Chapter IV
Computation of
total income
Heads of income
[R1] 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.
[R2] [***]
C.—Income from house property.
D.—Profits and gains of business or profession.
E.—Capital gains.
F.—Income from other sources.
A.—Salaries
[R3] 15.
[R4] 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 their previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
[R5] [Explanation 1.]—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.
[Explanation 2.]—Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “salary” for the purposes of this section.]
Deductions from salaries.
45[R6] 16. The income chargeable under the head “Salaries” shall be computed after making the following deductions, namely:—
[R8] [a deduction of]
[R10] [a sum equal to thirty-three and one-third per cent of the salary or [R11] [fifteen] thousand rupees, whichever is less]]:
[R12] [***]
[R13] [Provided that in the case of an assessee, being a woman, whose total income before making any deduction under this clause does not exceed seventy-five thousand rupees, the provisions of this clause shall have effect as if for the words “[R14] [fifteen] thousand rupees”, the words [R15] [eighteen] thousand rupees” had been substituted.]
[R16] [***].—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;]
The following clauses (i) and (ia) shall be substituted for existing clause (i) by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997:
(i) in the case of an assessee whose income from salary, before allowing a deduction under this clause, does not exceed sixty thousand rupees, a deduction of a sum equal to thirty-three and one-third per cent of the salary or eighteen thousand rupees, whichever is less;
(ia) in any other case, a deduction of a sum equal to thirty-three and one-third per cent of the salary or fifteen thousand rupees, whichever is less:
Provided that in the case of an assessee, being a woman, whose total income before making any deduction under this clause, does not exceed seventy-five thousand rupees, the provisions of this clause shall have effect as if for the words “fifteen thousand rupees”, the words “eighteen thousand rupees” had been substituted.
Explanation.—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 clause (i) or clause (ia), as the case may be;
(ii) 57[R18] [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;
58[R19] (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 59[R20] of the Constitution, leviable by or under any law.]
[***]
“Salary”,
“perquisite” and “profits in lieu of salary” defined.
[R23] 17. [R24] 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;
[R25] [(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;
[R26] (2) “perquisite” includes—
(i)[R27] 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 [R28] [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.]
[R29] [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 [R30] [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:
[R31] [Provided that nothing in this
clause shall apply to,—
(i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;
[R32] [(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—
(a) in any hospital maintained by the Government or any local authority or any other hospital approved 72[R33] by the Government for the purposes of medical treatment of its employees;
(b) in respect of the prescribed diseases [R34] or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines[R35] :
Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;]
(iii) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government for the purposes of clause (ib) of sub-section (1) of section 36;
(iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government for the purposes of section 80D;
(v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i) and (ii)]; so, however, that such sum does not exceed ten thousand rupees in the previous year;
(vi) any expenditure incurred by the employer on—
(1) medical treatment of the employee, or any member of the family of such employee, outside ;
(2) travel [R36] [and] stay abroad of the employee or any member of the family of such employee for medical treatment;
(3) travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, [R37] [Subject to the condition that—
(A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of ; and
(B) the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees;]
(vii) any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause.
Explanation.—For the purposes of clause (2),—
(i) “hospital” includes a dispensary or a clinic [R38] [or a nursing home];
(ii) “family”, in relation to an individual, shall have the same meaning as in clause (5) of section 10; and
(iii) “gross total income” shall have the same meaning as in clause (5) of section 80B;]
[R39] [***]
[R40] (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) [R41] [, clause (10A)] [R42] [, clause (10B)], clause (11), [R43] [clause (12) [R44] [,clause (13)] or clause (13A)] of section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund [R45] [***], to the extent to which it does not consist of contributions by the assessee or [R46] [interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this sub-clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in clause (10D) of section 10.]
C.- Income
from House property
Income from house property.
Annual value
how determined
[R48] 22. [R49] The annual value of property consisting of
any buildings 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”
23. (1) 88[R51] [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:]
[R52] [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:]
[R53] [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 exceeds 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, [R54] [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;
[R55] [(c) in the case of a building comprising one or more residential units, the erection of which is 93[R56] [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;]
[R57] [(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 95[R58] [but before the 1st day of April, 1992], 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.
[R59] [***]]]
[R60] 98[R61] Explanation 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.]
[R62] [Explanation 2.—For the removal of doubts, it is here by 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.]
[R63] [(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 therefrom is derived by the owner, the annual value of such house or part of the house shall be taken to be nil;
(ii) which is let during any part or parts of 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 let.
Explanation.—Where any such residential unit as is referred to in the second proviso to sub-section (1) is in the occupation of the owner for the purposes of his own residence, nothing contained in that proviso shall apply in computing the annual value of that residential unit.]
[R64] [***]
[R65] [(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 therefrom is derived by the owner.]
Deductions from income from house property.
[R66] [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:—
[R67] [(i) in respect of repairs of, and collection of rent from, the property, a sum equal to one-fifth of the annual value;]
(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 [R69] [(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.
[R70] [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 [R71] [or any other tax levied by the State Government] in respect of the property;
(viii) [R72] [Omitted
by the Finance Act, 1992 w.e.f. 1-4-1993.]
(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[R73] [***].
[R74] [Explanation.—the
deduction under this clause shall be made irrespective or 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;]
[R75] (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.
[R76] [(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 [R77] [15a[R78] [ten]]
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 [R79] [or
sub-section (3) 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.
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”.
[R80] [Special provision for cases where unrealised rent allowed as
deduction is realised subsequently.
Where a
deduction has been made under clause (x) of sub-section (1) of 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.
[R81] 26.
[R82] 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.
[R83] [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.
[R84] 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 impartible estate shall be deemed to be the
individual owner of all the properties comprised in the estate;
[R85] [(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 [R86] 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.
[R87] 28. [R88] 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 of any other company, at or in connection with the
termination of his office or the modification of the terms and conditions
relating thereto;
(c) any
person, by whatever name called, holding an agency in
[R89] [(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;
[(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);]
[R90] [(iiib) cash assistance (by whatever name
called) received or receivable by any person against exports under any scheme of
the Government of India;]
[R91] [(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 Drawback Rules, 1971;]
[R92] [(iv) the value of
any benefit or perquisite, whether convertible into money or not, arising from
business or the exercise of a profession;]
[R93] [(v) any interest, salary, bonus,
commission or remuneration, by whatever name called, due to, or received by, a
partner of a firm from such firm:
Provided that
where any interest, salary, bonus, commission or remuneration, by whatever name
called, or any part thereof has not been allowed to be deducted under clause (b)
of section 40, the income under this clause shall be adjusted to the extent of
the amount not so allowed to be deducted;]
[R94] [(vi) any sum received under a Keyman
insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For
the purposes of this clause, the expression “Keyman insurance policy” shall
have the meaning assigned to it in clause (10D) of section 10.]
Explanation 1.— 31[R95] [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.
The income
referred to in section 28 shall be computed in accordance with the provisions
contained in sections 30 to [R96] [43D].
Rent, rates,
taxes, repairs and insurance for buildings.
[R97] 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.
[R98] 31. [R99] 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.
[R100] 32.(1) In respect of depreciation of buildings,
machinery, plant or furniture owned [R101] [,wholly or partly,] 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—
(i) [R102] [* * *];
(ii) [R103] [in the case of any
block of assets, such percentage on the written down value thereof as may be
prescribed 40[R104] ]
[R105] [* * *]
[R106] [Provided 43[R107] [* * *] that no deduction shall be allowed under this clause in respect of—
(a) any
motor car manufactured outside, where such motor car is acquired by the assessee after the 28th day of February, 1975, unless it is
used—
(i) in a business of running it on hire for tourists; or
(ii) outside in his business or profession in another country;
and
(b) any machinery or
plant if the actual cost thereof is allowed as a deduction in one or more years
under an agreement entered into by the Central Government under section 42;]
[R108] [Provided[R109] [further] that where any asset falling within a block of assets is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this clause in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed under this clause in the case of block of assets comprising such asset:]
[R110] [Provided also, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991.]
The following fourth proviso shall be
inserted in sub-section (1) by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 :
Provided also that the aggregate deduction, in respect of
depreciation of buildings, machinery, plant or furniture allowable to the
predecessor and the successor in the case of succession, referred to in section
170 or the amalgamating company and the amalgamated company in the case of
amalgamation, as the case may be, shall not exceed in any previous year the
deduction calculated at the prescribed rates as if the succession or the
amalgamation had not taken place, and such deduction shall be apportioned
between the predecessor and the successor, or the amalgamating company and the
amalgamated company, as the case may be, in the ratio of the number of days for
which the assets were used by them.
[R111] [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 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 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 provisions 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 *(c) of sub-section 9 (6) of section
43.]
[R112] (iia) [* * *]
[R113] (iii) [* * *]
[R114] (iv) [* * *]
[R115] (v) [* * *]
[R116] (vi) [* * *]
[R117] (1A) [* * *]
(2) Where, in the
assessment of the assessee, [R118] [* * *] full effect cannot be given to any allowance 55[R119] [under clause (ii) of sub-section (1)]
in any previous year, owing to there being no profits or gains chargeable for that
previous year, or owing to the 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.
The following sub-section (2) shall be
substituted for existing sub-section (2) by the Finance (No. 2) Act, 1996,
w.e.f. 1-4-1997 :
(2) Where in the
assessment of the assessee full effect cannot be given to any allowance under
clause (ii) of
sub-section (1) in any previous year owing to there being no profits or gains
chargeable for that previous year or owing to the profits or gains being less
than the allowance, then, the allowance or the part of allowance to which
effect has not been given (hereinafter referred to as unabsorbed depreciation
allowance), as the case may be,—
(i) shall be set off against the profits and gains, if
any, of any business or profession carried on by him and assessable for that
assessment year;
(ia) if
the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the
income under any other head, if any, assessable for that assessment year;
(ii) if the unabsorbed
depreciation allowance cannot be wholly set off under clause (i) and clause (ia), the
amount of allowance not so set off shall be carried forward to the following
assessment year and—
(a) it
shall be set off against the profits and gains, if any, of any business or
profession carried on by him and assessable for that assessment year;
(b) if the unabsorbed
depreciation allowance cannot be wholly so set off, the amount of unabsorbed
depreciation allowance not so set off shall be carried forward to the
following assessment year not being more than eight assessment years immediately
succeeding the assessment year for which the aforesaid allowance was first
computed:
Provided that
the business or profession for which the allowance was originally computed
continued to be carried on by him in the previous year relevant for that
assessment year:
Provided
further that the time limit of eight assessment years specified in
sub-clause (b) shall not apply in the case of a company for the assessment
year beginning with the assessment year relevant to the previous year in which
the said company has become a sick industrial company under sub-section (1) of
section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1
of 1986), and ending with the assessment year relevant to the previous year in
which the entire net worth of such company becomes equal to or exceeds the
accumulated losses.
Explanation.—For
the purposes of this clause, “net worth” shall have the meaning assigned to it
in clause (ga) of sub-section (1) of section 3 of the
Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).
[R120] [Investment allowance. 57[R121]
[R122] 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:
[R123] [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 [R124] [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 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.
[R125] [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
[R126] (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:]
[R127] [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;]
[R128] [(c) any
new machinery or plant installed after the 31st day of March, 1983, but before
the [R129] [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 [R130] for the purposes of this clause by the Central Government.]
Explanation. - For the purposes of this sub-section and [R131] [sub-sections (2B) [R132] [,(2C)] and (4)],—
[R133] [(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[R134] [does not exceed,—
[R135] [(i) in a case where the previous year ends before
the 1st day of August, 1980, ten lakh rupees;
(ii) in a case where the previous year ends after the 31st day of
July, 1980, but before the 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.
[R136] [(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.]
[R137] (2B) Where
any new machinery or plant is installed after the 30th day of June, 1977, but
before the 1st day of April, 71[R138] [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,[R139] 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 authority[R140] 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 an article or thing invented
in such laboratory; and
(iii) the machinery or plant is not used for the purpose of
business of manufacture or 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 anybody [including a society registered under the Societies
Registration Act, 1860 (21 of 1860) and financed wholly or mainly by the
Government;
(b) [R141] [***]
(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.]
[R142] [(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 notified [R143] in this behalf by the Central Government in the
Official Gazette, is installed after the 31st day of May, 1983 [R144] [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 [R145] [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 [R146] [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 [R147] [Assessing] Officer under section 143, the [R148] [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 [R149] [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 credited 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 [R150] [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 acquird or the machinery or plant was installed, the
assessee does not utilise 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 [R151] [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 [R152] 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 sell 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
notification 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 [R153] [***] as may be specified therein.
[R154] [(8A) The
Central Government, if it considers necessary 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.]
[R155] [(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, where 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.]
[R156] (9) [Omitted
by the Finance Act, 1990, w.r.e.f. 1-4-1976.]
[R157] [Investment deposit
account.
(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 [R158] (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 [R159] [(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 [R160] [***] business or
profession as computed in the accounts of the assessee audited in accordance
with sub-section (5),whichever is less :
[R161] [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 :]
92[R162] [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,—
94[R164] [(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) 95[R165] [The profits of business or profession of an
assessee for the purposes of sub-section (1) shall] 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 96[R166] Parts II and III of the 97[R167] [Schedule VI] to the Companies Act, 1956 (1
of 1956), 98[R168] [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. 99[R169] [***]]
(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;
2[R171] [(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 3[R172] duly singed 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.
4[R173] [(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 5[R174] [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.]
6[R175] [Explanation. - For the removal of doubts, it is hereby
declared that nothing contained in the 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.]
6[R176] (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 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.]
7[R177] [(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 8[R178] [***] 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 9[R179] [[in circumstances other than the
circumstances specified in clauses (b), (c) and (e) of
sub-section (5A)]], is not utilised in accordance with 10[R180] [, and within the time specified in,] the
scheme, either wholly or in part, 11[R181] [***] 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 12[R182] 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 it 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.
13[R183] [(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.]
Development rebate.
33. 14[R184] [(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 of 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.]
15[R185] 16[R186] (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 at any time previous
to the date of such installation by the assessee;
(ii) it is imported
in , a sum by way of development allowance equivalent to—
(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) 17[R187] [or sub-section (1A)] 18[R188] [of this section or sub-section (1) of
section 33A] 19[R189] [or any deduction under Chapter VI-A. 20[R190] [***]] is nil or is less than
the full amount of the development rebate calculated at the rate applicable
thereto under 21[R191] [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) 22[R192] [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) 23[R193] [or sub-section (1A) 24[R194] [of this section or sub-section (1) of section
33A] 25[R195] [or any deduction under Chapter VI-A 26[R196] [***]] 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.
27[R197] [(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 fulfil 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 amalgating
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.
28[R198] [(5) The
Central Government, if it considers necessary or expedient so to do, may by
notification29 [R199] 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.]
30[R200] [(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:]
]
31[R201] [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.]
32[R202] [Development
allowance.
33[R203] 33A. (1) In respect of
planting of tea bushes on any land in
(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,
34[R204] [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, 35[R205] [thirty] per cent of the actual cost of
planting,shall, subject to the provisions of this section, be allowed as a
deduction 36[R206] [in the
manner specified here under, 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 has been prepared for planting or replanting,
as the case may be :]
37[R207] [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 38[R208] [the previous year in respect of which the deduction
is required to be allowed under sub-section (1)] 39[R209] [(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 40[R210] [* * *])] is nil or is less than the full
amount of the development allowance calculated at the rates 41[R211] [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 42[R212] [(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 43[R213] [* * *])] 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.
44[R214] (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—
(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)45[R215] ; 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).
46[R216] [(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 fulfil 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:
47[R217] [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 48[R218] hilly areas for the purposes of this section
and such order shall not be questioned before any court of law or any other
authority.
49[R219] [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.]
50[R220] [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, 51[R221] [whichever is earlier,—
(a) 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 within
that Bank in accordance with, and for the purposes specified in, a scheme
(hereafter in this section referred to as the scheme) approved in this behalf
by the Tea Board; or
(b) deposited
any amount in an account (hereafter in this section referred to as the Tea
Deposit Account) opened by the assessee in accordance with, and for the
purposes specified in, a scheme framed by the Tea Board (hereafter in this
section referred to as the deposit scheme) with the previous approval of the
Central Government,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 52[R222] [, or in the Tea Deposit 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 53 [R223] 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 54[R224] [the special account or the Tea Deposit
Account shall not be allowed to be withdrawn except for the purposes specified
in the scheme or, as the case may be, in the deposit scheme] or in the circumstances
specified below :—
(a) 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 55[R225] [or in the Tea Deposit Account], is withdrawn
during any previous year by the assessee in the circumstances 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 55[R226] [or in the Tea Deposit Account], is utilised by the assessee for the purposes of any
expenditure in connection with such business in accordance with the scheme 56[R227] [or the deposit 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 55[R228] [or in the Tea Deposit Account], which is released
during any previous year by the National Bank 56[R229] [or which is withdrawn by the assessee from
the Tea Deposit Account] for being utilised by the
assessee for the purposes of such business in accordance with the scheme 56[R230] [or the deposit 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 56[R231] [or the deposit 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 Government
company 57 [R232] 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 57a[R233] [or the deposit 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).]
58[R234] [eserves for shipping business.
33AC. (1) 59[R235] [In the case of an assessee, being a
Government company or 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 fifty per cent of profits derived from
the business of operation of ships (computed under the head “profits and gains
of business or profession” and before making any deduction under this section),
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 that
referred to in clause (a) or clause (b) of sub-section (2), the
amount so utilised; or
(b) has
not been utilised for the purpose specified in clause
(a) of sub-section (2), the amount 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) 60[R236] "public company” shall have the meaning
assigned to in section 3 of the Companies Act, 1956 (1 of 1956);
61[R237] [(aa) 62[R238] "Government company” shall have the meaning
assigned to it in section 617 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.]
63[R239] [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)64[R240] of sub-section (1) of section 32 in respect
of the building, machinery, plant or furniture so damaged or destroyed:
65[R241] [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 68[R244] [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:
69[R245] [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.—2kj70[R246] [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
(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 2kj71[R247] 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.
72[R248] [estriction on unabsorbed depreciation
and unabsorbed investment allowance for limited period in case of certain
domestic companies.
