a capital asset (not being a
capital asset referred to in section 50), the cost of acquisition thereof for
the purposes of section 48, and the amount arrived at after such addition or
deduction shall be taken to be the actual cost of the asset or the amount of
expenditure of a capital nature or, as the case may be, the cost of acquisition
of the capital asset as aforesaid.
Explanation
1.—In this sub-section, unless the context otherwise
requires,—
(a) “rate of exchange” means the rate of exchange determined or recognised by the Central Government for the conversion of
Indian currency into foreign currency or foreign currency into Indian currency;
(b) 29[R387] "foreign
currency” and “Indian currency” have the meanings respectively assigned to them
in section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947).30[R388]
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 taken into account for the purposes of this sub-section.
Explanation
3.—Where the assessee has entered into a contract
with an 31[R389] authorised
dealer as defined in section 2 of the Foreign Exchange Regulation Act 1947 (7
of 1947),30[R390] for providing
him with a specified sum in a foreign currency on or after a stipulated future
date at the rate of exchange specified in the contract to enable him to meet
the whole or any part of the liability aforesaid, the amount, if any, to be
added to, or deducted from, the actual cost of the asset or the amount of
expenditure of a capital nature or, as the case may be, the cost of acquisition
of the capital asset under this sub-section shall, in respect of so much of the
sum specified in the contract as is available for discharging the liability
aforesaid, be computed with reference to the rate of exchange specified
therein.
(2) The provisions of sub-section (1) shall not be taken into
account in computing the actual cost of an asset for the purpose of the
deduction on account of development rebate under section 33.]
32-33[R391] [Certain deductions to be only on actual payment.
34[R392] 43B. Notwithstanding
anything contained in any other provision of this Act, a deduction otherwise
allowable under this Act in respect of—
35[R393] [(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, or]
(b) any sum
payable by the assessee as an employer by way of
contribution to any provident fund or superannuation fund or gratuity fund or
any other fund for the welfare of employees, 36[R394] [or]
36[R395] [(c) any
sum referred to in clause (ii) of sub-section (1) of section 36,] 37[R396] [or]
37[R397] [(d) any
sum payable by the assessee as interest on any loan
or borrowing from any public financial institution 37a [R398] [or a state
financial corporation or a State industrial investment corporation], in
accordance with the terms and conditions of the agreement governing such loan
or borrowing,]shall be allowed (irrespective of the previous year in which the
liability to pay such sum was incurred by the assessee
according to the method of accounting regularly employed by him) only in
computing the income referred to in section 28 of that previous year in which
such sum is actually paid by him:
38[R399] [Provided that nothing
contained in this section shall apply in relation to any sum referred to in
clause (a) 39[R400] [or clause
(c)] 37[R401] [or clause
(d)] which is actually paid by the assessee on or
before 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 was incurred as aforesaid and the evidence of
such payment is furnished by the assessee along with
such return:
40[R402] [Provided further that no
deduction shall, in respect of any sum referred to in clause (b), be allowed
unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other 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 sum has been realised
within fifteen days from the due date]].
Explanation41[R403] [1] : For the
removal of doubts, it is hereby declared that where a deduction in respect of
any sum referred to in clause (a) or clause (b) of this section is allowed in
computing the income referred to in section 28 of the previous year (being a
previous year relevant to the assessment year commencing on the 1st day of
April, 1983, or any earlier assessment year) in which the liability to pay such
sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this
section in respect of such sum in computing the income of the previous year in
which the sum is actually paid by him.]
42[R404] [Explanation 2 : For the purposes of
clause (a), as in force at all material times, “any sum payable” means a sum
for which the assessee incurred liability in the
previous year even though such sum might not have payable within that year
under the relevant law.]
43[R405] [Explanation 44[R406] [3]: For the
removal of doubts it is hereby declared that where a deduction in respect of
any sum referred to in clause (c) 45[R407] [or clause
(d)] of this section is allowed in computing the income referred to in section 28
of the previous year (being a previous year relevant to the assessment year
commencing on the 1st day of April, 1988, or any earlier assessment year) in
which the liability to pay such sum was incurred by the assessee,
the assessee shall not be entitled to any deduction
under this section in respect of such sum in computing the income of the
previous year in which the sum is actually paid by him.]
46[R408] [Explanation 47[R409] [4]: For the
purposes of this section, the expression “public financial institution” shall
have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of
1956).]
The
following Explanation 4 shall be substituted by the Finance Act, 1990, w.e.f. 1-4-1991:
Explanation
4 :For the purposes of this section,—
(a) “public financial institution” shall have the meaning
assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
(b) “State
financial corporation” means a financial corporation established under section
3 or section 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
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 sub-section (1) of section 36.
48[R410] [Special provision for computation of cost of acquisition of
certain assets.
43C. (1) Where an asset [not being
an asset referred to in sub-section (2) of section 45] which becomes the
property of an amalgamated company under a scheme of amalgamation, is sold
after the 29th day of February, 1988, by the amalgamated company as stock-in-trade
of the business carried on by it, the cost of acquisition of the said asset to
the amalgamated company in computing the profits and gains from the sale of
such asset shall be the cost of acquisition of the said asset to the
amalgamating company, as increased by the cost, it any, of any improvement made
thereto, and the expenditure, if any, incurred, wholly and exclusively in
connection with such transfer by the amalgamating company.
(2) Where an
asset [not being an asset referred to in sub-section (2) of section 45] which
becomes the property of the assessee on the total or
partial partition of a Hindu undivided family or under a gift or will or an
irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade of the business carried on by
him, the cost of acquisition of the said asset to the assessee
in computing the profits and gains from the sale of such asset shall be the
cost of acquisition of the said asset to the transferor or the donor, as the
case may be, as increased by 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 transfer or the
donor, as the case may be.]
49[R411] 44. Notwithstanding
anything to the contrary contained in the provisions of this Act relating to
the computation of income chargeable under the head “Interest on securities”,
“Income from house property”, “Capital gains” or “Income from other sources”,
or in section 199 or in sections 28 to 50[R412] [43B], the
profits and gains of any business of insurance, including any such business
carried on by a mutual insurance company or by a co-operative society, shall be
computed in accordance with the rules contained in the First Schedule.
51[R413] [Special provision for deduction in the case of trade, professional
or similar association.
44A.(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 52[R414] [(other than
an association or institution referred to in clause (23A) of section (10)] from
its members, whether by way of subscription or otherwise (not being
remuneration received for rendering any specific services to such members)
falls short of the expenditure incurred by such association during that
previous year (not being expenditure deductible in computing the income under
any other provision of this Act and not being in the nature of capital
expenditure) solely for the purposes of protection or advancement of the common
interests of its members, the amount so fallen short (hereinafter referred to
as deficiency) shall, subject to the provisions of this section, be allowed as
a deduction in computing the income of the association assessable for the
relevant assessment year under the head “Profits and gains of business or
profession” and if there is no income assessable under that head or the
deficiency allowable exceeds such income, the whole or the balance of the
deficiency, as the case may be, shall be allowed as a deduction in computing
the income of the association 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 any allowance or loss in respect of any earlier assessment year is
carried forward and set off against the income for the relevant assessment
year.
(3) The amount
of deficiency to be allowed as a deduction under this section shall in no case
exceed one-half of the total income of the association as computed before
making any allowance under this section.
(4) This section
applies only to that trade, professional or similar association the income of
which or any part thereof is not distributed to its members except as grants to
any association or institution affiliated to it.]
53[R415] [Maintenance of accounts by certain persons carrying on
profession or business.
44AA. (1) Every person carrying on
legal, medical, engineering or architectural profession or the profession of
accountancy or technical consultancy or interior decoration or any other 54[R416] profession as is
notified by the Board in the Official Gazette shall keep and maintain such
books of account and other documents as may enable the 55[R417] [Assessing]
Officer to compute his total income in accordance with the provisions of this
Act.
(2) Every person
carrying on business or profession [not being profession referred to in
sub-section (1)] shall,—
(i) if his income from business or profession exceeds
twenty-five thousand rupees or his total sales, turnover or gross receipts, as
the case may be, in business or profession exceed or exceeds two hundred and
fifty thousand rupees in any one of the three years immediately preceding the
previous year; or
(ii) where the
business or profession is newly set up in any previous year, if his income from
business or profession is likely to exceed twenty- five thousand rupees or his
total sales, turnover or gross receipt, as the case may be, in business or
profession are or is likely to exceed two hundred and fifty thousand rupees,
during such previous year,keep and maintain such
books of account and other documents as may enable the 56[R418] [Assessing]
Officer to compute his total income in accordance with the provisions of this
Act.
57[R419] (3) The
Board may, having regard to the nature of the business or profession carried on
by any class or persons, prescribed, by rules, the books of account and other
documents (including inventories, wherever necessary) to be kept and
maintained under sub-section (1) or sub-section (2), the particulars to be
contained therein and the form and the manner in which and the place at which
they shall be kept and maintained.
(4) Without
prejudice to the provisions of sub-section (3), the Board may prescribe, by
rules, the period for which the books of account and other documents to be kept
and maintained under sub-section (1) or sub-section (2) shall be retained.]
58[R420] [Audit of accounts of certain persons carrying on business or
profession.
59[R421] 44AB. 60[R422] every person,—
(a) carrying on
business shall, if his total sales, turnover or gross receipts, as the case may
be, in business exceed or exceeds forty lakh rupees
in any previous year 61[R423] [***]; or
(b) Carrying on
profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year 61[R424] [***],get his accounts of such previous year 62[R425] [***] audited
by an accountant before the specified date and obtain before the date the
report of such audit in the prescribed form duly signed and verified by such accountant
and setting forth such particulars as may be prescribed:
Provided that in a case where such person is
required by or under any other law to get his accounts audited 63[R426] [***], it
shall be sufficient compliance with the provisions of this section if such
person gets the accounts of such business or profession audited under such law
before the specified date and obtains before that date the report of the audit
as required under such other law and a further report in the form prescribed
under this section.
Explanation: For the purposes of
this section,—
(i) “Accountant” shall have the same meaning as in the Explanation
below sub-section (2) of section 288;
64[R427] [(ii) “specified date”, in relation to the accounts of the previous
year relevant to an assessment year means,—
(a) Where the assessee is a company, the 31st day of December of the
assessment year;
(b) in any other case, the 31st day of October of the assessment
year.]]
65[R428] [Special provision for computing profits and gains from the
business of trading in certain goods.
44AC. (1) Notwithstanding anything to
the contrary contained in sections 28 to 43C, in the case of an assessee, being a person other than a public sector company
(hereafter in this section referred to as the buyer), obtaining in any sale by
way of auction, tender or any other mode, conducted by any other person or his
agent (hereafter in this section referred to as the seller),—
(a) any goods in
the nature of alcoholic liquor for human consumption (other than Indian-made
foreign liquor), a sum equal to forty per cent of the amount paid or payable by
the buyer as the purchase price in respect of such goods shall be deemed to be
the profits and gains of the buyer from the business of trading in such goods
chargeable to tax under the head “Profits and gains of business or profession”:
66[R429] [Provided that nothing
contained in this clause shall apply to a buyer where the goods are not
obtained by him by way of auction and where the sale price of such goods to be
sold by the buyer is fixed by or under any State Act;]
The following Explanation shall be inserted by the Finance
Act, 1990, w.e.f. 1-4-1991:
Explanation: For the purposes of
this clause, “purchase price” means any amount (by whatever name called) paid
or payable by the buyer to obtain the goods referred to in this clause, but
shall not include the amount paid or payable by him towards the bid money in an
auction, or, as the case may be, the highest accepted offer in case of tender
or any other mode;
(b) the right to
receive any goods of the nature specified in column (2) of the Table below, or
such goods, as the case may be, a sum equal to the percentage, specified in the
corresponding entry in column (3) of the said Table, of the amount paid or
payable by the buyer in respect of the sale of such right or as the purchase
price in respect of such goods shall be deemed to be the profits and gains of
the buyer from the business of trading in such goods chargeable to tax under
the head “Profits and gains of business or profession”.
Table
|
S.No. |
Nature of goods |
Percentage |
|
(1) |
(2) |
(3) |
|
(i) |
Timber obtained under a forest lease |
Thirty-five per cent |
|
(ii) |
Timber obtained by any mode other than under a forest lease |
Fifteen per cent |
|
(iii) |
Any other forest produce not being timber |
Thirty-five per cent |
(2) For the
removal of doubts, it is hereby declared that the provisions of sub-section (1)
shall not apply to a buyer (other than a buyer who obtains any goods, from any
seller which is a public sector company) in the further sale or any goods
obtained under or in pursuance of the sale under sub-section (1).
(3) In a case
where the business carried on by the assessee does
not consist exclusively of trading in goods to which this section applies and
where separate accounts are not maintained or are not available, the amount of
expenses attributable to such other business shall be an amount which bears to
the total expenses of the business carried on by the assessee
the same proportion as the turnover of such other business bears to the total
turnover of the business carried on by the assessee.
Explanation: For the purposes of
this section, “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 66a [R430] [or
co-operative society].
67[R431] [Special provision for computing profits and gains of
shipping business in the case on non-residents.
44B.(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 of
operation of ships, a sum equal to seven and a half 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 tax under the head “Profits and gains
of 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 assessee or 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
68[R432] [Special provision for computing profits and gains in connection
with the business of exploration, etc., of mineral oils.
44BB.(1) Notwithstanding anything to
the contrary contained in sections 28 to 41 and sections 43 and 43A, in the
case of an assessee 69[R433] [, being a
non-resident,] engaged in the business or providing services or facilities in
connection with, or supplying plant and machinery on hire used, or to be used,
in the prospecting for, or extraction or production of, mineral oils, a sum
equal to ten 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
tax under the head “Profits and gains of business or profession”:
Provided that this sub-section shall not
apply in a case where the provisions of section 42 or section 44D or section
115A or section 293A apply for the purposes of computing profits or gains or
any other income referred to in those 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 assessee
or to any person on his behalf on account of the provision of services and
facilities 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, mineral
oils in India; and
(b) the
amount received or deemed to be received in
Explanation : For the purposes of this section,—
(i) “plant” includes ships, aircraft,
vehicles, drilling units, scientific apparatus and equipment, used for the
purposes of the said business;
(ii) “mineral oil” includes petroleum and natural gas.]
70[R434] [Special provision for computing profits and gains of the
business of operation of aircraft in the case of non-residents.
44BBA.(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 of
operation of aircraft, a sum equal to five 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 tax under the head “Profits and gains of
business 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
(b) the amount
received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers,
livestock, mail or goods from any place outside India.]
71[R435] [Special provision for computing profits and gains of foreign
companies engaged in the business of civil construction,
etc., in certain turnkey power projects.
71a[R436] 44BBB. Notwithstanding
anything to the contrary contained in sections 28 to 44AA, in the case of an assessee, being a foreign company, engaged in the business
of civil construction or the business of erection of plant or machinery or
testing or commissioning thereof, in connection with a turnkey power project
approved by the Central Government in this behalf and financed under any
international aid programme, a sum equal to ten per
cent of the amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such
civil construction, erection, testing or commissioning shall be deemed to be
the profits and gains of such business chargeable to tax under the head
“Profits and gains of business or profession.”]
72[R437] [Deduction of head office expenditure in the case of
non-residents.
44C. Notwithstanding anything to the
contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, no allowance shall be made,
in computing the income chargeable under the head “Profits and gains of
business or profession”, in respect of so much of the expenditure in the nature
of head of office 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
(b) an amount equal to the average head office expenditure; or
(c) the amount of so much of the expenditure in the nature of
head office expenditure incurred by the assessee as
is attributable to the business or profession of the assessee
in
Provided that in a case where the adjusted
total income of the assessee is a loss, the amount
under clause (a) shall be computed at the rate of five per cent 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 or section 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 section 72 or sub-section (2) of
section 73 or sub-section (1) 73[R438] [or
sub-section (3)] of section 74 or sub-section (3) of section 74A or the
deductions under Chapter VI-A;
(ii) “Average
adjusted total income” means,—
(a) in a case
where the total income of the assessee is assessable
for each of the three assessment years immediately preceding the relevant
assessment year, one-third of the aggregate amount of the adjusted total
income in respect of the previous years relevant to the aforesaid three
assessment years;
(b) in a case
where the total income of the assessee is assessable
only for two of the aforesaid three assessment years, one-half of the aggregate
amount of the adjusted total income in respect of the previous years relevant
to the aforesaid two assessment years;
(c) in a case
where the total income of the assessee is assessable
only for one of the aforesaid three assessment years, the amount of the adjusted
total income in respect of the previous year relevant to that assessment year;
(iii) “Average head office expenditure” means,—
(a) in a case
where any expenditure in the nature of head office expenditure has been allowed
as a deduction in computing the income of the assessee
chargeable under the head “Profits and gains of business or profession” in
respect of each of the three previous years relevant to the assessment years
commencing on the 1st day of April, 1974, the 1st day of April, 1975, and the
1st day of April, 1976, one-third of the aggregate amount of the expenditure so
allowed;
(b) in a case
where such expenditure has been so allowed only in respect of two of the
aforesaid three previous years, one-half of the aggregate amount of the expenditure
so allowed;
(c) in a case
where such expenditure has been so allowed only in respect of one of the
aforesaid three previous years, the amount of the expenditure so allowed;
(iv) “Head office
expenditure” means executive and general administration expenditure incurred by
the assessee outside
(a) Rent, rates,
taxes, repairs or insurance of any premises outside
(b) salary,
wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or
profits in lieu of or in addition to salary, whether paid or allowed to any
employee or other person employed in, or managing the affairs of, any office
outside India;
(c) travelling by any employee or
other person employed in, or managing the affairs of, any office outside
(d) such other matters connected with executive and general
administration as may be prescribed.]
74[R439] [Special provisions for computing income by way of royalties,
etc., in the case of foreign companies.
44D. Notwithstanding anything to the
contrary contained in sections 28 to 44C, in the case of an assessee, being a foreign company,—
(a) the
deductions admissible under the said sections in computing the income by way of
royalty or fees for technical services received 75[R440] [from
Government or an Indian concern in pursuance of an agreement made by the
foreign company with Government or with the Indian concern] before the 1st day
of April, 1976, shall not exceed in the aggregate twenty per cent of the gross
amount of such royalty or fees as reduced by so much of the gross amount of
such royalty as consists of lump sum consideration for the transfer outside
India of, or the imparting of information outside India in respect of, any
data, documentation, drawing or specification relating to any patent,
invention, model, design, secret formula or process or trade mark or similar
property;
(b) no deduction
in respect of any expenditure or allowance shall be allowed under any of the
said sections in computing the income by way of royalty or fees for technical
services received 76[R441] [from
Government or an Indian concern in pursuance of an agreement made by the foreign
company with Government or with the Indian concern] after the 31st day of
March, 1976;
77[R442] [(c) no
deduction in respect of any expenditure or allowance shall be allowed under any
of the said sections in computing income by way of interest received from
Government or an Indian concern on moneys borrowed or debt incurred by the
Government or the Indian concern in foreign currency.]
Explanation: For the purposes of
this section,—
(a) “Fees for
technical services” shall have the same meaning as in 78[R443] [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 78[R444] [Explanation
2] to clause (vi) of sub-section (1) of section 9;
(d) royalty
received 79[R445] [from
Government or an Indian concern in pursuance of an agreement made by a foreign
company with Government or with the Indian concern] after the 31st day of
March, 1976, shall be deemed to have been received in pursuance of an agreement
made before the 1st day of April, 1976, if such agreement 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.]
E.—Capital gains
80[R446] 45. 81[R447] [(1)] Any
profits or gains arising from the transfer of a capital asset effected in the
previous year shall, save as otherwise provided in sections 82[R448] [53, 54, 54B, 83[R449] [* * *] 84[R450] [85[R451] [54D, 86[R452] [54E, 54F and 54G]]]],
be chargeable to income-tax under the head “Capital gains”, and shall be deemed
to be the income of the previous year in which the transfer took place.
87[R453] [(2) Notwithstanding anything
contained in sub-section (1), the profits or gains arising from the transfer by
way of conversion by the owner of a capital asset into, or its treatment by him
as stock-in-trade of a business carried on by him shall be chargeable to
income-tax as his income of the previous year in 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 of such conversion or treatment
shall be deemed to be the full value of the consideration received or accruing
as a result of the transfer of the capital asset.]
88[R454] [(3) The
profits or gains arising from the transfer of a capital asset by a person to a
firm or other association of persons or body of individuals (not being a
company or a co-operative society) in which he is or becomes a partner or
member, by way of capital contribution or otherwise, shall be chargeable to tax
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 of the
firm, association or body as the value of the capital asset shall be deemed to
be the full value of the consideration received or accruing as a result of the
transfer of the capital asset.
(4) The profits
or gains arising from the transfer of a capital asset by way of distribution of
capital assets on the dissolution of a firm or other association 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 of the firm, association or
body, of the previous year in which the said transfer takes place and, for the
purposes of section 48, the fair market value of the asset on the date of such
transfer shall be deemed to be the full value of the consideration received or
accruing as a result of the transfer.]
