Circular : No. 588, dated 2-1-1991

1162. Announcement by Finance Minister in Lok Sabha on 7-9-1990 regarding deduction of tax at source from payments in respect of systems software

1. In his statement made in the Lok Sabha on September 7, 1990 the Finance Minister had, inter alia, announced :

At present, customs duty is levied on the value of computer software by treating it as a commodity import. The non-resident licenser or seller is also subjected to income-tax on royalty payment for licensing of the software. To avoid this dual levy for exporters, Government has decided that lump sum payment for systems software supplied by the manufacturer along with the hardware itself would be subjected only to customs duty and not to income-tax. Application software forming part of an approved software export scheme would be subjected only to income-tax on the licenser or seller.

2. It has been decided that the concession, as above, insofar as it relates to income-tax, will be available in relation to imports made during the current financial year itself and subsequent years. Accordingly, where a taxpayer, engaged in the business of export of software for computer application, imports any systems software, supplied by the manufacturer of the computer hardware, along with the hardware itself, the lump sum payment made to the foreign supplier for acquisition of any right in relation to, or for use of, such systems software will not be liable to tax in India as payment by way of royalty or otherwise. Such lump sum payments will, henceforth, be allowed to be made without deduction of tax at source under section 195(1) of the Income-tax Act, 1961. Necessary amendment of the law in this regard will be introduced before Parliament shortly.

Circular : No. 589, dated 16-1-1991.

1215. Whether Assessing Officer can exercise discretion under section 220(6) to treat assessee as not being in default in respect of amounts disputed in first appeal pending before Deputy Commissioner (Appeals)/Commissioner (Appeals)

Clarification 1

1. Under section 220(6) of the I.T. Act, 1961 where an assessee has presented an appeal u/s 246 of the Act before the Deputy Commissioner (Appeals) or the Commissioner (Appeals), the Assessing Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.

2. Having regard to the proper and efficient management of the work of collection of revenue, the Board has considered it necessary and expedient to order that on an application being filed by the assessee in this behalf, the Assessing Officer will exercise his discretion u/s 220(6) of the Act (subject to such conditions as he may think fit to impose) so as to treat the assessee as not being in default in respect of the amount in dispute in the appeal in the following situations :

(i) the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which, there exist conflicting decisions of one or more High Courts or, the High Court of jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment, or

(ii) the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or Court in assessees own case.

3. It is clarified that in the situations mentioned in para 2 above, the assessee will be treated as not in default only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or Court alters the situation referred to in para 2 about, the Assessing officer will no longer be bound by the instructions and will excercise his disertion independently.

4. In respect of other cases, not covered by para 2 above, the Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discrtion under the provision, the financial capacity of the assessee to pay demand will not be relevant.

Circular : No. 530, dated 6-3-1989.

Judicial analysis

Explained in - The above circular was explained in Madhu Silica (P.) Ltd. v. CIT 1996 Tax L.R. 521 (Guj.), as follows :

8. From the aforesaid provision of the Act and Circular issued by the Board of Direct Taxes, it is apparent that in the case where the assessee has preferred an appeal under section 246, the Assessing Officer has been vested with the discretion to treat the assessee as not being in default in respect of the amount in dispute in appeal as long as the appeal remains undisposed of even though time for payment of demand under the assessment has expired. The power being discretionary, general guidelines laying down the circumstances in which the assessee may be treated not being in default, was issued by the Board in exercise of its power under section 119 of the Act which has been reproduced hereinabove. As per the instructions contained in clause 2 of the circular it is obvious that where the demand in dispute relates to issue that have been decided in favour of the assessee in an earlier order by an appellate authority or court in the assessees own case, the assessee is not to be treated being in default in respect of that amount in dispute in appeal. While laying down that guidelines it has been further clarified that in that situation the assessee will be treated as not in default only in respect of the amount attributable to such disputed points, namely, which have been decided in favour of the assessee in earlier order by the appellate authority. We also notice that another Circular No. 589, dated 16-1-1991 had been issued by the Board wherein the Board clarified under clause (2) of its instruction contained in the circular that according to para 2 of the Circular No. 530, the Assessing Officer in two situations referred to in that para 2 was bound to treat the assessee not in default in respect of the amount in dispute in appeal.

9. It is not in dispute that the aforesaid circular being in the nature of laying down general guidelines for proper administration of the Act for those who are employed in the execution of the Act are bound to observe such instruction particularly ones which are beneficial to the assessee. (p. 523)

Explained in - Gujarat State Fertilizers & Chemicals Ltd. v. Dy. CIT [1997] 226 ITR 270/98 Taxman 100 (Guj.) it was observed as follows :

As per Circular No. 530, dated March 6, 1989, on an application being filed by the assessee the Assessing Officer will exercise his discretion under section 220(6) subject to such conditions as he may think fit to impose, so as to treat the assessee as not being in default in respect of the amount in the appeal in the situations indicated in paragraph 2 of the circular. Accordingly, where the demand in dispute relates to issues that have been decided in favour of the assessee in an earlier order by an appellate authority or a court in the assessees own case, the assessee is to be treated as not being in default in respect of the amounts attributed to such disputed amounts.

Clarification 2

1. Reference is invited to Boards Circular No. 530 [F. No. 404/82/88-ITCC], dated March 6, 1989 regarding the above-mentioned subject.

2. According to paragraph 2 of the said Circular, the Assessing Officer is, in the two situations referred to in that paragraph, bound to treat the assessee as not in default in respect of the amount in dispute in appeal. In respect of other cases, the Circular stated in paragraph 4

In respect of other cases, not covered by para 2 above, Assessing Officer will take into account all the relevant factors and communicate his decision to the assessee in the form of a speaking order. While exercising discretion under this provision, the financial capacity of the assessee to pay the demand will not be relevant.

3. Representations have been received by the Board that the exclusion of financial capacity of the assessee to pay the demand, from the factors relevant for exercise of Assessing Officers discretion under section 220(6) of the Income-tax Act, is prejudicial to those assessees who are not financially sound.

4. The matter has been reconsidered by the Board. It has been decided to substitute paragraph 4 of Circular No. 530 by the following paragraph :

In respect of other cases not covered by paragraph 2 above, the Assessing Officer, while considering the situation for treating the assessees to be not in default, would consider all relevant factors having a bearing on the demand raised and communicate his decision to the assessee in the form of a speaking order.

Circular : No. 590, dated 30-1-1991.

50. Interest income of non-resident Indians - Tax problems of non-resident Indians repatriated from Kuwait

1. By Circular No. 590, dated 30-1-1991 (see Clarification 1), Indian nationals normally resident in Kuwait who were forced to return to India because of the Iraqi invasion, were made eligible for exemption under section 10(4)(ii) of the Income-tax Act in respect of their NRE/FCNR accounts maintained by them up to 31st March, 1991.

2. With the cessation of hostilities in the Gulf and with a view to facilitate the Kuwait NRIs to return to Kuwait, RBI has now decided to permit them to continue to maintain their NRE/FCNR accounts in banks in India and to maintain their foreign currency accounts and assets abroad for a further period up to 30th June, 1991.

3. Taking into account the abovementioned factors, it is clarified that individuals normally resident in Kuwait and returning to India after 2nd August, 1990 would now be eligible for exemption under section 10(4)(ii) of the Income-tax Act in respect of such accounts maintained up to 30th June, 1991.

Circular : No. 604, dated 11-6-1991.

CLARIFICATION 1

Following the invasion of Kuwait by Iraq in August 1990, Indian nationals normally resident in Kuwait have been forced to return to India. These non-resident Indians may like to go back once the situation in the gulf region stabilises.

Taking into account the peculiar and difficult circumstances under which non-resident Indians have been compelled to return to India, the Reserve Bank of India have decided to permit them to continue to maintain their NRE/FCNR Accounts in Banks in India and to maintain their foreign currency accounts and assets abroad up to 31st March, 1991. A Press Release dated 15th November, 1990 has been issued in this regard.

2. Under the provisions of sub-clause (ii) of clause (4) of section 10 of the Income-tax Act, 1961, income by way of interest on amounts deposited in a Non-Resident External Account in any Bank in India is exempt from income-tax in the case of an individual who is a person resident outside India as defined in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973.

3. Taking into account the circumstances under which the NRIs have returned to India and in view of the decision of the Reserve Bank of India to allow them to maintain their NRE/FCNR Accounts up to 31st March, 1991, it is clarified that individuals normally resident in Kuwait and returning to India after 2nd August, 1990 would be eligible for the exemption under section 10 (4)(ii) of the Income-tax Act in respect of such accounts maintained up to 31st March, 1991.

TAXATION LAWS (AMENDMENT) ACT, 1991 - CIRCULAR NO. 591, DATED 30-1-1991 AND CIRCULAR NO. 593, DATED 5-2-1991 CIRCULAR NO. 598,

Circular : No. 592, dated 4-2-1991

51. Clarification regarding exemption of interest on Non-Resident (External) Accounts in case of joint account holders

1. Section 10(4)(ii) of the Income-tax Act, 1961 provides for exemption from income-tax in the case of an individual, who is a person resident outside India as defined in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), on any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the said Act and the rules made thereunder.

2. The issue, whether the interest income on moneys standing to the credit in Non-Resident (External) Accounts in joint names is exempt from income-tax under section 10(4)(ii) of the Income-tax Act, has been raised before the Board as some Assessing Officers are not treating such interest income as exempt from income-tax. The controversy has arisen because of the use of the word individual in section 10(4)(ii), inserted by the Direct Tax Laws (Amendment) Act 1987 with effect from 1-4-1989, which was not there in the earlier section 10(4A). It is argued that the interest on Non-Resident (External) Accounts in joint names, which was exempt from tax prior to 1-4-1989 because of the use of the word person, shall not be exempt now because such joint account holders constitute a separate entity, viz., Association of Persons and cannot be said to be individuals.

3. The matter has been examined and it is clarified that the joint holders of the Non-Resident (External) Accounts do not constitute an association of persons by merely having these accounts in joint names. The benefit of exemption under section 10(4)(ii) of the Income-tax Act will be available to such joint account holders, subject to fulfilment of other conditions contained in that section by each of the individual joint account holders.

Circular : No. 594, dated 27-2-1991

461. Deduction for expenses on commission payable to agents appointed under the Standardised Agency System for Government securities and the agents of Post Office Time Deposits and Unit Trust of India

1. The agents of Standardised Agency System, Post Office Time Deposits and Unit Trust of India, have drawn the attention of the Board to the fact that where no detailed accounts are maintained and the gross commission received by them is less than Rs. 60,000, the benefit of an ad hoc deduction for expenses, at the rate of 50 per cent of the gross receipts of commission, is available to the authorised agents of Unit Trust of India and the agents of the following securities :

(i) National Savings Certificates II Issue;

(ii) National Savings Certificates VI Issue;

(iii) National Savings Certificates VII Issue;

(iv) Social Securities Certificates; and

(v) Post Office Time Deposits.

2. In view of the discontinuance of some of the above certificates and the notification of new schemes, the aforesaid agents have requested that the currently notified schemes, as listed in paragraph 3 below, may be allowed the benefit of the same ad hoc deduction.

3. The Board has considered these representations and has decided that the benefit of an ad hoc deduction, at the rate of 50 per cent of the gross receipts of commission, be given to the authorised agents of Unit Trust of India and the agents of the following securities :

(1) National Savings Certificates VIII Issue;

(2) Social Securities Certificates;

(3) Post Office Time Deposit Accounts;

(4) Post Office Recurring Deposit Accounts;

(5) National Savings Scheme, 1987;

(6) Post Office Monthly Income Account Scheme;

(7) Kisan Vikas Patra;

(8) Public Provident Fund Accounts; and

(9) Deposit Scheme for Retiring Government Employees, 1989.

Circular : No. 595, dated 5-3-1991

335. Clarification regarding winding up of superannuation funds

1. The Board had clarified earlier that a gratuity fund, approved under the Income-tax Act, cannot be wound up unless it is necessitated by the winding up or discontinuance of the employers trade or undertaking, and that the revocation of a gratuity fund cannot be permitted on the basis of a resolution of the trustees and/or beneficiaries.

2. The Board has been requested to consider whether an approved superannuation fund can be allowed to be wound up only when the undertaking of the assessee is wound up or discontinued.

3. Rules 93 and 94 of the Income-tax Rules, relating to superannuation funds, are analogous to rules 107 and 108 of the Income-tax Rules relating to gratuity funds. Further rule 3(a) of Part B of the Fourth Schedule to the Income-tax Act prescribes that superannuation funds should be established under an irrevocable trust in connection with a trade or undertaking.

4. The Board has, therefore, been advised that an approved superannuation fund also cannot be wound up unless necessitated by the winding up or discontinuance of the employers trade or undertaking.

Circular : No. 596, dated 15-3-1991.

174. Clarification regarding applicability of section 13(1)(d) from assessment year 1984-85 and not from assessment year 1983-84

1. Clause (d) of sub-section (1) of section 13 of the Income-tax Act was substituted by the Finance Act, 1983, with effect from 1-4-1983. The provisions of the new sub-clause were to be applicable from the assessment year 1983-84 onwards. This was also clarified in paragraph 18.7 of Boards Circular No. 372, dated 8-12-1983. However, under sub-clause (ii) of the said section, religious/ charitable trusts and institutions, having investments otherwise than in one or more of the forms or modes specified in section 11(5) of the Act, which had been made before 1st March, 1983, were allowed to change their pattern of investment to that specified in section 11(5) before 30th November, 1983. Many trusts and institutions, who changed their investment pattern between 1-4-1983 and 30-11-1983, were denied the benefit of exemption for the assessment year 1983-84 in view of the provisions of section 13(1)(d).

2. The issue has been considered in the Board and it is decided that the provisions of section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84. It is also decided that appellate decisions on this issue, hitherto in favour of the assessee, may not be further contested, and pending appeals/references may be withdrawn by the Chief Commissioners of Income-tax, in exercise of the powers delegated to them.

JUDICIAL ANALYSIS

Explained in - In CIT v. Deoria Public Charitable Trust [1993] 67 Taxman 282/196 ITR 110 (Cal.), it was held that the Boards Circular No. 596 has laid down that the provisions of section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84

Circular : No. 597, dated 27-3-1991.

1182. Clarification regarding discontinuance of Form No. 16B

1. Reference is invited to the Boards Circular No. 597[`1] *, dated 27-3-1991[`2] *, containing instructions regarding the use of Form Nos. 16, 16A and 16B for issuing certificates of tax deducted at source, under the various provisions of the Income-tax Act, 1961. These three forms had replaced the earlier unified Form No. 16 with effect from 28-2-1991 vide the Income-tax (Sixth Amendment) Rules, 1991 notified under SO 148(E), dated 28-2-1991.

2. In the light of the experience gained from the use of Form No. 16B, and, with a view to further streamlining the work of issue of certificates for tax deducted at source, the Central Government have decided to discontinue the use of Form No. 16B and to substitute it with Form No. 16A, with effect from 1st July, 1993. In other words, TDS certificates which were required to be issued in Form No. 16B, will now be issued in Form No. 16A, with effect from 1-7-1993. For this purpose, Rule 31 of the Income-tax Rules, 1962 has been suitably amended by the Income-tax (Eleventh Amendment) Rules, 1993 published under notification No. SO 405(E), dated 21st June, 1993. A copy of this notification is enclosed for information and guidance at Annexure I. In addition, the following points may also be noted for guidance and compliance :

(i) Under the provisions of section 203 of the Income-tax Act, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194AA, 194B, 194D, 194E, 194EE, 194F, 194G, 194H, 195, 196A, 196B, 196C and 196D, is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia, the amount deducted and any other particulars that may be prescribed. This certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962 to the persons to whose account credit is given or to whom the payment is made or the cheque or warrant is issued, as the case may be.

(ii) The existing Form No. 16 shall continue to be used for issuing certificates of tax deducted at source under section 192, relating to salaries.

(iii) The existing Form No. 16A shall, with effect from 1-7-1993, be used for issuing the certificates of tax deducted at source under :

(a) Section 193, relating to interest on securities;

(b) Section 194, relating to dividends;

(d) Section 194B, relating to winnings from lotteries or crossword puzzles;

(e) Section 194BB, relating to winnings from horse races;

(f) Section 194C, relating to payment to contractors and sub-contractors;

(g) Section 194D, relating to insurance commission;

(h) Section 194E, relating to payment to non-resident sportsmen/Sports Associations;

(i) Section 194EE, relating to payment in respect of deposits under the National Savings Scheme;

(j) Section 194F, relating to payment on account of repurchase of units by a Mutual Fund or the Unit Trust of India;

(k) Section 194G, relating to payment of commission, remuneration or prize on sale of lottery tickets;

(l) Section 196, relating to payment of other sums to a non-resident or a foreign company;

(m) Section 196A(2), relating to income of foreign company;

(n) Section 196B, relating to income from units payable to an offshore fund;

(o) Section 196C, relating to income from foreign currency bonds or shares of an Indian company; and

(p) Section 196D, relating to income of Foreign Institutional Investors from securities.

(iv) Both Form Nos. 16 and 16A will be issued by tax-deductors on their own stationery, including computer stationery or, on printed forms which may be available from the market. Tax-deductors should take care while procuring these forms that the same are in the prescribed proforma.

(v) Form Nos. 16 and 16A shall not bear any serial number as before. Copies of these forms are enclosed as Annexures II and III.

(vi) As Form No. 16B is exactly similar to Form No. 16A excepting that it bears a serial number, it has been decided that tax-deductors can utilise these forms by scoring out the serial number and writing 16A in place of 16B, till stocks last with them. Similarly, the Income-tax Department would continue to sell these forms by converting them to Form No. 16A, till stocks last.

3. As per the provisions of sub-rule (3) of rule 31, the aforesaid TDS certificates are to be furnished to the payee within a period of one month and fourteen days from the date of credit or payment of the sum, or as the case may be, from the date of issue of a cheque or warrant for payment of any dividend to shareholders, subject to the exceptions covered by the proviso to sub-rule (3). For deduction under section 192 or 194D, the certificates can be issued within one month from the close of the financial year in which deductions were made. Failure to issue these certificates within the prescribed time invites penalty under section 272A of the Income-tax Act at the rate of a minimum of Rs. 100 and a maximum of Rs. 200 for every day during which the failure continues.

4. According to the provisions of section 206 of the Income-tax Act, 1961, read with rule 37 of the Income-tax Rules, 1962, the person responsible for deducting tax under any of the provisions of Chapter XVIIB of the Income-tax Act is required to file an annual return of tax, deducted at source, within the prescribed time, after the end of financial year during which deduction is made. For ready reference, the table given below rule 37 which has specified the various annual returns, the forms in which these returns are to be furnished, and, the months by the end of which these returns have to be filed with the concerned Assessing Officer (as per rule 36A), is reproduced below :

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194B from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commissions paid/credited during the year without deduction of tax	26E	June
10.	Annual return of deduction of tax under section 194EE from Payments in respect of deposits under National Savings Scheme	26F	June
11.	Annual return of deduction of tax under section 194F from Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	26G	June
12.	Annual return of deduction of tax under section 194G from Commission, etc., on sale of lottery tickets	26H	June
13.	Annual return of deduction of tax under section 194H from Commission, brokerage, etc.	26-I	June
[N.B. - Deduction of tax at source under section 194H was applicable during the period 1-10-1991 to 31-5-1992 only].

It may be mentioned that if a person fails to furnish in due time, any of the aforesaid annual returns, he shall be liable to pay a penalty under section 272A of the Income-tax Act, at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred for every day during which the failure continues, subject, however, to the condition that the amount of such penalty shall not exceed the amount of tax which was deductible or collectible, at source.

This may please brought to the notice of all Disbursing Officers of the Departments of Government of India, State Governments, Public Sector Undertakings, etc. In case any assistance is needed, the Income-tax Officer concerned and/or the Public Relations Officer of the Income-tax Department may please be contacted.

Circular : No. 664, dated 29-9-1993.

Clarification I

1. Under the provisions of section 203 of the Income-tax Act, 1961, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194B, 194BB, 194C, 194D and 195 of the Income-tax Act is required to furnish a certificate to the effect that tax has been deducted, and to specify therein, inter alia, the amount deducted and any other particulars that may be prescribed. The certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962, to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued as the case may be.

2. So far different forms were prescribed under rule 31 for certificates of tax deducted under different sections of the Act. By Notification No. SO 937(E), dated 10-10-1988, however, old rule 13 has been substituted by a new rule which provides for a unified form to be issued in Form No. 16 in respect of tax deducted under all the aforementioned sections. Another important departure from the existing provisions is that the said certificate shall now be issued on a paper serially numbered and printed by the Central Government in book form and supplied for a nominal consideration to the person deducting tax at source on an application to be made by him in Form No.17 to the Commissioner having jurisdiction over him in this regard. This amendment shall come into force on 1-4-1989.

3. In this connection, attention is invited to the provisions of section 272A(2)(g) of the Income-tax Act according to which if a person fails to furnish a certificate as required by section 203 he shall pay, by way of penalty, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200, for every day during which the failure continues.

Circular : No. 529, dated 13-2-1989.

Clarification 2

1. Under the provisions of section 203 of the Income-tax Act, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194B, 194BB, 194C, 194D, 194E, 195 and 196A is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia the amount deducted, and any other particulars that may be prescribed. The certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962, to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued, as the case may be.

2. With a view to streamlining the work of issue of certificates for tax deducted at source, and avoiding the problems experienced in the use of the unified Form No. 16 [which was brought into force with effect from 1-4-1989 vide Notification No. SO 937(E), dated the 10th October, 1988 (Ref. Boards Circular No. 529, dated 13-2-1989, the Central Government have now introduced a new scheme for the issue of these certificates. The main features of the scheme are as under :

(i) Instead of the existing common Form No. 16 for various deductions, three different forms, viz, Form Nos. 16, 16A and 16B have been introduced by amending, inter alia, rule 31 of the Income-tax Rules through Notification No. SO 148(E), dated 28-2-1991.

(ii) The new Form No. 16 shall be used for issuing the certificates for tax deducted at source under section 192 relating to salaries.

(iii) Form No. 16A shall be used for issuing the certificates of tax deducted at source under section 193 relating to interest on securities, section 194 relating to dividends and section 194D relating to insurance commission.

(iv) Form No. 16B shall be used for issuing the certificates of tax deducted at source under section 194A relating to interest other than interest on securities, section 194B relating to winnings from lotteries or crossword puzzles, section 194BB relating to winnings from horse races, section 194C relating to payments to contractors or sub-contractors, section 194E relating to payments to non-resident sportsmen or sports associations, section 195 relating to other sums, and section 196A relating to income payable to unit-holders of Mutual Fund.

(v) Form Nos. 16 and 16A can be issued on private stationery of the tax deductor or the printed forms available in the market, without approaching the Income-tax Department. However, these forms must be in the prescribed proforma.

(vi) Form No. 16B shall be issued on a paper serially numbered and printed by the Central Government in book form and supplied for a consideration to the person deducting tax at source on an application made by him in Form No. 17 to the Chief Commissioner or Commissioner of Income-tax having jurisdiction over him in this regard. However, in the case of companies which have adopted computerisation for furnishing such certificates, the Commissioner of Income-tax can waive the stipulation of the issue of certificates on forms printed by the Government. Such companies can issue the certificates through computers, but in the prescribed proforma.

(vii) The new forms are to be used by the tax deductors for issuing any certificates for tax deducted at source after 28-2-1991.

3. It may be mentioned that as per sub-rule (3) of rule 31, the aforesaid TDS certificates are to be furnished to the payee within a period of one month from the date of credit or payment of the sum, or as the case may be, from the date of issue of a cheque or warrant for payment of any dividend to a shareholder, subject to the exceptions covered by the provisos to sub-rule (3). For deductions under sections 192 and 194D, the certificates can be issued within one month from the close of the financial year in which the deductions were made. Non-furnishing of these certificates within the prescribed time invites penalty under section 272A of the Income-tax Act at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred per day for the period of default.

4. According to rule 37 of the Income-tax Rules, a person responsible for deducting tax under any of the provisions of Chapter XVIIB of the Income-tax Act is required to file an annual return of tax deduction by the end of the specified month. The annual return for deduction from salaries (Form No. 24) was hitherto required to be filed by the 30th of April every year. This date has now been changed to 31st May by the aforesaid Notification of 28th February, 1991. Form No. 24 has also been modified vide Notification No. SO 220 (E), dated 26th March, 1991. The returns this year may be filed in the new form.

5. For ready reference, the Table below rule 37, which specifies the Form numbers and the months by the end of which the annual return of tax-deduction have to be filed, is reproduced below :

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194 from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commission paid/credited during the year without deduction of tax	26E	June

It may be mentioned that if a person fails to furnish in due time, any of the aforesaid annual returns he shall be liable to pay penalty under section 272A of the Income-tax Act, at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred per day for the period of default.