34A. (1) In computing the
profits and gains of the business of a domestic company in relation to the
previous year relevant to the assessment year commencing on the 1st day of
April, 1992, where effect is to be given to the unabsorbed depreciation
allowance or unabsorbed investment allowance or both in relation to any previous
year relevant to the assessment year commencing on or before the 1st day of
April, 1991, the deduction shall be restricted to two- third of such allowance
or allowances and the balance,—
(a) where it relates
to depreciation allowance, be added to the depreciation allowance for the
previous year relevant to the assessment year commencing on the 1st day of
April, 1993 and be 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;
(b) where it relates
to investment allowance, be carried forward to the assessment year commencing
on the 1st day of April, 1993 and the balance of the investment allowance, if
any, still outstanding shall be carried forward to the following assessment
year and where the period of eight years has expired before the portion of such
balance is adjusted, the said period shall be extended beyond eight years till
such time the portion of the said balance is absorbed in the profits and gains
of the business of the domestic company.
(2) For the assessment
year commencing on the 1st day of April, 1992, the provisions of sub-section
(2) of section 32 and sub-section (3) of section 32A shall apply to the extent
such provisions are not inconsistent with the provisions of sub-section (1) of
this section.
(3) Nothing contained in
sub-section (1) shall apply where the amount of unabsorbed depreciation
allowance or of the unabsorbed investment allowance, as the case may be, or the
aggregate amount of such allowances in the case of a domestic company is less
than one lakh rupees.
(4) Nothing contained in
sections 234B and 234C shall apply to any shortfall in the payment of any tax
due on the assessed tax or, as the case may be, returned income where such
shortfall is on account of restricting the amount of depreciation allowance or
investment allowance under this section and the assessee has paid the amount of
shortfall before furnishing the return of income under sub-section (1) of
section 139.]
73[R249] [Expenditure on scientific research.
74[R250] 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.
75[R251] [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 authority25x276[R252] 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;]
77[R253] (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
approved25x478[R254] for the purposes of this clause by the prescribed
authority 25x579[R255] [by notification in the Official Gazette];
80[R256] 80a[R257] (iii) any sum paid to a
university, college or other institution to be used for research in social
science or statistical research :
Provided that
such university, college or institution is for the time being approved 81[R258] for the purposes of this clause by the prescribed
82[R259] authority 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):
83[R260] [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),—
84[R261] [(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 :]
85[R262] [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.]
86[R263] Explanation 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.
87[R264] [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 88[R265] 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 89[R266] [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 shallbe
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 this section in respect of expenditure
represented wholly or partly by an asset, no deduction shall be allowed under 90[R267] [clause (ii) of sub-section (1) of
section 32 for the same 91[R268] [or any other] previous year in respect of
that asset;
(v) where the asset 92[R269] [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 93[R270] [clause (ii) of sub-section (1)] of
section 32.
94[R271] [(2A) 95[R272] Where 96[R273] [, before the 1st day of March, 1984,] the
assessee pays any sum 97[R274] [(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) 98[R275] [or to a public sector company] to be used
for scientific research undertaken under a programme approved in this behalf by
the prescribed authority99 [R276] 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.]
98[[R277] 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.]
1[R278] [(2AA) Where
the assessee pays any sum to a National Laboratory 2[R279] [or a University or an Indian Institute of Technology] with a specific
direction that the said sum shall be used for scientific research undertaken
under a programme approved in this behalf by the prescribed authority, then—
(a) there shall be
allowed a deduction of a sum equal to one and one-fourth times the sum so paid;
and
(b) no
deduction in respect of such sum shall be allowed under any other provision of
this Act :
3[R280] [Provided that the prescribed authority
shall, before granting approval, satisfy itself about the feasibility of
carrying out the scientific research and shall submit its report to the Director
General in such form as may be prescribed.]
4-8[R281] [Explanation.—For
the purposes of this section,—
(a) “National
Laboratory” means a scientific laboratory functioning at the national level
under the aegis of the Indian Council of Agricultural Research, the Indian
Council of Medical Research, the Council of Scientific and Industrial Research,
the Defence Research and Development Organisation, the Department of Electronics, the Department
of Bio-Technology or the Department of Atomic Energy and which is approved as a
National Laboratory by the prescribed authority in such manner as may be
prescribed;
(b) “University” shall
have the same meaning as in Explanation to clause (ix) of
section 47;
(c) “Indian Institute
of Technology” shall have the same meaning as that of “Institute” in clause (g)
of section 32
9[R282] of the Institutes of Technology Act, 1961
(59 of 1961)].
10[R283] [2B)(a) Where 11[R284] [, 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 authority 12[R285] 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 13[R286] [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 authority14[R287] , 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.
15[[R288] (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.]]
16[R289] [Expenditure on acquisition of patent
rights on 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 year.
(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.]
17[R290] [(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
other wise transferred the rights.]
18[R291] [Expenditure on know-how.
35AB. (1) Subject to the
provisions of sub-section (2), where the assessee has paid in any previous year
any lumpsum 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 lumpsum 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 deduced 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).]
19[R292] [Expenditure on eligible projects or schemes. 20 [R293]
35AC. (1) Where an assessee incurs any expenditure by way of payment of any
sum to a public sector company or a local authority or to an association or
institution approved 21[R294] by the National Committee 22[R295] for carrying out any eligible project or
scheme, the assessee shall, subject to the provisions of this section, be
allowed a deduction of the amount of such expenditure incurred during the
previous year:
Provided that
a company may, for claiming the deduction under this sub-section, incur
expenditure either by way of payment of any sum as aforesaid or directly on the
eligible project or scheme.
(2) The deduction under
sub-section (1) shall not be allowed unless the assessee furnishes along with
his return of income a certificate—
23[R296] (a) where
the payment is to a public sector company or a local authority or an
association or institution referred to in sub-section (1), from such public
sector company or local authority or, as the case may be, association or
institution;
24[R297] (b) in
any other case, from an accountant, as defined in the Explanation below
sub-section (2) of section 288,in such form, manner and containing such
particulars (including particulars relating to the progress in the work
relating to the eligible project or scheme during the previous year) as may be
prescribed.
(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.
24a[R298] [(4) Where
an association or institution is approved by the National Committee under
sub-section (1), and subsequently that Committee is satisfied that the project
or the scheme is not being carried on in accordance with all or any of the
conditions subject to which approval was granted, it may, at any time, after
giving a reasonable opportunity of showing cause against the proposed
withdrawal to the concerned association or institution, withdraw the approval.
(5) Where any project or
scheme has been notified as an eligible project or scheme under clause (b) of the Explanation and subsequently
the National Committee is satisfied that the project or the scheme is not being
carried out in accordance with all or any of the conditions subject to which
such project or scheme was notified, such notification may be withdrawn in the
same manner in which it was issued:
Provided that
a reasonable opportunity of showing cause against the proposed withdrawal shall
be given by the National Committee to the concerned association, institution, public sector company or the local authority, as the case
may be.]
Explanation.—For the purposes
of this section,—
(a) “National
Committee” means the Committee constituted by the Central Government, from
amongst persons of eminence in public life, in accordance with the rules made
under this Act;
(b) “eligible project
or scheme” means such project or scheme for promoting the social and economic
welfare of, or the uplift of, the public as the Central Government may, by
notification in the Official Gazette, specify25 [R299] in this behalf on the recommendations of the
National Committee.]
Export markets
development allowance.
26[R300] 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 inserted by the Finance Act, 1968, w.e.f. 1-4-1968.]
Agricultural development allowance.
27[R301] 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.
28[R302] 35CC. [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.]
29[R303] [Expenditure by way of
payment to associations and institutions for carrying out rural development programmes.
30[R304] 35CCA. 31[R305] [(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 authority32[R306] ; or
(b) to
an association or institution, which has as its object the training of persons
for implementing programmes of rural development; 33[R307] [or]
33[R308] [(c) to
a rural development fund set up and notified 34[R309] by the Central Government in this 35[R310] [behalf; or]
36[R311] [(d) to
the National Urban Poverty Eradication Fund set up and notified by the Central
Government in his 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.]
37[R312] [(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 has 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 [R312] Inserted, ibid.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.]
38[R313] [(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.]
38[R314] [(2B) No
certificate of the nature referred to in sub-section (2) or sub-section (2A)
shall be issued by any association or institution unless 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.]
39[R315] [Expenditure by way of
payment to associations and institutions for carrying out programmes of
conservation of natural resources.
40[R316] [(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
41[R317] by the prescribed authority 42[R318] ; or
(b) to
such fund, for 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 43[R319] [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 44[R320] :
Provided that the prescribed authority 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.]
45[R321] [Amortisation of
certain preliminary expenses.
46[R322] 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:—
(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 47 [R323] 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 building), 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 borrowing” 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 of capital plant and machinery,
where the terms under which such moneys are borrowed or the debt is incurred
provided for the repayment thereof during a period of not less than seven
years.
(4) Where the assessee is a person other than a company or a co-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 48[R324] 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.]
49[R325] [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 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 minerals 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 purposes of
exploring, locating or proving deposits of any mineral, and includes any such
operation which proves to be infructuous 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.
(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 from 50[R326] 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.
51[R327] 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—
52[R328] (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;
53[R329] [(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;]
54[R330] [(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;]
55[R331] (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;
58[R334] [(iia) a sum equal to one and one-third times the
amount of the expenditure incurred on payment of any salary 59[R335] [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 60[R336] [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;]
61[R337] (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 share-holders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be
deemed to be capital borrowed within the meaning of this clause;
61[R338] (iv) 62[R339] 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 63[R340] 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;
64[R341] (v) 65[R342] 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;
66[R343] [(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 of 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 thereunder
or under any standing order, award, contract of
service or otherwise;]
67[R344] (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;
68[R345] (vii) subject
to the provisions of sub-section (2), the amount of 69[R346] [any bad debt or part thereof which is
written off as irrecoverable in the accounts of the assessee for the previous
year]:
70[R347] [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;]
71[R348] [(viia) 72[R349] 73[R350] in respect of any provision for bad and
doubtful debts made by—
(a) a scheduled bank
[not being as. 74[R351] [***] 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 exceeding75[R352] [ten] 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 , an amount not exceeding five per cent of
the total income (computed before making any deduction under this clause and
Chapter VI-A);]
76[R353] [(c) a
public financial institution or a State financial corporation or a State
industrial investment corporation, an amount not exceeding five per cent of the
total income (computed before making any deduction under this clause and
Chapter VI-A).]
Explanation.—For the purposes
of this clause,—
77[R354] [(i) “non-scheduled bank” means a 78[R355] 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;]
79[R356] [(ia)] “rural branch” means a branch of a scheduled
bank 80[R357] [or a nonscheduled 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;
81[R358] [(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;]
82[R359] [(iii) “public
financial institution” shall have the meaning assigned to it in 83[R360] section 4A of the Companies Act, 1956 (1 of
1956);
(iv) “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);
(v) “State industrial
investment corporation” means a 84[R361] 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 this sub-section;]
(viii) 85[R362] [in respect of any special reserve created by
a financial corporation which is engaged in providing long-term finance for 86[R363] [industrial or agricultural development or
development of infrastructure facility in India or by a public company formed
and registered in India with the main object of carrying on the business of
providing long-term finance for construction or purchase of houses in India for
residential purposes, an amount not exceeding forty per cent of the profits
derived from such business of providing long-term finance (computed under the
head “Profits and gains of business or profession” 86a[R364] [before making any deduction under this
clause]) carried to such reserve account:]
Provided that
the corporation 87[R365] [or, as the case may be, the company] is for
the time being approved 88[R366] 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 89[R367] [twice the amount of] the paid-up share
capital 89a[R368] [(excluding the amounts capitalised from
reserves)] of the corporation 87[R369] [or, as the case may be, the company], no allowance under this clause
shall be made in respect of such excess.
90[R370] [Explanation.—In
this clause,—
(a) “financial corporation” shall include a public company and a
Government company;
(b) 91[R371] "public company” shall have the meaning
assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(c) 92[R372] "Government company” shall have the
meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956);]
93[R373] [(d) “infrastructure
facility” shall have the meaning assigned to it in section 80-IA;]
93a[R374] [(e) “long-term finance” means any loan
or advance where the terms under which moneys are loaned or advanced provide
for repayment along with interest thereof during a period of not less than five
years;]
95[R376] [(ix) any
expenditure bona fide incurred by a company for the purpose of promoting
family planning amongst its 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) 96[R377] [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;]
97[R378] [(x) any
sum paid by a public financial institution by way of contribution towards any
fund specified under clause (23E) of section 10.
Explanation.—For the purposes of
this clause, “public financial institution” shall have the meaning assigned to
it in 98[R379] section 4A of the Companies Act, 1956 (1 of
1956).]
99[R380] (2) In making any deduction for a bad debt or part thereof, the
following provisions shall apply—
1[R381] [(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 or 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 2[R382] [(being a previous year relevant to the assessment year commencing on the
1st day of April, 1988, or any earlier assessment year)], but the 3 [R383] [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
4[R384] [(being a previous year relevant to the assessment year commencing on the
1st day of April, 1988, or any earlier assessment year)] and the 5[R385] [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;
6[R386] [(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.]
General
7[R387] 37. 8[R388] (1) 9[R389] Any expenditure (not being expenditure of the nature described in
sections 30 to 36 10[R390] [***] 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
business or profession”.
11[R391] 12[R392] (2) Notwithstanding
anything contained in sub-section (1), any expenditure in the nature of
entertainment expenditure incurred by any assessee during 13[R393] [any previous year commencing on or after the 1st day of April, 1992]
shall be allowed as follows:
(a) where
the amount of such expenditure 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 fifty per
cent of such expenditure in excess of ten thousand rupees.
Explanation.—For the purposes of
this sub-section, “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;
(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 for the
purposes of the business or profession of the assessee by any employee or other
person;
(iii) 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 provision 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.]
14[R394] 15[R395] (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.]
16[R396] 17[R397] (3) 18[R398] 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, as may be prescribed.]
23[R403] [(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
depreciation 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.]
24[R404] [(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.
25[R405] 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 26[R406] [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 26[R407] [Assessing] Officer may determine having
regard to the part so used.
(2) Where any building,
machinery, plant or furniture is not exclusively used 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 27[R408] [clause (ii) of sub-section (1)] of
section 32 shall be restricted to a fair proportionate part thereof which the 26[R409] [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.
28[R410] 39. [Omitted
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.]
29[R411] Amounts not deductible.
40. Notwithstanding anything to
the contrary in sections 30 to30[R412] [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—
31[R413] 32[R414] (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;]
33[R415] (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;
34[R416] 33[R417] (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 and if
the tax has not been paid there on nor deducted therefrom under Chapter XVII-B;
(iv) any payment to a provident or other
fund established for the benefit of employees of the assessee, unless the
assessee has made effective arrangements 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”;
36[R419] [(b) in the case of any firm assessable
as such,—
(i) any payment of
salary, bonus, commission or remuneration, by whatever name called
(hereinafter referred to as remuneration) to any partner who is not a working
partner; or
(ii) any payment of remuneration to any
partner who is a working partner, or of interest to any partner, which, in
either case, is not authorised by, or is not in accordance with, the terms of
the partnership deed; or
(iii) any payment of remuneration to any
partner who is a working partner, or of interest to any partner, which, in
either case, is authorised by, and is in accordance with, the terms of the
partnership deed, but which relates to any period (falling prior to the date of
such partnership deed) for which such payment was not authorised by, or is not
in accordance with, any earlier partnership deed, so, however, that the period
of authorisation for such payment by any earlier partnership deed does not
cover any period prior to the date of such earlier partnership deed ; or
(iv) any payment of interest to any partner
which is authorised by, and is in accordance with, the terms of the
partnership deed and relates to any period falling after the date of such
partnership deed insofar as such amount exceeds the amount calculated at the
rate of eighteen per cent simple interest per annum; or
36a[R420] (v) any payment of remuneration to any partner who is a
working partner, which is authorised by, and is in accordance with, the terms
of the partnership deed and relates to any period falling after the date of
such partnership deed in so far a as the amount of such payment to all the
partners during the previous year exceeds the aggregate amount computed as
hereunder :—
(1) In case of a firm carrying on a profession referred to in
section 44AA or which is notified for the purpose of that section—
|
(a) on the first Rs. 1,00,000 of the book-profit or in case of a loss |
Rs. 50,000 or at the rate of 90 per cent of the book-profit, whichever is more; |
|
(b) on the next Rs. 1,00,000 of the book-profit |
at the rate of 60 per cent; |
|
(c) on the balance of the book-profit |
at the rate of 40 per cent; |
|
(2) in the case of any other firm— |
|
|
(a) on the first Rs. 75,000 of the book-profit, or in case of a loss |
Rs. 50,000 or at the rate of 90 per cent of the book- profit, whichever is more; |
|
(b) on the next Rs. 75,000 of the book-profit |
at the rate of 60 per cent; |
|
(c) on the balance of the book-profit |
at the rate of 40 per cent : |
Provided that in relation to any payment under this clause to the partner
during the previous year relevant to the assessment year commencing on the 1st
day of April, 1993, the terms of the partnership deed may, at any time during
the said previous year, provide for such payment.
Explanation 1.—Where an individual is a partner in a firm on
behalf, or for the benefit, of 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 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 as partner in a representative capacity and
interest paid by the firm to the person so represented shall be taken into
account for the purposes of this clause.
Explanation 2.—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.
Explanation 3.—For the purposes of this clause, “book-profit”
means the net profit, as shown in the profit and loss account for the relevant
previous year, computed in the manner laid down in Chapter IV-D as increased by
the aggregate amount of the remuneration paid or payable to all the partners
of the firm if such amount has been deducted while computing the net profit.
Explanation
4.—For the
purposes of this clause, “working partner” means an individual who is actively
engaged in conducting the affairs of the business or profession of the firm of
which he is a partner;
37[R421] [(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.]
(c) [Omitted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989. Earlier, it was amended 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.]
(d) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]
38[R422] [Expenses or payments not deductible in
certain circumstances.
39[R423] 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”.
40[R424] (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 41[R425] [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 therefrom, 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 individual any relative of the assessee ;
(ii) where the assessee is a company, firm, association of persons or Hindu un- divided family any 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 purposes 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.
