Chapter IV
Computation of total income
Heads of income
Heads of income.
92[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.
C.—Income from house property.
D.—Profits and gains of business or profession.
E.—Capital gains.
F.—Income from other sources.
94[R3] [Expenditure incurred in relation to income not includible in total income95[R4] .
14A. For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act:]
96[R5] [Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.]
A.—Salaries
Salaries.
97[R6] 15. 98[R7] The following income shall be chargeable to income-tax under the head “Salaries”—
(a) any salary due99[R8] from an employer or a former employer to an assessee in the previous year, whether paid99[R9] or not;
(b) any salary paid99[R10] or allowed99[R11] to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
1[R12] [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.
2[R13] [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.]
3[R14] 16. The income chargeable under the head “Salaries” shall be computed after making the following deductions, namely :—
4[R15] [5[R16] [(i) in the case of an assessee whose income from salary, before allowing a deduction under this clause,—
(A) does not exceed five lakh rupees, a deduction of a sum equal to forty per cent of the salary or thirty thousand rupees, whichever is less;
(B) exceeds five lakh rupees, a deduction of a sum of twenty thousand rupees;]]
6[R17] [(ii) a deduction in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the 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;]
7[R18] [(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 2768[R19] of the Constitution, leviable by or under any law.]
“Salary”,
“perquisite” and “profits in lieu of salary” defined.
11[R22] 17. 12[R23] For the purposes of sections 15 and 16 and of this section,—
(1) “salary”13[R24] includes13[R25] —
(i) wages;
(ii) any annuity or pension;
(iv) any fees13[R27] , commissions, perquisites or profits in lieu of or in addition to any salary or wages;
(v) any advance of salary;
14[R28] [(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;
15[R29] [(viii) the contribution made by the Central Government in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD;]
16[R30] (2) “perquisite” includes—
17[R31] (i) the value of rent-free accommodation provided to the assessee by his employer;
(ii) the value of any concession in the matter of rent17a[R32] 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 18[R33] [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 19[R34] [fifty] thousand rupees:]
20[R35] [Provided that nothing contained in this sub-clause shall apply to the value of any benefit provided by a company free of cost or at a concessional rate to its employees by way of allotment of shares, debentures or warrants directly or indirectly under 21[R36] [any Employees’ Stock Option Plan or Scheme of the company offered to such employees in accordance with the guidelines issued in this behalf by the Central Government]22[R37] .]
23[R38] [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;
(v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund 25[R40] [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; and
26[R41] [(vi) the value of any other fringe benefit or amenity27[R42] as may be prescribed28[R43] :]
The
following sub-clause (vi) shall be substituted for the existing sub-clause (vi)
of clause (2) of section 17 by the Finance Act, 2005, w.e.f. 1-4-2006 :
(vi) the value of any other fringe benefit or amenity (excluding the fringe benefits chargeable to tax under Chapter XII-H) as may be prescribed :
29[R44] [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;
30[R45] [(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 approved31[R46] by the Government for the purposes of medical treatment of its employees;
(b) in respect of the prescribed diseases32[R47] or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines33[R48] :
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 34[R49] [fifteen] 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 India;
(2) travel 35[R50] [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, 36[R51] [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 India; 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 :
37[R52] [Provided further that for the assessment year beginning on the 1st day of April, 2002, nothing contained in this clause shall apply to any employee whose income under the head “Salaries” (whether due from, or paid or allowed by, one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees.]
Explanation.—For the purposes of clause (2),—
(i) “hospital” includes a dispensary or a clinic 38[R53] [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;]
40[R55] (3) “profits41[R56] in lieu of salary” includes—
(i) the amount of any compensation41[R57] 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) 42[R58] [, clause (10A)] 43[R59] [, clause (10B)], clause (11), 44[R60] [clause (12) 45[R61] [, 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 46[R62] [* * *], to the extent to which it does not consist of contributions by the assessee or 47[R63] [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;]
48[R64] [(iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from any person—
(A) before his joining any employment with that person; or
(B) after cessation of his employment with that person.]
C.—Income from house property
50[R66] 22. 51[R67] The annual value of property consisting of any buildings52[R68] or lands appurtenant thereto of which the assessee is the owner52[R69] , other than such portions of such property as he may occupy52[R70] 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”.
53[R71] [Annual value how determined.
23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be—
(a) the sum for which the property might reasonably be expected to let from year to year; or
(b) where the property or any part of the property is let and the actual rent received or receivable54[R72] by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or
(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable :
Provided that the taxes levied55[R73] by any local authority in respect of the property shall 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.
Explanation.—For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules56[R74] as may be made in this behalf, the amount of rent which the owner cannot realise.
(2) Where the property consists of a house or part of a house which—
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) 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 or part of the house shall be taken to be nil.
(3) The provisions of sub-section (2) shall not apply if—
(a) the house or part of the house is actually let during the whole or any part of the previous year; or
(b) any other benefit there from is derived by the owner.
(4) Where the property referred to in sub-section (2) consists of more than one house—
(a) the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf;
(b) the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.]
57[R75] [Deductions from income from house property.
24. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—
(a) a sum equal to thirty per cent of the annual value;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:
Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :
Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed 58[R76] [within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees.
Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed 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 deduction under any other provision of this Act, shall be deducted under this clause in equal installments for the said previous year and for each of the four immediately succeeding previous years:]
59[R77] [Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.
Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]
Amounts not deductible from income from
house property.
25. Notwithstanding anything contained in section 24, any 60[R78] [***] 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”.
61[R79] [Special provision for cases where
unrealised rent allowed as deduction is realised subsequently.
25A. Where a deduction has been made under clause (x) of sub-section (1) of section 24 62[R80] [as it stood immediately before its substitution by the Finance Act, 2001] 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 63[R81] [as it stood immediately before its substitution by the Finance Act, 2001]) as the income of that previous year, whether the assessee is the owner of that property in that year or not.]
64[R82] [Unrealised rent received subsequently to
be charged to income-tax.
25AA. Where the assessee cannot realise rent from a property let to a tenant and subsequently 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 as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year.]
65[R83] [Special provision for arrears of rent
received.
25B. Where the assessee—
(a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and
(b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting 66[R84] [a sum equal to thirty per cent of such amount], shall be deemed to be the income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not.]
67[R85] 26. 68[R86] 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.
69[R87] [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.
70[R88] 27. For the purposes of sections 22 to 26—
(i) an individual who transfers otherwise than for adequate considera-tion 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 ;
71[R89] [(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 72[R90] section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof ;
(iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof;]
(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.
74[R93] 28. 75[R94] The following income shall be chargeable to income-tax under the head “Profits and gains of business or profession”,—
(i) the profits and gains76[R95] of any business or profession76[R96] which was carried on by the assessee at any time during the previous year ;
(ii) any compensation76[R97] or other payment due to76[R98] or received by76[R99] ,—
(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 India 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 India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto ;
77[R100] [(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 similar78[R101] association from specific services78[R102] performed for its members ;
79[R103] [(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) ;]
80[R104] [(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ;]
81[R105] [(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 ;]
82[R106] [(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession ;]
83[R107] [(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 ;]
84[R108] [(va) any sum, whether received or receivable, in cash or kind, under an agreement for—
(a) not carrying out any activity in relation to any business; or
(b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services:
Provided that sub-clause (a) shall not apply to—
(i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable under the head “Capital gains”;
(ii) any sum received as compensation, from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone layer under the United Nations Environment Programme, in accordance with the terms of agreement entered into with the Government of India.
Explanation.—For the purposes of this clause,—
(i) “agreement” includes any arrangement or understanding or action in concert,—
(A) whether or not such arrangement, understanding or action is formal or in writing; or
(B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;
(ii) “service” means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging;]
85-86[R109] [(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.—[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.
29. 87[R110] The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 88[R111] [43D].
Rent, rates,
taxes, repairs and insurance for buildings.
87[R112] 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 repairs89[R113] 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.
90[R114] [Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of the cost of repairs referred to in sub-clause (i), and the amount paid on account of current repairs referred to in sub-clause (ii), of clause (a), shall not include any expenditure in the nature of capital expenditure.]
Repairs and insurance of machinery,
plant and furniture.
91[R115] 31. 92[R116] 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 repairs93[R117] thereto ;
(ii) the amount of any premium paid in respect of insurance against risk of damage or destruction thereof.
94[R118] [Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of current repairs shall not include any expenditure in the nature of capital expenditure.]
95[R119] 32. (1) 96[R120] [In respect of depreciation of—
(i) buildings97[R121] , machinery97[R122] , plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned97[R123] , wholly or partly, by the assessee97[R124] and used for the purposes of the business97[R125] or profession, the following deductions shall be allowed—]
98[R126] [(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed99[R127] ;]
(ii) 1[R128] [in the case of any block of assets, such percentage on the written down value thereof as may be prescribed2[R129] :]
4[R131] [Provided 5[R132] [***] that no deduction shall be allowed under this clause in respect of—
(a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 6[R133] [but before the 1st day of April, 2001], unless it is used—
(i) in a business of running it on hire for tourists ; or
(ii) outside India in his business or profession in another country ; and
(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 :]
7[R134] [Provided further that where an asset referred to in clause (i) or clause (ii) 8[R135] [or clause (iia)], as the case may be, 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 sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) 8a[R136] [or clause (iia)], as the case may be :]
9[R137] [Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed.
Explanation.—For the purposes of this proviso,—
(a) the expression “commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor-cab”, “tractor” and “road-roller”;
(b) the expressions “heavy goods vehicle”10[R138] , “heavy passenger motor vehicle”11[R139] , “light motor vehicle”11[R140] , “medium goods vehicle”11[R141] , “medium passenger motor vehicle”11[R142] , “maxi-cab”12[R143] , “motor-cab”12[R144] , “tractor”11[R145] and “road roller” shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988):]
13[R146] [Provided also that, 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:]
14[R147] [Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, 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 or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.]
15[R148] [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 16[R149] [sub-section] “written down value of the block of assets” shall have the same meaning as in clause *[R150] (c) of sub-section †[R151] (6) of section 43.]
17[R152] [Explanation 3.—For the purposes of this sub-section, the expressions “assets” and “block of assets” shall mean—
(a) tangible assets, being buildings, machinery, plant or furniture;
(b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature.
Explanation 4.—For the purposes of this sub-section, the expression “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 searching for discovery or testing of deposits for the winning of access thereto).
18[R153] [Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;]
19[R154] [(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) :
Provided that such further deduction of fifteen per cent shall be allowed to—
(A) a new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or
(B) any industrial undertaking existing before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than 20[R155] [ten] per cent:
Provided further that no deduction shall be allowed in respect of—
(a) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or
(b) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; or
(c) any office appliances or road transport vehicles; or
(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or other-wise) in computing the income chargeable under the head “Pro-fits and gains of business or profession” of any one previous year:
Provided also that no deduction shall be allowed under clause (A) or, as the case may be, clause (B), of the first proviso unless the assessee furnishes the details of machinery or plant and increase in the installed capacity of production in such form, as may be prescribed21[R156] along with the return of income, and the report of an accountant, as defined in the Explanation below sub-section (2) of section 288 certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.
Explanation.—For the purposes of this clause,—
(1) “new industrial undertaking” means an undertaking which is not formed,—
(a) by the splitting up, or the reconstruction, of a business already in existence; or
(b) by the transfer to a new business of machinery or plant previously used for any purpose;
(2) “installed capacity” means the capacity of production as existing on the 31st day of March, 2002;]
The
following clause (iia) shall be substituted for the existing clause (iia) of
sub-section (1) of section 32 by the Finance Act, 2005, w.e.f. 1-4-2006 :
(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) :
Provided that no deduction shall be allowed in respect of—
(A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or
(B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or
(C) any office appliances or road transport vehicles; or
(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;
22[R157] [(iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and 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 23[R158] [an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act23a[R159] , of any asset by the banking company to the banking institution.]]
28[R164] [(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year29[R165] , 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 the 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.]
30[R166] Investment allowance.31[R167]
32[R168] 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 business33[R169] 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 installed33[R170] 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 :
34[R171] [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 34[R172] [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.
35[R173] [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
36[R174] [(ii) in a small-scale industrial undertaking37[R175] for the purposes of business of manufacture37[R176] or production37[R177] of any article or thing37[R178] ; or
(iii) in any other industrial undertaking37[R179] for the purposes of business of construction, manufacture37[R180] or production37[R181] of any article or thing, not being an article or thing37[R182] specified in the list in the Eleventh Schedule :]
38[R183] [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 ;]
39[R184] [(c) any new machinery or plant installed after the 31st day of March, 1983, but before the 40[R185] [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 approved41[R186] for the purposes of this clause by the Central Government.]
Explanation.—For the purposes of this sub-section and 42[R187] [sub-sections (2B) 43[R188] [, (2C)] and (4)],—
44[R189] [(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 India by any other person, if the following conditions are fulfilled, namely :—
(i) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India ;
(ii) such machinery or plant is imported into India from any country outside India ; and
(iii) no deduction on account of depreciation in respect of such machinery or plant has 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 45[R190] [does not exceed,—
46[R191] [(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.
47[R192] [(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.]
47[R193] [(2B) Where any new machinery or plant is installed after the 30th day of June, 1977, but before the 1st day of April, 48[R194] [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,49-50[R195] 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 authority49-50[R196] 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 any body [including a society registered under the Societies Registration Act, 1860 (21 of 1860)] and financed wholly or mainly by the Government;
(c) “University” means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956) to be a University for the purposes of that Act.]
52[R198] [(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 notified53[R199] in this behalf by the Central Government in the Official Gazette, is installed after the 31st day of May, 1983 54[R200] [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 55[R201] [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 56[R202] [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 57[R203] [Assessing] Officer under section 143, the 57[R204] [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 57[R205] [Assessing] Officer may allow, a further amount to the Investment Allowance Reserve Account out of the profits and gains of the previous year in which such notice is served on the assessee or of the immediately preceding previous year, if the accounts for that year have not been made up; and, if the assessee credits any further amount to such account within the time aforesaid, the amount so credited shall be deemed to have been credited to the Investment Allowance Reserve Account of the previous year in which the deduction is admissible and such amount shall not be taken into account in determining the adequacy of the reserve required to be created by the assessee in respect of the previous year in which such further credit is made:
Provided that such opportunity shall not be allowed by the 58[R206] [Assessing] Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to sub-section (1) of section 145 or sub-section (2) of that section or the omission by the assessee to disclose his income fully and truly.
(5) Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act—
(a) if the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed; or
(b) if at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant 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 59[R207] [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 60[R208] Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) where the sale or transfer of the ship, aircraft, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (6) or sub-section (7).
(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, aircraft, machinery or plant, in respect of which investment allowance has been allowed to the amalgamating company under sub-section (1),—
(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (4) in respect of the reserve created by the amalgamating company and in respect of the period within which such ship, aircraft, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (4A) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and
(b) the balance of investment allowance, if any, still outstanding to the amalgamating company in respect of such ship, aircraft, machinery or plant, shall be allowed to the amalgamated company in accordance with the provisions of sub-section (3), so, however, that the total period for which the balance of investment allowance shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (3) and the amalgamated company shall be treated as the assessee in respect of such ship, aircraft, machinery or plant for the purposes of this section.
(7) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, aircraft, machinery or plant, the provisions of clauses (a) and (b) of sub-section (6) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this sub-section shall apply only where—
(i) all the property of the firm relating to the business immediately before the succession becomes the property of the company;
(ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
(8) The Central Government, if it considers necessary or expedient so to do, may, by 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 61[R209] [***] as may be specified therein.
62[R210] [(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.]
63[R211] [(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 Gazette64[R212] , 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.]
(9) [Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]
65-66[R213] [Investment
deposit account.
32AB. (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head “Profits and gains of business or profession”, has, out of such income,—
(a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, which-ever 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 scheme67[R214] (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 68[R215] [(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 69[R216] [***] business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less :
70[R217] [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:]
71[R218] [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,—
73[R220] [(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 India by any other person, if the following conditions are fulfilled, namely :—
(a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) no deduction on account of depreciation in respect of such machinery or plant has 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) 74[R221] [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 75[R222] Parts II and III of the 76[R223] [Schedule VI] to the Companies Act, 1956 (1 of 1956), 77[R224] [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. 78[R225] [***]]
(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;
80[R227] [(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 form81[R228] duly signed and verified by such accountant :
Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
82[R229] [(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 83[R230] [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.]
84[R231] [Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) in relation to any withdrawals made from the deposit account either before or after the expiry of a period of five years from the date of deposit.]
84[R232] [(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.]
85[R233] [(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 86[R234] [***] 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 87[R235] [[in circumstances other than the circumstances specified in clauses (b), (c) and (e) of sub-section (5A)]], is not utilised in accordance with 88[R236] [, and within the time specified in,] the scheme, either wholly or in part, 89[R237] [***] 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 90[R238] 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.
91[R239] [(10) Where a deduction has been allowed to an assessee under this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year].
Explanation.—In this section,—
(a) “computers” does not include calculating machines and calculating devices;
(b) “Development Bank” means—
(i) in the case of an assessee carrying on business of growing and manufacturing tea in India, the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);
(ii) in the case of other assessees, the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank or institution as may be specified in the scheme in this behalf.]
33. 92[R240] [(1) (a) In respect of a new ship93[R241] 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.]
94[R242] [95[R243] (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 India;
(ii) such ship is wholly used for the purposes of the business carried on by the assessee; and
(iii) such other conditions as may be prescribed.
(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 India at any time previous to the date of such installation by the assessee;
(ii) it is imported in India by the assessee from any country outside India;
(iii) no deduction on account of depreciation or development rebate in respect of such 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) 96[R244] [or sub-section (1A)] 97[R245] [of this section or sub-section (1) of section 33A] 98[R246] [or any deduction under Chapter VI-A 99[R247] [***]]) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under 1[R248] [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) 2[R249] [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) 3[R250] [or sub-section (1A)] 4[R251] [of this section or sub-section (1) of section 33A] 5[R252] [or any deduction under Chapter VI-A 6[R253] [***]]) 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.
7[R254] [(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 amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for the purposes of this section and section 34.]
(4) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, machinery or plant, the provisions of clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this clause shall apply only where—
(i) all the property of the firm relating to the business immediately before the succession becomes the property of the company;
(ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
8[R255] [(5) The Central Government, if it considers it necessary or expedient so to do, may, by notification9[R256] 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.]
10[R257] [(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:]
11[R258] [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.]
12[R259] [Development
allowance.
13[R260] 33A. (1) In respect of planting of tea bushes on any land in India owned by an assessee who carries on business of growing and manufacturing tea in India, a sum by way of development allowance equivalent to—
(i) where tea bushes have been planted on any land not planted at any time with tea bushes or on any land which had been previously abandoned, 14[R261] [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, 15[R262] [thirty] per cent of the actual cost of planting, shall, subject to the provisions of this section, be allowed as a deduction 16[R263] [in the manner specified hereunder, namely :—
(a) the amount of the development allowance shall, in the first instance, be computed with reference to that portion of the actual cost of planting which is incurred during the previous year in which the land is prepared for planting or replanting, as the case may be, and in the previous year next following, and the amount so computed shall be allowed as a deduction in respect of such previous year next following; and
(b) thereafter, the development allowance shall again be computed with reference to the actual cost of planting, and if the sum so computed exceeds the amount allowed as a deduction under clause (a), the amount of the excess shall be allowed as a deduction in respect of the third succeeding previous year next following the previous year in which the land has been prepared for planting or replanting, as the case may be :]
17[R264] [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 18[R265] [the previous year in respect of which the deduction is required to be allowed under sub-section (1)] 19[R266] [(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 20[R267] [***])] is nil or is less than the full amount of the development allowance calculated at the rates 21[R268] [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 22[R269] [(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 23[R270] [***])] 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.
(3) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :—
(i) the particulars prescribed24[R271] 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 India as profits or for the creation of any asset outside India; and
(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)25; 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).
26[R272] [(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:
27[R273] [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 28[R274] hilly areas for the purposes of this section and such order shall not be questioned before any court of law or any other authority.
29[R275] [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.]
30[R276] [Tea
development account 31[R277] [,coffee development account and rubber development account]
33AB. (1) Where an assessee carrying on business of growing and manufacturing tea31[R278] [or coffee or rubber] in India has, before the expiry of six months from the end of the previous year or before 31[R279] [the due date of] furnishing the return of his income, 32[R280] [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 with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board 33[R281] [or the Coffee Board or the Rubber Board]; or
(b) 34[R282] [deposited any amount in an account (hereafter in this section referred to as the Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (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 35[R283] [forty] 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 36[R284] [, or in the 37[R285] [***] 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 form38[R286] 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 39[R287] [the special account or the 40[R288] [***] 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.
41[R289] [(4) Notwithstanding anything contained in sub-section (3), where any amount standing to the credit of the assessee in the special account or in the Deposit Account is released during any previous year by the National Bank or withdrawn by the assessee from the Deposit Account, and such amount is 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, the whole of such amount so utilised shall be deemed to be the profits and gains of business of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.]
(5) Where any amount, standing to the credit of the assessee in the special account 42[R290] [or in the 43[R291] [***] Deposit Account], is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.
(6) Where any amount standing to the credit of the assessee in the special account 42[R292] [or in the 43[R293] [***] Deposit Account] is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 42[R294] [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 42[R295] [or in the 43[R296] [***] Deposit Account], which is released during any previous year by the National Bank 44[R297] [or which is withdrawn by the assessee from the 43[R298] [***] Deposit Account] for being utilised by the assessee for the purposes of such business in accordance with the scheme 44[R299] [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 44a[R300] [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 a Government company45[R301] 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 46[R302] [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,—
47[R303] [(a) “Coffee Board” means the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942);
(aa) “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);
(ab) “Rubber Board” means the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Act, 1947 (24 of 1947);]
(b) “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953).]
48[R304] [Site
Restoration Fund.49[R305]
33ABA. (1) Where an assessee is carrying on business consisting of the prospecting for, or extraction or production of, petroleum or natural gas or both in India and in relation to which the Central Government has entered into an agreement with such assessee for such business, has before the end of the previous year—
(a) deposited with the State Bank of India any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Government of India in the Ministry of Petroleum and Natural Gas; or
(b) deposited any amount in an account (hereafter in this section referred to as the Site Restoration Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Ministry referred to in clause (a) (hereafter in this section referred to as the deposit scheme), 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—
(i) a sum equal to the amount or the aggregate of the amounts so deposited; or
(ii) 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, or in the Site Restoration 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:
Provided also that any amount credited in the special account or the Site Restoration Account by way of interest shall be deemed to be a deposit.
(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 form50[R306] duly signed and verified by such accountant :
Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
(3) Any amount standing to the credit of the assessee in the special account or the Site Restoration 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.
(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 or in the Site Restoration Account is withdrawn on closure of the account during any previous year by the assessee, the amount so withdrawn from the account, as reduced by the amount, if any, payable to the Central Government by way of profit or production share as provided in the agreement referred to in section 42, 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.
Explanation.—Where any amount is withdrawn on closure of the account in a previous year in which the business carried on by the assessee is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.
