bill
draft direct taxes code bill, 2009
Direct Taxes Code Bill, 2009
A Bill to consolidate and amend the law relating to direct taxes.
Be it
enacted by Parliament in the Sixty First Year of the
CHAPTER-I
PRELIMINARY
Short
title, extent and commencement
1. (1) This Code may be called the Direct Taxes
Code, 2009.
(2) It extends
to the whole of
(3) Save as
otherwise provided in this Code, it shall come into force on the 1st day of
April, 2011.
PART-A
INCOME-TAX
CHAPTER - II
BASIS OF CHARGE
Liability
to pay income-tax
2. (1) Subject to the provisions of this Code,
every person shall be liable to pay income-tax in respect of his total income
for the financial year.
(2) The
liability to pay income-tax, referred to in sub-section (1), shall be the
amount of income-tax calculated at the rate specified in the First Schedule and
in the manner provided therein.
(3) However,
if a person is a company, the liability to pay income-tax referred to in
sub-section (1) shall be the higher of the following amounts:-
(a) the amount of the liability calculated under sub-section (2); and
(b) the amount calculated at the rate specified in Paragraph A of the
Second Schedule and in the manner provided therein.
(4) The liability
to pay income-tax shall be discharged by payment of pre-paid taxes in
accordance with the provisions of this Code.
(5) Without
prejudice to the foregoing and subject to the provisions of this Code, every
person may be charged in respect of his liability to pay income-tax referred to
in sub-section (1).
(6) The
income-tax charged under the foregoing provisions shall be collected after
allowing credit for pre-paid taxes, if any, in accordance with the provisions
of this Code.
(7) The
liability to pay income-tax, or the chargeability thereof, under the foregoing
provisions, for any financial year, shall be determined in accordance with the
provisions of this Code as they stand on the 1st day of April immediately
succeeding the last day of the financial year.
Scope of
total income
3. (1) Subject to the provisions of this Code,
the total income for any financial year of a person, who is a resident, shall
include all income from whatever source derived which-
(a) accrues, or is deemed to accrue, to him in
(b) accrues to him outside
(c) is received, or is deemed to be received, by him, or on his behalf,
in
(d) is received by him, or on his behalf, outside
(2) Subject to
the provisions of this Code, the total income for any financial year of a
person, who is a non-resident, includes all income from whatever source derived
which-
(a) accrues, or is deemed to accrue, to him in
(b) is received, or is deemed to be received, by him, or on his behalf,
in
(3) Any income
which accrues to a resident outside
(a) the income having been charged to tax outside
(b) the method for granting of relief for the avoidance of double
taxation under any agreement referred to in section 258.
Residence
in
4. (1) An individual shall be resident in
(a) ‘for a period, or periods, amounting in all to one hundred and
eighty-two days, or more, in that year; or
(b) for a period, or periods, amounting in all to -
(i) sixty days, or more, in that year, and
(ii) three hundred and sixty-five days, or more,
within the four years immediately preceding that year.
(2) The
provisions of clause (b) of sub-section (1) shall not apply in respect
of an individual who is-
(a) a citizen of
(b) a citizen of
(c) a citizen of
(3) A company
shall be resident in
(a) it is an Indian company; or
(b) its place of control and management, at any time in the year, is
situated wholly, or partly, in
(4) However,
every other person shall be resident in
Income
deemed to accrue in India
5. (1) The income shall be deemed to accrue in
(a) a business connection in
(b) a property in
(c) an asset or source of income in
(d) the transfer, directly or indirectly, of a capital asset situate in
(2) Without
prejudice to the generality of the provisions of sub-section (1), the following
income shall be deemed to accrue in
(a) income from employment, if it is for-
(i) service rendered in
(ii) service rendered outside
(iii) the rest period, or leave period, which
precedes, or succeeds, the period of service rendered in
(b) dividend received outside
(c) interest accrued from the Government or any resident;
(d) interest accrued from any non-resident, if the interest is in respect
of any debt incurred and the debt is used for the purposes of-
(i) a business carried on by the non-resident in
(ii) earning any income from any source in
(e) royalty accrued from the Government or any resident;
(f) royalty accrued from a non-resident, if the royalty is for the
purposes of -
(i) a business carried on by the non-resident in
(ii) earning any income from any source in
(g) fees for technical services accrued from the Government or any
resident;
(h) fees for technical services accrued from any non-resident, in
respect of services utilised for the purposes of,-
(i) a business carried on by the non-resident in
(ii) earning any income from any source in
(i) transportation charges accrued from the
Government or any resident;
(j) transportation charges accrued from any non-resident, if the
transportation charges are in respect of the carriage to, or from, a place in
(3) For the
purposes of clause (a) of sub-section (1), in the case of a business of
which all the operations are not carried out in India, the income of the
business deemed to accrue in India shall be only such part of the income as is
reasonably attributable to those operations carried out in India.