43[R427] (3) 44[R428] 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 45[R429] 45a[R430] [ten] thousand] rupees
otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, 46[R431] [twenty per cent of such
expenditure shall not be allowed as a deduction]:
Provided that where an allowance has been made in
the assessment for any year not being 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 47[R432] 45a[R433] [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 48[R434] [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 :
Provided further that no disallowance under this
sub-section shall be made where any payment in a sum exceeding 49 [R435] 45a[R436] [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 50[R437] , having regard to the nature and
extent of banking facilities available, considerations of business expediency
and other relevant factors.]
51[R438] [(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.]
52[R439] [(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.]
53[R440] (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.]
54[R441] 55[R442] (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.]
57[R444] [(9) No deduction shall be allowed in respect of any sum paid
by the assessee as an employer towards the setting up or formation of, or as
contribution to, any fund, trust, company, association of persons, body of
individuals, society registered under the Societies 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.
(10) Notwithstanding anything contained in sub-section (9), where
the 58[R445] [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.]
59[R446] [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.]
60[R447] [Omitted by the Finance Act,
1992, w.e.f. 1-4-1993.]
Profits chargeable to tax.
41. 61[R448] 62[R449] (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
(hereinafter referred to as the first-mentioned person) and subsequently during
any previous year,—
(a) the
first-mentioned person 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 such person 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 ; or
(b) the successor in
business has obtained, whether in cash or in any other manner whatsoever, any
amount in respect of which loss or expenditure was incurred by the
first-mentioned person or some benefit in respect of the trading liability
referred to in clause (a) by way of remission or cessation thereof, the
amount obtained by the successor in business or the value of benefit accruing
to the successor in business shall be deemed to be profits and gains of the
business or profession, and accordingly chargeable to income-tax as the income
of that previous year.
The following Explanation 1 shall
be inserted in sub-section (1) by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 :
Explanation
1.—For the purposes of this sub-section, the expression “loss or
expenditure or some benefit in respect of any such trading liability by way of remission
or cessation thereof” shall include the remission or cessation of any liability
by a unilateral act by the first mentioned person under clause (a) or
the successor in business under clause (b) of that sub-section by way of
writing off such liability in his accounts.
62a[R450] [Explanation].—For the purposes of
this sub-section, “successor in business” means—
(i) where there has been an amalgamation of a company with
another company, the amalgamated company ;
(ii) where the first-mentioned person is succeeded by any other
person in that business or profession, the other person ;
(iii) where a firm carrying on a business or profession is
succeeded by another firm, the other firm.]
(3) Where an asset
representing expenditure of a capital nature on scientific research within the
meaning of clause (iv) of sub-section (1), 65[R453] [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) 66[R454] [or, as the case may be, the amount of the
deduction under clause (ia)] of sub-section
(2) 67[R455] [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.
68[R456] (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.
69[R457] [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 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.]
(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), 70[R458] [***] sub-section (3), or sub-section (4) in
respect of that business or profession, any loss, not being a loss sustained in
speculation business 71[R459] [***], 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.
72[R460] [(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.
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 participation73[R461] [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 infructuous 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;
75[R463] [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
allowance 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 the extent necessary to give
effect to the terms of the agreement.
76[R464] [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—
77 [R465] (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 :
78[R466] [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, 79[R467] [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 80[R468] [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).
81[R469] [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 82[R470] [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 82[R471] [Assessing] Officer may, with the previous
approval of the 83[R472] [Deputy] Commissioner, determine having
regard to all the circumstances of the case.
84[R473] [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.]
84a[R474] [Explanation 4A.—Where before the date of
acquisition by the assessee (hereinafter referred to as the first mentioned
person), the assets were at any time used by any other person (hereinafter
referred to as the second mentioned person) for the purposes of his business or
profession and depreciation allowance has been claimed in respect of such
assets in the case of the second mentioned person and such person acquires on
lease, hire or otherwise assets from the first mentioned person, then, notwithstanding
anything contained in Explanation 3, the actual cost of the transferred
assets, in the case of first mentioned person, shall be the same as the written
down value of the said assets at the time of transfer thereof by the second
mentioned person.]
Explanation
5.—Where a building
previously the property of the assessee is brought into use 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.
85[R475] [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 for the purposes of its business.]
86[R476] [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.]
87[R477] [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 which the profits or gains are computed
under the head “Profits and gains of business or profession”;
88[R478] (3) “plant”
includes ships, vehicles, books, scientific apparatus and surgical equipment
used for the purposes of the business or profession 89[R479] [but does not include tea
bushes or livestock];
90[R480] [(i) “scientific research” means any
activities for the extension of knowledge in the fields of natural or applied
science including agricultural, 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;91[R481] 92[R482] "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 actual
delivery or transfer of the commodity or scrips.
Provided that
for the purposes of this clause—
(a) a contract in
respect of raw materials 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.
93[R483] (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:
94[R484] [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), when such depreciation was not
deductible in determining the written down value for the purposes of the said
clause (vi);]
95[R485] [(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 96[R486] [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.
97[R487] [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”.
98[R488] [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.]
99[R489] [Special provisions consequential to
changes in rate of exchange of currency.
1[R490] 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 2[R491] [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) 3[R492] "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). 4[R493]
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 5[R494] authorised dealer as defined in section 2 of
the Foreign Exchange Regulation Act, 1947 (7 of 1947), 6[R495] 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.]
7[R496] [Certain deductions to be only on actual
payment.
8[R497] 43B. 9[R498] Notwithstanding anything contained in any
other provision of this Act, a deduction otherwise allowable under this Act in
respect of—
10[R499] [(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, 11[R500] [or]
11a[R501] (c) any
sum referred to in clause (ii) of sub-section (1) of section 36,] 12[R502] [or]
12[R503] [(d) any
sum payable by the assessee as interest on any loan or borrowing from any
public financial institution 13[R504] [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, 13a[R505] [;or]
The following clause (e) shall be
inserted after clause (d) by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 :
(e) any sum payable by the
assessee as interest on any term loan from a scheduled bank in accordance with
the terms and conditions of the agreement governing such loan,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 :
14[R506] [Provided that nothing contained in this
section shall apply in relation to any sum referred to in clause (a) 15[R507] [or clause (c)], 16[R508] [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:
17[R509] [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]].
Explanation18[R510] [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.]
19[R511] [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 been payable within that year
under the relevant law.]
20[R512] 21[R513] Explanation 3].—For the removal of doubts it is hereby declared
that where a deduction in respect of any sum referred to in clause (c) 22[R514] [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.]
The following Explanation 3A
shall be inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 :
Explanation
3A.—For the removal of doubts, it is hereby declared that where a deduction in
respect of any sum referred to in clause (e) 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, 1996, 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.
23[R515] [Explanation 4.—For
the purposes of this section,—
(a) “public financial institution” shall have the meaning
assigned to it in 24[R516] section 4A of the Companies Act, 1956 (1 of
1956);
The following clause (aa) shall be inserted in Explanation
4 by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997:
(aa) “scheduled
bank” shall have the meaning of assigned to it in clause (ii) of the Explanation
to clause (viia) of sub-section (1) of
section 36;
(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 25[R517] 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.]
26[R518] [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, if 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 transferor or the
donor, as the case may be.]
27[R519] [Special provision in case of income of
public financial institutions, etc. 28 [R520]
43D. Notwithstanding anything to
the contrary contained in any other provision of this Act, in the case of a
public financial institution or a scheduled bank or a State financial
corporation or a State industrial investment corporation, the income by way of
interest in relation to such categories of bad or doubtful debts as may be
prescribed0z29[R521] having regard to the guidelines issued by the Reserve Bank of India in
relation to such debts, shall be chargeable to tax in the previous year in
which it is credited by the public financial institution or the scheduled bank
or the State financial corporation or the State industrial investment
corporation to its profit and loss account for that year or, as the case may
be, in which it is actually received by that institution or bank or
corporation, whichever is earlier.
Explanation.—For the purposes of
this section,—
(a) “public financial institution” shall have the meaning
assigned to it in 30[R522] section 4A of the Companies Act, 1956 (1 of
1956);
(b) “scheduled bank” shall have the meaning assigned to it in
clause (ii) of the Explanation to clause (viia)
of sub-section (1) of section 36;
(c) “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);
(d) “State industrial
investment corporation” means a 31[R523] 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.]
Insurance business.
32[R524] 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 33[R525] [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.
34[R526] [Special provision for deduction in the
case of trade, professional or similar association.
35[R527] 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 36[R528] [(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.]
37[R529] [Maintenance of accounts by certain
persons carrying on profession or business.
38[R530] 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 profession
as is notified39[R531] by the Board in the Official Gazette shall keep and maintain such books
of account and other documents as may enable the 40[R532] [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 a profession referred to in sub-section (1)]
shall,—
(i) if
his income from business or profession exceeds 41[R533] [forty] thousand rupees or his total sales,
turnover or gross receipts, as the case may be, in business or profession
exceed or exceeds
42[R534] [five hundred] 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 43[R535] [forty] thousand rupees or his total sales,
turnover or gross receipts, as the case may be, in business or profession are
or is likely to exceed 44[R536] [five hundred] thousand rupees, during such
previous year,keep and maintain such books of account
and other documents as may enable the 45[R537] [Assessing] Officer to compute his total
income in accordance with the provisions of this Act.
(3) The Board may, having regard
to the nature of the business or profession carried on by any class of persons,
prescribe 46[R538] , 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 any 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.]
47[R539] [Audit of accounts of certain persons
carrying on business or profession.
48[R540] 44AB. 49[R541] 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 50[R542] [* * *]; or
(b) carrying on
profession shall, if his gross receipts in profession exceed ten lakh rupees in
any previous year 50[R543] [* * *],get his accounts of such previous year 51[R544] [* * *] audited by an accountant before the
specified date and 52[R545] [furnish by] that 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:
53[R546] [Provided that this section shall not apply
to the person, who derives income of the nature referred to in 54[R547] [* * *] section 44B or section 44BB or section 44BBA
or section 44BBB, on and from the 1st day April, 1985 or, as the case may be,
the date on which the relevant section came into force, whichever is later :
Provided
further that] in a case where such person is required by or under any other law
to get his accounts audited 55[R548] [* * *], 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 56[R549] [furnishes by] 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;
57[R550] (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 58[R551] [30th day of November] of the assessment
year;
(b) in any other
case, the 31st day of October of the assessment year.]]
Special provision for computing profits and gains from the business of
trading in certain goods.
44AC. 59[R552] [Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]
60[R553] 60a[R554] Special provision for computing profits
and gains of the business of civil construction, etc.
44AD. (1) Notwithstanding
anything to the contrary contained in sections 28 to 43C, in the case of an
assessee engaged in the business of civil construction or supply of labour for
civil construction, a sum equal to eight per cent of the gross receipts paid or
payable to the assessee in the previous year on account of such business or, as
the case may be, a sum higher than the aforesaid sum as declared by the
assessee in his return of income, 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
nothing contained in this sub-section shall apply in case the aforesaid gross
receipts paid or payable exceed an amount of forty lakh rupees.
(2) Any deduction allowable
under the provisions of sections 30 to 38 shall, for the purposes of
sub-section (1), be deemed to have been already given full effect to and no
further deduction under those sections shall be allowed.
(3) The written down value of
any asset used for the purpose of the business referred to in sub-section (1)
shall be deemed to have been calculated as if the assessee had claimed and had
been actually allowed the deduction in respect of the depreciation for each of
the relevant assessment years.
(4) The provisions of
sections 44AA and 44AB shall not apply in so far as they relate to the business
referred to in sub-section (1) and in computing the monetary limits under those
sections, the gross receipts or, as the case may be, the income from the said
business shall be excluded.
(5) Nothing contained in the
foregoing provisions of this section shall apply, where the assessee claims and
produces evidence to prove that the profits and gains from the aforesaid
business are lower than the profits and gains specified in sub-section (1), and
thereupon the Assessing Officer shall proceed to make an assessment of the
total income or loss of the assessee and determine the sum payable by the
assessee on the basis of assessment made under sub-section (3) of section 143.
Explanation.—For the purposes of
this section, the expression “civil construction” includes—
(a) the
construction or repair of any building, bridge, dam or other structure or of
any canal or road;
(b) the
execution of any works contract.
60b[R555] Speacial provision for computing profits
and gains of business of plying, hiring or leasing goods carriages.
44AE. (1) Notwithstanding anything to the contrary
contained in sections 28 to 43C, in the case of an assessee, who owns not more
than ten goods carriages and who is engaged in the business of plying, hiring
or leasing such goods carriages, the income of such business chargeable to tax
under the head “Profits and gains of business or profession” shall be deemed to
be the aggregate of the profits and gains, from all the goods carriages owned
by him in the previous year, computed in accordance with the provisions of
sub-section (2).
(2) For the purposes of
sub-section (1), the profits and gains from each goods carriage,—
(i) being
a heavy goods vehicle, shall be an amount equal to two thousand rupees for
every month or part of a month during which the heavy goods vehicle is owned by
the assessee in the previous year or, as the case may be, an amount higher than
the aforesaid amount as declared by him in his return of income;
(ii) other than a
heavy goods vehicle, shall be an amount equal to one thousand eight hundred
rupees for every month or part of a month during which the goods carriage is
owned by the assessee in the previous year or, as the case may be, an amount
higher than the aforesaid amount as declared by him in his return of income.
(3) Any deduction allowable
under the provisions of sections 30 to 38 shall, for the purposes of
sub-section (1), be deemed to have been already given full effect to and no
further deduction under those sections shall be allowed.
(4) The written down value of
any asset used for the purpose of the business referred to in sub-section (1)
shall be deemed to have been calculated as if the assessee had claimed and had
been actually allowed the deduction in respect of the depreciation for each of
the relevant assessment years.
(5) The provisions of
sections 44AA and 44AB shall not apply in so far as they relate to the business
referred to in sub-section (1) and in computing the monetary limits under those
sections, the gross receipts or, as the case may be, the income from the said
business shall be excluded.
(6) Nothing contained in the
foregoing provisions of this section shall apply, where the assessee claims and
produces evidence to prove that the profits and gains from the aforesaid
business are lower than the profits and gains specified in sub-sections (1) and
(2), and thereupon the Assessing Officer shall proceed to make an assessment of
the total income or loss of the assessee and determine the sum payable by the
assessee on the basis of assessment made under sub-section (3) of section 143.
Explanation.—For the purposes of
this section,—
(a) the
expressions “goods carriage” 61[R556] and “heavy goods vehicle” 61[R557] shall have the meanings respectively
assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
(b) an
assessee, who is in possession of a goods carriage, whether taken on hire
purchase or on instalments and for which the whole or part of the amount
payable is still due, shall be deemed to be the owner of such goods carriage.]
62[R558] [Special provision for computing profits
and gains of shipping business in the case of non-residents.
63[R559] 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 by or on
behalf of the assessee 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
outside .
64[R560] [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 65[R561] [, being a non-resident,] engaged in the
business of 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.]
66[R562] [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.]
67[R563] [Special provision for
computing profits and gains of foreign companies engaged in the business of civil
construction, etc., in certain turnkey power projects.
68[R564] 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.”]
69[R565] [Deduction
of head office expenditure in the case of non-resident.70[R566]
71[R567] 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 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
(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[R569] [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;
(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.]
75[R571] [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 76[R572] [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 lumpsum 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 77[R573] [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;
Explanation.—For the purposes of
this section,—
(a) “fees for
technical services” shall have the same meaning as in 80[R576] [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 80a[R577] [Explanation 2] to clause (vi)
of sub-section (1) of section 9;
(d) royalty received 81[R578] [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.]
82[R579] 45. 83[R580] [(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 84[R581] [***] 85[R582] [54, 54B, 86[R583] [***] 87[R584] [88[R585] [54D, 89[R586] [54E, 89a[R587] 54EA, 54EB,] 54F 90[R588] [,54G and 54H]]]]], 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.
91[R589] [(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.]
92[R590][(2A) Where any person has had at any time during
previous year any beneficial interest in any securities, then, any profits or
gains arising from transfer made by the depository or participant of such
beneficial interest in respect of securities shall be chargeable to income-tax
as the income of the beneficial owner of the previous year in which such
transfer took place and shall not be regarded as income of the depository who
is deemed to be the registered owner of securities by virtue of sub-section (1)
of section 10 of the Depositories Act, 1996, and for the purposes of—
(i) section 48;
and
(ii) proviso to
clause (42A) of section 2,the cost of acquisition and the period of holding of
any securities shall be determined on the basis of the first-in first-out
method.
Explanation.—For the purposes of this sub-section, the
expressions “beneficial owner”, “depository” and “security”92a[R591] shall have the
meaning respectively assigned to them in clauses (a), (e) and (l)of sub-section
(1) of section 2 of the Depositories Act, 1996.]
93[R592][(3) The profits or gains arising from the transfer
of 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.]
94[R593][(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 95[R594][income under the
head “Capital gains” of the previous year in which such compensation or part
thereof, or such consideration or part thereof, was first received]; 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.]
96[R595][(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.
97[R596]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 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 with 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.
97a[R597]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 capital asset under a gist 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; 99[R599][(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:]
1[R600][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;]
2[R601][(vi) any transfer, in a scheme of amalgamation, of capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company;]
3[R602][(via) any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if—
(a) at least twenty-five per cent of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company, and
(b) such transfer does not attract tax on capital gains in the country, in which the amalgamating company is incorporated;
(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;
4[R603][(viia) any transfer of a capital asset, being bonds or shares referred to in sub-section (1) of section 115AC, made outside India by a non-resident to another non-resident;]
5[R604][(viii) any transfer of agricultural land in
6[R605][(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 notified7[R606] 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;]
8[R607][(x)\ any transfer by way of conversion of 9[R608][bonds or] debentures, debenture-stock or deposit certificates in any from, of a company into shares or debentures of that company.]
10[R609][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.]
12[R611]48. 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 asset and the cost of any improvement thereto:
13[R612]Provided that in the case of an assessee, who is a non-resident, 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 reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :
Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and “indexed cost of any improvement” had respectively been substituted.
Explanation.—For the purposes of this section,—
(i) “foreign currency” and “Indian currency”14[R613] shall have the meanings respectively assigned to them in section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);
(ii) 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;
(iii) “indexed cost of acquisition” means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;
(iv) “indexed cost of any improvement” means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;
(v) “Cost Inflation Index” for any year means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the Consumer Price Index for urban non-manual employees for that year, by notification15[R614] in the Official Gazette, specify in this behalf.]