Clarification 3

1. Reference is invited to Boards Circular No. 597, dated 27-3-1991 containing detailed instructions on the use of new Form Nos. 16, 16A and 16B in lieu of the unified Form No. 16 which was in force from 1-4-1989 to 28-2-1991.

2. As stated in paragraph 2(vii) of the said Circular, the new forms are to be used by the tax-deductors for issuing any certificate for tax deducted at source after 28-2-1991. However, representations have been received by the Board from various quarters that since the new Form No. 16B was not available in adequate numbers at many places after 28-2-1991, TDS certificates issued after that date in the unified Form No. 16 may be accepted by the Income-tax Department.

3. The matter has been considered by the Board and it has been decided that the TDS certificates issued in the unified Form No. 16 after 28-2-1991, will also be accepted by the Assessing Officers in lieu of Form No. 16B for the assessment year 1991-92. In other words, the unified Form No. 16 will also be accepted in lieu of Form No. 16B in cases where tax has been deducted at source under sections 194A, 194B, 194BB, 194C, 194E, 195 and 196A of the Income-tax Act during the financial year 1990-91.

Circular : No. 605, dated 12-6-1991.

Clarification 4

1. Reference is invited to Boards Circular No. 605, dated 12-6-1991, conveying the Boards decision that in view of the shortage of the new Form No. 16B, the Assessing Officers may accept the TDS certificates in the old Form No. 16 also in respect of deductions of tax at source under sections 194A, 194B, 194BB, 194C, 194E, 195 and 196A of the Income-tax Act, 1961, for the assessment year 1991-92.

2. Despite measures taken to make Form No. 16B available in adequate numbers at all places, the shortage of these forms is still continuing. The Board have, therefore, decided that TDS certificates issued in the old Form No. 16 may also be accepted by the Assessing Officers in lieu of Form No. 16B in respect of tax deducted at source up to 31st December, 1991. Simultaneously, the Field Officers may also sell the existing stock of Form No. 16 lying with them, till 31-12-1991.

3. It may be clarified here that the old Form No. 16 shall be accepted only for the categories of TDS for which the new Form No. 16B has been prescribed. Form No. 16B shall also remain in force along with old Form No. 16 and the tax-deductors can use either of the two forms.

Circular : No. 607, dated 4-7-1991.

Clarification 5

1. Reference is invited to Boards Circular No. 607, dated 4-7-1991 conveying Boards decision that the TDS certificates issued by tax deductors in the old (unified) Form No. 16 would continue to be accepted by the Income-tax Department in lieu of the new Form No. 16B, till 31-12-1991.

2. The position in this regard was recently reviewed by the Board and it has been decided that the TDS certificates issued up to 31st March, 1992 in the old (unified) Form No. 16 will continue to be accepted by the Assessing Officers, in lieu of Form No. 16B.

3. It may be clarified that the unified Form No. 16 shall be accepted only for those categories of TDS for which the new Form No. 16B is prescribed at present. Form No. 16B shall also remain in force along with the old (uniform) Form No. 16 and the tax deductors can use either of the two forms till 31-3-1992. TDS certificates issued after 31-3-1992 will not be accepted in the aforesaid Form No. 16.

Circular : No. 625, dated 12-2-1992.

Circular : No. 599, dated 24-4-1991

221. Clarification regarding treatment of securities as stock-in-trade or investment

1. By Circular No. 599, dated 24-4-1991 (see clarification 2), it was clarified that securities held by banks must be regarded as their stock-in-trade and the claim of loss, if debited in the books of account, should be given the same treatment as is normally given to the stock-in-trade. It was also clarified that the interest paid for broken period on the purchase of securities must be regarded as revenue payment and allowed accordingly.

2. Consequent upon the judgment of the Supreme Court in the case of Vijaya Bank Ltd v. CIT [1991] 187 ITR 541, the above circular was withdrawn by the issue of Circular No. 610, dated 31-7-1991 [See Clarification 1]. There have been representations from the Indian BanksAssociation to the effect that the Supreme Court in the case of Vijaya Bank Ltd. was concerned only with the claim for broken period interest and did not decide the issue whether the securities constituted stock-in-trade or investment. It has therefore been represented that the withdrawal of Circular No. 599, dated 24-4-1991 in toto was not called for.

3. The Board has reconsidered the treatment to be accorded to securities held by banks. In the case of Vijaya Bank Ltd. (supra), the Supreme Court considered the issue whether, in a case where the assessee purchases securities at a price determined with reference to their actual value as well as the interest accrued thereon till the date of purchase, the entire price paid for them would be in the nature of capital outlay or whether the interest portion could be claimed as a revenue expenditure. It was in this context that the Supreme Court held that whatever was the consideration which prompted the assessee to purchase the securities, the price paid for them was in the nature of capital outlay and no part of it could be set off as expenditure against income accruing on those securities. The Court was not directly concerned with the issue whether the securities form part of stock-in-trade or capital assets.

4. The question whether a particular item of investment in securities constitutes stock-in-trade or a capital asset is a question of fact. In fact, the banks are generally governed by the instructions of the Reserve Bank of India from time to time with regard to the classification of assets and also the accounting standards for investments. The Board has, therefore, decided that the Assessing Officers should determine on the facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment taking into account the guidelines issued by the Reserve Bank of India in this regard from time to time.

Circular : No. 665, dated 5-10-1993.

clarification 1

Consequent to the judgment of the Supreme Court in the case of Vijaya Bank Ltd. v. CIT [1991] 187 ITR 541, Circular No. 599, dated 24-4-1991 of the Central Board of Direct Taxes, New Delhi may be treated as withdrawn.

Circular : No. 610, dated 31-7-1991.

clarification 2

1. Clarifications on the following issues have been sought by banks from the Central Board of Direct Taxes :

(i) Whether the securities held by the banks constitute their stock-in-trade or investment, and consequently whether the loss claimed by the banks on the valuation of their securities should be allowed as a deduction in computing their taxable profits ?

(ii) Whether deduction claimed in respect of interest paid for broken period on the purchase of securities should be allowed as a deduction from the taxable profits ?

2. The matter has been considered by the Board and it has been decided that the securities must be regarded as stock-in-trade by the banks. Therefore, the claim of loss, if debited in the books of account, would be given the same treatment as is normally given to the stock-in-trade. As far as the second issue is concerned, both the interest payments and receipts must be regarded as revenue payments/receipts, and only the net interest on securities shall be brought to tax as business income.

Judicial Analysis

Explained in - American Express Bank Ltd. v. Dy. CIT [1998] 65 ITD 67 (Mum. - Trib.) with the following observations :

Admittedly the Supreme Court decision in the case of Vijaya Bank Ltd. v. CIT [1991] 187 ITR 541/57 Taxman 152 was delivered on 19-9-1990 well before the issue of Circular No. 599 and secondly, though the decision was rendered after the order of the Assessing Officer but his action being in consonance with the law laid down by the Supreme Court, there was no reason for not following the decision of the Supreme Court. In view of these facts and circumstances of the case, the Tribunal was bound to follow the decision of the Supreme Court in the case of Vijaya Bank Ltd. (supra). The Circular No. 599 was issued without considering the Supreme Court decision cited supra. It was quite possible that the Board when issuing the Circular No. 599 might not be even aware of the Supreme Court decision cited supra. The language of the later Circular No. 610 made it clear that Circular No. 599 did not have the benefit of going through the Supreme Court decision in the matter. Circular No. 599 was neither existing at the time when the Assessing Officer framed the impugned assessments nor was allowed to remain in operation for a considerable period. The said circular was withdrawn as soon as the Board realised that such clarification issued by it was contrary to the principle laid down by the Supreme Court and the Board had rightly withdrawn the circular within about three months from the date of first issue of the circular. The circular issued by the Board was in the nature of clarification or, at best the departmental view on the subject, which was not binding on the Courts.

Circular : No. 600, dated 23-5-1991.

554. Profits retained for export business in the case of tax-payers engaged in the business of growing and manufacturing tea - Calculation of claim of deduction

1. The Board has received representations regarding problems faced by tea exporters in calculating the claim of deduction under section 80HHC of the Income-tax Act.

2. In the case of tax-payers engaged in the business of growing and manufacturing tea, the income chargeable to tax from the sale of tea grown and manufactured in India, is computed under rule 8 of the Income-tax Rules. Under this rule, the composite income is first determined as if it were income derived from business and 40 per cent of such income is deemed to be income liable to tax.

3. The question raised in the said representations is whether the amount to be deducted under section 80HHC is to be computed with reference to the total income from the composite activity or whether it would be computed with reference to 40 per cent of the composite profits, being the part which is to be taken as income chargeable to tax. In other words, clarification has been sought whether the deduction under section 80HHC is to be made before allocation of composite profits under rule 8 or whether the allocation under rule 8 is to be made first and then deduction under section 80HHC allowed from 40 per cent of the composite profits.

4. These representations have been considered. The Board is of the opinion that deduction under section 80HHC is to be allowed after the income chargeable to tax under the head Profits and gains of business and profession has been computed under rule 8. This is illustrated by the following two examples :

EXAMPLE I

Abbreviated Profit & Loss A/c

		Rs.		Rs.
Expenses		1,200	Domestic sales	1,000
Profit		300	Exports (FOB)	500
		1,500		1,500
Profits from tea business				Rs. 300
Allocation under rule 8 :
Income chargeable
under I.T. Act, 40 per cent				Rs. 120
Agricultural income				Rs. 180
Income chargeable to income-tax
Less : deduction under section 8OHHC				Rs. 120
	Rs. 120 500			Rs. 40
	Rs. 1,500			Rs. 40
				Rs. 80

EXAMPLE II

Abbreviated Profit & Loss A/c

	Rs.			Rs.
Expenses	1,200	Export Sales		1,500
Profits	300	(FOB)
	1,500			1,500

Profits from the business			Rs. 300
Allocation under rule 8 :
Income chargeable under I.T. Act 40 per cent			Rs. 120
Agricultural income			Rs. 180
Income chargeable to income-tax				Rs. 120
Less : Deduction under section 80HHC				Rs. 120
Taxable income				Rs. Nil

Judicial analysis

 Circular No. 600, dated 23-5-1991 is not valid in law - Warren Tea Ltd. v. Union of India [1999] 102 Taxman 501 (Cal.).

Circular : No. 601, dated 4-6-1991.

865. Prima facie adjustments under section 143(1)(a) in respect of disallowance under section 43B and nature of evidence to be enclosed with the returns in support of actual payment

1. Reference is invited to Circular No. 581 dated 28-9-1990 issued by the Board in respect of prima facie adjustments under section 143(1)(a) and the scope of section 154. It was clarified in the said circular that where an evidence in support of a deduction claimed under section 43B, or in support of certain other exemptions and deductions, is required to be attached along with the return of income, but is not so attached, the said deduction/exemption shall be disallowed under section 143(1)(a) and a subsequent rectification under section 154 will not be possible in respect of the same, even if the assessee later on furnishes evidence in support thereof.

2. In terms of section 43B, the following deductions are allowed only in the previous year in which payments in respect thereof have actually been made:

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force; or

(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees; or

(d) any sum payable by the assessees interest on any loan or borrowing from any Public Financial Institution 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.

3. The first proviso to section 43B stipulates that the deduction in terms of clauses (a), (c) and (d) above, even if the related payment is not made during the previous year would still be allowable if the amounts have actually been paid before the due date for filing the return of income for that year under section 139(1) and the evidence of such payment is furnished along with the return.

4. It has been brought to the notice of the Board that difficulties often arise in enclosing evidence in terms of clauses (a), (c) and (d) of section 43B because of the voluminous nature of the evidence or where no such evidence can be submitted due to certain reasons.

5. As far as evidence of payments under clause (a) is concerned, there should normally be no difficulty as the assessee can enclose the challan, etc., evidencing the payment. In case this is not possible, for any reason, then he must submit, along with the return of income, a certificate from an accountant, as defined in the Explanation to section 288 of the Act. The accountant should verify that the payment of tax, etc., mentioned in clause (a) and claimed as a deduction, has been made by due date for the filing of return under sub-section (1) of section 139 of the Act.

6. As regards evidence of payment under clause (c), the evidence required will be a certificate from an accountant as defined in the Explanation to section 288 of the Act.

7. For payments of the type referred to in clause (d), the evidence required would either be a certificate from the institution concerned, or a certificate from an accountant as defined in the Explanation to section 288 of the Act.

8. The evidence mentioned in paragraphs 5 to 7 above considered sufficient for the purposes of making prima facie adjustments under section 143(1)(a). However, in cases selected for scrutiny and assessment under section 143(3), further evidence can be called for if necessary.

JUDICIAL ANALYSIS

Explained in - In Sri Jawahar Lal Gupta v. ITO [1993] 199 ITR 726 (All.), it was observed that a perusal of Circular No. 601, dated 4-6-1991, issued by the CBDT makes it clear that as far as the evidence of payment of tax is concerned, a certified copy of the accountant might be sufficient for the purpose of making prima facie adjustment in regard to assessments made under section 143(1)(a).

Circular : No. 602, dated 5-6-1991.

SECTION 9  INSTRUCTIONS TO SUBORDINATE AUTHORITIES

1458. Instruction to subordinate authorities - Extension of due date for filing the return of gifts for assessment year 1990-91 in certain cases

1. Reference is invited to Boards order under section 9(2)(a) of the Gift-tax Act, 1958 (F. No. 143/6/91-TPL dated 30-5-1991) whereby the due date for filing of return of gifts for the assessment year 1990-91 has been extended from 30-6-1990 to 30-6-1991 in the case of those assessees who had made any gift or gifts during the period 20th March, 1990 to 31st March, 1990. Interest chargeable under section 16B of the Act for late filing of the return of gifts has also been waived in such cases up to 30th June, 1991.

2.1 Further, in case any such assessee had already filed the return of gifts for the assessment year 1990-91 in respect of any gift or gifts made by him during the period 1-4-1989 to 19-3-1990, wherein the gift or gifts made during the period 20-3-1990 to 31-3-1990 had not been disclosed, the levy of penalty under section 17(1)(c) of the Act for not disclosing such gifts in that return has also been waived, if such assessee files a revised return by 30-6-1991 disclosing all the gifts in that revised return.

2.2 However, where, in such a case, an assessment under section 15(3) of the Act has already been completed on the basis of the original return, the levy of penalty under section 17(1)(c) shall be waived if the assessee informs the Assessing Officer in writing by 30-6-1991 the particulars of the gift or gifts made by him during the period 20-3-1990 to 31-3-1990, which had not been disclosed in the original return filed by him.

3. The abovementioned order under section 9(2)(a) of the Act has been passed to remove any hardship in such cases resulting from the uncertainty that prevailed regarding the treatment of gifts made during the period 20-3-1990 to 31-3-1990 on account of the provisions of the Gift-tax Bill, 1990, which has since lapsed because of the dissolution of the Lok Sabha on 13-3-1990.

4. A Press Note has also been issued clarifying the position, which appeared in the newspapers on 1st June, 1991 and 3rd June, 1991. It has also been clarified in the Press Note that the date of filing the return of gifts for the assessment year 1991-92 will remain 30-6-1991 in all cases and the return of gifts for this assessment year has to be filed under the provisions of the existing Gift-tax Act, 1958. A copy of the Press Note is enclosed.

5.1 Assessees falling under the categories mentioned in paragraphs 2.1 and 2.2 above should file the revised returns or the necessary information in writing before the Assessing Officer, as the case may be, for the assessment year 1990-91 on or before 30-6-1991, so that they can avoid the penal consequences of section 17(1)(c) of the Act.

5.2 Where any such revised returns or information in writing is received from the assessee, the Assessing Officer must take prompt action to bring to tax all the gifts made during the period 1-4-1989 to 31-3-1990 relevant for the assessment year 1990-91.

PRESS NOTE

The Government had earlier issued a Press Note, which appeared in the newspapers on 21st/22nd March, 1991, clarifying that consequent upon the lapse of the Gift-tax Bill, 1990 because of the dissolution of the Lok Sabha, the provisions of the existing Gift-tax Act, 1958 continue to apply to all gifts made. Taxpayers were advised to immediately file the returns of gifts for the assessment year 1990-91 under the Gift-tax Act, 1958. They were also informed that for providing necessary relief in cases where returns of gift for the assessment year 1990-91 had been delayed for bona fide reasons, the Central Board of Direct Taxes will suitably extend the date of filing the returns of gifts.

2. Accordingly, the Central Board of Direct Taxes has passed an order dated the 30th May, 1991 under section 9(2)(a) of the Gift-tax Act, 1958 to the following effect :

(i) In the cases of assessees who had made any gift or gifts chargeable to gift-tax during the period 20th March, 1990 to 31st March, 1990, the due date for furnishing the returns of gifts for the assessment year 1990-91 has been extended from 30th June, 1990 to 30th June, 1991.

(ii) Interest chargeable under section 16B of the Act for delay in furnishing of the returns in such cases has also been waived up to 30th June, 1991.

(iii) In cases of the type mentioned at (i) above, if any assessee had also made any gift or gifts during the period 1st April, 1989 to 19th March, 1990, in respect of which he had already filed a return of gifts for the assessment year 1990-91, the levy of penalty under section 17(1)(c) of the Act for not disclosing in that return the gift or gifts made during the period 20th March, 1990 to 31st March, 1990 has also been waived, if such assessee files a revised return on or before 30th June, 1991 disclosing all the gifts.

However, if in such a case an assessment under section 15(3) of the Act has already been completed on the basis of the original return, the levy of penalty under section 17(1)(c) will be waived if the assessee informs the Assessing Officer in writing on or before 30th June, 1991, all the particulars of gift or gifts made by him during the period 20th March, 1990 to 31st March, 1990 which he had not disclosed in original return filed by him.

3. Therefore, assessees falling in the categories mentioned in the preceding para must file returns or revised returns or the necessary information, as the case may be, for the assessment year 1990-91 on or before 30th June, 1991 to avoid any penal consequences.

4. It is further clarified that the due date for furnishing of the returns of gifts for the assessment year 1991-92, which is 30th June, 1991, remains the same and these returns are also to be filed under the existing Gift-tax Act, 1958.

Circular : No. 603, dated 6-6-1991.

199. Valuation of perquisites in the form of reimbursement of medical expenses/provisions of medical facilities by an employer[`3] 1

1. In supersession of Circular No. 376, dated January 6,1984, Circular No. 445, dated December 31, 1985, Circular No. 481, dated February 20, 1987 and all other instructions on the subject, the Board have decided that the value of the perquisite arising by way of payment or reimbursement by an employer of expenditure on medical treatment incurred by his employee on himself or on his spouse, children or parents, including the provision of free medical treatment or treatment at a concessional rate, will not be included in the taxable salary of the employee in the following cases :

(i) Where the medical treatment is availed at hospitals, clinics, etc., maintained by the employer;

(ii) Where the medical treatment is availed of at hospitals maintained by the Government or local authorities or hospitals approved for the purposes of the Central Government Health Scheme or Central Medical Scheme (a list of such hospitals furnished by the Ministry of Health and Family Welfare on 11-4-1991 is annexed);

(iii) Where the expenditure is on medical insurance premia;

(iv) Where the medical treatment is availed of from any doctor outside the institutions/schemes mentioned in (i) to (iii) above an expenditure of up to Rs. 10,000 in a year, in the aggregate; and

(v) Where the medical treatment is availed of in a hospital outside India and the expenditure is incurred for treatment (including on travel and stay abroad in connection with such treatment) as also on travel and stay abroad of one attendant, to the extent permitted by the RBI, subject to the condition that the amount qualifying for such tax exemption would not include expenditure incurred on travel in the case of employees whose gross total income, as computed under the Income-tax Act without considering the amount paid or reimbursed for expenditure in connection with medical treatment abroad, exceeds Rs. 1,00,000.

2. The contents of this circular will be applicable in relation to the assessment year 1991-92 and the subsequent years.

LIST OF hospitals RECOGNISED UNDER CENTRAL GOVERNMENT HEALTH SCHEME

	Govt. Hospital		Private Hospital
1.	Delhi		(For maternity cases only)
1.	Dr. R.M.L. Hospital	1.	Dr. B.L. Kapur Memorial Hospital, Pusa Road
2.	Safdarjang Hospital	2.	St. Stephens Hospital, Tees Hazari
3.	Smt. Sucheta Kripalani Hospital (Only for maternity and for staff working in the Hospital)	3.	Kasturba Hospital, near Jama Masjid
4.	CGHS Maternity and Gynae Hospital, R.K. Puram	4.	Girdhari Lal Maternity Hospital., Opposite Kamla Market, Ajmeri Gate
5.	CGHS Maternity Centre, Srinivaspuri	5.	Delhi Neurological Research Centre (for CT Scan)
6.	CGHS Maternity Centre, Kalkaji.
			Private Hospital(For T.B. only)
7.	All Centres under New Delhi Municipal Committee (only for maternity cases)	6.	Lala Ram Swaroop TB Hospital, Mehrauli
8.	All Centres under MunicipalCorporation of Delhi (only for maternity cases)	7.	Rajan Babu TB Hospital, Kingsway Camp.
			For By-Pass Surgery
9.	Badshah Khan Hospital, Faridabad.	8.	Escorts Heart Institute
		9.	Batra Hospital
		10.	Natural Heart Institute.
			For General Cases
		11.	Narinder Mohan Hospital, Mohan Nagar, Ghaziabad

2. Ahmedabad

1. Government Civil Hospital

2. Government Mental Hospital

3. Government TB Hospital

4. Government Dental Hospital

5. Sh. M.P. Shah Cancer Hospital (Government aided).

3. Allahabad

1. S.R.N. Hospital

2. M.L.N. Hospital

3. M.D. Eye Hospital

4. Dufferin Hospital

5. T.B. Sapru Hospital

6. Kamla Nehru Memorial Hospital

7. S.N. Children Hospital.

4. Bangalore

1. Bowring & Lady Curson

2. Central Leprosarium, Magadi Road

3. HSIS Gosha Hospital, Taskar Town

4. Isolation Hospital, Old Madras Road

5. Lady Willingdon & TB Demonstration Training Centre, K.G. Road

6. Minto Opthalmic Hospital, Albert Victoria Road

7. SDS Sanatorium, Hosur Road

8. T.B. Sanatorium, Old Madras Road

9. Vani Vilas Hospital, Krishnarajendra Road

10. Victoria Hospital

11. Sri Jayachamarajendra Institute of Indian Medicine, Tank Bund Road.

	Govt. Hosipital			Private Hosipital
5.	Bombay
	1.		J.J. Hospital	1.	Bombay Hospital
	2.		St. George Hospital	2.	Nanavati Hospital
	3.		G.T. Hospital	3.	Radhibai Vatumal Sanatorium
	4.		Cama Alblese Hospital	4.	Sarvodya Hospital
	5.		N.M. Mental Hospital	5.	Tata Memorial Hospital
	6.		Municipal Hospitals (three)	6.	Children Orthopaedic Hospital
	7.		Railway Hospital	7.	National Hospital
	8.		Naval Hospital	8.	Mangal Anand Hospital.
6.	Calcutta
	1.		S.S.K.M. Hospital	1.	Bahela Hospital
	2.		Medical College & Hospital	2.	Ramakrishna Mission Seva Pratishthan
	3.		N.R.S. Medical College & Hospital	3.	Lumbini Park Mental Hospital
	4.		R.G. Kar Medical College & Hospital	4.	Belle Vue Clinic
	5.		Polyclinic at Subushan Hospital	5.	Heart Care Centre
	6.		Diagnostic and Research Centre	6.	East India Clinic.
	7.		National Medical College
	8.		K.S. Roy T.B. Hospital
7.	Hyderabad
	1.	Osmania General Hospital		1.	C.C. Shroff Hospital
	2.	Gandhi Medical Hospital, Secundrabad		2.	Sagarlal Memorial Hospital
	3.	E.N.T. Hospital		3.	Sai Ram Hospital
	4.	Quarantine Fever Hospital		4.	Sharvana Nursing Home.
	5.	Govt. Maternity Hospital
	6.	Nizam Orthopaedic Hospital
	7.	Niloufer Hospital
	8.	Mental Hospital
	9.	Cancer Hospital
	10.	Osmania Dental College
	11.	T.B. Hospital
	12.	Sarojini Eye Hospital
	13.	Govt. Ayurvedic Hospital
	14.	Govt. Unani Hospital
8.	Jaipur
	1.	Indian Red Cross Society Polyclinic (for tests only)		1.	S.M.D. Hospital
	2.	S.M.S. Zanana T.B. and Mental Hospital
9.	Kanpur
	1.	L.L.R. Hospital
	2.	U.I.S.E. Hospital
	3.	U.H.M. Hospital
	4.	A.H.M. Hospital
	5.	K.P.M. Hospital
	6.	M.I. Chest Hospital
	7.	J.K. Cancer Institute
	8.	L.L.R. Cardiology Institute
10.	Lucknow
	1.	Civil Hospital		1.	Ramakrishna Mission Vivekananda Polyclinic
	2.	Balrampur Hospital		2.	U.P. Medical Center (for CT Scan)
	3.	Medical College Hospital
11.	Madras
	1.	Government Stanle, Medical College Hospital		1.	Public Health Centre
	2.	Government Kilpauk Medical College Hospital		2.	Andhra Mahila Sabha Nursing Home
	3.	Govt. General Hospital		3.	Cancer Institute.
	4.	Govt. Royapettah Hospital
	5.	Govt. Mental Hospital
	6.	Govt. Opthalmic Hospital
	7.	Govt. R.S.R.M. Hospital
	8.	Govt. Kasturba Gandhi Hospital
	9.	Govt. Thiruvatteswarar T.B. Hospital
	10.	Govt. T.B. Sanatorium,Tambaram
	11.	Govt. Chest Institutes Tuberculosis Demonstration and Training Centre, Chetput
	12.	Institute of Obstetric and Gynaecology and Hospital for Women and Children
	13.	Institute of Child Health and Hospital for Children
	14.	Govt. Homoeopathic Medical College and Hospital
	15.	Govt. Peripheral Hospital, K.K. Nagar.
12.	Meerut
	1.	P.L. Sharma Hospital
	2.	Medical College Hospital
	3.	Dufferin Hospital.
13.	Nagpur
	1.	Medical College Hospital		1.	Mure Memorial Hospital
	2.	Mayo General Hospital		2.	Matru Sewa Sangh Maternity Hospital
	3.	Dental College and Hospital		3.	Gopikrishna Toori Neurological Clinic
	4.	Mental Hospital.		4.	Rashtra Sant Tukdoji Cancer Hospital
				5.	Nagpur Neurological Research Centre (for CT Scan).
14.	Patna
	1.	Patna Medical College & Hospital		1.	Kurjee Holy Family Hospital.
	2.	Nalanda Medical College & Hospital
	3.	Patna City Govt. Hospital
	4.	Rajendranagar Hospital.
15.	Pune
	1.	Sasson General Hospital		1.	K.E.M. Hospital
	2.	Anud Chest Hospital		2.	Ruby Hall Clinic
	3.	Mental Hospital, Yerwada		3.	Hardikar Hospital
				4.	N.M. Wadia Hospital
				5.	Sencheti Hospital
				6.	Joshi Hospital
				7.	Sharda Clinic
				8.	Colony Nursing Home
				9.	Sanjeevan Hospital
				10.	Poone Hospital and Research Centre
				11.	Nature Cure Institute, Urli, Kanchan.