(6) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 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 or in the Site Restoration Account, which is released during any previous year by the State Bank of India or which is withdrawn by the assessee from the Site Restoration Account for being utilised by the assessee for the purposes of such business in accordance with the scheme 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.
(8) Where any asset acquired in accordance with the scheme 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 a Government company52[R308] 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 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 may, if it considers necessary or expedient so to do, 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.—For the purposes of this section,—
(a) “State Bank of India” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);
(b) the expression “amount standing to the credit of the assessee in the special account or the Site Restoration Account” includes interest accrued to such accounts.]
53[R309] [Reserves
for shipping business.
33AC. (1) 54[R310] [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) :]
55[R311] [Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the aggregate of the amounts of the paid-up share capital, the general reserves and amount credited to the share premium account of the assessee, no allowance under this sub-section shall be made in respect of such excess :]
56[R312] [Provided further that for five assessment years commencing on or after the 1st day of April, 2001 and ending before the 1st day of April, 2006, the provisions of this sub-section shall have effect as if for the words “an amount not exceeding fifty per cent of profits”, the words “an amount not exceeding the profits” had been substituted:]
57[R313] [Provided also that no deduction shall be allowed under this section for any assessment year commencing on or after the 1st day of April, 2005.]
(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 58[R314] [, other than in any scheme of demerger] by the asses-see to any person at any time before the expiry of 59[R315] [three] 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.
60[R316] [(4) Where the ship is sold or otherwise transferred (other than in any scheme of demerger) after the expiry of the period specified in clause (c) of sub-section (3) and the sale proceeds are not utilised for the purpose of acquiring a new ship within a period of one year from the end of the previous year in which such sale or transfer took place, 61[R317] [so much of such sale proceeds which represent the amount credited to the reserve account and utilised for the purposes mentioned in clause (c) of sub-section (3)] shall be deemed to be the profits of the assessment year immediately following the previous year in which the ship is sold or transferred.]
Explanation.—For the purposes of this section,—
(a) 62[R318] “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956) ;
63[R319] [(aa) 64[R320] “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.]
65[R321] [Rehabilitation
allowance.
33B. Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of—
(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature ; or
(ii) riot or civil disturbance ; or
(iii) accidental fire or explosion ; or
(iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war),and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged or destroyed :
66[R322] [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 69[R325] [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 India as profits or for the creation of any asset outside India :
Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948)70[R326] , or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 :
71[R327] [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.—[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 72[R328] 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.
73[R329] [Restriction 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.]
74[R330] [Expenditure on scientific research.
75[R331] 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.
76[R332] [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 277[R333] 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 authority78[R334] 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 ;]
79[R335] (ii) 80[R336] [an amount equal to one and one-fourth times of 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 approved81[R337] for the purposes of this clause by the 82[R338] [Central Government] 83[R339] [by notification in the Official Gazette] ;
84[R340] [85[R341] (iii) 86[R342] [an amount equal to one and one-fourth times of 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 approved87[R343] for the purposes of this clause by the 88[R344] [Central Government] 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) :
89[R345] [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 90[R346] [Central Government] 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 90[R347] [Central Government] 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 90a[R348] [Central Government] 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),—
91[R349] [(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 year92[R350] shall be deducted for that previous year :]
93[R351] [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.]
94[R352] [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.
95[R353] [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 53A96[R354] 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 97[R355] [incurred before the 1st day of April, 1967,] ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause (i) falls short of the said expenditure, then—
(a) there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and
(b) no deduction shall be allowed under that clause for that previous year or for any subsequent previous year ;
(iii) if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation ; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place ;
(iv) where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under 98[R356] [clause (ii) of sub-section (1)] of section 32 for the same 99[R357] [or any other] previous year in respect of that asset ;
(v) where the asset 1[R358] [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 2[R359] [clause (ii) of sub-section (1)] of section 32.
3[R360] [(2A) 4[R361] Where 5[R362] [, before the 1st day of March, 1984,] the assessee pays any sum 6[R363] [(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) 7[R364] [or to a public sector company] to be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority8[R365] 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.]
8a[R366] [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.]
9[R367] [(2AA) 10[R368] Where the assessee pays any sum to a National Laboratory 11[R369] [or a 12[R370] [University or an Indian Institute of Technology or a specified person] 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 authority13[R371] , 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 :
14[R372] [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.15[R373] ]
16[R374] [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 317[R375] of the Institutes of Technology Act, 1961 (59 of 1961)];
18[R376] [(d) “specified person” means such person as is approved by the prescribed authority.]
19[R377] [(2AB) (1) Where a company engaged in the business of 20[R378] [bio-technology or in the business of] manufacture or production of any drugs, pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified21[R379] by the Board incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority22[R380] , then, there shall be allowed a deduction of 23[R381] [a sum equal to one and one-half times of the expenditure] so incurred.
24[R382] [Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).]
(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.
(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.
(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed.]
25[R383] [(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 26[R384] [27[R385] [2005]].]
28[R386] [(2B) (a) Where 29[R387] [, 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 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 30[R388] [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.]
31[R389] [(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—
(a) the Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;
(b) the prescribed authority32[R390] , when such question relates to any activity other than the activity specified in clause (a), 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.
33[R391] [(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.]]
34[R392] [Expenditure
on acquisition of patent rights or copyrights.
35A. (1) In respect of any expenditure of a capital nature incurred after the 28th day of February, 1966 35[R393] [but before the 1st day of April, 1998], on the acquisition of patent rights or copyrights (hereafter, in this section, referred to as rights) used for the purposes of the business, there shall, subject to and in accordance with the provisions of this section, be 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.]
36[R394] [(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 amalga-mating company if the latter had not so
sold or otherwise transferred the rights.]
37[R395] [(7) Where in a scheme of demerger, the demerged company sells or otherwise transfers the rights to the resulting company (being an Indian company),—
(i) the provisions
of sub-sections (3) and (4) shall not apply in the case of the demerged
company; and
(ii) the provisions of this
section shall, as far as may be, apply to the resulting company as they would
have applied to the demerged company, if the latter had not sold or otherwise
transferred the rights.]
38[R396] [Expenditure
on know-how.
35AB. (1) Subject to the provisions of sub-section (2), where the assessee has paid in any previous year 39[R397] [relevant to the assessment year commencing on or before the 1st day of April, 1998] any lump sum consideration for acquiring39a[R398] any know-how for use for the purposes of his business, one-sixth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years.
(2) Where the know-how referred to in sub-section (1) is developed in a laboratory, university or institution referred to in sub-section (2B) of section 32A, one-third of the said lump sum consideration paid in the previous year by the assessee shall be deducted in computing the profits and gains of the business for that year, and the balance amount shall be deducted in equal instalments for each of the two immediately succeeding previous years.
40[R399] [(3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and the amalgamating or the demerged company is entitled to a deduction under this section, then, the amalgamated company or the resulting company, as the case may be, shall be entitled to claim deduction under this section in respect of such undertaking to the same extent and in respect of the residual period as it would have been allowable to the amalgamating company or the demerged company, as the case may be, had such amalgamation or demerger not taken place.]
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).]
41[R400] [Expenditure
for obtaining licence to operate telecommunication services.
35ABB. (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to operate telecommunication services 42[R401] [either before the commencement of the business to operate telecommunication services or thereafter at any time during any previous year] and for which payment has actually been made to obtain a licence, 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,—
43[R402] [(i) “relevant previous years” means,—
(A) in a case where the licence fee is
actually paid before the commencement of the business to operate
telecommunication services, the previous years beginning with the previous year
in which such business commenced;
(B) in any other
case, the previous years beginning with the previous year in which the licence
fee is actually paid,
and the subsequent previous year
or years during which the licence, for which the fee is paid, shall be in
force;]
(ii) “appropriate
fraction” means the fraction the numerator of which is one and the denominator
of which is the total number of the relevant previous years;
(iii) “payment has
actually been made” means the actual payment of expenditure irrespective of the
previous year in which the liability for the expenditure was incurred according
to the method of accounting regularly employed by the assessee.
(2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the previous year in which the licence is transferred.
(3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred to obtain the licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as profits and gains of the business in the previous year in which the licence has been transferred.
Explanation.—Where the licence is transferred in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.
(4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed under sub-section (1) in respect of the previous year in which the licence is transferred or in respect of any subsequent previous year or years.
(5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the deduction to be allowed under sub-section (1) for expenditure incurred remaining unallowed shall be arrived at by—
(a) subtracting the
proceeds of transfer (so far as they consist of capital sums) from the
expenditure 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 licence is transferred.
(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the licence to the amalgamated company (being an Indian company),—
(i) the provisions of sub-sections (2), (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
transferred the licence.]
44[R403] [(7) Where, in a scheme of demerger, the demerged company sells or otherwise transfers the licence to the resulting company (being an Indian company),—
(i) the provisions of sub-sections (2), (3)
and (4) shall not apply in the case of the demerged company; and
(ii) the provisions
of this section shall, as far as may be, apply to the resulting company as they
would have applied to the demerged company if the latter had not transferred
the licence.]
45[R404] [(8) Where a deduction for any previous year
under sub-section (1) is claimed and allowed in respect of any expenditure
referred to in that sub-section, no deduction shall be allowed under
sub-section (1) of section 32 for the same previous year or any subsequent
previous year.]
46[R405] [Expenditure
on eligible projects or schemes.47[R406]
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 approved48[R407] by the National Committee49[R408] 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—
50[R409] (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;
51[R410] (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.
52[R411] [(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently—
(i) 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; or
(ii) such association or institution, to which approval has been granted, has not furnished to the National Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed, the National Committee 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:
Provided that a copy of the order withdrawing the approval shall be forwarded by the National Committee to the Assessing Officer having jurisdiction over the concerned association or institution.
(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation, and subsequently—
(i) the National 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 such project or scheme was notified; or
(ii) a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed, 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 local authority, as the case may be:
Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme.]
53[R412] [(6) Notwithstanding anything contained in any other provision of this Act, where—
(i) the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or
(ii) a company has claimed deduction under the proviso to sub-section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub-section (5), the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.]
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, specify54[R413] in this
behalf on the recommendations of the National Committee.]
Export markets development allowance.
35B. 55[R414] [Omitted by
the Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws
(Amendment) Act, 1989, w.e.f. 1-4-1989. Original section 35B was
inserted by the Finance Act, 1968, w.e.f. 1-4-1968.]
Agricultural development allowance.
35C. 56[R415] [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.]
35CC. 57[R416] [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.]
58[R417] [Expenditure by way of payment to associations and institutions
for carrying out rural development programmes.
59[R418] 35CCA. 60[R419] [(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 authority61[R420] ; or
(b) to an association or institution, which has as its object
the training of persons for implementing programmes of rural development; 62[R421] [or]
62[R422] [(c) to a rural development fund set up and
notified63[R423] by the Central
Government in this 64[R424] [behalf; or]
65[R425] [(d) to the National
Urban Poverty Eradication Fund set up and notified by the Central Government in
this behalf,]the assessee shall, subject to the
provisions of sub-section (2), be allowed a deduction of the amount of such
expenditure incurred during the previous
year.]
66[R426] [(2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or institution to the effect that—
(a) the programme of rural development had been approved by the
prescribed authority before the 1st day of March, 1983; and
(b) where
such payment is made after the 28th day of February, 1983, such programme
involves work by way of construction of any building or other structure
(whether for use as a dispensary, school, training or welfare centre, workshop
or for any other purpose) or the laying of any road or the construction or
boring of a well or tube-well or the installation of any plant or machinery,
and such work has commenced before the 1st day of March, 1983.]
67[R427] [(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.]
67[R428] [(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.]
68[R429] [Expenditure by way of payment to associations and institutions
for carrying out programmes of conservation of natural resources.
35CCB. 69[R430] [(1) Where an assessee incurs any expenditure 70[R431] [on or before the 31st day of March, 2002] 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 affore-station, to be used for carrying out any programme of
conservation of natural resources or afforestation approved71[R432] by the prescribed
authority72[R433] ; 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 73[R434] [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 authority74[R435] :
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.]
75[R436] [Amortisation of certain preliminary expenses.
76[R437] 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 :
77[R438] [Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words “an amount equal to one-tenth of such expenditure for each of the ten successive previous years”, the words “an amount equal to one-fifth of such expenditure for each of the five successive previous years” had been substituted.]
(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 approved78[R439] 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) :
79[R440] [Provided that where the aggregate amount of expenditure referred to in sub-section (2) is incurred after the 31st day of March, 1998, the provisions of this sub-section shall have effect as if for the words “two and one-half per cent”, the words “five per cent” had been substituted.]
Explanation.—In this sub-section—
(a) “cost of the
project” means—
(i) in a case referred to in clause (i) of
sub-section (1), the actual cost of the fixed assets, being land, buildings, leaseholds,
plant, machinery, furniture, fittings and railway sidings (including
expenditure on development of land and buildings), which are shown in the books
of the assessee as on the last day of the previous year in which the business
of the assessee commences;
(ii) in a case referred to in clause (ii) of
sub-section (1), the actual cost of the fixed assets, being land, buildings,
leaseholds, plant, machinery, furniture, fittings and railway sidings
(including expenditure on development of land and buildings), which are shown
in the books of the assessee as on the last day of the previous year in which
the extension of the industrial undertaking is completed or, as the case
may be, the new industrial unit commences production or operation, in so far as
such fixed assets have been acquired or developed in connection with
the extension of the industrial undertaking or the setting up of the new
industrial unit of the assessee;
(b) “capital
employed in the business of the company” means—
(i) in a case referred to in clause (i) of
sub-section (1), the aggregate of the issued share capital, debentures and
long-term borrowings as on the last day of the previous year in which the
business of the company commences;
(ii) in a case referred to in clause (ii) of sub-section
(1), the aggregate of the issued share capital, debentures and long-term
borrowings as on the last day of the previous year in which the extension of
the industrial undertaking is completed or, as the case may be, the new
industrial unit commences production or operation, in so far as such capital,
debentures and long-term borrowings have been issued or obtained in connection
with the extension of the industrial undertaking or the setting up of the new
industrial unit of the company;
(c) “long-term
borrowings” means—
(i) any moneys borrowed by the company from
Government or the Industrial Finance Corporation of India or the Industrial
Credit and Investment Corporation of India or any other financial institution 80[R441] [which is eligible for
deduction under clause (viii) of sub-section (1) of section 36] or any banking
institution (not being a financial institution referred to above), or
(ii) any moneys borrowed or debt incurred by
it in a foreign country in respect of the purchase outside India of capital
plant and machinery, where the terms under which such moneys are borrowed or
the debt is incurred provide for the repayment thereof during a period of not
less than seven years.
(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 form81[R442] 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
amalga-mating company if the amalgamation had not taken place.
82[R443] [(5A) 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 specified in sub-section (1), to another company in a scheme of demerger,—
(i) no deduction shall be admissible under sub-section (1) in
the case of the demerged company for the previous year in which the demerger
takes place; and
(ii) the provisions of this section
shall, as far as may be, apply to the resulting company, as they would have
applied to the demerged company, if the demerger 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.]
83[R444] [Amortisation
of expenditure in case of amalgamation or demerger.
35DD. (1) Where an assessee, being an Indian company, incurs any expenditure, on or after the 1st day of April, 1999, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five successive previous years beginning with the previous year in which the amalgamation or demerger takes place.
(2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act.]
84[R445] [Amortisation
of expenditure incurred under voluntary retirement scheme.
35DDA. (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee 85[R446] [in connection with] his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years.
86[R447] [(2) Where the assessee, being an Indian company, is entitled to the deduction under sub-section (1) and the undertaking of such Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another Indian company in a scheme of amalgamation, 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.
(3) Where the undertaking of an Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another company in a scheme of demerger, the provisions of this section shall, as far as may be, apply to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place.
(4) Where there has been reorganisation of business, whereby a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, the provisions of this section shall, as far as may be, apply to the successor company, as they would have applied to the firm or the proprietary concern, if reorganisation of business had not taken place.
(5) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) in the case of the amalgamating company referred to in sub-section (2), in the case of demerged company referred to in sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place.
(6) No deduction shall be
allowed in respect of the expenditure mentioned in sub-section (1) under any
other provision of this Act.]]
87[R448] [Deduction for expenditure on prospecting, etc., for certain
minerals.
35E. (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, is engaged in any operations relating to prospecting for, or extraction or production of, any mineral and incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), the assessee shall, in accordance with and subject to the provisions of this section, be allowed for each one of the relevant previous years a deduction of an amount equal to one-tenth of the amount of such expenditure.
(2) The expenditure referred to in sub-section (1) is that incurred by the assessee after the date specified in that sub-section at any time during the year of commercial production and any one or more of the four years immediately preceding that year, wholly and exclusively on any operations relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule or on the development of a mine or other natural deposit of any such mineral or group of associated minerals :
Provided that there shall be excluded from such expenditure any portion thereof which is met directly or indirectly by any other person or authority and any sale, salvage, compensation or insurance moneys realised by the assessee in respect of any property or rights brought into existence as a result of the expenditure.
(3) Any expenditure—
(i) on the acquisition of the site of the
source of any mineral or group of associated minerals referred to in
sub-section (2) or of any rights in or over such site;
(ii) on the
acquisition of the deposits of such mineral or group of associated minerals or
of any rights in or over such deposits; or
(iii) of a capital
nature in respect of any building, machinery, plant or furniture for which
allowance by way of depreciation is admissible under section 32,shall not be
deemed to be expenditure incurred by the assessee for any of the purposes
specified in sub-section (2).
(4) The deduction to be allowed under sub-section (1) for any relevant previous year shall be—
(a) an amount equal
to one-tenth of the expenditure specified in sub-section (2) (such one-tenth
being hereafter in this sub-section referred to as the instalment); or
(b) such amount as is sufficient to reduce
to nil the income (as computed before making the deduction under this section)
of that previous year arising from the commercial exploitation [whether or not
such commercial exploitation is as a result of the operations or development
referred to in sub-section (2)] of any mine or other natural deposit of the
mineral or any one or more of the minerals in a group of associated
minerals as aforesaid in respect of which the expenditure was incurred,
whichever amount is less :
Provided that the amount of the instalment relating to any relevant previous year, to the extent to which it remains unallowed, shall be carried forward and added to the instalment relating to the previous year next following and deemed to be part of that instalment, and so on, for succeeding previous years, so, however, that no part of any instalment shall be carried forward beyond the tenth previous year as reckoned from the year of commercial production.
(5) For the purposes of this section,—
(a) “operation relating to prospecting”
means any operation undertaken for the 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 form88[R449] 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 amalga-mating company if the amalgamation had
not taken place.
89[R450] [(7A) 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 demerger,—
(i) no deduction
shall be admissible under sub-section (1) in the case of the demerged company
for the previous year in which the demerger takes place; and
(ii) the provisions of this section shall, as far as may be,
apply to the resulting company as they would have applied to the demerged
company, if the demerger 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.]
90[R451] 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—
91[R452] (i) the amount of any premium paid in respect of insurance against risk of damage92[R453] or destruction92[R454] of stocks or stores92[R455] used for the purposes of the business or profession;
93[R456] [(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;]
94[R457] [(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;]
95[R458] (ii) any sum paid to an employee as bonus or commission96[R459] 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;
(iia) 99[R462] [Omitted by the Finance Act, 1999, w.e.f. 1-4-2000.]
1[R463] (iii) the amount of the interest2[R464] paid in respect of capital2[R465] borrowed for the purposes of the business2[R466] or profession:
3[R467] [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.]
Explanation.—Recurring subscriptions paid periodically by shareholders, 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;
The following clause (iiia) shall be inserted after clause (iii) of sub-section (1) of section 36 by the Finance Act, 2005, w.e.f. 1-4-2006 :
(iiia) the pro rata amount of discount on a zero coupon bond having regard to the period of life of such bond calculated in the manner as may be prescribed.
Explanation.—For the purposes of this clause, the expressions—
(i) “discount” means the difference between the amount received or receivable by the infrastructure capital company or infrastructure capital fund or public sector company issuing the bond and the amount payable by such company or fund or public sector company on maturity or redemption of such bond;
(ii) “period of life of the bond” means the period commencing from the date of issue of the bond and ending on the date of the maturity or redemption of such bond;
(iii) “infrastructure capital company” and “infrastructure capital fund” shall have the same meanings respectively assigned to them in clauses (a) and (b) of Explanation 1 to clause (23G) of section 10;
4[R468] (iv) 5[R469] any sum paid6[R470] 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 7[R471] 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;
8[R472] (v) 9[R473] any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust;
10[R474] [(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;]
11-12[R475] (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;
11-12[R476] (vii) subject to the provisions of sub-section (2), the amount of 13[R477] [any 14[R478] bad debt or part thereof</a14[R479] which is written off as irrecoverable in the accounts of the assessee for the previous year]:
15[R480] [Provided that in the case of 16[R481] [an assessee] 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.]
17[R482] [Explanation.—For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee;]
18[R483] [(viia) 19[R484] [20[R485] in respect of any provision for bad and doubtful debts made by—
(a) a scheduled bank [not being 21[R486] [* * *] a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank, an amount 22[R487] [not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding 23[R488] [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner :
24[R489] [Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year:]
25[R490] [Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words “five per cent”, the words “ten per cent” had been substituted:]
26[R491] [Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government:
Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head “Profits and gains of business or profession.”]
27[R492] [Explanation.—For the purposes of this sub-clause, “relevant assessment years” means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;]
(b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);]
28[R493] [(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) :]
29[R494] [Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year.]
Explanation.—For the purposes of this clause,—
30[R495] [(i) “non-scheduled bank” means a 31[R496] 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;]
32[R497] [(ia)] “rural branch” means a branch of a scheduled bank 33[R498] [or a non-scheduled bank] situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year;
34[R499] [(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;]
35[R500] [(iii) “public financial institution” shall have the meaning assigned to it in section 4A36[R501] 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 Government company37[R502] 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 38[R503] [eligible for deduction under clause (viii) of this sub-section];]
(viii) 39[R504] [in respect of any special reserve created 40[R505] [and maintained] by a financial corporation41[R506] which is engaged in providing long-term finance for 42[R507] [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” 43[R508] [before making any deduction under this clause]) carried to such reserve account:]
Provided 45[R510] [***] that where the aggregate of the amounts carried to such reserve account from time to time exceeds 46[R511] [twice the amount of] the paid-up share capital 47[R512] [and of the general reserves] of the corporation 48[R513] [or, as the case may be, the company], no allowance under this clause shall be made in respect of such excess.
49[R514] [Explanation.—In this clause,—
(a) “financial corporation” shall include a public company and a Government company;
(b) 50[R515] “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(c) 51[R516] “Government company” shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956);]
52[R517] [(d) “infrastructure facility” shall have the meaning assigned to it in clause (23G) of section 10;]
53[R518] [(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;]
55[R520] [(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) 56[R521] [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;]
57[R522] [(x) any sum paid by a public financial institution by way of contribution towards 58[R523] [any Exchange Risk Administration Fund set up by public financial institutions, either jointly or separately].