Cost with reference to certain modes of acquisition.
16[R615]49. 17[R616][(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
18[R617][(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) 19[R618][or clause (v)] 20[R619][or clause (vi)] 21[R620][or clause (via)] of section 47;
22[R621][(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.
23[R622][Explanation.—In this 24[R623][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) 25[R624][or clause (iv) of this 26[R625] [sub-section].]
27[R626][(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.]
28[R627] [2A) Where the capital asset, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in clause (x) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock or deposit certificates in relation to which such asset is acquired by the assessee.]
29[R628][(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.]
30[R629][Special provision for computation of capital gains in case of depreciable assets.
31[R630]50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets 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 within 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 or the fair market value, as the case may be, in computing the cost of acquisition.
Consideration for transfer in cases of
understatement.
32[R631]52. [Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.]
Exemption of
capital gains from a residential house.
33[R632]53. [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
Profit on sale of
property used for residence.
34[R633]54. 35[R634][(1)] 36[R635][37[R636][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 38[R637][***], 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 39[R638][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 with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain 40[R639][ is greater than the cost of 41[R640][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.
43[R642][(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 scheme44[R643] 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.—45[R644][Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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.]
46[R645][Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.
47[R646]54B. 48[R647][(1) 49[R648][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 50[R649][(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 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.]
51[R650][(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 scheme52[R651] 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.—53[R652][Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
Capital gain on transfer of jewellery held for personal
use not to 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.]
54[R653][Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases.
55[R654]54D. 56[R655][(1)] 57[R656][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 58[R657][(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.]
59[R658][(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 insitituion as may be specified in, and utilised in accordance with, any scheme60[R659] which the Central Government may, by notificagtion 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.—61[R660][Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
62[R661][Capital gain on transfer of capital assets not to be charged in certain cases.
63[R662]54E. (1) Where the capital gain arises from the transfer of a 64[R663][long-term capital asset] 65[R664][before the 1st day of April, 1992], (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 66[R665][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 not less than the 67[R666][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 67[R667][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 acquisition of the new asset bears to the 68[R668][net consideration] shall not be charged under section 45 :
69[R669][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 :]
70[R670][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 immediatley following the date on which such compensation is received by the assessee 71[R671][or the 31st day of March, 1992, whichever is earlier].]
Explanation 1.—72[R672][For the purpose 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) 73[R673]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 recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder, 74[R674][where the investment in such shares is made before the 1st day of March, 1978];
75[R675][(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 nationalised 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);
76[R676][(b) in a case where the original asset is transferred after the 28th day of February, 1979 77[R677][but before the 1st day of March, 1983], such National Rural Development Bonds as the Central Government may notify78[R678] in this behalf in the Official Gazette;]
79[R679][(c) in a case where the original asset is transferred after the 28th day of February, 1983 80[R680][but before the 1st day of April, 1986], any of the following assets, anmely :—
(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 notification81[R681] in the Official Gazette, specify in this behalf;
(iii) such National Rural Development bonds as have been notified82[R682] under 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 83[R683]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;]
84[R684][(d) in a case where the original asset is transferred after the 31st day 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 notification85[R685] in the Official Gazette, specify in this behalf ;
87[R687][(e) in a case where the original asset is transferred after the 31st day of March, 1989, any of the assets specified in cluases (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 notification88[R688] in the Official Gazette, specify in this behalf.]
89[R689][Explanation 2.—”Eligible issue of capital” shall have the meaning assigned to it in sub-section (3) of section 80CC.
90[R690][Explanation 3.—An assessee shall not be deemed to have invested the 91[R691][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 92[R692][4].— “Cost”,
in relation to any new asset, being a deposit referred to in 93[R693] [sub-clause (vi) of clause (a)]
of Explanation 1, means the amount of such deposit.
94[R694] [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.
95[R695] [(1A) Where
the assessee deposits after the 27th day of April,
1978, the 96[R696] [whole or any part of the net consideration in
respect] of the original asset in any new asset, being a deposit referred to
in 97[R697] [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 of the co-operative society referred to in
the said 98[R698] [sub-clause (vi)] with which such depsoit 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
assesee 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 99[R699][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.]
1[R700][(1B) Where
on the fulfilment of the conditions specified in
sub-section (1A), the cost of the new asset referred to in that sub-section is
taken 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 2[R701][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.]
3[R702][(1C) Notwithstanding
anything contained in sub-section (1), where the capital gain arises from the
transfer of the original asset, made after the 31st day of March, 1992, in
respect of which the assessee had received any amount by way of advance on or
before the 29th day of February, 1992 and had invested or deposited the whole
or any part of such amount in the new asset on or before the later date, then,
the provisions of clauses (a) and (b) of sub-section (1) shall
apply in the case of such investment or deposit as they apply in the case of
investment or deposit under that sub-section.]
(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 4[R703][long-term capital assets] of the previous
year in which the new asset is transferred or converted (otherwise than by
transfer) into money.]
5[R704][6[R705]][Explanation 1].—Where the assessee
deposits after the 27th day of April, 1978, the 7[R706] [whole or any part of the net consideration
in respect] of the original asset in any new asset, being a deposit referred to
in 8[R707][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.]
9[R708][Explanation 2.—In a case where the
original asset is transferred after the 28the 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 transfer) such new asset on the date on which such loan or
advance is taken.]
13[R712][(3) Where
the cost of the equity shares referred to in 14[R713][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) 15[R714][***], a deduction with reference to
such cost shall not be allowed under section 80CC.]
15a[R715][Capital gain on transfer
of long-term capital assets not to be charged in the case of investment in
specified bonds or debentures.
54EA. (1) Where the capital
gain arises from the transfer of a long-term capital asset (the capital asset
so transferred being hereafter in this section referred to as the original
asset) and the assessee has, at any time within period of six months after the
date of such transfer, invested the whole or any part of the net consideration
in any of the bonds, debentures or units of any mutual fund referred to in
clause (23D) of section 10, specified by the Board in this behalf by
notification in the Official Gazette (such assets hereafter in this section
referred to as the specified bonds or debentures), 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
specified bonds or debentures 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
specified bonds or debentures is less than the net consideration in respect of
the original asset, so much of the capital gainal as bears to the whole of the
capital gain the same proportion as the cost of acquisition of the specific
bonds or debentures bears to the net consideration shall not be charged under
section 45.
(2) Where the specified bonds
or debentures are transferred or converted (otherwise than by transfer) into
money at any time within a period of three years from the date of their 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 specified bonds or
debentures as provided in clause (a) or clause (b) of sub-section (1) shall be deemed to be the
income chargeable under the head “Capital gains” relating to long-term capital
assets of the previous year in which the specified bonds or debentures are
transferred or converted (otherwise than by transfer) into money.
Explanation.—In
a case where the original asset is transferred and the assessee invests the
whole or any part of the net consideration in respect of the original asset in
any specified bonds or debentures and such assessee takes any loan or advance
on the security of such specified bonds or debentures, he shall be deemed to
have converted (otherwise than by transfer) such specified bonds or debentures
into money on the date on which such loan or advance is taken.
(3) Where the cost of the
specified bonds or debentures has been taken into account for the purposes of
clause (a) or clause (b)
of sub-section (1), a rebate with reference to such cost shall not be allowed
under section 88.
Explanation.—For the purposes of this section,—
(a) “cost, in relation to
any specified bonds or debentures, means the amount invested in such specified
bonds or debentures out of the net consideration received or accruing as a
result of the transfer of the original asset;
(b) “net consideration”, in relation to the transfer of a capital
asset, means the full value of the consideration received or accruing as a
result of the transfer of the capital asset as reduced by the expenditure
incurred wholly and exclusively in connection with such transfer.
Capital gain on transfer of long-term capital assets not to be charged in
certain cases.
54EB. (1) Where the capital gain arises from the
transfer of a long-term capital asset (the capital asset so transferred being
hereafter in this section referred to as the original asset), and the assessee
has, at any time within a period of six months after the date of such transfer
invested the whole or any part of capital gains, in any of the assets specified
by the Board in this behalf by notification in the Official Gazette (such
assets hereafter in this section referred to as the long-term specified
assets), the capital gain shall be dealt with in accordance with the following
provisions of this section, that is to say,—
(a) if the cost of the long-term
specified asset is not less than the capital gain arising from the transfer of
the original asset, the whole of such capital gain shall not be charged under
section 45;
(b) if the cost of the
long-term specified asset is less than the capital gain arising from the
transfer 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
long-term specified asset bears to the whole of the capital gain, shall not be
charged under section 45.
Explanation.—“Cost”,
in relation to any long-term specified asset, means the amount invested in such
specified asset out of capital gains received or accruing as a result of the
transfer of the original asset.
(2) Where the long-term specified asset is transferred or converted
(otherwise than by transfer) into money at any time within a period of seven
years from the date of its acquisition, the amount of capital gains arising
from the transfer of the original asset not charged under section 45 on the
basis of the cost of such long-term specified asset as provided in clause (a), or as the case may be, clause (b)
of sub-section (1) shall be deemed to be the income chargeable under the head
“Capital gains” relating to long-term capital assets of the previous year in
which the long-term specified asset is transferred or converted (otherwise than
by transfer) into money.
Explanation.—In
a case where the original asset is transferred and the assessee invests the
whole or any part of the capital gain received or accrused
as a result of transfer of the original asset in any long-term specified asset
and such assessee takes any loan or advance on the security of such specified
asset, he shall be deemed to have converted (otherwise
than by transfer) such specified asset into money on the date on which such
loan or advance is taken.
(3) Where the cost of the
long-term specified asset has been taken into account for the purposes of
clause (a) or clause (b)
of sub-section (1), a deduction from the amount of income-tax with reference to
such cost shall not be allowed under section 88.]
16[R716][Capital gain on
transfer of certain capital assets not to be charged in case of investment in
residential house.. 17[R717]
54F. (1) 18[R718][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 19[R719][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 to 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,—
21[R721][***] “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 22[R722][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 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 new asset is transferred.]
23[R723][(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 scheme 24[R724] 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.—. 25[R725][Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]
26[R726][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
of 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 order27[R727], 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 scheme 28 [R728]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.—29[R729][Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]
30[R730][Extension of time for
acquiring new asset or depositing or investing amount of capital gain.
54H. Notwithstanding anything
contained in sections 54, 54B, 54D 31[R731][***] and 54F, where the transfer of the
original asset is by way of compulsory acquisition under any law and the amount
of compensation awarded for such acquisition is not received by the assessee on
the date of such transfer, the period for acquiring the new asset by the
assessee referred to in those sections or, as the case may be, the period
available to the assessee under those sections for depositing or investing the
amount of capital gain in relation to such compensation as is not received on
the date of the transfer, shall be reckoned from the date of receipt of such
compensation:
Provided that
where the compensation in respect of transfer of the original asset by way of
compulsory acquisition under any law is received before the 1st day of April,
1991, the aforesaid period or periods, if expired, shall extend up to the31st
day of December, 1991.]
Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”.
32[R732]55. (1) For the purposes of 33[R733][sections 48 and 49],—
35[R735][(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 36[R736][1st day of April, 37[R737][1981]], 38[R738][***] 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 39[R739][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.
40[R740](2) 41[R741][For the purposes of sections 48 and 49,
“cost of acquisition”,—
42[R742][(a) in
relation to a capital asset, being goodwill of a business tenancy rights, stage
carriage permits or loom hours,—-
(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 [not being a case falling under
sub-clauses (i) to (iv) of sub-section
(1) of section 49], shall be taken to be nil;
(aa) 43[R743][in a case where, by virtue of holding a
capital asset, being a share or any other securityr44[R744], within the meaning of clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause
referred to as the financial asset), the assessee—
(A) becomes
entitled to subscribe to any additional financial asset; or
(B) is allotted any
additional financial asset without any payment,then, subject to the provisions
of sub-clauses (i) and (ii) of clause (b)],—
(i) in
relation to the original financial asset, on the basis of which the assessee
becomes entitled to any additional financial asset, means the amount actually
paid for acquiring the original financial asset;
(ii) in relation to
any right to renounce the said entitlement to subscribe to the financial
asset, when such right is renounced by the assessee in favour of any person,
shall be taken to be nil in the case of such assessee;
(iii) in relation to
the financial asset, to which the assessee has subscribed on the basis of the
said entitlement, means the amount actually paid by him for acquiring such
asset; and
45[R745][(iiia) in relation to the financial asset
allotted to the assessee without any payment and on the basis of holding of any
other financial asset, shall be taken to be nil in the case of such
assessee;]
(iv) in relation to any
financial asset purchased by any person in whose favour the right to subscribe
to such asset has been renounced, means the aggregate of the amount of the
purchase price paid by him to the person renouncing such right and the amount
paid by him to the company or institution, as the case may be, for acquiring
such financial asset;]
(b) in
relation to any other capital asset,—]
(i) where the capital asset became the property of the assessee
before the 45a[R746][1st day of April, 45b[R747][1981]], means the cost of acquisition of the
asset to the assessee or the fair market value of the asset on the 46[R748][1st day of April, 47[R749][1981]], at the option of the assessee;
(ii) where the capital
asset became the property of the assessee by any of the modes specified in 48[R750][sub-section (1) of] section 49, and the
capital asset became the property of the previous owner before the 46[R751][1st day of April, 47[R752][1981]], means the cost of the capital asset
to the previous owner of the fair market value of the asset on the 46[R753][1st day of April, 47[R754][1981]], 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;
[***]
50[R756][(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 acquision 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.
51[R757][eference to Valuation Officer.
52[R758]55A. With a view to ascertaining
the fair market value of a capital asset for the purposes of this Chapter, the 52a[R759][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 53[R760][Assessing] Officer is of opinion that the
value so claimed is less than its fair market value;
(b) in any other case, if the 53[R761][Assessing] Officer is of opinion—
(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 54[R762] of the value of the asset as so claimed or
by more than such amount 54[R763] 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,55[R764]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,
section35 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 56[R765][Assessing] Officer under sub-section (1) of
section 16A of that 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
57[R766]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;
58[R767][(ia) Income referred to in sub-clause (viii)
of clause (24) of section 2;]
59[R768][(ib) Income referred to in sub-clause (ix)
of clause (24) of section 2;]
60[R769][(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”;]
61[R770][(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”;
61a[R771][(iv) income
referred to in sub-clause (ix) 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” or under the head “Salaries”.]
Deductions.
62[R772]57. The incomergeable under the head “Income from other sources”
shall be computed after making the following deductions, namely:—
(i) in the case of dividends, 63[R773][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 64[R774][or interest] on behalf of the assessee;
65[R775][(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 66[R776][sub-sections (1) 67[R777][***] and (2)] of section 32 and subject to
the provisions of 68[R778][section 38];
69[R779][(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:
71[R781]Explanation.—[Omitted by the Finance Act, 1988, w.e.f.
1-4-1989].
Amounts not deductible.
72[R782]58. 73[R783][(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;
74[R784][ia) any expenditure of the nature referred
to in sub-section (12)75[R785] 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
79[R789][(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”.]
80[R790][(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”.]
81[R791][(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”.]
82[R792][(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 owning 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.]
Profits chargeable to tax.
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]For relevant case laws.
[R2]B.—Interest on securities”
omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R3]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-ITJ], 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.
[R4]For relevant case laws, see
[R5]Existing Explanation
renumbered as Explanation 1 by the Finance Act, 1992, w.e.f. 1-4-1993.
[R6]For relevant case laws.
[R7]Substituted by the Finance Act, 1974, w.e.f
1-4-1975.
[R8]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.
[R9]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:” |
[R10]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. 1-4-1989. *”thirty” was substituted for “twenty five” by the
Finance Act, 1986, w.e.f. 1-4-1987 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.
[R11]Substituted for “twelve” by
the Finance Act, 1993, w.e.f. 1-4-1994.
[R12]Omitted by the Finance Act, 1989, 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.”
[R13]Inserted by the Finance Act,
1992, w.e.f. 1-4-1993.
[R14]Substituted
for “twelve” and “fifteen”, respectively, by the Finance Act, 1993, w.e.f.
1-4-1994.
[R15]Substituted for “twelve” and “fifteen”, respectively, by the Finance Act, 1993, w.e.f. 1-4-1994.
[R16]“1” omitted by the Finance Act,
1989, w.e.f. 1-4-1990.
[R17]Omitted by the Finance Act, 1989, w.e.f.
1-4-1990. 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;”
[R18]Inserted by the Finance
(No.2) Act, 1980, w.e.f. 1-4-1981.
[R19]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.
[R20]For text of article 276(2)
of the Constitution, see Appendix One.
[R21]Omitted by the Finance Act, 1974, 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.
[R22]Omitted by the Finance Act,
1974, w.e.f. 1-4-1975.
[R23]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. 1145/1146 [F. No. 200/9/78-IT (A-I)], dated 27-1-1978, Letter:
F. No. 35/50/65-IT(B), dated 27-4-1966, Circular No. 5, dated 6-9-1950,
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. 122, dated
19-10-1973, Instruction No. 1145 [F. No. 200/6/78-IT (A-I)], dated 27-1-1978,
Para I of Instruction No. 133, dated 10-2-1969, Circular No. 603, dated
6-6-1991, Circular No. 662, dated 27-9-1993, Circular No. 710, dated 24-7-1995,
Circular No. 708, dated 18-1-1995, as amended by Circular No. 727, dated
27-10-1995. n’s Master Guide to Income-tax Act.
[R24]For relevant case laws, see
[R25]Inserted by the Taxation
Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1978.
[R26]See rule 3 for ‘Valuation of perquisites’. See also Appendix Two for
an analysis of rule 3.
[R27]See rule 3 for ‘Valuation of perquisites’. See also Appendix Two for
an analysis of rule 3.
[R28]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.
[R29]Inserted by the Finance Act,
1989, w.e.f. 1-4-1990.
[R30]Inserted by the Labour Provident Funds Laws
(Amendment) Act, 1976, w.e.f. 1-8-1976.
[R31]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1991.