16. Referral Hospitals (with the approval of Director, CGHS):

1. All India Institute of Medical Sciences, New Delhi

2. G.B. Pant Hospital, New Delhi.

17. Specialised Hospitals (with the approval of Director, CGHS):

1. Tata Memorial Hospital, Bombay

2. C.M.C. Vellore (for Neurology)

3. Mental Hospital, Ranchi (Bihar)

4. Eyes Hospital, Sitapur (U.P.)

5. Railway Hospital, Perambur.

Circular : No. 604, dated 11-6-1991.

50. Interest income of non-resident Indians - Tax problems of non-resident Indians repatriated from Kuwait

CLARIFICATION 1

Circular : No. 590, dated 30-1-1991.

Circular : No. 605, dated 12-6-1991.

1182. Clarification regarding discontinuance of Form No. 16B

1. Reference is invited to the Boards Circular No. 597[`4] *, dated 27-3-1991[`5] *, containing instructions regarding the use of Form Nos. 16, 16A and 16B for issuing certificates of tax deducted at source, under the various provisions of the Income-tax Act, 1961. These three forms had replaced the earlier unified Form No. 16 with effect from 28-2-1991 vide the Income-tax (Sixth Amendment) Rules, 1991 notified under SO 148(E), dated 28-2-1991.

(ii) The existing Form No. 16 shall continue to be used for issuing certificates of tax deducted at source under section 192, relating to salaries.

(iii) The existing Form No. 16A shall, with effect from 1-7-1993, be used for issuing the certificates of tax deducted at source under :

(a) Section 193, relating to interest on securities;

(b) Section 194, relating to dividends;

(d) Section 194B, relating to winnings from lotteries or crossword puzzles;

(e) Section 194BB, relating to winnings from horse races;

(f) Section 194C, relating to payment to contractors and sub-contractors;

(g) Section 194D, relating to insurance commission;

(h) Section 194E, relating to payment to non-resident sportsmen/Sports Associations;

(i) Section 194EE, relating to payment in respect of deposits under the National Savings Scheme;

(j) Section 194F, relating to payment on account of repurchase of units by a Mutual Fund or the Unit Trust of India;

(k) Section 194G, relating to payment of commission, remuneration or prize on sale of lottery tickets;

(l) Section 196, relating to payment of other sums to a non-resident or a foreign company;

(m) Section 196A(2), relating to income of foreign company;

(n) Section 196B, relating to income from units payable to an offshore fund;

(o) Section 196C, relating to income from foreign currency bonds or shares of an Indian company; and

(p) Section 196D, relating to income of Foreign Institutional Investors from securities.

(v) Form Nos. 16 and 16A shall not bear any serial number as before. Copies of these forms are enclosed as Annexures II and III.

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194B from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commissions paid/credited during the year without deduction of tax	26E	June
10.	Annual return of deduction of tax under section 194EE from Payments in respect of deposits under National Savings Scheme	26F	June
11.	Annual return of deduction of tax under section 194F from Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	26G	June
12.	Annual return of deduction of tax under section 194G from Commission, etc., on sale of lottery tickets	26H	June
13.	Annual return of deduction of tax under section 194H from Commission, brokerage, etc.	26-I	June
[N.B. - Deduction of tax at source under section 194H was applicable during the period 1-10-1991 to 31-5-1992 only].

Circular : No. 664, dated 29-9-1993.

Clarification I

Circular : No. 529, dated 13-2-1989.

Clarification 2

(ii) The new Form No. 16 shall be used for issuing the certificates for tax deducted at source under section 192 relating to salaries.

(vii) The new forms are to be used by the tax deductors for issuing any certificates for tax deducted at source after 28-2-1991.

5. For ready reference, the Table below rule 37, which specifies the Form numbers and the months by the end of which the annual return of tax-deduction have to be filed, is reproduced below :

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194 from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commission paid/credited during the year without deduction of tax	26E	June

Circular : No. 597, dated 27-3-1991.

Clarification 3

Clarification 4

Circular : No. 607, dated 4-7-1991.

Clarification 5

Circular : No. 625, dated 12-2-1992.

Circular : No. 606, dated 20-6-1991.

622. Computation of surcharge on the amount of income-tax where assessee is entitled to rebate under Chapter VIII

1. Central Board of Direct Taxes have received queries from the assessees, who are to file their returns of income for the assessment year 1991-92, regarding computation of surcharge on income-tax where the total income of a person exceeds Rs. 75,000. The queries are as to whether surcharge is to be computed on the amount of income-tax before or after allowing tax rebate under Chapter VIII of the Income-tax Act, i.e., tax rebate on life insurance premia, contributions to provident fund and investment in certain new shares or units, etc.

2. This is to clarify that surcharge is to be computed on the amount of income-tax as reduced by the tax rebate calculated under Chapter VIII of the Act.

Circular : No. 607, dated 4-7-1991.

1182. Clarification regarding discontinuance of Form No. 16B

1. Reference is invited to the Boards Circular No. 597[`6] *, dated 27-3-1991[`7] *, containing instructions regarding the use of Form Nos. 16, 16A and 16B for issuing certificates of tax deducted at source, under the various provisions of the Income-tax Act, 1961. These three forms had replaced the earlier unified Form No. 16 with effect from 28-2-1991 vide the Income-tax (Sixth Amendment) Rules, 1991 notified under SO 148(E), dated 28-2-1991.

(ii) The existing Form No. 16 shall continue to be used for issuing certificates of tax deducted at source under section 192, relating to salaries.

(iii) The existing Form No. 16A shall, with effect from 1-7-1993, be used for issuing the certificates of tax deducted at source under :

(a) Section 193, relating to interest on securities;

(b) Section 194, relating to dividends;

(d) Section 194B, relating to winnings from lotteries or crossword puzzles;

(e) Section 194BB, relating to winnings from horse races;

(f) Section 194C, relating to payment to contractors and sub-contractors;

(g) Section 194D, relating to insurance commission;

(h) Section 194E, relating to payment to non-resident sportsmen/Sports Associations;

(i) Section 194EE, relating to payment in respect of deposits under the National Savings Scheme;

(j) Section 194F, relating to payment on account of repurchase of units by a Mutual Fund or the Unit Trust of India;

(k) Section 194G, relating to payment of commission, remuneration or prize on sale of lottery tickets;

(l) Section 196, relating to payment of other sums to a non-resident or a foreign company;

(m) Section 196A(2), relating to income of foreign company;

(n) Section 196B, relating to income from units payable to an offshore fund;

(o) Section 196C, relating to income from foreign currency bonds or shares of an Indian company; and

(p) Section 196D, relating to income of Foreign Institutional Investors from securities.

(v) Form Nos. 16 and 16A shall not bear any serial number as before. Copies of these forms are enclosed as Annexures II and III.

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194B from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commissions paid/credited during the year without deduction of tax	26E	June
10.	Annual return of deduction of tax under section 194EE from Payments in respect of deposits under National Savings Scheme	26F	June
11.	Annual return of deduction of tax under section 194F from Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	26G	June
12.	Annual return of deduction of tax under section 194G from Commission, etc., on sale of lottery tickets	26H	June
13.	Annual return of deduction of tax under section 194H from Commission, brokerage, etc.	26-I	June
[N.B. - Deduction of tax at source under section 194H was applicable during the period 1-10-1991 to 31-5-1992 only].

Circular : No. 664, dated 29-9-1993.

Clarification I

Circular : No. 529, dated 13-2-1989.

Clarification 2

(ii) The new Form No. 16 shall be used for issuing the certificates for tax deducted at source under section 192 relating to salaries.

(vii) The new forms are to be used by the tax deductors for issuing any certificates for tax deducted at source after 28-2-1991.

5. For ready reference, the Table below rule 37, which specifies the Form numbers and the months by the end of which the annual return of tax-deduction have to be filed, is reproduced below :

Sl. No.	Nature of returns	Form No.	Month
(1)	(2)	(3)	(4)
1.	Annual return of deduction of tax under section 192 from Salaries	24	May
2.	Annual return of deduction of tax under section 193 from Interest on securities	25	June
3.	Annual return of deduction of tax under section 194 from Dividends	26	April
4.	Annual return of deduction of tax under section 194A from Interest other than interest on securities	26A	June
5.	Annual return of deduction of tax under section 194 from Winnings from lotteries or crossword puzzles	26B	May
6.	Annual return of deduction of tax under section 194BB from Winnings from horse races	26BB	May
7.	Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor	26C	June
8.	Annual return of deduction of tax under section 194D from Insurance commission	26D	June
9.	Annual return of insurance commission paid/credited during the year without deduction of tax	26E	June

Circular : No. 597, dated 27-3-1991.

Clarification 3

Circular : No. 605, dated 12-6-1991.

Clarification 4

Clarification 5

Circular : No. 625, dated 12-2-1992.

Circular: No. 608, dated 25-7-1991.

1388. Valuation of agricultural land comprised in tea, coffee, rubber and cardamom - Guidelines therefor

CLARIFICATION 1

1. Attention is invited to the Boards Circular No. 326, dated 6-2-1982 issued from File No. 319/15/80-WT [printed here as Clarification 3] on the above subject. In view of various practical difficulties in implementing this circular the Board makes the following broad guidelines for the valuation of lands comprised in coffee plantations in order to have some uniform procedure for speedy completion of the pending assessments as far as Karnataka charges are concerned.

2. The plantation land in the coffee plantations may be classified into the following three categories, namely :

(a) lands covered by plants which have started yielding;

(b) virgin land which is in the process of being developed and land covered by plants which have not started yielding;

(c) virgin land capable of being planted but which has not been planted and lands not falling in any of the above specified categories.

3. In valuing lands at 2(a) above, the value will be determined on the basis of yield per acre. As far as coffee plantations are concerned, the following yield/value pattern was considered reasonable:

Yield per acre in kg.	Valuation
	Rs.
250 and below	5,000
251-350	6,000
351-450	7,000
451-550	9,000
551-650	11,000
651-750	13,000
751 and above	15,000

The average of six years production of the yielding area is to be arrived at on this basis. Where, however, six years data is not available, the average is to be worked out with reference to the number of years for which yield is available.

4. In respect of lands at 2(b) above, the value may be taken at Rs. 3,000 per acre with due consideration to peculiar factors in individual cases. With regard to value of lands at 2(c) above, no value need be taken as the value of such virgin lands may be negligible.

5. Regarding the stock of coffee, a value of the same may be separately determined on the basis of the average of the preceding three years dividends and added to the value of the land.

6. With regard to the other assets, such as land utilised for constructing roads, paths, farm houses, store houses, yards, buildings for processing, building for housing the coolies and the supervisory staff, etc., no separate addition need be made.

7. Pending wealth-tax assessments involving valuation of coffee plantations may be finalised on the above basis.

Circular : No. 357 [F. No. 319/9/83-WT], dated 26-5-1983.

Judicial analysis

Explained in - The above circular was commented upon in CWT v. Smt. Manorama Devi Birla [1993] 199 ITR 250 (Cal.), with the following observations :

So far as the question regarding the acceptance of the valuation on the basis of the circular is concerned, it is no doubt true that the circular is not binding on the assessee if it is not accepted by the assessee. The valuation can always be challenged by the assessee even if it is made on the basis of the circular unless it is consented to by the assessee. In this case, as we have indicated, the assessee asked the Wealth-tax Officer to accept the valuation made by the Registered Valuer. But since the Wealth-tax Officer was of the view that he was bound by the said circular, he did not consider the valuation report at all. It is not necessary for us to go into the question whether the circular is arbitrary or not. It is no doubt true that there has been linkage of the yield per acre and the valuation of the coffee estate. In our opinion, no valuation can be made in arithmetical precision. The circular purports to give a broad guideline as to how the valuation of coffee plantation has to be made. The Registered Valuer has also valued the plantation.... (p. 256)

CLARIFICATION 2

1. Circular No. 357 dated 26-3-1983 prescribing guidelines for valuation of land comprised in coffee plantation, was made applicable only to the Karnataka Charge.

2. The scope of this circular has since been reviewed and it is decided that the procedure laid down for the valuation of coffee plantations will apply in respect of coffee plantations all over country.

CLARIFICATION 3

1. Prior to the amendment made by the Finance Act, 1969, agricultural wealth was wholly exempt from wealth-tax. The Finance Act, 1969 extended the levy of wealth-tax to the value of agricultural property with effect from the assessment year 1970-71. The Finance (No. 2) Act, 1980 has excluded from the purview of wealth-tax, the value of agricultural property other than the value of agricultural land comprised in tea, coffee, rubber or cardamom plantations and trees standing on such plantations. This amendment has come into force with effect from 1-4-1981, and accordingly applies in relation to the assessment year 1981-82 and subsequent years. Therefore, agricultural lands comprised in tea, coffee, rubber and cardamom plantations are liable to wealth-tax from the assessment year 1970-71 onwards.[`8] 1

2. So far, no rules have been framed for the valuation of agricultural land or lands comprised in tea, coffee, rubber or cardamom plantations in particular. In order to have some uniform procedure for the valuation of agricultural land comprised in these plantations, the following broad guidelines have been laid down for the valuation of such lands.

3. The agricultural land in the specified plantations may be classified into the following three categories, namely :

(a) lands covered by plants which have started yielding;

(b) virgin land which is in the process of being developed and land covered by plants which have not started yielding;

(c) virgin land capable of being planted but which has not been planted and lands not falling in any of the specified categories.

4. The value of the lands at 3(a) above will be determined by employing the income capitalisation method. For this purpose, land utilised for constructing roads, paths, farm houses, store houses, yards, buildings for processing, buildings for housing the coolies and the supervisory staff will not be worked out separately, but will be deemed to be covered by the value of the land with reference to the yield.

The following procedure will be adopted :

1. The net annual income of the estate will be computed by taking the average of the aggregate gross income as per accounts for 6 years including the relevant accounting year as reduced by the average of aggregate expenditure for the same years.

2. If any expenditure for self-management is not debited to the accounts, the average aggregate expenditure will be increased by an amount equal to 5 per cent of the average of the gross income from the plantation as an allowance for self-management of the plantation.

3. In computing expenditure, the expenses will be allowed on commercial principles but will not include the following :

(a) interest on borrowals for preparation and development of the estate;

(b) provision for gratuity;

(d) wealth-tax;

(e) depreciation on plant and machinery (excluding tools and implements);

(f) expenses of capital nature.

4. The net annual income as computed above will be reduced by an ad hoc deduction of 25 per cent of such net annual income.

5. The annual income as so arrived at will be capitalised by adopting a multiplier of 6.

5. The value of land at 3(b) above will be determined by adding the actual cost of the improvement to the market value of the virgin land.

6. The value of land at 3(c) above will be determined by the usual method of valuation, i.e., to ascertain the market value on the basis of what it would fetch if sold in the open market. While doing so, due regard may be given to the value of the land recommended by the Tea/Coffee/Rubber/Cardamom Board for the purpose of granting development loan relevant to the valuation date.

7. Pending wealth-tax assessments involving valuation of specified plantations may be finalised on the above basis.

Circular : No. 326 [F. No. 319/15/80-WT], dated 6-2-1982.

Judicial analysis

ExplainEd in - The above circular was referred to in Smt. Aliamma Mani Chacko v. GTO [1983] 15 TTJ (Coch.) 428. The Tribunal observed :

2. The main ground of appeal in all these appeals that has been argued before us is regarding the valuation of the estate. It is urged that the value of Rs. 9,000 per acre estimated is not justified. It is submitted that the agricultural income was high only in one of the assessment years. It is also submitted that the assessee has only the leasehold rights and not Jenmom rights and, therefore, the value cannot be as high as Rs. 9,000 per acre. In the course of the hearing before us, the assessees representative pointed out a circular issued by the CBDT, viz., Circular No. 326 [F. No. 319/15/80WT dated 6-2-1982], wherein guidelines have been laid down for valuation of the agricultural lands. It is submitted that the lands in question come under the category (a) appearing in para 3 of the circular and, therefore, the valuation of the land should be made only in accordance with the guidelines given in para 4 of this circular. It is submitted that the value on this basis would be less than the value returned by the assessee.

3. The departmental representative pointed out that the valuation according to this circular which is only in respect of the wealth-tax assessments would be less than the value returned by the assessees here for gift-tax assessments. It is also submitted by the departmental representative that this circular issued for wealth-tax purposes may not be relevant for gift-tax assessments.

4. We consider that both for gift-tax and wealth-tax assessment proceedings it is the market value of the asset that has to be determined. The guidelines laid down in the circular referred to by the assessees representative are for the purpose of computation of the market value. Though the market value in respect of wealth-tax assessments, it cannot be said that this computation should not be taken for the purpose of gift-tax assessments. . . . (p. 429)

Explained in - CWT v. Smt. Suguna Mahendran [1994] 209 ITR 684 (Mad.). It was observed that circular was issued for the purpose of determining the value of the lands by following the income capitalisation method.

Circular : No. 609, dated 29-7-1991 as amended by Circular No. 622, dated 6-1-1992.

244. Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running these vehicles on hire for tourists

1. The second proviso to section 32(1)(ii) of the Income-tax Act, 1961, which disallows depreciation on foreign motor cars, is reproduced below :

Provided further that no deduction shall be allowed under this clause in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists.

2.1 The intention behind this provision is to discourage use of foreign cars for the purposes of business or profession. However, in order to promote tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists, on which full depreciation is allowable.

2.2 Where tour operators or travel agents use certain foreign motor cars, owned by them, for providing transportation services to tourists, depreciation should be allowed on these cars. The position will not change even where such transportation services are provided as a part of package tour for tourists, which may include a number of other services like boarding and lodging, service of guides, etc. A tourist, who opts for a package tour, agrees to pay for a number of services including use of car provided to him by the tour operator or travel agent. Thus, it can be said that the car has been taken by him on hire from such tour operator or travel agent. Therefore, depreciation on foreign motor cars, owned by him and used for providing transportation services to tourists, whether in a package tour or otherwise, should be allowed.

3. Further, under sub-item (2)(ii) of item III of Appendix I to the Income-tax Rules, 1962, a higher rate of depreciation, namely, 40 per cent is allowed on motor buses, motor lorries and motor taxis used in a business of running them on hire. Therefore, where a tour operator or travel agent uses such vehicles, owned by him, in providing transportation services to the tourists, higher rate of depreciation should be allowed on such vehicles. It is clarified that motor vans are akin to motor lorries or motor buses and, therefore, higher rate of depreciation will be allowed on motor vans also, if they are used for providing transport services to tourists.

Judicial analysis

explained in - The above circular was explained in Sita World Travel (I) (P.) Ltd. v. IAC [1993] 45 ITD 623 (Delhi - Trib.), in the following words :

We are unable to agree with the stand of the revenue that the C.B.D.T. circular is not applicable to the instant case. It clearly states that when a tourist, who opts for a package tour agrees to pay for a number of services including use of car provided to him by the tour operator or travel agent, it could be said that the car has been taken by him on hire from such tour operator or travel agent and that therefore, depreciation on foreign motor car owned by him and used for providing transportation services to tourists, whether in a package tour or otherwise, should be allowed. It also further adds that where a tour operator or travel agent uses such vehicles owned by him in providing transportation services to the tourists, higher rate of depreciation should be allowed on such vehicles. No appreciable argument has been advanced by the Revenue as to how the C.B.D.T. circular is not applicable to the facts of the instant case. The intention behind the legislative provision is only to discourage use of foreign cars for the purpose of business or profession, but in order to provide the tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists, as in the instant case, on which full depreciation is allowable. Hence as is evident from the circular, this enables the assessee to have his claim fully allowed in regard to depreciation. (p. 626)

Approved in - The above circular was referred to with approval, in ABC India Ltd. v. Dy. CIT [1996] 217 ITR 255 (Gauhati), with the following observations :

. . . it is made clear that the circular dated July 29, 1991 and circular dated June 14, 1993 (see Sl. No. 214), shall be binding on the income-tax authority, but whether the petitioner will be entitled to the benefit of the circulars will have to be decided by the authority as and when the same is agitated before the authority. (pp. 268-269)

Circular : No. 610, dated 31-7-1991.

221. Clarification regarding treatment of securities as stock-in-trade or investment

Circular : No. 665, dated 5-10-1993.

clarification 1

clarification 2

1. Clarifications on the following issues have been sought by banks from the Central Board of Direct Taxes :

(ii) Whether deduction claimed in respect of interest paid for broken period on the purchase of securities should be allowed as a deduction from the taxable profits ?

Circular : No. 599, dated 24-4-1991.

Judicial Analysis

Explained in - American Express Bank Ltd. v. Dy. CIT [1998] 65 ITD 67 (Mum. - Trib.) with the following observations :

REMITTANCES IN FOREIGN EXCHANGE (IMMUNITIES) SCHEME, 1991/INDIA DEVELOPMENT BONDS SCHEME, 1991 - CIRCULAR NO. 611, DATED 30-9-1991

Provisions explained

GOLD BONDS SCHEME, 1993

SECURITIES LENDING SCHEME, 1997

VOLUNTARY DISCLOSURE OF INCOME SCHEME, 1997

KAR VIVAD SAMADHAN SCHEME, 1998

Circular : No. 612, dated 13-11-1991.

FINANCIAL YEAR 1991-92

1676. Instructions for deduction of tax at source from salary - Rates of tax for the financial year 1991-92

1. Reference is invited to Boards Circular No.568, dated 27-7-1990 wherein the rates of income-tax deduction during the financial year 1990-91 from the payment of income chargeable under the head Salaries under section 192 of the Income-tax Act,1961,etc.,were intimated. The present circular contains the rates of deduction of income-tax from the payment of salaries during the financial year 1991-92, and explains certain connected provisions of the Income-tax Act.

2. The Finance (No. 2) Act, 1991, does not make any change in the rate structure of personal income-tax for the financial year 1991-92.Thus,the income-tax exemption limit for individuals is retained at Rs. 22,000 and the same rates of tax, as applicable for the financial year 1990-91,will apply. An extract of sub-paragraph (1) of paragraph A of Part III of the First Schedule to the Finance (No. 2) Act, 1991, giving the tax rates applicable, is at Annexure I.