(4) The income
deemed to accrue in
(a) any income accruing through, or from, operations which are confined
to the purchase of goods in
(b) interest accrued from a resident, in respect of any debt incurred
and used for the purposes of,-
(i) a business carried on by the resident outside
(ii) earning any income from any source outside
(c) royalty accrued from a resident for the purposes of,-
(i) a business carried on by the resident outside
(ii) earning any income from any source outside
(d) royalty consisting of lump sum consideration accrued from a resident
for the transfer of any rights (including the granting of a licence) in respect
of computer software supplied by a non-resident manufacturer, along with a
computer or computer-based equipment, under any scheme approved under the
Policy on Computer Software Export, Software Development and Training, 1986 of
the Government of India.
(e) fees for technical services, accrued from a resident, in respect of
services utilised for the purposes of,-
(i) a business carried on by the resident outside
(ii) earning any income from any source outside
(f) transportation charges for the carriage by aircraft or ship,
accrued from any resident, if the transportation charges are in respect of the
carriage from a place outside
(5) The
provisions of sub-section (2) shall be applicable regardless of the fact that,-
(a) the payment is made outside
(b) the services are rendered outside
(c) the income has otherwise not accrued in
Income deemed
to be received in the financial year
6. The following income shall be deemed to be
received in the financial year:—
(a) any contribution made by the employer, in the financial year, to
the account of an employee with any permitted savings intermediary referred to
in sub-section (2) of section 66.
(b) any contribution made by the employer to any fund, other than an
approved fund, or the interest thereon.
Total
income to include income of any other person
7. (1) The total income of any person shall include
the following income of any other person:—
(a) any income transferred, whether revocable or not, to any other
person without transferring the asset from which the income accrues;
(b) any income accruing from an asset transferred to any trust, if the transfer
is revocable during the life time of the beneficiary of the trust; and
(c) any income accruing from an asset transferred to any other person,
not being a trust, if the transfer is revocable during the lifetime of such
other person.
(2) For the purpose
of this section, -
(a) a transfer shall be deemed to be revocable if -
(i) it contains any provision for the re-transfer,
directly or indirectly, of the whole or any part of the income or assets to the
transferor; or
(ii) it, in any way, gives the transferor a right
to re-assume power, directly or indirectly, over the whole or any part of the
income or assets;
(b) a transfer shall include any settlement, trust, covenant, agreement
or arrangement.
Total income
to include income of spouse, minor child, etc.
8. (1) The total income of any individual shall
include, -
(a) all income which accrues, directly or indirectly, -
(i) to the spouse, by way of salary, commission,
fees or any other form of remuneration, from a concern in which the individual
has a substantial interest other than any income solely attributable to the
application of the technical or professional knowledge and experience of the
spouse;
(ii) from assets transferred, directly or indirectly,
to the spouse by the individual, otherwise than for adequate consideration, or
in connection with an agreement to live apart; and
(iii) from assets transferred, directly or
indirectly, to any other person by the individual otherwise than for adequate consideration,
to the extent to which the income from such assets is for the immediate or
deferred benefit of the spouse;
(b) all income which accrues to a minor child (other than a minor child
being a person with disability or person with severe disability) of the
individual, other than income which accrues to the child on account of any-
(i) manual work done by the child; or
(ii) activity involving application of the skill,
talent or specialised knowledge and experience of the child;
(c) all income derived from any converted property or part thereof;
(d) all income derived from any converted property which is received by
the spouse or minor child upon partition of the Hindu undivided family of which
the individual is a member.