Explanation.—For the purposes of this clause, “public financial institutions” shall have the meaning assigned to it in 59[R524] section 4A of the Companies Act, 1956 (1 of 1956);]
60[R525] [(xi) any expenditure incurred by the assessee, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the assessee and used for the purposes of his business or profession, so as to make such computer system Y2K compliant computer system :
Provided that no such deduction shall be allowed in respect of such expenditure under any other provisions of this Act :
Provided further that no such deduction shall be admissible unless the assessee furnishes in the prescribed form61[R526] , along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.
Explanation.—For the purposes of this clause,—
(a) “computer system” means a device or collection of devices including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, or more of which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to, logic, arithmetic, data storage and retrieval, communication and control;
(b) “Y2K compliant computer system” means a computer system capable of correctly processing, providing or receiving data relating to date within and between the twentieth and twenty-first century;]
62[R527] [(xii) any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act for the objects and purposes authorised by the Act under which such corporation or body corporate was constituted or established.]
The following clause (xiii) shall be inserted
after clause (xii) of sub-section (1) of section 36 by the Finance Act, 2005,
w.e.f. 1-4-2006:
(xiii) any amount of banking cash transaction tax paid by the assessee during the previous year on the taxable banking transactions entered into by him.
Explanation.—For the purposes of this clause, the expressions “banking cash transaction tax” and “taxable banking transaction” shall have the same meanings respectively assigned to them under Chapter VII of the Finance Act, 2005.
63[R528] (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply—
64[R529] [(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 65[R530] [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the 66[R531] [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 67[R532] [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)] and the 68[R533] [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;
69[R534] [(v) where such debt or part of debt relates
to advances made by an assessee to which clause (viia) of sub-section (1)
applies, no such deduction shall be allowed unless the assessee 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.]
70[R535] 37. 71[R536] (1) 72[R537] Any expenditure73[R538] (not being expenditure of the nature described in sections 30 to 36 74[R539] [***] and not being in the nature of capital expenditure73[R540] or personal expenses of the assessee), laid out or expended wholly and exclusively75[R541] for the purposes of the business75[R542] or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.
76[R543] [Explanation.—For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]
78[R545] [79[R546] (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.]
Building, etc., partly used for business, etc., or not
exclusively so used.
87[R554] 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 88[R555] [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 89[R556] [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 90[R557] [clause (ii)
of sub-section (1)] of section 32 shall be restricted to a fair proportionate
part thereof which the 91[R558] [Assessing]
Officer may determine, having regard to the user of such building, machinery,
plant or furniture for the purposes of the business or profession.
39. [Omitted
by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.]
40. Notwithstanding anything to the contrary in sections 30 to 92[R559] [38], the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,—
93[R560] (a) in the case of any assessee—
94[R561] [(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,—
(A) outside India; or
(B) in India to a non-resident, not being a company or to a foreign company,on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
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;
(ia) any interest, commission or brokerage, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
Explanation.—For the purposes of this sub-clause,—
(i) “commission or brokerage” shall have the same meaning as in clause (i) of the Explanation to section 194H;
(ii) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
(iii) “professional services” shall have the same meaning as in clause (a) of the Explanation to section 194J;
(iv) “work” shall have the same meaning as in Explanation III to section 194C;
(ib) any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004;]
The following sub-clause (ic) shall be inserted after
sub-clause (ib) of clause (a) of section 40 by the Finance Act, 2005, w.e.f.
1-4-2006 :
(ic) any sum paid on account of fringe benefit tax under Chapter XII-H;
95[R562] (ii) any sum paid on account of any rate or tax levied96[R563] on the profits or gains of any business or profession96[R564] or assessed at a proportion of, or otherwise on the basis of, any such profits or gains;
97[R565] [98[R566] (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;]
99[R567] [(iii) any payment which is chargeable under the head “Salaries”, if it is payable—
(A) outside India; or
(B) to a non-resident, and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;]
(iv) any payment to a provident or other fund established for the benefit of employees of 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”;
1[R568] [(v) any tax actually paid by an employer referred to in clause (10CC) of section 10;]
2[R569] [(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 in so far as such amount exceeds the amount calculated at the rate of 3[R570] [twelve] per cent simple interest per annum; or
4[R571] (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 as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :—
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(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— |
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(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; |
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(c) on the balance of the book-profit |
at the rate of 40 per cent; |
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(2) in the case of any other firm— |
|
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(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; |
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(b) on the next Rs. 75,000 of the book-profit |
at the rate of 60 per cent; |
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(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;]
5[R572] [(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.]
6[R573] [Expenses
or payments not deductible in certain circumstances.
7[R574] 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”.
8[R575] (2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person9[R576] referred to in clause (b) of this sub-section, and the 10[R577] [Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him there from, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.
(b) The persons referred to in clause (a) are the following, namely :—
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(i) where the assessee is an individual |
any relative of the assessee; |
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(ii) where the assessee is a company, firm, association of persons or Hindu undivided 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.
(3) 12[R579] Where the assessee incurs any expenditure13[R580] 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 Gazette14[R581] , in a sum exceeding 15[R582] [16[R583] [twenty] thousand] rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, 17[R584] [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 any previous year the assessee makes any payment in respect thereof in a sum exceeding 18[R585] [19[R586] [twenty] 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 20[R587] [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 21[R588] [22[R589] [twenty] 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 prescribed23[R590] , having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.]
24[R591] [(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.]
(5) 25[R592] [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.]
(6) 26[R593] [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.]
27[R594] [28[R595] (7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision 29[R596] (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 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 year30[R597] .
Explanation.—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 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.]
32[R599] [(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 33[R600] [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.]
34[R601] [(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.]
(12) 35[R602] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
41. 36[R603] [37[R604] (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 obtained38[R605] , whether in cash or in any other manner whatsoever, any amount in respect of such38[R606] loss or expenditure38[R607] or some benefit in respect of such trading liability by way of remission or cessation thereof38[R608] , 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 obtained38[R609] , 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.
39[R610] [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.]
40[R611] [Explanation 2].—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;]
41[R612] [(iv) where there has been a demerger, the resulting company.]
42[R613] [(2) Where any building, machinery, plant or furniture,—
(a) which is owned by the assessee;
(b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32; and
(c) which was or has been used for the purposes of business, is sold43[R614] , discarded, demolished or destroyed43[R615] and the moneys payable43[R616] in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year in which the moneys payable for the building, machinery, plant or furniture became due43[R617] .
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 for the purpose of which the building, machinery, plant or furniture was being used is no longer in existence, the provision of this sub-section shall apply as if the business is in existence in that previous year.]
(3) Where an asset representing expenditure of a capital nature on scientific research within the meaning of clause (iv) of sub-section (1), 45[R619] [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) 46[R620] [or, as the case may be, the amount of the deduction under clause (ia)] of sub-section (2), 47[R621] [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.
48[R622] (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.
49[R623] [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.]
50[R624] [(4A) Where a deduction has been allowed in respect of any special reserve created and maintained under clause (viii) of sub-section (1) of section 36, any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn.
Explanation.—Where any amount is withdrawn from the special reserve 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 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), 51[R625] [***] sub-section (3) 52[R626] [, sub-section (4) or sub-section (4A)] in respect of that business or profession, any loss, not being a loss sustained in speculation business 53[R627] [***], 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.
54[R628] [(6) References in sub-section (3) to any other provision of this Act which has been amended or omitted by the Direct Tax Laws (Amendment) Act, 1987 shall, notwithstanding such amendment or omission, be construed, for the purposes of that sub-section, as if such amendment or omission had not been made.]
Special provision for deductions in the case of business for
prospecting, etc., for mineral oil.
42. 55[R629] [(1)] For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation to which the Central Government has entered into an agreement with any person for the association or participation 56[R630] [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 : 57[R631] [***]
58[R632] [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.
59[R633] [(2) Where the business of the assessee consisting of the prospecting for or extraction or production of petroleum and natural gas is transferred wholly or partly or any interest in such business is transferred in accordance with the agreement referred to in sub-section (1), subject to the provisions of the said agreement and where the proceeds of the transfer (so far as they consist of capital sums)—
(a) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of transfer, shall be allowed in respect of the previous year in which such business or interest, as the case may be, is transferred;
(b) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred in connection with the business or to obtain interest therein and the amount of such expenditure remaining unallowed, shall be chargeable to income-tax as profits and gains of the business in the previous year in which the business or interest therein, whether wholly or partly, had been transferred :
Provided that in a case where the provisions of this clause do not apply, the deduction to be allowed for expenditure incurred remaining unallowed shall be arrived at by substracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed.
Explanation.—Where the business or interest in such business is transferred in a previous year in which such business carried on by the assessee is no longer in existence, the provisions of this clause shall apply as if the business is in existence in that previous year;
(c) are not less than the amount of the expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed in respect of the previous year in which the business or interest in such business is transferred or in respect of any subsequent year or years:
60[R634] [Provided that where in a scheme of amalgamation or demerger, the amalga-mating or the demerged company sells or otherwise transfers the business to the amalgamated or the resulting company (being an Indian company), the provisions of this sub-section—
(i) shall not apply in the case of the amalgamating or the demerged company; and
(ii) shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the latter had not transferred the business or interest in the business.]]
61[R635] [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 requires62[R636] —
63[R637] (1) “actual cost” means the actual cost62[R638] of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met62[R639] directly or indirectly by any other person or authority:
64[R640] [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, 65[R641] [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 66[R642] [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).
67[R643] [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 68[R644] [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 68[R645] [Assessing] Officer may, with the previous approval of the 69[R646] [Joint Commissioner], determine having regard to all the circumstances of the case.
70[R647] [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.]
71[R648] [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.
72[R649] [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.]
73[R650] [Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalga-mated company and the amalgamated company is an Indian com-pany, the actual cost of the transferred capital asset to the amalga-mated 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.]
74[R651] [Explanation 7A.—Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting company is an Indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business:
Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company.]
75[R652] [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.]
76[R653] [Explanation 9.—For the removal of doubts, it is hereby declared that where an asset is or has been acquired on or after the 1st day of March, 1994 by an assessee, the actual cost of asset shall be reduced by the amount of duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944.]
77[R654] [Explanation 10.—Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee :
Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee.]
78[R655] [Explanation 11.—Where an asset which was acquired outside India by an assessee, being a non-resident, is brought by him to India and used for the purposes of his business or profession, the actual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used in India for the said purposes since the date of its acquisition by the assessee.]
79[R656] [Explanation 12.—Where any capital asset is acquired by the assessee under a scheme for corporatisation of a recognised stock exchange in India, approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the actual cost of the asset shall be deemed to be the amount which would have been regarded as actual cost had there been no such corporatisation;]
(2) “paid” means actually paid80[R657] 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”;
81[R658] (3) “plant”82[R659] includes ships, vehicles, books82[R660] , scientific apparatus and surgical equipment used for the purposes of the business or profession 83[R661] [but does not include tea bushes or livestock] 84[R662] [or buildings or furniture and fittings];
(4) 85[R663] [(i) “scientific research” means any activities for the extension of knowledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries;]
(ii) references to expenditure incurred on scientific research include all expenditure incurred for the prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research;
(iii) references to scientific research related to a business or class of business include—
(a) any scientific research which may lead to or facilitate an extension of that business or, as the case may be, all businesses of that class;
(b) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business or, as the case may be, all businesses of that class;
86[R664] (5) 87[R665] “speculative transaction”88[R666] means a transaction in which a contract88[R667] for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery88[R668] 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; 89[R669] [or]
The
following clause (d) shall be inserted after clause (c) in the proviso to
clause (5) of section 43 by the Finance Act, 2005, w.e.f. 1-4-2006 :
(d) an eligible transaction in respect of trading in derivatives referred to in clause (aa) of section 289a[R670] of the Securities Contracts (Regu-lation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; shall not be deemed to be a speculative transaction;
The following Explanation shall be inserted after the proviso to clause (5) of section 43 by the Finance Act, 2005, w.e.f. 1-4-2006 :
Explanation.—For the purposes of this clause, the expressions—
(i) “eligible transaction” means any transaction,—
(A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and
(B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;
(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose;
90[R671] (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 allowed91[R672] 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:
92[R673] [Provided that in determining the written down value in respect of depreciation allowed under sub-clauses (a), (b) and (c) of clause buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, “depreciation actually allowed” shall not include (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the pur-poses of the said clause (vi);]
93[R674] [(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;
(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
94[R675] [(C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced—
(a) by 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) by 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, so, however, that the amount of such decrease does not exceed the written down value;]
(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 95[R676] [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.
96[R677] [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.]
97[R678] [Explanation 2A.—Where in any previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets of the demerged company for the immediately preceding previous year shall be reduced by the 98[R679] [written down value of the assets] trans-ferred to the resulting company pursuant to the demerger.
Explanation 2B.—Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the 99[R680] [written down value of the transferred assets 1[R681] [***] of the demerged company immediately before the demerger.
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”.
3[R683] [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.]
4[R684] [Explanation 5.—Where in a previous year, any asset forming part of a block of assets is transferred by a recognised stock exchange in India to a company under a scheme for corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the written down value of the block of assets in the case of such company shall be the written down value of the transferred assets immediately before such transfer.]
5[R685] [Special provisions consequential to
changes in rate of exchange of currency.
43A. Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset in any previous year from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency (as compared to the liability existing at the time of acquisition of the asset) at the time of making payment—
(a) towards the whole or a part of the cost of the asset; or
(b) towards 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 along with interest, if any, the amount by which the liability as aforesaid is so increased or reduced during such previous year and which is taken into account at the time of making the payment, irrespective of the method of accounting adopted by the assessee, shall be added to, or, as the case may be, deducted from—
(i) the actual cost of the asset as defined in clause (1) of section 43; or
(ii) the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35; or
(iii) the amount of expenditure of a capital nature referred to in section 35A; or
(iv) the amount of expenditure of a capital nature referred to in clause (ix) of sub-section (1) of section 36; or
(v) the cost of acquisition of a capital asset (not being a capital asset referred to in section 50) 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:
Provided that where an addition to or deduction from the actual cost or expenditure or cost of acquisition has been made under this section, as it stood immediately before its substitution by the Finance Act, 2002, on account of an increase or reduction in the liability as aforesaid, the amount to be added to, or, as the case may be, deducted under this section from, the actual cost or expendi-ture or cost of acquisition at the time of making the payment shall be so adjusted that the total amount added to, or, as the case may be, deducted from, the actual cost or expenditure or cost of acquisition, is equal to the increase or reduction in the aforesaid liability taken into account at the time of making payment.
Explanation 1.—In this 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) 6[R686] “foreign currency” and “Indian currency” have the meanings respectively assigned to them in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
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 section.
Explanation 3.—Where the assessee has entered into a contract with an authorised dealer7[R687] as defined in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), 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 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.]
8[R688] [Certain
deductions to be only on actual payment.
9[R689] 43B. 10[R690] Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
11[R691] [(a) any sum payable by the assessee by way of tax11a[R692] , 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, 12[R693] [or]
13[R694] [(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 14[R695] [or]
14[R696] [(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 15[R697] [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 16[R698] [, or]
16[R699] [(e) any sum payable by the assessee as
interest on any 17[R700] [loan or
advances] from a scheduled bank in accordance with the terms and conditions of
the agreement governing such loan 18[R701] [or
advances],] 19[R702] [or]
20[R703] [(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee,] 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 :
21[R704] [Provided that nothing contained in this section shall apply in relation to any sum 22[R705] [***] 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.
Explanation 24[R707] [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.]
25[R708] [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.]
26[R709] [27[R710] [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) 28[R711] [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.]
29[R712] [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.]
30[R713] [Explanation 3B.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) 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, 2001, 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.]
31[R714] [Explanation 4.—For the purposes of this section,—
(a) “public financial institutions” shall have the meaning assigned to it in section 4A32[R715] of the Companies Act, 1956 (1 of 1956);
33[R716] [(aa) “scheduled bank” shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11;]
(b) “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(c) “State industrial investment corporation” means a Government company34[R717] 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 35[R718] [eligible for deduction under clause (viii) of sub-section (1) of section 36].]
36[R719] [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.]
37[R720] [Special
provision in case of income of public financial institutions, public companies,
etc.
43D. Notwithstanding anything to the contrary contained in any other provision of this Act,—
(a) 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 prescribed38[R721] having regard to the guidelines issued by the Reserve Bank of India in relation to such debts;
(b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed39[R722] having regard to the guidelines issued by the National Housing Bank 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 or the public company 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 or company, whichever is earlier.
Explanation.—For the purposes of this section,—
(a) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);
(b) “public company” means a company,—
(i) which is a public company within the meaning of section 340[R723] of the Companies Act, 1956 (1 of 1956);
(ii) whose main object is carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; and
(iii) which is registered in accordance with the Housing Finance Companies (NHB) Directions, 1989 given under section 30 and section 31 of the National Housing Bank Act, 1987 (53 of 1987);
(c) “public financial institution” shall have the meaning assigned to it in section 4A41[R724] of the Companies Act, 1956 (1 of 1956);
(d) “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;
(e) “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);
(f) “State industrial investment corporation” means a Government company within the meaning of section 61742[R725] of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects.]
43[R726] 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 44[R727] [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.
45[R728] [Special provision for deduction in the case of trade, professional or similar association.
46[R729] 44A. (1) Notwithstanding anything to the contrary contained in this Act, where the amount received during a previous year by any trade, professional or 47[R730] similar association 48[R731] [(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.]
49[R732] [Maintenance
of accounts by certain persons carrying on profession or business.
50[R733] 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 notified51[R734] by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the 52[R735] [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 53[R736] [one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds 54[R737] [ten lakh] 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 55[R738] [one lakh twenty] 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 56[R739] [ten lakh] rupees, 57[R740] [during such previous year; or
(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD or section 44AE or section 44AF 58[R741] [or section 44BB or section 44BBB], as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year,] keep and maintain such books of account and other documents as may enable the 59[R742] [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, prescribe60[R743] , by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]
61[R744] [Audit
of accounts of certain persons carrying on business or profession.
62[R745] 44AB. 63[R746] 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 64[R747] [***]; or
(b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any 65[R748] [previous year; or
(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD or section 44AE or section 44AF 66[R749] [or section 44BB or section 44BBB], as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year,] 67[R750] [***] get his accounts of such previous year 68[R751] [***] audited by an accountant before the specified date and 69[R752] [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 :
70[R753] [Provided that this section shall not apply to the person, who derives income of the nature referred to in 71[R754] [***] section 44B or 72[R755] [section 44BBA], on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :
Provided further that] in a case where such person is required by or under any other law to get his accounts audited 73[R756] [***], 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 74[R757] [furnishes by] that date the report of the audit as required under such other law and a further report 75[R758] [by an accountant] 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;
76[R759] [(ii) “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means 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. 77[R760] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
78[R761] [79[R762] Special
provision for computing profits and gains of 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 :
80[R763] [Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.]
(3) The written down value of any asset used for the purpose of the 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.
81[R764] [(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 during the previous year relevant to the assessment year commencing on the 1st day of April, 1997 or any earlier assessment year, 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.]
82[R765] [(6) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
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.]
83[R766] Special
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 84[R767] [at any time during the previous year] 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 85[R768] [three thousand five hundred] 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 86[R769] [three thousand one hundred and fifty] 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 :
87[R770] [Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.]
(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.
88[R771] [(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 during the previous year relevant to the assessment year commencing on the 1st day of April, 1997 or any earlier assessment year, 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.]
89[R772] [(7) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-sections (1) and (2), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
Explanation.—For the purposes of this section,—
(a) the expressions “goods carriage”90[R773] and “heavy goods vehicle” 90[R774] 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.]
91[R775] [Special provisions for computing profits and gains of retail business.
44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover 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 respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year.
(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 :
Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset used for the purpose of the 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 total turnover or, as the case may be, the income from the said business shall be excluded.]
92[R776] [(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
93[R777] [Special provision for computing profits and gains of shipping business in the case of non-residents.
94[R778] 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 India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.]
95[R779] [Explanation.—For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature.]
96[R780] [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 97[R781] [, 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 India 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 India.
98[R782] [(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.]
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.]
99[R783] [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 India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods from any place in India; and
(b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India.]
1[R784] [Special
provision for computing profits and gains of foreign companies engaged in
the business of civil construction, etc., in certain turnkey power projects.
2[R785] 44BBB. 3[R786] [(1)] 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 4[R787] [***], 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”.]
5[R788] [(2) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.]
6[R789] [Deduction
of head office expenditure in the case of non-residents.7[R790]
8[R791] 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 India10[R793] , whichever is the least :
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) 11[R794] [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 India, including expenditure incurred in respect of—
(a) rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes of the business or profession;
(b) salary, wages, annuity, pension, fees, bonus, commission, gra-tuity, 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 India; and
(d) such other matters connected with executive and general administration as may be prescribed.]
13[R796] [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 14[from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or with the Indian concern] before the 1st day of April, 1976, shall not exceed in the aggregate twenty per cent of the gross amount of such royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property;
(b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received 14[R797] [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 15-16[R798] [but before the 1st day of April, 2003];
Explanation.—For the purposes of this section,—
(a) “fees for technical services” shall have the same meaning as in 19[R801] [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 20[R802] [Explanation 2] to clause (vi) of sub-section (1) of section 9;
(d) royalty received 21[R803] [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.]
22[R804] [Special provision for computing income
by way of royalties, etc., in case of non-residents.
44DA. (1) The income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after the 31st day of March, 2003, where such non-resident (not being a company) or a foreign company carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as the case may be, shall be computed under the head “Profits and gains of business or profession” in accordance with the provisions of this Act :
Provided that no deduction shall be allowed,—
(i) in respect of any expenditure or allowance which is not wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India; or
(ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices.
(2) Every non-resident (not being a company) or a foreign company shall keep and maintain books of account and other documents in accordance with the provisions contained in section 44AA and get his accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income, the report of such audit in the prescribed form23[R805] duly signed and verified by such accountant.
Explanation.—For the purposes of this section,—
(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
(b) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(c) “permanent establishment” shall have the same meaning as in clause (iiia) of section 92F.]
E.—Capital gains
Capital gains.
24[R806] 45. 25[R807] [(1)] Any profits or gains arising from the transfer of a capital asset26[R808] effected in the previous year shall, save as otherwise provided in sections 27[R809] [***] 28[R810] [54, 54B, 29[R811] [***] 30[R812] [31[R813] [54D, 32[R814] [54E, 33[R815] [54EA, 54EB,] 54F 34[R816] [, 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.
35[R817] [(1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of—
(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or
(ii) riot or civil disturbance; or
(iii) accidental fire or explosion; or
(iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), then, any profits or gains arising from receipt of such money or other assets shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person of the previous year in which such money or other asset was received and for the purposes of section 48, value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
Explanation.—For the purposes of this sub-section, the expression “insurer” shall have the meaning assigned to it in clause (9) of section 236[R818] of the Insurance Act, 1938 (4 of 1938).]
37[R819] [(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.]
38[R820] [(2A) 39[R821] 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”40[R822] , “depository”40[R823] and “security”40[R824] shall have the meanings respectively assigned to them in clauses (a), (e) and (l) of sub-section (1) of section 2 of the Depositories Act, 1996.]
41[R825] [(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise41a[R826] , 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.]