3. Sub-section (1) of section 192 provides that the person responsible for paying any income chargeable under the head Salaries shall, at the time of making payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee for that financial year. The provisions of sub-section (3) of the said section are intended for making adjustment for excess or shortfall or inadvertent nature and /or due to unforeseen circumstances. The aggregate tax thus calculated on the estimated income, divided by 12 and rounded off to the nearest rupee, is required to be deducted from the monthly salary.

4. The substance of the main provisions of law insofar as they relate to income chargeable under the head Salaries on which tax is to be deducted at source during the financial year 1991-92 is given hereunder and in the succeeding paragraphs :

(i) No tax will be deducted at source in any case unless the estimated salary income for the financial year exceeds Rs. 22,000. Some typical examples of calculations are at Annexure II.

(ii) Salary includes wages, fees, commissions, perquisites, profits in lieu of or in addition to salary, advance of salary, annuity or pension gratuity, payments in respect of encashment of leave, etc. It also includes the annual accretion to the employees account 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 of the Income-tax Act.Other items included in salary, profits in lieu of salary and perquisites are described in section 17 of the Income-tax Act.

(iii) The value of perquisites by way of free or concessional residential accommodation, or motor car provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962. It is, however, clarified 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 purpose.

(iv) Other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric energy, water for household consumption, educational facilities, etc., should also be taken into account for the purpose of computing the estimated salary income of the employees during the current financial year (Example III at Annexure II illustrates computation of some such perquisites). The valuation has to be done in accordance with rule 3 of the Income-tax Rules.

(v) The value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a Director of the company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employees income under the head Salary exclusive of the value of any benefit or amenity not provided for by way of monetary payment exceeds Rs. 24,000.

(vi) In cases where salary is received from more than one employee,the aggregate salary from these employers will have to be taken into account for the purpose of tax deduction at source.

(vii) Hitherto,the value of medical facility provided to employees and members of their families was required to be included in the taxable income of the employees,except to the extent it was exempted under the administrative circulars issued by the Central Board of Direct Taxes. The Finance (No. 2) Act,1991 has, however, now provided in the Income-tax Act itself, the extent, and the conditions, relevant for exemption from tax,of the medical facilities provided by the employer. The relevant details are given in para 5(ix) of this Circular.

Exemptions/Deductions in computing total income

5. The exemptions/deductions which can be taken into account for computing the total income of an employee are discussed hereunder :

(i) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India, or (b) on retirement from service,or after termination of service,to any place in India is exempt under clause (5) of section 10 subject, however, to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, family in relation to an individual means

(1) The spouse and children of the individual; and

(2) The parents,brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.

It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purposes of such travel.

(ii) Death-cum-retirement gratuity is exempt to the extent specified from inclusion in computing the total income under clause (10) of section 10.

(iii) Any payment received by an employee of the Central Government, or a State Government, as cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement on superannuation or otherwise, is exempt under sub-clause (i) of clause (10AA) of section 10. In the case of other employees, this exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation, or otherwise, subject to maximum of eight months leave. This exemption will be further limited to maximum amount specified by the Government of India from time to time. Presently, this limit has been specified in the Government of India [Notification No. SO 553 (E) (F.No. 142/11/88-TPL) dated 8-6-1988, at Rs.79,920].

(iv) Under section 10(10B), the retrenchment compensation received by a workman is exempt from income-tax subject to certain limits. The maximum amount of retrenchment compensation exempt is the sum calculated on the basis provided in section 25F(b) of the Industrial Disputes Act,1947 or any amount not less than Rs. 50,000 as the Central Government may by notification specify in the Official Gazette, whichever is less. These limits shall not apply in the case where the compensation is paid under any Scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workman in the undertaking to which the Scheme applies and other relevant circumstances.

It may be added that a number of public sector undertakings have formulated voluntary retirement schemes for their employees. Any payment received by an employee, whether a workman or executive, of a public sector company at the time of his voluntary retirement in accordance with any scheme which the Central Government may approve having regard to the economic viability of the public sector undertaking/company and other relevant circumstances will be exempt under section 10(10C) of the Income-tax Act.

(v) Under section 10(13A) of the Income-tax Act,1961 any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from income-tax to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations. According to rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be :

(a) The actual amount of such allowance received by an employee in respect of the relevant period; or

(b) The actual expenditure incurred in payment of rent in excess of 1/10th of the salary due for the relevant period; or

(c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or

(d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period,

whichever is the least.

For this prupose salary includes dearness allowance, i.e., if the terms of employment so provide, but excludes all other allowances and perquisites.

It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee.

Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been deduced as an administrative measure that salaried employees drawing house rent allowance up to Rs. 600 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.

(vi) Clause (14) of section 10 provides for exemption of the following allowances :

(i) Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties,which the Central Government may specify by notification in the Official Gazette.

(ii) Any allowance granted to an assessee either to meet his personal expenses at the place of his posting or at the place he ordinarily resides or to compensate him for the increased cost of living, which the Central Government may specify by notification in the Official Gazette.

The Direct Tax Laws (Second Amendment) Act,1989 has inserted the following proviso to the aforesaid clause :

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

By Notification No. SO 143(E), dated 21-2-1989, SO 144(E), dated 21-2-1989, [as amended by Notification No. 259(E), dated 27-3-1990], GSR 606(E), dated 9-6-1989 and SO 267(E), dated 29-3-1990, the Central Government have specified the following allowances as exempt from tax to the extent and subject to the conditions indicated therein :

(a) Any allowance granted to meet cost of travel on tour or on transfer, including any allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;

(b) Any special compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area allowance;

(d) Any allowance granted to an employee working in a transport system to meet his personal expenses during his duty performed in the course of running of such transport from one place to another;

(e) Children Education Allowance;

(f) Any allowance granted to an employee to meet the hostel expenditure of his child;

(g) Any allowance granted to meet the expenditure incurred on conveyance in the performance of duties of an office or employment of profit;

(h) Any special compensatory allowance in the nature of Composite Hill Compensatory Allowance of High Altitude allowance or Uncongenial Climate allowance or snowbound Area Allowance or Avalanche Allowance; and

(i) Any allowance granted to meet the expenditure incurred on a helper where such a helper is engaged for the performance of duties of an office or employment of profit; any allowance granted for encouraging academic research and any other professional pursuit; any allowance granted to meet the expenses incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.

It may be noted that the Dearness Allowance and City Compensatory Allowance granted to an employee are not covered by the aforesaid notifications; these allowances will clearly be part of income and will have to be taken into account in the computation of income for the purpose of deduction of tax at source.

(vii) Under section 10(15)(iv)(i) of the Income-tax Act as amended by the Finance Act, 1990, interest payable by the Government on deposits made by an employee of the Central Government or State Government or a public sector company from out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette is exempt from income-tax. By Notification No. F.2/14/89-NS-II, dated 7-6-1989, as amended by Notification No. 2/14/89-NS-II, dated 12-10-1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause.

(viii) (a) Under section 16 of the Income-tax Act, the taxable salary is to be computed after making standard deduction of a sum equal to 33¹/₃% of the salary or Rs. 12,000, whichever is less. For this purpose the term salarywill include fees, commissions, perquisites or profits in lieu of or in addition to salary, but will not include any payment received by the employees which is specifically exempt from tax under clauses (10), (10A), (10AA), (10B), (10C), (10D), (11), (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10(13A) of the Act will not be taken into account for the purpose of computing the amount of the standard deduction.

This deduction will be available also to persons drawing pension during the current financial year at the same rate and subject to the same ceiling as to the employees in actual service.

It may be noted that the standard deduction in full will be admissible even to those employees who are entitled to conveyance facilities.

(b) The tax on employment within the meaning of clause (2) of article 276 of the Constitution of India, leviable by or under any law shall also be allowed as a deduction in computing the income of the salaried taxpayers under the head Salaries

(c) A deduction is also allowed under clause (ii) of section 16 in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer subject to certain limits.In the case of a Government employee, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees or the actual amount or entertainment allowance, whichever is the least, is allowable as deduction. In the case of a non-Government employee, deduction for entertainment allowance to the extent specified in sub-clause (b) of clause (ii) of section 16 will be given only if the allowance is regularly received by him from his present employer from a date prior to 1st April, 1955.

(ix) Under section 17, as amended by the Finance (No. 2) Act, 1991, exemption from tax will also be available in respect of

(a) the value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer;

(b) reimbursement by the employer,of expenditure incurred by an employee on his medical treatment or on treatment of any member of his family, in any hospital maintained by Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;

(c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government) or reimbursement of insurance premium to the employees who take medical insurance for themselves or for their family members (under any scheme approved by the Central Government);

(d) reimbursement by the employer, if the amount spent by an employee in obtaining medical treatment for himself or any member of his family from any doctor, not exceeding in the aggregate Rs.10,000 in an year;

(e) as regards medical treatment abroad, the actual expenditure incurred on medical treatment, including the expenditure on travel or stay abroad of the patient and one attendant, in cases where an attendant is permitted by the Reserve Bank of India to accompany the patient, will be exempted from tax. However, the expenditure on travel abroad will be exempted from tax only in the case of employees whose gross total income as computed under the Income-tax Act without including the amount reimbursed in connection with travel abroad does not exceeds Rupees one lakh, and subject to such further conditions as the Central Board of Direct Taxes may prescribe.

(x) Under section 80CCA of the Income-tax Act, 100% deduction will be allowed to an individual, a Hindu undivided family, and certain categories of persons or bodies of individuals, subject to a ceiling of Rs. 40,000 in respect of,

(1) any amount deposited under such schemes [e.g., National Savings Scheme (NSS)] as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(2) any amount paid to effect or keep in force a contract for such annuity plan of the LIC, as the Central Government may specify by notification. By Notification No. GSR 903(E), dated 6-9-1988, the Central Government have specified Jeevan Dhara and Jeevan Akshay plans of the Life Insurance Corporation of India for the purpose of section 80CCA.

It may be noted that the aforesaid deduction will be allowed only in respect of deposits/payments made out of the employees income chargeable to tax. Also such deposits/payments made upto 31st March of the financial year will qualify for deduction. It should also be noted that where any amount standing to the credit of the employee under the National Savings Scheme or any other scheme notified by the Central Government, in respect of which deduction has already been claimed under section 80CCA, together with interest accrued thereon, is withdrawn in any previous year, or where any amount is received on account of the surrender of the policy or as annuity or bonus in accordance with the deferred annuity plan of the LIC, in any previous year, the whole of such amount shall be deemed to be the income of the employee in that previous year in which such withdrawal is made or such amount is received, and shall be chargeable to tax as the income of the previous year. The Drawing and Disbursing Officer should satisfy themselves about the actual deposits or payments made by the employees by calling for such particulars/information as they deem necessary before allowing the deduction. Similarly the DDOs should ascertain from the employees about the withdrawals made by them from the NSS or any other notified scheme of the amount received on account of the annuity plans of the LIC, and the said amount shall be included in the computation of the employees income and charged to tax accordingly. For this purpose, the DDOs should call for such proof/particulars/information as they deem necessary.

(xi) Under section 80CCB deduction shall be allowed in the case of an assessee, being an individual, Hindu undivided family and certain categories of associations of persons or bodies of individuals, in relation to the investment made in the units of any plan framed in accordance with Equity Linked Savings Scheme of the Mutual Funds specified under section 10(23D) of the Income-tax Act or of the Unit Trust of India.The deduction shall be allowed on so much of the amount invested as does not exceed Rs.10,000. When any amount in respect of which deduction has been allowed is returned to the assessee either by way of repurchase of the units by the Funds or Trust or on the termination of the Plan, it shall be deemed to be his income of the previous year in which the amount is returned. Further, where a Hindu undivided family has effected a partition or an association or persons is dissolved after deduction has been allowed to it, such amount on its return shall be deemed to be the income of the recipient.

The Drawing and Disbursing Officers should satisfy themselves about the fact of investment made by the employees by calling for such information/particulars as they may deem necessary before allowing the deduction. Similarly, the DDOs should ascertain from the employees about the return of the investment either by way of repurchase of the units by the Fund, etc., or on the termination of the plan. In the case of such repurchase, etc., the amount returned should be included in the computation of the employees income and charged to tax accordingly.

(xii) Under section 80D, introduced w.e.f. 1-4-1987, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 3,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons mentioned below provided that such insurance is in accordance with the scheme framed by the General Insurance Corporation of India as approved by the Central Government, popularly known as Mediclaim.

The categories of persons are :

(a) where the assessee is an individual, any sum paid to effect or to keep in force an insurance on the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the assessee;

(b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in force an insurance on the health of any member of the family;

(c) where the assessee is an association of persons or a body of individuals consisting in either case, only a husband and wife governed by the system of community or property in force in the State of Goa and the Union Territories of Dadra and Nagar Haveli and Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on the health of the dependent children of the members of such an association or body.

(xiii) Under section 80DD, introduced by the Finance Act,1990, a deduction or Rs. 6,000 is allowed in the case of resident individuals who incur expenditure on medical treatment (including nursing), training and rehabilitation of a handicapped dependent relative suffering from permanent physical disability (including blindness) or mental retardation, specified in the rules being made in this behalf by the Board. The deduction will be available only to those assessees whose total income before allowance of this deduction does not exceed Rs. 1,00,000 in a year. Further, the permanent physical disability or mental retardation of the dependent relative has to be certified by a physician, surgeon, oculist, or a psychiatrist, as the case may be, working in a Government hospital including a departmental dispensary or a hospital maintained by a local authority as per Explanation given below section 80DD. The Drawing and Disbursing Officer should, therefore, call for such particulars/certificates/information from the employee as they deem necessary to verify the genuineness of the claim before they allow this deduction.

(xiv) No deduction should be made from the salary income in respect of any donations for charitable purposes. The tax relief on such donations, as admissible under section 80G of the Act, will have to be claimed by the taxpayer separately at the time of finalisation of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime Ministers Drought Relief Fund, National Childrens Fund, Indira Gandhi Memorial Trust or Rajiv Gandhi Foundation, are made, 50% of such contributions may be deducted in computing the total income of the employee. The donations to the Prime Ministers National Relief Fund,the Prime Ministers Armenia Earthquake Relief Fund, and the Africa (Public Contributions - India ) Fund will, however be eligible for 100% deduction. Deduction will not be admissible where the aggregate of all contributions during the financial year is less than Rs. 250.

(xv) Under section 80GG of the Act, an assessee is entitled to a deduction in respect of house rent paid by him for his own residence at the places specified under rule 11B of the Income-tax Rules, 1962. Such deduction is permissible subject to the following conditions :

(a) the assessee has not been in receipt of any house rent allowance specifically granted to him which qualifies for exemption under section 10(13A) of the Act;

(b) he will be entitled to a deduction in respect of house rent paid by him in excess of 10 per cent of his total income, subject to a ceiling or 25 per cent thereof or Rs.1,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deductions under section 88GG;

(i) any residential accommodation himself or by his spouse or minor child or where such assessee is a member of a Hindu undivided family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession; or

(ii) at any other place, any residential accommodation being accommodation in the occupation of the assessee, the value of which is to be determined under sub-clause (i) of clause (a), or as the case may be, clause (b) of sub-section (2) of section 23.

(d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely :

(i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior (Lashkar) Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune, Srinagar, Surat, Vadodara (Baroda) or Varanasi (Banaras) or the urban agglomeration of each of such places; or

(ii) Bombay, Calicut, Cochin, Ghaziabad, Hubli- Dharwar, Madras, Solapur, Trivandrum or Vishakapatnam.

Explanation: Urban agglomeration in relation to a place means the area for the time being included in the urban agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard.

The disbursing authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessees. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent.

(xvi) Section 80RRA (as amended by the Finance Act,1990) provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in foreign currency from any employer (i.e., a foreign employer or an Indian concern) for any services rendered by him outside India, an amount equal to the followings shall be allowed as deduction in computing the total income of the individual;

(i) fifty per cent of the remuneration, or

(ii) seventy-five per cent of such remuneration as is brought into India, by or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973; and any rules made thereunder whichever is higher.

In the case of an employee of Central Government or any State Government, or a person who was immediately before taking up the service outside India, in the employment of the Central Government or any State Government, the deduction will be allowed only if the service of the employee is sponsored by the Central Government. In the case of any other individual, the deduction will be allowed only if he is a technician and the terms and conditions of his service outside India are approved for the purpose of the said section by the Central Government or the prescribed authority. It is pertinent to note that the deduction is to be allowed with reference to the remuneration received by the individual in foreign currency for services rendered outside India. Thus, if the remuneration is paid to the Indian technician, etc., partly in Indian currency and partly in foreign currency, the amount paid in Indian Currency, will not be taken into account for purposes of deduction under section 80RRA. Likewise, if a part of the remuneration, although paid in foreign currency relates to service rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. The expression foreign employer has been defined in Explanation (b) to section 80RRA to mean (i) the Government of a foreign State; or (ii) a foreign enterprise; or (iii) any association or body established outside India. While allowing the deduction under this section, documentary evidence should be obtained on the following points :

(a) in the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service having been sponsored by the Central Government;

(b) in the case of any other individual being a technician, the fact of the terms and conditions or his service outside India having been approved in this behalf by the Central Government (Ministry of Finance, Department or Revenue, Foreign Tax Division, New Delhi).

(It should also be ensured that the deduction is allowed with reference to the remuneration received in foreign currency in respect of the period of service outside India).

(xvii) The Finance (No.2) Act,1991 has substituted the existing section 80U by a new section, bearing the same number. According to the new section, in computing the total income of a resident individual, who at the end of the previous year, is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability, or mental retardation specified in the rules being made in this behalf by the Board, which is certified by physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, and which has the effect of reducing considerably such individuals capacity for normal work or engaging in a gainful employment or occupation, there shall be allowed a deduction of a sum of twenty thousand rupees. The rules specifying a permanent physical disability (including blindness or partial blindness) and mental retardation are being framed by the Central Board of Direct Taxes.

The deduction under this section can be allowed by the employer on the basis of a certificate from a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, as stated above.

Tax rebate

6. According to section 88, an assessee will be entitled to a deduction of 20% of the amount invested or deposited in the following items during the previous year from the income-tax payable by him on his total income:

(i) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the wife or husband or any child of the individual, it may be noted that any premium or other payments made on a policy as is not in excess of 10% of the actual capital sum assured,will alone qualify for deduction.

(ii) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as has been referred to in section 80CCA(1)(ii), on the life of the individual, the wife or husband or any child of the individual. Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity.

(iii) Any sum deducted from the salary payable by or on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purposes of securing to him a deferred annuity or making provision for his wife or children, insofar as the sum deducted does not exceed 1/5th of the salary.

(iv) Any contribution made :

(a) by an individual to any provident fund to which the Provident Fund Act,1925 applies;

(b) to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or a minor of whom he is the guardian;

(d) by an employee to an approved superannuation fund.

It may be noted that contribution to any fund shall not include any sums in repayment of loan;

(v) Any deposit in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules,1959, as amended from time to time where such sums are deposited in an account standing in the name of an individual, or a minor of whom he is the guardian.

(vi) Any subscription :

(a) to any such security of the Central Government as the Central Government, may, by notification in the Official Gazette, specify in this behalf;

(b) to any such savings certificate as defined under section 2(c) of the Government Savings Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf. Interest on NSC (VI Issue) which is deemed investment also qualifies for deduction

(vii) Any sum paid as contribution :

(a) for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India;

(b) for participation in any Unit Linked Insurance plan of the LIC Mutual Fund notified by the Central Government under clause (23D) of section 10.

(viii) Any subscription made to any such deposit scheme of the National Housing Banks as the Central Government, may, by notification in the Official Gazette specify in this behalf.

(ix) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head Income from house property (or which would, if it has not been used for assessees own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board, etc. The deduction will also be allowable in respect of repayment of loans borrowed by an assessee from the Government, or any bank or Life Insurance Corporation, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long-term finance for construction or purchase of houses in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be public company, public sector company or a university established by law or a college affiliated to such university, or a local authority. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however, will not include, admission fee or cost of share or initial deposit or the cost of any addition or alteration to or renovation or repair of the house property which is carried out after the issue of the completion certificate by competent authority, or after the occupation of the house by the assessee or after it has been let out. Payments towards any expenditure in respect of which the deduction is allowable under the provisions of section 24 of the Income-tax Act will also not be included in payments towards the cost purchase or construction of a house property. Where the house property in respect of which deduction has been allowed under these provisions is transferred by the taxpayer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him or he receives back, by way of refund or otherwise, any sum specified in section 88(2) (xv), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deduction of income- tax so allowed in the earlier years shall be added to the tax on the total income of the assessee with which he is chargeable for such assessment year. It may be noted that the amount which will qualify for tax rebate in respect of this item will not exceed Rs. 10,000. In respect of repayment of loans taken for the purchase or construction of a new residential house property, the construction of which does not get completed by the end of the financial year 1991-92, no tax rebate in respect of these items shall be admissible to the employees.

(x) The Finance (No. 2) Act,1991 has introduced a new provision in section 88 so as to include in the list of savings, for purposes of tax rebate under this section, subscriptions to schemes similar to the Home Loan Accounts Scheme of the National Housing Bank, floated by (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or, (b) any authority constituted in India by or under any law enacted either for the purposes of dealing with and satisfying the need for housing accommodation or for the purposes of planning, development or improvement of cities, towns, villages, or for both.

Subject to the limits mentioned for various items, the entitlement to tax rebate will be calculated at the rate of 20% of the total amount of the aforesaid savings, etc. the maximum tax rebate allowable will be Rs. 10,000 generally and Rs. 14,000 in the case of authors, playwrights, artists, musicians, actors, sportsmen and athletes.The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information as they deem necessary before allowing the aforesaid rebate. In case the DDO is not satisfied about the genuineness of the employees claim regarding any deposit/subscription/ payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such amount by filing his return of income and furnishing the necessary proof, etc., therewith, to the satisfaction of the Assessing Officer. It may also be mentioned here that the deposits/subscriptions/payments towards the items qualifying for the tax rebate should be made out of the employees income chargeable to tax.

Calculation of income-tax and surcharge

7. (a) The net salary income in the case of each employee arrived at after allowing the applicable deductions from the gross salary is liable to income-tax during the financial year 1991-92, at the rates referred to in para 2 above. After calculating the tax liability, the tax rebate provided for in section 88 of the I.T. Act should be allowed as a deduction. The balance amount is the tax payable by the employee which is required to be deducted from the monthly salary in equal instalments. It may be noted here that the tax rebate under section 88, shall not in any case exceed the amount of income-tax on the total income of the assessee with which he is chargeable.

(b) Surcharge : In the case of every person having a total income exceeding Rs. 75,000 the amount of income-tax thus computed, as reduced by the rebate of tax, mentioned above, shall be increased by a surcharge, for the purposes of union, calculated at the rate of 12% of such tax. This surcharge will, however, not apply to a non-resident.

(c) Rounding off : It may also be noted that the total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupees by ignoring the fraction less than five rupees and increasing the fraction which is five rupees or more, to ten rupees. Similarly, the net amount of tax deductible should be rounded off to the nearest rupee by ignoring the fraction less than 50 paise and increasing the fraction which is fifty paise or more, to one rupee.

Miscellaneous provisions for information/guidance of DDOs

8. As stated in para 2 above, sub-section (1) of section 192 makes the person responsible for paying salary, also responsible for deducting income-tax at source from the payment of salary. The scope of deduction of tax at source from Salaries was further modified by the Finance Act,1987 by the insertion so sub-section (2),(2A) and (2B) in section 192. The salient features of these provisions as modified by the Finance Act, 1989 are given below :

(a) Sub-section (2) of section 192 deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head Salary due or received from the former/other employer and also tax deducted at source therefrom in writing and duly verified by him and by the former/other employer. The present employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

(b) Sub-section (2A) of section 192 provides that in respect of salary payment of employees of Government company, co-operative society, local authority, university, institution, association or body deduction of tax at source may be made after allowing relief under section 89(1),whenever salary, etc., paid in arrears or in advance.

(c) Sub-section (2B) enables a taxpayer to furnish particulars of income other than salaries to his employer who shall deduct out of the salary payment, the tax due on the total income subject to the conditions that the total amount of tax deducted shall not be less than the amount deductible from income from salaries only.

To meet the requirements of these provisions the Central Government have notified necessary amendments in the Income-tax Rules,1962 vide Notification No. SO 963(E), dated 29-10-1987. Detailed instructions in this regard were issued by the Department vide Circular No. 504 [F. No.275/138/87-IT(B)], dated 8-2-1988.

(d) In the case of pensioners who receive their pension from any branch of a nationalized bank,the deduction from the amount of pension on account of standard deduction under section 16, contributions to National Savings Scheme, etc., under section 80CCA, contributions to Mutual Funds, etc., under section 80CCB, and the rebate in income-tax under section 88 on account of contributions to Provident Fund, Life Insurance, National Saving Certificates, etc., will be allowed by the concerned bank at the time of deduction of tax at source from the pension before making payment to the concerned pensioners, in the same manner as explained in the preceding paragraphs. In order to ensure uniformity of practice throughout the country in this regard, the Reserve Bank of India have issued necessary instructions to State Bank of India and all Nationalised Banks vide their pension Circular (Central Series) No. 12/C.D.R 1991 [Ref.: CO: DGBA: GA(NBS) No. 56/GA, 64(11-CVL)-90-91], dated the 29th May, 1991. All such branches of the State Bank/Nationalised Banks as have been entrusted with task or payment of pension to pensioners must adhere to these instructions strictly.