89[R455] [(5) Notwithstanding anything
contained in sub-section (1), where the capital gain arises from the transfer
of a capital asset, being a transfer by way of compulsory acquisition under any
law, or a transfer the consideration for which was determined or approved by
the Central Government or the Reserve Bank of India, and the compensation or
the consideration for such transfer is enhanced or further enhanced by any
court, Tribunal or other authority, the capital gain shall be dealt with in the
following manner, namely:—
(a) the capital
gain computed with reference to the compensation awarded in the first instance
or, as the case may be, the consideration determined or approved in the first
instance by the Central Government or the Reserve Bank of India shall be
chargeable as income under the head “Capital gains” of the previous year in
which the transfer took place; and
(b) the amount by which the compensation or consideration is
enhanced or further enhanced by the court, Tribunal or other authority shall be
deemed to be income chargeable under the head “Capital gains” of the previous
year in which such amount is received by the assessee.
Explanation: For the purposes of
this sub-section,—
(i) in relation to the amount referred
to in clause (b), the cost of acquisition and the cost of improvement shall be
taken to be nil;
(ii) the provisions of this sub-section shall apply also in a
case where the transfer took place prior to the 1st day of April, 1988;
(iii) where by reason of the death of the person who made the
transfer, or for any other reason, the enhanced compensation or consideration
is received by any other person, the amount referred to in clause (b) shall be
deemed to be the income, chargeable to tax under the head “Capital gains”, of
such other person.]
The following sub-section (6) shall be inserted by the
Finance Act, 1990, w.e.f. 1-4-1991
:
(6) Notwithstanding
anything contained in sub-section (1), the difference between the repurchase
price of the units referred to in sub-section (2) of section 80CCB and the
capital value of such units shall be deemed to be the capital gains arising to
the assessee in the previous year in which such
repurchase takes place or the plan referred to in that section is terminated
and shall be taxed accordingly.
Explanation : For the purposes of this sub-section, “capital value of
such units” means any amount invested by the assessee
in the units referred to in sub-section (2) of section 80CCB.
Capital gains on
distribution of assets by companies in liquidation.
46.(1) Notwithstanding anything
contained in section 45, where the assets of a company are distributed to its
shareholders on its liquidation, such distribution shall not be regarded as a
transfer by the company for the purposes of section 45.
(2) Where a
shareholder on the liquidation of a company receives any money or other assets
from the company, he shall be chargeable to income-tax under the head “Capital
gains”, in respect of the money so received or the market value of the other
assets on the date of distribution, 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 the consideration
for the purposes of section 48.
Transactions not
regarded as transfer.
47. Nothing contained in section 45
shall apply to the following transfers:—
(i) any distribution of capital 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 parent company or its nominees hold the whole of the
share capital of the subsidiary company; and
(b) the subsidiary company is an Indian company;
91[R457] [(v) any
transfer of a capital asset by a subsidiary company to the holding company, if—
(a) the whole of the share capital of the subsidiary company is
held by the holding company, and
(b) the holding company is an Indian company:]
92[R458] [Provided that nothing
contained in clause (iv) or clause (v) shall apply to
the transfer of a capital asset made after the 29th day of February, 1988, as
stock-in-trade;]
93[R459] [(vi) any transfer, in a scheme of amalgamation, of
a capital asset by the amalgamating company to the amalgamated company if the
amalgamated company is an Indian company;
(vii) any transfer
by a shareholder, in a scheme of amalgamation, of a capital asset being a share
or shares held by him in the amalgamating company if—
(a) the transfer is made in consideration of the allotment to
him of any share or shares in the amalgamated company, and
(b) the amalgamated company is an Indian company;
94[R460] [(viii) any transfer of agricultural land in
95[R461] [(ix) any transfer of a capital asset, being any work of art,
archaeological, scientific or art collection, book, manuscript, drawing,
painting, photograph or print, to the Government or a University or the
National Museum, National Art Gallery, National Archives or any such other
public museum or institution as may be notified96[R462] by the Central
Government in the Official Gazette 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
or incorporated by or under a Central, State or Provincial Act and includes an
institution declared under section 3 of the University Grants Commission Act,
1956 (3 of 1956), to be a University for the purposes of that Act.]
97[R463] [Withdrawal of exemption in certain cases.
47A. Where at any time before the
expiry of a period of eight years from the date of the transfer of a capital
asset referred to in clause (iv) or, as the case may be, clause (v) of section
47,—
(i) Such capital asset is converted by the transferee company
into, or is 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 ceases or
cease to hold the whole of the share capital of the subsidiary company,the amount of profits or gains arising from the
transfer of such capital asset not charged under section 45 by virtue of the
provisions 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 chargeable under the head “Capital gains” of the previous
year in which such transfer took place.]
98[R464] [Mode of computation and deductions.
48.(1) The
income chargeable under the head “Capital gains” shall be computed,—
(a) be deducting
from the full value of the consideration received or accruing as a result of
the transfer of the capital asset the 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:
99[R465] [Provided that in the case of an assessee, who is a non-resident Indian, capital gains
arising from the transfer of a capital asset being shares in, or debentures of,
an Indian company shall be computed by converting the cost of acquisition,
expenditure incurred wholly and exclusively in connection with such transfer
and the full value of the consideration received or accruing as a result of the
transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and
the capital gains so computed in such foreign currency shall be reconverted
into Indian currency, so however, that the aforesaid manner of computation of
capital gains shall be applicable in respect of capital gains accruing or
arising from every re-investment thereafter in, and sale of, shares in, or
debentures of, an Indian company.
Explanation: For the purposes of
this clause,—
(i) “Non-resident Indian” shall have the same meaning as in
clause (e) of section 115C;
(ii) “Foreign
currency” and “Indian currency” shall have the meanings respectively assigned
to them in section 2 of the Foreign Exchange Regulation Act, 1973 (46 of
1973);
(iii) The
conversion of Indian currency into foreign currency and the reconversion
of foreign currency into Indian currency shall be at the rate of exchange
prescribed in this behalf;]
(b) Where the
capital gain arises from the transfer of a long-term capital asset (hereafter
in this section referred to, respectively, as long-term capital gain and
long-term capital asset) by making the further deductions specified in
sub-section (2).
(2) The
deductions referred to in clause (b) of sub-section (1) are the following,
namely:—
(a) Where the
amount of long-term capital gain arrived at after making the deductions under
clause (a) of sub-section (1) does not exceed ten thousand rupees, the whole of
such amount;
(b) in any other case, ten thousand rupees as increased by a sum
equal to,—
(i) in respect of long-term capital gain so arrived at relating
to capital assets, being buildings or lands or any rights in buildings or lands
or gold, bullion or jewellery,—
(A) in the case of a company, ten per cent of the amount of such
gain in excess of ten thousand rupees;
(B) in the case of any other assessee,
fifty per cent of the amount of such gain in excess of ten thousand rupees;
1[R466] [(ia) in
respect of long-term capital gain so arrived at relating to equity shares of
venture capital undertakings,—
(A) in the case of a company, other than venture capital
company, thirty per cent of the amount of such gain in excess of ten thousand
rupees;
(B) in the case of venture capital company, sixty per cent of
the amount of such gain in excess of ten thousand rupees;
(C) in any other case, sixty per cent of the amount of such gain
in excess of ten thousand rupees;]
(ii) in respect of long-term capital gain so arrived at relating
to 2[R467] [capital
assets other than capital assets referred to in sub-clauses (i) and (ia),]—
(A) in the case of a company, thirty per cent of the amount of
such gain in excess of ten thousand rupees;
(B) in any other case, sixty per cent of the amount of such gain
in excess of ten thousand rupees:
Provided that where the long-term capital
gain relates to both categories of capital assets referred to in sub-clauses (i) and (ii), the deduction of ten thousand rupees shall be
allowed in the following order, namely:—
(1) The
deduction shall first be allowed against long-term capital gain relating to the
assets mentioned in sub-clause (i);
(2) Thereafter,
the balance, if any, of the said ten thousand rupees shall be allowed as
deduction against long-term capital gain relating to the assets mentioned in
sub-clause (ii),And the provisions of sub-clause (ii)
shall apply as if references to ten thousand rupees therein were references to
the amount of deduction allowed in accordance with clauses (1) and (2) of this
proviso:
Provided
further that, in
relation to the amount referred to in clause (b) of sub-section (5) of section
45, the initial deduction of ten thousand rupees under clause (a) of this
sub-section shall be reduced by the deduction already allowed under clause (a)
of section 80T in the assessment for the assessment year commencing on the 1st
day of April, 1987, or any earlier assessment year or, as the case may be, by
the deduction allowed under clause (a) of this sub-section in relation to the
amount of compensation or consideration referred to in clause (a) of
sub-section (5) of section 45 and references to ten thousand rupees in clauses
(a) and (b) of this sub-section shall be construed as references to such
reduced amount, if any.
3[R468] [Explanation :
For the purposes of this section,—
(a) “venture
capital company” means such company as is engaged in providing finance to
venture capital undertakings mainly by way of acquiring equity shares of such
undertakings or, if the circumstances so require, by way of advancing loans to
such undertakings, and is approved by the Central Government in this behalf;
(b) “venture
capital undertaking” means such company as the prescribed authority may, having
regard to the following factors, approve for the purposes of sub-clause (ia) of clause (b) of sub-section (2), namely :—
(1) the total investment in the company does not exceed ten crore rupees or such other higher amount as may be
prescribed;
(2) the company does not have adequate financial resources to
undertake projects for which it is otherwise professionally or technically
equipped; and
(3) the company seeks to employ any technology which will result
in significant improvement over the existing technology in
(3) The deductions specified in sub-section (2) shall be
made also for the purposes of computing any loss under the head “Capital gains”
in so far as it pertains to any long-term capital asset and, for the this
purpose, any reference in that sub-section to the amount of long-term capital
gain arrived at after making the deductions under clause (a) of sub-section (1)
shall be construed as reference to the amount of loss arrived at after making
the said deductions.]
Cost with reference to
certain modes of acquisition.
49.4[R469] [(1) Where
the capital asset became the property of the assessee—
(i) on any distribution of assets on
the total or partial partition of a Hindu undivided family;
(ii) under a
gift or will;
(iii) (a) by succession,
inheritance or devolution, or
5[R470] [(b)on any distribution of assets on
the dissolution of a firm, body of individuals, or other association of
persons, where such dissolution had taken place at any time before the 1st day
of April, 1987, or]
(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) 6[R471] [or clause
(v)] 7[R472] [or clause
(vi)] of section 47;
8[R473] [(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
acquisition of the asset shall be deemed to be the cost for which the previous
owner of the property acquired it, as increased by the cost of any improvement
of the assets incurred or borne by the previous owner or the assessee, as the case may be.
9[R474] [Explanation :
In this 10[R475] [sub-section]
the expression “previous owner of the property” in relation to any capital
asset owned by an assessee means the last previous owner
of the capital asset who acquired it by a mode of acquisition other than that
referred to in clause (i) or clause (ii) or clause
(iii) 11[R476] [or clause
(iv) of this 10[R477] [sub-section].]
7[R478] [(2) Where
the capital asset being a share or shares in an amalgamated company which is an
Indian company became the property of the assessee in
consideration of a transfer referred to in clause (vii) of section 47, the cost
of acquisition of the asset shall be deemed to be the cost of acquisition to
him of the share or shares in the amalgamating company.]
12[R479] [(3) Notwithstanding
anything contained in sub-section (1), where the capital gain arising from the
transfer of a capital asset referred to in clause (iv) or, as the case may be,
clause (v) of section 47 is deemed to be income chargeable under the head
“Capital gains” by virtue of the provisions contained in section 47A, the cost
of acquisition of such asset to the transferee company shall be the cost for
which such asset was acquired by it.]
13[R480] [Special provision for computation of capital gains in case
of depreciable assets.
50. Notwithstanding anything
contained in clause (42A) of section 2, where the capital asset is an asset
forming part of a block of asset in respect of which depreciation has been
allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922),
the provisions of sections 48 and 49 shall be subject to the following
modifications:—
(1) where the
full value of the consideration received or accruing as a result of the
transfer of the asset together with the full value of such consideration
received or accruing as a result of the transfer of any other capital asset
falling within the block of the assets during the previous year, exceeds the
aggregate of the following amounts, namely:—
(i) Expenditure incurred wholly and exclusively in connection
with such transfer or transfers;
(ii) The written
down value of the block of assets at the beginning of the previous year; and
(iii) The actual
cost of any asset falling with in the block of assets acquired during the
previous year,such excess
shall be deemed to be the capital gains arising from the transfer of short-term
capital assets;
(2) where any
block of assets ceases to exist as such, for the reason that all the assets in
that block are transferred during the previous year, the cost of acquisition of
the block of assets shall be the written down value of the block of assets at
the beginning of the previous year, as increased by the actual cost of any
asset falling within that block of assets, acquired by the assessee
during the previous year and the income received or accruing as a result of
such transfer or transfers shall be deemed to be the capital gains arising from
the transfer of short-term capital assets.]
51. 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 negotiations shall be deducted from the cost for which the
asset was acquired or the written down value of the fair market value, as the
case may be, in computing the cost of acquisition.
Consideration
for transfer in cases of understatement.
14[R481] 52. [Omitted by the Finance Act, 1987, w.e.f.
1-4-1988.]
15[R482] [Exemption of capital gains from a residential house.
53. Notwithstanding anything
contained in section 45, where in the case of an assessee
being an individual 16[R483] [or a Hindu
undivided family], the capital gain arises from the transfer of 17[R484] [long-term
capital 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”, the capital gain arising from such transfer shall be
dealt with in accordance with the following provisions of this section, that is
to say,—
(a) in a case where the full value of the consideration received
or accruing as a result of the transfer of such capital asset does not exceed
two hundred thousand rupees the whole of the capital gain shall not be charged
under section 45;
(b) in a case where the full value of such consideration exceeds
two hundred thousand rupees, so much of the capital gain as bears to the whole
of the capital gain the same proportion as the amount of two hundred thousand
rupees bears to such consideration shall not be charged under section 45 :
Provided that nothing contained in this section shall apply to a case where the assessee owns on the date of such transfer any other
residential house.]
18[R485] [Explanation : In this section and
in sections 54, 54B, 54D, 54E, 54F and 54G, references to capital gain shall be
construed as references to the amount of capital gain as computed under clause
(a) of sub-section (1) of section 48.]
Profit on sale of
property used for residence.
19[R486] 54. 20[R487] [(1) 21[R488] [22[R489] [Subject to
the provisions of sub-section (2), where, in the case of an assessee
being an individual or a Hindu undivided family], the capital gain arises from
the transfer of a long-term capital asset 23[R490] [***], 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 24[R491] [one year before
or two years after the date on which the transfer took place purchased], or has
within a period of three years after that date constructed, a residential
house, then], instead of the capital gain being charged to income-tax as income
of the previous year in which the transfer took place, it shall be dealt
within accordance with the following provisions of this section, that is to
say,—
(i) if the amount of the capital gain 25[R492] [ is greater
than the cost of 26[R493] [the
residential house] so purchased or constructed (hereafter in this section
referred to as the new asset)], the difference between the amount of the
capital gain and the 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 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 capital gain shall not be charged under section 45; and for the purpose of
computing in respect of the new asset any capital 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 reduced by the amount of the capital gain.
28[R495] [(2) The
amount of the capital gain which is not appropriated by the assessee
towards the purchase of the new asset made within one year before the date on
which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the
new asset before the date of furnishing the return of income under section
139, shall be deposited by him before furnishing such return [such deposit
being made in any case not later than the due date 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, and utilised in
accordance with, any scheme29[R496] 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
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the
purchase or construction of the new asset together with 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 utilised wholly or partly for
the 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 previous year 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 scheme aforesaid.
Explanation:
Where any amount becomes chargeable under section 45 in accordance with the
proviso to this sub-section, then,—
(a) for the
purposes of the deductions to be made under clause (b) of sub-section (1) of
section 48, the initial deduction of ten thousand rupees under sub-section (2)
of that section shall not be admissible; and
(b) Nothing
contained in section 53 shall apply in relation to such amount.]
Relief of tax on
capital gains in certain cases.
54A. [Omitted by the Finance (No.
2) Act, 1971, w.e.f. 1-4-1972. Original section was
inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
The Direct Tax Laws (Amendment) Act, 1989 has deleted new section 54A, dealing
with relief of tax on capital gains on transfer of property held under trust
for charitable or religious purposes or by certain institution, earlier
inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.]
30[R497] [Capital gain on transfer of land used for agricultural purposes
not to be charged in certain cases.
54B. 31[R498] [(1)] 32[R499] [Subject to
the provisions of sub-section (2), where the capital gain arises] from the
transfer of a capital asset being land which, in the two years immediately
preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes 31[R500] [(hereinafter
referred to as the original asset)], and the assessee
has, within a period of two years after that date, purchased any other land for
being used for agricultural purposes, then, instead of the capital gain being
charged to income-tax as income of the previous year in which the transfer took
place, it shall be dealt with in accordance 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 so purchased (hereinafter referred to as the new asset), the
difference between the amount of the capital gain and the 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 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 of the new asset,
the capital gain shall not be charged under section 45; and for the purpose of
computing in respect of the new asset any capital gain arising from its transfer
within a period of three years of its purchase, the cost shall be reduced by
the amount of the capital gain.]
33[R501] [(2) The
amount of the capital gain which is not utilised by
the assessee for the purchase of the new asset before
the date of furnishing the return of income under section 139, shall be
deposited by him before furnishing such return [such deposit being made in any
case not later than the due date 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, and utilised in accordance
with, any scheme34[R502] 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
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the
purchase of the new asset together with 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 utilised wholly or partly for
the purchase 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 previous year in which the period of two 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 scheme aforesaid.
Explanation:
Where any amount becomes chargeable under section 45 in accordance with the
proviso to this sub-section, then, for the purposes of
the deductions to be made under clause (b) of sub-section (1) of section 48,
the initial deduction of ten thousand rupees under sub-section (2) of that
section shall not be admissible.]
Capital gain on
transfer of jewellery held for personal use not be charged in certain cases.
54C. [Omitted
by the Finance Act, 1976, w.e.f. 1-4-1976. Original section was inserted by
the Finance Act, 1972, w.e.f. 1-4-1973.]
35[R503] [Capital gain on compulsory acquisition of lands and
buildings not to be charged in certain cases.
54D. 36[R504] [(1)] 37[R505] [Subject to
the provisions of sub-section (2), where the capital gain arises] 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, in the 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 said undertaking 38[R506] [(hereafter in
this section referred to as the original asset)], and the assessee
has within a period of three years after that date purchased any other land or
building or any right in any other land or building or constructed any other
building for the purposes of shifting or re-establishing the said undertaking
or setting up another industrial undertaking, then, instead of the capital
gain being charged to income-tax as the income of the previous year in which
the transfer took place, it shall be dealt with in accordance 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 new asset), the difference between the amount of the capital gain and 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 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 capital gain shall not be charged under section 45; and for the purpose of
computing in respect of the new asset any capital 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 reduced by the amount of the capital gain.]
39[R507] [(2) The
amount of the capital gain which is not utilised by
the assessee for the purchase or construction of the
new asset before the date of furnishing the return of income under section 139,
shall be deposited by him before furnishing such return [such deposit being
made in any case not later than the due date 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, and utilised in accordance
with, any scheme40[R508] 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
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the
purchase or construction of the new asset together with the amount so deposited
shall be deemed to be the cost of new asset :
Provided that if the amount deposited under
this sub-section is not utilised wholly or partly for
the 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 previous year 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 scheme aforesaid.
Explanation:
Where any amount becomes chargeable under section 45 in accordance with the
proviso to this sub-section, then, for the purposes of the deductions to be
made under clause (b) of sub-section (1) of section 48, the initial deduction
of ten thousand rupees under sub-section (2) of that section shall not be admissible.]
41[R509] [Capital gain on transfer of capital assets not be charged in
certain cases.
42[R510] 54E. (1)
Where the capital gain arises from the transfer of a 43[R511] [long-term
capital asset], (the capital asset so transferred being hereafter in this
section referred to as the original asset) and the assessee
has, within a period of six months after the date of such transfer, invested or
deposited the 44[R512] [whole or any
part of the net consideration] in any specified asset (such specified asset
being hereafter in this section referred to as the new asset), the capital gain
shall be dealt with in accordance with the following provisions of this
section, that is to say,—
(a) if the cost of the new asset is less than the 45[R513] [net
consideration] in respect of the original 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 45[R514] [net
consideration] in respect of the original asset, so much of the capital gain as
bears to the whole of the capital gain the same proportion as the cost of
acquisition of the new asset bears to the 46[R515] [net
consideration] shall not be charged under section 45:
47[R516] [Provided that in a case
where the original asset is transferred after the 28th day of February, 1983,
the provisions of this sub-section shall not apply unless the assessee has invested or deposited
the whole or, as the case may be, any part of the net consideration in the new
asset by initially subscribing to such new asset :]
48[R517] [Provided further that in a
case where the transfer of the original asset is by way of compulsory acquisition
under any law and the full amount of compensation 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 received on the date of the
transfer, be reckoned from the date immediately following the date on which
such compensation is received by the assessee.]