42[R827] [(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 instance43[R828] 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 44[R829] [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;
45[R830] [(c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration.]
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.]
46[R831] [(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.
47[R832] 46. (1) Notwithstanding anything contained in section 45, where the assets of a company are distributed to its shareholders on its liquidation48[R833] , such distribution shall not be regarded as a transfer by the company for the purposes of section 45.
(2) Where a shareholder on the liquidation of a company receives any money or other assets48[R834] from the company, he shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 48.
49[R835] [Capital
gains on purchase by company of its own shares or other specified securities.
46A. Where a shareholder or a holder of other specified securities receives any consideration from any company for purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities, then, subject to the provisions of section 48, the difference between the cost of acquisition and the value of consideration received by the shareholder or the holder of other specified securities, as the case may be, shall be deemed to be the capital gains arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which such shares or other specified securities were purchased by the company.
Explanation.—For the purposes of this section, “specified securities” shall have the meaning assigned to it in Explanation to section 77A50[R836] of the Companies Act, 1956 (1 of 1956).]
Transactions
not regarded as transfer.
51[R837] 47. Nothing contained in section 45 shall apply to the following transfers :—
(i) any distribution of capital assets52[R838] on the total or partial partition of a Hindu undivided family;
(iii) any transfer of a capital asset under a gift54[R840] or will or an irrevocable trust:
55[R841] [Provided that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its employees under 56[R842] [any Employees’ Stock Option Plan or Scheme of the company offered to such employees in accordance with the guidelines issued by the Central Government in this behalf];]
(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;
57[R843] [(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 :]
58[R844] [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;]
59[R845] [(vi) any transfer, in a scheme of amalgamation60[R846] , of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company;]
61[R847] [(via) any transfer, in a scheme of amalgamation60[R848] , 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 amalga-mating 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;]
62[R849] [(viaa) any transfer, in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949), of a capital asset by the banking company to the banking institution.
Explanation.—For the purposes of this clause,—
(i) “banking company” shall have the same meaning assigned to it in clause (c) of section 563[R850] of the Banking Regulation Act, 1949 (10 of 1949);
(ii) “banking institution” shall have the same meaning assigned to it in sub-section (15) of section 4563[R851] of the Banking Regulation Act, 1949 (10 of 1949);]
64[R852] [(vib) any transfer, in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company;
(vic) any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if—
(a) 65[R853] [the shareholders holding not less than three-fourths in value of the shares] of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
(b) such transfer does not attract tax on capital gains in the country, in which the demerged foreign company is incorporated :
Provided that the provisions of sections 391 to 39466[R854] of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause;
(vid) any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking;]
(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;
67[R855] [(viia) any transfer of a capital asset, being bonds or 68[R856] [Global Depository Receipts] referred to in sub-section (1) of section 115AC, made outside India by a non-resident to another non-resident;]
69[R857] [(viii) any transfer of agricultural land in India effected before the 1st day of March, 1970;]
70[R858] [(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 notified71[R859] 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;]
72[R860] [(x) any transfer by way of conversion of 73[R861] [bonds or] debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company;]
74[R862] [(xi) any transfer made on or before the 31st day of December, 75[R863] [1998] by a person (not being a company) of a capital asset being membership of a recognised stock exchange to a company in exchange of shares allotted by that company to the transferor.
Explanation.—For the purposes of this clause, the expression “membership of a recognised stock exchange” means the membership of a stock exchange in India which is recognised under the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(xii) any transfer of a capital asset, being land of a sick industrial company, made under a scheme prepared and sanctioned under section 1876[R864] of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) where such sick industrial company is being managed by its workers’ co-operative :
Provided that such transfer is made during the period commencing from the previous year in which the said company has become a sick industrial company under sub-section (1) of section 1777[R865] of that Act and ending with the previous year during 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 377[R866] of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986);]
78[R867] [(xiii) 79[R868] [any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of 80[R869] [demutualisation or] corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company :]
Provided that—
(a) all the assets and liabilities of the firm 81[R870] [or of the association of persons or body of individuals] relating to the business immediately before the succession become the assets and liabilities of the company;
(b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;
(c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and
(d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;
82[R871] [(e) the 83[R872] [demutualisation or] corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for 83[R873] [demutualisation or] corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
83[R874] [(xiiia) any transfer of a capital asset being a membership right held by a member of a recognised stock exchange in India for acquisition of shares and trading or clearing rights acquired by such member in that recognised stock exchange in accordance with a scheme for demutualisation or corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
(xiv) where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company :
Provided that—
(a) all the assets and liabilities of the sole proprietary concern relating to the business immediately before the succession become the assets and liabilities of the company;
(b) the shareholding of the sole proprietor in the company is not less than fifty per cent of the total voting power in the company and his shareholding continues to remain as such for a period of five years from the date of the succession; and
(c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;
(xv) any transfer in a scheme for lending of any securities under an agreement or arrangement, which the assessee has entered into with the borrower of such securities and which is subject to the guidelines issued by the Securities and Exchange Board of India, established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) 84[R875] [or the Reserve Bank of India constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)], in this regard.]
85[R876] [Withdrawal
of exemption in certain cases.
47A. 86[R877] [(1)] 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.]
87[R878] [(2) Where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gains not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the head “Capital gains” of the previous year in which such shares are transferred.]
88[R879] [(3) Where any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed to be the profits and gains chargeable to tax of the successor company for the previous year in which the requirements of the proviso to clause (xiii) or the proviso to clause (xiv), as the case may be, are not complied with.]
89[R880] [Mode
of computation.
90[R881] 48. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration91[R882] 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 transfer91[R883] ;
(ii) the cost of acquisition of the asset and the cost of any improvement91[R884] thereto:
92[R885] 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:
93[R886] [Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government:]
94[R887] [Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section:]
95[R888] [Provided also that no deduction shall be allowed in computing the income chargeable under the head “Capital gains” in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.]
Explanation.—For the purposes of this section,—
(i) “foreign currency”96 and “Indian currency”96[R889] 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;
97[R890] [(v) “Cost Inflation Index”, in relation to a previous 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 the immediately preceding previous year to such previous year, by notification98[R891] in the Official Gazette, specify, in this behalf.]]
Cost with
reference to certain modes of acquisition.
99[R892] 49. 1[R893] [(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 devolution2[R894] , or
3[R895] [(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) 4[R896] [or clause (v)] 5[R897] [or clause (vi)] 6[R898] [or clause (via)] 7[R899] [or clause (viaa)] of section 47;
8[R900] [(iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969,] the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
9[R901] [Explanation.—In this 10[R902] [sub-section] the expression “previous owner of the property” in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) 11[R903] [or clause (iv)] of this 12[R904] [sub-section].]
13[R905] [(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.]
14[R906] [(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.]
15[R907] [(2AA) Where the capital gain arises from the transfer of the shares, debentures or warrants, the value of which has been taken into account while computing the value of perquisite under clause (2) of section 17, the cost of acquisition of such shares, debentures or warrants shall be the value under that clause.]
(2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger.
(2D) The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C).]
Explanation.—For the purposes of this section, “net worth” shall mean the aggregate of the paid up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger.]
18[R910] [(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.]
19[R911] [Special
provision for computation of capital gains in case of depreciable assets.
20[R912] 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.]
21[R913] [Special
provision for cost of acquisition in case of depreciable asset.
50A. Where the capital asset is an asset in respect of which a deduction on account of depreciation under clause (i) of sub-section (1) of section 32 has been obtained by the assessee in any previous year, the provisions of sections 48 and 49 shall apply subject to the modification that 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.]
22[R914] [Special
provision for computation of capital gains in case of slump sale.
50B. (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place :
Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets.
(2) In relation to capital assets being an undertaking or division transferred by way of such sale, the “net worth” of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48.
(3) Every assessee, in the case of slump sale, shall furnish in the prescribed form23[R915] along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288, indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section.
24[R916] [Explanation 1.—For the purposes of this section, “net worth” shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account :
Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth.
Explanation 2.—For computing the net worth, the aggregate value of total assets shall be,—
(a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (c) of item (i) of sub-clause (c) of clause (6) of section 43; and
(b) in the case of other assets, the book value of such assets.]]
25[R917] [Special
provision for full value of consideration in certain cases.
50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(2) Without prejudice to the provisions of sub-section (1), where—
(a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;
(b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
Explanation.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]
51. Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money26[R918] 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.
52. 27[R919] [Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.]
Exemption of
capital gains from a residential house.
53. 28[R920] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
Profit on
sale of property used for residence.
29[R921] 54. 30[R922] [(1)] 31[R923] [32[R924] [Subject to the provisions of sub-section (2), where, in the case of an assessee33[R925] being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 34[R926] [***], 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 35[R927] [one year before or two years after the date on which the transfer took place purchased36[R928] ], 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 37[R929] [is greater than the cost of 38[R930] [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.
40[R932] [(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 scheme41[R933] 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.—42[R934] [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 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.]
43[R935] [Capital
gain on transfer of land used for agricultural purposes not to be charged in
certain cases.
44[R936] 54B. 45[R937] [(1)] 46[R938] [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 47[R939] [(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain.]
48[R940] [(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 scheme49[R941] 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.—50[R942] [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.]
51[R943] [Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases.
52[R944] 54D. 53[R945] [(1)] 54[R946] [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 undertaking55[R947] 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 56[R948] [(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 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.]
57[R949] [(2) The amount of the capital gain which is not utilised by the assessee for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme58[R950] 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.—59[R951] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
60[R952] [Capital
gain on transfer of capital assets not to be charged in certain cases.
61[R953] 54E. (1) Where the capital gain arises from the transfer of a 62[R954] [long-term capital asset] 63[R955] [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 64[R956] [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 65[R957] [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 65[R958] [net consideration] in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the new asset bears to the 66[R959] [net consideration] shall not be charged under section 45:
67[R960] [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:]
68[R961] [Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee 69[R962] [or the 31st day of March, 1992, whichever is earlier].]
Explanation 1.—70[R963] [For the purposes of this sub-section, “specified asset” means,—
(a) in a case where the original asset is transferred before the 1st day of March, 1979, any of the following assets, namely:—]
(i) securities of the Central Government or a State Government;
(ii) 71[R964] savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959);
(iii) units in the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);
(iv) debentures specified by the Central Government for the purposes of clause (ii) of sub-section (1) of section 80L;
(v) shares in any Indian company which are issued to the public or are listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made there under, 72[R965] [where the investment in such shares is made before the 1st day of March, 1978];
73[R966] [(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);
74[R967] [(b) in a case where the original asset is transferred after the 28th day of February, 1979 75[R968] [but before the 1st day of March, 1983], such National Rural Development Bonds as the Central Government may notify76[R969] in this behalf in the Official Gazette;]
77[R970] [(c) in a case where the original asset is transferred after the 28th day of February, 1983 78[R971] [but before the 1st day of April, 1986], any of the following assets, namely :—
(i) securities of the Central Government which that Government may, by notification in the Official Gazette, specify in this behalf;
(ii) special series of units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), which the Central Government may, by notification79-80[R972] in the Official Gazette, specify in this behalf;
(iii) such National Rural Development Bonds as have been notified79-80[R973] 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 81[R974] 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;]
82[R975] [(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 notification83[R976] in the Official Gazette, specify in this behalf;
85[R978] [(e) in a case where the original asset is transferred after the 31st day of March, 1989, any of the assets specified in clauses (c) and (d) and such debentures or bonds issued by the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987), as the Central Government may, by notification86[R979] in the Official Gazette, specify in this behalf.]
87[R980] [Explanation 2.—“Eligible issue of capital” shall have the meaning assigned to it in sub-section (3) of section 80CC.]
88[R981] [Explanation 3.—An assessee shall not be deemed to have invested the 89[R982] [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 90[R983] [4].—“Cost”, in relation to any new asset, being a deposit referred to in 91[R984] [sub-clause (vi) of clause (a)] of Explanation 1, means the amount of such deposit.
92[R985] [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.
93[R986] [(1A) Where the assessee deposits after the 27th day of April, 1978, the 94[R987] [whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in 95[R988] [sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), the cost of such new asset shall not be taken into account for the purposes of that sub-section unless the following conditions are fulfilled, namely :—
(a) the assessee furnishes, along with the deposit, a declaration in writing, to the bank or the co-operative society referred to in the said 96[R989] [sub-clause (vi)] with which such deposit is made, to the effect that the assessee will not take any loan or advance on the security of such deposit during a period of three years from the date on which the deposit is made;
(b) the assessee furnishes, along with the return of income for the assessment year relevant to the previous year in which the transfer of the original asset was effected or within such further time as may be allowed by the 97[R990] [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.]
98[R991] [(1B) Where on the fulfillment of the conditions specified in sub-section (1A), the cost of the new asset referred to in that sub-section is taken into account for the purposes of sub-section (1), the assessee shall, within a period of ninety days from the expiry of the period of three years reckoned from the date of such deposit, furnish to the 99[R992] [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.]
1[R993] [(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 2[R994] [long-term capital assets] of the previous year in which the new asset is transferred or converted (otherwise than by transfer) into money.]
3[R995] [4[R996] [Explanation 1].—Where the assessee deposits after the 27th day of April, 1978, the 5[R997] [whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in 6[R998] [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.]
7[R999] [Explanation 2.—In a case where the original asset is transferred after the 28th day of February, 1983 and the assessee invests the whole or any part of the net consideration in respect of the original asset in any new asset and such assessee takes any loan or advance on the security of such new asset, he shall be deemed to have converted (otherwise than by transfer) such new asset on the date on which such loan or advance is taken.]
11[R1003] [(3) Where the cost of the equity shares referred to in 12[R1004] [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) 13[R1005] [***], a deduction with reference to such cost shall not be allowed under section 80CC.]
14[R1006] [Capital
gain on transfer of long-term capital assets not to be charged in the case of
investment in 15[R1007] [specified
securities].
16[R1008] 54EA. (1) Where the capital gain arises from the transfer of a long-term capital asset 17[R1009] [before the 1st day of April, 2000] (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 the net consideration in any of the 18[R1010] [bonds, debentures, shares of a public company or units of any mutual fund referred to in clause (23D) of section 10,] specified 19[R1011] by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the 20[R1012] [specified securities]), 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 20[R1013] [specified securities] 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 20[R1014] [specified securities] 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 acquisition of the 20[R1015] [specified securities] bears to the net consideration shall not be charged under section 45.
(2) Where the 20a[R1016] [specified securities] 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 20a[R1017] [specified securities] as provided in clause (a) or clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which the 20a[R1018] [specified securities] 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 20a[R1019] [specified securities] and such assessee takes any loan or advance on the security of such 20a[R1020] [specified securities], he shall be deemed to have converted (otherwise than by transfer) such 20a[R1021] [specified securities] into money on the date on which such loan or advance is taken.
(3) Where the cost of the 20a[R1022] [specified securities] 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 20a[R1023] [specified securities], means the amount invested in such 20a[R1024] [specified securities] 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.
21[R1025] 54EB. (1) Where the capital gain arises from the transfer of a long-term capital asset 22[R1026] [before the 1st day of April, 2000] (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 23[R1027] 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 accrued 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.]
24[R1028] [Capital
gain not to be charged on investment in certain bonds.
54EC. (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 the long-term specified 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 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.
(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three 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 asset 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 accrued 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.
The following sub-section (3) shall be substituted for the existing sub-section (3) of section 54EC by the Finance Act, 2005, w.e.f. 1-4-2006 :
(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) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.
Explanation.—For the purposes of this section,—
(a) “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;
25[R1029] [(b) “long-term specified asset” means any bond redeemable after three years, issued,—
(i) on or after the 1st day of April, 2000, by 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) or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988);
(ii) on or after the 1st day of April, 2001, by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956);]]
26[R1030] [(iii) on or after the 1st day of April, 2002, by the National Housing Bank established under sub-section (1) of section 3 of the National Housing Bank Act, 1987 (53 of 1987) or by the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989).]
27[R1031] [Capital
gain on transfer of certain listed securities or unit not to be charged in
certain cases.
54ED. (1) Where the capital gain arises from the transfer of a long-term capital asset, being listed securities or unit (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 the whole or any part of the capital gain in acquiring equity shares forming part of an eligible issue of capital (such equity shares being hereafter in this section referred to as the specified equity shares), the said 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 equity shares 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 specified equity shares 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 the specified equity shares acquired bears to the whole of the capital gain shall not be charged under section 45.
Explanation.—For the purposes of this sub-section,—
(i) “eligible issue of capital” means an issue of equity shares which satisfies the following conditions, namely:—
(a) the issue is made by a public company formed and registered in India;
(b) the shares forming part of the issue are offered for subscription to the public;
(ii) “listed securities” shall have the same meaning as in clause (a) of the Explanation to sub-section (1) of section 112;
(iii) “unit” shall have the meaning assigned to it in clause (b) of the Explanation to section 115AB.
(2) Where the specified equity shares are sold or otherwise transferred within a period of one year 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 equity shares 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 such equity shares are sold or otherwise transferred.
(3) Where the cost of the specified equity shares 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.]
The following sub-section (3) shall be substituted for
the existing sub-section (3) of section 54ED by the Finance Act, 2005, w.e.f.
1-4-2006 :
(3) Where the cost of the specified equity shares has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),—
(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.
28[R1032] [Capital
gain on transfer of certain capital assets not to be charged in case of
investment in residential house.29[R1033]
54F. (1) 30[R1034] [Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 31[R1035] [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:
32[R1036] [Provided that nothing contained in this sub-section shall apply where—
(a) The assessee,—
(i) Owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii) Purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii) Constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.]
Explanation.—For the purposes of this section,—
34[R1038] [***] “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 35[R1039] [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.]
36[R1040] [(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 scheme37[R1041] 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.—38[R1042] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]]
39[R1043] [Exemption
of capital gains on transfer of assets in cases of shifting of industrial
undertaking from urban area.
54G. (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of, the shifting of such industrial undertaking (hereafter in this section referred to as the original asset) to any area (other than an urban area) and the assessee has within a period of one year before or three years after the date on which the transfer took place,—
(a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted ;
(b) acquired building or land or constructed building for the purposes of his business in the said area ;
(c) shifted the original asset and transferred the establishment of such undertaking to such area; and
(d) incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil ; or
(ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital gain shall not be charged under section 45 ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain.
Explanation.—In this sub-section, “urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order40[R1044] , 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 scheme41[R1045] 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.—42[R1046] [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
43[R1047] [Extension
of time for acquiring new asset or depositing or investing amount of capital
gain.
54H. Notwithstanding anything contained in sections 54, 54B, 54D 44[R1048] [***] 45[R1049] [, 54EC] 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 the 31st day of December, 1991.]
Meaning of “adjusted”, “cost of
improvement” and “cost of acquisition”.
46[R1050] 55. (1) For the purposes of 47[R1051] [sections 48 and 49],—
49[R1053] [(b) “cost of any improvement”,—
(1) in relation to a capital asset being goodwill of a business 50[R1054] [or a right to manufacture, produce or process any article or thing] 51[R1055] [or right to carry on any 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 52[R1056] [1st day of April, 53[R1057] [1981]], 54[R1058] [***] 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 55[R1059] [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.
56[R1060] (2) 57[R1061] [For the purposes of sections 48 and 49, “cost of acquisition”58[R1062] ,—
59[R1063] [(a) in relation to a capital asset, being goodwill of a business 60[R1064] [or a trade mark or brand name associated with a business] 61[R1065] [or a right to manufacture, produce or process any article or thing] 62[R1066] [or right to carry on any 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) 63[R1067] [in a case where, by virtue of holding a capital asset, being a share or any other security64[R1068] , 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 ;
65[R1069] [(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 ;] and
(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 ;]
66[R1070] [(ab) in relation to a capital asset, being equity share or shares allotted to a shareholder of a recognised stock exchange in India under a scheme for 67[demutualisation or] corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange:]
67[R1071] [Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil;]
(b) in relation to any other capital asset,—]
(i) where the capital asset became the property of the assessee68[R1072] before the 69[R1073] [1st day of April, 70[R1074] [1981]], means the cost of acquisition of the asset to the assessee or the fair71[R1075] market value of the asset on the 72[R1076] [1st day of April, 73[R1077] [1981]], at the option of the assessee ;
(ii) where the capital asset became the property of the assessee74[R1078] by any of the modes specified in 75[R1079] [sub-section (1) of] section 49, and the capital asset became the property of the previous owner before the 75a[R1080] [1st day of April, 75b[R1081] [1981]], means the cost of the capital asset to the previous owner or the fair76[R1082] market value of the asset on the 75a[R1083] [1st day of April, 75b[R1084] [1981]], at the option of the assessee ;
(iii) where the capital asset became the property of the assessee76[R1085] 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 fair76[R1086] market value of the asset on the date of distribution ;
78[R1088] [(v) where the capital asset, being a share or a stock of a company, became the property of the assessee on—
(a) the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares,
(b) the conversion of any shares of the company into stock,
(c) the re-conversion of any stock of the company into shares,
(d) the sub-division of any of the shares of the company into shares of smaller amount, or
(e) the conversion of one kind of shares of the company into another kind, means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived.]
(3) Where the cost for which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset became the property of the previous owner.
79[R1089] [Reference
to valuation Officer.
80[R1090] 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter81[R1091] , the 82[R1092] [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 83[R1093] [Assessing] Officer is of opinion that the value so claimed is less than its fair market value ;
(b) in any other case, if the 83[R1094] [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 percentage84[R1095] of the value of the asset as so claimed or by more than such amount84[R1096] 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, 85[R1097] and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the 86[R1098] [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
Income from other sources.
87[R1099] 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 incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—
(i) dividends ;
88[R1100] [(ia) income referred to in sub-clause (viii) of clause (24) of section 2 ;]
89[R1101] [(ib) income referred to in sub-clause (ix) of clause (24) of section 2 ;]
90[R1102] [(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” ;]
91[[R1103] (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”;
92[R1104] [(iv) income referred to in sub-clause (xi) 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”;]
93[R1105] [(v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004, the whole of such sum :
Provided that this clause shall not apply to any sum of money received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer.
Explanation.—For the purposes of this clause, “relative” means—
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).]
94[R1106] 57. The income chargeable under the head “Income from other sources” shall be computed after making the following deductions, namely :—
(i) in the case of dividends, 95[R1107] [other than dividends referred to in section 115-O,] 96[R1108] [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 97[R1109] [or interest] on behalf of the assessee ;
98[R1110] [(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 99[R1111] [sub-sections (1) 1[R1112] [***] and (2)] of section 32 and subject to the provisions of 2[R1113] [section 38] ;
3[R1114] [(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 4[R1115] [fifteen] 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 purpose5 [R1116] of making or earning such income.
Explanation.—[Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]
8[R1118] 58. 9[R1119] [(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 ;
10[R1120] [(ia) any expenditure of the nature referred to in sub-section (12)11[R1121] of section 40A ;]
(ii) 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 12[R1122] [***] ;
(iii) any payment which is chargeable under the head “Salaries”, if it is payable outside India, unless tax has been paid thereon or deducted there from under Chapter XVII-B ;
15[R1125] [(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”.]