9. (a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 192 shall pay, within the prescribed time. The sum so deducted to the credit of the Central Government in the prescribed manner (vide rule 30 of the Income-tax Rules,1962). In the case of deductions made by or on behalf of the Government, the payment has to be made on the day of the tax-deduction itself. In other cases, the payment has to be normally made within one week of the deduction. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which tax is actually paid. Section 271C lays down that if any person fails to deduct tax at source, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine.

While making the payment of tax deducted at source to the credit of the Central Government, it may kindly be ensured that the correct amount of income-tax is recorded in the relevant challan. It may also be ensured that the right type of challan is used. The relevant challan for making payment of tax deducted at source from salaries is No. 9 with Blue colour band. Where the amount of tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein.

(b) According to the provisions of section 203 every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that the tax has been deducted, and, to specify therein the amount deducted, and certain other particulars. This certificate, usually called the TDS certificate, has to be furnished within a period of one month from the end of the relevant financial year, in the case of employees receiving salary income. The certificate has to be issued in Form No. 16 which has been prescribed under Boards Notification No. SO 148(E), dated 28-2-1991 and circulated by Circular No. 597, dated 27-3-1991 [F. No 275/42/91-IT(B)]. A specimen of the certificate is enclosed as Annexure III. This certificate is to be issued on the tax deductors own stationery. If he fails to issue the TDS certificate to the person concerned as required by section 203, he will be liable to pay by way of penalty under section 272A a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax-deduction Account Number (TAN) in the challans.TDS certificates, returns, etc. Detailed instructions in this regard are available in this Departments Circular No. 497 [F. No. 275/118/87-IT(B)], dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty under section 272BB a sum up to Rs. 5,000.

(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules,the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax shall, after the end of each financial year, prepare and deliver, by 31st May of the succeeding financial year, an annual return of deduction of tax to the designated/concerned Assessing Officers. This return has to be furnished in Form No. 24. It may be noted that a copy of each of the TDS certificates issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be likely to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues, so, however, that this sum shall not exceed the amount of tax which was deductible at source.

10. These instructions are not exhaustive and are issued only with a view to help the employers to understand the various provisions relating to deduction of tax from salaries. Wherever there is any doubt, reference may be made to the provisions of the Income-tax Act, and the Finance (No. 2) Act,1991.

11. In case any assistance is required, the Assessing Officer/the local Public Relations Officer of the Income-tax Department may be approached.

ANNEXURE I

EXTRACT FROM THE FINANCE (NO. 2) ACT, 1991 - PART III
OF THE FIRST SCHEDULE

Paragraph A - Sub-Paragraph I

In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,

Rates of income-tax

(1)	where the total income does not exceed Rs. 22,000	Nil;
(2)	where the total income exceeds Rs. 22,000 but does not exceed Rs. 30,000	20 per cent of the amount by which the total income exceeds Rs. 22,000.
(3)	where the total income exceeds Rs. 30,000 but does not exceed Rs. 50,000	Rs. 1,600 plus 30 per cent of the amount by which the total income exceeds Rs. 30,000.
(4)	where the total income exceeds Rs. 50,000 but does not exceed Rs. 1,00,000	Rs. 7,600 plus 40 per cent of the amount by which the total income exceeds Rs. 50,000.
(5)	where the total income exceeds Rs. 1,00,000	Rs. 27,600 plus 50 per cent of the amount by which the total income exceeds Rs. 1,00,000.

Surcharge on income-tax

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall,

(i) in the case of every individual, Hindu undivided family or association of persons or body of individuals referred to in sections 88 and 88A having a total income exceeding seventy-five thousand rupees, be reduced by the amount of rebate of income-tax calculated under Chapter VIII-A, and the income-tax as so reduced.

(ii) in the case of every person, other than those mentioned in item (i) having a total income exceeding seventy-five thousand rupees,

be increased by a surcharge for purposes of the Union calculated at the rate of twelve per cent of such income-tax :

Provided that no such surcharge shall be payable by a non-resident.

ANNEXURE II

Typical examples of income-tax calculations

Example I

		Rs.	Rs.
1.	Total Salary Income (including allowances)		66,000
2.	Deposits under National Savings Scheme		12,000
3.	Contribution to Government Provident Fund	6,000
4.	Payment towards Life Insurance Premia	1,000
5.	Contribution for participation in Unit-linked Insurance Plan, 1971, made under section 19(1)(cc) of the Unit Trust of India Act, 1963	300	11,520
6.	Deposits in a 10-Year account or 15-Year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959	500
7.	C.G.E.I.S.	720
8.	Subscription to National Savings Certificates VIII Issue	3,000

Computation of total income

		Rs.
1.	Gross Total Salary Income	66,000
2.	Deduct : Amount of standard deduction under section 16(i) of the Income-tax Act, 1961, 33¹/₃% of amount subject to maximum of Rs. 12,000	(-)12,000
3.	Gross total income (1 minus 2)	54,000
4.	Deduct : Under section 80CCA Deposit under NSS	12,000
5.	Total income	42,000
6.	Tax on total income (Rs. 1,600 plus 30% of the amount in excess of Rs. 30,000 i.e., Rs. 12,000)	5,200
7.	Deduct rebate on savings, etc., at 20% under section 88 on account of contribution/payment towards G.P.F., Life Insurance Premia, Unit-linked Insurance Plan and Deposit in 10-Year Account or 15-Year Account under Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, CGEIS, National Savings Certificate totalling Rs. 11,520	2,304
8.	Tax payable	2,896

(Average monthly deduction comes to Rs. 241 for 11 months and Rs. 245 in the last month).

Example II

(Illustrating calculation of House Rent allowance under section 10(13A)
in respect of residential accommodation situated in Delhi)

		Rs.	Rs.
1.	Salary (excluding allowances)		50,000
2.	Dearness allowance		18,000
3.	House rent allowance received		9,600
4.	City compensatory allowance received		1,200
5.	Actual rent paid		16,800
6.	Deposits under the National Savings Scheme		12,000
7.	Contribution to General Provident Fund, etc.	6,800
8.	LIP	3,000
9.	Deposits in a 10-Year account under the		10,800
	Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959.	1,000

Computation of total income

1.	Salary (including Dearness Allowance)		68,000
2.	House rent allowance received		9,600
3.	City compensatory allowance received		1,200
	Total Salary Income		78,800
4.	Less : House rent allowance exempt under section 10(13A)
	(a) Actual rent paid	16,800
	Less: 10% of salary	6,800
		10,000
	(b) (Actual amount of house rent allowance received on expenditure on rent in excess of 10% of the salary or 50% of salary, whichever is the least)		(-)9,600
			69,200
5.	Standard deduction u/s 16(i) @ 33¹/₃% or subject to a maximum of Rs. 12,000		(-)12,000
6.	Gross total income		57,200
7.	Less : Deduction u/s 80CCA (Deposits under NSS)		12,000
8.	Total income		45,200
9.	Tax on total income (Rs. 1,600 plus 30% of Rs. 15,200)		6,160
10.	Deduct tax rebate on savings u/s 88 (GPF, CTD, LIP, etc., Rs. 10,800 @ 20%)		(-)2,160
11.	Tax Payable		4,000

(Average monthly deduction comes to Rs. 333 for 11 months and Rs. 337 in the last month).

Example III

(Illustrating calculations and valuation of some perquisites in case of
an employee of a private company posted at Bombay)

			Rs.
1.	Salary including Dearness Allowance		65,000
2.	Bonus		10,000
3.	Free gas, electricity, water, etc. (actual bills paid by the company)		3,000
4.	Furniture at cost (including television set, radio set, refrigerator, other household appliances and air-conditioner) to the company		40,000
5.	(i) Furnished flat provided to the employee for which actual rent paid by the company (actual rent assumed to be equal to the Fair Rental Value)		46,000
	(ii) Rent recovered from the employee		12,000
6.	Deposits under the National Savings Scheme		12,000
7.	Contribution to Recognised Provident Fund	11,000
8.	LIP	10,000
9.	Subscription to National Savings Certificates VIII Issue	5,000	26,620
10.	Interest accrued on investment in NSC VI Issue	620

Computation of total income

1.	Salary	65,000
2.	Bonus	10,000	75,000
3.	Valuation of perquisites :
	(a) Furnished flat at concessional rent u/s 17(2) read with clauses (a) and (b) of rule 3 of the I. T. Rules, 1962. Fair Rental Value (FRV) (assumed to be equal to actual rent Rs. 46,000) 10% of salary including bonus	7,500
	Add : Excess of (FRV) over 60% of salary including bonus of Rs. 75,000 (i.e., Rs. 46,000 - Rs. 45,000)	1,000
	Add : Perquisite of the furniture (10% of cost, i.e., Rs. 40,000)	4,000
		12,500
	Less : Rent paid by the employee	12,000	500
			75,500
4.	Free gas, electricity, etc.		3,000
			78,500
5.	Less : Standard deduction u/s 16(i) 33¹/₃% subject to maximum of Rs. 12,000		(-)12,000
6.	Gross total income		66,500
7.	Less : Deduction u/s 80CCA (NSS)		(-)12,000
8.	Total income		54,500
9.	Tax on total income (Rs. 7,600 plus 40% of Rs. 4,500)		9,400
10.	Deduct :
	Tax rebate on savings of (PF, LIP, NSC including interest on NSC VI Issue) @ 20% of Rs. 26,620		(-)5,324
11.	Tax payable		4,076

(Average monthly deduction comes to Rs. 340 for 11 months and Rs. 336 in the last month).

Notes :

(i) In the case of Government servants, the value of perquisites of unfurnished accommodation provided free is determined in accordance with rules framed by the Government for allotment of residence to its employees. For determining the perquisite value of free furniture, it is taken as in other cases; at 10% per annum of the original cost of the furniture, or if it is hired from a third party, the actual hire charges payable.

(ii) Where unfurnished accommodation is provided to its employees by the Reserve Bank of India or any other public sector body specified in sub-clause (2) of clause (a) of rule 3 of the Income-tax Rules, say, a Nationalised Bank, State Trading Corporation, etc., it is taken as 10% of the salary due to the employee and where the accommodation is furnished as in other cases, an additional 10% of the original cost of furniture, or if it is hired from a third party, the actual hire charges payable therefor.

(iii) In the example given above the actual rent has been assumed to be equal to the Fair Rental Value. Fair Rental Value can, however, be different from the actual rent. It is defined in Explanation 2, below clause (a) of rule 3 to mean in the case of an accommodation which is unfurnished, the rent which a similar accommodation would realise in the same locality or the municipal valuation in respect of the accommodation, whichever is higher.

(iv) In case the accommodation is situated in Bombay, Calcutta, Delhi and Madras, the excess over 60% of salary over fair rental value, as against 50% in other cases, is required to be added in determining the value of perquisites in view of Boards Circular No. 374, dated 14-12-1982.

Example IV

(Example of Income-tax and Surcharge calculation in the case of an employee
posted in Delhi and repaying House Building Loan)

		Rs.
1.	Total Salary (including D.A.)	1,20,000
2.	House Rent Allowance	12,000
3.	City Compensatory Allowance	1,200
4.	Deposits under the National Savings Scheme	30,000
5.	Contribution to GPF, Payment of LIC premium, etc.	16,500
6.	Actual rent paid	25,200
7.	Refund of loan taken for the construction of house	12,000

Computation of total income

1.	Salary (including DA & CCA)		1,21,200
2.	House rent allowance received	Rs.	12,000
3.	Less : Allowance u/s 10(13A)		1,33,200
	Actual rent paid	25,200
	Less : 10% of salary	(-)12,000
		13,200
	(Actual amount of HRA received or expenditure on rent in excess of 1/10th of the salary or 50% of salary, whichever is the least) Rs. 12,000		(-)12,000
			1,21,200
4.	Less : Standard deduction u/s 16(i) @ 33¹/₃% subject to a maximum of Rs. 12,000		(-)12,000
5.	Gross total income		1,09,200
6.	Less : Deduction u/s 80CCA (Deposits under NSS)		(-)30,000
7.	Total income		79,200
8.	Tax on total income (Rs. 7,600 plus 40% of Rs. 29,200)		19,280
9.	Deduction of tax rebate on savings u/s 88 GPF, etc.	16,500
	Refund of H.B. Loan limited to	10,000
	Rs. 10,000 @ 20% of Rs. 26,560	26,500	(-)5,300
10.	Tax payable		Rs.
	IT - Rs. 19,280 - Rs. 5,300		13,980
	Surcharge on Rs. 13,980		1,678
11.	Total		15,658

(Average monthly deduction comes to Rs. 1,305 for 11 months and Rs. 1,303 in the last month).

ANNEXURE III

FORM NO. 16

[See rule 31(1)(a)]

Certificate under section 203 of the Income-tax Act,1961 for tax deducted at source from income chargeable under the head Salaries

Name and address of the Employer		Name and Designation of the Employer
........................................................................		...............................................................
........................................................................		................................................................
........................................................................		...............................................................
PAN /GIR NO.	TAN	PAN/GIR NO.
TDS Circle where Annual Return/Statement under section 206 is to be filed		PERIOD		Assessment Year 19...
		From	To

DETAILS OF SALARY PAID AND ANY OTHER INCOME AND TAX DEDUCTED

1.	Gross Salary*			Rs....
2.	Less: Allowance to the extent exempt under section 10		Rs....
3.	Balance (1-2)			Rs....
4.	Deductions :
	(a) Standard deduction	Rs....
	(b) Entertainment allowance	Rs....
	(c) Tax on Employment	Rs....
5.	Aggregate of 4 (a to c)		Rs....
6.	Income chargeable under the head Salaries (3-5)				Rs....
7.	Add: Any other income reported by the employee				Rs....
8.	Gross Total Income (6+7)				Rs....
9.	Deductions under Chapter VI-A
		Gross	Qualifying	Deductible
		Amount	Amount	Amount
	(a)	Rs....	Rs....	Rs....
	(b)	Rs....	Rs....	Rs....
	(c)	Rs....	Rs....	Rs....
	(d)	Rs....	Rs....	Rs....
10.	Aggregate of deductible amount under chapter VI-A				Rs....
11.	Total income (8-10)				Rs....
12.	Tax on total income				Rs....
13.	Rebate and Relief under Chapter VIII
	I. Under section 88 (please specify)
		Gross	Qualifying	Tax
		Amount	Amount	Rebate/Relief
	(a)	Rs....	Rs....
	(b)	Rs....	Rs....
	(c)	Rs....	Rs....
	(d)	Rs....	Rs....
	(e)	Rs....	Rs....
	(f) Total (a) to (e)	Rs....	Rs....	Rs....
	II. Under section 88A (please specify)
	(a)	Rs....	Rs....
	(b)	Rs....	Rs....
	(c) Total [(a) + (b)]			Rs....
	III Under section 89 (Attach details)				Rs....
14.	Aggregate of Tax Rebates and relief at 13 Above [I(f) + II (c) + III]				Rs....
15.	Tax [payable (12-14) and surcharge thereon				Rs....
16.	Less: Tax deducted at source				Rs....
17.	Tax payable/Refundable (15-16)				Rs....

DETAILS OF TAX DEDUCTED AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT

Amount

Date of payment

Name of Bank & Branch where tax Deposited

Certified that a sum of Rs. (in words)......... has been deducted at source and paid to the credit of the Central Government. Further certified that the above information is true and correct as per records.

	Signature of the person responsible for deduction of tax
Place.........	Full Name...................
Date..............	Designation.................

Circular : No. 613, dated 14-11-1991.

FINANCIAL YEAR 1991-92

1766. Deduction of tax at source - Payments made to contractors and sub-contractors - Instructions regarding rates of deduction during financial year 1991-92

1. Reference is invited to Boards Circular No. 539, dated 13-7-1989 on the above subject.

2. According to the provisions of section 194C of the Income-tax Act, 1961, any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the bodies specified therein shall, at the time of credit of such sum to the account of the contractor, or, payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 2 per cent of such sum as income-tax on income comprised therein. The bodies are :

(a) the Central Government or any State Government; or

(b) any local authority; or

(d) any company ; or

(e) any co-operative society.

3. Similarly, when a contractor makes payment of a sum to a resident sub-contractors in pursuance of a contract with the sub-contractor for carrying out the whole or any part of the work undertaken by him he is required to deduct an amount equal to 1 per cent of such sum as income-tax on income comprised therein.

4. The amount of income-tax to be deducted at the aforesaid rates is to be further increased by a surcharge at the following rates :

(i) in a case where the payee is a non-corporate resident person	12%
(ii) in a case where the payee is a domestic company	15%

5.1 No deduction of tax is, however, required to be made from any sum credited or paid in pursuance of a contract, referred to in the foregoing paragraphs, if the consideration for the contract does not exceed Rs. 10,000.

5.2 Further, where the Assessing Officer is satisfied that the total income of a contractor or a sub-contractor justifies the deduction of income-tax, at a lower rate or no deduction of income-tax, the Assessing Officer can give to him such certificate as may be appropriate. For this, an application has to be made to the Assessing Officer on Form No. 13C (copy enclosed). During the validity of this certificate, deduction of tax at source will be made in accordance with the direction given in the certificate.

6. The responsibilities, obligations, etc., under the Income-tax Act, of the persons deducting tax at source are as follows :

(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 194C is required to pay, within the prescribed time, the sum so deducted to the credit of the Central Government in the prescribed manner (vide rule 30 of the Income-tax Rules, 1962). In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally, the sum has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Government, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall also be liable to pay simple interest at fifteen per cent per annum of the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that if a person fails to deduct tax at source, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted by him. In this regard, attention is also invited to the provisions of section 276B, which lays down that if a person fails to pay to the credit of the Central Government within the prescribed time the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

Detailed instructions regarding the use of these forms have been issued in Boards Circular No. 597, dated 27-3-1991. However, with a view to removing difficulties, if any, faced by the tax-deductors in obtaining Form 16B, the Board have allowed the use of the old Form No. 16 also for issuing certificates of tax deducted at source, till 31-12-1991. Instructions in this regard have been issued in Boards Circular No. 607, dated 4-7-1991. If a person fails to furnish a certificate as required under section 203, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs.100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax-deduction Account Number (TAN) in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in Boards Circular No. 497, dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he shall be liable to pay by way of penalty under section 272BB, a sum up to Rs. 5,000.

(d) According to the provisions of section 206, read with rules 36A and 37, of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax at source from payment to contractor or sub-contractor, shall prepare and deliver by the 30th June following the financial year an annual return of deduction of tax under section 194C. This return is to be furnished in Form No. 26C, to the designated/concerned Assessing Officer. It may be noted that a copy of each TDS certificate issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. The maximum penalty will, however, not exceed the amount of tax which was deductible at source.

7. These instructions are not exhaustive and are issued only with a view to helping the person responsible for making deduction of tax at source under section 194C. In case, any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be approached.

Form No. 13C

[See rule 28(2)]

Application for a certificate under section 194C(4) of the Income-tax Act, 1961, relating to deduction of income-tax from payments made to contractors
and sub-contractors

The Assessing Officer

.....................................................................

Sir,

I,....................., of........................., do hereby declare that my total income (including income

[name] [address]

comprised in payments of the nature referred to in section 194C of the Income-tax Act, 1961) computed in accordance with the provisions of that Act for the previous year relevant to the

was less than the minimum liable to income-tax

assessment year 19...-19.... ________________________________________________________ and I have no reason to expect that my total income (computed as aforesaid) for the

amounted to Rs. .....................................................................

three assessment years next following will increase substantially.

2. I, therefore, request that a certificate may be issued to the person(s) responsible for paying any sum in pursuance of the contract, particulars of which are given in the Schedule hereto,

[`9] [`1]not to deduct income-tax

authorising him/them _______________________________________________ at the time of credit

to deduct income-tax at the rate of......per cent

of such sum(s) to my account or, as the case may be, payment thereof to me.

3. I hereby declare that what is stated in this application is correct.

	...........................................................
	Signature
Date.................	...........................................................
	Address
	........................................................
	Permanent Account Number

SCHEDULE

Sl. No.

Full name and address of the authority/person with whom the contract was made

Date of the contract

Nature of the contract

Date by which work on the contract would be completed

Sums expected to be credited/paid in pursuance of the contract during the current previous year and each of the three immediately succeeding years

(1)

(2)

(3)

(4)

(5)

(6)

Date..........................	....................................
	Signature

Circular : No. 614, dated 14-11-1991.

Financial year 1991-92

1769. Instructions for deduction of tax at source from insurance commission, etc. - Rate of tax applicable during the financial year 1991-92

1. Reference is invited to the Boards Circular No. 570, dated 27-7-1990 wherein the rates at which the deduction of income-tax was to be made during the financial year 1990-91, from payment of income by way of insurance commission under section 194D of the Income-tax Act, 1961 were circulated.

2. There is no change in the rates for deducting income-tax during the financial year 1991-92. These rates are as under :

(i) in the case of a non-corporate resident person	10 per cent
(ii) in the case of a domestic company	21.5 per cent

3. Further, the amount of income-tax deducted at the aforesaid rates is to be increased by a surcharge at the rate of 12 per cent in the case of a non-corporate resident person and at the rate of 15 per cent in the case of a domestic company.

4. It may be noted that the provisions of section 194D apply in relation to income by way of insurance commission paid to a resident only. However, under the provisions of section 195, income-tax is required to be deducted from payments (including payments by way of insurance commission) made to a non-corporate non-resident assessee or to a foreign company also.

5. According to the provisions of section 194D, any person paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of insurance policies) is required to deduct at the time of actual payment or at the time of credit of such income, whichever is earlier, income-tax at the rates in force. However, no such deduction is required to be made in a case where the amount of such income or the aggregate amount of such income during the financial year does not exceed Rs. 5,000.

6. There is also a provision in the Income-tax Act for deduction of tax at source under section 194D at lower rate or no deduction in certain cases. For this purpose, a certificate for deduction at lower rate or no deduction can be obtained by a resident individual from his Assessing Officer, as provided in sub-section (1) of section 197. Where any such certificate is given, the person responsible for paying the insurance commission shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificates or deduct no tax, as the case may be.

7. The responsibilities, obligations, etc., under the Income-tax Act of the person deducting tax at source are as follows :

(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 194D shall pay, within the prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally the same has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at 15 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that if any person fails to deduct tax at source, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B of the Act lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

(b) According to the provisions of section 203, every person deducting tax at source is required to furnish a certificate to the effect that the tax has been deducted, and, to specify therein the amount deducted, and, certain other particulars. The certificate has to be issued in Form No. 16A (copy enclosed at Annexure I) within the prescribed period of one month and fourteen days to the person to whose account credit is given or to whom payment is made by any mode, as the case may be. Form No. 16A can be issued by the tax deductors on their own stationery. Detailed instructions regarding the use of these forms have been issued in Boards Circular No. 597, dated 27-3-1991. If a person fails to issue a certificate as required by section 203, he shall be liable to pay, by way of penalty under section 272A of the Act, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A of the Income-tax Act, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax Deduction Account Number (TAN) in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in the Boards Circular No. 497, dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he shall be liable to pay by way of penalty, under section 272BB, a sum up to Rs. 5,000.

If a person fails to furnish in due time the annual return, he shall be liable to pay, by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. However, the maximum penalty will not exceed the amount of tax deductible.

8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making deduction of tax at source under section 194D. Wherever there is any doubt, a reference may be made to the provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is required, the Assessing Officer concerned or the Local Public Relations Officer of the Income-tax Department may be approached.

Annexure I

Form No. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the
Income-tax Act, 1961

For interest on securities, dividends, interest on time deposits referred to in clauses (vii) and (viia) of sub-section (3) of section 194A; insurance commission; payments in respect of deposits under National Savings Scheme; payments on account of repurchase of units by the Mutual Fund or Unit Trust of India; commission, remuneration or prize on sale of lottery tickets; commission or brokerage; income from units referred to in section 196B.

Name and address of the person deducting tax	TDS circle where Annual Return under section 206 is to be delivered	Name and address of the person to whom payment made or in whose account it is credited
.........................................................

.........................................................		.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................

TAX DEDUCTION A/C NO. OF THE DEDUCTOR	NATURE OF PAYMENT	PAN/GIR NO. OF THE PAYEE

PAN/GIR NO. OF THE DEDUCTOR		FOR THE PERIOD ...... 19..... TO 19.....