[R32]Substituted by the Finance
Act, 1994, w.r.e.f. 1-4-1993. Prior to its substitution, clause (ii) as
substituted by the Finance Act, 1992, w.e.f. 1-4-1993, read as under:
“(ii) any sum paid by the employer—
(a) in respect of any expenditure actually
incurred by the employee on his medical treatment or treatment of any member of
his family in any hospital maintained by the Government or any local authority
or any other hospital approved by the Government for the purposes of medical
treatment of its employees;
(b) directly to a hospital, approved by the Chief Commissioner
having regard to the prescribed guidelines for the purposes of medical
treatment of the prescribed diseases or ailments, on account of such treatment
of the employee or any member of his family;”
[R33]For list of hospitals recognised under the Central Government Health Scheme vide
Circular No. 603, dated 6-6-1991, see n’s Master Guide to Income-tax
Act.
[R34]See rule 3A(2)
for prescribed diseases..
[R35]See rule 3A(1)
for conditions to be fulfilled by a hospital to obtain Chief Commissioner’s
approval.
[R36]Substituted for “or” by the Finance Act,
1993, w.e.f. 1-4-1993.
[R37]Substituted, ibid.
Prior to substitution, the portion beginning with “subject to the condition”
and ending with “Reserve Bank of India in this behalf, prescribe” as amended
by the Finance Act, 1992, w.e.f. 1-4-1993, read as under:
“subject to the condition that the expenditure on
travel referred to in sub-clauses (2) and (3) of this clause
shall be excluded from perquisite only in the case of an employee whose gross
total income, as computed before including therein the said expenditure, does not
exceed two lakh rupees and subject to such further
conditions and limits in relation to such expenditure as the Board may, having
regard to the guidelines, if any, issued by the Reserve Bank of India in this
behalf, prescribe;”
[R38]Inserted by the Finance Act,
1992, w.e.f. 1-4-1993.
[R39]Sub-clause (vi) along with
consequential amendments in sub-clauses (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, 1984, w.e.f. 1-4-1985. Amendment thus never came
into operation
[R40]See also Letter F.No. 35/26/64-IT(B), dated
25-5-1964.
[R41]Inserted by the Finance (No.
2) Act, 1965, with retrospective effect from 1-4-1962.
[R42]Inserted by the Finance Act,
1975, w.e.f. 1-4-1976.
[R43]Substituted for “or Clause (12)” by
the Direct Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.
[R44]Inserted by the Fiance Act, 1995, w.e.f. 1-4-1996.
[R45]Words “(not being an
approved superannuation fund)” omitted, ibid.
[R46]Substituted for “interest on such
contributions” by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
[R47]Sub-heading “B.—Interest on
securities” and sections 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:
[R48]See also Circular No. 9, dated 25-3-1969 and Circular No. 2(XLVIII-2), dated
13-6-1955.
[R49]For relevant case laws, see
[R50]For relevant case laws, see
[R51]Substituted by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-4-1976.
[R52]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:”
[R53]Substituted by the Taxation
Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R54]Inserted by the Finance Act,
1978, w.e.f. 1-4-1979.
[R55]Inserted, ibid.
[R56]Substituted for “completed
after the 31st day of March, 1978” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R57]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.
[R58]Inserted by the Finance Act,
1992, w.e.f. 1-4-1993.
[R59]“so, however, that the income in respect of
any residential unit referred to in clause (a) or clause (b) or
clause (c) or clause (d) is in no case a loss” omitted by the
Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1984.
[R60]Inserted by the Taxation Laws (Amendment)
Act, 1975, w.e.f. 1-4-1976.
[R61]Existing Explanation
renumbered as Explanation 1 by the Taxation Laws (Amendment) Act, 1984, w.e.f.
1-4-1985.
[R62]Inserted, ibid.
[R63]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 VI-A), 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 square brackets in clause (i)
were substituted for “one thousand and eight hundred” by the Finance Act, 1982,
w.e.f. 1-4-1983.
[R64]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.”
[R65]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.”
[R66]See also Circular No. 363,
dated 24-6-1983 and Circular No. 28, dated 20-8-1969.
[R67]Substituted by the Finance Act, 1992, w.e.f.
1-4-1993. Prior to substitution, clause (i)
read as under :
“(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;”
[R68]Omitted by the Finance Act,
1968, w.e.f. 1-4-1969.
[R69]Substituted for “not being a
capital charge”, ibid.
[R70]Inserted by the Finance Act,
1983, w.e.f. 1-4-1984.
[R71]Inserted by the Finance Act,
1968, w.e.f. 1-4-1969.
[R72]Prior to omission clause (viii)
read as under:
“(viii) any sums
spent to collect the rent from the property, not exceeding six per cent of the
annual value of the property;”
[R73]“; and” omitted by the
Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R74]Inserted, ibid.
[R75]Rule 4 prescribes following conditions for
‘deductibility of unrealised rent: (1) The
tenancy must be bona fide. (2) The defaulting tenant should have
vacated, or steps should have been taken by the assessee to compel him to
vacate the property. (3) The defaulting tenant should not be in
occupation of any other property of the assessee. (4)The assessee must
either have taken all reasonable steps to institute legal proceedings for the
recovery of the unpaid rent, or satisfy the assessing officer that legal
proceedings would be useless. (5) The annual value of the property to
which the unpaid rent relates must have been included in the assessed income of
the previous year for which that rent was due, and tax should have been duly
paid on such assessed income. (6) The deduction allowed should in no
case exceed the income under the head ‘Income from house property’ included in
the total income, as computed without making this deduction. (7) If,
after deduction has been allowed in one year, the assessee realises
the unpaid rent in a subsequent year, the amount so realised
will be brought to tax under the head ‘Income from house property’ in the year
of receipt, irrespective of whether the assessee continues to be the owner of
that property in that year or not.
[R76]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.”
[R77]Word “fifteen” shall be
substituted for “ten” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R78]Substituted for “five” by
the Finance Act, 1994, w.e.f. 1-4-1995.
[R79]Inserted by the Finance (No.
2) Act, 1996, w.r.e.f. 1-4-1995.
[R80]Inserted by the Taxation
Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R81]See also Letter F.No. 45/230/63-ITJ, dated 22-2-1965. For details, see
[R82]For relevant case laws, see
[R83]Inserted by the Taxation
Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R84]For relevant case laws, see
[R85]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;”
[R86]For text of section 53A of
the Transfer of Property Act, 1882, see Appendix One.
[R87]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, Circular No. 25, SIA Series, dated
20-10-1975, Circular No. 599, dated 24-4-1991 and Circular No. 665, dated
5-10-1993.
[R88]For relevant case laws, see
[R89]Inserted by the Finance Act,
1973, w.r.e.f. 1-4-1972.
[R90]Inserted, ibid.,
w.r.e.f. 1-4-1967.
[R91]Inserted, ibid.,
w.r.e.f. 1-4-1972.
[R92]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R93]Inserted by the Finance Act,
1992, w.e.f. 1-4-1993. Earlier clause (v) was inserted by the Direct Tax
Laws (Amdt.) Act, 1987, w.e.f. 1-4-1989 and was omitted
by the Direct Tax Laws (Amdt.) Act, 1989, with effect
from the same date.
[R94]Inserted by the Finance (No.
2) Act, 1996, w.e.f. 1-10-1996.
[R95]Prior to its omission, Explanation
1 read as under:
[R96]Substituted for “43C” by the
Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. Earlier “43C” was substituted for
“43B” by the Finance Act, 1988, w.e.f. 1-4-1988. “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.
[R97]For relevant case laws, see
[R98]See also Circular No. 26-D(XL VI-22), dated 10-10-1966. n’s
Master Guide to Income-tax Act.
[R99]For relevant case laws, see
[R100]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, Letter [F.No. 10/47/68-IT(A-II)], dated 17-7-1968, read with letter
dated 21-6-1968, Circular No. 609, dated 29-7-1991, Circular No. 622, dated
6-1-1992 and Circular No. 652, dated 14-6-1993. For details, see
For relevant case laws, see n’s Master Guide
to Income-tax Act.
[R101]The italicised
words shall be inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R102]Omitted
by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986,
w.e.f. 1-4-1988. Earlier, original clause (i)
was substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R103]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.
[R104]See rule 5
and Appendix I to the Income-tax Rules, 1962. See also Appendix Two for
procedure for claiming higher depreciation.
[R105]First proviso omitted by the
Finance Act, 1995, w.e.f. 1-4-1996. Prior to its omission, first proviso, as
inserted by the Finance Act, 1966, w.e.f. 1-4-1966 and amended by the Finance
Act, 1983, w.e.f. 1-4-1984, read as under:
“Provided that where the actual cost of any machinery or plant does not exceed 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:”
[R106]Substituted by the Finance
(No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to substitution, second proviso, as
inserted by the Finance Act, 1975, w.e.f. 1-4-1975 and amended by the Taxation
Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988, read
as under:
“Provided further
that no deduction shall be allowed under this clause 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:”
[R107]Word “further” omitted by the Finance Act,
1995, w.e.f. 1-4-1996
[R108]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1992.
[R109]Substituted for “also” by the Finance Act,
1995, w.e.f. 1-4-1996.
[R110]Inserted by the Taxation
Laws (Amendment) Act, 1991, w.e.f. 15-1-1991.
[R111]Inserted by the Taxation Laws
(Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R112]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 clause (2) of the Explanation below clause (vi) of
this sub-section;
(b) “residential accommodation” includes accommodation in the
nature of a guest house but does not include premises used as a hotel;’
[R113]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 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 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:’
[R114]. 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” is 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;’
[R115]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 cost 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;’
[R116]Clause (vi) was
omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act,
1986, w.e.f. 1-4-1988. 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, w.e.f. 1-4-1976, 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 the 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.’
[R117]Sub-section (1A) was omitted
by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986,
w.e.f 1-4-1988. Original sub-section (1A) was inserted by the Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971.
[R118]Words “(or, if the assessee
is a registered firm or an unregistered firm assessed as a registered firm, in
the assessment of its partners)” omitted by the Finance Act, 1992, w.e.f.
1-4-1993. This expression was earlier omitted by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989.
[R119]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.
[R120]Inserted by the Finance Act,
1976, w.e.f. 1-4-1976.
[R121]Vide Notification No. SO 233(E),
dated 19-3-1990, 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. For details, refer n’s Direct Taxes Circulars, 1994 edn.,
Vol. 1,p. 1.409.
[R122]See also Circular No. 305,
dated 12-6-1981, Circular No. 324, dated 3-2-1982, Circular No. 314, dated 17-9-1981
and PIB Press Release, dated 23-10-1989. For details, see
[R123]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R124]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R125]Inserted, ibid.
[R126]Substituted by the Finance
(No. 2) Act, 1977, w.e.f. 1-4-1978.
[R127]Inserted, ibid
[R128]Inserted by the Finance Act,
1983, w.e.f. 1-4-1984.
[R129]Substituted for “1st day of
April, 1988” by the Finance Act, 1986, w.e.f. 1-4-1987.
[R130]For approved company, see
[R131]Substituted for “sub-section
(4)” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R132]Inserted by the Finance Act,
1983, w.e.f. 1-6-1983.
[R133]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;
[R134]Substituted for “does not exceed ten lakh rupees” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R135]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;”
[R136]Inserted by the Finance (No.
2) Act, 1977, w.e.f. 1-4-1978.
[R137]Inserted by the Finance (No.
2) Act, 1977, w.e.f. 1-4-1978.
[R138]Substituted for “1982” by
the Finance Act, 1982, w.e.f. 1-4-1982.
[R139]The prescribed authority under rule 5A is
Secretary, Department of Scientific & Industrial Research, Government of
India.
[R140]The prescribed authority
under rule 5A is Secretary, Department of Scientific & Industrial Research,
Government of India.
[R141]Omitted by the Finance Act,
1987, w.e.f. 1-4-1987. Prior to omission it 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);’
[R142]Inserted by the Finance Act, 1983, w.e.f.
1-6-1983.
[R143]Vide Notification No. SO 555(E), dated 1-8-1984. For details, refer n’s
Direct Taxes Circulars, 1994 edn., Vol. 1 pp. 1.408-1.409.
[R144]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R145]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.
[R146]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R147]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R148]Substituted for “Income-tax” by the Direct
Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[R149]Substituted for “Income-tax” by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R150]Substituted for “Income-tax” by the Direct
Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R151]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f 1-4-1989.
[R152]For definition of ‘Government company’,
[R153]“not
being earlier than three years from the date of such notification,” omitted by
the Finance Act, 1986, w.e.f. 1-4-1986.
[R154]Inserted by the Finance (No.
2) Act, 1977, w.e.f. 1-4-1978.
[R155]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.”
[R156]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.”
[R157]. Inserted by the Finance
Act, 1986, w.e.f. 1-4-1987.
[R158]Investment Deposit Account
Scheme, 1986 is the scheme framed by the Government under sub-section (1). For
details of the Scheme, see n’s Direct Taxes Circulars, 1994 edn.,
vol. 1, pp. 1.409-1.417.
[R159]Inserted by the Finance Act,
1987, w.e.f. 1-4-1987.
[R160]Word “eligible” omitted by
the Finance Act, 1989, w.e.f. 1-4-1991.
[R161]Inserted by the Finance Act,
1987, w.e.f. 1-4-1987.
[R162]Inserted by the Finance Act,
1990, w.e.f. 1-4-1990.
[R163]Omitted by the Finance Act,
1989, w.e.f. 1-4-1991. Prior to omission clause (i)
read as under :
‘(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;’
[R164]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.’
[R165]Substituted 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,” by the
Finance Act, 1989, w.e.f. 1-4-1991.
[R166]For text of Parts II and III
of Schedule VI to the Companies Act, 1956, see Appendix One.
[R167]Substituted for “Sixth
Schedule” by the Finance Act, 1989, w.e.f. 1-4-1991.
[R168]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.
[R169]“and”
omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R170]Omitted, ibid. Prior
to omission, clause (b) read as under :
“(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.”
[R171]Inserted by the Finance Act,
1989, w.e.f. 1-4-1991.
[R172]See rule 5AB and Form No. 3AA for audit report required under section 32AB(5).
[R173]Inserted by the Finance Act,
1987, w.e.f. 1-4-1987
[R174]Substituted for “and” by the
Finance Act, 1989, w.r.e.f. 1-4-1987.
[R175]Inserted, ibid.
[R176]Inserted, ibid.
[R177]Inserted by the Finance Act,
1987, w.e.f. 1-4-1987.
[R178]‘eligible’
omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R179]Inserted by the Finance Act, 1989, with
retrospective effect from 1-4-1987.
[R180]Inserted by the Finance Act,
1987, w.e.f. 1-4-1987.
[R181]“within
that previous year” omitted, ibid.
[R182]For definition of
“Government company”,
[R183]Substituted by the Direct
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. 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’.
[R184]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.
[R185]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R186]See rule 5B.
[R187]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R188]Inserted by the Finance Act, 1965, w.e.f.
1-4-1965.
[R189]Inserted by the Finance (No. 2) Act, 1967,
w.e.f. 1-4-1968.
[R190]“or
section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R191]Substituted for “that
sub-section” by the Finance Act, 1964, w.e.f. 1-4-1964.
[R192]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R193]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R194]Inserted by the Finance Act,
1965, w.e.f. 1-4-1965.
[R195]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1968.
[R196]“or
section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R197]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.
[R198]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R199]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.
See n’s Direct Taxes Circulars,
1994 edn.,
Vol. 1, p. 1.428.
[R200]Inserted by the Finance Act,
1965, w.e.f. 1-4-1965.
[R201]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1968.
[R202]Inserted by the Finance Act,
1965, w.e.f. 1-4-1965.
[R203]See also Circular No. 325,
dated 3-2-1982. n’s Master Guide to Income-tax Act.
[R204]Substituted for “forty” by
the Finance Act, 1966, w.e.f. 1-4-1966.
[R205]Substituted for “twenty”, ibid
[R206]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.
[R207]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.”
[R208]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.
[R209]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
[R210]“or
section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R211]Inserted by the Finance Act,
1966, w.e.f. 1-4-1966.
[R212]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.
[R213]“or
section 280-O” omitted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R214]See rule 8A and Form Nos. 4, 5
and 5A.
[R215]For definition of
“Government company”,
[R216]Substituted by the Finance
(No. 2) Act, 1967, w.e.f. 1-4-1967.
[R217]Substituted by the Finance
Act, 1981, w.e.f. 1-4-1982.
[R218]For notified hilly areas, see
[R219]Inserted by the Finance Act,
1975, with retrospective effect from 1-4-1965.
[R220]Substituted by the Finance
Act, 1990, w.e.f. 1-4-1991. Prior to substitution, section 33AB, as inserted by
the Finance Act, 1985, w.e.f. 1-4-1986 and later amended by the Finance Act,
1987, w.e.f. 1-4-1988, read as under :
‘33AB. Tea development account.—(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 assessment years commencing on
the 1st day of April, 1986, and the 1st day of April, 1987.’
[R221]Substituted for words beginning with
“whichever is earlier, deposited with the National Bank” and ending with “the
assessee shall, subject to the provisions of this section,” by the Finance Act,
1994, w.e.f. 1-4-1995
[R222]Inserted by the Finance Act,
1994, w.e.f. 1-4-1995.
[R223]See rule 5AC and Form No. 3AC
for audit report required under section 33AB(2).
[R224]Substituted for “the special account shall
not be allowed to be withdrawn except for the purposes specified in the scheme”
by the Finance Act, 1994, w.e.f. 1-4-1995.
[R225]Inserted by the Finance Act,
1994, w.e.f. 1-4-1995.
[R226]Inserted by the Finance Act,
1994, w.e.f. 1-4-1995.
[R227]Inserted, ibid.
[R228]Inserted by the Finance Act,
1994, w.e.f. 1-4-1995.
[R229]Inserted, ibid.
[R230]Inserted, ibid.
[R231]Inserted, ibid.
[R232]For definition of
“Government Company”,
[R233]Inserted by the Finance Act,
1994, w.e.f. 1-4-1995.
[R234]Inserted by the Direct tax
Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990.
[R235]Substituted for the portion
beginning with the words “In the case of an assessee” and ending with the words
“manner laid down in sub-section (2) :” by the Finance
Act, 1995, w.e.f. 1-4-1996. Prior to substitution the quoted portion, as
amended by the Finance Act, 1992, w.e.f. 1-4-1993, read as under
:
“In the case of an assessee, being a Government
company or 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) :”
[R236]For definition of “public
company” under clause (iv) of section 3(1) of the Companies Act, 1956, see
Appendix One.