16[R1126] [(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”.]
17[R1127] [(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”.]
18[R1128] [(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.]
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, see Case Laws
[R2]“B.—Interest on securities” omitted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R3]Inserted by the Finance Act, 2001, w.r.e.f. 1-4-1962.
[R4]See also Circular No. 11/2001, dated 23-7-2001.
[R5]Inserted by the Finance Act, 2002, w.r.e.f. 11-5-2001.
[R6]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.
[R7]For relevant case laws, see case laws.
[R12]Existing Explanation renumbered as Explanation
1 by the Finance Act, 1992, w.e.f. 1-4-1993.
[R13]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
Earlier Explanation 2 was inserted and omitted by the Direct Tax Laws (Amendment)
Act, 1987/1989, w.e.f. 1-4-1989.
[R14]For relevant case laws, see case laws
[R15]Clause (i) of section 16 shall be omitted by
the Finance Act, 2005, w.e.f. 1-4-2006.
[R16]Substituted by the Finance Act, 2003, w.e.f. 1-4-2004.
Prior to its substitution, clause (i), as substituted by the Finance
Act, 2001, w.e.f. 1-4-2002, read as under :
“(i) in the case of
an assessee whose income from salary, before allowing a deduction under this
clause,—
(A) does not exceed one lakh fifty thousand rupees, a deduction
of a sum equal to thirty-three and one-third per cent of the salary or thirty
thousand rupees, whichever is less;
(B) exceeds
one lakh fifty thousand rupees but does not exceed three lakh rupees, a deduction
of a sum of twenty-five thousand rupees;
(C) exceeds three lakh rupees but does not exceed five lakh
rupees, a deduction of a sum of twenty thousand rupees;”
Earlier clause (i) was amended by the Finance Act, 1974, w.e.f. 1-4-1975, Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, Finance Act, 1981, w.e.f. 1-4-1982, Finance Act, 1982, w.e.f. 1-4-1983, Finance Act, 1983, w.e.f. 1-4-1984, Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1975, Finance Act, 1985, w.e.f. 1-4-1986, Finance Act, 1986, w.e.f. 1-4-1987, Finance Act, 1988, w.e.f. 1-4-1989, Finance Act, 1989, w.e.f. 1-4-1990, Finance Act, 1992, w.e.f. 1-4-1993, Finance Act, 1993, w.e.f. 1-4-1994, Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, Finance Act, 1997, w.e.f. 1-4-1998 and Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[R17]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002.
Earlier clause (ia) was inserted by the Finance (No. 2) Act, 1996,
w.e.f. 1-4-1997 and clause (ii) was amended by the Finance (No. 2) Act,
1980, w.e.f. 1-4-1981, Finance Act, 1997, w.e.f. 1-4-1998 and Finance (No. 2)
Act, 1998, w.e.f. 1-4-1999.
[R18]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.
[R19]Article 276(2) of the Constitution reads as under :
“276. (2) The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two thousand and five hundred rupees per annum.”
[R20]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.
[R21]Omitted by the Finance Act, 1974, w.e.f. 1-4-1975.
[R22]See also
Circular No. 9/2003, dated 18-11-2003, Circular No. 603, dated 6-6-1991 and
Circular No. 710, dated 24-7-1995..
[R23]For relevant case laws, see case laws
[R24]For the meaning of the terms/expressions “salary”,
“includes”, “fee . . . in addition to any salary” and “any gratuity”
[R25]For the meaning of the terms/expressions “salary”, “includes”,
“fee . . . in addition to any salary” and “any gratuity”
[R26]For the meaning of the terms/expressions “salary”,
“includes”, “fee . . . in addition to any salary” and “any gratuity”
[R27]For the meaning of the terms/expressions “salary”,
“includes”, “fee . . . in addition to any salary” and “any gratuity”
[R28]Inserted by the Taxation Laws (Amendment) Act, 1984,
with retrospective effect from 1-4-1978.
[R29]Inserted by the Finance (No. 2) Act, 2004, w.r.e.f.
1-4-2004.
[R30]See rule 3.
[R31]In terms of section 10A of the Salaries and Allowances
of Ministers Act, 1952/Salaries and Allowances of Officers of Parliament Act,
1953 and section 9A of the Salary and Allowances of Leaders of Opposition in
Parliament Act, 1977, value of rent-free furnished residence (including
maintenance thereof) provided to a minister/an officer of Parliament and a
Leader of the Opposition is not to be included in the computation of his income
chargeable to tax under the head “Salaries”.
[R33]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.
[R34]Substituted for “twenty-four” by the Finance Act,
2001, w.e.f. 1-4-2002.
[R35]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R36]Substituted for “the Employees’ Stock Option Plan or
Scheme of the said company” by the Finance Act, 2001, w.e.f. 1-
4-2001.
[R37]See Notification
No. SO 1021(E), dated 11-10-2001 for Guidelines regarding Employees’ Stock
Option Plan or Scheme.
[R38]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R39]Omitted by the Finance Act, 2000, w.e.f. 1-4-2001.
Prior to its omission, sub-clause (iiia), as inserted by the Finance
Act, 1999, w.e.f. 1-4-2000, read as under :
‘(iiia) the
value of any specified security allotted or transferred, directly or
indirectly, by any person free of cost or at concessional rate, to an
individual who is or has been in employment of that person :
Provided that in a case where allotment
or transfer of specified securities is made in pursuance of an option exercised
by an individual, the value of the specified securities shall be taxable in the
previous year in which such option is exercised by such individual.
Explanation.—For the purposes
of this clause,—
(a) “cost”
means the amount actually paid for acquiring specified securities and where no
money has been paid, the cost shall be taken as nil;
(b) “specified
security” means the securities as defined in clause (h) of section 2 of
the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and includes
employees’ stock option and sweat equity shares;
(c) “sweat
equity shares” means equity shares issued by a company to its employees or
directors at a discount or for consideration other than cash for providing
know-how or making available rights in the nature of intellectual property
rights or value additions, by whatever name called; and
(d) “value” means the difference between the fair market value and the cost for acquiring specified securities;’
[R40]Inserted by the Labour Provident Fund Laws (Amendment)
Act, 1976, w.e.f. 1-8-1976.
[R41]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R43]See rule 3.
[R44]Inserted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1991.
[R45]Substituted by the Finance Act, 1994, w.r.e.f.
1-4-1993. Prior to its substitution, clause (ii) was substituted by the
Finance Act, 1992, w.e.f. 1-4-1993.
[R46]For list of hospitals recognised under the Central Government Health Scheme vide Circular No. 603, dated 6-6-1991,.
[R47]See rule 3A(2) for prescribed diseases.
[R48]See rule 3A(1) for conditions to be fulfilled by a hospital to
obtain Chief Commissioner’s approval.
[R49]Substituted for “ten” by the Finance (No. 2) Act,
1998, w.e.f. 1-4-1999.
[R50]Substituted for “or” by the Finance Act, 1993, w.e.f.
1-4-1993.
[R51]Substituted, by the Finance Act, 1993, w.e.f.
1-4-1993. Prior to its substitution it was amended by the Finance Act,
1992, w.e.f. 1-4-1993.
[R52]Inserted by the Finance Act, 2002, w.e.f. 1-4-2002.
[R53]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R54]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.
[R55]See also
Letter F. No. 35/26/64-IT(B), dated 25-5-1964.
[R58]Inserted by the Finance (No. 2) Act, 1965, with
retrospective effect from 1-4-1962.
[R59]Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.
[R60]Substituted for “or clause (12)” by the Direct Taxes (Amendment) Act, 1964, w.e.f. 6-10-1964.
[R62]Words “(not being an approved superannuation fund)”
omitted, by the Finance Act, 1995, w.e.f. 1-4-1996.
[R63]Substituted for “interest on such contributions” by
the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996.
[R64]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R65]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 and section 18 were amended by the Finance Act,
1965, w.e.f. 1-4-1965 and the Finance Act, 1988, w.e.f. 1-4-1988. Sections 19
and 20 were amended by the Finance Act, 1979, w.e.f. 1-4-1980.
[R66]See also Circular No. 9, dated 25-3-1969 and Circular No. 2(XLVIII-2), dated 13-6-1955.
[R67]For relevant case laws, see case laws
[R71]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002.
Prior to its substitution, section 23, as amended by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1967, Finance Act, 1968, w.e.f. 1-4-1969, Taxation Laws
(Amendment) Act, 1970, w.e.f. 1-4-1971, Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976, Finance Act, 1978, w.e.f. 1-4-1979, Finance Act, 1982, w.e.f.
1-4-1983, Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985/1-4-1984,
Finance Act, 1986, w.e.f. 1-4-1987 and Finance Act, 1992, w.e.f. 1-4-1993, read
as under :
‘23. Annual value how determined.—(1)
For the purposes of section 22, the annual value of any property shall be
deemed to be—
(a) the sum for which the property might reasonably be expected
to let from year to year; or
(b) where the property is let and the annual rent received or receivable
by the owner in respect thereof is in excess of the sum referred to in clause (a),
the amount so received or receivable :
Provided that where the property
is in the occupation of a tenant, the taxes levied by any 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
:
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, 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;
(c) in the case of a building comprising one or more residential
units, the erection of which is 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;
(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 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.
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.
Explanation 2.—For the removal of doubts, it is hereby declared that
where a deduction in respect of any taxes referred to in the first proviso to
this sub-section is allowed in determining the annual value of the property in
respect of any previous year (being a previous year relevant to the assessment
year commencing on the 1st day of April, 1984 or any earlier assessment year),
no deduction shall be allowed under the first proviso in determining the annual
value of the property in respect of the previous year in which such taxes are
actually paid by the owner.
(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.
(2A) [***]
(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.’
[R74]See rule 4.
[R75]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002.
Prior to its substitution, section 24, as amended by the Finance Act, 1968, w.e.f.
1-4-1969, Finance (No. 2) Act, 1977, w.e.f. 1-4-1977, Finance Act, 1983, w.e.f.
1-4-1984, Finance Act, 1986, w.e.f. 1-4-1987, Finance Act, 1992, w.e.f.
1-4-1993, Finance Act, 1994, w.e.f. 1-4-1995, Finance (No. 2) Act, 1996, w.e.f.
1-4-1997/w.r.e.f. 1-4-1995, Finance (No. 2) Act, 1998, w.e.f. 1-4-1999, Finance
Act, 1999, w.e.f. 1-4-2000 and Finance Act, 2000, w.e.f. 1-4-2001, read as
under:
‘24. Deductions from income from
house property.—(1) Income chargeable under the head “Income from house
property” shall, subject to the provisions of sub-section (2), be computed
after making the following deductions, namely:—
(i) in respect of repairs of, and collection of rent from, the
property, a sum equal to one-fourth of the annual value;
(ii) the amount of any premium paid to insure the property
against risk of damage or destruction ;
(iii) [***]
(iv) where the property is subject to an annual charge (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.
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 or any other tax
levied by the State Government in respect of the property;
(viii) [***]
(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.
Explanation.—The deduction
under this clause shall be made irrespective of whether the period during which
the property or, as the case may be, part of the property was vacant precedes
or follows the period during which it is let;
(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.
(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 thirty 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 or sub-section (3) of section 23 :
Provided further that where the
property is acquired or constructed with capital borrowed on or after the 1st
day of April, 1999 and such acquisition or construction is completed before the
1st day of April, 2003, the provisions of the first proviso shall have effect
as if for the words “thirty thousand rupees”, the words “one lakh rupees” had
been substituted.
(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.’
[R76]Substituted for “before the 1st day of April, 2003” by
the Finance Act, 2002, w.e.f. 1-4-2003.
[R77]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R78]Words “annual charge or” omitted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R79]Inserted by the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-4-1985.
[R80]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R81]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R82] Inserted by the
Finance Act, 2001, w.e.f. 1-4-2002.
[R83]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R84]Substituted for “a sum equal to one-fourth of such
amount for repairs of, and collection of rent from, the property” by the
Finance Act, 2001, w.e.f. 1-4-2002.
[R85]See also Letter F. No. 45/230/63-ITJ, dated 22-2-1965..
[R86]For relevant case laws, see case laws
[R87]Inserted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976.
[R88]For relevant case laws, see case laws
[R89]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R90] For text of section
53A of the Transfer of Property Act, 1882, see
Appendix One.
[R91]Clauses (iv) and (v) omitted by the
Finance Act, 2001, w.e.f. 1-4-2002. Prior to their omission, clauses (iv)
and (v) read as under :
‘(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 ;’
[R92]Clauses (iv) and (v) omitted by the
Finance Act, 2001, w.e.f. 1-4-2002. Prior to their omission, clauses (iv)
and (v) read as under :
‘(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 ;’
[R93]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, Circular
No. 665, dated 5-10-1993, Circular No. 742, dated 2-5-1996 (as amended by
Circular No. 765, dated 15-4-1998); Letter dated 12-3-1996, Circular No. 787,
dated 10-2-2000; Circular No. 6/2001, dated 5-3-2001, Circular No. 2/2002,
dated 15-2-2002 and Circular No. 4/2004, dated 13-5-2004..
[R94]For relevant case laws, see case laws
[R96]For the meaning of the terms/expressions “profits and
gains”, “profession”, “compensation”, “due to” and “received by”,
[R97]For the meaning of the terms/expressions “profits and
gains”, “profession”, “compensation”, “due to” and “received by”
[R98]For the meaning of the terms/expressions “profits and
gains”, “profession”, “compensation”, “due to” and “received by”,
[R99]For the meaning of the terms/expressions “profits and
gains”, “profession”, “compensation”, “due to” and “received by”
[R100]Inserted by the Finance Act, 1973, w.r.e.f. 1-4-1972.
[R103]Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1962.
[R104]Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1967.
[R105]Inserted, by the Finance Act, 1990, w.r.e.f. 1-4-1972.
[R106]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R107]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.
[R108]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R109]Inserted by the Finance (No. 2) Act, 1996, w.e.f.
1-10-1996.
[R110]For relevant case laws, see case laws
[R111]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.
[R112]For relevant case laws, see case laws
[R113]For the meaning of the expression “current repairs”
[R114]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R115]See also
Circular No. 26-D(XLVI-22), dated 10-10-1966.
[R116]For relevant case laws, see case laws
[R117]For the meaning of the expression “current repairs”
[R118]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R119]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, Circular No. 14 of 1955, dated 11-4-1955, Circular No. 609, dated 29-7-1991, Circular No. 622, dated 6-1-1992, Circular No. 652, dated 14-6-1993 and Circular No. 2/2001, dated 9-2-2001. For details,.
[R120]Substituted for the opening portion beginning with the
words “In respect of depreciation of buildings, machinery, plant or furniture
owned, wholly or partly,” and ending with the words and figures “section 34, be
allowed—” by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999. Prior to its
substitution, the quoted portion, as amended by the Finance (No. 2) Act, 1996,
w.e.f. 1-4-1997, read as under :
“In respect of depreciation of buildings, machinery, plant or furniture owned, 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—”
[R121]For the meaning of the terms/expressions “buildings”,
“machinery”, “owned by the assessee” and “used for the purposes of the
business”.
[R122]For the meaning of the terms/expressions “buildings”,
“machinery”, “owned by the assessee” and “used for the purposes of the
business”.
[R123]For the meaning of the terms/expressions “buildings”,
“machinery”, “owned by the assessee” and “used for the purposes of the
business”.
[R124]For the meaning of the terms/expressions “buildings”,
“machinery”, “owned by the assessee” and “used for the purposes of the
business”.
[R125]For the meaning of the terms/expressions “buildings”,
“machinery”, “owned by the assessee” and “used for the purposes of the
business”.
[R126]Inserted by the Income-tax (Amendment) Act, 1998,
w.e.f. 1-4-1998. Earlier, original clause (i) was substituted by the
Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976 and later on omitted by
the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f.
1-4-1988.
[R127]See rule
5(1A) and Appendix IA.
[R128]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.
[R129]See rule 5(1) and Appendix I of Income-tax Rules. See
also Appendix Two for procedure
for claiming higher depreciation.
[R130]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 :”
[R131]Substituted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992. Prior to its substitution, second proviso was 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.
[R133]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R134]Substituted by the Income-tax (Amendment) Act, 1998,
w.e.f. 1-4-1998. Prior to its substitution, second proviso, as inserted by the
Finance (No. 2) Act, 1991, w.e.f. 1-4-1992 and later on amended by the Finance
Act, 1995, w.e.f. 1-4-1996, read as under :
“Provided 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 :”
[R135]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R139]Clauses (17), (21), (23), (24)
and (44) of section 2 of the Motor Vehicles Act, 1988, define “heavy
passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”,
“medium passenger motor vehicle” and “tractor”, respectively, as follows :
‘(17) “heavy
passenger motor vehicle” means any public service vehicle or private
service vehicle or educational institution bus or omnibus the gross vehicle
weight of any of which, or a motor car the unladen weight of which, exceeds
12,000 kilograms;
** ** **
(21) “light motor vehicle” means a transport vehicle or
omnibus the gross vehicle weight of either of which or a motor car or tractor
or road roller the unladen weight of any of which, does not exceed 7,500
kilograms;
** ** **
(23) “medium goods vehicle” means any goods carriage other
than a light motor vehicle or a heavy goods vehicle;
(24) “medium passenger motor vehicle” means any public service
vehicle or private service vehicle, or educational institution bus other than a
motor cycle, invalid carriage, light motor vehicle or heavy passenger motor
vehicle;
** ** **
(44) “tractor” means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road-roller;’
[R140]Clauses (17), (21), (23), (24)
and (44) of section 2 of the Motor Vehicles Act, 1988, define “heavy
passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”,
“medium passenger motor vehicle” and “tractor”, respectively, as follows :
‘(17) “heavy
passenger motor vehicle” means any public service vehicle or private
service vehicle or educational institution bus or omnibus the gross vehicle
weight of any of which, or a motor car the unladen weight of which, exceeds
12,000 kilograms;
** ** **
(21) “light motor vehicle” means a transport vehicle or
omnibus the gross vehicle weight of either of which or a motor car or tractor
or road roller the unladen weight of any of which, does not exceed 7,500
kilograms;
** ** **
(23) “medium goods vehicle” means any goods carriage other
than a light motor vehicle or a heavy goods vehicle;
(24) “medium passenger motor vehicle” means any public service
vehicle or private service vehicle, or educational institution bus other than a
motor cycle, invalid carriage, light motor vehicle or heavy passenger motor
vehicle;
** ** **
(44) “tractor” means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road-roller;’
[R141]Clauses (17), (21), (23), (24)
and (44) of section 2 of the Motor Vehicles Act, 1988, define “heavy
passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”,
“medium passenger motor vehicle” and “tractor”, respectively, as follows :
‘(17) “heavy
passenger motor vehicle” means any public service vehicle or private
service vehicle or educational institution bus or omnibus the gross vehicle
weight of any of which, or a motor car the unladen weight of which, exceeds
12,000 kilograms;
** ** **
(21) “light motor vehicle” means a transport vehicle or
omnibus the gross vehicle weight of either of which or a motor car or tractor
or road roller the unladen weight of any of which, does not exceed 7,500
kilograms;
** ** **
(23) “medium goods vehicle” means any goods carriage other
than a light motor vehicle or a heavy goods vehicle;
(24) “medium passenger motor vehicle” means any public service
vehicle or private service vehicle, or educational institution bus other than a
motor cycle, invalid carriage, light motor vehicle or heavy passenger motor
vehicle;
** ** **
(44) “tractor” means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road-roller;’
[R142]Clauses (17), (21), (23), (24)
and (44) of section 2 of the Motor Vehicles Act, 1988, define “heavy
passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”,
“medium passenger motor vehicle” and “tractor”, respectively, as follows :
‘(17) “heavy
passenger motor vehicle” means any public service vehicle or private
service vehicle or educational institution bus or omnibus the gross vehicle
weight of any of which, or a motor car the unladen weight of which, exceeds
12,000 kilograms;
** ** **
(21) “light motor vehicle” means a transport vehicle or
omnibus the gross vehicle weight of either of which or a motor car or tractor
or road roller the unladen weight of any of which, does not exceed 7,500
kilograms;
** ** **
(23) “medium goods vehicle” means any goods carriage other
than a light motor vehicle or a heavy goods vehicle;
(24) “medium passenger motor vehicle” means any public service
vehicle or private service vehicle, or educational institution bus other than a
motor cycle, invalid carriage, light motor vehicle or heavy passenger motor
vehicle;
** ** **
(44) “tractor” means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road-roller;’
[R145]Clauses (17), (21), (23), (24)
and (44) of section 2 of the Motor Vehicles Act, 1988, define “heavy
passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”,
“medium passenger motor vehicle” and “tractor”, respectively, as follows :
‘(17) “heavy
passenger motor vehicle” means any public service vehicle or private
service vehicle or educational institution bus or omnibus the gross vehicle
weight of any of which, or a motor car the unladen weight of which, exceeds
12,000 kilograms;
** ** **
(21) “light motor vehicle” means a transport vehicle or
omnibus the gross vehicle weight of either of which or a motor car or tractor
or road roller the unladen weight of any of which, does not exceed 7,500
kilograms;
** ** **
(23) “medium goods vehicle” means any goods carriage other
than a light motor vehicle or a heavy goods vehicle;
(24) “medium passenger motor vehicle” means any public service
vehicle or private service vehicle, or educational institution bus other than a
motor cycle, invalid carriage, light motor vehicle or heavy passenger motor
vehicle;
** ** **
(44) “tractor” means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road-roller;’
[R147]Fifth proviso substituted by the Finance Act, 1999,
w.e.f. 1-4-2000. Prior to its substitution, fifth proviso, as inserted by the Finance
(No. 2) Act, 1996, w.e.f. 1-4-1997 and later on amended by the Finance (No. 2)
Act, 1998, w.e.f. 1-4-1999, read as under :
“Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible asset or know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession, referred to in clause (xiii) and clause (xiv) of section 47 or 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.”
[R148]Inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R149]Substituted for “clause” by the Finance Act, 2002,
w.e.f. 1-4-2003.
[R150]Should be read as ‘sub-clause’.
[R151]Should be read as ‘clause’.
[R152]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R153]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R154]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
Earlier it was 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 ;’
[R155]Substituted for “twenty-five” by the Finance (No. 2)
Act, 2004, w.e.f. 1-4-2005.
[R156]See
rule 5A and Form No. 3AA.
[R157]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f.
1-4-1998. Earlier original clause (iii) was amended by the Finance Act,
1966, w.e.f. 1-4-1966 and the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and
later on omitted by the Taxation Laws (Amendment and Miscellaneous Provisions)
Act, 1986, w.e.f. 1-4-1988.
[R158]Substituted for “an Indian company” by the Finance
Act, 2005, w.e.f. 1-4-2005.
[R159]For text of section 5(c) of the Banking
Regulation Act, 1949 For text of section 45 of the Banking Regulation Act,
1949, see Appendix One.
[R160]Clause (iv) was omitted by the Taxation Laws
(Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original
clause (iv) was 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.
[R161]Clause (v) was omitted by the Taxation Laws
(Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original
clause (v) was 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.