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO
CENTRAL GOVERNMENT ACCOUNT

Date of payment/credit

Amount paid/credited(Rs.)

Amount of income-tax deducted (Rs.)

Rate at which deducted

Date & Challan No. of deposit of tax into Central Government Account

Name of the bank and branch where tax deposited

Certified that a sum of Rs. (in words) ...................... has been deducted at source and paid to the credit of the Central Government as per details given above.

Place.................	.....................................................................
Date..................	Signature of person responsible for deduction of tax
	Full Name............................................
	Designation.........................................

Circular : No. 614, dated 14-11-1991.

Financial year 1991-92

1769. Instructions for deduction of tax at source from insurance commission, etc. - Rate of tax applicable during the financial year 1991-92

2. There is no change in the rates for deducting income-tax during the financial year 1991-92. These rates are as under :

(i) in the case of a non-corporate resident person	10 per cent
(ii) in the case of a domestic company	21.5 per cent

7. The responsibilities, obligations, etc., under the Income-tax Act of the person deducting tax at source are as follows :

Annexure I

Form No. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the
Income-tax Act, 1961

Name and address of the person deducting tax	TDS circle where Annual Return under section 206 is to be delivered	Name and address of the person to whom payment made or in whose account it is credited
.........................................................

.........................................................		.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................

TAX DEDUCTION A/C NO. OF THE DEDUCTOR	NATURE OF PAYMENT	PAN/GIR NO. OF THE PAYEE

PAN/GIR NO. OF THE DEDUCTOR		FOR THE PERIOD ...... 19..... TO 19.....

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO
CENTRAL GOVERNMENT ACCOUNT

Date of payment/credit

Amount paid/credited(Rs.)

Amount of income-tax deducted (Rs.)

Rate at which deducted

Date & Challan No. of deposit of tax into Central Government Account

Name of the bank and branch where tax deposited

Certified that a sum of Rs. (in words) ...................... has been deducted at source and paid to the credit of the Central Government as per details given above.

Place.................	.....................................................................
Date..................	Signature of person responsible for deduction of tax
	Full Name............................................
	Designation.........................................

Circular: No. 615, dated 22-11-1991.

FINANCIAL YEAR 1991-92

1712. Instructions for deduction of income-tax at source from the interest on securities - Rate of tax during the financial year 1991-92

1. Reference is invited to the Boards Circular No. 579 dated 14-9-1990 regarding deduction of income-tax at source from the payment of interest on securities for the financial year 1990-91.

2. For the financial year 1991-92, there is no change in the basic rates of tax and surcharge insofar as they relate to deduction of tax at source from payment of interest on securities. The applicable rates have been given in the paragraph 3 of the draft Circular enclosed.

3. It may be noted that :

(a) tax will be deducted at source under section 193 at the time of credit to the account of the payee or at the time of payment thereof, whichever is earlier. For this purpose, credit to any suspense account or any other account, by whatever name called, shall be deemed to be a credit of such income to the account of the payee;

(b) tax will not be deducted at source from any interest payable to a resident individual on debentures issued by a company in which the public are substantially interested, if the interest is paid by the company by an account payee cheque and the amount of such interest, or, as the case may be, the aggregate amount of such interest paid or likely to be paid during the financial year by the company to such an individual does not exceed Rs. 2,500;

(c) tax will not be deducted at source under section 193 in the case of a resident individual who makes a declaration in Form No. 15F (given as Annexure II to the enclosed draft Circular) to the effect that tax on his estimated total income of the financial year 1991-92 will be nil;

(d) no tax will be deducted at source or it will be deducted at a lower rate in the case of a person other than a company where a certificate under section 197 is issued by the Assessing Officer specifying the rate of such deduction of tax at source.

4. The responsibilities, obligations, etc., under the Income-tax Act, of the person deducting tax at source, are as follows :

(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 193 is required to pay, within the prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally, the sum has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to deduct tax at source, or, after deducting, fails to pay tax to the credit of the Central Government, he shall be liable to action under the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall also be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that if any person fails to deduct tax at source, he shall be liable to pay by way of penalty a sum equal to the amount of tax which he failed to deduct at source. In this regard, attention is also invited to the provisions of section 276B which lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

(b) According to the provisions of section 203 every person deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein the amount so deducted and certain other particulars. The certificate has to be furnished in Form No. 16A (copy given as Annexure III to the enclosed draft Circular), within the prescribed period of one month and fourteen days to the person to whose account credit is given or to whom payment is made by any mode, as the case may be. Form No. 16A can be issued by the tax deductors on their own stationery. Detailed instructions regarding the use of these forms have been issued in Boards Circular No. 597 dated 27-3-1991. If a person fails to furnish a certificate as required under section 203, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the tax deduction account number (TAN) in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in the Boards Circular No. 497, dated 9-10-1987. If a person fails to comply with provisions of section 203A, he shall be liable to pay by way of penalty under section 272BB a sum up to Rs. 5,000.

(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax at source shall prepare and deliver by the 30th June following the financial year, to the designated/concerned Assessing Officer, the annual return of deduction of tax from interest on securities in Form No. 25. It may be noted that a copy of each TDS certificate issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. The maximum penalty will, therefore, not exceed the amount of tax deductible.

Draft circular to all treasury officers, etc.

1. I am to invite your attention to this office letter regarding deduction of income-tax from interest on Government securities during the financial year 1990-91.

2. According to the provisions of section 193 of the Income-tax Act, 1961, the person responsible for paying any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax at the rates in force on the amount of interest payable. For this purpose credit to any suspense account or any other account by whatever name called, shall be deemed to be a credit of such income to the account of the payee.

3. Income-tax is to be deducted during the financial year 1991-92 from the entire amount of interest on securities at the following rates :

I.	In the case of a person other than a company :	Rates of income-tax
	(i) Where the person is resident in India-on income by way of interest payable on any security (excluding interest payable on a tax-free security)	10 per cent
	(ii) Where the person is not resident in India
	(1) In the case of a non-resident Indian
	(A) on investment income and long- term capital gains	20 per cent
	(B) on income by way of interest payable on a tax-free security	15 per cent
	(C) on the whole of the other	Income-tax at 30 per centincome of the amount of the income
		or
		Income-tax in respect of the income at the rates prescribed in Sub-paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1992 (vide Annexure I), if such income had been the total income, whichever is higher.
	(2) In the case of any other person,
	(A) on the income by way of interest on a tax-free security	15 per cent
	(B) on the whole of other income (excluding interest payable on a tax-free security)	[As against 1(c) above]
II.	In the case of a company;
	(i) where the company is a domestic company - on income by way of interest on securities (excluding interest payable on a tax-free security)	21.5 per cent
	(ii) where the company is not a domestic company
	(A) on interest payable on a tax-free security	44 per cent
	(B) on interest on other securities	65 per cent.

Surcharge on income-tax

The amount of tax deducted as per the rates given above shall be increased :

(i) by a surcharge for purposes of the Union @ 12% of such income-tax in the case of a resident person other than a company; and

(ii) by a surcharge @ 15% of such income-tax in the case of a domestic company.

4. The term domestic company means an Indian company or any other company which, in respect of its income liable to tax under the Income-tax Act, 1961, has made the prescribed arrangements for the declaration and payment within India, of the dividends [including dividends on preference shares] payable out of such income.

5. In making payment of crediting interest on Government securities from 1st April, 1991, you are requested to deduct income-tax at the rates specified above, except in cases where an exemption or abatement certificate granted by an Income-tax Officer/Assessing Officer under sub-section (1) of section 197 of the Income-tax Act, 1961, is produced. In this connection, the following points should be kept in view :

(i) exemption or abatement certificates issued before 1st April, 1991, authorising deduction of tax at a particular rate expressed as percentage of the amount of interest should be accepted and acted upon, if operative for the financial year ending on 31st March, 1992;

(ii) where a certificate is issued by the Income-tax Officer/Assessing Officer on or after 1st April, 1991, authorising deduction of tax at a specified rate in respect of any person, income-tax should be deducted at the rates specified therein;

(iii) no tax should be deducted in cases in which, from a certificate issued by the Income-tax Officer/Assessing Officer or otherwise, you are satisfied that the payee is a person exempt from payment of income-tax under sections 10 to 13A of the Income-tax Act, 1961;

(iv) no tax should be deducted from interest payable on 7-year National Savings Certificate (IV Issue), National Development Bonds, etc., which have been specifically exempted from the requirement of tax deduction at source under the proviso to section 193 or of the interest payable on such debentures/securities/bonds as have been specified by the Central Government by notification in the Official Gazette under the proviso to section 193;

(v) no tax should be deducted from any interest payable on any other security of the Central or State Government where the security is held by a resident individual, and the holder makes a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner as provided in section 197A(1) of the Income-tax Act. A copy of declaration form prescribed under the provisions of section 197A of the Income-tax Act is at Annexure II. A copy of such declaration should be forwarded by you on or before the seventh day of the month next following the month in which the declaration is furnished to you, to the Chief Commissioner/Commissioner of Income-tax concerned, as provided in rule 29C(5) of the Income-tax Rules, 1962;

(vi) no tax should be deducted from any sum payable in respect of any security owned by a corporation established by or under a Central Act which under any law for the time being in force is exempt from income-tax on its income. Payments made to Life Insurance Corporation and Unit Trust of India are exempt from the requirement of TDS by their respective Acts;

(vii) under section 288B of the Income-tax Act, fractions of one rupee contained in the amount of tax will have to be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee. Hence, the amount of tax to be deducted at source should be rounded off to be nearest rupee in accordance with the aforesaid provisions of the Act.

6. The responsibilities, obligations, etc., under the Income-tax Act, of the person deducting tax at source, are as follows :

(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 193 is required to pay, within the prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally, the sum has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to deduct tax at source, or, after deducting, fails to pay tax to the credit of the Central Government, he shall be liable to action under the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that if any person fails to deduct tax at source he shall be liable to pay by way of penalty a sum equal to the amount of tax which he failed to deduct at source. In this regard, attention is also invited to the provisions of section 276B which lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

(b) According to the provisions of section 203, every person deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein the amount so deducted and certain other particulars. The certificate has to be furnished in Form No. 16A (copy enclosed at Annexure III), within the prescribed period of one month and fourteen days to the person to whose account credit is given or to whom payment is made by any mode, as the case may be. Form No. 16A can be issued by the tax deductors on their own stationery. Detailed instructions regarding the use of these forms have been issued in Boards Circular No. 597 [F.No. 275/42/91-IT(B)] dated 27th March, 1991. If a person fails to furnish a certificate as required under section 203, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the tax deduction account number (TAN) in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in the Boards Circular No. 497 [F. No. 275/118/87-IT(B)], dated 9-10-1987. If a person fails to comply with provisions of section 203A, he shall be liable to pay by way of penalty under section 272BB a sum up to Rs. 5000.

(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employee and every other person responsible for deducting tax at source shall prepare and deliver by the 30th June following the financial year, to the designated/concerned Assessing Officer, the annual return of deduction of tax from interest on securities in Form No. 25. It may be noted that a copy of each TDS certificate issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. The maximum penalty will, however, not exceed the amount of tax deductible.

7. In case of any doubt, the Assessing Officer or the local Public Relations Officer of the Income-tax Department should be consulted.

ANNEXURE I

EXTRACT FROM THE FINANCE (NO. 2) ACT, 1991, PART IIIOF THE FIRST SCHEDULE

Paragraph A, Sub-paragraph I

In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-paragraph II of this Paragraph or any other Paragraph of this part applies:

Rates of income-tax

(1)	Where the total income does not	Nil;
	exceed Rs. 22,000
(2)	Where the total income exceeds	20 per cent of the amount by which the
	Rs. 22,000 but does not exceed	total income exceeds Rs. 22,000;
	Rs. 30,000
(3)	Where the total income exceeds	Rs. 1,600 plus 30 per cent of the amount by
	Rs. 30,000 but does not exceed	which the total income exceeds Rs. 30,000;
	Rs. 50,000
(4)	Where the total income exceeds	Rs. 7,600 plus 40 per cent of the amount by
	Rs. 50,000 but does not exceed	which the total income exceeds Rs. 50,000;
	Rs. 1,00,000
(5)	Where the total income exceeds	Rs. 27,600 plus 50 per cent of the amount by
	Rs. 1,00,000	which the total income exceeds Rs. 1,00,000.

Surcharge on Income-tax

The amount of income-tax computed in accordance with the preceding provisions of this Sub-paragraph shall

(ii) in the case of every person, other than those mentioned in item (i) having total income exceeding seventy-five thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of twelve per cent of such income-tax :

Provided that no such surcharge shall be payable by a non-resident.

ANNEXURE II

FORM NO. 15F

[See rule 29C(1)]

Declaration under section 197A(1) of the Income-tax Act, 1961 to be made
by an individual claiming receipt of interest on securities
without deduction of tax

I, ...................................................................................................., son/daughter/wife of........................................................................resident of....................................................................... @ do hereby declare:

1. that the securities, particulars of which are given below, stand in my name and are beneficially owned by me, and the interest therefrom is not includible in the total income of any other person under sections 60 to 64 of the Income-tax Act, 1961 :

Description of

securities

Number of

securities

Dates of

securities

Amount of

securities

Date(s) on

which the

securities

were acquired

by the

declarant

2. that my present occupation is...........................................;

3. that the tax on my estimated total income including the interest on securities referred to in paragraph 1 above, computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on....................relevant to the assessment year 19........19.........will be nil;

4. *that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Chief Commissioner or Commissioner of Income-tax................;

that I was last assessed to income-tax for assessment year 19........19........by the Assessing Officer......................Circle/Ward/District and the permanent account number allotted to me is.......................;

5. that I am resident in India within the meaning of section 6 of the Income-tax Act, 1961.

......................................................

Signature of the declarant

Verification

I,............................., do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.

Verified today, the.........................day of......................19.........

Place.........................	...............................
	Signature of Declarant

Notes :

1. @ Give complete postal address.

2. The declaration should be furnished in duplicate.

3. *Delete whichever is not applicable.

4. Before signing the verification, the declarant should satisfy himself that the information furnished in the declaration is true, correct and complete in all respects. Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961, and on conviction be punishable

(i) in a case where tax sought to be evaded exceeds one lakh rupees, with rigorous imprisonment which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to three years and with fine.

[FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED]

1. Name and address of the person responsible for paying the interest on securities mentioned in Paragraph 1 of the declaration

2. Date on which the declaration was furnished by the Declarant

3. Period for which interest is paid

4. Amount of interest

5. Date on which interest is paid

Forwarded to the Chief Commissioner or Commissioner of Income-tax,...........................

	.................................
	Signature of the person
Place........	responsible for paying
Date.........	interest on securities.

ANNEXURE III

FORM NO. 16A

[See Rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961

[For interest on securities; dividends; interest on time deposits referred to in clauses (vii) and (viia) of sub-section (3) of section 194A; insurance commission; payments in respect of deposits under National Savings Scheme; payments on account of repurchase of units by the Mutual Fund or Unit Trust of India; commission, remuneration or prize on sale of lottery tickets; commission or brokerage; income from units referred to in section 196B].

Name and address of the	TDS circle	Name and address of the
person deducting tax	where Annual	person to whom payment
................................................	Return under	is made or in whose
................................................	section 206 is to	account it is credited
................................................	be delivered	................................................
................................................	................................................	................................................
................................................	................................................	................................................
................................................	................................................	................................................
	................................................	................................................
TAX DEDUCTION A/C NO.	NATURE OF	PAN/GIR NO. OF THE
OF THE DEDUCTOR	PAYMENT	PAYEE
PAN/GIR NO. OF THE		FOR THE PERIOD
DEDUCTOR		19 ..... TO 19 .....

DETAILS OF PAYMENT, TAX REDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of

payment/

credit

Amount

paid/

credited

(Rs.)

Amount of

income-tax

deducted

(Rs.)

Rate at

which

deducted

Date &

challan No.

of deposit

of tax into

Central

Govt.

Account

Name of

the Bank &

Branch

where tax

deposited

Certified that a sum of Rs. (in words)........................has been deducted at source and paid to the credit of the Central Government as per details given above.

..................................................................

Signature of person responsible for deduction of tax

Place...............

Date................

Full Name ..........................

Designation........................

Circular : No. 616, dated 22-11-1991.

FINANCIAL YEAR 1991-92

1737. Instructions for deduction from winnings from lottery, crossword puzzles, horse races or from commission, etc., paid on sale of lottery tickets - Rates of tax applicable during the financial year 1991-92

1. Reference is invited to the Boards Circular No. 569, dated 27-7-1990 on the above subject wherein the rates at which the deduction of tax under sections 194B and 194BB was to be made during the financial year 1990-91 from winnings from lotteries, or crossword puzzles or horse races were communicated.

2. The Finance (No. 2) Act, 1991 does not make any change in the rates of tax applicable during the financial year 1991-92 in the matter of deduction of tax at source under sections 194B and 194BB of the Income-tax Act, 1961. However, a new section 194G has been inserted in the Income-tax Act, providing for deduction of tax at source from commission, etc., on sale of lottery tickets. The salient provisions regarding tax deduction from winnings from lotteries, horse races, etc., and the new sections are explained in the succeeding paragraphs.

3. According to section 194B of the Income-tax Act, 1961, the person responsible for paying to any person any income by way of winnings from lotteries or crossword puzzles, in an amount exceeding five thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force. The Finance (No. 2) Act, 1991 has not made any change in the rates of tax, already in force, viz., 40% (plus surcharge), which will continue to be in force during the financial year 1991-92 also.

4. Section 194BB relating to deduction of tax at source from winnings from horse races, which is similar to section 194B, has however, been slightly amended with effect from 1-10-1991 and the exemption limit of rupees five thousand has been reduced to rupees two thousand five hundred. In other words, income-tax at the existing rates of 40% (plus surcharge) will be deducted from all winnings from horse races in excess of rupees two thousand five hundred.

5. The amount of income-tax deducted under sections 194B and 194BB shall be increased by a surcharge at the rate of 12% of such income-tax in the case of a resident person (other than a company). However, when the payee is a domestic company, the rate of surcharge will be 15%.

6. The Finance (No. 2) Act, 1991 has also introduced, with effect from 1-10-1991 a new provision in the form of section 194G in the Income-tax Act, which lays down that any person who is responsible for paying, on or after the 1st day of October, 1991, to any person who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets, in an amount exceeding one thousand rupees, shall, at the time of credit of such income to the account of the payee, or, at the time of payment of such income in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. The tax deducted will be further increased by a surcharge at the rate of 12% of the sum deducted. In case, however, the payee is a domestic company, the rate of surcharge will be 15%.

7. It is further clarified in this regard that where any such income, e.g., commission, remuneration, etc., is credited to any account, whether called Suspense Account or by any other name in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and tax will have to be deducted at source.

8. The responsibilities, obligations, etc., under the Income-tax Act of the persons deducting tax at source are as follows :

(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of sections 194B, 194BB and 194G, etc., shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. Reference in this regard is invited to rule 30 of the Income-tax Rules, 1962 which prescribed the time for payment of tax into the Governments account. Normally, the tax is required to be deposited within a week from the date of deduction of tax. Where, however, deduction is made by or on behalf of the Government, the sum has to be credited to the Central Government on the day of the deduction itself. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government, he shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date such tax was deductible to the date on which such tax is actually paid into the Government account. Reference in this regard is also invited to section 271C according to which a person who fails to deduct the whole or any part of tax as required under the provisions of Chapter XVII of the Act shall pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B lays down that if a person fails to pay to the credit of the Central Government, the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and seven years and with fine.

(b) According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein, the amount deducted and certain other prescribed particulars. The certificate has to be furnished within the prescribed period (as given in rule 31 of the I.T. Rules, generally, within one month and fourteen days of the date of payment/deduction) to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued, as the case may be. The certificate for tax deduction under section 194G has to be issued in Form No. 16A (copy enclosed) on tax-deductors own stationery. In case of deduction under sections 194B and 194BB, however, the certificate is required to be furnished in Form No. 16B printed by the Central Government (which is to be obtained from the concerned Commissioner of Income-tax by making a nominal payment).

If a person fails to furnish a certificate of tax deduction, he shall be liable to pay by way of penalty, under section 272A a sum which shall not be less than Rs. 100, but which may extend to Rs. 200 for every day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a tax deduction account number (TAN) and quote the same in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in this Departments Circular No. 497 dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he shall pay by way of penalty under section 272BB, a sum which may extend to Rs. 5,000.

(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed persons in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under the provisions of Chapter XVII of the Income-tax Act (which includes sections 194B, 194BB and 194G) shall, within the prescribed time after the end of each financial year, prepare and deliver or cause to be delivered to the designated/concerned Assessing Officer, a return of deduction of tax under sections 194B, 194BB and 194G. The returns for tax deduction under sections 194B and 194BB have to be filed by 31st May, following the financial year in which tax deduction is made. These returns have to be filed in the prescribed forms (Nos. 26B and 26BB, respectively). For deductions under section 194G, the return form and the time limit for filing the return are being prescribed. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty, a sum which will not be less than Rs. 100 per day and not more than Rs. 200 per day for each day during which the default continues so, however, that their amount shall not exceed the amount of tax which was deductible at source.

9. These instructions have been issued with a view to helping the persons responsible for making deduction of tax at source under sections 194B, 194BB and 194G. However, if there is any doubt, a reference may be made to the provisions of the Income-tax Act, 1961. In case any assistance is required, the Assessing Officer concerned or the Local Public Relations Officer of the Income-tax Department may be approached.

FORM NO. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203
of the Income-tax Act, 1961

Name and address of the person deducting tax	TDS circle where Annual Return under section 206 is to be delivered	Name and address of the person to whom payment is made or in whose account it is credited
......................................................	...................................................	........................................................
......................................................	...................................................	........................................................
......................................................	...................................................	........................................................

TAX DEDUCTION A/C NO. OF THE DEDUCTOR

NATURE OF PAYMENT

PAN/GIR NO. OF THE PAYEE

PAN/GIR NO. OF THE DEDUCTOR

FOR THE PERIOD.............19.........

TO 19..........

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of payment/credit

Amount paid/credited

(Rs.)

Amount of income-tax deducted

(Rs.)

Rate at which deducted

Date & Challan No. of deposits of tax into Central Government Account

Name of bank and branch where tax deposited

Certified that a sum of Rs. (in words)..........................has been deducted at source and paid to the credit of the Central Government as per details given above.

Place.......................	.................................................................
Date........................	Signature of person responsible for deduction of tax
	Full Name...........................................
	Designation........................................

Circular: No. 617, dated 22-11-1991.

1065. Clarification regarding extension of applicability to interest on time deposits with banks

1. According to the provisions of section 194A of the Income-tax Act, 1961, any person, not being an individual or HUF, who is responsible for paying to a resident (for non-residents, the provisions are different and are contained in section 195) any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. These provisions are, however, subject to the exceptions provided in the said section.

2. One such exception, contained in clause (vii) of sub-section (3) of section 194A, hitherto related to interest income credited or paid in respect of deposits with, (i) a banking company to which the Banking Regulation Act, 1949 applies, or (ii) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).

3. The Finance (No. 2) Act, 1991 has, however, substituted the aforesaid clause with the following clauses with effect from the 1st October, 1991 :

(vii) to such income credited or paid in respect of deposits (other than time deposits) with a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act);

(viia) to such income credited or paid in respect of

(a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank;

(b) deposits (other than time deposits) with a co-operative society other than a co-operative society or bank referred to in sub-clause (a),

engaged in carrying on the business of banking.

Explanation : For the purposes of clauses (vii) and (viia) time deposits means deposits (excluding recurring deposits) repayable on the expiry of fixed periods.

4. The effect of the aforesaid change is that income-tax shall now be deductible at source from the interest income on the deposits with, (i) a banking company, or (ii) a co-operative society engaged in carrying on the business of banking, other than a co-operative land mortgage bank, a co-operative land development bank, primary agricultural credit society or a primary credit society. Deduction of tax at source will have to be made from such interest income credited or paid on or after 1st October, 1991. In this connection, the following points may be noted :

(a) Deduction of tax is required to be made at the time of credit of interest income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier.

(b) Where the interest is credited in the books of account of the payer, to any account, whether called Interest payable account or suspense account or of any other name, such crediting shall be deemed to be credit of such interest to the account of the payee and tax will have to be deducted at source. Thus, in the case of cumulative time deposits where interest is credited periodically but the payment to the depositor is made only at the time of maturity, tax will have to be deducted at source, every time the credit of interest is made in the account books of the payer/bank.

(c) In the case of cumulative deposits made prior to 1-4-1991 no tax is required to be deducted in respect of interest income which relates to the period prior to 1-4-1991.

(d) The new provisions are not applicable to interest on savings bank accounts.