[R237]Inserted by the Finance Act,
1992, w.e.f. 1-4-1993.
[R238]For definition of
“Government company”,
[R239]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1967.
[R240]Clause (iii) of
section 32(1) has been omitted, w.e.f. 1-4-1988.
[R241]. Inserted by the Finance
Act, 1984, w.e.f. 1-4-1985.
[R242]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:
“(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.”
[R243]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 specified, 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.”
[R244]Substituted for “the
relevant previous year” by the Finance Act, 1990, w.r.e.f. 1-4-1962.
[R245]Inserted by the Finance Act,
1966, w.e.f. 1-4-1966.
[R246]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.”
[R247]For definition of “Government Company”,
[R248]Inserted by the Finance Act,
1992, w.e.f. 1-4-1992.
[R249]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.
[R250]See also Press Note, dated
5-6-1982, issued by the Ministry of Finance (Department of Revenue).
For relevant case laws, see n’s Master Guide
to Income-tax Act.
[R251]Inserted by the Direct Taxes
(Amendment) Act, 1974, w.e.f. 1-4-1974.
[R252]See rule 6(1). The prescribed
authority under rule 6(1) is Director General (Income-tax Exemptions) in concurrence
with secretary, Department of Scientific & Industrial Research, Government
of India.
[R253]See rule 6(2) and Form No. 3CF
for application by scientific or industrial research institution.
[R254]For complete list of
approved scientific research university/institutions, etc. under this clause,
refer n’s Direct Taxes Circulars, 1994 edn., Vol. 1,
pp. 1.439-1.544; and n’s Yearly Tax Digest & Referencer,
1995 edn., p. 6.197 and 1996 edn.,
pp. 5.23 to 5.45.
[R255]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R256]Substituted by the Finance
(No. 2) Act, 1991, w.e.f. 1-4-1992. Prior to substitution, clause (iii),
as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, read
as under:
“(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 prescribed authority by notification in the Official
Gazette.”
[R257]See rule 6(2) and Form No. 3CF
for application by Scientific and Industrial Research Institution.
[R258]For complete list of approved
social science or statistical research university/institutions, etc., under
this clause, refer n’s Direct Taxes Circulars, 1994 end.,
Vol. 1, pp. 1.545-1.571; n’s Yearly Tax Digest & Referencer,
1995 edn., p. 6.206 and 1996 edn.,
pp. 5.46 to 5.52.
[R259]See rule 6(1) for prescribed
authority,
[R260]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R261]Substituted for clause (i) by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968.
[R262]Inserted by the Finance Act,
1984, w.e.f. 1-4-1984.
[R263]Existing Explanation
renumbered as Explanation 1, ibid.
[R264]Inserted, ibid.
[R265]For text of section 53A of
the Transfer of Property Act, see Appendix One.
[R266]. Inserted by the Finance
(No. 2) Act, 1967, w.e.f. 1-4-1968.
[R267]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.
[R268]Inserted by the Finance (No.
2) Act, 1980, with retrospective effect from 1-4-1962.
[R269]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1968.
[R270]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.
[R271]Inserted by the Direct Taxes
(Amendment) Act, 1974, w.e.f. 1-4-1974.
[R272]For
guidelines for approval of scientific research programmes
and list of approved programmes, refer n’s Direct Taxes Circulars, 1994 edn., Vol. 1, pp.
1.571-1.573.
[R273]Inserted
by the Finance Act, 1984, w.e.f. 1-4-1984.
[R274]Inserted
by the Finance (No. 2) Act, 1983, w.e.f. 1-4-1984.
[R275]Inserted by the Finance (No. 2) Act, 1980,
w.e.f. 1-9-1980.
[R276]See rule 6.
[R277]Inserted
by the Finance (No. 2) Act, 1980, w.e.f. 1-9-1980.
[R278]Inserted by the Finance Act,
1993, w.e.f. 1-4-1994.
[R279]Inserted
by the Finance Act, 1994, w.e.f.
1-4-1995.
[R280]Substituted for following
provisos by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996. Prior to their
substitution, the said provisos, as amended by the Finance Act, 1994, w.e.f.
1-4-1995, read as under :
“Provided that
every National Laboratory or University or Indian Institute of Technology
desirous of obtaining approval under this sub-section shall make an application
in the prescribed form* and manner to the prescribed authority** :
Provided further
that the prescribed authority may, before granting approval, call for such
documents or information† from the National Laboratory or the University or the
Indian Institute of Technology as it thinks necessary in order to satisfy
itself about the genuineness of the activities relating to scientific research
of such Laboratory or University or Institute, as the case may be.”
* See rules 6(3), (5) and (6) and Form Nos. 3CG, 3CH
and 3CI for application by sponsor for approval under section 35(2AA), form of
order of approval by Director General (IT Exemptions) and form of receipt of
payment, for carrying out an approved programme of
scientific research issued by National Laboratory, respectively.
** The prescribed authority under rule 6(3)
to (7) is Secretary, Department of Scientific & Industrial
Research/Director General (Income-tax Exemptions).
† The prescribed
returns under rules 6(7)(b), 6(7)(d), 6(7)(f) and 6(7)(g),
respectively, are as follows : Six monthly statement showing progress of
implementation of approved programme and actual
expenditure incurred thereon, copy of annual audited account for each approved programme (by 31st October of each year), completion
certificate along with copy of report on research activities carried out and
salient features of result obtained and its further application for commercial
exploitation, and copy of audited statement of accounts for approved programme (to be submitted within 6 months of completion of
programme).
[R281]Substituted by the Finance
Act, 1994, w.e.f. 1-4-1995. Prior to substitution the Explanation, as
inserted by the Finance Act, 1993, w.e.f. 1-4-1994, read as under
:
Explanation.—For the purposes of this sub-section,
“National Laboratory” means a scientific laboratory functioning at the national
level under aegis of the Indian Council of Agricultural Research, the Indian
Council of Medical Research or the Council of Scientific and Industrial
Research and which is approved as a National Laboratory by the prescribed
authority in such manner as may be prescribed.’
[R282]Clause (g) of section
3 of the Institutes of Technology Act, 1961, defines “Institute” as under :
“(g) “Institute” means any of the
Institutions mentioned in section 2 and includes the Indian Institute of
Technology, Kharagpur incorporated under the Indian Institute of Technology
(Kharagpur) Act, 1956 (5 of 1956);”
[R283]Inserted by the Finance (No.
2) Act, 1980, w.e.f. 1-9-1980.
For guidelines for approval of scientific research programmes under this sub-section, refer n’s Direct Taxes
Circulars, 1994 edn., Vol. 1, pp. 1.574-1.579.
[R284]Inserted by the Finance Act,
1984, w.e.f. 1-4-1984.
[R285]See rule 6.
[R286]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.
[R287]See rule 6.
[R288]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1967.
[R289]Inserted by the Finance Act,
1966, w.e.f. 1-4-1966. For relevant case laws, see n’s Master Guide to
Income-tax Act.
[R290]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1967.
[R291]Inserted by the Finance Act,
1985, w.e.f. 1-4-1986.
[R292]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1992.
[R293]See rules 11F to 11-O and Form
Nos. 58A and 58B for ‘Rules relating to National Committee for promotion of
Social and Economic Welfare’.
[R294]The prescribed authority
under rule 11L is Secretary to National Committee for Promotion of Social and Economic
Welfare, Department of Revenue, Government of India, See rule 11L, form
of application (in two sets) to be submitted for approval of association/institution
or for recommendation of project/scheme.
[R295]For constitution of National
Committee for Promotion of Social and Economic Welfare and appointment of
members thereof, refer n’s Direct Taxes Circulars, 1994 edn., Vol. 1. pp.1.579-1.580.
[R296]See rule 11-O(1)
and Form No. 58A for certificate of expenditure by way of payment qua
eligible projects/schemes from public sector company/local authority, etc.
[R297]See rule 11-O(2)
and Form No. 58B for certificate of payment/expenditure directly incurred by
company qua eligible projects/schemes from chartered accountant.
[R298]Inserted by the Finance (No.
2) Act, 1996, w.e.f.1-10-1996.
[R299]For notified eligible
projects and schemes, refer n’s Direct Taxes Circular, 1994 edn.,
Vol. 1, pp. 1.580-1.631; and n’s yearly Tax Digest, 1995 edn.,
pp. 6.70 to 6.108 and 6.206 to 6.210 and 1996 edn.,
pp. 5.52 to 5.89 and 5.177 to 5.180.
[R300]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 inserted, 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) travelling 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.’
[R301]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.”
[R302]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) an 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 kilometers, 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, urbanisation 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.’
[R303]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.
[R304]For relevant case laws, see
[R305]Substituted by the Finance
Act, 1979, w.e.f. 1-6-1979.
For guidelines for approval of programmes
of rural development, refer n’s Direct Taxes Circulars, 1994 edn.,
Vol. 1, pp. 1.639-1.645.
[R306]The ‘prescribed authority’
under rule 6AAA to approve the programme of rural
development shall be the Committee consisting of the following namely:—
(a) The
Chief Commissioner or Commissioner of Income-tax who exercises jurisdiction
over the State or, as the case may be, the Union territory in which the programme of rural development is to be carried out - Chairman;
(b) An
officer not below the rank of a Secretary to the Government of the State or, as
the case may be, the Union territory in which the programme
of rural development is to be carried out - Member;
The ‘prescribed
authority’ to approve an association or institution shall be the Committee
consisting of the following, namely:—
(a) The
Chief Commissioner or Commissioner of Income-tax, who exercises jurisdiction
over the State or, as the case may be, the Union territory in which the
principal office of the association or institution is situated - Chairman;
(b) An
Officer not below the rank of a Secretary to the Government of the State or, as
the case may be, the Union territory in which the principal office of the
association or institution is situated - Member
Where two or more
Commissioners exercise jurisdiction over the State or, as the case may be, the
Union territory, the Board may, by notification in the Official Gazette,
empower the Chief Commissioner or Commissioner specified in this behalf to be
the Chairman of the Committee.
[R307]Inserted by the Finance Act,
1983, w.e.f. 1-4-1983.
[R308]Inserted by the Finance Act,
1983, w.e.f. 1-4-1983.
[R309]National Fund for Rural
Development has since been notified. n’s Master Guide
to Income-tax Act.
[R310]Substituted for “behalf” by the
Finance Act, 1995, w.e.f. 1-4-1996.
[R311]Inserted, ibid.
[R312]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.”
[R313]Inserted by the Finance Act, 1983, w.e.f.
1-4-1983.
[R314]Inserted by the Finance Act,
1983, w.e.f. 1-4-1983.
[R315]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.
[R316]Substituted by the Finance
Act, 1990, w.e.f. 1-4-1991. Earlier sub-section (1) read as under:
“(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 or conservation of natural resources, to be used
for carrying out any programme of conservation of
natural resources approved by the prescribed authority, 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.”
[R317]For list of approved
associations or institutions, see n’s Master Guide to Income-tax Act.
[R318]The prescribed authority
under rule 6AAC is Secretary, Department of Environment, Government of India.
[R319]Inserted by the Finance Act,
1990, w.e.f. 1-4-1991.
[R320]See rule 6AAC. The prescribed
authority is Secretary, Department of Environment, Government of India.
[R321]Inserted by the Taxation
Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R322]For relevant case laws, see
[R323]For list of approved
concerns, see
[R324]See rule 6AB and Form No. 3B
for audit report to be filed by assessee other than company or a co-operative
society under section 35D(4).
[R325]Inserted by the Taxation
Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R326]See rule 6AB and Form No. 3B
for audit report to be filed by assessee other than company or co-operative
society under section 35E(6).
[R327]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(XLVII-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. n’s Master Guide to Income-tax Act.
[R328]For relevant case laws, see
[R329]Inserted by the Finance Act,
1979, w.e.f. 1-4-1980.
[R330]Inserted by Income-tax
(Amendment) Act, 1986, w.e.f. 1-4-1987.
[R331]For relevant case laws, see
[R332]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.”
[R333]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 the 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.”
[R334]Inserted by the Finance (No.
2) Act, 1980, w.e.f. 1-4-1981.
[R335]Inserted by the Finance Act,
1984, w.e.f. 1-4-1984.
[R336]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R337]For relevant case laws, see
[R338]For relevant case laws, see
[R339]See rules 75, 87 and 88.
[R340]For conditions specified by
the Board, see n’s Master Guide to Income-tax Act.
[R341]See rules 103 and 104.
[R342]For relevant case laws, see
[R343]Inserted by the Finance Act,
1987, w.e.f. 1-4-1988.
[R344]For relevant case laws, see
[R345].For relevant case laws, see
[R346]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.
[R347]Inserted by the Finance Act,
1985, w.e.f. 1-4-1985.
[R348]Inserted by the Finance Act, 1979, w.e.f.
1-4-1980.
[R349]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 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 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.
[R350]Rule 6ABA provides that the aggregate
average advances made by the rural branches of a scheduled bank shall be
computed in the following manner, namely :—
(a) the amounts of advances made by each rural branch as
outstanding at the end of the last day of each month comprised in the previous
year shall be aggregated separately;
(b) the sum so arrived at in the case of each such branch shall
be divided by the number of months for which the outstanding advances have
been taken into account for the purposes of clause (a);
(c) the aggregate of the sums so arrived at in respect of each
of the rural branches shall be the aggregate average advances made by the
rural branches of the scheduled bank.
[R351]Words “a bank approved by the Central
Government for the purposes of clause (viiia)
or” omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R352]Substituted for “four” by
the Finance Act, 1994, w.e.f. 1-4-1995. Earlier “four” was substituted for
“two” by the Finance Act, 1993, w.e.f. 1-4-1994.
[R353]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1992.
[R354]Inserted by the Finance Act, 1982, w.e.f.
1-4-1983.
[R355]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
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;’
[R356]Relettered by the Finance Act, 1982, w.e.f. 1-4-1983.
[R357]Inserted, ibid.
[R358]. Substituted for the
following clause (ii), [as amended by the Finance Act, 1985, w.e.f.
1-4-1985] 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;’
[R359]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1992.
[R360]For text of section 4A of
the Companies Act, 1956, and notified institutions thereunder,
see Appendix One.
[R361]For definition of “Government company”,
[R362]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.
[R363]Substituted for the portion
beginning with the words “industrial or agricultural development in India” and
ending with the words “such reserve account” by the Finance Act, 1995, w.e.f.
1-4-1996. Prior to its substitution, the quoted portion, as amended by the
Finance Act, 1979, w.e.f. 1-4-1980 and the Finance Act, 1985, w.e.f. 1-4-1985,
read as under :
“industrial or
agricultural development in India or by a public company formed and registered
in India with the main object of carrying on the business of 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 this clause and Chapter
VI-A) carried to such reserve account:”
[R364]Substituted for “before making
any deduction under this section” by the Finance (No. 2) Act, 1996, w.r.e.f.
1-4-1996.
[R365]Inserted by the Finance Act,
1979, w.e.f. 1-4-1980.
[R366]For approved financial corporations, see
[R367]Inserted by Finance Act,
1981, w.e.f. 1-4-1982.
[R368]Words “and general reserves”
shall be substituted for “(excluding the amounts capitalised
from reserves)” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R369]Inserted by the Finance
Act, 1979, w.e.f.
1-4-1980.
[R370]Substituted by the Finance
Act, 1992, w.r.e.f. 1-4-1987. Prior to substitution, Explanation as
inserted by the Finance Act, 1970, w.r.e.f. 1-4-1966 and later on omitted by
the Finance Act, 1974, w.e.f. 1-4-1975 and again inserted by the Finance Act,
1979, w.e.f. 1-4-1980 and further substituted by the Finance (No. 2) Act, 1991,
w.r.e.f. 1-4-1987, read as under :
‘Explanation.—In
this clause,—
(a) “financial corporation” shall include a public company;
(b) “public
company” shall have the meaning assigned to it in section 3 of the Companies
Act, 1956 (1 of 1956)’.
[R372]For definition of “Government company”,
[R373]Inserted by the Finance Act, 1995, w.e.f.
1-4-1996.
[R374]Inserted by the Finance (No. 2) Act, 1996, w.r.e.f.
1-4-1996.
[R375]Omitted by the Finance Act,
1994, w.e.f. 1-4-1995. Prior to omission clause (viiia),
as inserted by the Finance Act, 1982, w.e.f. 1-4-1983 and later on amended by
the Finance Act, 1985, w.e.f. 1-4-1985, read as under :
‘(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 this clause and Chapter VI-A) carried to such reserve
account:
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);’
For approved banks under
the omitted clause (viiia), see n’s Master Guide to Income-tax Act.
[R376]Inserted by the Finance Act, 1965, w.e.f.
1-4-1965.
[R377]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R378]Inserted by the Finance Act,
1989, w.e.f. 1-4-1989.
[R379]For text of section 4A of
the Companies Act, 1956, and notified institutions thereunder,
see Appendix One.
[R380]For relevant case laws, see
[R381]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 account 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;”
[R382]Inserted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R383]Substituted for “Income-tax”
ibid., w.e.f. 1-4-1988.
[R384]Inserted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R385]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R386].Inserted by Finance Act,
1985, w.e.f. 1-4-1985.
[R387]See rules 9A and 9B for
computation of deduction in respect of expenditure on production of feature
films/expenditure on acquisition of distribution rights of film.
[R388]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. 2P(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, Board’s Circular Letter No. 10/22/65-ITA(A-I), dated
24-5-1965, Circular No. 651, dated 11-6-1993, and Circular No. 671, dated
27-10-1993.
[R389]For relevant case laws, see
[R390]“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.
[R391]Substituted for
existing sub-sections (2) and (2A) by the Finance Act, 1992, w.e.f 1-4-1993.
Prior to substitution, sub-sections (2) and (2A), as amended by the Finance
(No. 2) Act, 1962, w.e.f. 1-4-1962, the Finance Act, 1965, w.e.f. 1-4-1965, the
Taxation Laws (Amendment) w.e.f. 1-10-1967, the Finance Act, 1968, w.e.f.
1-4-1968, the Finance Act, 1970, w.e.f. 1-4-1970, the Finance Act, 1976, w.e.f.