Explanation
1: 49[R518] [For the
purposes of this sub-section, “specified asset” means—
(a) in a case
where the original asset is transferred before the 1st day of March, 1979, any
of the following assets, namely :—]
(i) securities of the Central
Government or a State Government;
(ii) 50[R519] savings
certificates as defined in clause (c) of section 2 of the Government Savings
Certificates Act, 1959 (46 of 1959);
(iii) units in the Unit Trust of India established under the Unit
Trust of India 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 listed in a recognised stock exchange in India in accordance with the
Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made
there under, 51[R520] [where the
investment in such shares is made before the 1st day of March, 1978];
52[R521] [(va) equity
shares forming part of any eligible issue of capital, where the investment 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 of India established
under the State Bank of India Act, 1955 (23 of 1955), or any subsidiary bank as
defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or
any nationalized bank, that is to say, any corresponding new bank, constituted
under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970), or any co-operative society engaged in
carrying on the business of banking (including a co-operative land mortgage
bank or a co-operative land development bank);
53[R522] [(b) in
a case where the original asset is transferred after the 28th day of February,
1979 54[R523] [but before
the 1st day of March, 1983], such National Rural Development Bonds as the Central
Government may notify55[R524] in this behalf
in the Official Gazette;]
56[R525] [(c) in
a case where the original asset is transferred after the 28th day of February,
1983 57[R526] [but before the
1st day of April, 1986], any of the following assets, namely:—
(i) Securities of the Central Government which that Government
may, by notification in the Official Gazette, specify in this behalf;
(ii) special
series of units of the Unit Trust of India established under the Unit Trust of
India Act, 1963 (52 of 1963), which the Central Government may, by notification58[R527] in the Official
Gazette, specify in this behalf;
(iii) such National Rural Development bonds as have been notified59under
clause (b) of Explanation 1 or as may be notified in this behalf under this
clause by the Central Government;
(iv) such
debentures issued by the Housing and Urban Development Corporation Limited [a 60-61[R528] Government
company as defined in section 617 of the Companies Act, 1956 (1 of 1956)], as
the Central Government may, by notification in the Official Gazette, specify in
this behalf;]
62[R529] [(d) in
a case where the original asset is transferred after the 31st of March, 1986,
any of the assets specified in clause (c) and such bonds issued by any public
sector company, as the Central Government may, by notification63[R530] in the
Official Gazette, specify in this behalf.
65[R532] [(e) in
a case where the original asset is transferred after the 31st day of March,
1989, any of the assets specified in clauses (c) and (d) and such debentures or
bonds issued by the National Housing Bank established under section 3 of the
National Housing Bank Act, 1987 (53 of 1987), as the Central Government may, by
notification in the Official Gazette, specify in this behalf.]
66[R533] [Explanation 2: “Eligible issue of
capital” shall have the meaning assigned to it in sub-section (3) of section
80CC.]
66[R534] [Explanation 3 : An assessee shall not be deemed to have invested the 67[R535] [whole or any
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 subscribed to or purchased the shares in the
manner specified in sub-section (4) of section 80CC.]
Explanation
68[R536] [4] : “Cost”, in relation to any new asset, being a deposit
referred to in 69[R537] [sub-clause
(vi) of clause (a)] of Explanation 1, means the amount of such deposit.
70[R538] [Explanation 5 : “Net consideration”,
in relation to the transfer of a capital asset, means the full value of the
consideration received or accruing as a result of the transfer of the capital
asset as reduced by any expenditure incurred wholly and exclusively in
connection with such transfer.
71[R539] [(1A) Where the assessee
deposits after the 27th day of April, 1978, the 72[R540] [whole or any
part of the net consideration in respect] of the original asset in any new
asset, being a deposit referred to in 73[R541] [sub-clause
(vi) of clause (a)] of Explanation 1 below sub-section (1), the cost of such
new asset shall not be taken into account for the purposes of that sub-section
unless the following conditions are fulfilled, namely:—
(a) the assessee furnishes, along with the deposit, a declaration
in writing, to the bank or the co-operative society referred to in the said 73[R542] [sub-clause
(vi)] with which such deposit is made, to the effect that the assessee will not take any loan or advance on the security
of such deposit during a period of three years from the date on which the
deposit is made;
(b) the assessee furnishes, along with the return of income for the
assessment year relevant to the previous year in which the transfer of the
original asset was effected or within such further time as may be allowed by
the 74[R543] [Assessing]
Officer, a copy of the declaration referred to in clause (a) duly attested by
an officer not below the rank of sub-agent, agent or manager of such bank or an
officer of corresponding rank of such co-operative society.]
75[R544] [(1B) Where on the fulfillment of
the conditions specified in sub-section (1A), the cost of the new asset
referred to in that sub-section is taken into account for the purposes of
sub-section (1), the assessee shall, within a period
of ninety days from the expiry of the period of three years reckoned from the
date of such deposit, furnish to the 74[R545] [Assessing]
Officer a certificate from the officer referred to in clause (b) of sub-section
(1A) to the effect that the assessee has not taken
any loan or advance on the security of such deposit during the said period of
three years.]
(2) Where the
new asset is transferred, or converted (otherwise than by transfer) into money,
within a period of three years from the date of its acquisition, the amount of
capital gain arising from the transfer of the original asset not charged 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 under the head “Capital gains” relating to 76[R546] [long-term
capital assets] of the previous year in which the new asset is transferred or
converted (otherwise than by transfer) into money.]
76a[R547] [77[R548] [Explanation
1] : Where the assessee deposits after the 27th day
of April, 1978, the 78[R549] [whole or any
part of the net consideration in respect] of the original asset in any new
asset, being a deposit referred to in 79[R550] [sub-clause
(vi) of clause (a)] of Explanation 1 below sub-section (1), and such assessee takes any loan or advance on the security of such
deposit, he shall be deemed to have converted [otherwise than by transfer) such
deposit into money on the date on which such loan or advance is taken.]
80[R551] [Explanation 2 :
In a case where the original asset is transferred after the 28th day of
February, 1983 and the assessee invests the whole or
any part of the net consideration in respect of the original asset in any new
asset and such assessee takes any loan or advance on
the security of such new asset, he shall be deemed to have converted (otherwise
than by transfer) such new asset on the date on which such loan or advance is
taken.]
84[R555] [(3) Where
the cost of the equity shares referred to in 85[R556] [sub-clause (va) of clause (a)] of Explanation 1 below sub-section (1)
is taken into account for the purposes of clause (a) or clause (b) of
sub-section (1) 86[R557] [ * * *], a
deduction with reference to such cost shall not be allowed under section 80CC.]
87[R558] [Capital gain on transfer of certain capital assets not to be
charged in case of investment in residential house.
54F.(1) 88[R559] [Subject to
the provisions of sub-section (4), where, in the case of an assessee
being an individual or a Hindu undivided family], the capital gain arises from
the transfer of any long-term capital asset, not being a residential house
(hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 89[R560] [two years]
after the date on which the transfer took place purchased, or has within a
period of three years after that date constructed, a residential house
(hereafter in this section referred to as the new asset), the capital gain
shall be dealt with in accordance with the following provisions of this section
that is to say,—
(a) if the cost of the new asset is not less than the net
consideration in respect of the original 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, so much of the capital gain as
bears to the whole of the capital gain the same proportion as the cost of 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
the date of the transfer of the original asset, or purchases, within the
period of one year after such date, or constructs, within the period of three
years after such date, any residential house, the income from which is
chargeable under the head “Income from house property”, other than the new
asset.
Explanation:
For the purposes of this section,—
91[R562] [* * *] “net consideration”, in relation to the transfer of a capital asset,
means the full value of the consideration received or accruing as a result of the
transfer of the capital asset as reduced by any expenditure incurred wholly and
exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of 92[R563] [two years]
after the date of the transfer of the original asset, or constructs, within the
period of three years after such date, any residential house, the income from
which is chargeable under the head “Income from house property”, other than the
new asset, the amount of capital gain arising from the transfer of the original
asset not charged 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 under the head “Capital gains”
relating to long-term capital assets of the previous year in which such
residential house is purchased or constructed.
(3) Where the
new asset is transferred within a period of three years from the date of its
purchase or, as the case may be, its construction, the amount of capital gain
arising from the transfer of the original asset not charged under section 45
on the basis of the cost of such new asset as provided in cause (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 in which such new asset is transferred.]
93[R564] [(4) The
amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within
one year before the date on which the transfer of the original asset took
place, or which is not utilised by him for the
purchase or construction of the new asset before the date of furnishing the
return of income under section 139, shall be deposited by him before furnishing
such return [such deposit being made in any case not later than the due date
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, and utilised
in accordance with, any scheme94[R565] 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
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the
purchase or construction of the new asset together with 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 utilised wholly or partly for
the 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 the original asset not charged
under section 45 on the basis of the cost of the new asset as provided in
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 the assessee 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 the previous year 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 the unutilised amount in accordance with
the scheme aforesaid.
Explanation : Where any amount becomes chargeable under section 45 in
accordance with sub-section (2) or sub-section (3) or the proviso to this
sub-section, then, for the purposes of the deductions to be made under clause
(b) of sub-section (1) of section 48, the initial deduction of ten thousand
rupees under sub-section (2) of that section shall not be admissible.]
95[R566] [Exemption of capital gains on transfer of assets in cases of
shifting of industrial undertaking from urban area.
54G.(1)Subject to the provisions of sub-section (2), where the capital gain
arises from the transfer of a capital asset, being machinery or plant or
building or land or any rights in building or land used for the purposes of the
business of an industrial undertaking situate in an urban area, effected in the
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 assessee has
within a period of one year before or three years after the date on which the
transfer took place,—
(a) purchased
new machinery or plant for the purposes of business of the industrial
undertaking 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 said area;
(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 the
Central Government for the purposes of this section,then, instead of the capital gain being charged to
income-tax as income of the previous year in which the transfer took place, it
shall be dealt with in accordance with the following provisions of this
section, that is to say,—
(i) if the amount of the capital gain is greater than the cost
and expenses incurred in relation to all or any of the purposes mentioned in
clauses (a) to (d) (such cost and expenses being hereafter in this section
referred to as the new asset), the difference between the amount of the capital
gain and the 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 its transfer within a period of three
years of its being purchased, acquired, constructed or transferred, 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 capital gain shall not be charged under section 45; and for the purpose of
computing in respect of the new asset any capital gain arising from its transfer
within a period of three years of its being purchased, acquired, constructed
or transferred, as the case may be, the cost shall be reduced by the amount of
the capital gain.
Explanation
: In this sub-section, “urban area” means any such area within the limits of a
municipal corporation or municipality as the Central Government may, having
regard to the population, concentration of industries, need for proper planning
of the area and other relevant factors, 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 and expenses 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 of furnishing the return of income under
section 139, shall be deposited by him before furnishing such return [such
deposit being made in any case not later than the due date 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, and utilised in
accordance with, any scheme96[R567] 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
the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all
or any of the purposes aforesaid together with 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 utilised wholly or partly for
all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1)
within the period specified in that sub-section, then,—
(i) the amount not so utilised shall be charged under section 45 as the income of
the previous year 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 scheme aforesaid.
Explanation:
Where any amount becomes chargeable under section 45 in accordance with the
proviso to this sub-section, then for the purposes of the deductions to be made
under clause (b) of sub-section (1) of section 48, the initial deduction of ten
thousand rupees under sub-section (2) of that section shall not be admissible.]
Meaning of “adjusted”,
“cost of improvement” and “cost of acquisition”.
55. (1) For the purposes of 97[R568] [sections 48
and 49],—
99[R570] [(b) “cost
of any improvement”,—
(1) in relation to a capital asset being goodwill of a business
shall be taken to be nil; and
(2) in relation to any other capital asset,—]
(i) where the capital asset became the property of the previous
owner or the assessee before the 1[R571] [1st day of
April, 1974], and the fair market value of the asset on that day is taken as
the cost of acquisition at the option of the assessee,
means all expenditure of a capital nature incurred in making any additions or
alterations to the capital asset on or after the said date by the previous
owner or the assessee, and
(ii) in any
other case, means all expenditure of a capital nature incurred in making any
additions or alterations to the capital asset by the assessee
after it became his property, and, where the capital asset became the property
of the assessee by any of the modes specified in 2[R572] [sub-section
(1) of] section 49, by the previous owner,But does
not include any expenditure which is deductible in computing the income
chargeable under the head “Interest on securities”, “Income from house
property”, “Profits and gains of business or profession”, or “Income from other
sources”, and the expression “Improvement” shall be construed accordingly.
3[R573] (2) 4[R574] [For the purposes of sections 48 and
49, “cost of acquisition”,—
(a) in relation to a capital asset, being goodwill of a
business,—
(i) in the case of acquisition of such
asset by the assessee by purchase from a previous
owner, means the amount of the purchase price; and
(ii) in any other case, shall be taken to be nil;
(b) in relation to any other capital asset,—]
(i) where the capital asset became the
property of the assessee before the 1[R575] [1st day of
April, 1974], means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1[R576] [1st day of
April, 1974], at the option of the assessee;
(ii) where the
capital asset became the property of the assessee by
any of the modes specified in 5[R577] [sub-section
(1) of] section 49, and the capital asset became the property of the previous
owner before the 6[R578] [1st day of
April, 1974], means the cost of the capital asset to the previous owner or the
fair market value of the asset on the 6[R579] [1st day of
April, 1974], at the option of the assessee;
(iii) where the
capital asset became the property of the assessee on
the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head
“Capital gains” in respect of that asset under section 46, means the fair
market value of the asset on the date of distribution;
8[R581] (v) where
the capital asset, being a share or a stock of a company, became the property
of the assessee on—
(a) the consolidation and division of all or any of the share
capital of the company into shares of larger amount than its existing 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 of smaller 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 the cost 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 cannot be ascertained,
the cost of acquisition to the previous owner means the fair market value on
the date on which the capital asset became the property of the previous owner.
9[R582] [eference to Valuation Officer.
55A. With a view to ascertaining
the fair market value of a capital asset for the purposes of this Chapter, the 10[R583] [Assessing]
Officer may refer the valuation of capital asset to a Valuation Officer—
(a) in a case
where the value of the asset as claimed by the assessee
is in accordance with the estimate made by a registered valuer,
if the 10[R584] [Assessing]
Officer is of opinion that the value so claimed is less than its fair market
value;
(b) in any other case, if the 10a[R585] [Assessing]
Officer is of opinion—
11[R586] (i) that the fair market value of the asset
exceeds the value of the asset as claimed by the assessee
by more than such percentage of the value of the asset as so claimed or by more
than such amount as may be prescribed in this behalf; or
(ii) that having
regard to the nature of the asset and other relevant circumstances, it is
necessary so to do,12[R587] 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 and section 37 of the Wealth-tax Act, 1957 (27 of
1957), shall with the necessary modifications, apply in relation to such
reference as they apply in relation to a reference made by the 13[R588] [Assessing]
Officer under sub-section (1) of section 16A of the Act.
Explanation:
In this section, “Valuation Officer” has the same meaning, as in clause (r) of
section 2 of the Wealth-tax Act, 1957 (27 of 1957).]
F.—Income from other sources
14[R589] 56. (1)
Income of every kind which is not to be excluded from the total income under
this Act shall be chargeable to income-tax under the head “Income from other
sources”, if it is not chargeable to income-tax under any of the heads
specified in section 14, items A to E.
(2) In
particular, and without prejudice to the generality of the provisions of
sub-section (1), the following income shall be chargeable to income-tax under
the head “Income from other sources”, namely:—
(i) Dividends;
15[R590] [(ia) income
referred to in sub-clause (viii) of clause (24) of section 2;]
16[R591] [(ib) income
referred to in sub-clause (ix) of clause (24) of section 2;]
17[R592] [(ic) income
referred to in sub-clause (x) of clause (24) of section 2, if such income is
not chargeable to income-tax under the head “Profits and gains of business or
profession”;]
18[R593] [(id) income by way of interest on securities, if the income is not
chargeable to income-tax under the head “Profits and gains of business or
profession”;]
(ii) Income from
machinery, plant or furniture belonging to the assessee
and let 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
belonging to him and also buildings, and the letting of the buildings is
inseparable from the letting of the said machinery, plant or furniture, the
income from such letting, if it is not chargeable to income-tax under the head
“Profits and gains of business or profession”.
19[R594] 57. The
income chargeable under the head “Income from other sources” shall be computed after making the
following deductions, namely:—
(i) in the case of dividends, 20[R595] [or interest
on securities], any reasonable sum paid by way of commission or remuneration to
a banker or any other person for the purpose of realising
such dividend 20[R596] [or interest]
on behalf of the assessee;
20a[R597] [(ia)in
the case of income of the nature referred to in sub-clause (x) of clause (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 with the
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 accordance with the
provisions of sub-clause (ii) of clause (a) and clause (c) of section 30,
section 31 and 21[R598] [sub-sections
(1) 22[R599] [* * *] and
(2)] of section 32 and subject to the provisions of 23[R600] [section 38];
24[R601] [(iia) in the case of income in the nature of family
pension, a deduction of a sum equal to thirty-three and one-third per cent of
such income or twelve thousand rupees, whichever is less.
Explanation:
For the purposes of this clause, “family pension” means a regular monthly
amount payable by the employer to a person belonging to the family 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 or earning such income:
25[R602] [Provided that nothing
contained in clause (i) or clause (iii) shall apply
in computing the income by way of dividends in the case of an assessee, being a foreign company.
26[R603] Explanation: [Omitted by the Finance
Act, 1988, w.e.f. 1-4-1989] ]
58. 27[R604] [(1)]
notwithstanding anything to the contrary contained in section 57, the following
amounts shall not be deductible in computing the income chargeable under the
head “Income from other sources”, namely:—
(a) in the case of
any assessee,—
(i) any personal expenses of the assessee;
28[R605] [(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
(iii) any payment which is chargeable under the head “Salaries”,
if it is payable outside
32[R609] [(1A) The provisions of sub-clause (iia) of clause (a) of section 40 shall, so far as may be,
apply in computing the income chargeable under the head “Income from other
sources” as they apply in computing the income chargeable under the head
“Profits and gains of business or profession”.]
33[R610] [(2) The provisions of section 40A
shall, so far as may be, apply in computing the income chargeable under the
head “Income from other sources” as they apply in computing the income chargeable
under the head “Profits and gains of business or profession”.]
34[R611] [(3) In the case of an assessee, being a foreign company, the provisions of
section 44D shall, so far as may be, apply in computing the income chargeable
under the head “Income from other sources” as they apply in computing the
income chargeable under the head “Profits and gains of business or
profession”.]
35[R612] [(4) In the case of an assessee having income chargeable under the head “Income
from other sources”, no deduction in respect of any expenditure or allowance in
connection with such income shall be allowed under any provision of this Act in
computing the income by way of any winnings from lotteries, crossword puzzles,
races including horse races, card games and other games 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 an assessee,
being the owner of horses maintained by him for running in horse races, from
the activity of owing and maintaining such horses.
Explanation:
For the purposes of this sub-section, “horse race” means a horse race upon
which wagering or betting may be lawfully made.]
59. (1) The provisions of
sub-section (1) of section 41 shall apply, so far as may be, in computing the
income of an assessee under section 56, as they apply
in computing the income of an assessee under the head
“Profits and gains of business or profession”.
[R1]B.—Interest on securities” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R2]See also Circular No. 2(LVIII-32)-D of 1966, dated 21-2-1966, Circular No. 293, dated 10-2-1981, Letter [F.No. 45/118/66-TTJ], dated 21-8-1967, Circular No. 309, dated 3-7-1981, Letter No. 35/1/65-IT (B), dated 5-11-1965, Circular No. 312, dated 31-8-1981 and Letter F. No. 40/29/67-IT (A-I), dated 22-5-1967.
[R3]Restored to its original position by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, deleting Explanation 2 earlier inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
[R4]Substituted by the Finance Act, 1974, w.e.f. 1-4-1975.
[R5]Substituted for “in respect of expenditure incidental to the employment of the assessee,” by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R6]Substituted
for the following [as it stood after amendment made by the Finance (No. 2)
Act, 1980, w.e.f 1-4-1981] by the Finance Act, 1981, w.e.f. 1-4-1982 :
“a sum
calculated on the basis provided hereunder, namely :—
|
(a) |
where the salary does not exceed Rs.
10,000 |
20 per cent of such salary; |
|
(b) |
where the salary exceeds Rs. 10,000 |
Rs. 2,000 plus 10 per cent of the amount by which such
salary exceeds Rs. 10,000 or Rs.
3,500, whichever is less;” |
[R7]Substituted for “a sum equal to *thirty per cent of the salary or †ten thousand rupees, whichever is less” by the Finance Act, 1988, w.e.f. 1-4-1988. *“thirty” was substituted for “twenty-five” by the Finance Act, 1986, w.e.f. 1-4-1981 and “twenty-five” was substituted for “twenty” by the Finance Act, 1982, w.e.f. 1-4-1983. †”ten” was substituted for “six” by the Finance Act, 1986, w.e.f. 1-4-1987 and “six” was substituted for “five” by the Finance Act, 1983, w.e.f. 1-4-1984.
[R8]Omitted by the Finance
Act, 1982, w.e.f. 1-4-1990. Earlier, the
proviso, as amended by the Finance Act, 1981, w.e.f.
1-4-1982, read as under :
“Provided that—
(i) [***]
(ii) where any motor car, motor cycle,
scooter or other moped is provided to the assessee by
his employer for use by the assessee, otherwise than
wholly and exclusively in the performance of his duties; or
(iii) where one or more motor cars are
owned or hired by the employer of the assessee and
the assessee is allowed the use of such motor car or
all or any of such motor cars, otherwise than wholly and exclusively in the
performance of his duties,
the deduction under this clause shall not exceed one thousand rupees.”
[R9]Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1975 and numbered as Explanation 1 by the Finance Act, 1985, w.e.f. 1-4-1986.
[R10]“1” omitted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R11]Omitted, ibid.,
Earlier, Explanation 2, as inserted by the Finance Act, 1985, w.e.f. 1-4-1986, stood as under :
“Explanation 2 : For the purposes of the proviso to this clause, the use of any vehicle referred to therein for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as the use of such vehicle otherwise than wholly and exclusively in the performance of his duties;”
[R12]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R13]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990. Earlier, it was omitted by the Finance Act, 1974, w.e.f. 1-4-1975.