5. The rates at which the tax is required to be deducted on income by way of interest other than interest on securities are contained in Part II of the First Schedule to the Finance (No. 2) Act, 1991 and are summarised below :

(a) in the case of non-corporate taxpayers, resident in India, at the rate of 10% of the interest income and surcharge thereon, which is at present 12% of such income-tax (thus, the rate of tax deduction will be 11.2%).

(b) in the case of domestic companies, at the rate of 20% of the interest income and surcharge thereon, which is at present 15% of such income-tax (thus, the rate of tax deduction will be 23%).

No deduction of tax under certain circumstances.

6. There will, however, be no deduction of tax at source provided the amount of interest income does not exceed Rs. 2,500 during a financial year. [This is in terms of the provisions of clause (i) of sub-section (3) of section 194A]. The limit of Rs. 2,500 is to be worked out with reference to the aggregate of the amounts of interest income credited or paid or likely to be credited or paid during a financial year by a payer to a payee. For the current year the banks will have to take into account the amount of interest paid or credited during the entire period of the financial year 1991-92, and not only the interest paid or credited after the 1st October, 1991.

7. There will also be no deduction of tax at source where the recipient of the interest income, being a resident individual, furnishes a declaration in writing, in duplicate, in Form No. 15H (copy enclosed), to the effect that the tax on his estimated total income of the relevant financial year will be nil (provisions of section 197A of the I.T. Act). This declaration is to be furnished to the person responsible for paying the interest income.

8. Besides above, proviso to sub-section (1) of section 194A of the Income-tax Act provides that in the case of a person (not being a company or a registered firm), there will be no deduction of tax at source provided he furnishes (i) an affidavit, or (ii) a statement in writing, in Form No. 15A (copy enclosed) to the effect that his estimated total income for the relevant assessment year is below the taxable limit. The statement in Form No. 15A is required to be attested by a Member of Parliament, a Gazetted Officer of the Central or State Government, an officer of any banking company, etc., as indicated in the Form. This provision applies in the case of trusts also which are not companies.

9. Section 197 of the Income-tax Act also provides that in the case of taxpayers other than companies, the Assessing Officer, on an application made to him, can issue a certificate for deduction of tax at a lower rate than the rates in force, or for no deduction of tax at source if he is satisfied that the total income of the recipient so warrants. Where any such certificate is given, the payer of the interest income, e.g., a bank manager during the validity of the certificate, is to deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.

Responsibility and procedure for deduction of tax.

10. The responsibility for deducting tax at source in terms of the provisions of section 194A, has been cast on the payer of the interest income in terms of section 204 of the I.T. Act. Where the payer is a company, the company itself including the principal officer thereof will be responsible for deducting tax at source. In the case of banks, which are generally companies, the banks themselves will be responsible for deducting tax at source. However, since the bank branches maintain their separate accounts and pay interest to the depositors, the officer-in-charge of the branch is expected to deduct tax at source and also comply with other legal obligations as discussed in the succeeding paragraphs.

11. The procedure regarding deduction of tax at source, is contained in sections 200, 201, 203, 203A, 206 and 206A of the Income-tax Act, 1961 and in rules 30, 31, 36A, 37 and 114A of the Income-tax Rules, 1962. According to the provisions of section 200 of the Income-tax Act, any person deducting tax in accordance with the provisions, inter alia, of section 194A, shall pay, within the prescribed time the tax so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the tax is required to be paid on the day of the deduction itself. In other cases, generally, the payment is to be made within one week of the last day of the month in which deduction is made. In special cases, the Assessing Officer, with the approval of the Deputy Commissioner can also permit a tax-deductor to pay the income-tax deducted at source on quarterly basis. For this purpose, a consolidated application may be made by the head office of the bank, on behalf of all its branches to the concerned Assessing Officer. The Assessing Officer can also grant a consolidated permission in respect of all the branches of the concerned bank. Once such a permission is granted, it will not be necessary for each branch of the bank to obtain separate permission in its case.

If a person fails to deduct tax at source, or, after deducting, fails to pay it to the credit of the Central Government, he shall be liable to action under the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at the rate of fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that a person who fails to deduct tax at source shall be liable to pay, by way of penalty, a sum, equal to the amount of tax which he failed to deduct at source. In this regard, attention is also invited to the provisions of section 276B of the Income-tax Act which lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

12. Further, according to the provisions of section 203 of the Income-tax Act, 1961, every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that tax has been deducted and to specify therein the amount so deducted, the rate at which tax has been deducted and other prescribed particulars. The certificate has to be furnished within the period prescribed by rule 31(3) of the Income-tax Rules, 1962. The certificate for tax deduction under section 194A has to be issued generally within one month and fourteen days from the date of credit or payment of interest, in Form No. 16A (copy enclosed). If the payer fails to furnish this certificate, he shall be liable to pay, under section 272A of the Income-tax Act, by way of penalty, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

13. Under the provisions of section 203A of the Income-tax Act, 1961, it is obligatory for all persons responsible for deducting tax at source to obtain a tax deduction account number (TAN) from the concerned Assessing Officer, and quote the same in the TDS certificates and the challans and returns relating to TDS. Detailed instructions in this regard are available in this Departments Circular No. 497, dated 9-10-1987. A copy of Form No. 49B, for making the application for obtaining the TAN from the Assessing Officer is enclosed for ready reference. If a person fails to comply with the provisions of section 203A, he shall be liable to pay, under section 272BB of the I.T. Act, by way of penalty, a sum which may extend to Rs. 5,000.

14. According to the provisions of section 206 of the Income-tax Act, read with rules 36A and 37 of the Income-tax Rules, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association and every other person responsible for deducting tax under the provisions of Chapter XVII of the Income-tax Act (which includes section 194A) shall, within the prescribed time after the end of each financial year, prepare and deliver, or cause to be delivered to the prescribed Income-tax authority, the annual return of deduction of tax at source. The return in respect of tax deducted at source under section 194A is required to be filed by 30th day of June (following the financial year) in which the tax is so deducted. The annual return has to be filed on Form No. 26A. If a person fails to furnish in due time the annual return, he shall be liable to pay, under section 272A of the Act, by way of penalty, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. However, the amount of penalty shall not exceed the amount of tax which was deductible at source.

15.1 Section 206A, read with rule 37AA, provides that a person paying interest to a resident without deduction of tax at source has to furnish an annual return giving details of such interest paid. This return is to be filed in Form No. 27A and is to be furnished within 30 days from the end of the financial year in which such interest has been paid. If a person fails to furnish in due time the annual return, he is liable to pay, under section 272A of the Act, by way of penalty, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the default continues.

15.2 Further, sub-section (2) of section 197A provides that the person responsible for paying the interest income is to deliver one copy each of the declaration on Form No. 15H, referred to in para 7, to the concerned Chief Commissioner or Commissioner before the 7th day of the month next following the month in which the declaration is furnished to him. Failure to deliver copies of this form will attract penalty under section 272A on the above lines.

Deduction of tax in the case of joint accounts.

16. Doubts may sometimes arise in this connection about the manner of deducting tax at source from interest income on deposits in joint names. Reference for this purpose may please be made to Board Circular No. 256 dated 29-5-1979. An extract from this circular is reproduced below for ready reference :

. . . in the case of deposit in joint names, say in two names, in the absence of any proof to the contrary, both the persons can be treated as payees for the purpose of deduction of tax under section 194A of the Act. As such, unless the person paying the interest on such deposit(s) has definite information about the beneficial ownership of the deposit(s), the interest payable under a joint account can be aggregated with the amount of interest payable by that person to any one of the payees in their separate or independent accounts. The persons responsible for deducting the tax are advised that, in the absence of any information to the contrary, they may aggregate the interest on a joint account with the interest on deposit in the individuals account who has higher interest income. Thus, if there is a deposit of Rs. 5,000 in a joint account of M/s. XY and there are deposits of Rs. 4,000 in the name of X and Rs. 3,000 in the name of Y with the same payer, the rate of interest being 12% per annum, the payer may aggregate the interest in the joint account amounting to Rs. 600 with the interest of Rs. 480 on the deposit of X and hence the aggregate interest during a financial year exceeds Rs. 1,000 (this limit has since been raised to Rs. 2,500) he may deduct the tax at the prescribed rate. The fact that the joint account may be styled as M/s. YX instead of M/s. XY will not make any difference.

17. These instructions are not exhaustive and are issued with a view to help the persons responsible for making deduction of tax at source under section 194A of the Income-tax Act. However, where there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is needed, the Income-tax Officer concerned or the Local Public Relations Officer of the Income-tax Department may please be approached.

FORM NO. 15A

[See rule 29A]

Statement under the proviso to section 194A(1) of the Income-tax Act, 1961, relating to deduction of tax from income by way of interest other than income chargeable under the head Interest on securities

*I/We,........................................................................................................ , do hereby declare

[name of the person entitled to receive the interest]

that *my/our estimated total income assessable for the assessment year next following the financial year 19.....19..... will be less than the minimum liable to income-tax.

2. I give below the other necessary particulars :

(a)	Full name and address of the person(s) making
	the statement	.........................................
(b)	Fathers name	.........................................
(c)	Occupation of the person(s) making the statement	.........................................
(d)	Name of Income-tax Circle/Ward/District where last assessed to tax (if
	not assessed to income-tax at any time, state NOT ASSESSED)	.........................................

3. I further declare that to the best of my knowledge and belief the information furnished above is correct, complete and is truly stated.

Place....................	..................................
Date.....................	Signature

ATTESTATION BY GAZETTED OFFICER

Certified that the above statement has been signed in my presence by Shri/Sarvashri........................who *is/are known to me.

Place....................	...................................
Date.....................	Name, designation and signature of the Gazetted Officer

Note: *Delete whichever is not applicable.

FORM NO. 15H

[See Rule 29C(3)]

Declaration under section 197A(1) of Income-tax Act, 1961, to be made by an individual claiming receipt of interest other than interest on securities without deduction of tax

I..............., son/daughter/wife of...................resident of...................@ do hereby declare

1. that the sums, particulars of which are given below, stand in my name and beneficially belong to me, and the interest in respect of such sums is not includible in the total income of any other person under sections 60 to 64 of the Income-tax Act, 1961:

Name and address of the person to whom the sums are given on interest

Amount of such sums

Date(s) on which such sums were given on interest

Period for which such sums were given on interest

Rate of interest

2. that my present occupation is.....................;

3. that the tax on my estimated total income including the interest on securities referred to in paragraph 1 above, computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on ................... relevant to the assessment year 19.....19..... will be nil ;

4. *that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Chief Commissioner or Commissioner of Income tax, ....................;

that I was last assessed to income-tax for the assessment year 19.....19..... by the Assessing Officer..................., Circle/Ward/District and the permanent account number allotted to me is...........................;

5. that I am resident in India within the meaning of section 6 of the Income-tax Act, 1961.

.....................................................

Signature of the declarant

Verification

I...............................................do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.

Verified today, the...........................................day of .......................19.......

Place ................		..............................................
		Signature of the declarant

Notes :

1. @ Give complete postal address.

2. The declaration should be furnished in duplicate.

3. *Delete whichever is not applicable.

4. Before signing the verification, the declarant should satisfy himself that the information furnished in the declaration is true, correct and complete in all respects.

5. Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961, and on conviction be punishable

(i) in a case where tax sought to be evaded exceeds one lakh rupees, with rigorous imprisonment which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to three years and with fine.

[FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED]

1. Name and address of the person responsible for paying the interest on sums mentioned in Paragraph 1 of the declaration

2. Date on which the declaration was furnished by the declarant

3. Period for which interest is credited/paid

4. Amount of interest

5. Rate on which interest is credited/paid

Forwarded to the Chief Commissioner or Commissioner of Income-tax,................

Place........		.........................................................................
Date...........		Signature of the person responsible for paying interest other thaninterest on securities

FORM NO. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961

Name and address of the person deducting tax	TDS circle where Annual Return under section 206 is to be delivered	Name and address of the person to whom payment made or in whose account it is credited
Name and address of the person deducting tax
.........................................................
.........................................................
.......................................................	...............................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................

TAX DEDUCTION A/C NO.	NATURE OF	PAN/GIR NO. OF THE PAYEE
OF THE DEDUCTOR	PAYMENT
PAN/GIR NO. OF THE		FOR THE PERIOD ...... 19.....
DEDUCTOR		TO 19.....

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of payment/ credit

Amount paid/ credited (Rs.)

Amount of income-tax deducted

(Rs.)

Rate at which deducted

Date & Challan No. of deposit of tax into Central Government Account

Name of bank and branch where tax deposited

Certified that a sum of Rs. (in words) ...................... has been deducted at source and paid to the credit of the Central Government as per details given above.

Place.................		.................................................................
Date..................		Signature of person responsible for deduction of tax
		Full Name............................................
		Designation.........................................

FORM NO. 49B

[See rule 114A]

Form of application for allotment of tax deduction account number under section 203A

The Assessing Officer,

...............................................

Sir,

Whereas I/we am/are liable to deduct tax in accordance with Chapter XVII under the heading B. - Deduction at source of the Income-tax Act, 1961 ;

And whereas no tax deduction account number has been allotted to me/us;

I/We hereby request that a tax deduction account number be allotted to me/us;

I/We give below the necessary particulars :

1. Full name and address

2. Status [whether individual, HUF, company, etc.]

3. If an individual

(a) name of father (or husband)

(b) age

4. If firm/HUF/AOP/BOI/company, the names and addresses of partners/members/directors

5. Source(s) of income

6. Particulars of business, if any :

Name

Address

Nature of business

(i) Head Office

(ii) Branch(es)

7. Date on which the tax was last deducted in accordance with Chapter XVII under the heading B.-Deduction at source of the Income-tax Act, 1961

8. The nature of payments from which tax has been or will be deducted

9. Whether permanent account number has been allotted or not, if so, state the number

	.............................
	Signed
	(Applicant)

Verification

I/We,.........................................................in my/our capacity as.............................................................

[name] [designation]

do hereby declare that what is stated above is true to the best of my/our information and belief.

Verified today this the...................................day of.........................19.......at.........................

.[place]

.............................

Signed

(Applicant)

Circular : No. 618, dated 22-11-1991.

SECTION 194EE l PAYMENTS IN RESPECT OF DEPOSITS UNDER NSS, ETC.

1146. Instructions regarding deduction of tax at source from payments in respect of deposits under NSS, etc.

1. The Finance (No. 2) Act, 1991 has inserted a new section 194EE in the Income-tax Act, 1961 with effect from the 1st October, 1991, which reads as follows :

194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent :

Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :

Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.

2. The new section requires every person responsible for paying any amounts referred to in clause (a) of sub-section (2) of section 80CCA of the Income-tax Act (e.g., withdrawals under the National Savings Scheme) to deduct income-tax at source at the rate of 20 per cent of the amounts paid. Presently, the National Savings Scheme (NSS), operated by the post offices, is the only scheme covered by section 80CCA. However, more such schemes may be notified by the Central Government in future.

3. The amount of tax deducted at the aforesaid rate of 20 per cent is to be further increased by a surcharge at the rate of 12 per cent of such tax.

4. No deduction of tax at source is, however, required to be made in the following cases :

(a) where the amount of payment or the aggregate amount of payments in a financial year is less than Rs. 2,500;

(b) where the payment is made to the heirs of a deceased assessee (depositor);

(c) where the depositor, being an individual, resident in India, furnishes a declaration in writing, in Form No. 15-I (copy given), in duplicate, to the payer, to the effect that the tax on his total income for the relevant financial year will be nil.

5. The responsibilities, obligations, etc., under the Income-tax Act, of the person responsible for deducting tax at source under section 194EE are given below :

(a) According to the provisions of section 200, any person deducting tax at source under section 194EE, shall pay, within the prescribed time (laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the tax deducted at source is to be paid to the credit of the Central Government, on the day of the deduction itself. The tax will have to be credited to the Government account by book adjustment in the same manner as for example, the income-tax deducted from the salaries payable to the employees is credited to the Government account. In case of failure to deduct tax at source, the payer will be liable under section 201 to pay simple interest at the rate of 15 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid to the Government account. In addition, he will also be liable to pay, by way of penalty, under section 271C a sum equal to the amount of tax which he failed to deduct at source. In case of failure to pay the tax to the credit of the Central Government within the prescribed time, similar penal provisions, including prosecution, under section 276B are attracted.

(b) According to the provisions of section 203, the payer is required to furnish to the payee, a certificate to the effect that tax has been deducted and to specify therein the prescribed particulars (vide rule 31 of the Income-tax Rules, 1962). This certificate has to be issued on the tax deductors own stationery, in Form No. 16A (copy given). Further, the certificate has to be issued by the deductor within a period of one month and 14 days from the date of payment. If a person fails to furnish the certificate in due time, he will be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day, during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a tax-deduction account Number (TAN) and quote the same in various challans, certificates, returns, etc. Detailed instructions in this regard are available in this departments Circular No. 497, dated 9-10-1987. A copy of Form No. 49B in which the application has to be made for obtaining the TAN, is enclosed for ready reference. If a person fails to comply with the provisions of section 203A, he shall be liable to pay, by way of penalty under section 272BB, a sum which may extend to Rs. 5,000.

(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, etc., responsible for deducting tax is required to prepare and deliver, or cause to be delivered, to the designated/concerned Assessing Officer by the prescribed date after the end of the financial year, an annual return of deduction of tax under section 194EE in the prescribed form. The form in which the return has to be filed and the due date for filing it are being notified. If a person fails to furnish in due time the annual return, he shall be liable to pay, by way of penalty, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day, during which the failure continues; so, however, that this sum shall not exceed the amount of tax which was deductible at source.

(e) The payer or tax-deductor is also required to deliver a copy of all the forms (No. 15-I) received by him during a month to the Chief Commissioner or Commissioner of Income-tax having jurisdiction over him within 7 days of the month in which the declarations are furnished to him.

6. This circular has been issued with a view to helping the persons responsible for making deduction of tax under section 194EE. However, where there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is needed, the concerned Assessing Officer or the local public relation officer/income-tax of the department may be approached.

Form No. 15-I

[See rule 29C(3A)]

Declaration under section 197A(1) of the Income-tax Act, 1961 to be made by an individual claiming receipt of any amount referred to in clause (a) of sub-section (2) of section 80CCA without deduction of tax

I,......................................................,son/daughter/wife of ....................................... resident of............................@ do hereby declare :

1. that the particulars of my account under the National Savings Scheme and the amount of withdrawal are as under :

Particulars of the Post

Office where the account

under the National Savings

Scheme is maintained and

the account number

Date on which the

account was opened

The amount of

withdrawal from

the account

2. that my present occupation is.............................;

3. that the tax on my estimated total income including the amount referred to, in clause (a) of sub-section (2) of section 80CCA, mentioned in paragraph 1 above, computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on.............relevant to the assessment year 19....19....will be nil;

4. *that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Chief Commissioner or Commissioner of Income-tax,............;

that I was last assessed to income-tax for the assessment year 19....19.... by the Assessing Officer ............. Circle/Ward/District and the permanent account number allotted to me is...........................;

5. that I am resident in India within the meaning of section 6 of the Income-tax Act, 1961.

		......................................................
		Signature of the declarant

Verification

I,................., do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.

Verified today, the............day of...........19......

Place.		......................................................
		Signature of the declarant

Notes :

1. @ Give complete postal address.

2. The declaration should be furnished in duplicate.

3. *Delete whichever is not applicable.

4. Before signing the verification, the declarant should satisfy himself that the information furnished in the declaration is true, correct and complete in all respects.

5. Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961, and on conviction be punishable

(i) in a case where tax sought to be evaded exceeds one lakh rupees, with rigorous imprisonment which shall not be less than six months but which may be extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to three years and with fine.

[FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED]

1. Name and address of the person responsible for paying the amount referred to in clause (a) of sub-section (2) of section 80CCA

2. Date on which the declaration was furnished by the declarant

3. Amount and date of withdrawal from account number.......under the National Savings Scheme

Forward to the Chief Commissioner or Commissioner of Income-tax.

..............................................................................

Place.....................

[Signature of the person responsible

for paying any amount referred to

Date........................

in clause (a) of sub-section (2)

of section 80CCA]

FORM NO. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961

[For interest on securities, dividends or insurance commission]

Name and address of the	TDS circle	Name and address of the person
person deducting tax	where Annual	to whom payment made or in
.........................................................	Return under	whose account it is credited
	section 206 is to
.........................................................	be delivered	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................

TAX DEDUCTION A/C NO.	NATURE OF	PAN/GIR NO. OF THE PAYEE
OF THE DEDUCTOR	PAYMENT

PAN/GIR NO. OF THE		FOR THE PERIOD ....................
DEDUCTOR		19..... TO 19.....

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of	Amount	Amount of	Rate at	Date &	Name of
payment/	paid/	income-tax	which	Challan No.	bank and
credit	credited	deducted	deducted	of deposit of	branch
	(Rs.)	(Rs.)		tax into	where tax
				Central	deposited
				Government
				Account

Certified that a sum of Rs. (in words) ...................... has been deducted at source and paid to the credit of the Central Government as per details given above.

Place.................		.................................................................
Date..................		Signature of person responsible for deduction of tax
		Full Name............................................
		Designation.........................................

Form No. 49B

[See rule 114A]

Form of application for allotment of tax deduction account number under section 203A

The Assessing Officer,

..............................................

Sir,

Whereas I/we am/are liable to deduct tax in accordance with Chapter XVII under the heading B. - Deduction at source of the Income-tax Act, 1961;

And whereas no tax deduction account number has been allotted to me/us;

I/We hereby request that a tax deduction account number be allotted to me/us;

I/We give below the necessary particulars :

1. Full name and address

2. Status [whether individual, HUF, company, etc.]

3. If an individual

(a) name of father (or husband)

(b) age

4. If firm/HUF/AOP/BOI/company, the names and addresses of partners/members/directors

5. Source(s) of income

6. Particulars of business, if any:

Name

Address

Nature of business

(i) Head Office

(ii) Branch(es)

7. Date on which the tax was last deducted in accordance with Chapter XVII under the heading B. - Deduction at source of the Income-tax Act, 1961

8. The nature of payments from which tax has been or will be deducted

9. Whether permanent account number has been allotted or not, if so, state the number

	..........................................
	Signed
	(Applicant)

Verification

I/We..............................................................in my/our capacity as........................................................

[name] [designation]

do hereby declare that what is stated above is true to the best of my/our information and belief.

Verified today this the...................................day of..........................19......at..............................

[place]

	...................................
	Signed (Applicant)

Circular : No. 619, dated 4-12-1991.

SECTION 194H l COMMISSION, BROKERAGE, ETC¹[A10] [A1].

1147. Instructions for deduction of tax at source from commission, brokerage, etc.

1. The Finance (No. 2) Act, 1991 has introduced a new section 194H, into the Income-tax Act, 1961, which provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of October, 1991, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.

2. For the purposes of this section, commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing.

3. It may also be stated that credit of any income to any account whether called Suspense account or by any other name shall be deemed to be credit of such income to the account of the payee and the provisions of section 194H shall apply accordingly.

4. The tax so deducted at the rate of ten per cent is required to be increased by surcharge at the rate of twelve per cent where the payee is a resident person (other than a company) and at the rate of fifteen per cent where the payee is a domestic company.

5. No deduction is, however, required to be made in the following cases :

(i) Where the aggregate amount of commission income credited or paid or likely to be credited or paid by a payer to a payee during a financial year does not exceed two thousand five hundred rupees.

(ii) Where the payment is made by an individual or a Hindu undivided family.

(iii) In cases of such persons or class or classes of persons (whether payer or payee) as the Central Government may, having regard to the extent of inconvenience caused or likely to be caused to them, and being satisfied that it would not be prejudicial to the interests of revenue, by Notification in the Official Gazette, specify, in this behalf.

(iv) Where payment of commission income is made for professional services. For this purpose, professional services mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy to technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA of the Income-tax Act. So far, only two professions, namely, of film artists and authorised representatives, have been notified.

6. A question may raise whether there would be deduction of tax at source under section 194H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/principal, deduction of tax at source is required to be made from the amount of commission. Therefore, the consignor/principal will have to deposit the tax deductible on the amount of commission income to the credit of the Central Government, within the prescribed time, as explained in the succeeding paragraphs.

7. The responsibilities, obligations, etc., under the Income-tax Act of a person deducting income-tax at source are as follows :

(a) According to the provisions of section 200, any person deducting tax at source under section 194H shall pay, within the prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the tax so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, payment is normally to be made within one week from the last day of month in which the deduction is made. However, with the permission of the Assessing Officer, tax deducted at source can also be paid to the credit of the Central Government on quarterly basis. If a person fails to deduct tax at source, or, after deducting, fails to pay tax to the credit of the Central Government, he shall be liable to action under the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which the tax was deductible to the date on which it is actually paid. Further, section 271C lays down that if any person fails to deduct tax at source, he shall be liable to pay by way of penalty a sum equal to the amount of tax which he failed to deduct at source. In this regard, attention is also invited to the provisions of section 276B which lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine.