1-4-1977 and the Finance Act, 1983, w.e.f. 1-4-1976/1-4-1984, read as under :
‘(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 33 or section 33A 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) |
at the rate of
½ per cent; |
|
(iii) on
the next Rs. 1,20,00,000 of the profits and gains
of the business (computed in the manner aforesaid |
at the rate of
¼ per cent; |
|
(iv) on the
balance of the profits and gains of the business(computed in the manner
aforesaid) |
nil |
(2A)
Notwithstanding anything contained in sub-section (1) or sub-section (2), no
allowance shall be made in respect of so such 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 is in excess of the
aggregate amount computed as hereunder :—
|
(i) on the first Rs. 10,00,000 of
the profits and gains of the business or profession (computed before making
any allowance under section 32A 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; |
|
(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 exceed 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-section (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.
Explanation. 1.—For the
purposes of this sub-section, “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.
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 of 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 provision 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.’
[R392]See also Circular No. 644, dated
15-3-1993, Circular No. 708, dated 18-7-1995 and Circular No. 727, dated
27-10-1995. n’s Master Guide to Income-tax Act. For
relevant case laws, see n’s Master Guide to Income-tax Act.
[R393]Substituted for “any
previous year commencing on the 1st day of April, 1992” by the Finance Act,
1994, w.r.e.f. 1-4-1993.
[R394]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.
[R395]See Circular No. 203, dated
16-7-1976, Circular No. 200, dated 28-6-1976 and Circular No. 19, dated
13-6-1969. n’s Master Guide to Income-tax Act.
[R396]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R397]See Circular No. 203, dated
16-7-1976, Circular No. 200, dated 28-6-1976 and Circular No. 19, dated
13-6-1969. For details and relevant case laws, see n’s Master Guide to
Income-tax Act.
[R398]See rules 6AC, 6B
and 6D. Limits prescribed under rule 6B for allowability
of advertisement expenditure are as follows :
ADVERTISEMENT
EXPENSES - The admissible quantum of deduction for advertisement expenditure is
as follows :
In respect of
articles intended for presentation, the quantum of deduction will be as follows :
|
where the
amount of expenditure does not exceed Rs. 1,000 on
each such article |
100% |
|
In any other
case |
Rs.
1,000, plus 50% of expenditure in excess of Rs.
1,000 on each cash article. |
In respect of any
advertisement outside India involving payment in foreign currency, the
deduction shall not exceed the amount covered by the foreign exchange granted
to, or permitted to be acquired by the assessee for this purpose under the law
relating to foreign exchange for the time being in force.
The Assessing
Officer has the power to disallow such part of the expenditure which, in his
opinion, is excessive or unreasonable having regard to the legitimate business
needs of the assessee and the benefit derived therefrom. However, the
disallowance can be made by the Assessing Officer in the following cases only :
(a) where the payment is made to a person who has a substantial
interest in the business of the assessee or to the relative of such person; and
(b) where the payment is made to a person who carries on
business or profession as a publicity or advertisement agent and the assessee
has substantial interest in that business or profession.
Where payment
exceeds Rs. 10,000, deduction will be allowed only if
such payment is made by a crossed cheque drawn on a bank or by a crossed demand
draft. Even if an item of expenditure in excess of Rs.
10,000 is claimed and allowed as a deduction in any year on accrual basis, the
actual payment when made in a subsequent year should be made by a crossed
cheque or demand draft only. Otherwise, the deduction already allowed will be
withdrawn by the assessing authority.
Rule 6D
prescribes following limits for deductibility of travelling
expenses/allowances.
TRAVEL IN
(i) In respect of travel by rail, road, waterway or
air, the expenditure actually incurred.
(ii) In
respect of any other expenditure (including hotel expenses or allowances paid)
in connection with such travel, an amount calculated at the following rates for
the period spent outside such headquarters :
|
Where the
amount of such expenditure does not exceed Rs.
1,500 per day |
100% |
|
In any other
case |
Rs.
1,500 plus 75% of such expenditure in excess of Rs.
1,500 per day |
TRAVELLING
OUTSIDE INDIA—The quantum of deduction will have to be worked out on the
following lines :
|
Step 1 |
- Note down the
amount covered by foreign exchange granted or permitted to be acquired for
purposes of the travel. |
|
Step 2 |
- Note down the
expenditure incurred on such travel in Indian currency. |
|
Step 3 |
- Aggregate the
amounts under Step 1 and Step 2; say Rs. X. |
|
Step 4 |
- Note down the
total number of days spent by the employee or other person outside India. In
arriving at this figure, the number of days required for such travel by a
reasonably direct route in the mode of travel adopted by him should be
excluded; say A. |
|
Step 5 |
- Note down the
number of days mainly devoted by such employee or other person for the
purpose of the business or profession of the assessee outside India. Any
intervening public holidays in the foreign country can be included, provided
the person has devoted the succeeding working day mainly for the business
purpose; say B. |
|
Step 6 |
- Find out (X)
× (B)/(A) say Rs. Y. |
The deduction
admissible will be the actual total expenditure incurred by the assessee on the
travel, or Rs. Y, whichever is less.
For
relevant case laws, see n’s Master guide to Income-tax Act.
[R399]k 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.
[R400]Omitted by the Finance Act,
1985, w.e.f. 1-4-1986. Omitted such sub-section (3B), as inserted by the
Finance 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 provision 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.
[R401]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
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.
[R402]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 engaged 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, 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.
[R403]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
For relevant case laws, see Income-tax Act.
[R404]Inserted by the Finance Act,
1983, with retrospective effect from 1-4-1979.
[R405]For relevant case laws, see
[R406]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R407]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R408]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.
[R409]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R410]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.”
[R411]See also Circular No. 91/58/66-ITJ(19), dated 18-5-1967. n’s
Master Guide to Income-tax Act.
[R412]Substituted for “39” by the
Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R413]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;”
[R414]For relevant case laws, see
[R415]For relevant case laws, see
[R416]Inserted by the Income-tax (Amendment)
Act, 1972, with retrospective effect from 1-4-1962 subject to savings
prescribed by sections 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, of 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 it 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 of 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.’
[R417]For relevant case laws, see
[R418]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.
[R419]Substituted by the Finance
Act, 1992, w.e.f. 1-4-1993. Prior to substitution, clause (b), as
amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985, the Direct
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989, and the Direct Tax Laws
(Amendment) Act, 1987, with effect from 1-4-1989, read as under :
‘(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.
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 a 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;’
[R420]See Circular No. 739, dated
25-3-1996. n’s Master Guide to Income-tax Act.
[R421]Inserted by the Direct Tax
Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R422]Inserted by the Finance Act,
1968, w.e.f. 1-4-1968.
[R423]See also 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.
[R424]For relevant case laws, see
[R425]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R426]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.”
[R427]31-3-1969 specified vide
Notification No. SO 623, dated 14-2-1969. See n’s Direct Taxes
Circulars, 1994 edn., Vol.1, p. 739.
[R428]For relevant case laws, see
[R429]Substituted for “two
thousand five hundred” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989. See also Circular No. 522, dated 18-8-1988. For details see
[R430]Word “twenty” shall be
substituted for “ten” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R431]Substituted for “such
expenditure shall not be allowed as a deduction” by the Finance Act, 1995,
w.e.f. 1-4-1996.
[R432]Substituted for “two
thousand five hundred” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.
1-4-1989.
[R433]Word “twenty” shall be
substituted for “ten” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R434]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R435]Substituted for “two thousand
five hundred” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R436]Word “twenty” shall be
substituted for “ten” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R437]See rule 6DD for cases and
circumstances in which payment in a sum exceeding Rs.
10,000 may be made otherwise than by a crossed cheque drawn on a bank or by a
crossed bank draft. For an analysis of rule 6DD, see Appendix One.
[R438]Inserted by the Finance Act,
1969, w.e.f. 1-4-1969.
[R439]Prior to its omission,
sub-section (5), as amended by the Direct Taxes (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 employee, 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 the 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
(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;’
[R440]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.”
[R441]Inserted by the Finance Act,
1975, with retrospective effect from 1-4-1973.
[R442] For relevant case laws, see
[R443]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 advances 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.’
[R444]Inserted by the Finance Act,
1984, with retrospective effect from 1-4-1980.
[R445]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R446]Inserted by the Finance Act,
1984, w.r.e.f. 1-4-1980.
[R447]Prior to omission
sub-section (12), as inserted by the Finance Act, 1985, w.e.f. 1-4-1986, read as
under:
“(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 other 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.”
[R448]Substituted by the Finance
Act, 1992, w.e.f. 1-4-1993. Prior to substitution, sub-section (1) read as under :
“(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.”
[R449]For relevant case laws, see
[R450]Existing Explanation
shall be renumbered as Explanation 2 by the Finance (No. 2) Act, 1996,
w.e.f. 1-4-1997.
[R451]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 the 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.’
[R452]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 no 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.’
[R453]Inserted by the Finance (No.
2) Act, 1980, w.e.f. 1-4-1981.
[R454]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1968.
[R455]Inserted by the Finance (No.
2) Act, 1980, w.e.f. 1-4-1981.
[R456]For relevant case laws, see
[R457]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.’
[R458]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.
[R459]‘or
under the head “Capital gains” omitted by the Finance Act, 1987, w.e.f.
1-4-1988.
[R460]Inserted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R461]Substituted for “in such business of the
Central Government” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R462]“and”
omitted, ibid.
[R463]Inserted by the Finance Act,
1981, w.e.f. 1-4-1981.
[R464]Inserted, ibid.
[R465]See also Circular No. 190, daed 1-3-1976. n’s Master Guide to
Income-tax Act.
For relevant
case laws, see n’s Master Guide to Income-tax Act.
[R466]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.
[R467]Inserted by the Finance Act,
1975, w.e.f. 1-4-1975.
[R468]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 were inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[R469]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.”
[R470]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R471]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R472]Substituted for “Inspecting
Assistant”, ibid.
[R473]. 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 Indian 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-tax Act, 1922 (11 of 1922), or the actual price for
which the asset is re-acquired by him, whichever is the less.”
[R474]Inserted by the Finance (No.
2) Act, 1996, w.e.f. 1-10-1996.
[R475]Substituted by the Finance
Act, 1965, w.e.f. 1-4-1965.
[R476]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1967.
[R477]Inserted by the Finance Act,
1986, with retrospective effect from 1-4-1974.
[R478]For relevant case laws, see
[R479]Inserted by the Finance Act,
1995, w.r.e.f. 1-4-1962.
[R480]Substituted by the Finance
Act, 1968, w.e.f. 1-4-1969.
[R481]See also Circular No. 23D(XXXIX-4), dated 12-9-1960. n’s
Master Guide to Income-tax Act.
[R482]. For relevant case laws, see
[R483]For relevant case laws, see
[R484]Inserted by the Finance (No.
2) Act, 1965, with retrospective effect from 1-4-1962.
[R485]Inserted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R486]Substituted for “any asset”
by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986,
w.e.f. 1-4-1988.
[R487]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 was substituted by the Finance Act,
1965, w.e.f. 1-4-1965 and Explanation 2A was inserted by the Finance
(No. 2) Act, 1967, w.e.f. 1-4-1967.
[R488]Inserted by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R489]Inserted by the Finance (No.
2) Act, 1967, w.e.f. 1-4-1967.
[R490]See also Letter, dated 4-1-1967,
issued by Ministry of Finance to FICCI. For details, see
For relevant
case laws, see n’s Master Guide to Income-tax Act.
[R491]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.
[R492]For definition of “foreign
currency”, Section 2(k) of the Foreign Exchange Regulation Act, 1973
defines “Indian currency” 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 (20 of 1934);’
[R493]Now Foreign Exchange
Regulation Act, 1973 (46 of 1973).
[R494]Section 2(b) of the
Foreign Exchange Regulation Act, 1973 defines “authorised dealer” as under :
‘(b) “authorised dealer” means a person for the time being
authorised under section 6 to deal in foreign exchange;’.
[R495]Now Foreign Exchange
Regulation Act, 1973 (46 of 1973).
[R496]Inserted by the Finance Act,
1983, w.e.f. 1-4-1984.
[R497]See also Circular No. 496,
dated 25-9-1987 and Circular No. 674, dated 29-12-1993.
[R498]For relevant case laws, see
[R499]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”.
[R500]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R501]Inserted, ibid.
[R502]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R503]Inserted by the Finance Act,
1988, w.e.f. 1-4-1989.
[R504]Inserted by the Finance Act,
1990, w.e.f. 1-4-1991.
[R505]The italicised words shall
be inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R506]Inserted by the Finance Act,
1987, w.e.f. 1-4-1988.
[R507]Inserted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R508]Inserted by the Finance Act,
1988, w.e.f. 1-4-1989.
[R509]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 paid 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.”
[R510]Inserted by the Direct Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1989.
[R511]Inserted by the Finance Act,
1989, with retrospective effect from 1-4-1984.
[R512]Inserted by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R513]Remember by the Finance Act,
1989, with retrospective effect from 1-4-1984.
[R514]Inserted by the Finance Act,
1988, w.e.f. 1-4-1989.
[R515]Substituted by the Finance
Act, 1990, w.e.f. 1-4-1991. Prior to substitution Explanation 4 as
inserted by the Finance Act, 1988, w.e.f. 1-4-1989 and amended by the Finance
Act, 1989, with retrospective effect from 1-4-1984, read as under :
‘Explanation
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).’
[R516]For text of section 4A of
the Companies Act, 1956, and notified institutions thereunder,
see Appendix One.
[R517]For definition of
“Government company”,
[R518]Inserted by the Finance Act,
1988, w.e.f. 1-4-1988.
[R519]Inserted by the Finance (No.
2) Act, 1991, w.e.f. 1-4-1991.
[R520]See also Circular No. 698,
dated 26-12-1994.
[R521]See rule 6EA of specified
categories of bad
or doubtful debts.
[R522]For text of section 4A of
the Companies Act, 1956, and notified institutions there under, see
Appendix One.
[R523]For definition of
“Government Company”,
[R524]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.
[R525]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.
[R526]Inserted by the Finance Act,
1964, w.e.f. 1-4-1964.
[R527]For relevant case laws, see
[R528]Inserted by the Finance (No.
2) Act, 1965, with retrospective effect from 1-4-1964.
[R529]Inserted by the Taxation
Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R530]For relevant case laws, see
[R531]For specified professions, see
[R532]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R533]Substituted for the words
“twenty-five” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R534]Substituted for the words
“two hundred any fifty”, ibid.
[R535]Substituted for
“twenty-five”, ibid.
[R536]Substituted for the words
“two hundred and
fifty”, ibid.
[R537]Substituted for “Income-tax”
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R538]See rule 6F for prescribed
books of account to be maintained by professionals. Form 3C has been prescribed
as a Daily Case Register to be maintained by Medical Professionals. For an
analysis of rule 6F, see Appendix Two.
[R539]Inserted by the Finance Act,
1984, w.e.f. 1-4-1985.
[R540]See also Circular No. 452,
dated 17-3-1986 and Circular No. 561, dated 22-5-1990.
For relevant
case laws, see n’s Master Guide to Income-tax Act.
[R541]See rule 6G. Prescribed audit
reports are as under :—
(i) Audit report in case of person who carries on
business and who is required to get his accounts audited under any other law:
Form 3CA
(ii) Audit
report in case of person who carries on business and who is not required to get
his accounts audited under any other law : Form 3CB
(iii) Audit
report in case of professionals: Form 3CC
(iv)
Prescribed particulars in case of (i) and (ii)
above : Form 3CD
(v)
Prescribed particulars in case of (iii) above :
Form 3CE
[R542]“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.
[R543]“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.
[R544]“or
years” omitted, ibid.
[R545]Substituted for “obtain
before” by the Finance Act, 1995, w.e.f. 1-7-1995.
[R546]Substituted for “Provided
that” by the Finance Act, 1992, w.r.e.f. 1-4-1985.
[R547]Words “section 44AC or”
omitted by the Finance Act, 1995, w.e.f. 1-7-1995.
[R548]“by
accountant” omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R549]Substituted for “obtains before” by the Finance Act,
1995, w.e.f. 1-7-1995.
[R550]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, whether 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.’
[R552]Prior to
omission section 44AC, as inserted by the Finance Act, 1988, w.e.f. 1-4-1989
and later amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989
and the Finance Act, 1990, w.e.f. 1-4-1991, read as under :
’44AC. Special
provision for computing profits and gains from the business of trading in
certain goods.—(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”:
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 in fixed by or under any State Act.
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 of 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 or co-operative society.
[R553]Inserted by the Finance Act,
1994, w.e.f. 1-4-1994.
[R554]See also Circular No. 737,
dated 23-2-1996. For details, see n’s Master Guide to Income-tax Act.
[R555]See Circular No. 737, dated
23-2-1996. n’s Master Guide to Income-tax Act.
[R556]Clause (14) and
clause (16) of section 2 of the Motor Vehicles Act, 1988, defines “goods
carriage” and “heavy goods vehicle” as follows:
‘(14) “goods carriage” means any motor vehicle
constructed or adapted for use solely for the carriage of goods, or any motor
vehicle not so constructed or adopted when used for the carriage of goods;’
‘(16) “heavy goods vehicle” means any goods carriage the gross
vehicle weight of which, or a tractor or a road-roller the unladen
weight of either of which, exceeds 12,000 kilograms;’
[R557]Clause (14) and
clause (16) of section 2 of the Motor Vehicles Act, 1988, defines “goods
carriage” and “heavy goods vehicle” as follows:
‘(14) “goods
carriage” means any motor vehicle constructed or adapted for use solely for the
carriage of goods, or any motor vehicle not so constructed or adopted when used
for the carriage of goods;’
‘(16) “heavy goods vehicle” means any goods carriage the gross
vehicle weight of which, or a tractor or a road-roller the unladen
weight of either of which, exceeds 12,000 kilograms;’
[R558]Inserted by the Finance Act,
1975, w.e.f. 1-4-1976.
[R559]For relevant case laws, see
[R560]Inserted by the Finance Act,
1987, with retrospective effect from 1-4-1983.
[R561]Inserted by the Finance Act,
1988, with retrospective effect from 1-4-1983.
[R562]Inserted by the Finance Act,
1987, w.e.f. 1-4-1988.