[R14]Omitted by the Finance Act, 1974, w.e.f. 1-4-1975, w.e.f. 1-4-1975. Earlier, clause (iv) was substituted/amended by the Finance Act, 1968, w.e.f. 1-4-1968, the Finance, Act, 1969, w.e.f. 1-4-1970, the Finance Act, 1970, w.e.f. 1-4-1971 and the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
[R15]Omitted by the Finance Act, 1974, w.e.f. 1-4-1975.
[R16]See also Circular No. 150, dated 19-11-1974, Circular No. 130, dated 16-3-1974, Circular No. 374, dated 14-12-1983, Instruction No. 1146 [F.No. 200/9/78 (A-I)], dated 27-1-1978, Letter : F. No. 35/50/65-IT(B), dated 27-4-1966, Circular No. 5, dated 16-9-1950, Circular No. 311, dated 24-8-1981, Circular No. 41 (LVIII-2), dated 27-10-1956, Letter : F. No. 35/7/65-(IT(B), dated 12-2-1965, Circular No. 445, dated 31-12-1985, Circular No. 481, dated 20-2-1987, Circular No. 122, dated 19-10-1973, Instruction No. 1145 [F.No. 200/6/78-IT(A-I)], dated 27-1-1978, Circular No. 386, dated 6-7-1984 and Para I of Instruction No. 133, dated 10-2-1969.
[R17]Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1978.
[R18]See rule 3.
[R19]In terms of section 10A of the Salaries and Allowances of Ministers Act, 1952/Salaries and Allowances of Officers of Parliament Act, 1953 and section 9A of the Salary and Allowances of Leaders of Opposition in Parliament Act, 1977, value of rent-free furnished residence (including maintenance thereof) provided to a minister/an officer of Parliament and a Leader of the Opposition is nor to be included in the computation of his income chargeable to tax under the head “Salaries”.
[R20]Substituted for ‘under the head “Salaries”, exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds eighteen thousand rupees; ‘by the Finance Act, 1985, w.e.f. 1-4-1986.
[R21]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R22]Inserted by the Labour Provident Fund Laws (Amendment) Act, 1976, w.e.f. 1-8-1976.
[R23]Sub-clause (vi) along with consequential amendments in sub-clause (iv) and (v), omitted by the Finance Act, 1985, w.e.f. 1-4-1985. Original sub-clause was inserted by the Taxation Laws (Amendment) Act, 1985, w.e.f. 1-4-1985. Original sub-clause was inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. Amendment thus never came into operation.
[R24]See also Letter F.No. 35/26/64-IT(B), dated 25-5-1964.
[R25]Inserted by the Finance (No. 2) Act, 1965, with retrospective effect from 1-4-1962.
[R26]Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.
[R27]Substituted for “or clause (12)” by the Direct Tax Laws (Amendment) Act, 1964, w.e.f. 6-10-1964.
[R28]Sub-heading, “B.—Interest
on securities” and serious 18 to 21 omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to their omission. Sub-heading
section 18 (as amended by the Finance Act, 1965, w.e.f.
1-4-1965 and the Finance Act, 1988, w.e.f. 1-4-1988],
section 19, section 20 (as amended by the Finance Act, 1979, w.e.f. 1-4-1980) and section 21. read as under :
‘B.—Interest on securities
18. Interest on securities.—(1) The following
amounts due to an assessee in the previous year shall
be chargeable to income-tax under the head “Interest on securities”,—
(i) interest on
any security of the Central or State Government;
(ii) interest on debentures or other
securities for money issued by or on behalf of a local authority or a company
or a corporation established by a Central, State or Provincial Act.
(2) Nothing contained in sub-section (1) shall
be construed as precluding an assessee from being
charged to income-tax in respect of any interest on securities received by him
in a previous year if such interest had not been charged to income-tax for any
earlier previous year.
19. Deductions from interest on securities.—Subject
to the provisions of section 21, the income chargeable under the head “Interest
on securities” shall be computed after making the following deductions—
(i) any
reasonable sum expended by the assessee for the
purpose of realising such interest;
(ii) any interest payable on money
borrowed for the purpose of investment in the securities by the assessee.
20. Deductions from interest on securities in
the case of a banking company.—(1) In the case of a banking company—
(i) the sum to
be regarded as a sum reasonable expended for the purpose of referred to in
clause (i) of section 19 shall be an amount
bearing to the aggregate of its expenses as are admissible under the
provisions of sections 30, 31, 36 and 37 (other than clauses (iii), (vi),
(vii) and (viia) of sub-section (1) of
section 36) the same proportion as the gross receipts from interest on
securities (inclusive of tax deducted at source) chargeable to income-tax
under section 18 bear to the gross receipts of the company from all sources
which are included in the profit and loss account of the company;
(ii) the amount to be regarded as
interest payable on moneys borrowed for the purpose referred to in clause (ii)
of section 19 shall be an amount which bears to the amount of interest payable
on all moneys borrowed by the company the same proportion as the gross receipts
from interest on securities (inclusive of tax deducted at source)
chargeable to income-tax under section 18 bear
to the gross receipts from all sources which are included in the profit and loss
account of the company.
(2) The expenses deducted under clauses (i) and (ii) of sub-section (1) shall not
again form part of the deductions admissible under sections 30 to 37 for the
purposes of computing the income of the company under the head “Profits and
gains of business or profession”.
Explanation : For the purposes of this section,
“moneys borrowed” includes moneys received by way of deposits.
21. Amounts not deductible from interest on securities.—Notwithstanding anything contained in sections 19 and 20, any interest chargeable under this Act which is payable outside India (not being interest 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 in respect of which there is no person in India who may be treated as an agent under section 163 shall not be deducted in computing the income chargeable under the head “Interest on securities”.
[R29]See also Circular No. 9, dated 25-3-1969 and Circular No. 2(XLVIII-2), dated 13-6-1955.
[R30]Substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R31]Substituted for the
following proviso, which was earlier substituted for the first proviso and Explanation
by the Finance Act, 1968, w.e.f. 1-4-1969, by the
Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985
:
“Provided that where the property is in the occupation of a tenant, the taxes levied by any local authority in respect of the property shall, to the extent such taxes are borne by the owner, be deducted in determining the annual value of the property:”
[R32]Substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R33]Inserted by the Finance Act, 1978, w.e.f. 1-4-1979
[R34]Inserted, ibid.
[R35]Substituted for “completed after the 31st day of March, 1978”, by the Finance Act, 1982, w.e.f. 1-4-1983.
[R36]Substituted for “so, however, that the income in respect of any residential unit referred to in clause (a) or clause (b) or clause (c) is in no case a loss” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R37]“, so, however, that the income in respect of any residential unit referred to in clause (a) or clause (b) or clause (d) is in no case a loss”, omitted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1984.
[R38]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1976.
[R39]Numbered as Explanation 1 by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R40]Inserted, ibid.
[R41]Substituted for the
following sub-section (2) by the Finance Act, 1986, w.e.f.
1-4-1987 :
“(2) Where the property consists of—
(i) a house in
the occupation of the owner for the purposes of his own residence, the annual
value of such house shall first be determined in the same manner as if the
property had been let and further be reduced by one-half of the amount so determined
or [three thousand and six hundred] rupees, whichever is less ;
(ii) more than one house in the
occupation of the owner for the purposes of his own residence, the provisions
of clause (i) shall apply only in respect of
one of such houses, which the assessee may, at his
option, specify in this behalf :
Provided that for the purposes of clauses (i) and (ii), where the sum so arrived at
exceeds ten per cent of the total income of the owner (the total income for
this purpose being computed without including therein any income from such
property and before making any deduction under Chapter VIA), the excess shall
be disregarded.
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, nothing contained in that
proviso shall apply in computing the annual value of that residential unit.”
Earlier, sub-section (2) was first amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and later substituted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971 and also by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. Words in source brackets in clause (i) were substituted for “one thousand and eight hundred” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R42]Sub-section (2A) omitted
by the Finance Act, 1986, w.e.f. 1-4-1987. Prior to
its omission, sub-section (2A), as inserted by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-4-1976, stood as under:
“(2A) For the removal of doubt, it is hereby declared that, where the property consists of more than one house and such houses are in the occupation of the owner for the purposes of his own residence, the annual value of the houses, other than that the annual value of which is required to be determined under clause (ii) of sub-section (2), shall be determined under sub-section (1) as if such houses had been let.”
[R43]Substituted for the
following sub-section (3) by the Finance Act, 1986, w.e.f.
1-4-1987:
“(3) Where the property referred to in
sub-section (2) consists of one residential house only and it cannot 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 a building not belonging to him, the annual value of such house
shall—
(a) If the house was not actually
occupied by the owner during the whole of the previous year, be taken to be nil,
or
(b) If the house was actually occupied by
the owner for a fraction of the previous year, be taken to be that fraction of
the annual value determined under sub-section (2) :
Provided that the following conditions are in either
case fulfilled:—
(i) The house
is not actually let, and
(ii) No other benefit therefrom is derived by the owner.”
[R44]See also Circular No. 363, dated 24-6-1983 and Circular No. 28, dated 20-8-1969.
[R45]Omitted by the Finance Act, 1968, w.e.f. 1-4-1969.
[R46]Substituted for “not being a capital charge” by the Finance Act, 1968, w.e.f. 1-4-1969.
[R47]Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.
[R48]Inserted by the Finance Act, 1968, w.e.f. 1-4-1969.
[R49]“; and” omitted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R50]Inserted, ibid.
[R51]See rule 4.
[R52]Substituted for the
following sub-section (2) by the Finance Act, 1986, w.e.f.
1-4-1987:
“(2) The total amount deductible under sub-section (1) in respect of property of the nature referred to in sub-section (3) of section 23 shall not exceed the annual value of the property as determined under section 23.”
[R53]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R54]See also Letter F. No. 45/230/63-ITJ, dated 22-2-1965.
[R55]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R56]Substituted for the
following clause (iii) by the Finance Act, 1987, w.e.f.
1-4-1988:
“(iii) a member of a co-operative society to whom a building or part thereof is allotted or leased under a house building scheme of the society shall be deemed to be the owner of that building or part thereof;”
[R57]See also Press Note, dated 9-10-1952, issued by the Ministry of Finance, Instruction No. 971 [F. No. 228/12/76-IT (A-II)], dated 8-7-1976, Circular No. 1(XLVII-12), dated 16-1-1962, Circular No. 35-D(XLVII-20), dated 24-11-1965 and Circular No. 25, SIA Series, dated 20-10-1975.
[R58]Inserted by the Finance Act, 1973, with retrospective effect from 1-4-1972.
[R59]Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1962.
[R60]Inserted, ibid. w.r.e.f. 1-4-1967.
[R61]Inserted, ibid. w.r.e.f. 1-4-1972.
[R62]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R63]Prior to its omission, Explanation
1 read as under:
“Explanation 1: The profits and gains of a business shall include the profits and gains of managing agency.”
[R64]See also Press Note, dated 9-10-1952, issued by the Ministry of Finance, Instruction No. 971 [F. No. 228/12/76-IT (A-II)], dated 8-7-1976, Circular No. 1(XLVII-12), dated 16-1-1962, Circular No. 35-D(XLVII-20), dated 24-11-1965 and Circular No. 25, SIA 1975 Series, dated 20-10-1975.
[R65]Substituted for “43B” by the Finance Act, 1988, w.e.f. 1-4-1988. Earlier, “43B” was substituted for “43A” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and “43A” was substituted for “43” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R66]See also Circular No. 26-D(XLVI-22), dated 10-10-1966.
[R67]See also Circular No. 9, dated 23-3-1943, Circular No. 29-D(XIX-14), dated 31-8-1965, Letter [F.No. 10/14/66-IT (A-I)], dated 12-12-1966 and Letter [F.No. 10/47/68-IT(A-II], dated 17-7-1968 read with letter dated 21-6-1968.
[R68]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Earlier, original clause (i), as
substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f.
1-4-1976, stood as under:
“(i) in the
case of ships other than ships ordinarily plying on inland waters, such
percentage on the actual cost thereof to the assessee
as may, in any case or class of cases or in respect of any period or periods,
be prescribed :
Provided that different percentages may be prescribed for different periods having regard to the date of acquisition of the ship;”
[R69]Substituted for “in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed :” by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R70]See rule 5 and Appendix I.
[R71]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R72]Substituted for “seven hundred and fifty” by the Finance Act, 1983, w.e.f. 1-4-1984.
[R73]Inserted by the Finance Act, 1975, w.e.f. 1-4-1975.
[R74]“Or clause (iii)” omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R75]Inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R76]*Should be read as ‘sub-clause’.
[R77]†Should be read as ‘clause’.
[R78]Omitted by the Taxation
Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Original clause (iia), as inserted
by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981,
stood as under:
‘(iia) in the
case of any new machinery or plant (other than ships and aircraft) which has
been installed after the 31st day of March, 1980, but before the 1st day of
April, 1985, a further sum equal to one-half of the amount admissible under
clause (ii) (exclusive of extra allowance for double or multiple shift
working of the machinery or plant and the extra allowance in respect of
machinery or plant installed in any premises used as a hotel) in respect of the
previous year in which such machinery or plant is installed or, if the
machinery or plant is first put to use in the immediately succeeding previous
year, then, in respect of that previous year:
Provided that no deduction shall be allowed under this
clause in respect of—
(a) Any machinery or plant installed in
any office premises or any residential accommodation;
(b) Any office appliances or road
transport vehicles; and
(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 the head
“Profits and gains of business or profession” of any one previous year.
Explanation: For the purposes of this clause,—
(a) “New machinery or plant” shall have
the meaning assigned to it in clauses (2) of the Explanation
below clause (vi) of his this sub-section;
(b) “Residential accommodation” includes accommodation in the nature of a guest house but does not include premises used as a hotel;’
[R79]Clause (iii) was
omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-1988. Prior to its omission,
original clause (iii), as amended by the Finance Act, 1966, w.e.f. 1-4-1966 and later amended by the Finance (No. 2)
Act, 1967, w.e.f. 1-4-1967, stood as under:
‘(iii) in the case of any building,
machinery, plant or furniture which is sold, discarded, demolished or destroyed
in the previous year (other than the previous year in which it is first brought
into use), the amount by which the moneys payable in respect of such building,
machinery, plant or furniture, together with the amount 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 the assessee.
Explanation: For the purposes of this clause,—
(1) “Moneys payable” in respect of ay
building, machinery, plant or furniture includes—
(a) Any insurance, salvage or
compensation moneys 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
such motor car shall be taken to be a sum which bears to the amount for which
the motor car is sold or, as the case may be, the amount of any insurance,
salvage or compensation moneys payable in respect thereof (including the amount
of scrap value, if any) the same proportion as the amount of twenty-five
thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the
said proviso;
(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company;’
[R80]Clause (iv) was
omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-1988. Original clause (iv),
as amended by the Finance Act, 1983, w.e.f. 1-4-1984,
the Finance Act, 1978, w.e.f. 1-4-1979, the Finance
Act, 1976, w.e.f. 1-4-1977 and the Finance Act, 1966,
w.e.f. 1-4-1966, stood as under :
‘(iv) in the case of any building which has been newly erected after the 31st day of March, 1961, where the building is used solely for the purpose of residence of persons employed in the business and the income of each such person chargeable under the head “Salaries” in ten thousand rupees or less, or where the building is used solely or mainly for the welfare of such persons as a hospital, creche, school, canteen, library, recreational centre, shelter, rest-room or lunch-room, a sum equal to forty per cent of the actual cost of the building to the assessee in respect of the previous year of erection of the building;’
[R81]Clause (v) was
omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-1988. Original clause (v),
as inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968 and later amended by the Finance Act, 1983, w.e.f.
1-4-1984, stood as under:
‘(v) in the case of any new building, the erection of which is completed after the 31st day of March, 1967, where the building is owned by an Indian company and used by such company as a hotel and such hotel is for the time being approved in this behalf by the Central Government, a sum equal to twenty-five per cent of the actual cot of erection of the building to the assessee, in respect of the previous year in which the erection of the building is completed or, if such building is first brought into use as a hotel in the immediately succeeding previous year, then in respect of that previous year;’
[R82]Clause (vi) was
omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-988. Original clause (vi), as
inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f.
1-4-1975 and later amended by the Finance Act, 1976, stood as under :
‘(vi) in the case of a new ship or a new
aircraft acquired after the 31st day of May, 1974, by an assessee
engaged in the business of operation of ships or aircraft or in the case of
new-machinery or plant (other than office appliances or road transport
vehicles) installed after that date for the purposes of business of generation
or distribution of electricity or any other form of power or of construction,
manufacture or production of any one or more of the articles or things
specified in items 1 to 24 (both inclusive) in the list in the Ninth Schedule
or in the case of new machinery or plant (other than office appliances or road
transport vehicles) installed after that date in a small-scale industrial
undertaking for the purposes of business of manufacture or production of any
other articles or things, a sum equal to twenty per cent of the actual cost of
the ship, aircraft, machinery, or plant to the assessee,
in respect of the previous year in which the ship or aircraft is acquired or
the machinery or plant is installed, or if the ship, aircraft, machinery, or
plant is first put to use in the immediately succeeding previous year, then,
in respect of that previous year; but any such sum shall not be deductible in
determining the written down value for the purposes of clause (ii) :
Provided that the assessee
may, 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 assessment year in respect of which he first
becomes entitled to deduction
under this clause, furnish to the Income-tax
Officer a declaration in writing that the provisions of this clause shall not
apply to him, and if he does so, the provisions of this clause shall not apply
to him, for that assessment year and for every subsequent assessment year; so,
however, that the assessee may, by notice in writing
furnished to the Income-tax Officer 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 any such subsequent
assessment year, revoke his declaration and upon such revocation, the
provisions of this clause shall apply to the assessee
for that subsequent assessment year and for every assessment year thereafter:
Provided further that no deduction shall
be allowed under this clause in respect of—
(a) any machinery or plant installed in
any office premises or any residential accommodation, including any
accommodation in the nature of a guest house,
(b) any ship, aircraft, machinery or
plant in respect of which the deduction by way of development rebate is
allowable under section 33, and
(c) any ship or aircraft acquired after
the 31st day of March, 1976, or any machinery or plant installed after that
date.
Explanation : For the purposes of this clause,—
(1) “new ship” or “new aircraft” includes
a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any
time previous to the date of such acquisition owned by any person resident in
India;
(2) “new machinery or plant” includes
machinery or plant which before its installation by the assessee
was used outside
(a) such machinery or plant was not, at
any time previous to the date of such installation by the assessee,
used in
(b) such machinery or plant is imported
into
(c) no deduction on account of
depreciation in respect of such machinery or 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 prior to
the date of the installation of the machinery or plant by the assessee;
(3) an industrial undertaking shall be
deemed to be a small-scale industrial undertaking, if the aggregate value of
the machinery and plant installed, as on the last day of the previous year, for
the purposes of the business of the undertaking does not exceed seven hundred
and fifty thousand 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 the
assessee; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.’
[R83]Sub-section (1A) was
omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-1988. Original sub-section (1A), as
inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971, stood as under:
‘(1A) Where the business or profession is
carried on in a building not owned by the assessee
but in respect of which the assessee holds a lease
or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or
Profession after the 31st day of March, 1970, on
the construction of any structure or doing of any work in or in relation to,
and by way of renovation or extension of, or improvement to, the building,
then, in respect of depreciation of such structure or work, the following
deductions shall, subject to the provisions of section 34, be allowed—
(i) such
percentage on the written down value of the structure or work as may in any
case or class of cases be prescribed;
(ii) in the case of any such structure or
work which is sold, discarded, demolished, destroyed or is surrendered as a
result of the determination of the lease or other right of occupancy in
respect of the building in the previous year (other than the previous year in
which it is constructed or done) the amount by which the moneys payable in
respect of such structure or work together with the amount 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 the assessee.
Explanation : For the purposes of this clause,—
(i) “moneys
payable”, in respect of any structure or work, includes—
(a) any insurance or compensation moneys
payable in respect thereof;
(b) where the structure or work is sold,
the price for which it is sold; and
(ii) “sold” shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (1).’
[R84]Restored by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. This expression was earlier omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
[R85]Substituted for “under clause (i) or clause (ii) or clause (iia) or clause (iv) or clause (v) or clause (vi) of sub-section (1) or under clause (i) of sub-section (1A)” by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R86]Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.
[R87]See also Circular No. 305, dated 12-6-1981, Circular No. 324, dated 3-2-1982 and Circular No. 314, dated 17-9-1981.
[R88]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R89]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R90]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R91]Substituted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R92]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R93]Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.
[R94]Substituted for “1st day of April, 1988” by the Finance Act, 1986, w.e.f. 1-4-1987.
[R95]Substituted for “sub-section (4)” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R96]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[R97]Substituted for the
following clause (1) by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988:
‘(1) “new ship” or “new aircraft” or “new machinery or plant” shall have the same meanings as in the Explanation to clause (vi) of sub-section (1) of section 32;’
[R98]Substituted for “does not exceed ten lakh rupees” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R99]Substituted for the
following by the Finance Act, 1986, with retrospective effect from 1-4-1985:
“(i) in a case
where the previous year ends before the 1st day of August, 1980, ten lakh rupees; and
(ii) In a case where the previous year ends after the 31st day of July, 1980, twenty lakh rupees;”
[R100]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R101]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R102]Substituted for “1982” by the Finance Act, 1982, w.e.f. 1-4-1982.