[R162]Clause
(vi) was omitted by the Taxation Laws (Amendment and Miscellaneous
Provisions) Act, 1986, w.e.f. 1-4-1988. Original clause (vi) was
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.
[R163]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.
[R164]Substituted by the Finance Act, 2001, w.e.f. 1-4-2002.
Prior to its substitution, sub-section (2), as amended by the Taxation Laws
(Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988, Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Finance Act, 1992, w.e.f.
1-4-1993, substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and
further amended by the Finance Act, 2000, w.e.f. 1-4-2001, read as under :
‘(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 ;
(ii) 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;
(iii) if
the unabsorbed depreciation allowance cannot be wholly set off under clause (i)
and clause (ii), 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 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).’
[R165]For
the meaning of the expression “no profits or gains chargeable for that previous
year”
[R166]Inserted by the Finance Act, 1976, w.e.f. 1-4-1976.
[R167]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.
[R168]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.
[R171]Inserted
by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R172]Inserted by the Direct Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
[R173] Inserted, by the Direct Tax Laws (Amendment)
Act, 1989, w.e.f. 1-4-1989.
[R174]Substituted by the Finance (No. 2) Act, 1977, w.e.f.
1-4-1978.
[R175]For
the meaning of the terms/expressions “industrial undertaking”, “manufacture”,
“production” and “article or thing”
[R176]For
the meaning of the terms/expressions “industrial undertaking”, “manufacture”,
“production” and “article or thing”
[R177]For
the meaning of the terms/expressions “industrial undertaking”, “manufacture”,
“production” and “article or thing”
[R178]For
the meaning of the terms/expressions “industrial undertaking”, “manufacture”,
“production” and “article or thing”
[R179]For the meaning of the terms/expressions “industrial undertaking”, “manufacture”, “production” and “article or thing”
[R180]For the meaning of the terms/expressions “industrial
undertaking”, “manufacture”, “production” and “article or thing”
[R181]For the meaning of the terms/expressions “industrial undertaking”, “manufacture”, “production” and “article or thing”,
[R182]For the meaning of the terms/expressions “industrial
undertaking”, “manufacture”, “production” and “article or thing”
[R184]Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.
[R185]Substituted for “1st day of April, 1988” by the Finance Act, 1986, w.e.f. 1-4-1987.
[R189]Substituted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R190]Substituted for “does not exceed ten lakh rupees” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R191] Substituted by the Finance Act, 1986, w.r.e.f.
1-4-1985.
[R192]Inserted
by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R193]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978
[R194]Substituted
for “1982” by the Finance Act, 1982, w.e.f. 1-4-1982.
[R195]The
prescribed authority under rule 5AA is Secretary, Department of Scientific
& Industrial Research, Government of India.
[R196]The prescribed authority under rule 5AA is Secretary,
Department of Scientific & Industrial Research, Government of India.
[R197]Omitted
by the Finance Act, 1987, w.e.f. 1-4-1987.
[R198]Inserted
by the Finance Act, 1983, w.e.f. 1-6-1983.
[R199]See Notification No. SO 555(E), dated 1-8-1984.
[R200]Inserted by the Direct Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
[R201]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.
[R202]Inserted
by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R203]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R204]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R205]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R206]Substituted
for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R207]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R209]“not being earlier than three years from the date of such
notification,” omitted by the Finance Act, 1986, w.e.f. 1-4-1986.
[R210]Inserted
by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R211]Substituted
for sub-section (8B) by the Direct Tax Laws (Amendment) Act, 1989, w.e.f.
1-4-1989. Earlier sub-section (8B) was inserted by the Finance Act, 1986,
w.e.f. 1-4-1987.
[R213]Inserted
by the Finance Act, 1986, w.e.f. 1-4-1987.
[R214]Investment Deposit Account Scheme, 1986 is the scheme framed by the Government under sub-section (1).
[R215]Inserted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R216]Word
“eligible” omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R217]Inserted
by the Finance Act, 1987, w.e.f. 1-4-1987.
[R218]Inserted
by the Finance Act, 1990, w.e.f. 1-4-1990.
[R219]Omitted
by the Finance Act, 1989, w.e.f. 1-4-1991.
[R220]Substituted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R221]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.
[R222]For
text of Parts II and III of Schedule VI to the Companies Act, 1956, see Appendix One.
[R223]Substituted
for “Sixth Schedule” by the Finance Act, 1989, w.e.f. 1-4-1991.
[R224]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.
[R225]“and” omitted by the Finance
Act, 1989, w.e.f. 1-4-1991.
[R226]Omitted
by the Finance Act, 1989, w.e.f. 1-4-1991.
[R227]Inserted,
by the Finance Act, 1989, w.e.f. 1-4-1991.
[R228]See
rule 5AB and Form No. 3AAA for audit
report required under section 32AB(5).
[R229]Inserted
by the Finance Act, 1987, w.e.f. 1-4-1987.
[R230]Substituted
for “and” by the Finance Act, 1989, w.r.e.f. 1-4-1987.
[R231]Inserted,
by the Finance Act, 1989, w.r.e.f. 1-4-1987.
[R232]Inserted,
by the Finance Act, 1989, w.r.e.f. 1-4-1987.
[R233]Inserted
by the Finance Act, 1987, w.e.f. 1-4-1987.
[R234]“eligible” omitted by the Finance Act, 1989, w.e.f. 1-4-1991.
[R235]Inserted,
by the Finance Act, 1989, w.r.e.f. 1-4-1987.
[R236]Inserted
by the Finance Act, 1987, w.e.f. 1-4-1987.
[R237]“within that previous year”
omitted, by the Finance Act, 1987, w.e.f. 1-4-1987.
[R239]Substituted
by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R240]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 by the Finance
(No. 2) Act, 1965, w.e.f. 1-4-1965.
[R242]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R243]See
rule 5B.
[R244] Inserted by the
Finance Act, 1964, w.e.f. 1-4-1964.
[R245]Inserted
by the Finance Act, 1965, w.e.f. 1-4-1965.
[R246]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R247]“or section 280-O” omitted by the Finance Act, 1988, w.e.f.
1-4-1988.
[R248]Substituted for “that sub-section” by the Finance Act,
1964, w.e.f. 1-4-1964.
[R249]Inserted,
by the Finance Act, 1964, w.e.f. 1-4-1964.
[R250]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R251]Inserted
by the Finance Act, 1965, w.e.f. 1-4-1965.
[R252]Inserted
by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R253]“or section 280-O” omitted by the Finance Act, 1988, w.e.f.
1-4-1988.
[R254]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.
[R255]Inserted
by the Finance Act, 1964, w.e.f. 1-4-1964.
[R256]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.
[R257]Inserted
by the Finance Act, 1965, w.e.f. 1-4-1965.
[R258] Inserted by the Finance (No. 2) Act, 1967,
w.e.f. 1-4-1968.
[R259]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R260]See also
Circular No. 325, dated 3-2-1982.
[R261]Substituted for “forty” by the Finance Act, 1966,
w.e.f. 1-4-1966.
[R262] Substituted for “twenty”, by the Finance Act,
1966, w.e.f. 1-4-1966.
[R263]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” by the Finance Act, 1966,
w.e.f. 1-4-1966.
[R264]Substituted by the Finance Act, 1990, w.e.f. 1-4-1990.
[R265]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.
[R266]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.
[R267]“or section 280-O” omitted by
the Finance Act, 1988, w.e.f. 1-4-1988.
[R268] Inserted by the
Finance Act, 1966, w.e.f. 1-4-1966.
[R269]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.
[R270]“or section 280-O” omitted by
the Finance Act, 1988, w.e.f. 1-4-1988.
[R271]See rule 8A and Form Nos. 4, 5 and 5A.
[R272]Substituted
by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967.
[R273]Substituted by the Finance Act, 1981, w.e.f. 1-4-1982.
[R275]Inserted
by the Finance Act, 1975, w.r.e.f. 1-4-1965.
[R277]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R278]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R279]Inserted
by the Finance Act, 2003, w.e.f. 1-4-2004.
[R280]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.
[R281]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R282]Substituted
for the portion beginning with the words “deposited any amount” and ending with
the words “approval of the Central Government,” by the Finance Act, 2003,
w.e.f. 1-4-2004. Prior to its substitution, the quoted portion read as under :
“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,”
[R283]Substituted
for “twenty” by the Finance Act, 2001, w.e.f. 1-4-2002.
[R284]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R285]Word “Tea” omitted by the Finance Act, 2003, w.e.f.
1-4-2004.
[R286]See rule 5AC and Form No. 3AC for audit report
required under section 33AB(2).
[R287]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.
[R288]Word “Tea” omitted by the Finance Act, 2003, w.e.f.
1-4-2004.
[R289]Substituted, the Finance Act, 2003, w.e.f. 1-4-2004.
Prior to its substitution, sub-section (4) read as under :
‘(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.’
[R290]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R291]Word “Tea” omitted by the Finance Act, 2003, w.e.f.
1-4-2004.
[R292]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R293]Word “Tea” omitted by the Finance Act, 2003, w.e.f.
1-4-2004.
[R294]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R295]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R296]Word
“Tea” omitted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R297]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R298]Word
“Tea” omitted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R299]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R300]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R302]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R303]Clauses (a), (aa) and (ab)
substituted for clause (a) by the Finance Act, 2003, w.e.f. 1-4-2004.
Prior to its substitution, clause (a) read as under :
‘(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);'
[R304]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R305]See Site Restoration Fund Scheme, 1999.
[R306]See rule 5AD and Form No.
3AD.
[R307]Proviso omitted by the Finance Act, 1999, w.e.f.
1-4-1999. Prior to its omission, proviso was inserted by the Finance (No. 2)
Act, 1998, w.e.f. 1-4-1999.
[R309]Inserted by the Direct Tax Laws (Second Amendment)
Act, 1989, w.e.f. 1-4-1990.
[R310]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) :”
[R311]Substituted by the Finance Act, 2002, w.e.f. 1-4-2003.
Prior to its substitution, first proviso read as under :
“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.”
[R312]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R313]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005
[R314]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R315]Substituted for “eight” by the Finance Act, 2003,
w.e.f. 1-4-2004.
[R316]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R317]Substituted for “such sale proceeds” by the Finance
Act, 2005, w.r.e.f. 1-4-2004.
[R318]For definition of “public company” under clause (iv)
of section 3(1) of the Companies Act, 1956, see Appendix One.
[R319]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R321]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R322]Inserted
by the Finance Act, 1984, w.e.f. 1-4-1985.
[R323]Omitted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original sub-section (1)
was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R324]Omitted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original sub-section (2)
was 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.
[R325]Substituted for “the relevant previous year” by the
Finance Act, 1990, w.r.e.f. 1-4-1962.
[R326]For the meaning of the expression “a licensee within
the meaning of the Electricity (Supply) Act, 1948 (54 of 1948)”
[R327]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R329]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R330]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.
[R331]See also
Circular No. 778, dated 20-8-1999 and Press Note, dated 5-6-1982, issued by the
Ministry of Finance (Department of Revenue).. For
relevant case laws, see Case Laws
[R332]Inserted by the Direct Taxes (Amendment) Act, 1974,
w.e.f. 1-4-1974.
[R333]Section 40A(5) has now been
omitted. Explanation 2(a) to section 40A(5)
defined “salary” as under :
‘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) ** ** ** ’
[R334]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.
[R335]See rule 6(2) and Form No. 3CF for form of
application by scientific or industrial research institution.
[R336]Substituted for “any sum paid” by the Finance Act,
1999, w.e.f. 1-4-2000.
[R337]For complete list of approved scientific research
university/institutions, etc.
[R338]Substituted for “prescribed authority” by the Finance
Act, 1999, w.e.f. 1-4-2000.
[R339]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R340]Substituted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992. Prior to substitution, clause (iii) was amended by the Direct
Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.
[R341]See rule 6(2) and Form No.
3CF for form of application by Scientific and Industrial Research Institution.
[R342]Substituted for “any sum paid” by the Finance Act,
1999, w.e.f. 1-4-2000.
[R343]For complete list of approved social science or statistical research university/institutions, etc.
[R344]Substituted for “prescribed authority” by the Finance
Act, 1999, w.e.f. 1-4-2000.
[R345]Inserted by the Direct Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
[R346]Substituted for “prescribed authority” by the Finance
Act, 1999, w.e.f. 1-4-2000.
[R347]Substituted for “prescribed authority” by the Finance
Act, 1999, w.e.f. 1-4-2000.
[R348]Substituted for “prescribed authority” by the Finance
Act, 1999, w.e.f. 1-4-2000.
[R349]Substituted for clause (i) by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R351]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R352]Existing Explanation renumbered as Explanation
1, by the Finance Act, 1984, w.e.f. 1-4-1984.
[R353]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R354]For text of section 53A of the Transfer of Property
Act, see Appendix One.
[R355]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[R356]Substituted for “clauses (i), (ii), (iia), (iii)
and (iv) of sub-section (1) or under sub-section (1A)” by the Taxation
Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R357]Inserted by the Finance (No. 2) Act, 1980, w.r.e.f. 1-4-1962.
[R358]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968.
[R359]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.
[R360]Inserted by the Direct Taxes (Amendment) Act, 1974,
w.e.f. 1-4-1974.
[R362]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R365]See rule
6(1)
[R366]Inserted by the Finance (No. 2) Act, 1980, w.e.f.
1-9-1980.
[R367]Inserted by the Finance Act, 1993, w.e.f. 1-4-1994.
[R368]See rule 6(3), 6(5), 6(6) and 6(7)
and Form Nos. 3CG to 3CJ. The procedure laid down by rule 6 is, inter alia,
as follows :
n Prescribed authority
is Head of National Laboratory, University or IIT and in case of specified
person, the Principal Scientific Adviser to the Government of India.
n The application
for approval is to be made by the sponsor in Form No. 3CG.
n The National
Laboratory, University or Indian Institute of Technology, etc., shall issue a
receipt of payment for carrying out an approved programme of scientific
research, in Form No. 3CI.
n The prescribed authority will grant approval only if the conditions mentioned in sub-rule (7) of rule 6 are satisfied.
[R369]Inserted by the Finance Act, 1994, w.e.f. 1-4-1995.
[R370]Substituted for “University or an Indian Institute of
Technology” by the Finance Act, 2001, w.e.f. 1-4-2002.
[R372]Substituted for the 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.”
[R373]See rule 6(7)(b)
and Form No. 3CJ.
[R374]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 the 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.’
[R376]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R377]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998. See rule 6(1B), (4), (5A) and (7A) and Form Nos. 3CK to 3CM.
[R378]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R380]Prescribed authority is Secretary, Department of Scientific & Industrial Research, Government of India.
[R381]Substituted for “a sum equal to one and one-fourth times of the expenditure” by the Finance Act, 2000, w.e.f. 1-4-2001.
[R382]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R383]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f.
1-4-1998.
[R384]Figures “2007” shall be substituted for “2005” by the
Finance Act, 2005, w.e.f. 1-4-2006.
[R385]Substituted for “2000” by the Finance Act, 1999,
w.e.f. 1-4-2000.
[R386]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
[R387]Inserted by the Finance Act, 1984, w.e.f. 1-4-1984.
[R388]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.
[R389]Substituted
by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its substitution,
sub-section (3) read as under :
“(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 authority, whose decision shall be final.”
[R390]See rule 6.
[R391]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R392]Inserted by the Finance Act, 1966, w.e.f. 1-4-1966.
[R393]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R394]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R395]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R396]Inserted by the Finance Act, 1985, w.e.f. 1-4-1986.
[R397]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R399]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R400]Inserted by the Finance Act, 1997, w.r.e.f. 1-4-1996.
[R401]Inserted by the Finance Act, 1999, w.r.e.f. 1-4-1996.
[R402]Substituted by the Finance Act, 1999, w.r.e.f.
1-4-1996. Prior to its substitution, clause (i), as inserted by the
Finance Act, 1997, w.r.e.f 1-4-1996, read as under :
‘(i) “relevant previous years” means the previous years beginning with the previous year in which the licence fee is actually paid and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in force;’
[R403]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R404]Inserted by the Finance Act, 1999, w.r.e.f. 1-4-1996.
[R405]Inserted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
[R406]See rules 11F, 11G, 11H, 11-I, 11J, 11K, 11L, 11M, 11N
and 11-O and Form Nos. 58A and 58B for ‘Rules relating to
National Committee for Promotion of Social and Economic Welfare’.
[R407]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
for form of application (in two sets) to be submitted for approval of
association/institution or for recommendation of project/scheme.
[R408]For constitution of
National Committee for Promotion of Social and Economic Welfare and appointment
of members thereof
[R409]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.
[R410]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.
[R411]Substituted by the Finance (No. 2) Act, 2004, w.e.f.
1-10-2004. Prior to their substitution, sub-sections (4) and (5), as inserted
by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996, read as under
:
“(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.”
[R412]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R414]Prior to its omission, section 35B was 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.
[R415]Prior to its omission, section 35C was 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.
[R416]Prior to its omission, section 35CC was amended by the
Finance Act, 1983, w.e.f. 1-4-1983 and Finance Act, 1985, w.e.f. 17-3-1985.
[R417]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.
[R418]For relevant case laws, see case laws
[R419]Substituted by the Finance Act, 1979, w.e.f. 1-6-1979.
[R420]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.
See also Division Two.
[R421]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R422]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R423]National Fund for Rural Development has since been
notified.
[R424]Substituted for “behalf,” by the Finance Act, 1995,
w.e.f. 1-4-1996.
[R425]Inserted by the Finance Act, 1995, w.e.f. 1-4-1996.
[R426]Substituted by the Finance Act, 1983, w.e.f. 1-4-1983.
Earlier it was amended by the Finance Act, 1979, w.e.f. 1-6-1979.
[R427]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R428]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R429]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.
[R430]Substituted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R431]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R432]For list of approved associations or institutions
[R433]The prescribed authority under rule 6AAC is Secretary, Department of Environment, Government of India.
[R434]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R435]See rule 6AAC. The
prescribed authority is Secretary, Department of Environment, Government of
India.
[R436]Inserted by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971.
[R438]. Inserted
by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[R440]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[R441]Substituted for “which is for the time being approved
by the Central Government for the purposes of clause (viii) of
sub-section (1) of section 36” by the Finance Act, 2000, w.e.f. 1-4-2000.
[R442]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).
[R443]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R444]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R445]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.
[R446]Substituted for “at the time of” by the Finance Act,
2005, w.r.e.f. 1-4-2004.
[R447]Sub-sections
(2) to (6) substituted for sub-section (2) by the Finance Act, 2002, w.r.e.f.
1-4-2001. Prior to its substitution, sub-section (2) read as under:
“(2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act.”
[R448]Inserted by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971.
[R449]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).
[R450]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R451]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 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.
[R452]For relevant case laws, see case laws
[R453]For the meaning of the terms/expressions “damage”,
“destruction” and “stocks or stores”
[R454]For the meaning of the terms/expressions “damage”,
“destruction” and “stocks or stores”
[R455]For the meaning of the terms/expressions “damage”,
“destruction” and “stocks or stores”
[R456]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R457]Inserted by the Income-tax (Amendment) Act, 1986,
w.e.f. 1-4-1987.
[R458]For relevant case laws, see case laws
[R460]First proviso omitted by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to its omission, first proviso
was inserted by the Payment of Bonus (Amendment) Act, 1976, with retrospective
effect from 25-9-1975.
[R461]Second proviso omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to its omission, second proviso was substituted by the Payment of Bonus (Amendment) Act, 1976, with retrospective effect from 25-9-1975.
[R462]Prior to its omission, clause (iia), as
inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981 and later on amended
by the Finance Act, 1984, w.e.f. 1-4-1984 and the Direct Tax Laws (Amendment)
Act, 1987, w.e.f. 1-4-1988, read as under :
‘(iia)
a sum equal to one and one-third times the amount of the expenditure incurred
on payment of any salary 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 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;’
[R468]For relevant case laws, see case laws
[R469]See rules 75, 87 and 88.
[R472]See rules
103 and 104.
[R473]For relevant case laws, see caselaws
[R474]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R475]For relevant case laws, see case laws
[R476]For relevant case laws, see case laws
[R477]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.
[R480]Inserted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R481]Substituted for “a bank” by the Finance Act, 1997,
w.r.e.f. 1-4-1992.
[R482]Inserted by the Finance Act, 2001, w.r.e.f. 1-4-1989.
[R483]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R484]Substituted by the Income-tax (Amendment) Act, 1986, w.e.f. 1-4-1987. 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.
[R485]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.
[R486]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.
[R487]Substituted for “not exceeding five per cent” by the
Finance Act, 2002, w.e.f. 1-4-2003.
[R488]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.
[R489]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R490]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R491]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R492]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R493]Inserted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
[R494]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R495]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R496]Section 5(c) of the Banking Regulation Act,
1949, defines “banking company” as follows:
‘(c)
“banking company” means any company which transacts the
business of banking in India.
Explanation.—Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;’
[R497]Relettered by the Finance Act, 1982, w.e.f. 1-4-1983.
[R498]Inserted, by the Finance Act, 1982, w.e.f. 1-4-1983.
[R499]Substituted by the Direct Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989. Earlier it was amended by the Finance Act, 1985, w.e.f.
1-4-1985.
[R500]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
[R503]Substituted for “approved by the Central Government
under clause (viii) of this sub-section” by the Finance Act, 2000,
w.e.f. 1-4-2000.
[R504]Operative part of this clause was amended by the Finance
Act, 1966, w.e.f. 1-4-1966 Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, Finance
(No. 2) Act, 1971, w.e.f. 1-4-1972 and Finance Act, 1974, w.e.f. 1-4-1975.
[R505]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R507]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:”
[R508]Substituted for “before making any deduction under
this section” by the Finance (No. 2) Act, 1996, w.r.e.f. 1-4-1996.
[R509]First proviso omitted by the Finance Act, 1999, w.e.f.
1-4-2000. Prior to its omission, first proviso, as amended by the Finance Act,
1979, w.e.f. 1-4-1980, read as under:
“Provided that the corporation or, as the case may be, the company is for the time being approved by the Central Government for the purposes of this clause :”
[R511]Inserted by the Finance Act, 1981, w.e.f. 1-4-1982.
[R512]Substituted for “(excluding the amounts capitalised
from reserves)” by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R513]Inserted by the Finance Act, 1979, w.e.f. 1-4-1980.
[R514]Substituted by the Finance Act, 1992, w.r.e.f.
1-4-1987. Prior to substitution, Explanation was inserted by the Finance
Act, 1970, w.r.e.f. 1-4-1966, omitted by the Finance Act, 1974, w.e.f.
1-4-1975, inserted by the Finance Act, 1979, w.e.f. 1-4-1980 and substituted by
the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1987.
[R517]Substituted by the Finance Act, 1997, w.e.f. 1-4-1998.
Prior to its substitution, clause (d), as inserted by the Finance Act,
1995, w.e.f. 1-4-1996, read as under :
‘(d) “infrastructure facility” shall have the meaning assigned to it in section 80-IA;’
[R519]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);’
[R520]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R521]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R522]Inserted by the Finance Act, 1989, w.e.f. 1-4-1989.