[R563]Inserted by the Finance Act,
1989, w.e.f. 1-4-1990.
[R564]See also Circular No. 552,
dated 9-2-1990. n’s Master Guide to Income-tax Act.
[R565]Inserted by the Finance Act,
1976, w.e.f. 1-6-1976.
[R566]See also Circular No. 649,
dated 31-3-1993. For details, see n’s Master Guide to Income-tax Act.
[R567]For relevant case laws, see
[R568]Omitted by the Finance Act,
1993, w.e.f. 1-4-1993. Prior to omission, clause (b) read as under :
“(b) an amount equal to the average head office expenditure; or”
[R569]Inserted by the Finance Act,
1987, w.e.f. 1-4-1988.
[R570]. Omitted by the Finance Act,
1993, w.e.f. 1-4-1993. Prior to omission clause (iii) read as under :
‘(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;’
[R571]Inserted by the Finance Act, 1976, w.e.f.
1-6-1976.
[R572]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.
[R573]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.
[R574]Omitted by the Finance Act,
1994, w.e.f. 1-4-1995. Prior to its omission, clause (c), as inserted by
the Finance Act, 1983, w.e.f. 1-6-1983, read as under:
“(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;”
[R575]. Omitted by the Finance Act,
1994, w.e.f. 1-4-1995. Prior to its omission, clause (d), as inserted by
the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1989, read as under
:
“(d) no deduction in respect of any expenditure or
allowance shall be allowed under any of the said sections in computing the
income referred to in clause (ab) of
sub-section (1) of section 115A.
[R576]Substituted for “the Explanation”
by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R577]Substituted for “the
Explanation” by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R578]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.
[R579]See also Circular No. 23D
(XXIII-6) of 1965. For details, see n’s Master Guide to Income-tax Act.
For relevant
case laws, Income-tax Act.
[R580]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.
[R581]Figure “53,” omitted by the
Finance Act, 1992, w.e.f. 1-4-1993.
[R582] “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.
[R583]“54C” omitted by the Finance
Act, 1976, w.e.f. 1-4-1976.
[R584]Substituted for “and 54D” by
the Finance (No. 2) Act. 1977, w.e.f. 1-4-1978.
[R585]Substituted for “54D and
54E” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R586]Substituted for “54E and
54F” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R587]Inserted by the Finance (No.
2) Act, 1996, w.e.f 1-10-1996.
[R588]Substituted for “and 54G” by
the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991.
[R589]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.
[R590]Inserted by the Depositories Act, 1966, w.r.e.f 20-9-1995.
[R591]For respective definitions, see Appendix One.
[R592]. 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.
[R593]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R594]Substituted for ‘income under the head “Capital gains” of the previous year in which the transfer took place’ by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1988.
[R595]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R596]For relevant case laws.
[R597]. For relevant case laws.
[R598]Clause (ii) omitted by the Finance Act, 1987, w.e.f. 1-4-1988. Prior to its omission, clause (iii)
stood as under :
“(ii) any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons;”
[R599]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R600]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R601]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R602]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R603]Inserted by the Finance Act, 1992, w.e.f. 1-6-1992.
[R604]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R605]Inserted by the Finance Act, 1976, w.e.f. 1-4-1977.
[R606]For notified public institution.
[R607]. Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1962.
[R608]Inserted by the Finance Act, 1992, w.r.e.f. 1-4-1962.
[R609]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R610]Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, section 48, a
amended by the Finance Act, 1987, w.e.f. 1-4-1988,
the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f.
1-4-1990, the Finance Act, 1989, w.e.f. 1-4-1990 and
the Finance
(No. 2) Act, 1991, w.e.f. 1-4-1992, read as under :
‘48. Mode of computation and deductions.—(1)
The income chargeable under the head “Capital gains” shall be computed,—
(a) 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 asset and the cost of any improvement thereto:
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 fifteen thousand rupees,
the whole of such amount ;
(b) in any
other case, fifteen 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 fifteen
thousand rupees;
(B) in the
case of any other assessee, fifty per cent of the amount of such gain in excess
of fifteen thousand rupees;
(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 fifteen thousand rupees;
(B) in the
case of venture capital company, sixty per cent of the amount of such gain in
excess of fifteen thousand rupees;
(C) in any
other case, sixty per cent of the amount of such gain in excess of fifteen
thousand rupees;
(ii) in respect of long-term capital
gain so arrived at relating to 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
fifteen thousand rupees;
(B) in any
other case, sixty per cent of the amount of such gain in excess of fifteen
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 fifteen 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 fifteen 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 fifteen 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 fifteen
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 fifteen thousand rupees in clauses (a)
and (b) of this sub-section shall be construed as references to such
reduced amount, if any.
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 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.”
[R611]For relevant case laws, see Income-tax Act.
[R612]See rule 115A.
[R613]For definition of “foreign currency” and “Indian currency”
[R614]Notified Cost Inflation Index is as under
:
1981-82 : 100/1982-83 : 109/1983-84 : 116/1984-85 : 125/1985-86 : 133/1986-87 : 140/1987-88 : 150/1988-89 : 161/1989-90 : 172/1990-91 : 182/1991-92 : 199/1992-93 : 223/1993-94 : 244/1994-95 : 259/1995-96 : 281.
[R615]. For relevant case laws, see Income-tax Act.
[R616]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R617]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”
[R618]. Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R619]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R620]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R621]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R622]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R623]Substituted for “section” by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1967.
[R624]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.
[R625]Substituted for “section” by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R626]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R627]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1962.
[R628]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985.
[R629]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, 1886 (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.
[R630]For relevant case laws, see Income-tax Act.
[R631]. 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
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.
[R632]Prior to omission, section 53, as amended by the Taxation
Laws (Amendment) Act, 1984, w.e.f. 1-4-1985 and the
Finance Act, 1987, w.e.f. 1-4-1988, read as under :
‘53. Exemption of capital gains from a
residential house.—Notwithstanding anything contained in section 45, where
in the case of an assessee being an individual or a Hindu undivided family, the
capital gain arises from the transfer of 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.
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.’
[R633]See also
Circular No. 471, dated 15-10-1986, Circular No. 520, dated 11-8-1988, Circular
No. 538, dated 13-7-1989, Circular No. 672, dated 16-12-1993, Circular No. 667,
dated 18-10-1993 and Circular No. 743, dated 6-5-1996. For details, see
Income-tax Act.
For relevant case laws, see Income-tax Act.
[R634]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R635]Substituted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R636]. Substituted for “Where, in the case of an assessee being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R637]“to which the provisions of section 53 are not applicable” omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R638]. 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.
[R639]. Substituted for “is greater than the cost of the new asset” by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R640]Substituted for “the house property” by the Finance Act, 1982, w.e.f. 1-4-1983.
[R641]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 which is not a short-term capital asset.’
[R642]Substituted for the following sub-section (2) [as
inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974 and
amended by the Finance Act, 1982, w.e.f. 1-4-1983 and
the Finance Act, 1986, w.e.f. 1-4-1987] 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 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 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.
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 head “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 is such enhancement had not been made as the full value of the consideration so received or accruing.’
[R643]. For text of Capital Gains Accounts Scheme, 1988—GSR 724(E), dated 22-6-1988 and the list of authorised branches (except rural branches) of the banks specified to receive deposits and maintain account GSR 725(E), dated 22-6-1988.
[R644]Prior to omission, Explanation, as amended by
the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992, read
as under:
“Explanation.—Where any amount becomes
chargeable under section 45 in accordance with the proviso to this sub-section,
then,—
(a) for the purpose of the deductions
to be made under clause (b) of sub-section (1) of section 48, the
initial deduction of fifteen 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.”
[R645]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R646]. For relevant case laws, see Income-tax Act.
[R647]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R648]. Substituted for “Where the capital gain arises” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R649]Inserted by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R650]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.”
[R651]For text of the Capital Gains Accounts Scheme, 1988—GSR 724(E), dated 22-6-1988 and for list of authorised branches (except rural branches) of the banks specified to receive deposits and maintain accounts—GSR 725(E), dated 22-6-1988.
[R652]Prior to omission, Explanation, as amended by
the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992, read
as under :
“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 fifteen thousand rupees under sub-section (2) of that section shall not be admissible.”
[R653]Inserted by the Finance Act, 1973, w.e.f. 1-4-1974.
[R654]For relevant case laws, see Income-tax Act.
[R655]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R656]Substituted for “Where the capital gain arises” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R657]Inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974.
[R658]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 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 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
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 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.”
[R659]For text of the Capital Gains Accounts Scheme, 1988—GSR 724(E), dated 22-6-1988 and for list of authorised branches (except rural branches) of the banks specified to receive deposits and maintain accounts—GSR 725(E), dated 22-6-1988.
[R660]Prior to omission, Explanation, as amended by
the Finance (No.2) Act, 1991, w.e.f. 1-4-1992, read
as under :
“Explanation.—Where any amount becomes chargeable under section 45 in accordance with the proviso to this sub-section, then, for the purposes of the deduction to be made under clause (b) of sub-section (1) of section 48, the initial deduction of fifteen thousand rupees under sub-section (2) of that section shall not be admissible.”
[R661]Inserted by the Finance (No.2) Act, 1977, w.e.f. 1-4-1978.
[R662]See also Circular No. 359, dated 10-5-1983 and Circular No. 560, dated 18-5-1990. For details, see Income-tax Act.
[R663]Substituted for “capital assets, not being a short-term capital asset” by the Finance Act, 1987, w.e.f 1-4-1988.
[R664]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R665]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.
[R666]Substituted for “full value of consideration received or accruing” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R667]Substituted for “full value of consideration received or accruing” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R668]Substituted for “full value of such consideration”, ibid.
[R669]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R670]Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1984.
[R671]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R672]Substituted for “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 were inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R673]For definition of “savings certificates”.
[R674]. Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R675]Inserted, ibid.
[R676]. Inserted by the Finance Act, 1979, w.e.f. 1-4-1979.
[R677]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R678]For notification, see Income-tax Act.
[R679]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R680]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R681]. For notification, see Income-tax Act.
[R682]For notification, see Income-tax Act.
[R683].For definition of “Government company”.
[R684]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R685]. For notification, see Income-tax Act.
[R686]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).’
[R687]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R688]For notification, see Income-tax Act.
[R689]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R690]Inserted, ibid.
[R691]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.
[R692]Substituted for “2” by the Finance Act, 1978, w.e.f. 1-4-1978.
[R693]Substituted for “clause (vi)” by the Finance
Act, 1979, w.e.f. 1-4-1979.
[R694]. Inserted, ibid.
[R695]Inserted by the Finance Act, 1978, w.e.f.
1-4-1978.
[R696].
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.
[R697]Substituted for “clause (vi)”, ibid.
[R698]Substituted for “clause (vi)” by the Finance Act,
1979, w.e.f. 1-4-1979.
[R699]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R700]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R701]. Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R702]. Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R703]Substituted for “capital assets other than short-term capital assets” by the Fiannce Act, 1987, w.e.f. 1-4-1988.
[R704]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R705]Numbered as Explanation 1 by the Finance Act, 1983, w.e.f. 1-4-1983.
[R706]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.
[R707]Substituted for “clause (vi)”, ibid.
[R708]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R709]Omitted by the Finance Act, 1987, w.e.f.
1-4-1988. Original sub-section (3) was inserted by the Finance Act, 1978, w.e.f. 1-4-1978. Prior to its omission, sub-section (3) as amednded 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 Governemnt 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 additinal
compensation or, as the case may be, the adidtional
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 clasue (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 Februrary, 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 cosideration 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 vlaue 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 enchanced.’
[R710]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 addititional compensation or, as the case may be, the additional consideration referred to in sub-section (3) in any relvant 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.’
[R711]Omitted by the Finance Act, 1987, w.e.f.
1-4-1988. Original sub-section (5) was inserted 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-caluse (vi) of clause (a) of Explanation 1 below sub-section (1), the provision 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.”
[R712]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.
[R713]Substituted for “clause (va)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R714]“or clause (a) or clause (b) of sub-section (3)” omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R715]Sections 54EA and 54EB inserted by the Finance (No.2) Act, 1996, w.e.f. 1-10-1996.
[R716]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R717]For relevant case laws, see Income-tax Act.
[R718]Substituted for “Where, in the case of an assessee being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R719]Inserted, ibid.
[R720]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 cpital asset which is not a short-term capital asset;’
[R721]. ”(ii)” omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R722]Substituted for “one year”, ibid.
[R723]. Inserted, ibid.
[R724]For text of the Capital Gains Accounts Scheme, 1988—GSR 724(E), dated 22-6-1988 and for list of authorised branches (except rural branches) of the banks specified to receive deposits and maintain accounts—GSR 725(E), dated 22-6-1988.
[R725]Prior to omission, Explanation, as amended by
the Finance (No.2) Act, 1991, w.e.f. 1-4-1992, read
as under :
“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 fifteen thousand rupees under sub-section (2) of that section shall not be admissible.”
[R726]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R727]. For notified urban area, see Income-tax Act.
[R728]For text of the Capital Gains Accounts Scheme, 1988—GSR 724(E), dated 22-6-1988 and for list of authorised branches (except rural branches) of the banks specified to receive deposits and maintain accounts—GSR 725(E),dated 22-6-1988
[R729]Prior to omission, Explanation, as amended by
the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992, read
as under:
“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 fifteen thousand rupees under sub-section (2) of that section shall not be admissible.”
[R730]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
[R731]“54E” omitted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R732]. For relevant case laws, see Income-tax Act.
[R733]Substituted for “sections 48, 49 and 50” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R734]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.
[R735]Substituted for’ “cost of any improvement”, in relation to a capital asset,—’ by the Finance Act, 1987, w.e.f. 1-4-1988.
[R736]. 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.
[R737]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R738]Words “and the fair market value of the asset on that day is taken as the cost of acquisition at the option of the assessee,” omitted, ibid.
[R739]. Inserted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1967.
[R740]See also Circular No. 31(LXXVII-5)-D, dated 21-9-1962. For details, see Income-tax Act.
[R741]. 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.
[R742].
Substituted for clause (a) by the Finance Act, 1994, w.e.f.
1-4-1995. Prior to substitution, clause (a) read as under:
“(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;”
[R743]Substituted for the portion beginning with the words
“in a case where” and ending with the words “sub-clauses (i)
and (ii) of clause (b)” by the Finance Act, 1995, w.e.f. 1-4-1996.
Prior to its substituions, the quoted portion read as
under:
“in a case where, by virtue of holding a capital asset, being a share or any other security within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause referred to as the financial asset), the assessee becomes entitled to subscribe to any additional financial asset, then, subject to the provisions of sub-clauses (i) and (ii) of clause (b)”
[R744]For definition of “security”,
[R745]. Inserted by the Finance Act, 1995, w.e.f. 1-4-1996.
[R746]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.
[R747]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R748]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.
[R749]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R750]Inserted by the Finance (No.2) Act, 1967, w.e.f. 1-4-1967.
[R751]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.
[R752]. Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R753]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.
[R754]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R755]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.
[R756]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R757]Inserted by the Taxation Laws (Amendment) Act, 1972, w.e.f. 1-1-1973.
[R758]. For relevant case laws, see Income-tax Act.
[R759]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R760]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R761]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R762]Percentage of value of asset referred to in section 55A(b)(i) :15%
Amount referred to in section 55A(b)(i) : Rs. 25,000.
[R763]. Percentage
of value of asset referred to in section 55A(b)(i) :15%
Amount referred to in section 55A(b)(i) : Rs. 25,000.
[R764]See rule 111AB. Prescribed form of report of valuation by registered valuer (vide Wealth tax Rules) are as follows:
|
(i)Immovable property (other than agricultural
lands, plantations, forests, mines and quarries) |
Form O-1 |
|
(ii)Agricultural
lands (other than coffee, tea, rubber and cardamom plantations) |
Form O-2 |
|
(iii)Coffee,
tea, rubber or cardamom plantations |
Form O-3 |
|
(iv)Forests |
Form O-4 |
|
(v)Mines
and quarries |
Form O-5 |
|
(vi)Stock,
shares, debentures, securities, shares in partnership firms and business
assets including goodwill but excluding those referred to in any other item
in this Table |
Form O-6 |
|
(vii)Machinery
and plant |
Form O-7 |
|
(viii)Jewellery |
Form O-8 |
|
(ix)Work
of art |
Form O-9 |
|
(x)Life
interest, reversions and interest in expectancy |
Form O-10 |
[R765]Substituted for “Wealth-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R766]See also Letter
[F. No. 40/29/67-IT (A-I)], dated 22-5-1967, Circular No. 371, dated
31-11-1983, Circular No. 409, dated 12-2-1985 and Circular No. 3-D(XXXI-20), dated 30-3-1967. For details, see
Income-tax Act.
For relevant case laws, see Income-tax Act.
[R767]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R768]Inserted by the Finance Act, 1972, w.e.f. 1-4-1972.
[R769]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R770]. Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R771]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
[R772]See also
Circular No. 156, dated 23-12-1974, Circular No. 594, dated 27-2-1991, Circular
No. 648, dated 30-3-1993 and Circular No. 677, dated 28-1-1994. For details
For relevant case laws, see Income-tax Act.
[R773]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R774]. Inserted, ibid.
[R775]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R776]Substituted for “sub-sections (1) and (2)” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R777]“,(1A)” omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R778]Substituted for “sections 34 and 38”, ibid.
[R779]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R780]Proviso omitted by the Finance Act, 1994, w.e.f. 1-4-1995. Prior to omission proviso, as inserted by
the Finance Act, 1976, w.e.f. 1-6-1976, and later on
substituted by the Finance (No.2) Act, 1991, w.r.e.f.
1-4-1989, read as under:
“Provided that nothing contained in clause (i) or clause (iii) shall apply in computing the income referred to in clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 115A in the case of an assessee,being a foreign company.”
[R781]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.’
[R782]For relevant case laws, see Income-tax Act.
[R783]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.
[R784]Inserted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R785]Sub-section (12) of section 40A has now been omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R786]“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.
[R787]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.
[R788]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.”
[R789]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.
[R790]Inserted by the Finance Act, 1968, w.e.f. 1-4-1968.
[R791]. Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.
[R792]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R793]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”.’
[R794]. 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”.’
[R795]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.’