[R103]See rule 5A.
[R104]See rule 5A.
[R105]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1987, read as under:
‘(b) “public sector company” means any corporation established by or under any Central, State or Provincial Act, or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);’
[R106]Inserted by the Finance Act, 1983, w.e.f. 1-6-1983.
[R107]SO 555(E), dated 1-8-1984.
[R108]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R109]Substituted for “the previous year in respect of which the deduction is to be allowed” by the Finance Act, 1990, w.r.e.f. 1-4-1976.
[R110]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R111]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R112]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R113]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R114]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R115]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R116]For definition of “Government company”, see footnote 60 on p. 1.80 ante.
[R117]Vide Notification No. SO 233(E), dated 29-3-1990, no investment allowance shall be allowed in respect of any new ship or aircraft acquired or any new machinery or plant installed after 31-3-1990.
[R118]“Not being earlier than three years from the date of such notification,” omitted by the Finance Act, 1986, w.e.f. 1-4-1986.
[R119]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R120]Substituted for
sub-section (8B) by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Sub-section (8B), as inserted by the
Finance Act, 1986, w.e.f. 1-4-1987, stood as under:
“(8B) Subject to the provisions of clause (ii) of sub-section (3), no deduction shall be allowed under this section in the case of an assessee who has claimed the deduction allowable under section 32AB.”
[R121]Prior to omission
sub-section (9) read as under:
“(9) For the removal of doubts, it is hereby declared that the deduction under sub-section (1) shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the Investment Allowance Reserve Account Exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid), in accordance with the profit and loss account.”
[R122]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R123]Investment Deposit Account Scheme, 1986 is the scheme framed by the Government under sub-section (1).
[R124]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R125]Shall be omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R126]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R127]Inserted by the Finance Act, 1990, w.e.f. 1-4-1990.
[R128]Shall be omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R129]Substituted for the
following clause (ii) by the Finance Act, 1987, w.e.f.
1-4-1987:
‘(ii) “new ship” or “new aircraft” or “new machinery” shall have the same meanings as in the Explanation to clause (vi) of sub-section (1) of section 32.’
[R130]For the portion beginning
with the words “The profits of eligible business or profession” and ending with
the words “eligible business or profession are maintained,”, the following
shall be substituted by the Finance Act, 1989, w.e.f.
1-4-1991.
“The profit of business or profession of an assessee for the purposes of sub-section (1) shall”;
[R131]“Schedule VI” shall be substituted for “Six Schedule”, ibid.
[R132]Substituted for “as increased by an amount equal to the depreciation, if any, debited in the audited profit and loss account; and” by the Finance Act, 1987, w.e.f. 1-4-1987.
[R133]Shall be omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R134]Shall be omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R135]See rule 5AB and Form No. 3AA.
[R136]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R137]Substituted for “and” by the Finance Act, 1989, with retrospective effect from 1-4-1987.
[R138]Inserted, ibid.
[R139]Inserted, ibid.
[R140]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R141]Shall be omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R142]Inserted by the Finance Act, 1989, with retrospective effect from 1-4-1987.
[R143]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R144]“Within that previous year,” omitted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R145]Substituted by the Direct
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-89. Prior
to its substitution, sub-section (10) stood as under:
‘(10) No deduction shall be allowed under this section in the case of an assessee who has claimed the deduction allowable under section 33AB.’
[R146]Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Sub-section (1) was first amended by the Income-tax (Amendment) Act, 1963, w.e.f. 1-4-1963, and then by the Finance Act, 1965, and then by the Finance (No. 2) Act, 1965, w.e.f. 1-4-1965.
[R147]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R148]See rule 5B.
[R149]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R150]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R151]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R152]“Or section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R153]Substituted for “that sub-section” by the Finance Act, 1964, w.e.f. 1-4-1964.
[R154]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R155]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R156]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R157]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R158]“Or section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R159]Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. Sub-section (3) was first amended by the Finance Act, 1964, w.e.f. 1-4-1964 and then by the Finance Act, 1966, w.e.f. 1-4-1966.
[R160]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R161]In terms of Notification
No. SO 2167, dated 28-5-1971, issued under sub-section (5) of section 33, the
grant of development rebate has been discontinued in respect of ships acquired
or machinery or plant installed after 31-5-1974. However, section 16 of the
Finance Act, 1974, as amended by section 30 of the Finance Act, 1975, has made
an independent provision for the continuance of development rebate for a
limited period in certain cases. As a result grant of the rebate was continued,
subject to certain conditions, for limited period, i.e., from 1-6-1974
to 31-5-1977 in respect of—
(a) Ship which was acquired after
31-5-1974 but before 1-1-1977;
(b) Any machinery or plant [other than
mentioned in (c) below] which was installed after 31-5-1974 but before
1-6-1975; and
(c) coal-fired equipment or any machinery or plant for converting oil-fired equipment into coal-fired equipment which was installed after 31-5-1974 but before 1-6-1977.
[R162]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R163]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R164]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R165]See also Circular No. 325, dated 3-2-1982.
[R166]Substituted for “forty” by the Finance Act, 1966, w.e.f. 1-4-1966.
[R167]Substituted for “twenty”, ibid.
[R168]Substituted for “in respect of the third succeeding previous year next following the previous year in which the land is prepared for planting or replanting, as the case may be”, ibid.
[R169]Substituted for the
following by the Finance Act, 1990, w.e.f. 1-4-1990:
“Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and no deduction shall be allowed under clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970.”
[R170]Substituted for “the third succeeding previous year next following the previous year in which the land has been prepared” by the Finance Act, 1966, w.e.f. 1-4-1966.
[R171]Substituted for “(the total income for this purpose being computed after making the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33 but without making any allowance under sub-section (1) of this section)” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R172]“Or section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R173]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R174]Substituted for “(the total income for this purpose being computed after making the allowance under sub-section (1) or sub-section (1A) or cause (ii) of sub-section (2) of section 33 but without making any allowance under sub-section (1) of this section)” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R175]“Or section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R176]See rule 8A and Form Nos. 4, 5 and 5A.
[R177]For definition of “Government company”, see footnote 60 on p. 1.80 ante.
[R178]Substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R179]Substituted by the Finance Act, 1981, w.e.f. 1-4-1982.
[R181]Inserted by the Finance Act, 1975, with retrospective effect from 1-4-1965.
[R182]Inserted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R183]Substituted for “assessment year commencing on the 1st day of April, 1986, and the four assessment years next following that assessment years” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R184]Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.
[R185]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R186]Inserted by the Finance Act, 1984, w.e.f. 1-4-1985.
[R187]Omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original sub-section (1), as amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, stood as under:
[R188]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Original sub-section (2), as amended by the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967, the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1975 and the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, stood as under :
“(2) For the purposes of section 32—
(i) the
aggregate of all deductions in respect of depreciation made under sub-section
(1) or sub-section (1A) of section 32 or under the Indian Income-tax Act, 1922
(11 of 1922), or under any Act repealed by that Act or under the Indian
Income-tax Act, 1886 (2 of 1886), shall, in no case, exceed the actual cost to
the assessee of the building, machinery, plant,
furniture, structure or work, as the case may be.
Explanation: Where a capital asset is transferred—
(i) By a
holding company to its subsidiary company or by a subsidiary company to its
holding company, or
(ii) By a company to another company in a
scheme of amalgamation,
and the conditions specified in clause (iv)
or clause (v) or, as the case may be, clause (vi) of section 47
are satisfied, then, in determining the aggregate of all deductions in respect
of depreciation under this clause, account shall also be taken of the
deductions in respect of depreciation allowed in the case of the company from
which the asset has been transferred;
(ii) nothing in clause (i) or clause (ii) or clause (iia) or clause (iv) or clause (v) or
clause (vi) of sub-section (1) of section 32 shall be deemed to authorise the allowance for any previous year of any sum in
respect of any building, machinery, plant or furniture sold, discarded,
demolished or destroyed in that year;
(iii) nothing in clause (i) of sub-section (1A) of section 32 shall be deemed
to authorise the allowance for any previous year of
any sum in respect of any structure or work in or in relation to a building
referred to in that sub-section which is sold, discarded, demolished or
destroyed or is surrendered as a result of the determination of the lease or
other right of occupancy in respect of the building in that year.”
“(1) The deductions referred to in sub-section (1) or sub-section (1A) of section 32 shall be allowed only if the prescribed particulars have been furnished; and the deduction referred to in section 33 shall be allowed only if the particulars prescribed for the purpose of clause (i) and clause (ii) of sub-section (1) of section 32 have been furnished by the assessee in respect of the ship or machinery or plant.”
[R189]Substituted for “the relevant previous year” by the Finance Act, 1990, w.r.e.f. 1-4-1962.
[R190]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R191]Prior to omission, Explanation
read as under:
“Explanation: For the removal of doubts, it is hereby declared that the deduction referred to in section 33 shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the reserve account aforesaid exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid) in accordance with the profit and loss account.”
[R192]For definition of “Government company”, see footnote 60 on p. 1.80 ante.
[R193]Reintroduced with modification by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier section 35 was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
[R194]See also Press Note, dated 5-6-1982, issued by the Ministry of Finance (Department of Revenue).
[R195]Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-74.
[R196]See rule 6 and Form No. 3CF.
[R197]See rule 6 and Form No. 3CF.
[R198]See rule 6 and Form No. 3CF.
[R199]Inserted by the Direct Tax Laws (Amendment) Act, 189, w.e.f. 1-4-1989.
[R201]See rule 6 and Form No. 3CF.
[R202]Inserted by the Direct Tax Laws (Amendment) Act, 189, w.e.f. 1-4-1989.
[R203]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-89.
[R204]Substituted for clause (i) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R205]Inserted by the Finance act, 1984, w.e.f. 1-4-1984.
[R206]Numbered as Explanation 1, ibid.
[R207]Inserted by the Finance act, 1984, w.e.f. 1-4-1984
[R208]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R209]Substituted for “clauses (i), (ii), (iia), (iii) and (vi) of sub-section (1) or under sub-section (1A)”, by the Taxation laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R210]Inserted by the Finance (No. 2) Act, 1980, with retrospective effect from 1-4-1962.
[R211]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R212]Substituted for “clauses (i), (ii) and (iii) of sub-section (1)” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R213]Inserted by the Direct Taxes (Amendment) Act, 1974, w.e.f. 1-4-1974.
[R215]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R216]Inserted by the Finance (No. 2) Act, 1983, w.e.f. 1-4-1984.
[R217]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-9-1980.
[R218]See rule 6.
[R219]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-9-1980.
[R221]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R222]See rule 6.
[R223]Substituted for “clauses (i), (ii), (iia) and (iii) of sub-section (1) or under sub-section (1A)” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R224]See rule 6.
[R225]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R226]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R227]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R228]Inserted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R229]Immediately prior to its
omission, section 35B, as amended by the Finance Act, 1973, with retrospective
effect from 1-4-1968, Direct Taxes (Amendment) Act, 1974, with retrospective
effect from 1-4-1973, Finance Act, 1978, w.e.f.
1-4-1978, Finance Act, 1979, w.e.f. 1-4-1980, Finance
(No. 2) Act, 1980, w.e.f. 1-4-1981 and Finance Act,
1983, w.e.f. 1-4-1983, stood as under :
’35B. (1)(a) Where an assessee,
being a domestic company or a person (other than a company) who is resident in
India, has incurred after the 29th day of February, 1968 but before the 1st day
of March, 1983, whether directly or in association with any other person, any
expenditure (not being in the nature of capital expenditure or personal
expenses of the assessee) referred to in clause (b),
he shall, subject to the provisions of this section, be allowed a deduction of
a sum equal to one and one-third times the amount of such expenditure incurred
during the previous year :
Provided that in respect of the expenditure
incurred after the 28th day of February, 1973, but before the 1st day of April,
1978, by a domestic company, being a company in which the public are
substantially interested, the provisions of this clause shall have effect as if
for the words “one and one-third times”, the words “one and one-half times” had
been substituted.
(b) The expenditure referred to in clause
(a) is that incurred wholly and exclusively on—
(i)
advertisement or publicity outside
(ii) [***];
(iii) [***];
(iv) maintenance outside
(v) [***];
(vi) [***];
(vii) traveling outside
(viii) [***];
(ix) such other activities for the
promotion of the sale outside
Explanation 1 : In this section, “domestic company”
shall have the meaning assigned to it in clause (2) of section 80B.
Explanation 2 : For the removal of doubts, it is hereby
declared that nothing in clause (b) shall be construed to include any
expenditure which is in the nature of purchasing and manufacturing expenses
ordinarily debitable to the trading or manufacturing
account and not to the profit and loss account.
(1A) [***]
(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.’
[R230]Immediately prior to its
omission, section 35C, as amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, Finance Act, 1983, w.e.f.
1-4-1984, and Finance Act, 1984, w.e.f. 1-4-1984,
stood as under :
“35C. (1)(a) Where any company or a
co-operative society is engaged in the manufacture or processing of any article
or thing which is made from, or uses in such manufacture or processing as raw
material, any product of agriculture, animal husbandry, or dairy or poultry
farming, and has incurred, after the 29th day of February, 1968 but before the
1st day of March, 1984, whether directly or through an association or body
which has been approved for the purposes of this section by the prescribed
authority, any expenditure in the provision of any goods, services or
facilities specified in clause (b) to a person (not being a person
referred to in clause (b) of sub-section (2) of section 40A) who is a
cultivator, grower or producer of such product in India, the company or
co-operative society shall, subject to the provisions of this section, be
allowed a deduction of the amount of such expenditure incurred during the
previous year.
(b) The goods, services or facilities
referred to in clause (a) are the following :—
(i) fertilisers, seeds, pesticides, concentrates for cattle and
poultry feed, tools or implements, for use by such cultivator, grower or
producer;
(ii) dissemination of information on, or
demonstration of, modern techniques or methods of agriculture, animal
husbandry, or dairy or poultry farming, or advice on such techniques or methods;
(iii) such other goods, services or
facilities as may be prescribed.
Explanation : In computing the expenditure which is to
be allowed as deduction under this section, the amount, if any, received by the
company or co-operative society in consideration of, or as compensation for,
such goods, services or facilities shall be deducted.
(2) Where a deduction under this section is
claimed and allowed for any assessment year
in respect of any expenditure of the nature specified in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.”
[R231]Immediately prior to its
omission, section 35CC, as amended by the Finance Act, 1983, w.e.f. 1-4-1983 and Finance Act, 1985, w.e.f.
17-3-1985, stood as under:
’35CC. (1) Where the assessee,
being a company or a co-operative society, incurs any expenditure on any programme of rural development, the assessee
shall, in accordance with and subject to the provisions of this section, be
allowed a deduction of the amount of such expenditure incurred during the
previous year:
Provided that the approval of the prescribed
authority has been obtained by the assessee in
respect of such programme before incurring the
expenditure:
Provided further that the prescribed authority
shall not approve any programme unless such programme is a programme falling
within any such class or category of programmes of
rural development as may be specified by the Central Government in this behalf:
Provided also that no programme
shall be approved under this section after the 16th day of March, 1985.
Explanation: For the purposes of this sub-section,—
(a) “programme
of rural development” includes any programme for
promoting the social and economic welfare of, or the uplift of, the public in
any rural area;
(b) “rural area” means any area other
than—
(i) any area
which is comprised within the jurisdiction of a municipality (whether known as
a municipality, municipal corporation, notified area committee, town area
committee, town committee or by any other name) or a cantonment board and which
has a population of not less than ten thousand according to the last preceding
census of which the relevant 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 of any municipality or cantonment board referred to in sub-clause (i), as the Central Government may, having regard to
the stage of development of such area (including the extent of, and scope for, urbansiation of such area) and other relevant considerations,
specify in this behalf by notification in the Official Gazette.
(2) Where the expenditure referred to in
sub-section (1) results in the acquisition or creation of an asset, being
building, machinery, plant or furniture, and the assessee
does not divest itself of the ownership of such asset before the end of the
previous year, no deduction in respect of such expenditure shall be allowed
under sub-section (1) but the assessee shall be
entitled to the allowance for depreciation in respect of the asset so acquired
or created as if such asset was used for the purposes of the business and the
provisions of sections 32, 34, 41 and 43 shall, so far as may be, apply
accordingly.
(3) No deduction shall be allowed in respect of
the expenditure referred to in sub-section (1) unless the assessee
furnishes, along with the return of income for the assessment year for which
the deduction is claimed, a statement of such expenditure in the prescribed
form duly signed and verified by an accountant as defined in the Explanation
below sub-section (2) of section 288 and setting forth such particulars as may
be prescribed.
(4) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.’
[R232]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Section 35CCA was earlier omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original section 35CCA was inserted by the Finance Act, 1978, w.e.f. 1-6-1978.
[R233]Substituted by the Finance Act, 1979, w.e.f. 1-6-1979.
[R234]See rule 6AAA.
[R235]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983. National Fund or Rural Development has since been notified. For notification, Direct Taxes Circulars, Vol. 1, 1988 edn.
[R236]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983. National Fund or Rural Development has since been notified. For notification, Direct Taxes Circulars, Vol. 1, 1988 edn.
[R237]Substituted for following sub-section
(2), which was earlier substituted by the Finance Act, 1979, w.e.f. 1-6-1979, by the Finance Act, 1983, w.e.f. 1-4-1983:
“(2)
The deduction under sub-section (1) shall not be allowed with respect to
expenditure by way of payment of any sum to any association or institution,
unless such association or institution is for the time being approved in this
behalf by the prescribed authority:
Provided that the prescribed authority shall not grant such approval for more than three years at a time.”
[R238]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R239]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R240]Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original section 35CCB was inserted by the Finance Act, 1982, w.e.f. 1-6-1982.
[R242]See rule 6AAC.
[R243]Shall be inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R244]See rule 6AAC.
[R245]See rule 6AAC.
[R246]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R248]See rule 6AB and Form No. 3B.
[R249]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R250]See rule 6AB and Form No. 3B.
[R251]See also Circular No. 4-P(LVIII-30), dated 25-11-1965, Circular No. 44(3)-IT/49, dated 12-2-1949, Circular No. 110, dated 13-4-1973, Letter [F.No. 44/13/64-ITJ)], dated 6-9-1964, Letter [F.No. 216/6/77-IT(A-II)], dated 7-6-1978, Circular No. 403, dated 5-12-1984, Circular No. 30(XL VII-18), dated 30-11-1964, Circular No. 14, dated 23-4-1969, Extracts from Minutes (Item 31) of Ninth Meeting of DTAC held on 5-11-1966, Circular dated 6-10-1952, extracted from CIT v. Corporation Bank Ltd. [1986] 157 ITR 509 (Kar.), Circular No. 20, dated 13-6-1969, Extracts of Instruction No. 370 [F. No. 205/15/71-IT(A-II)], dated 13-1-1972 and Letter [F.No. 10/66/61-IT(A-I)], dated 16-1-1962.
[R252]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R253]Inserted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987.
[R254]First proviso omitted by
the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Prior to its omission, first proviso, as inserted by the Payment of
Bonus (Amendment) Act, 1976, with retrospective effect from 25-9-1975, stood as
under:
“Provided that the deduction in respect of bonus paid to an employee employed in a factory or other establishment to which the provisions of the Payment of Bonus Act, 1965 (21 of 1965), apply shall not exceed the amount of bonus payable under that Act.”
[R255]Second proviso omitted by
the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. Prior to its omission, second proviso, as substituted by the Payment
of Bonus (Amendment) Act, 1976, with retrospective effect from 25-9-1975, stood
as under:
“Provided further that the amount of the bonus
(not being bonus referred to in the first proviso) or commission is reasonable
with reference to—
(a) The pay of the employee and
conditions of his service;
(b) The profits of the business or
profession for the previous year in question; and
(c) The general practice in similar business or profession.”
[R256]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R257]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R258]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R259]See rules 75, 87 and 88.
[R261]See rules 103 and 104.
[R262]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R263]Substituted for “any debt, or part thereof, which is established to have become a bad debt in the previous year” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R264]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R265]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R266]Substituted for the
following by the Income-tax (Amendment) Act, 1986, w.e.f.
1-4-1987 :
“in respect of any provision for bad and
doubtful debts made by a scheduled bank (not being a bank approved by the
Central Government for the purposes or clause (viiia)
or a bank incorporated by or under the laws of a country outside India) or a
non-scheduled bank, an amount not exceeding ten per cent of the total income
(computed before making any deduction under this clause and Chapter VI-A) or an
amount not exceeding two per cent of the aggregate average advances made by the
rural branches of such bank, computed in the prescribed manner, whichever is
higher.”
Earlier, above opening Para of clause (viia) was substituted by the Finance Act, 1985, w.e.f. 1-4-1985. It was also amended by the Finance Act, 1982, w.e.f. 1-4-1983.
[R267]See rule 6ABA.
[R268]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R269]Section 5(c) of
the Banking Regulation Act, 1949 defines “banking company” as follows:
‘(c) “Banking company” means any company
which transacts the business of banking in India.
Explanation : Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;’
[R270]Relettered by the Finance Act, 1982, w.e.f. 1-4-1983.
[R271]Inserted, ibid.
[R272]Substituted for the following
clause (ii), as amended by the Finance Act, 1985, w.e.f.