[R523]Substituted for “any fund specified under clause (23E)
of section 10” by the Finance Act, 2003, w.e.f. 1-4-2003.
[R525]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R526]See rule
6ABB and Form No. 3BA.
[R527]Inserted by the Finance Act, 2003, w.r.e.f. 1-4-2002.
[R528]For relevant case laws, see case laws
[R529]Substituted by the Direct Tax Laws (Amendment) Act,
1987, w.e.f. 1-4-1989.
[R530]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R531]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R532]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R533]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R534]Substituted by the Finance Act, 1997, w.r.e.f.
1-4-1992. Prior to its substitution, clause (v), as inserted by the
Finance Act, 1985, w.e.f. 1-4-1985, read as under :
“(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.”
[R535]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.
[R536]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, Letter [F. No. 9/56/66-IT(A-I)], dated 17-1-1967, Letter [F.No.
9/23/67-IT(A-I)], dated 6-7-1967, Circular No. 5-P(XIV-I), dated 28-9-1963,
Letter [F. No. 10/67/65-IT(A-I)], dated 26-8-1965, Circular No. 16, dated
18-9-1969, Circular No. 64(XI-2), dated 27-1-1951, Circular No. 117, dated
22-8-1973, Letter [F. No. 10/25/63-IT(A-I)], dated 18-6-1964, Letter [F. No.
204/42/77-IT(A-II)], dated 28-9-1977, Circular No. 1-D(IV-53), dated 20-1-1966,
Circular No. 2, dated 8-3-1946, Letter [F. No. 35/5/65-IT(A-I)], dated
1-7-1965, Circular No. 69(XIX-3), dated 27-11-1951, Circular No. 4, dated
19-6-1950, Letter [F. No. 10/80/64-IT(A-I)], dated 26-2-1965, Letter [F. No.
10/92/64-IT(A-I)], dated 13-9-1965, Circular No. 3, dated 26-3-1946, Circular
No. 22, dated 23-6-1943, Letter [F. No. 10/16/63-IT(A-I)], dated 14-5-1963,
Letter [F. No. 10/8/63-IT(A-I)], dated 14-10-1963, Letter [F. No.
27(24)-IT/59], dated 19-5-1959, Letter [F. No. 7/33/62-IT(A-I)], dated
28-8-1963, Circular No. 2-P(XI-6), dated 23-8-1965, Letter [F. No.
13A/20/68-IT(A-II)], dated 3-10-1968, Letter [F. No. 32/6/62-IT(A-I)], dated
16-1-1963, Extracts from the minutes of the 16th meeting of CDTAC held on
2-2-1972, Instruction No. 943 [F. No. 204/15/76-IT(A-II)], dated 2-4-1976,
Circular No. 420, dated 4-6-1985, Circular No. 2(40)/66-EAC, dated
16/17-1-1967, issued by the Ministry of Commerce, Circular No. 42 [C. No.
19(7)-IT/42], dated 22-8-1942, Circular No. 36 [R. 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 IT(A-I), dated 24-5-1965, Circular No. 651, dated
11-6-1993; Circular No. 671, dated 27-10-1993 and Press Release, dated 23-1-2001.
[R537]For relevant case laws, see case laws
[R539]“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.
[R544]Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.
Omitted sub-section (2) was substituted for sub-sections (2) and (2A) by the
Finance Act, 1992, w.e.f. 1-4-1993. Erstwhile sub-sections (2) and (2A) were
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) Act, 1967, 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.r.e.f. 1-4-1976/1-4-1984. Prior to its omission, sub-section (2), as
substituted by the Finance Act, 1992, w.e.f. 1-4-1993, and later on amended by
the Finance Act, 1994, w.r.e.f. 1-4-1993, read as under :
‘(2) Notwithstanding anything contained
in sub-section (1), any expenditure in
the nature of entertainment expenditure incurred by any assessee during 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.’
[R545]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.
[R546]See Circular
No. 203, dated 16-7-1976, Circular No. 200, dated 28-6-1976 and Circular No.
19, dated 13-6-1969.
[R547]Omitted by the Finance
Act, 1997, w.e.f. 1-4-1998. Prior to its omission, sub-section (3), as inserted
by the Finance Act, 1964, w.e.f. 1-4-1964, read as under :
“(3) 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.”
[R548]Omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
Omitted sub-section (3A) was inserted by the Finance Act, 1983, w.e.f.
1-4-1984. 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.
[R549]Omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
Omitted sub-section (3B) was inserted by the Finance Act, 1983, w.e.f.
1-4-1984. 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.
[R550]Omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
Omitted sub-section (3C) was inserted by the Finance Act, 1983, w.e.f.
1-4-1984. 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.
[R551]Omitted by the Finance Act, 1985, w.e.f. 1-4-1986.
Omitted sub-section (3D) was inserted by the Finance Act, 1983, w.e.f.
1-4-1984. 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.
[R552]Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.
Prior to its omission, sub-section (4), as inserted by the Finance Act,
‘(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,
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.’
[R553]Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.
Prior to its omission, sub-section (5), as inserted by the Finance Act, 1983,
w.r.e.f. 1-4-1979, read as under :
“(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).”
[R554]For relevant case laws, see case laws
[R555]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R556]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R557]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.
[R558]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R559]Substituted for “39” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989.
[R560]See also
Circular No. 91/58/66-ITJ(19), dated 18-5-1967 and
Circular No. 786, dated 7-2-2000.
[R561]Sub-clauses (i), (ia) and (ib)
substituted for sub-clause (i) by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
Prior to its substitution, sub-clause (i), as substituted by the Finance
Act, 1988, w.e.f. 1-4-1989 and the Finance Act, 2003, w.e.f. 1-4-2004, read as under :
‘(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,—
(A)
outside India; or
(B)
in India to a non-resident, not being a company or to
a foreign company,
on which
tax has not been deducted or, after deduction, has not been paid before the expiry
of the time prescribed under sub-section (1) of section 200 and in accordance
with other provisions of Chapter XVII-B :
Provided that where in
respect of any such sum, tax has been deducted under Chapter XVII-B or paid 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.
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;’
[R562]For relevant case laws, see case laws
[R563]For the meaning of the expressions “any rate or tax
levied” and “profits or gains of any business or profession”
[R564]For the meaning of the expressions “any rate or tax
levied” and “profits or gains of any business or profession”
[R565]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.
[R566]For relevant case laws, see case laws
[R567]Substituted by the Finance Act, 2003, w.e.f. 1-4-2004.
Prior to its substitution, sub-clause (iii) read as under
:
‘(iii) any payment which is chargeable under the head “Salaries”, if it is payable outside India and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;’
[R568]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
Original clause (v) was inserted by the Finance Act, 1968, w.e.f.
1-4-1969, amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971
and later on omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
[R569]Substituted by the Finance Act, 1992, w.e.f. 1-4-1993.
Prior to substitution, clause (b) was 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.
[R570]Substituted for “eighteen” by the Finance Act, 2002,
w.e.f. 1-6-2002.
[R571]See Circular
No. 739, dated 25-3-1996.
[R572]Inserted by the Direct Tax Laws (Amendment) Act, 1989,
w.e.f. 1-4-1989.
[R573]Inserted by the Finance Act, 1968, w.e.f. 1-4-1968.
[R574]See also Press Note, dated 2-5-1969, issued by Ministry of Finance, Letter [F.No. 1(22)/69-TPL (Pt.)], dated 18-4-1969, Circular No. 34, dated 5-3-1970, Circular No. 33, dated 29-12-1969, Circular No. 250, dated 11-1-1979, Circular No. 522, dated 18-8-1988, Letter [F. No. 142(14)/70-TPL], dated 28-9-1970, Letter [F. No. 1(22)/69-TPL(Pt.)], dated 18-4-1969, Circular No. 220, dated 31-5-1977, Circular No. 169 (para 27), dated 23-6-1975, Letter [F. No. 204/10/71-IT(A-II)], dated 17-4-1971 and Letter BC No. T-Ii/256-Misc. 75-76, dated 15-11-1975, from the Commissioner of Income-tax, Bombay.
[R575]For relevant case laws, see case laws
[R577]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R578]Omitted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989. Prior to its omission, proviso was amended by the Finance (No.
2) Act, 1971, w.e.f. 1-4-1972.
[R579]For relevant case laws, see case laws
[R581]31-3-1969 specified vide Notification No. SO.
623, dated 14-2-1969.
[R582]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.
[R583]Substituted for “ten” by the Finance (No. 2) Act,
1996, w.e.f. 1-4-1997.
[R584]Substituted for “such expenditure shall not be allowed
as a deduction” by the Finance Act, 1995, w.e.f. 1-4-1996.
[R585]Substituted for “two thousand five hundred” by the
Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R586]Substituted for “ten” by the Finance (No. 2) Act,
1996, w.e.f. 1-4-1997.
[R587]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R588]Substituted for “two thousand five hundred” by the
Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R589]Substituted for “ten” by the Finance (No. 2) Act,
1996, w.e.f. 1-4-1997.
[R590]See rule 6DD
for cases and circumstances in which payment in a sum exceeding Rs. 20,000 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 Two.
[R591]Inserted by the Finance Act, 1969, w.e.f. 1-4-1969.
[R592]Prior to its omission, sub-section (5) was 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.
[R593]Prior to its omission, sub-section (6) was amended by
the Finance Act, 1984, w.e.f. 1-4-1985.
[R594]Substituted by the Finance Act, 1999, w.e.f. 1-4-2000.
Prior to its substitution, sub-section (7), as inserted by the Finance Act,
1975, w.r.e.f. 1-4-1973, read as under :
‘(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 purposes 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.’
[R595]For relevant case laws, see case laws
[R596]For the meaning of the term “provision”, see
case laws
[R598]Sub-section (8) was omitted by the Finance Act, 1985,
w.e.f. 1-4-1986. Prior to its omission sub-section (8) was inserted by the Finance
Act, 1975, w.e.f. 1-4-1976.
[R599]Inserted by the Finance Act, 1984, with retrospective
effect from 1-4-1980.
[R600]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R601]Inserted by the Finance Act, 1984, w.r.e.f. 1-4-1980.
[R602]Prior to omission sub-section (12) was inserted by the
Finance Act, 1985, w.e.f. 1-4-1986.
[R603]Substituted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R604]For relevant case laws, see case laws
[R610]Inserted by the Finance (No. 2) Act, 1996, w.e.f.
1-4-1997.
[R611]Explanation
renumbered as Explanation 2 by the Finance (No. 2) Act, 1996, w.e.f.
1-4-1997.
[R612]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R613]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f.
1-4-1998. Earlier original sub-section (2) was amended by the Finance (No. 2)
Act, 1980, w.e.f. 1-4-1981 and later on omitted by the Taxation Laws (Amendment
and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R614]For the meaning of the terms/expressions “sold”,
“demolished or destroyed”, “moneys payable” and “due”
[R615]For the meaning of the terms/expressions “sold”,
“demolished or destroyed”, “moneys payable” and “due”
[R616]For the meaning of the terms/expressions “sold”,
“demolished or destroyed”, “moneys payable” and “due
[R617]For the meaning of the terms/expressions “sold”,
“demolished or destroyed”, “moneys payable” and “due”
[R618]Omitted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Original sub-section (2A)
was inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.
[R619]Inserted by the Finance (No. 2) Act, 1980, w.e.f.
1-4-1981.
[R620]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1968.
[R621]Inserted by the Finance (No. 2) Act, 1980, w.e.f.
1-4-1981.
[R622]For relevant case laws, see case laws
[R623]Substituted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R624]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R625]Words “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.
[R626]Substituted for “or sub-section (4)” by the Finance
Act, 1997, w.e.f. 1-4-1998.
[R627]Words ‘or under the head “Capital gains”’ omitted by
the Finance Act, 1987, w.e.f. 1-4-1988.
[R628]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R629]Section 42 renumbered as sub-section (1) thereof by
the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[R630]Substituted for “in such business of the Central Government” by the Finance Act, 1981, w.e.f. 1-4-1981.
[R631]Word “and” omitted by the Finance Act, 1981, w.e.f.
1-4-1981.
[R632]Inserted by the Finance Act, 1981, w.e.f. 1-4-1981.
[R633]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R634]Substituted by the Finance Act, 1999, w.e.f. 1-4-2000.
Prior to its substitution, proviso, as inserted by the Finance (No. 2) Act,
1998, w.e.f. 1-4-1999, read as under :
“Provided that in a scheme of amalgamation, the
amalgamating company sells or otherwise transfers the business to the
amalgamated company (being an Indian company), the provisions of this
sub-section—
(i) shall not apply in the case of the amalgamating company; and
(ii) shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not transferred the business or interest in the business.”
[R635]Inserted by the Finance Act, 1981, w.e.f. 1-4-1981.
[R636]For the meaning of the expressions “unless the context
otherwise requires”, “actual cost” and “has been met”
[R638]For the meaning of the expressions “unless the context
otherwise requires”, “actual cost” and “has been met”
[R639]For the meaning of the expressions “unless the context
otherwise requires”, “actual cost” and “has been met”
[R640]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.
[R641]Inserted by the Finance Act, 1975, w.e.f. 1-4-1975.
[R642]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.
[R643]Substituted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R644]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R645]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R646]Substituted for “Deputy Commissioner” by the Finance
(No. 2) Act, 1998, w.e.f. 1-10-1998. Earlier “Deputy Commissioner” was
substituted for “Inspecting Assistant Commissioner” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R647]Substituted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Prior to its
substitution, Explanation 4 was amended by the Taxation Laws (Amendment)
Act, 1970, w.e.f. 1-4-1971.
[R648]Inserted by the Finance (No. 2) Act, 1996, w.e.f.
1-10-1996.
[R649]Substituted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R650]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R651]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R652]Inserted by the Finance Act, 1986, w.r.e.f. 1-4-1974.
[R653]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f.
1-4-1994.
[R654]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R655]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R656]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R658]For relevant case laws, see case laws
[R661]Inserted by the Finance Act, 1995, w.r.e.f. 1-4-1962.
[R662]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R663]Substituted by the Finance Act, 1968, w.e.f. 1-4-1969.
[R664]See also
Circular No. 23D(XXXIX-4), dated 12-9-1960.
[R665]For relevant case laws, see case laws.
[R666]For the meaning of the terms/expressions “speculative
transaction”, “contract” and “actual delivery”
[R667]For the meaning of the terms/expressions “speculative
transaction”, “contract” and “actual delivery”,
[R668]For the meaning of the terms/expressions “speculative
transaction”, “contract” and “actual delivery”
[R669]The italicised word shall be inserted by the Finance
Act, 2005, w.e.f. 1-4-2006.
[R670]For text of section 2(aa) of the Securities
Contracts (Regulation) Act, 1956, see Appendix
One.
[R671]For relevant case laws, see case laws
[R673]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f.
1-4-1962.
[R674]Inserted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R675]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R676]Substituted for “any asset” by the Taxation Laws
(Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R677]Substituted for 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.
[R678]Explanation 2A, Explanation 2B and proviso thereof inserted by the Finance Act, 1999,
w.e.f. 1-4-2000.
[R679]Substituted for “book value of the assets” by the
Finance Act, 2000, w.e.f. 1-4-2000.
[R680]Substituted for “value of the assets as appearing in the books of account”, by the Finance Act, 2000, w.e.f. 1-4-2000..
[R681]Words “as appearing in the books of account” omitted
by the Finance Act, 2003, w.e.f. 1-4-2004.
[R682]Omitted by the Finance Act, 2000, w.e.f. 1-4-2000.
Prior to its omission, proviso, as inserted by the Finance Act, 1999, w.e.f.
1-4-2000, read as under :
“Provided that if the value of the assets as appearing in the books of account of the demerged company immediately before the demerger exceeds the written down value of such assets in the hands of the demerged company, the amount representing such excess shall be reduced from the written down value of the assets.”
[R683]Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R684]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R685]Substituted by the
Finance Act, 2002, w.e.f. 1-4-2003. Prior to its substitution, section 43A, as
inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and amended by the
Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Direct Tax Laws
(Amendment) Act, 1989, w.e.f. 1-4-1989, read as under :
‘43A. Special provisions consequential
to changes in rate of exchange of currency.—(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 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) “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).
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 authorised dealer as defined in section 2 of
the Foreign Exchange Regulation Act, 1947 (7 of 1947), 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.’
[R686]Clause (m) and clause (q) of section 2
of the Foreign Exchange Management Act, 1999, define “foreign currency” and
“Indian currency” respectively as follows :
‘(m) “foreign currency” means any currency other than Indian
currency;
(q) “Indian currency” means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under section 28A of the Reserve Bank of India Act, 1934 (2 of 1934);’
[R687]Clause (c) of section 2 of the Foreign Exchange
Management Act, 1999, defines “authorised dealer” as follows
:
‘(c) “authorised person” means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities;’
[R688]Inserted by the Finance Act, 1983, w.e.f. 1-4-1984.
[R689]See also
Circular No. 496, dated 25-9-1987 and Circular No. 674, dated 29-12-1993.
[R690]For relevant case laws, see case laws
[R691]Substituted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R693]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R694]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.
[R695]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R696]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R697]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R698]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R699]Inserted by the Finance (No. 2) Act, 1996, w.e.f.
1-4-1997.
[R700]Substituted for “term loan” by the Finance Act, 2003,
w.e.f. 1-4-2004.
[R701]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R702]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R703]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R704]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R705]Words “referred to in clause (a) or clause (c)
or clause (d) or clause (e) or clause (f)” omitted by the
Finance Act, 2003, w.e.f. 1-4-2004. Earlier the quoted words were amended by
the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Finance Act, 1988,
w.e.f. 1-4-1989, Finance (No. 2) Act, 1998, w.r.e.f. 1-4-1997 and Finance Act,
2001, w.e.f. 1-4-2002.
[R706]Second proviso omitted by the Finance Act, 2003,
w.e.f. 1-4-2004. Prior to its omission, the second proviso, as substituted by
the Finance Act, 1989, w.e.f. 1-4-1989, read as under:
“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.”
[R707]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R708]Inserted by the Finance Act, 1989, w.r.e.f. 1-4-1984.
[R709]Inserted by the Direct Tax Laws (Amendment) Act, 1987,
w.e.f. 1-4-1989.
[R710]Renumbered by the Finance Act, 1989, w.r.e.f.
1-4-1984.
[R711]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989.
[R712]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997.
[R713]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R714]Substituted by the Finance Act, 1990, w.e.f. 1-4-1991.
Prior to substitution, Explanation 4 was inserted by the Finance Act,
1988, w.e.f. 1-4-1989 and amended by the Finance Act, 1989, w.r.e.f. 1-4-1984.
[R715]For text of section 4A of the Companies Act, 1956, and
notified institutions thereunder, see Appendix
One.
[R716]Substituted by the Finance Act, 1999, w.e.f. 1-4-2000.
Prior to its substitution, lause (aa), as inserted by the Finance (No.
2) Act, 1996, w.e.f. 1-4-1997, read as under :
‘(aa)“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;’
[R717]For definition of “Government company
[R718]Substituted for “approved by the Central Government
under clause (viii) of sub-section (1) of section 36” by the Finance
Act, 2000, w.e.f. 1-4-2000.
[R719]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R720]Substituted by the Finance Act, 1999, w.e.f. 1-4-2000.
Prior to its substitution, section 43D, as inserted by the Finance (No. 2) Act,
1991, w.e.f. 1-4-1991, read as under :
‘43D.
Special provision in case of income of public financial institutions, etc..—Notwithstanding
anything to the contrary contained in any other provision of this Act, in
the 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 prescribed 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 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 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.’
[R721]See rule 6EA, framed under section 43D, as it stood prior to 1-4-2000.
[R722]See rule 6EB.
[R723]Clause (iv) of section 3(1) of the Companies
Act, 1956, defines “public company”. For text of section 3, see Appendix One.
[R724]For text of section 4A of the Companies Act, 1956, and
notified institutions thereunder, see Appendix
One.
[R725]For definition of “Government company
[R726]See also
Letter [F. No. 14/3/7-IT(A-I)], dated 7-8-1967 and
Circular No. 38, dated 3-10-1956.
[R727]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.
[R728]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
[R731]Inserted by the Finance (No. 2) Act, 1965, w.r.e.f.
1-4-1964.
[R732]Inserted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976.
[R733]For relevant case laws, see case laws
[R735]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[R736]Substituted for “forty” by the Finance (No. 2) Act,
1998, w.e.f. 1-4-1999. Earlier “forty” was substituted for “twenty-five” by the
Finance Act, 1992, w.e.f. 1-4-1993.
[R737]Substituted for “five hundred thousand” by the Finance
(No. 2) Act, 1998, w.e.f. 1-4-1999. Earlier “five hundred thousand” was substituted
for “two hundred and fifty thousand” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R738]Substituted for “forty” by the Finance (No. 2) Act,
1998, w.e.f. 1-4-1999. Earlier “forty” was substituted for “twenty-five” by the
Finance Act, 1992, w.e.f. 1-4-1993.
[R739]Substituted for “five hundred thousand” by the Finance
(No. 2) Act, 1998, w.e.f. 1-4-1999. Earlier “five hundred thousand” was
substituted for “two hundred and fifty thousand” by the Finance Act, 1992,
w.e.f. 1-4-1993.
[R740]Substituted for “during such previous year,” by the
Finance Act, 1997, w.e.f. 1-4-1998.
[R741]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R742]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R743]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.
[R744]Inserted by the Finance Act, 1984, w.e.f. 1-4-1985.
[R745]See also Circular
No. 452, dated 17-3-1986 and Circular No. 561, dated 22-5-1990.
For relevant case laws, see case laws
[R746]See rule 6G.
Prescribed audit reports are as under:—
(i) Audit report in case of person who carries
on business or profession 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 or profession and who is not required to get his accounts audited
under any other law: Form 3CB
(iii) Prescribed particulars in case of (i) and (ii) above: Form 3CD
[R747]Words “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.
[R748]Substituted for “previous year,” by the Finance Act,
1997, w.e.f. 1-4-1998.
[R749]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R750]Words “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.
[R751]Words “or years” omitted by the Finance Act, 1988,
w.e.f. 1-4-1989.
[R752]Substituted for “obtain before” by the Finance Act,
1995, w.e.f. 1-7-1995.
[R753]Substituted for “Provided that” by the Finance Act,
1992, w.r.e.f. 1-4-1985.
[R754]Words “section 44AC or” omitted by the Finance Act, 1995, w.e.f. 1-7-1995.
[R755]Substituted for “section 44BB or section 44BBA or
section 44BBB” by the Finance Act, 2003, w.e.f. 1-4-2004.
[R756]Words “by an accountant” omitted by the Finance Act,
1985, w.e.f. 1-4-1985.
[R757]Substituted for “obtains before” by the Finance Act,
1995, w.e.f. 1-7-1995.
[R758]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.
[R759]Substituted by the Finance Act, 2001, w.e.f. 1-4-2001.
Prior to its substitution, clause (ii), as substituted by the Finance
Act, 1988, w.e.f. 1-4-1989 and later on amended by the Finance Act, 1994,
w.e.f. 1-4-1994, read as under :
‘(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 30th day of November of
the assessment year;
(b) in any other case, the 31st day of October of the assessment year.’