(b) According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein, the amount deducted and certain other particulars. This certificate has to be furnished in Form No. 16A (copy enclosed) within the prescribed period of one month and fourteen days to the person to whose account credit is given or to whom payment is made or cheque is issued. The certificate can be issued on the tax deductors own stationery. If a person fails to furnish this certificate, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200 for each day during which the failure continues.

(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax-deduction Account Number (TAN) in the various challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in this Departments Circular No. 497, dated 9-10-1987 for reference and guidance. If a person fails to comply with the provisions of section 203A, he shall be liable to pay by way of penalty under section 272BB, a sum up to Rs. 5,000.

These instructions are not exhaustive and are issued with a view to helping the persons responsible for making deduction of tax at source under section 194H. Where there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be approached.

Form No. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961

[For interest on securities, dividends, interest on time deposits referred to in clauses (vii) and (viia) of sub-section (3) of section 194A; insurance commission; payments in respect of deposits under National Savings Scheme; payments on account of repurchase of units by the Mutual Fund or Unit Trust of India; commission, remuneration or prize on sale of lottery tickets; commission or brokerage; income from units referred to in section 196B.]

Name and address of the	TDS circle	Name and address of the person
person deducting tax	where Annual	to whom payment made or in
.........................................................	Return under	whose account it is credited
	section 206 is to
.........................................................	be delivered	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................
.........................................................	...............................	.......................................................

TAX DEDUCTION A/C NO.	NATURE OF	PAN/GIR NO. OF THE PAYEE
OF THE DEDUCTOR	PAYMENT

PAN/GIR NO. OF THE		FOR THE PERIOD ....................
DEDUCTOR		19..... TO 19.....

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of	Amount	Amount of	Rate at	Date &	Name of
payment/	Paid/	income-tax	which	Challan No.	bank and
credit	credited	deducted	deducted	of deposit of	branch
	(Rs.)	(Rs.)		tax into	where tax
				Central	deposited
				Government
				Account

Certified that a sum of Rs. (in words) ...................... has been deducted at source and paid to the credit of the Central Government as per details given above.

		.................................................................
		Signature of person responsible for deduction of tax
Place.................		Full Name............................................
Date..................		Designation.........................................

Top of Form

Section 206C  Profits And Gains From Business of Trading In Alcoholic liquor, Forest Produce, etc.

Circular : No. 620, dated 6-12-1991.

1189. Instructions regarding deduction of tax at source on profits and gains from the business of trading in alcoholic liquor, forest produce, etc.

Clarification I

1. Considerable difficulty has been felt in the past in assessing income of persons who take contracts for sale of liquor, forest produce, etc. It has been the Departments experience that for taking such contracts, firms or associations of persons are specifically constituted and very often no trace is left of them or their members after the contract has been executed. Persons have also been found to have taken contracts in benami names by floating undertakings or associations for short periods. Since tax is payable in the assessment years on the incomes of the previous years, the time by which the incomes from such sources become assessable, such persons become untraceable. Moreover, at the time of assessment years in these cases, either the accounts are not available or they are mostly incorrect or incomplete. Thus, even if assessments could be made on ex parte basis, it becomes almost impossible to collect the tax found due, either because it becomes difficult to establish the identity of the persons and trace them or because of the fact the persons in whose names contracts were taken are men of no means. With a view to combating large scale tax evasion by persons deriving incomes from such business, the Finance Act, 1988 has inserted a new section 44AC to provide for determination of income in such cases. Further, with a view to facilitating collection of taxes from such assessees, the Finance Act, 1988 has inserted a new section 206C to provide for collection of such tax at source.

2. Sections 44AC and 206C are reproduced below :

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in case of an assessee, being a person other than a public sector company (hereafter in this section referred to as the buyer), obtaining in any sale by way of auction, tender, or any other mode, conducted by any other person or his agent (hereafter in this section referred to as the seller),

(a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor a sum equal to forty per cent of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head Profits and gains of business or profession;

(b) the right to receive any goods of the nature specified in column (2) of the Table below, or such goods as the case may be, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table of the amount paid or payable by the buyer in respect of the sale of such right or as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head Profits and gains of business or profession.

Table

Sl. No.	Nature of goods	Percentage
(1)	(2)	(3)
(i)	Timber obtained under a forest lease	Thirty-five per cent
(ii)	Timber obtained by any mode other	Fifteen per cent
	than under a forest lease
(iii)	Any other forest produce not being timber	Thirty-five per cent

(2) For the removal of doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to a buyer (other than a buyer who obtains any goods from any seller which is a public sector company) in the further sale of any goods obtained under or in pursuance of the sale under sub-section (1).

(3) In a case where the business carried on by the assessee does not consist exclusively of trading in goods to which this section applies and where separate accounts are not maintained or are not available, the amount of expenses attributable to such other business shall be an amount which bears to the total expenses of the business carried on by the assessee the same proportion as the turnover of such other business bears to the total turnover of the business carried on by the assessee.

Explanation : For the purposes of this section, Seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm.

The provisions of this section will apply only to an assessee being a person other than a public sector company, referred to as buyer of any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor) or such goods as are mentioned in clause (b) of sub-section (1) of section 44AC, at the point of first sale. The provisions of this section shall not apply to any buyer in the second or subsequent sale of such goods. This amendment will take effect from 1st April, 1989 and will accordingly apply to assessment year 1989-90 and subsequent years :

(1) Every person, being a seller referred to in section 44AC, shall, at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax on income comprised therein :

Table

Sl. No.	Nature of goods	Percentage
(1)	(2)	(3)
(i)	Alcoholic liquor for human consumption (other	Fifteen per cent
	than Indian-made foreign liquor)
(ii)	Timber obtained under a forest lease	Fifteen per cent
(iii)	Timber obtained by any mode other than under	Ten per cent
	a forest lease
(iv)	Any other forest produce not being timber	Fifteen per cent.

Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certificate is in force.

(2) The power to recover tax by collection under sub-section (1) shall be without prejudice to any other mode of recovery.

(3) Any person collecting any amount under sub-section (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.

(4) Any amount collected in accordance with the provisions of this section and paid under sub-section (3) shall be deemed as payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to him for the amount so collected on the production of the certificate furnished under sub-section (5) in the assessment made under this Act for the assessment year for which such income is assessable.

(5) Every person collecting tax in accordance with the provisions of this section shall, within ten days from the date of debit or receipt of the amount, furnish to the buyer to whose account such amount is debited or from whom such payment is received, a certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected and such other particulars as may be prescribed.

(6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).

(7) Without prejudice to the provisions of sub-section (6), if the seller does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of two per cent per month or part thereof on the amount of such tax from the date on which such tax was collectable to the date on which the tax was actually paid.

(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of tax together with the amount of simple interest thereon referred to in sub-section (7) shall be charged upon all the assets of the seller.

It may be noted that the sum collected at source in accordance with the provisions of section 206C should be increased by a surcharge for the purpose of the Union calculated on the income-tax at the rates in force. Tax is required to be collected from the buyer either at the time of debiting the said amount to the account of the buyer or at the time of receipt of that amount from the buyer, whichever is earlier. This mode of recovery of tax shall be without prejudice to any other mode of recovery. The tax so collected by the seller shall be paid to the credit of the Central Government or as the Board directs within 7 days from the date of collection. It will be treated as tax paid on behalf of the person from whom the tax had been collected and credit shall be given for such amount in the assessment made under the Income-tax Act on production of a certificate. This section also provides that if a seller does not collect or after collecting fails to pay the tax, he shall be deemed to be an assessee in default in respect of the tax and the amount of tax together with the amount of simple interest calculated at the rate of 2 per cent per month or part thereof shall be a charge upon the assets of the seller. It may be noted that failure to pay the tax collected at source will attract the penal provisions of section 276B according to which such a person will be punishable with rigorous imprisonment, for a term between 3 months and 7 years and with fine.

This amendment will be effective from 1st June, 1988.

The Board by Notification No. SO 557(E), dated 9th June, 1988 has made necessary amendments in the Income-tax Rules, 1962 in this regard. It may be noted that failure to pay tax collected at source, a new challan form has been devised.[`11] *

Circular : No. 525, dated 24-11-1988.

Clarification II

1. Attention is invited to this Departments Circular No. 525, dated 24-11-1988 wherein the rates at which collection of income-tax have to be made at source during the financial year 1988-89 in respect of profits and gains from the business of trading in alcoholic liquor (other than Indian-made foreign liquor), timber and other forest produce were communicated.

2. Subsequent to the issue of the aforesaid circular, the Direct Tax Laws (Amendment) Act, 1989 substituted the words Ten per cent by words Five per cent occurring in column 3 against item (iii) of the table below sub-section (1) of section 206C of the Income-tax Act, thereby providing that in respect of the timber obtained by any mode other than forest lease, income-tax shall be collected at the rate of 5 per cent of the purchase price payable by the buyer. The said amendment has come into effect from 1-6-1988. The Direct Tax Laws (Amendment) Act has also inserted a new sub-section (5A) in section 206C to provide that every person collecting tax in accordance with the provisions of section 206C shall prepare half-yearly returns for the period ending on the 30th September and 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars as may be prescribed in the rules. It may also be added that the Direct Tax Laws (Amendment) Act has inserted a proviso to clause (a) of sub-section (1) of section 44AC of the Income-tax Act which provides that clause (a) relating to determination of profits in the trading of goods, in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor) at 40 per cent of the purchase price, shall not apply where the goods are not obtained by way of auction and where the sale price of such goods as sold by the buyer is fixed by or under any State Act. In such cases, tax will not be required to be collected under section 206C.

3. Subject to the amendments/modifications mentioned in para 2 above, the instructions contained in the Departments Circular No. 525, dated 24-11-1988 will be applicable during the current financial year also i.e., 1989-90. It may be noted that as per the provisions of the Finance Act, 1989 in cases in which tax has to be collected under section 206C, the collection shall be made at the rates specified in that section, i.e., at the rate of 15 per cent of the amount payable by the buyer (at the rate of 5 per cent in the case of timber obtained by any mode other than forest lease), and it shall be further increased by surcharge for the purpose of the Union calculated at the rate of 8 per cent of such collection.

4. It may also be mentioned that the tax so collected is to be paid within seven days to the credit of the Central Government, as provided in sub-section (3) of section 206C. Failure to do so attracts prosecution under section 276BB of the Income-tax Act. Failure to collect the tax from the buyers of the goods mentioned in sections 44AC and 206C makes the seller of the goods responsible for paying the tax to the Central Government in terms of sub-section (6) of section 206C.

Circular : No. 535, dated 26-6-1989.

Clarification III

1. Attention is invited to this Departments Circular No. 525, dated 24-11-1988 and No. 535, dated 26-6-1989, wherein the provisions relating to collection of income-tax at source under section 206C of the Income-tax Act in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc. were communicated.

2. According to sub-section (5A) of section 206C, every person collecting tax in accordance with the provisions of the said section shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority, the said returns in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. A new rule 37E prescribing the half-yearly returns regarding tax collected at source u/s 206C(5A) and another rule 37F prescribing the income-tax authorities to whom these half-yearly returns are to be furnished, have been inserted by the Income-tax Rules, 1962, vide Notification No. S.O. 149(E), dated 19-2-1990. These half-yearly returns are to be filed within one month from the end of the period to which the returns relate.

Circular : No. 565, dated 11-7-1990.

Clarification IV

1. Reference is invited to Boards Circular No. 565, dated 11-7-1990 regarding collection of income-tax at source under section 206C of the Income-tax Act in respect of profits and gains from the business of trading in alcoholic liquor, forest produce etc., as also to earlier Circulars referred to in paragraph 1 of Circular No. 565.

2. As a result of different systems prevailing in different States, the term purchase price, used in section 44AC of the Income-tax Act was being understood in different ways. In order to clarify this point, the Finance Act, 1990 has amended the said section to provide that the purchase price would mean any amount (by whatever name called) paid or payable by the buyer to obtain the goods referred to in that section, except the bid amount in an auction. Accordingly, the excise duty paid or payable by the buyer will also form part of the purchase price for the purposes of section 44AC. On the same analogy, the Nirgam Mulya or Issue Price which is paid by a buyer in the State of Uttar Pradesh will also form part of the purchase price. Thus, income-tax will have to be collected at source under the provisions of section 206C by all persons referred to in section 44AC of the Income-tax Act, 1961 (e.g. Central Government, State Government, local authority, corporations, etc.) at the specified rates, with reference to the purchase price including the excise duty, etc.

3. The above amendment has come into force with effect from the assessment year 1991-92 and, therefore, will be applicable to the collections under section 206C made during the financial year 1990-91.

4. The Finance Act, 1990 has further amended section 44AC so as to include a co-operative society also within the meaning of the term seller as defined therein. The said amendment has also come into effect from assessment year 1991-92 and will, accordingly, apply to collections made under section 206C during the financial year 1990-91.

Circular : No. 585, dated 27-11-1990.

Judicial analysis

Explained in - The above circular was explained in Badhar Khan Pukhraj v. Deputy Commissioner (Asstt.) [1993] 112 Taxation 74 (Trib.), in the following words :

17. The above circular clearly shows that since the provisions of section 44AC were being understood in different ways, a necessity of clarifying the position was felt. In view of this state of affairs regarding the scope and application of section 44AC it would not be unreasonable to hold that a substantial point of dispute was there, involved in the assessment in this case, and that the nature of such dispute went beyond the scope of adjustment contemplated under section 143(1) and which could have been made by rectifying an arithmetical error in the return. In that sense of the matter there existed mistake apparent from record in the intimation sent by the DC (Asstt.) under section 143(1) after making adjustments. In fact, the existence of such a mistake or error apparent from record was appreciated in his second order dated 2-1-1992 by the Assessing Officer himself when he corrected or rectified the mistake regarding inclusion of cost price of Rum in the computation of purchase price. We are thus satisfied that the order under appeal which has the effect of upholding the legality and validity of intimation sent under section 143(1) is not correct in law and is required to be vacated. We hold accordingly and direct that the addition of Rs. 1,05,39,059 made by the DC (Asstt.) by way of making adjustments be cancelled. (pp. 80-81)

Clarification V

1. Attention is invited to the Boards Circular No. 565, dated 11-7-1990 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc. and filing of half-yearly returns in this regard.

2. The Finance (No. 2) Act, 1991 does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1991-92. These rates and other relevant provisions are enumerated below.

3. Sub-section (1) of section 206C lays down that every person, being a seller referred to in section 44AC shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at time of receipt of such amount from the said buyer in cash or by issue of cheque or draft or by any other mode, whichever is earlier, collect from the buyer of the goods of the nature specified below, a sum equal to the percentage, as mentioned against each, of such amount as income-tax on the income comprised therein :

(i)	Alcoholic liquor for human consumption (other than Indian-made foreign liquor)	15%
(ii)	Timber obtained under a forest lease	15%
(iii)	Timber obtained by any mode other than under a forest lease	5%
(iv)	Any other forest produce not being timber	15%

Further, according to the provisions of the Finance (No.2) Act, 1991, the amount of tax collectible at source at the aforesaid rates shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and 12 per cent in respect of other buyers.

4. It may be clarified that seller for the aforesaid purpose means the Central Government or a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society. It is also clarified that the provisions of section 44AC, and, consequently, those of section 206C will apply only to an assessee being a person (as defined in the Act) other than a public sector company, referred to as buyer of any goods, in the preceding paragraph, at the point of first sale and not in the case of second or subsequent sale of such goods.

5. It is further clarified that in the case of goods of the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), the aforesaid provisions shall not apply to a buyer where such goods are not obtained by him by way of auction and where the sale price of such goods to be sold (further) by the buyer is fixed by or under any State Act.

6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief, any of the goods referred to above are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962 and Form No. 27C prescribed thereunder.

7. The responsibilities, obligations, etc., under the Income-tax Act of the person collecting tax at source under section 206C, are as follows :

(a) According to the provisions of sub-section (3) of section 206C, any person collecting any amount, as aforesaid, shall pay within seven days the amount so collect to the credit of the Central Government or as the Board directs.

(b) According to the provisions of sub-section (5) of section 206C, every person collecting tax as aforesaid shall within ten days from the date of debit, or receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that tax has been collected, specifying the sum so collected and the rate at which the tax has been collected and such other particulars as may be prescribed. On production of this certificate by the buyer, credit shall be given to him for the amount so collected in the assessment made under the Act for the assessment year for which such income is assessable. Reference in this regard may be made to rule 37D of the Income-tax Rules, 1962 and Form No. 27D prescribed thereunder.

If a person fails to issue the certificate of tax collected at source by him, as aforesaid, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) If any person responsible for collecting tax under the provisions of section 206C fails to collect the tax, he shall still be liable in terms of sub-section (6) of section 206C to pay the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.

(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2% per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine.

8. Sub-section (5A) of section 206C lays down that every person collecting tax in accordance with the provisions of the said section shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer the said returns. Under rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of 1 month from the end of the half-yearly period to which the return relates.

If a person fails to furnish the aforesaid returns in time, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.

9.These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making collection of tax at source under section 206C. Wherever, there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961, and the Finance (No. 2 ) Act, 1991. In case any assistance is required, the Assessing Officer concerned or local Public Relations Officer of the Income-tax Department may be approached.

Clarification vi

1. Attention is invited to the Boards Circular No. 620, dated 6-12-1991 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc., during the financial year 1991-92.

2. The Finance Act, 1992 does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1992-93. However, section 44AC, which was hitherto interlinked with section 206C, has been deleted by the Finance Act, 1992. Simultaneously, certain amendments consequential to the deletion of section 44AC have been made in section 206C.

3.1 Sub-section (1) of the amended section 206C enjoins that every person, being a seller shall, at the time of debiting of the amount payable by the buyer, to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode,whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax :

Table

Sl. No.	Nature of goods	Percentage
(1)	(2)	(3)
(i)	Alcoholic liquor for human consumption	Fifteen per cent
	(other than Indian-made foreign liquor)
(ii)	Timber obtained under a forest lease	Fifteen per cent
(iii)	Timber obtained by any mode other than	Five per cent
	under a forest lease
(iv)	Any other forest produce not being timber	Fifteen per cent

3.2 The term buyer in section 206C is defined to mean a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table referred above or the right to receive any such goods but does not include :

(i) a public sector company,

(ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or

(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act.

3.3 The term seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.

4. The amount of tax collectible at source at the rates referred to in paragraph 3.1 shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and at the rate of 12 per cent in respect of other buyers.

5. It is clarified that the provisions of sub-section (1) of section 206C in relation to a buyer will not apply to a public sector company, and, to any other buyer who obtains the said goods at a second or subsequent sale of such goods. Thus, these provisions will aply only at the point of the first sale of such goods.

6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that, to the best of his belief, any of the goods referred to in the Table in paragraph 3.1 are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962, and Form No. 27C prescribed thereunder.

7. The responsibilities, obligations, etc., under the Income-tax Act of the person collecting tax at source under section 206C, are as follows :

(a) Any person collecting any amount under section 206C (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.

(b) Every person collecting tax shall from the date of debit or within ten days of receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that tax has been collected, specifying the sum so collected and the rate at which the tax has been collected and such other particulars as may be prescribed. On production of this certificate by the buyer, credit shall be given to him for the amount so collected in the assessment made under the Act for the assessment year for which such income is assessable. Reference in this regard may be made to rule 37D of the Income-tax Rules, 1962 and Form No. 27D prescribed thereunder. If a person fails to issue the certificate of tax collected at source by him he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) If any person responsible for collecting tax fails to collect the tax, he shall still be liable to pay in terms of sub-section (6) of section 206C, the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.

(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government, he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2 per cent per month or part thereof, on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months and which may extend up to 7 years and with fine.

(e) Every person collecting tax shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer the said returns. Under rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of one month from the end of the half-yearly period to which the return relates.

(f) If a person fails to furnish the half-yearly returns in time, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.

8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for collecting tax at source under section 206C. Wherever, there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961, and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned or local Public Relations Officer of the Income-tax Department may be approached.

Circular : No. 634, dated 20-8-1992.

Clarification VII

1. Attention is invited to the Boards Circular No. 634, dated 20-8-1992 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc., during the financial year 1992-93.

2. The Finance Act, 1993 does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1993-94.

3.1 Sub-section (1) of section 206C enjoins that every person, being a seller shall at the time of debiting of the amount payable by the buyer, to the account of the buyer, or, at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the Table, of such amount as income-tax :

Table

Sl. No.	Nature of goods	Percentage
(1)	(2)	(3)
(i)	Alcoholic liquor for human consumption	Fifteen per cent
	(other than Indian-made foreign liquor)
(ii)	Timber obtained under a forest lease	Fifteen per cent
(iii)	Timber obtained by any mode other than	Five per cent
	under a forest lease
(iv)	Any other forest produce not being timber	Fifteen per cent

(i) a public sector company,

(ii) a buyer in the future sale of such goods obtained in pursuance of such sale, or

(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act.

4.The amount of tax collectible at source at the rates referred to in paragraph 3.1 shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and at the rate of 12 per cent in respect of other buyers.

5. It may be noted that the provisions of sub-section (1) of section 206C in relation to a buyer will not apply to a public sector company, and, to any other buyer who obtains the said goods at a second or subsequent sale of such goods. Thus, these provisions will apply only at the point of the first sale of such goods.

7. The responsibilities, obligations, etc., under the Income-tax Act, of the person collecting tax at source under section 206C, are as follows :

(a) Any person collecting any amount under section 206C (1) shall pay within seven days the amount so collected to the credit of the Central Government, or, as the Board directs.

(b) Every person collecting tax shall, within ten days from the date of debit, or, receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that the tax has been collected, specifying the amount of tax and the rate at which it has been collected, and, such other particulars as may be prescribed. This certificate has to be issued in Form No. 27D prescribed under rule 37D of the Income-tax Rules, 1962. On production of this certificate by the buyer, credit shall be given to him for the amount so collected, in the assessment made under the Act for the assessment year for which such income is assessable. If a person fails to issue the certificate of tax collected at source by him, he shall be liable to pay, by way of penalty, under section 272A(2), a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.

(c) If any person responsible for collecting tax fails to collect the tax, he shall himself be liable to pay, in terms of sub-section (6) of section 206C, the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.

(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government, he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2 per cent per month or part thereof, on the amount of such tax from the date on which such tax was collectible to the date on which such tax is actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall be not less than three months but which may extend up to 7 years, and with fine.

(e) Every person collecting tax shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer, the said returns. Under Rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of one month from the end of the half-yearly period to which the return relates.

(f) If a person fails to furnish the half-yearly returns in time, he shall be liable to pay by way of penalty, under section 272A (2) a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.

8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for collecting tax at source under section 206C. Whenever there is any doubt, reference may be made to the relevant provisions of the Income-tax Act, 1961, and Income-tax Rules, 1962. In case any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be contacted.

Circular :No. 660, dated 15-9-1993.

Judicial analysis

Explained in - In Satya Pal Amrik Singh & Co. v. Union of India [1997] 228 ITR 653 (Punj. & Har.), the Court referred to paragraph 5 of the above circular, and observed :

. . . Vide circular dated September 15, 1993, the Central Board of Direct Taxes has clarified that section 206C(1) of the Act in relation to the buyer will not apply to public sector undertakings/companies and to any other buyer who obtains goods at a subsequent sale of such goods and the provisions of section 206C will apply only at the time of first sale. Admittedly, CITCO is a public sector undertaking and, therefore, the provisions of section 206C are not attracted in its case. If this position of CITCO is taken into consideration in the light of our finding that the sale of liquor by CITCO to L-14 licensees falls within the expression subsequent sale as used in paragraph 5 of the circular issued by the Central Board of Direct Taxes, there can be no escape from the conclusion that the deduction of tax at source from the petitioners is illegal and without jurisdiction. As a logical corollary, it has to be held that the provisions of section 206C as amended by the Finance Act, 1992, are not available to the Income-tax Department to compel CITCO to deduct income-tax at source from the petitioners. (p. 663)

Nature of returns

Month

Nature of returns

Month

JUDICIAL ANALYSIS

Nature of returns

Month

Nature of returns

Month

Nature of returns

Month

Nature of returns

Month

Signature of the person responsible for deduction of tax

SCHEDULE

Date of payment/credit

Amount paid/credited(Rs.)

Amount of income-tax deducted (Rs.)

Rate at which deducted

Date & Challan No. of deposit of tax into Central Government Account

Name of the bank and branch where tax deposited

Date of payment/credit

Amount paid/credited(Rs.)

Amount of income-tax deducted (Rs.)

Rate at which deducted

Date & Challan No. of deposit of tax into Central Government Account

Name of the bank and branch where tax deposited

Description of

Number of

Dates of

Amount of

Date(s) on

Signature of Declarant

Nature of goods

Percentage

Percentage

Percentage

Percentage