1-4-1985 and by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989:
‘(ii) “Scheduled bank” has the same meaning as in the Explanation to clause (iii) of sub-section (5) of section 11, but does not include a co-operative bank;’
[R273]Operative part of this clause was amended first by the Finance Act, 1966, w.e.f. 1-4-1966 and then by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968 and then by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972 and then by the Finance Act, 1974, w.e.f. 1-4-1975.
[R274]Substituted for the portion beginning with “agricultural development in India” and ending with “carried to such reserve account:” by the Finance Act, 1979, w.e.f. 1-4-1980.
[R275]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R276]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R278]Inserted by the Finance Act, 1981, w.e.f. 1-4-1982.
[R279]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R280]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980. Original Explanation was inserted by the Finance Act, 1970, with retrospective effect from 1-4-1966 and later on omitted by the Finance Act, 1974, w.e.f. 1-4-1975.
[R281]Clause (iv) of
section 3(1) of the Companies Act, 1956 defines “public company” as a company
which is not a private company. Clauses (i), (ii)
and (iii) define expressions
“Company”, “existing company”, “private company”
and “public company”. Section 3 reads as follows:
‘(1) In this Act, unless the context otherwise
requires, the expressions “company”, “existing company”, “private company” and
“public company” shall, subject to the provisions of sub-section (2), have the
meaning specified below—
(i) “Company”
means a company formed and registered under this Act or an existing company as
defined in clause (ii);
(ii) “existing company” means a company
formed and registered under any of the previous companies laws specified
below:—
(a) Any Act or Acts relating to companies
in force before the Indian Companies Act, 1866 and repealed by that Act;
(b) The Indian Companies Act, 1866;
(c) The Indian Companies Act, 1882;
(d) The Indian Companies Act, 1913;
(e) The Registration of Transferred
Companies Ordinance, 1942; and
(f) Any law corresponding to any of the
Acts or the Ordinance aforesaid and in force—
(1) in the merged territories or in a
Part B State (other the State of
(2) in the State of Jammu and Kashmir, or
any part thereof, before the commencement of the Jammu and Kashmir (Extension
of Laws) Act, 1956, in so far as banking, insurance and financial corporations
are concerned, and before the commencement of the Central Laws (Extension to
Jammu and Kashmir) Act, 1968, in so far as other corporations are concerned,
and
(g) The Portuguese Commercial Code, in so
far as it relates to “sociedades anonimas”;
(iii) “private company” means a company
which, by its articles,—
(a) restricts the right to transfer its
shares, if any;
(b) limits the number of its members to
fifty not including—
(i) persons who
are in the employment of the company, and
(ii) persons who, having been formerly in
the employment of the company, were members of the company while in that employment
and have continued to be members after the employment ceased; and
(c) prohibits any invitation to the
public to subscribe for any shares in, or debentures of, the company:
Provided that where two or more persons hold one
or more shares in a company jointly, they shall, for the purposes of this definition,
be treated as a single member;
(iv) “public company” means a company
which is not a private company.
(2) Unless the context otherwise requires, the
following companies shall not be included within the scope of any of the
expressions defined in clauses (i) to (iv)
of sub-section (1), and such companies shall be deemed, for the purposes of
this Act, to have been formed and registered outside India:—
(a) a company the registered office
whereof is in Burma, Aden or Pakistan and which immediately before the
separation of that country from India was a company as defined in clause (i) of sub-section (1);
(b) [***]’
[R282]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R283]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R286]Inserted by the Finance (No 2) Act, 1967, w.e.f. 1-4-1967.
[R287]Inserted by the Finance Act, 1989, w.e.f. 1-4-1989.
[R288]Substituted for the
following clause (i) by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989:
“(i) no such
deduction shall be allowed unless such debt or part thereof—
(a) has been taken into accounted in
computing the income of the assessee of that previous
year or of an earlier previous year, or represents money lent in the ordinary
course of the business of banking or money-lending which is carried on by the assessee, and
(b) has been written off as irrecoverable in the accounts of the assessee for that previous year;”
[R289]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R290]Substituted for “Income-tax”, ibid, w.e.f. 1-4-1988.
[R291]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R292]Substituted for “Income-tax”, ibid. w.e.f. 1-4-1988.
[R293]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R294]See also Letter [F.No. 27(30)-IT/59], dated 6-7-1959, Letter [F.No. 9/54/64-IT(A-I)], dated 2-9-1964 and Letter [F.No. 9/56/66-IT(A-I)], dated 17-1-1967, Letter [F.No. 9/23/67-IT(A-I)], dated 6-7-1967, Circular No. 5-P(XIV-I), dated 28-9-1963, Letter [F.No. 10/67/65-IT(A-I)], dated 26-8-1965, Circular No. 16, dated 18-9-1969, Circular No. 64(XI-2), dated 27-1-1951, Circular No.117, dated 22-8-1973, Letter [F.No. 10/25/63-IT(A-I)], dated 18-6-1964, Letter [F. No. 204/42/77-IT(A-II)], dated 28-9-1977, Circular No. 1-D(IV-53), dated 20-1-1966, Circular No. 2, dated 8-3-1946, Letter [F.No. 35/5/65-IT(A-I)], dated 1-7-1965, Circular No. 69(XIX-3), dated 27-11-1951, Circular No. 4, dated 19-6-1950, Letter [F.No. 10/80/64-IT(A-I)], dated 26-2-1965, Letter [F.No. 10/92/64-IT(A-I)], dated 13-9-1965, Circular No. 3, dated 26-3-1946, Circular No. 22, dated 23-6-1943, Letter [F.No. 10/16/63-IT(A-I)], dated 14-5-1963, Letter [F.No. 10/8/63-IT(A-I)], dated 14-10-1963, Letter [F.No. 27(24)-IT/59], dated 19-5-1959, Letter [F.No. 7/33/62-IT(A-I)], dated 28-8-1963, Circular No. 2-P(XI-6), dated 23-8-1965, Letter [F.No. 13A/20/68-IT(A-II)], dated 3-10-1968, Letter [F.No. 32/6/62-IT(A-I)], dated 16-1-1963, Extracts from the minutes of the 16th meeting of CDTAC held on 2-2-1972, Instruction No. 943 [F.No. 204/15/76-IT(A-II)], dated 2-4-1976, Circular No. 420, dated 4-6-1985, Circular No. 2(40)/66-EAC, dated 16/17-1-1967, issued by the Ministry of Commerce, Circular No. 42 [C. No. 19(7)-IT/42], dated 22-8-1942, Circular No. 36 [. Disc. No. 54(13)-IT/43], dated 24-11-1943, Circular No. 48 [C. No. 19(22)-IT/42], dated 16-10-1942, Circular No. 192, dated 10-3-1976, Circular No. 316, dated 30-9-1981 and Board’s Circular Letter No. 10/22/65-IT (A-I), dated 24-5-1965.
[R295]See rules 9A and 9B.
[R296]“and section 80VV”, which was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976, omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R297]Circular No. 12D (LVIII-35), dated 19-7-1967.
[R298]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R299]Substituted for “3/4” by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962.
[R300]Substituted for “½”, ibid.
[R301]Inserted by the Taxation Laws (Amendment) Act, 1967, w.e.f. 1-10-1967.
[R302]Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.
[R303]Substituted
for the following sub-clauses (iii) and (iv) by the Finance Act,
1983, w.e.f. 1-4-1984:
|
“(iii) on the next Rs.
1,20,00,000 of the profits and gains of the business or profession (computed
in the manner aforesaid) |
at the rate of 1/8 per cent; |
|
(iv) on the balance of the profits and gains of the
business or profession (computed in the manner aforesaid) |
nil:” |
[R304]Inserted by the Fiance Act, 1968, w.e.f. 1-4-1968.
[R305]Numbered as Explanation 1 by the Finance Act, 1983, with retrospective effect from 1-4-1976.
[R306]“And sub-section (2B)” omitted by the Finance Act, 1976, w.e.f. 1-4-1977.Earlier, this expression was inserted by the Fiance Act, 1970, w.e.f.1-4-1970.
[R307]Inserted by the Fiance Act, 1983, with retrospective effect from 1-4-1976.
[R308]Inserted by the Taxation Laws (Amendment) Act, 1978, w.e.f. 1-4-1979. Originally, the sub-section was inserted by the Finance Act, 1970, w.e.f. 1-4-1970 which was later on omitted by the Finance Act, 1976, w.e.f. 1-4-1977.
[R309]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R310]Circular No. 203, dated 16-7-1976, Circular No. 200, dated 28-6-1976 and Circular No. 19, dated 13-6-1969.
[R311]See rules 6AC, 6B and 6D.
[R312]Omitted by the Finance
Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3A),
as inserted by the Finance Act, 1983, w.e.f.
1-4-1984, stood as under:
‘(3A) Notwithstanding anything contained in
sub-section (1), where the expenditure or, as the case may be, the aggregate
expenditure incurred by an assessee on any one or
more of the items specified in sub-section (3B) exceeds one hundred thousand
rupees, twenty per cent of such excess shall not be allowed as deduction in
computing the income chargeable under the head “Profits and gains of business
or profession”.’
Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979 and was later omitted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R313]Omitted by the Finance
Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3B),
as inserted by the Fiance Act, 1983, w.e.f. 1-4-1984, stood as under:
“(3B) The expenditure, referred to in
sub-section (3A) is that incurred on—
(i)
Advertisement, publicity and sales promotion; or
(ii) Running and maintenance of aircraft
and motor cars; or
(iii) Payments made to hotels.
Explanation: For the purposes of sub-sections (3A)
and (3B),—
(a) The expenditure specified in clause (i) to clause (iii) of sub-section (3B) shall
be the aggregate amount of expenditure incurred by the assessee
as reduced by so much of such expenditure as is not allowed under any other provisions
of this Act;
(b) Expenditure on advertisement,
publicity and sales promotion shall not include remuneration paid to employees
of the assessee engaged in one or more of the said
activities;
(c) Expenditure on running and
maintenance of aircraft and motor cars shall include,—
(i) Expenditure
incurred on chartering any aircraft and expenditure on hire charges for
engaging cars plied for hire;
(ii) Conveyance allowance paid to
employees and, where the assessee is a company,
conveyance allowance paid to its directors also.”
Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R314]Omitted by the Finance
Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3C),
as inserted by the Finance Act, 1983, w.e.f.
1-4-1984, stood as under:
“(3C) Nothing contained in sub-section (3A)
shall apply in respect of expenditure incurred by an assessee,
being a domestic company as defined in clause (2) of section 80B, or a
Person (other than a company) who is resident in
India in respect of expenditure incurred wholly and exclusively on—
(i)
advertisement, publicity and sales promotion outside India in respect of the
goods, services or facilities which the assessee
deals in or provides in the course of his business;
(ii) Running and maintenance of motor
cars in any branch, office or agency maintained outside India, for the
promotion of the sale outside India of such goods, services or facilities.”
Original sub-section was inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R315]Omitted by the Finance
Act, 1985, w.e.f. 1-4-1986. Omitted sub-section (3D),
as inserted by the Finance Act, 1983, w.e.f.
1-4-1984, stood as under:
“(3D) No disallowance under sub-section (3A)
shall be made—
(i) in the case
of an assessee in the business of operation of
aircraft, in respect of expenditure incurred on running and maintenance of such
aircraft;
(ii) in the case of an assessee engaged in the business of running motor cars on
hire, in respect of expenditure incurred in running and maintenance of such
motor cars.”
Original sub-section, as inserted by the Finance Act, 1978, w.e.f. 1-4-1979, and was later omitted by the Finance (No. 2) Act, 1980, w.e.f 1-4-1981.
[R316]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R317]Inserted by the Finance Act, 1983, with retrospective effect from 1-4-1979.
[R318]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R319]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R320]Substituted for “clauses (i), (ii), (iia) and (iii) of sub-section (1) and sub-section (1A)” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R321]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R322]Prior to its omission,
section 39 stood as under:
“Where a managing agent of a company is liable under an agreement in writing made for adequate consideration to share managing agency commission with a third party or third parties, the said agent and the said party or parties shall file a declaration showing the proportion in which such commission is shared between them under the agreement, and on proof to the satisfaction of the Income-tax Officer of the facts contained in such declaration, such agent and each such party shall be chargeable only on the share to which such agent or party is entitled under the agreement.”
[R323]See also Circular No. 91/58/66-ITJ(19), dated 18-5-1967, [Press Note, dated 2-5-1969, issued by Ministry of Finance, Circular No. 34, dated 5-3-1970, Circular No. 33, dated 29-12-1969, Circular No. 250, dated 11-1-1979, Circular No. 522, dated 18-8-1988, Letter [F.No. 142(14)/70-TPL], dated 28-9-1970, Letter [F.No. 1(22)/69-TPL(Pt.)], dated 18-4-1969, Circular No. 220, dated 31-5-1977, Circular No. 169 (Para 27), dated 23-6-1975, Letter [F.No. 204/10/71-IT(A-II)], dated 17-4-1971 and Letter BC No. T-II/256-Misc. 75-76, dated 15-11-1975, from the Commissioner of Income-tax, Bombay.
[R324]Substituted for “39” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R325]Substituted for the
following sub-clause (i) by the Finance Act,
1988, w.e.f. 1-4-1989:
“(i) any interest chargeable under this Act which is payable outside India (not being interest 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 in respect of which there is no person in India who may be treated as an agent under section 163;”
[R326]Inserted by the
Income-tax (Amendment) Act, 1972, with retrospective effect from 1-4-1962
subject to savings prescribed by section 4 and 5 of that Act which read as
under:
‘4. Wealth-tax not deductible in computing
the total income for certain assessment years.— Nothing contained in the
Indian Income-tax Act, 1922 (11 of 1922), shall be deemed to authorise, or shall be deemed ever to have authorised, any deduction in the computation of the income
of any assessee chargeable under the head “profits
and gains of business, profession or vocation” or “Income from other sources”
for the assessment year commencing on the 1st day of April, 1957, or any
subsequent assessment year, or any sum paid on account of wealth-tax.
Explanation: For the purposes of this section,
“wealth-tax” shall have the same meaning as is assigned to in the Explanation
to sub-clause (iia) of clause (a) of
section 40 of the principal Act.
5. Saving in certain cases.— Where, before the 15th day of July, 1972 [being the date on which the Income-tax (Amendment) Ordinance, 1972 (7 of 1972), came into force], the Supreme Court has, on an appeal in respect to the assessment of an assessee for any particular assessment year, held that wealth-tax paid by the assessee is deductible in computing the total income of that year, then, nothing contained in sub-clause (iia) of clause (a) of section 40, or sub-section (1A) of section 58, of the principal Act, as amended by this Act, or, as the case may be, section 4 of this Act, shall apply to the assessment of such assessee for that particular year.’
[R327]Omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. Original clause (v) was inserted by the Finance Act, 1968, w.e.f. 1-4-1969 and was later amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R328]Restored to its original version by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier clause (b) was substituted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
[R329]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R330]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R331]Immediately prior to its
omission, clause (c), as amendment by the Finance Act, 1963, w.e.f. 1-4-1963, Finance Act, 1964, w.e.f.
1-4-1964, Finance Act, 1965, w.e.f. 1-4-1965, Finance
Act, 1968, w.e.f. 1-4-1969, Finance (No. 2) Act, 1971
w.e.f. 1-4-1972, Finance Act, 1984, w.e.f. 1-4-1985 and Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 stood as under:
“(c) in the case of any company—
(i) any
expenditure which results directly or indirectly in the provision of any
remuneration or benefit or amenity to a director or to a person who has a
substantial interest in the company or to a relative of the director or of such
person, as the case may be,
(ii) any expenditure or allowance in
respect of any assets of the company used by any person referred to in
sub-clause (i) either wholly or partly for his
own purposes or benefit,
if in the opinion of the Assessing Officer any
such expenditure or allowance as is mentioned in sub-clause (i) and (ii) is excessive or unreasonable
having regard to the legitimate business needs of the company and the benefit
derived by or accruing to it therefrom, so, however,
that the deduction in respect of the aggregate of such expenditure and
allowance in respect of any one person referred to in sub-clause (i) shall, in no case, exceed—
(A) where such expenditure or allowance
relates to a period exceeding eleven months comprised in the previous year, the
amount of one hundred and two thousand rupees;
(B) where such expenditure or allowance
relates to a period not exceeding eleven months comprised in the previous year,
an amount calculated at the rate of eight thousand five hundred rupees for each
month or part thereof comprised in that period:
Provided that in a case where such person is
also an employee of the company for any period comprised in the previous year,
expenditure of the nature referred to in clauses (i),
(ii), (iii) and (iv) of the second proviso to clause (a)
of sub-section (5) of section 40A shall not be taken into account for the
purposes of sub-clause (A) or sub-clause (B), as the case may be,
Explanation: The provisions of this clause shall apply notwithstanding that any amount not to be allowed under this clause is included in the total income of any person referred to in sub-clause (i);”
[R332]Inserted by the Finance Act, 1968, w.e.f. 1-4-1968.
[R333]See also Circular No. 91/58/66-ITJ(19), dated 18-5-1967 [Press Note, dated 2-5-1969], issued by Ministry of Finance, Circular No. 34, dated 5-3-1970, Circular No. 33, dated 29-12-1969, Circular No. 250, dated 11-1-1979, Circular No. 522, dated 18-8-1988, Letter [F. No. 142(14)/70-TPL], dated 29-9-1970, Letter [F. No. 1(22)/69-TPL(Pt.)], dated 18-4-1969, Circular No. 220, dated 31-5-1977, Circular No. 169 (Para 27), dated 23-6-1975, Letter [F. No. 204/10/71-IT(A-II)], dated 17-4-1971 and Letter BC No. T-II/256-Misc. 75-76, dated 15-11-1975, from the Commissioner of Income-tax, Bombay.
[R334]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R335]Omitted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to
its omission, proviso, as amended by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, stood as under:
“Provided that the provisions of this sub-section shall not apply in the case of an assessee being a company in respect of any expenditure to which sub-clause (i) of clause (c) of section 40 applies.”
[R336]31-3-1969 specified vide Notification No. SO 623, dated 14-2-1969.
[R337]Substituted for “two thousand five hundred” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R338]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R340]See rule 6DD.
[R341]Substituted for “two thousand five hundred” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R342]Inserted by the Finance Act, 1969, w.e.f. 1-4-1969.
[R343]Prior to its omission,
sub-section (5), as amended by the Direct Tax Laws (Amendment) Act, 1974, w.e.f. 1-4-1974 Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985, Finance Act, 1984, w.e.f.
1-4-1985 and Finance Act, 1985, w.e.f. 1-4-1985,
stood as under:
‘(5) (a) Where the assessee—
(i) Incurs any
expenditure which results directly or indirectly in the payment of any salary
to an employee or a former employees, or
(ii) incurs any expenditure which results
directly or indirectly in the provision of any perquisite (whether convertible
into money or not) to an employee or incurs directly or indirectly any
expenditure or is entitled to any allowance in respect of any assets of the assessee used by an employee either wholly or partly for
his own purposes or benefit,
Then, subject to the provisions of clause (b),
so much of such expenditure or allowance as is in excess of the limit specified
in respect thereof in clause (c) shall not be allowed as a deduction:
Provided that where the assessee
is a company, so much of the aggregate of—
(a) The expenditure and allowance
referred to in sub-clauses (i) and (ii)
of this clause; and
(b) The expenditure and allowance
referred to in sub-clauses (i) and (ii)
of clause (c) of section 40,
In respect of an employee or a former employee,
being a director or a person who has a substantial interest in the company or a
relative of the director or of such person, as is in excess of the sum of one
hundred and two thousand rupees, shall in no case be allowed as a deduction:
Provided further that in computing the
expenditure referred to in sub-clause (i) or
the expenditure or allowance referred to in sub-clause (ii) of this
clause or aggregate referred to in the foregoing proviso, the following shall
not be taken into account, namely:—
(i) The value
of any travel concession or assistance referred to in clause (5) of
section 10;
(ii) Passage moneys or the value of any
free or concessional passage referred to in
sub-clause (i) of clause (6) of section
10;
(iii) Any payment referred to in clause (iv)
or clause (v) of sub-section (1) of section 36;
(iv) Any expenditure referred to in
clause (ix) of sub-section (1) of section 36.
(b) Nothing in clause (a) shall apply
to any expenditure or allowance in relation to—
(i) Any
employee in respect of any period of his employment outside India;
(ii) any employee being an individual
referred to in sub-clause (vii) or sub-clause (viia)
of clause (6) of section 10 in respect of any period during which he is
entitled to the exemption under sub-clause (vii) or, as the case may
be, sub-clause (viia) aforesaid;
(iii) Any employee whose income
chargeable under the head “Salaries” is seven thousand and five hundred rupees
or less.
(c) The limits referred to in clause (a)
are the following, namely:—
(i) in respect
of the expenditure referred to in sub-clause (i)
of clause (a), in the case of an employee, an amount calculated at the
rate of seven thousand five hundred rupees for each month or part thereof
comprised in the period of his employment in India during the previous year,
and in the case of a former employee, being an individual who ceases or ceased
to be the employee of the assessee during the
previous year or any earlier previous year, ninety thousand rupees:
Provided that where the expenditure is incurred
on payment of any salary to an employee or a former employee engaged in
scientific research during any one or more of the three years immediately
preceding the commencement of the business and such expenditure is deemed under
the Explanation to clause (i) of
sub-section (1) of section 35 to have been laid out or expended in the previous
year in which the business is commenced, the limit referred to in this
sub-clause shall, in relation to the previous year in which the business is
commenced, be an amount calculated at the rate of five thousand rupees for each
month or part thereof comprised in the period of his employment in India during
the previous year in which such business is commenced and in the period of his
employment in India during which he was engaged in scientific research during
the three years immediately preceding that previous year:
Provided further that in relation to any month
or part thereof comprised in any such previous year as is relevant to the
assessment year commencing on the 1st day of April, 1985, or any subsequent
assessment year, the reference to “five thousand rupees” in the preceding proviso
shall be construed as a reference to “seven thousand five hundred rupees”;
(ii) in respect of the aggregate of the
expenditure and the allowance referred to in sub-clause (ii) of clause (a),
one-fifth of the amount of the salary payable to the employee or an amount
calculated at the rate of one thousand rupees for each month or part thereof
comprised in the period of employment in India of the employee during the
previous year, whichever is less.