[R760]Prior to omission section 44AC was 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.
[R761]Inserted by the Finance Act, 1994, w.e.f. 1-4-1994.
[R762]See also
Circular No. 737, dated 23-2-1996.
[R763]Inserted by the Finance Act, 1997, w.r.e.f. 1-4-1994.
[R764]Inserted by the Income-tax (Second Amendment) Act,
1998, w.r.e.f. 1-4-1997. Earlier sub-section (5) was inserted by the Finance
Act, 1994, w.e.f. 1-4-1994 and later on omitted by the Finance Act, 1997,
w.e.f. 1-4-1997.
[R765]Inserted by the Finance Act, 1999, w.r.e.f. 1-4-1998.
[R766]See Circular
No. 737, dated 23-2-1996.
[R767]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R768]Substituted for “two thousand” by the Finance Act, 2002, w.e.f. 1-4-2003.
[R769]Substituted for “one thousand eight hundred”, by the Finance Act, 2002, w.e.f. 1-4-2003.
[R770]Inserted by the Finance Act, 1997, w.r.e.f. 1-4-1994.
[R771]Inserted by the Income-tax (Second Amendment) Act,
1998, w.r.e.f. 1-4-1997. Earlier sub-section (6) was inserted by the Finance
Act, 1994, w.e.f. 1-4-1994 and later on omitted by the Finance Act, 1997,
w.e.f. 1-4-1997.
[R772]Inserted by the Finance Act, 1999, w.r.e.f. 1-4-1998.
[R773]Clause (14) and clause (16) of section 2
of the Motor Vehicles Act, 1988, define “goods carriage” and “heavy goods
vehicle”, respectively, as follows :
‘(14)“goods
carriage” means any motor vehicle constructed or adopted 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;’
[R774]Clause (14) and clause (16) of section 2
of the Motor Vehicles Act, 1988, define “goods carriage” and “heavy goods
vehicle”, respectively, as follows :
‘(14)“goods
carriage” means any motor vehicle constructed or adopted 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;’
[R775]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R776]Inserted by the Finance Act, 1999, w.r.e.f. 1-4-1998.
[R777]Inserted by the Finance Act, 1975, w.e.f. 1-4-1976.
[R778]For relevant case laws, see case laws
[R779]Inserted by the Finance Act, 1997, w.r.e.f. 1-4-1976.
[R780]Inserted by the Finance Act, 1987, w.r.e.f. 1-4-1983.
[R781]Inserted by the Finance Act, 1988, w.r.e.f. 1-4-1983.
[R782]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R783]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R784]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R785]See also
Circular No. 552, dated 9-2-1990.
[R786]Renumbered as sub-section (1) by the Finance Act,
2003, w.e.f. 1-4-2004.
[R787]Words “and financed under any international aid
programme” omitted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R788]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R789]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[R790]See also
Circular No. 649, dated 31-3-1993.
[R791]For relevant case laws, see case laws
[R792]Omitted by the Finance Act, 1993, w.e.f. 1-4-1993.
[R794]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R795]Omitted by the Finance Act, 1993, w.e.f. 1-4-1993.
[R796]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976.
[R797]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.
[R798]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R799]Omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
Prior to its omission, clause (c) was inserted by the Finance Act, 1983,
w.e.f. 1-6-1983.
[R800]Omitted by the Finance Act, 1994, w.e.f. 1-4-1995.
Prior to its omission, clause (d) was inserted by the Finance (No. 2)
Act, 1991, w.r.e.f. 1-4-1989.
[R802]Substituted for “the Explanation” by the
Finance (No. 2) Act, 1977, w.e.f. 1-4-1977.
[R803]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.
[R804]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R805]See rule 6GA and Form No. 3CE.
[R806]See also
Circular No. 23D(XXIII-6) of 1965 and Circular No.
768, dated 24-6-1998.
For relevant case laws, see case laws
[R807]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.
[R808]For the meaning of the terms/expressions “transfer”,
“transfer of a capital asset”, and “effected”
[R810]“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.
[R818]For definition of “insurer” under section 2(9)
of the Insurance Act, 1938, see Appendix
One.
[R819]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.
[R820]Inserted by the Depositories Act, 1996, w.r.e.f.
20-9-1995.
[R821]See Circular
No. 768, dated 24-6-1998 for ‘determination of date of transfer and period of
holding securities held in dematerialized form’. See also Division
Two.
[R822]For definitions of “beneficial owner”, “depository”
and “security” under clauses (a), (e) and (l),
respectively, of section 2(1) of the Depositories Act, 1996, see Appendix One.
[R823]For definitions of “beneficial owner”, “depository”
and “security” under clauses (a), (e) and (l),
respectively, of section 2(1) of the Depositories Act, 1996, see Appendix One.
[R824]For definitions of “beneficial owner”, “depository”
and “security” under clauses (a), (e) and (l),
respectively, of section 2(1) of the Depositories Act, 1996, see Appendix One.
[R825]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.
[R827]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R829]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.
[R830]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R831]Inserted by the Finance Act, 1990, w.e.f. 1-4-1991.
[R832]For
relevant case laws, see case laws
[R835]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R836]For text of section 77A of the Companies Act, 1956, see Appendix One.
[R837]For relevant case laws, see case laws
[R839]Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R841]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R842]Substituted for “the Employees’ Stock Option Plan or
Scheme” by the Finance Act, 2001, w.e.f. 1-4-2001.
[R843]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R844]Inserted by the Finance Act, 1988, w.e.f. 1-4-1988.
[R845]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R847]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R849]Inserted by the Finance Act, 2005, w.e.f. 1-4-2005.
[R850]For text of sections 5(c) and 45 of the Banking
Regulation Act, 1949, see Appendix One.
[R851]For text of sections 5(c) and 45 of the Banking
Regulation Act, 1949, see Appendix One.
[R852]Clauses (vib), (vic) and (vid)
inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R853]Substituted for “at least seventy-five per cent of the
shareholders” by the Finance Act, 2000, w.e.f. 1-4-2000.
[R854]For text of sections 391 to 394 of the Companies Act,
1956, see Appendix One.
[R855]Inserted by the Finance Act, 1992, w.e.f. 1-6-1992.
[R856]Substituted for “shares” by the Finance Act, 2001,
w.e.f. 1-4-2002.
[R857]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R858]Inserted by the Finance Act, 1976, w.e.f. 1-4-1977.
[R860]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f.
1-4-1962.
[R861]Inserted by the Finance Act, 1992, w.r.e.f. 1-4-1962.
[R862]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R863]Substituted for “1997” by the Finance (No. 2) Act,
1998, w.r.e.f. 1-4-1998.
[R864]For text of section 18 of the Sick Industrial
Companies (Special Provisions) Act, 1985, see Appendix One.
[R865]For text of sections 3(1)(ga)
and 17 of the Sick Industrial Companies (Special Provisions) Act, 1985, see Appendix One.
[R866]For
text of sections 3(1)(ga) and 17 of the Sick
Industrial Companies (Special Provisions) Act, 1985, see Appendix One.
[R867]Clauses (xiii) to (xv) inserted by the
Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[R868]Substituted for the
portion beginning with the words “where a firm is succeeded” and ending with
the words “intangible asset to the company” by the Finance Act, 2001, w.e.f.
1-4-2002. Prior to its substitution, the quoted portion read as under :
“where a firm is succeeded by a company in the business carried on by it as a result of which the firm sells or otherwise transfers any capital asset or intangible asset to the company:”
[R869]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R870]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R871]Inserted, by the Finance Act, 2001, w.e.f. 1-4-2002.
[R872]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R873]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R874]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004.
[R875]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R876]Inserted by the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-4-1985.
[R877]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R878]Inserted, by the Finance Act, 1997, w.e.f. 1-4-1998.
[R879]Inserted by the Finance (No. 2) Act, 1998, w.e.f.
1-4-1999.
[R880]Substituted by the Finance Act, 1992, w.e.f. 1-4-1993.
Prior to substitution, section 48, was 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.
[R881]For relevant case laws, see case laws
[R882]For the meaning of the terms/expressions
“consideration”, “full value of the consideration”, “in connection with such
transfer”, “expenditure incurred wholly and exclusively...transfer” and
“improvement”
[R883]For the meaning of the terms/expressions
“consideration”, “full value of the consideration”, “in connection with such
transfer”, “expenditure incurred wholly and exclusively...transfer” and
“improvement”
[R884]For the meaning of the terms/expressions
“consideration”, “full value of the consideration”, “in connection with such
transfer”, “expenditure incurred wholly and exclusively...transfer” and
“improvement”
[R885]See rule
115A.
[R886]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R887]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R888]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005.
[R890]Substituted by the Finance Act, 2000, w.r.e.f.
1-4-1993. Prior to its substitution, clause (v) of Explanation, read
as
under
:
‘(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 notification in the Official Gazette, specify in this behalf.’
[R891]Notified Cost Inflation Index for relevant financial
year 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 : 281/1996-97 : 305/1997-98 : 331/1998-99 : 351/1999-2000 : 389/2000-2001 : 406/2001-2002 : 426/2002-2003 : 447/2003-2004 : 463/2004-2005 : 480.
[R892]For relevant case laws, see case laws
[R893]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R895]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R896]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R897]Inserted by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R898]Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.
[R899]Inserted by the Finance Act, 2005, w.e.f. 1-4-2005.
[R900]Inserted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976.
[R901]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965.
[R902]Substituted for “section” by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1967.
[R903]Inserted by the Taxation Laws (Amendment) Act, 1975,
w.e.f. 1-4-1976.
[R904]Substituted for “section” by the Finance (No. 2) Act,
1967, w.e.f. 1-4-1967.
[R905]Inserted, by the Finance (No. 2) Act, 1967, w.e.f.
1-4-1967.
[R906]Inserted by the Finance (No. 2) Act, 1991, w.r.e.f.
1-4-1962.
[R907]Inserted by the Finance Act, 2001, w.e.f. 1-4-2001.
[R908]Sub-sections (2B), (2C) and (2D) inserted by the
Finance Act, 1999, w.e.f. 1-4-2000.
[R909]Omitted by the Finance Act, 2000, w.e.f. 1-4-2001.
Prior to its omission, sub-section (2B), as inserted by the Finance Act, 1999,
w.e.f. 1-4-2000, read as under :
“(2B) Where the capital gain arises from the transfer of the specified security referred to in sub-clause (iiia) of clause (2) of section 17, the cost of acquisition of such specified security shall be the fair market value on the date of exercise of option.”
[R910]Inserted by the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-4-1985.
[R911]Substituted by the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Earlier section 50 was amended by the Finance Act, 1986, w.e.f.
1-4-1987 and the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978.
[R912]For relevant case laws, see case laws
[R913]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f.
1-4-1998.
[R914]Inserted by the Finance Act, 1999, w.e.f. 1-4-2000.
[R915]See rule 6H and Form No. 3CEA.
[R916]Explanation 1 and
Explanation 2 substituted for Explanation by the Finance Act,
2000, w.e.f. 1-4-2000. Prior to its substitution, Explanation, as
inserted by the Finance Act, 1999, w.e.f. 1-4-2000, read as under:
‘Explanation.—For the purposes of this section, “net worth” means the net worth as defined in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).’
[R917]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R919]Prior to omission sub-section (2) of section 52 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.
[R920]Prior to its omission, section 53 was 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.
[R921]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 relevant case laws, see case laws
[R922]Inserted by the Finance Act, 1978, with retrospective
effect from 1-4-1974.
[R923]Substituted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R924]Substituted for “Where, in the case of an assessee
being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R926].“to which the provisions of section 53 are not applicable”
omitted by the Finance Act, 1985, w.e.f. 1-4-1985.
[R927]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.
[R929]Substituted for “is greater than the cost of the new
asset” by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R931]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.’
[R932]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988.
Earlier it was inserted by the Finance Act, 1978, w.r.e.f. 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.
[R933]For text of 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 account—GSR
725(E), dated 22-6-1988
[R934]Prior to its omission, Explanation was amended
by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
[R935]Inserted by the Finance Act, 1970, w.e.f. 1-4-1970.
[R936]For relevant case laws, see case laws
[R937]Inserted by the Finance Act, 1978, with retrospective
effect from 1-4-1974.
[R938]Substituted for “Where the capital gain arises” by the
Finance Act, 1987, w.e.f. 1-4-1988.
[R939]Inserted by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R940]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988.
Earlier it was inserted by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R941]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,
[R942]Prior to omission, Explanation was amended by
the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992.
[R943]Inserted by the Finance Act, 1973, w.e.f. 1-4-1974.
[R944]For relevant case laws, see case laws
[R945]Inserted by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R946]Substituted for “Where the capital gain arises” by the
Finance Act, 1987, w.e.f. 1-4-1988.
[R948]Inserted by the Finance Act, 1978, w.r.e.f. 1-4-1974.
[R949]Substituted by the Finance Act, 1987, w.e.f. 1-4-1988.
Prior to substitution sub-section (2) was inserted by the Finance
Act, 1978, w.r.e.f. 1-4-1974.
[R950]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,
[R951]Prior to its omission, Explanation was amended
by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992.
[R952]Inserted by the Finance (No. 2) Act, 1977, w.e.f.
1-4-1978.
[R953]See also Circular No. 359, dated 10-5-1983 and Circular No. 560, dated 18-5-1990.
[R954]Substituted for “capital asset, not being a short-term capital asset” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R955]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R956]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.
[R957]Substituted for “full value of consideration received
or accruing” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R958]Substituted for “full value of consideration received or
accruing” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R959]Substituted for “full value of such consideration”, by
the Finance Act, 1979, w.e.f. 1-4-1979.
[R960]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R961]Inserted by the Taxation Laws (Amendment) Act, 1984,
w.e.f. 1-4-1984.
[R962]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R963]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.
[R965]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R966]Inserted, by the Finance Act, 1978, w.e.f. 1-4-1978.
[R967]Inserted by the Finance Act, 1979, w.e.f. 1-4-1979.
[R968]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R970]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R971]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R975]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987.
[R977]Omitted by the Finance Act, 1987, w.e.f. 1-4-1987.
[R978]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R980]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R981]Inserted, by the Finance Act, 1978, w.e.f. 1-4-1978.
[R982]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.
[R983]Substituted for “2” by the Finance Act, 1978, w.e.f.
1-4-1978.
[R984]Substituted for “clause (vi)” by the Finance Act, 1979, w.e.f. 1-4-1979.
[R985]Inserted, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R986]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R987]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.
[R988]Substituted for “clause (vi)”, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R989]Substituted for “clause (vi)”, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R990]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R991]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R992]Substituted for “Income-tax” by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[R993]Inserted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R994]Substituted for “capital assets other than short-term
capital assets” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R995]Inserted by the Finance Act, 1978, w.e.f. 1-4-1978.
[R996]Numbered as Explanation 1 by the Finance Act,
1983, w.e.f. 1-4-1983.
[R997]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.
[R998]Substituted for “clause (vi)”, by the Finance Act, 1979, w.e.f. 1-4-1979.
[R999]Inserted by the Finance Act, 1983, w.e.f. 1-4-1983.
[R1000]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) was amended by the Finance
Act, 1983, w.e.f. 1-4-1983 and the Finance Act, 1979, w.e.f. 1-4-1979.
[R1001]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) was amended by the Finance Act, 1979, w.e.f. 1-4-1979.
[R1002]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) was amended by the Finance
Act, 1979, w.e.f. 1-4-1979.
[R1003]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.
[R1004]Substituted for “clause (va)” by the Finance
Act, 1979, w.e.f. 1-4-1979.
[R1005]“or clause (a) or clause (b) of sub-section (3)” omitted by the Finance Act, 1987, w.e.f.
1-4-1988.
[R1006]Sections 54EA and 54EB inserted by the Finance (No. 2)
Act, 1996, w.e.f. 1-10-1996.
[R1007]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment)
Act, 1997, w.r.e.f. 1-10-1996.
[R1008]See also
Circular No. 748, dated 19-12-1996, Circular No. 750, dated 13-1-1997, Circular
No. 791, dated 2-6-2000 and PIB Press Release, dated 13-4-2000
[R1009]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R1010]Substituted for “bonds, debentures or units of any
mutual fund referred to in clause (23D) of section 10,” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1011]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1012]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1013]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1014]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1015]Substituted for “specified bonds or debentures” by the
Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1016]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1017]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1018]Substituted for “specified bonds or debentures”, by the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1019]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1020]Substituted for “specified bonds or debentures”, by the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1021]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1022]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1023]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1024]Substituted for “specified bonds or debentures”, by
the Income-tax (Amendment) Act, 1997, w.r.e.f. 1-10-1996.
[R1025]See also
Circular No. 748, dated 19-12-1996, Circular No. 750, dated 13-1-1997, Circular
No. 791, dated 2-6-2000 and PIB Press Release, dated 13-4-2000
[R1026]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001.
[R1028]Inserted by the Finance Act, 2000, w.e.f. 1-4-2001. See
also Circular No. 791, dated 2-6-2000.
[R1029]Substituted
by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, clause (b)
read as under :
‘(b) “long-term specified asset” means any bond redeemable after three years issued, on or after the 1st day of April, 2000, by 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) or by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988).’
[R1030]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003.
[R1031]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002.
[R1032]Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[R1033]For relevant case laws, see case laws
[R1034]Substituted for “Where, in the case of an assessee
being an individual” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R1035]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R1036]Substituted by the Finance Act, 2000, w.e.f. 1-4-2001. Prior
to its substitution, proviso, as inserted by the Finance Act, 1982, w.e.f.
1-4-1983, read as under :
‘Provided that nothing contained in this sub-section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset.’
[R1037]Omitted by the Finance Act, 1987, w.e.f. 1-4-1988
[R1038]“(ii)” omitted by the Finance Act, 1987, w.e.f. 1-4-1988
[R1039]Substituted for “one year” by the Finance Act, 1987, w.e.f. 1-4-1988.
[R1040]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988.
[R1041]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
[R1042]Prior to omission, Explanation was amended by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992
[R1043]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988
[R1045] 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
[R1046]Prior to omission, Explanation was amended by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992
[R1047]Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991
[R1048]omitted by the Finance Act, 1992, w.e.f. 1-4-1992.
[R1049]Substituted for “, 54EA, 54EB” by the Finance Act, 2001, w.e.f. 1-4-2001. Earlier the quoted figures and letters were inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999
[R1050]For relevant case laws, see case laws
[R1051]Substituted for “sections 48, 49 and 50” by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R1052]Omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Prior to its omission, clause (a) was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978 and the Finance Act, 1986, w.e.f. 1-4-1987
[R1053]Substituted for ‘ “cost of any improvement”, in relation to a capital asset,—’ by the Finance Act, 1987, w.e.f. 1-4-1988
[R1054]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998
[R1055]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003
[R1056]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
[R1057]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R1058]. 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 by the Finance Act, 1992, w.e.f. 1-4-1993
[R1059]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967
[R1060]See also Circular No. 31 (LXXVII-5)-D, dated 21-9-1962
[R1061]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
[R1063]Substituted for clause (a) by the Finance Act, 1994, w.e.f. 1-4-1995.
[R1064]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002
[R1065]Inserted by the Finance Act, 1997, w.e.f. 1-4-1998.
[R1066]Inserted by the Finance Act, 2002, w.e.f. 1-4-2003
[R1067]. 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 substitution, 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)”.
[R1069]Inserted by the Finance Act, 1995, w.e.f. 1-4-1996
[R1070]Inserted by the Finance Act, 2001, w.e.f. 1-4-2002
[R1071]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004
[R1073]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
[R1074]Substituted for “1974” by the Finance Act, 1992,
w.e.f. 1-4-1993.
[R1076]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
[R1077]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993.
[R1079]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967
[R1080]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
[R1081]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993
[R1082]For the meaning of the terms “became the property of the assessee” and “fair”
[R1083]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
[R1084]Substituted for “1974” by the Finance Act, 1992, w.e.f. 1-4-1993
[R1085]For the meaning of the terms “became the property of the assessee” and “fair”
[R1086]For the meaning of the terms “became the property of the assessee” and “fair”
[R1087]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
[R1088]Inserted by the Finance Act, 1964, w.e.f. 1-4-1964
[R1089]Inserted by the Taxation Laws (Amendment) Act, 1972, w.e.f. 1-1-1973
[R1090]For relevant case laws, see case laws
[R1091]For the meaning of the expression “with a view to … a capital asset for the purposes of this Chapter”
[R1092]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[R1093]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[R1094]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[R1095]Percentage of value of asset referred to in section 55A(b)(i) : 15%/Amount referred to in section 55A(b)(i) : Rs. 25,000. [Rule 111AA]
[R1096]Percentage of value of asset referred to in section 55A(b)(i) : 15%/Amount referred to in section 55A(b)(i) : Rs. 25,000. [Rule 111AA]
[R1097]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) |
Stocks, 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 |
[R1098]Substituted for “Wealth-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[R1099]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 relevant case laws, see case laws.
[R1100]Inserted by the Finance Act, 1965, w.e.f. 1-4-1965
[R1101]Inserted by the Finance Act, 1972, w.e.f. 1-4-1972
[R1102]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988
[R1103]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989
[R1104]Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996
[R1105]Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005
[R1106]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 relevant case laws, see case laws
[R1107]Inserted by the Finance Act, 2003, w.e.f. 1-4-2004
[R1108]Inserted by the Finance Act, 1988, w.e.f. 1-4-1989
[R1109]Inserted, the Finance Act, 1988, w.e.f. 1-4-1989
[R1110]Inserted by the Finance Act, 1987, w.e.f. 1-4-1988
[R1111]Substituted for “sub-sections (1) and (2)” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971
[R1112](1A)” omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988.
[R1113]Substituted for “sections 34 and 38”, by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988
[R1114]Inserted by the Finance Act, 1989, w.e.f. 1-4-1990.
[R1115]Substituted for “twelve” by the Finance Act, 1997, w.e.f. 1-4-1998
[R1117]Proviso omitted by the Finance Act, 1994,
w.e.f. 1-4-1995. Prior to its 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.”
[R1118]For relevant case laws, see case laws
[R1119]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.
[R1120]Inserted by the Finance Act,
1985, w.e.f. 1-4-1986.
[R1121]Sub-section (12) of section 40A was omitted by the Finance Act, 1992, w.e.f. 1-4-1993
[R1122]“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
[R1123]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
[R1124]Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to
its omission, clause (b) was amended by the Finance Act,
1963, w.e.f. 1-4-1963 and Finance Act, 1968, w.e.f. 1-4-1969.
[R1125]. Inserted by the Income-tax (Amendment) Act, 1972, w.r.e.f. 1-4-1962 subject to savings prescribed by section 5 of the Amendment Act regarding certain cases decided by the Supreme Court
[R1126]Inserted by the Finance Act, 1968, w.e.f. 1-4-1968
[R1127]Inserted by the Finance Act, 1976, w.e.f. 1-6-1976
[R1128]Inserted by the Finance Act, 1986, w.e.f. 1-4-1987
[R1129]Omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988
[R1130]Omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Prior to its omission, sub-section (3) was inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971
[R1131]Omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988