Explanation 1: The provisions of this sub-section shall
apply notwithstanding that any amount not to be allowed under this sub-section
is included in the total income of the employee or, as the case may be, the
former employee.
Explanation 2: In this sub-section,—
(a) “salary” has the meaning assigned to
it in clause (1) read with clause (3) of section 17 subject to
the following modifications, namely :—
(1) in the said clause (1), the
word “perquisites” occurring in sub-clause (iv) and the whole of
sub-clause (vii) shall be omitted;
(2) in the said clause (3), the
references to “assessee” shall be construed as
references to “employee or former employee” and the references to “his
employer or former employer” and “an employer or
a former employer” shall be construed as references to “the assessee”;
(b) “perquisite” means—
(i) rent-free
accommodation provided to the employee by the assessee;
(ii) any concession in the matter of rent
respecting any accommodation provided to the employee by the assessee;
(iii) any benefit or amenity granted or
provided free of cost or at concessional rate to the
employee by the assessee;
(iv) payment by the assessee
of any sum in respect of any obligation which, but for such payment, would have
been payable by the employee; and
(v) payment by the assessee of any sum, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect as assurance on the life of the employee or to effect a contract for an annuity;..
[R344]Prior to its omission,
sub-section (6) as amended by the Finance Act, 1984, w.e.f.
1-4-1985, stood as under:
“(6) Where the assessee
incurs any expenditure by way of fees for services rendered by a person who at
any time during the twenty-four months immediately preceding the previous year
was an employee of the assessee,—
(a) Such expenditure by way of fees, or
(b) where the assessee
has also incurred in relation to such person any expenditure by way of salary
referred to in sub-clause (i) of clause (a)
of sub-section (5), the aggregate of such expenditure by way of fees and by way
of salary,
shall not be allowed as a deduction to the extent such expenditure by way of fees or, as the case may be, the aggregate of such expenditure by way of fees and by way of salary exceeds ninety thousand rupees.”
[R345]Inserted by the Finance Act, 1975, with retrospective effect from 1-4-1973.
[R346]Sub-section (8) was
omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
Sub-section (8), as inserted by the Finance Act, 1975, w.e.f.
1-4-1976, stood as under:
‘(8) Where the assessee,
being a company (other than a banking company or a financial company), incurs
any expenditure by way of interest in respect of any deposit received by it,
fifteen per cent of such expenditure shall not be allowed as a deduction.
Explanation: In this sub-section,—
(a) “Banking company” means a company to
which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any
bank or banking institution referred to in section 51 of that Act;
(b) “Deposit” means any deposit of money
with, and includes any money borrowed by, a company, but does not include any
amount received by the company—
(i) from the
Central Government or any State Government or any local authority, or from any
other source where the repayment of the amount is guaranteed by the Central
Government or a State Government;
(ii) from the Government of a foreign
State, or from a citizen of a foreign State, or from any institution,
association or body (whether incorporated or not) established outside
(iii) as a loan from a banking company or
from a co-operative society engaged in carrying on the business of banking
(including a co-operative land mortgage bank or a co-operative land development
bank);
(iv) as a loan from any institution or
body specified in the list in the Tenth Schedule or such other institution or
body as the Central Government may, having regard to the nature and objects of
the institution or body, by notification in the Official Gazette, specify in
this behalf;
(v) from any other company;
(vi) from an employee of the company by
way of security deposit;
(vii) by way of security or as an advance
from any purchasing agent, selling agent or other agent in the course of, or
for the purpose of, the business of the company or as advance against orders
for the supply of goods or for the rendering of any service;
(viii) by way of subscription to any
share, stock, bond or debenture (such bond or debenture being secured by a
charge or a lien on the assets of the company) pending the allotment of the
said share, stock, bond or debenture, or by way of advance payment of any
moneys uncalled and unpaid upon by any shares in the company, if such moneys
are not repayable in accordance with the articles of association of the
company;
(ix) as a loan from any person where the
loan is secured by the creation of a mortgage, charge or pledge of any assets
of the company (such loan being hereafter in this sub-clause referred to as the
relevant loan) and the amount of the relevant loan, together with the amount
of any other prior debt or loan secured by the creation of a mortgage, charge
or pledge of such assets, is not more than seventy-five per cent of the price
that such assets would ordinarily fetch on sale in the open market on the date
of creation of the mortgage, charge or pledge for the relevant loan;
(c) “financial company” means—
(i) a
hire-purchase finance company, that is to say, a company which carries on, as
its principal business, hire-purchase transactions or the financing of such
transactions; or
(ii) an investment company, that is to
say, a company which carries on, as its principal business, the acquisition of
shares, stock, bonds, debentures, debenture stock, or securities issued by the
Government or a local authority, or other marketable securities of a like
nature; or
(iii) a housing finance company, that is
to say, a company which carries on, as its principal business, the business of
financing of acquisition or construction of houses, including acquisition or
development of land in connection therewith;
(iv) a loan company, that is to say, a
company [not being a company referred to in sub-clauses (i)
to (iii)] which carries on, as its principal business, the business of
providing finance, whether by making loans or advance or otherwise;
(v) a mutual benefit finance company,
that is to say, a company which carries on, as its principal business, the business
of acceptance of deposits from its members and which is declared by the Central
Government under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society;
(vi) a miscellaneous finance company, that is so say, a company which carries on exclusively, or almost exclusively, two or more classes of business referred to in the preceding sub-clauses.’
[R347]Inserted by the Finance Act, 1984, with retrospective effect from 1-4-1980.
[R348]Inserted by the Finance Act, 1984, with retrospective effect from 1-4-1980.
[R349]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R350]Inserted by the Finance Act, 1984, with retrospective effect from 1-4-1980.
[R351]Inserted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R352]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Original sub-section (2), as amended by the Finance (No. 2) Act,
1980, w.e.f. 1-4-1981, stood as under:
‘(2) Where any building, machinery, plant or
furniture which is owned by the assessee and which
was or has been used for th purposes of business or
profession is sold, discarded, demolished or destroyed and the moneys payable
in respect of such building, machinery, plant or furniture, as the case may be,
together with the amount of scrap value, if any, exceed the written down value,
so much of the excess as does not exceed the difference between the actual cost
and the written down value shall be chargeable to income-tax as income of the
business or profession of the previous year in which the moneys payable for the
building, machinery, plant or furniture became due:
Provided that where the building sold, discarded,
demolished or destroyed is a building to which Explanation 5 to section
43 applies, and the moneys payable in respect of such building, together with
the amount of scrap value, if any, exceed the actual cost as determined under
that Explanation, so much of the excess as does not exceed the
difference between the actual cost so determined and the written down value
shall be chargeable to income-tax as income of the business or profession of
such previous year:
Provided further that where an asset representing
expenditure of a capital nature on scientific research within the meaning of
clause (c) of sub-section (2B) of section 35, read with clause (4)
of section 43 owned by the assessee which was or has
been used for the purposes of business after it ceased to be used for the
purpose of scientific research related to the business is sold, discarded,
demolished or destroyed, the provisions of this sub-section shall apply as if
for the words “actual cost”, at the first place where they occur, the words
“actual cost as increased by twenty-five per cent thereof” had been
substituted.
Explanation: Where the moneys payable in respect of the building, machinery, plant or furniture referred to in this sub-section become due in a previous year in which the business or profession for the purpose of which the building, machinery, plant or furniture was being used is no longer in existence, the provisions of this sub-section shall apply as if the business or profession is in existence in that previous year.
[R353]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Original sub-section (2A), as inserted by the Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971, stood as
under:
‘(2A) Where any structure or work in or in
connection with a building, being the structure or work referred to in
sub-section (1A) of section 32, is sold, discarded, demolished, destroyed or is
surrendered as a result of the determination of the lease or other right of
occupancy in respect of the building and the moneys payable in respect of such
structure or work together with the amount of scrap value, if any, exceed the
written down value, so much of the excess as does not exceed the difference
between the actual cost of the structure or work and its written down value
shall be chargeable to income-tax as income of the business or profession of
the previous year in which the moneys payable for the structure or work became
due.
Explanation 1: Where the moneys payable in respect of
the structure or work referred to in this sub-section become due in a previous
year in which the business or profession for the purpose of which the
structure or work was constructed or done is not longer in existence, the
provisions of this sub-section shall apply as if the business or profession
were in existence in that previous year.
Explanation 2 : For the purposes of this sub-section, the expression “moneys payable” and the expression “sold” shall have the same meanings as in sub-section (1A) of section 32.’
[R354]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R355]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R356]Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[R357]Substituted by the
Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Prior to its substitution it stood as
under:
‘Explanation: The expression “moneys payable” and the expression “sold” in sub-sections (2) and (3) shall have the same meanings as in sub-section (1) of section 32.’
[R358]“Sub-section (2), sub-section (2A),” omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Italicised words were inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R359]‘Or under the head “Capital gains”’ omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R360]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R361]Substituted for “in such business of the Central Government” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R362]“And” omitted by the Finance Act, 1981, w.e.f. 1-4-1981.
[R363]Inserted, ibid.
[R364]Inserted by the Finance Act, 1981, w.e.f. 1-4-1981.
[R365]See also Circular No. 190, dated 1-3-1976.
[R366]Substituted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1968. Original proviso was inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R367]Inserted by the Finance Act, 1975, w.e.f. 1-4-1975.
[R368]. Substituted for “clause (i), clause (ii) or clause (iii) of sub-section (1) or sub-section (1A)” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Italicised words wee inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R369]Substituted by the
Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f 1-4-1988. Prior to its substitution, Explanation
2 stood as under:
“Explanation 2: Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the written down value thereof as in the case of the previous owner for the previous year in which the asset is so acquired or the market value thereof on the date of such acquisition, whichever is the less.”
[R370]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R371]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R372]Substituted for “Inspecting Assistant”, ibid.
[R373]Substituted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Prior to its substitution, Explanation 4 as amended by the
Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971,
stood as under:
“Explanation 4 : Where assets which had once belonged to the assessee and had been used by him for the purposes of his business or profession and thereafter ceased to be his property by reason of transfer or otherwise, are re-acquired by him, the actual cost to the assessee shall be the actual cost to him when he first acquired the assets less the depreciation actually allowed to him under this Act or under the corresponding provisions of the India Income-tax Act, 1922 (11 of 1922), diminished by any loss deducted, or as the case may be, increased by any profit assessed, under the provisions of clause (iii) of sub-section (1) or clause (ii) of sub-section (1A) of section 32 or sub-section (2) or sub-section (2A) of section 41 of this Act, or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), or the actual price for which the asset is re-acquired by him, whichever is the less.”
[R374]Substituted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R375]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R376]Inserted by the Finance Act, 1986, with retrospective effect from 1-4-1974.
[R377]Substituted by the Finance Act, 1968, w.e.f. 1-4-1969.
[R378]See also Circular No. 23D (XXXIX-4), dated 12-9-1960.
[R379]Inserted by the Finance (No. 2) Act, 1965, with retrospective effect from 1-4-1962.
[R380]Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R381]Substituted for “any asset” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R382]. Substituted for the
following Explanation 2 and Explanation 2A by the Taxation Laws
(Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Prior to their substitution, Explanation 2 as substituted by
the Finance At, 1965, w.e.f. 1-4-1965 and Explanation
2A as inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967, stood as under:
“Explanation 2 : When any capital asset
is transferred by a holding company to its subsidiary company 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
written down value of the transferred capital asset to the transferee-company
shall be taken to be the same as it would have been if the transferor-company
had continued to hold the capital asset for the purposes of its business.
Explanation 2A : Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company, and the amalgamated company is an Indian company, the written down value of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its business.”
[R383] Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R384]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R385]See also Letter, dated 4-1-1967, issued by Ministry of Finance to FICCI.
[R386]Restored to its original expression by the Direct Tax laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Earlier, it was amended by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date.
[R387]For
definition of “foreign currency”, see footnote 46 on p. 1.52 Expression
“Indian currency” has been defined in section 2(k) of the Foreign
Exchange Regulation Act, 1973, as under:
‘(k) “Indian currency” means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one-rupee notes issued under section 28A of the Reserve Bank of India Act, 1934 (2 of 1934).’
[R388]Now Foreign Exchange Regulation Act, 1973 (46 of 1973).
[R389]
Expression “authorised dealer” has been defined in
section 2(b) of the Foreign Exchange Regulation Act, 1973 as under:
‘(b) “Authorised dealer” means a person for the time being authorised under section 6 to deal in foreign exchange;’
[R390]Now Foreign Exchange Regulation Act, 1973 (46 of 1973).
[R391] Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.
[R392]See also Circular No. 496, dated 25-9-1987.
[R393] Substituted for the
following clause (a) by the Finance Act, 1988, w.e.f.
1-4-1989:
“(a) any sum payable by the assessee by way of tax or duty under any law for the time being in force, or”
[R394] Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R395]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R396] Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R397]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R398] Shall be inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R399] Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R400] Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R401] Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R402] Substituted for the
following second proviso by the Finance Act, 1989, w.e.f.
1-4-1989:
“Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been said during the previous year on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36.”
[R403] Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R404]Inserted by the Finance Act, 1989, with retrospective effect from 1-4-1984.
[R405]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R406]Renumbered by the Finance Act, 1989, with retrospective effect from 1-4-1984.
[R407]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R408]Inserted, ibid.
[R409]Renumbered by the Finance Act, 1989, with retrospective effect from 1-4-1984.
[R410]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R411]See also Letter [F. No. 14/3/7-IT(A-I)], dated 7-8-1967, Circular No. 38, dated 3-10-1956 and Circular No. 22 [. Disc. 51 (14)-IT-47], dated 23-9-1947.
[R412]Substituted for “43A” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Earlier, “43A” was substituted for “43” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R413]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R414]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1964.
[R415]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R417]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R418]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R419]See rule 6F and Form No. 3C.
[R420]Inserted by the Finance Act, 1984, w.e.f. 1-4-1985.
[R421]See also Circular No. 452, dated 17-3-1986.
[R422]See rule 6G and Form Nos. 3CA to 3CE.
[R423]“Or years relevant to the assessment year commencing on the first day of April, 1985, or any subsequent assessment year” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R424]“Or years relevant to the assessment year commencing on the first day of April, 1985, or any subsequent assessment year” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R425]“Or years” omitted, ibid.
[R426]“By an accountant” omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R427]Substituted for the
following clause (ii) by the Finance Act, 1988, w.e.f.
1-4-1989:
‘(ii) “specified date”, in relation to the accounts of the previous year or years relevant to an assessment year, means the date of the expiry of four months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later.’
[R428]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R429]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R430]Shall be inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R431]Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.
[R432]Inserted by the Finance Act, 1987, with retrospective effect from 1-4-1983.
[R433]Inserted by the Finance Act, 1988, with retrospective effect from 1-4-1983.
[R434]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R435]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R436]See also Circular No. 552, dated 9-2-1990.
[R437]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[R438]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R439]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[R440]Substituted for the portion beginning with “from an Indian concern” and ending with “with the Indian concern” by the Finance Act, 1983, w.e.f. 1-6-1983.
[R441]Substituted for the portion beginning with “from an Indian concern” and ending with “with the Indian concern” by the Finance Act, 1983, w.e.f. 1-6-1983.
[R442]Inserted, ibid.
[R443]Substituted for “the Explanation” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R444]Substituted for “the Explanation” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R445]Substituted for the portion beginning with “from an Indian concern” and ending with “with the Indian concern” by the Finance Act, 1983, w.e.f. 1-6-1983.
[R446]See also Circular No. 23D (XXIII-6) of 1965.
[R447]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. “(1)” deemed to have been omitted with the omission of sub-sections (2) to (4) by the Finance Act, 1966, w.e.f. 1-4-1966 and deemed to have been inserted with the insertion of sub-section (2) by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R448]“53, 54 and 54B” substituted for “53 and 54” by the Finance Act, 1970, w.e.f. 1-4-1970: “53, 54, 54B and 54C” substituted for “53, 54 and 54B” by the Finance Act, 1972, w.e.f. 1-4-1973 and “53, 54, 54B, 54C and 54D” substituted for “53, 54, 54B and 54C” by the Finance Act, 1973, w.e.f. 1-4-1974.
[R449]“54C” omitted by the Finance Act, 1976, w.e.f. 1-4-1976.
[R450]Substituted for “and 54D” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R451]Substituted for “54D and 54E” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R452]Substituted for “54E and 54F” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R453]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. Original sub-section (2) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on omitted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R454]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. Original sub-sections (3) and (4) were inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and later on omitted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R455]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R456]Clause (ii)
omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
Prior to its omission, clause (ii) stood as under:
“(ii) Any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons;”
[R457]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R458]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R459]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R460]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R461]Inserted by the Finance Act, 1976, w.e.f. 1-4-1977.
[R463]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R464]Substituted for the
following section 48 by the Finance Act, 1987, w.e.f.
1-4-1988:
‘48. Mode of computation and deductions.—The
income chargeable under the head “Capital gains” shall be computed by deducting
from the full value of the consideration received or accruing as a result of
the transfer of the capital asset the following amounts, namely:—
(i) Expenditure
incurred wholly and exclusively in connection with such transfer;
(ii) The cost of acquisition of the capital asset and the cost of any improvement thereto.’
[R465]Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.
[R466]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R467]Substituted for “other capital assets”, ibid.
[R468]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R469]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R470]Substituted for the
following sub-clause (b) by the Finance Act, 1987, w.e.f.
1-4-1988:
“(b) On any distribution of assets on the dissolution of a firm, body of individuals or other association of persons, or”
[R471]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R472]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R473]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R474]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R475]Substituted for “section” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R476]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R477]Substituted for “section” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R478]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R479]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R480]Substituted for the
following section 50 by the Taxation Laws (Amendment & Miscellaneous Provisions)
Act, 1986, w.e.f. 1-4-1988:
“50. Special provision for computing cost of
acquisition in the case of depreciable assets.—Where the capital asset is
an asset in respect of which a deduction on account of depreciation has been
obtained by the assessee in any previous year either
under this Act or under the Indian Income-tax Act, 1922 (11 of 1922) or any Act
repealed by that Act or under executive orders issued when the Indian
Income-tax Act, 1866 (2 of 1886), was in force, the provisions of sections 48
and 49 shall be subject to the following modifications:—
(1) The written down value, as defined in
clause (6) of section 43, of the asset, as adjusted, shall be taken as
the cost of acquisition of the asset.
(2) Where under any provision of section
49, read with sub-section (2) of section 55, the fair market value of the asset
on the 1st day of April, 1974, is to be taken into account at the option
of the assessee, then, the cost of acquisition of the
asset shall, at the option of the assessee, be the fair
market value of the asset on the said date, as reduced by the amount of
depreciation, if any, allowed to the assessee after
the said date, and as adjusted.”
The expression in italics was substituted for “1st day of January, 1964” by the Finance Act, 1986, w.e.f. 1-4-1987 and “1st day of January, 1964” was substituted for “1st day of January, 1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R481]Prior to its omission,
section 52 stood as under:
“(1) Where the person who acquires a capital
asset from an assessee is directly or indirectly
connected with the assessee and the Income-tax
officer has reason to believe that the transfer was effected with the object of
avoidance or reduction of the liability of the assessee
under section 45, the full value of the consideration for the transfer shall,
with the previous approval of the Inspecting Assistant Commissioner, be taken
to be the fair market value of the capital asset on the date of the transfer.
(2) Without prejudice to the provisions of
sub-section (1), if in the opinion of the Income-tax Officer the fair market
value of a capital asset transferred by an assessee
as on the date of the transfer exceeds the full value of the consideration
declared by the assessee in respect of the transfer
of such capital asset by an amount of not less than fifteen per cent of the
value so declared, the full value of the consideration for such capital asset
shall, with the previous approval of the Inspecting Assistant Commissioner, be
taken to be its fair market value on the date of its transfer:
Provided that this sub-section shall not apply in any
case—
(a) Where the capital asset is
transferred to the Government, or
(b) Where the full value of the consideration
for the transfer of the capital asset is determined or approved by the Central
Government or the Reserve Bank of India.”
Earlier, sub-section (2) and its proviso were inserted by the Finance Act, 1964, w.e.f. 1-4-1964 and the Finance Act, 1975 with retrospective effect from 1-4-1974, respectively. The proviso was later amended by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R482]Substituted for the
following by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-4-1985:
‘53. Capital gain exempt from tax.—
Notwithstanding anything contained in section 45, where a capital gain arises
from the transfer of one or more capital assets, being buildings or lands
appurtenant thereto, the income of which is chargeable under the head “Income
from house property”, and the full aggregate value of the consideration for
which the transfer is made does not exceed twenty-five thousand rupees, the
capital gain shall not be included in the total income of the assessee:
Provided that this section shall not apply in any case where the aggregate of the fair market values of all capital assets, being buildings or lands appurtenant thereto the income of which is chargeable under the head “Income from house property”, owned by the assessee immediately before the transfer aforesaid is made, exceeds the sum of rupees fifty thousand.’
[R483]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R484]Substituted for “capital asset (other than a short-term capital asset)”. ibid.
[R485]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R486]See also Circular No. 471, dated 15-10-1986, Circular No. 520, dated 11-8-1988, and Circular No. 538, dated 13-7-1989.
[R487]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R488]Substituted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R489]Substituted for “Where, in the case of an assessee being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R490]“To which the provisions of section 53 are not applicable” omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R491]Substituted for “one year before or after the date on which the transfer took place purchased” by the Finance Act, 1986, w.e.f. 1-4-1987.
[R492]Substituted for “is greater than the cost of the new asset” by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R493]Substituted for “the house property” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R494]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1988. Original Explanation,
as inserted by the Finance Act, 1982, w.e.f.
1-4-1983, stood as under:
‘Explanation”: For the purposes of this sub-section, “long-term capital asset” means a capital asset is not a short-term capital asset.’
[R495]Substituted for the
following sub-section (2), as inserted by the Finance Act, 1978, with
retrospective effect from 1-4-1974, amended by the Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1986, w.e.f.
1-4-1987 and the Finance Act, 1987, w.e.f. 1-4-1988:
‘(2) Where the transfer of the original asset is
by way of compulsory acquisition under any law and the compensation awarded
for such acquisition is enhanced by any court, tribunal or other authority,
then,
(a) so much of the capital gains computed
under section 48 by taking the compensation as so enhanced as the full value of
the consideration received or accruing as a result of such transfer, as is not
excluded under sub-section (1) from being charged to tax under section 45, or
(b) the capital gain attributable to the
enhancement of the compensation,
whichever is less (that which is less being
hereafter in this sub-section referred to as the unadjusted capital gain),
shall, if the assessee has within a period of one
year before or two years after the date of receipt of the additional
compensation purchased, or has within a period of three years after that date
constructed, a residential house (hereafter in this sub-section referred to as
the relevant asset), be dealt with in the following manner, that is to say,—
(i) if the
amount of the unadjusted capital gain is greater than the cost of the relevant
asset, the difference between the amount of the unadjusted capital gain and the
cost of the relevant asset shall be charged under section 45 as the income of
the previous year in which the transfer took place; and for the purpose of
computing in respect of the relevant asset any capital gain arising from its
transfer within a period of three years of its purchase or construction, as the
case may be, the cost be nil; or
(ii) if the amount of the unadjusted
capital gain is equal to or less than the cost of the relevant asset, the
unadjusted capital gain shall not be charged under section 45; and for the
purpose of computing in respect of the relevant asset any capital 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 reduced by the amount of
the unadjusted capital gain.
Explanation : For the purposes of this sub-section,
sub-section (2) of section 54B and sub-section (2) of section 54D,—
(1) “additional compensation”, in relation
to the transfer of any capital asset by way of compulsory acquisition under any
law, means the difference between the compensation for the acquisition of such
asset as enhanced by any court, tribunal or other authority and the
compensation which would have been payable if such enhancement had not been
made;
(2) the capital gain attributable to the
enhancement by any court, tribunal or other authority of the compensation for
the compulsory acquisition of any capital asset shall be—
(a) where the computation of the capital
gain under section 48 by taking the compensation which would have been payable
if such enhancement had not been made as the full value of the consideration
received or accruing as a result of the transfer results in a loss or does not
result in any profits or gains chargeable to income-tax under the held “Capital
gains”, the capital gain computed under section 48 by taking the compensation
as so enhanced as the full value of the consideration received or accruing as a
result of the transfer; and
(b) in any other case, the difference
between—
(i) the capital
gain computed under section 48 by taking the compensation as so enhanced as the
full value of the consideration so received or accruing, and
(ii) the capital gain computed under section 48 by taking the compensation which would have been payable if such enhancement had not been made as the full value of the consideration so received or accruing.’
[R496]For text of Capital Gains Accounts Scheme, 1988—GSR 725(E), dated 22-6-1988,
[R497]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R498]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R499]Substituting for “Where the capital gain arises” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R500]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R501]Substituted for the
following sub-section (2), as inserted by the Finance Act, 1978, with
retrospective effect from 1-4-1974, by the Finance Act, 1987, w.e.f. 1-4-1988:
“(2) Where the transfer of the original asset is
by way of compulsory acquisition under any law and the compensation awarded for
such acquisition is enhanced by any court, tribunal or other authority, then,
(a) so much of the capital gain, computed
under section 48 by taking the compensation as so enhanced as the full value of
the consideration received or accruing as a result of such transfer, as is not
excluded under sub-section (1) from being charged to tax under section 45, or
(b) the capital gain attributable to the
enhancement of the compensation, whichever is less (that which is less being
hereinafter referred to as the unadjusted capital gain), shall, if the assessee has within a period of two years after the date of
receipt of the additional compensation purchased any land for being used for
agricultural purposes (hereinafter referred to as the relevant asset), be dealt
with in the following manner, that is to say,—
(i ) if
the amount of the unadjusted capital gain is greater than the cost of the
relevant asset, the difference between the amount of the unadjusted capital
gain and the cost of the relevant asset shall be charged under section 45 as
the income of the previous year in which the transfer took place; and for the
purpose of computing in respect of the relevant asset any capital gain 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 unadjusted capital gain is equal to or less than the cost of the relevant asset, the unadjusted capital gain shall not be charged under section 45; and for the purpose of computing in respect of the relevant asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced by the amount of the unadjusted capital gain.”
[R502]For text of the Capital Gains Accounts Scheme, 1988—GSR 725(E),
[R503]Inserted by the Finance Act, 1973, w.e.f. 1-4-1974.
[R504]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R505]Substituted for “Where the capital gain arises” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R506]Inserted by the Finance Act, 1978, with retrospective effect, from 1-4-1974.
[R507]Substituted for the
following sub-section (2) as inserted by the Finance Act, 1978, with
retrospective effect from 1-4-1974, by the Finance Act, 1987, w.e.f. 1-4-1988:
“(2) Where the compensation awarded for the
compulsory acquisition of the original asset is enhanced by any court,
tribunal or other authority, then,
(a) so much of the capital gain, computed
under section 48 by taking the compensation as so enhanced as the full value of
the consideration received for accruing as a result of such transfer, as is not
excluded under sub-section (1) from being charged to tax under section 45, or
(b) The capital gain attributable to the
enhancement of the compensation,
whichever is less (that which is less being
hereafter in this sub-section referred to as the unadjusted capital gain),
shall, if the assessee has within a period of three
years after the date of receipt of the additional compensation purchased any
land or building or any right in any land or building or constructed any
building for the purposes of shifting or re-establishing the undertaking
referred to in sub-section (1) or setting up another industrial undertaking
(such land, building or right being herein after in this sub-section referred
to as the relevant asset), be dealt with in the following manner, that is to
say,—
(i) if the
amount of the unadjusted capital gain is greater than the cost of the relevant
asset, the difference between the amount of the unadjusted capital gain and the
cost of the relevant asset shall be charged under section 45 as the income of
the previous year in which the transfer took place; and for the purpose of
computing in respect of the relevant asset any capital 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 unadjusted capital gain is equal to or less than the cost of the relevant asset, the unadjusted capital gain shall not be charged under section 45; and for the purpose of computing in respect of the relevant asset any capital 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 reduced by the amount of the unadjusted capital gain.”
[R508]For text of the Capital Gains Accounts Scheme, 1988—GSR 725(E), dated 22-6-1988.
[R509]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R510]See also Circular No. 359, dated 10-5-1983.
[R511]Substituted for “capital asset, not being a short-term capital asset”, by the Finance Act, 1987, w.e.f. 1-4-1988.
[R512]Substituted for “full value of the consideration or any part thereof received or accruing as a result of such transfer” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R513]Substituted for “full value of consideration received or accruing”, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R514]Substituted for “full value of consideration received or accruing”, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R515]Substituted for “full value of such consideration”, ibid.
[R516]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R517]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1984.
[R518]Substituted ‘For the purposes of this sub-section and sub-section (3), “specified asset” means any of the following assets, namely: — ‘by the Finance Act, 1979, w.e.f. 1-4-1979. The italicised words have been inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R520]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R521]Inserted, ibid.
[R522]Inserted by the Finance Act, 1979, w.e.f. 1-4-1979.
[R523]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R525]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R526]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R529]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R531]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1987. Omitted Explanation
stood as under:
‘Explanation : For the purposes of this clause, “public sector company” means any corporation established by or under any Central, State or Provincial Act, or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956).’
[R532]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R533]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R534]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R535]Substituted for “full value of the consideration or any part thereof in any equity shares referred to in clause (va)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R536]Substituted for “2” by the Finance Act, 1978, w.e.f. 1-4-1978.
[R537]Substituted for “clause (vi)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R538]Inserted, ibid.
[R539]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R540]Substituted for “full value of the consideration or any part thereof received or accruing as a result of the transfer” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R541]Substituted for “clause (vi)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R542]Substituted for “clause (vi)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R543]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R544]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R545]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R546]Substituted for “capital assets other than short-term capital assets” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R547]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R548]Numbered as Explanation 1 by the Finance Act, 1983, w.e.f. 1-4-1983.
[R549]Substituted for “full value of the consideration or any part thereof received or accruing as a result of the transfer” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R550]Substituted for “clause (vi)”, ibid.
[R551]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R552]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1988. Original sub-section (3)
as inserted by the Finance Act, 1978, w.e.f.
1-4-1978. Prior to its omission, sub-section (3) as amended by the Finance
Act, 1983, w.e.f. 1-4-1983 and the Finance Act, 1979,
w.e.f. 1-4-1979, stood as under:
‘(3) Where the transfer of the original asset is
by way of compulsory acquisition under any law or where the full value of the
consideration for the transfer of the capital asset is determined or approved
by the Central Government or the Reserve Bank of India, and the compensation
awarded for such acquisition or, as the case may be, the full value of the
consideration so determined or approved is enhanced by any court, tribunal or
other authority, then, so much of the capital gain, computed under section 48
by taking the compensation or consideration as so enhanced as the full value of
the consideration received or accruing as a result of such transfer, as is
attributable to the enhancement of the compensation or consideration (hereafter
in this sub-section referred to as the unadjusted capital gain) shall, if the assessee has, within a period of six months after the date
of receipt of the additional compensation or, as the case may be, the
additional consideration, invested or deposited the whole or any part of such
additional compensation or consideration in any specified asset (hereafter in
this section referred to as the relevant asset), be dealt with in the
following manner, that is to say,—
(a) if the cost of the relevant asset is
not less than the additional compensation or consideration, the whole of the
unadjusted capital gain shall not be charged under section 45;
(b) if the cost of the relevant asset is
less than the additional compensation or consideration, so much of the unadjusted
capital gain as bears to the whole of the unadjusted capital gain the same
proportion as the cost of acquisition of the relevant asset bears to the
additional compensation or consideration shall not be charged under section
45.
Explanation : For the purposes of this sub-section,—
(i) “additional
compensation” shall have the meaning assigned to it in clause (1) of
the Explanation to sub-section (2) of section 54;
(ii)“additional consideration”, in
relation to the transfer of any capital asset the consideration for which 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 any court, Tribunal or other authority and the amount of consideration
which would have been payable if such enhancement had not been made;
(iii)“cost” in relation to any relevant
asset, being a deposit referred to in sub-clause (vi) of clause (a)
of Explanation 1 below sub-section (1) means the amount of such
deposit;
(iiia)
“specified asset” means—
(a) in relation to any additional
compensation or additional consideration received before the 1st day of March,
1979, any of the assets referred to in clause (a) of Explanation 1
below sub-section (1);
(b) in relation to any additional
compensation or additional consideration received after the 28th day of
February, 1979, the National Rural Development Bonds referred to in clause (b)
of Explanation 1 below sub-section (1);
(c) in relation to any additional
compensation or additional consideration received after the 28th day of
February, 1983, in any of the assets referred to in clause (c) of Explanation
1 below sub-section (1) by way of initial subscription thereto;
(iv) the capital gain attributable to the enhancement by any court, Tribunal or other authority of the compensation for the compulsory acquisition of any capital asset or of the consideration for the transfer of any capital asset as determined or approved by the Central Government or the Reserve Bank of India shall be deemed to be so much of the capital gain arising from the transfer of the capital asset as bears to the whole of the capital gain as computed under section 48 by taking the compensation or consideration as so enhanced as the full value of the consideration received or accruing as a result of the transfer, the same proportion as the amount of additional compensation or consideration bears to the compensation or consideration as so enhanced.’
[R553]Omitted by the Finance Act,
1987, w.e.f. 1-4-1988. Original sub-section (4) was
inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
Prior to its omission, sub-section (4) as amended by the Finance Act, 1979, w.e.f. 1-4-1979, stood as under:
‘(4) Where the relevant asset is transferred, or
converted (otherwise than by transfer) into money, within a period of three
years from the date of its acquisition, the amount of capital gain arising from
the transfer of the original asset not charged under section 45 on the basis of
the cost of such relevant asset as provided in clause (a) or, as the
case may be, clause (b), of sub-section (3) shall be deemed to be income
chargeable under the head “Capital gains” relating to capital assets other than
short-term capital assets of the previous year in which the relevant asset is
transferred or converted (otherwise than by transfer) into money.
Explanation : Where the assessee deposits after the 27th day of April, 1978, the whole or any part of the additional compensation or, as the case may be, the additional consideration referred to in sub-section (3) in any relevant asset, being a deposit referred to in sub-clause (vi) of clause (a) of Explanation 1 below sub-section (1), and such assessee takes any loan or advance on the security of such deposit, he shall be deemed to have converted (otherwise than by transfer) such deposit into money on the date on which such loan or advance is taken.’
[R554]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1988. Original sub-section (5)
by the Finance Act, 1978, w.e.f. 1-4-1978. Prior to
its omission, sub-section (5) as amended by the Finance Act, 1979, w.e.f. 1-4-1979, stood as under:
“(5) Where the assessee deposits the whole or any part of the additional compensation or, as the case may be, the additional consideration referred to in sub-section (3) in any relevant asset, being a deposit referred to in sub-clause (vi) of clause (a) of Explanation 1 below sub-section (1), the provisions of sub-section (1A) and (1B) shall apply in relation to such deposit as they apply in relation to the deposit referred to in the said sub-sections.”
[R555]Sub-section (6) which was originally inserted by the Finance Act, 1978, w.e.f. 1-4-1978, was renumbered as sub-section (3) by the Finance Act, 1987, w.e.f. 1-4-1988.
[R556]Substituted for “clause (va)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R557]“Or clause (a) or clause (b) of sub-section (3)” omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R558]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R559]Substituted for “Where, in the case of an assessee being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R560]Inserted, ibid.
[R561]Omitted by the Finance
Act, 1987, w.e.f. 1-4-1988. Prior to its omission,
clause (i) read as under:
‘(i) “long-term capital asset” means a capital asset which is not a short-term capital asset;’
[R562]“(ii)” omitted, ibid.
[R563]Substituted for “one year”, ibid.
[R564]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R565]For text of the Capital Gains Accounts Scheme, 1988—GSR 725(E), dated 22-6-1988.
[R566]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R567]For text of the Capital Gains Accounts Schemes, 1988—GSR 725(E), dated 22-6-1988.
[R568]Substituted for “sections 48, 49 and 50” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R569]Omitted, ibid.
Prior to its omission, clause (a), as amended by the Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971, stood as
under:
‘(a) “adjusted”, in relation to written
down value or fair market value, means diminished by any loss deducted or
increased by any profit assessed, under the provisions of clause (iii)
of sub-section (1) or clause (ii) of sub-section (1A) of section 32 or
sub-section (2) or sub-section (2A) of section 41, as the case may be, the
computation for this purpose being made with reference to the period commencing
from the 1st day of April, 1974 in cases to which clause (2) of section
50 applies;’
In the omitted clause, “1st day of April, 1974”
was substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987.
* “1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R570]Substituted for ‘cost of any improvement”, in relation to a capital asset,—’by the Finance Act, 1987, w.e.f. 1-4-1988.
[R571]Substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987. *“1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R572]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R573]See also Circular No. 31 (LXXVII-5) D, dated 21-9-1962.
[R574]Substituted for ‘For the purposes of sections 48 and 49, “cost of acquisition”, in relation to a capital asset,—’by the Finance Act, 1987, w.e.f. 1-4-1988.
[R575]Substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987. *“1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R576]Substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987. *“1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R577]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R578]Substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987. *”1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R579]Substituted for “1st day of January, *1964” by the Finance Act, 1986, w.e.f. 1-4-1987. *”1964" was substituted for “1954” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R580]Omitted by the Finance Act, 1966, w.e.f. 1-4-1966. Original clause (iv) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R581]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R582]Inserted by the Taxation Laws (Amendment) Act, 1972, w.e.f. 1-1-1973.
[R583]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R584]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R585]Substituted for
“Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
[R586]See rule 111AA.
[R587]See rule 111AB.
[R588]Substituted for
“Wealth-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1988.
[R589]See also Letter [F.No. 40/29/67-IT(A-I)], dated 22-5-1967, Circular No. 371,
dated 21-11-1983, Circular No. 409, dated 12-2-1985 and Circular No.
3-D(XXXI-20), dated 30-3-1967.
[R590]Inserted by the Finance
Act, 1965, w.e.f. 1-4-1965.
[R591]Inserted by the Finance
Act, 1972, w.e.f. 1-4-1972.
[R592]Inserted by the Finance
Act, 1987, w.e.f. 1-4-1988.
[R593]Inserted by the Finance
Act, 1988, w.e.f. 1-4-1989.
[R594]See also Circular No. 156,
dated 23-12-1974, Letter [F. No. 14/9/65-IT (A-I)], dated 22-9-1965,
Instruction No. 460 (extracts) F. No. 168/3/72-IT (A-I), dated 4-10-1972,
Letter F. No. 8/2/68-IT (A-I), dated 18-10-1968 and Circular No. 25 (LXVII-8)-D,
dated 7-6-1955.
[R595]Inserted by the Finance
Act, 1988, w.e.f. 1-4-1989.
[R596]Inserted by the Finance
Act, 1988, w.e.f. 1-4-1989.
[R597]Inserted by the Finance
Act, 1987, w.e.f. 1-4-1988.
[R598]Substituted for
“sub-sections (1) and (2)” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R599]“, (1A)” omitted by the
Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R600]Substituted for “sections
34 and 38”, ibid.
[R601]Inserted by the Finance
Act, 1989, w.e.f. 1-4-1990.
[R602]Inserted by the Finance
Act, 1976, w.e.f. 1-6-1976.
[R603]Prior to its omission,
the Explanation stood as under:
‘Explanation: For the purposes of
this section and section 58, “foreign company” shall have the same meaning as in
section 80B.’
[R604]Inserted by the Finance
Act, 1968, w.e.f. 1-4-1968 and is deemed always to
have been there vide section 3 of the Income-tax (Amendment) Act, 1972.
[R605]Inserted by the Finance
Act, 1985, w.e.f. 1-4-1986.
[R606]“and in respect of which
there is no person in India who may be treated as an agent under section 163”
omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R607]Omitted by the Finance
(No. 2) Act, 1971, w.e.f. 1-4-1972. Original
sub-clause was inserted by the Finance Act, 1968, w.e.f.
1-4-1969.
[R608]Omitted by the Finance
Act, 1988, w.e.f. 1-4-1989. Prior to its omission,
clause (b), as amended by the Finance Act, 1963, w.e.f.
1-4-1963 and Finance Act, 1968, w.e.f. 1-4-1969,
stood as under:
“(b)
in the case of a company, any expenditure or allowance of the nature referred
to in clause (c) of section 40, notwithstanding that the amount thereof
is included in the total income of any person referred to in sub-clause (i) of clause (c) of section 40.”
[R609].
Inserted by the
Income-tax (Amendment) Act, 1972, with retrospective effect from 1-4-1962
subject to savings prescribed by section 5 of the Amendment Act regarding
certain cases decided by the Supreme Court.
[R610]Inserted by the Finance
Act, 1968, w.e.f. 1-4-1968.
[R611]Inserted by the Finance
Act, 1976, w.e.f. 1-6-1976.
[R612]Inserted by the Finance
Act, 1986, w.e.f. 1-4-1987.
[R613]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Prior to its omission, sub-section (2) stood as under:
‘(2)
When any building, machinery, plant or furniture to which clauses (ii)
and (iii) of sub-section (2) of section 56 apply are sold, discarded,
demolished or destroyed, the provisions of sub-section (2) of section 41 shall
apply, so far as may be, in computing the income of an assessee
under section 56 as they apply in computing the income of an assessee under the head “Profits and gains of business or
profession”.’
[R614]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Prior to its omission, sub-section (3) as inserted by the Taxation
Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, stood as
under:
‘(3)
Where any structure or work referred to in sub-section (1A) of section 32 in or
in relation to a building to which clause (iii) of sub-section (2) of section
56 applies is sold, discarded, demolished or destroyed or is surrendered as a
result of the determination of the lease or other right of occupancy in
respect of the building, the provisions of sub-section (2A) of section 41 shall
apply, so far as may be, in computing the income of an assessee
under section 56 as they apply in computing the income of an assessee under the head “Profits and gains of business or
profession”.’
[R615]Omitted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988. Prior to its omission, the Explanation stood as under:
‘Explanation:
For the purpose of this section, the expression “sold” shall have the same
meaning as in sub-section (1) of section 32.’