(2) The income
referred to in sub-clause (i) of clause (a) of sub-section (1)
shall, regardless of anything contained therein, be included in the total
income of the spouse whose total income (excluding the income referred to in
that sub-clause) is higher.
(3) The Board
may prescribe the method for determining the income referred to in sub-clause (ii)
of clause (a) of sub-section (1).
(4) The income
referred to in clause (b) of sub-section (1) shall be included in the total
income of-
(a) the parent who is the guardian of the minor child, if the other
parent is not a guardian; or
(b) the parent whose total income (excluding the income referred to in
that clause) is higher, if both the parents are guardians of the child;
Income not
included in the total income
9. The total income for a financial year of any
person shall not include any of the income enumerated in the Sixth Schedule.
Persons not
liable to income-tax
10. The persons specified in the Seventh Schedule
shall not be liable to income-tax under section 3 of this Code.
CHAPTER - III
COMPUTATION OF TOTAL INCOME
A. - General
Interpretation
11. For the purposes of this Chapter, unless
otherwise stated, reference to any accrual, receipt, expenditure, withdrawal, asset
or liability shall be presumed to be always in relation to -
(a) the financial year in respect of which the income is computed; and
(b) the person in respect of whom the income is computed.
Classification
of sources of income
12. For the purposes of computation of total
income of any person for any financial year, income from all sources shall be
classified under the following :
A. Income from special sources.
B. Income from ordinary sources.
Computation
of income from special sources
13. (1) Every item listed in the Table in rule 3
of the First Schedule shall be a special source.
(2) The income
accruing from any special source shall be computed under the class ‘income from
special sources’ in accordance with the provisions of the Ninth Schedule.
Computation
of income from ordinary sources
14. (1) The income accruing from a source, other
than the special sources, shall be computed under the class ‘income from
ordinary sources’.
(2) For the
purposes of computation under sub-section (1), all income accruing from a
source, other than the special sources, shall be classified under the following
heads of income:—
A. Income from employment.
B. Income from house property.
C. Income from business.
D. Capital gains.
E. Income from residuary sources.
Apportionment
of income between spouses governed by Portuguese Civil Code
15. (1) The income of the husband and wife,
governed by the communiao dos bens, under each special source shall be
apportioned equally between the spouses.
(2) The income
of the husband and wife, governed by the communiao dos bens, under each
head of income (other than that under the head ‘Income from employment’) shall
be apportioned equally between the spouses.
(3) The income
so apportioned under sub-sections (1) and (2) shall be included separately in
the total income of the spouses, respectively.
(4) The income
under the head “Income from employment” shall be included in the total income
of the spouse who has actually earned it.
Avoidance
of double taxation
16. (1) Any income which is included in the total
income for any financial year shall not be included in the total income for any
succeeding financial years.
(2) Any income
which is includible in the total income of any person shall not be included in
the total income of any other person, unless otherwise provided.
Expenditure
not to be allowed as deduction
17. (1) In computing the total income for any
financial year, the following shall not be allowed as a deduction, namely :—
(a) any expenditure attributable to income which does not form part of
the total income under this Code and determined in accordance with the method
as may be prescribed;
(b) any amount which has been allowed as a deduction in any preceding
financial year;
(c) any expenditure incurred for any purpose which is an offence or
which is prohibited by law;
(d) any provision made by the person for any liability if the liability
remains unascertained by the end of the financial year; and
(e) any expenditure referred to in clause (o) of sub-section (2)
of section 56.
(2) Any amount
allowed as a deduction under any provision of this Code shall not be allowed as
a deduction under any other provision of this Code.
(3) The
provisions of this section shall apply regardless of anything to the contrary
contained in any other provisions of this Chapter.
Amount not
deductible where tax is not deducted at source
18. (1) Any amount on which tax is deductible at
source under Chapter XI during the financial year shall not be allowed as a
deduction in computing the total income if,—
(a) the tax has not been deducted during the financial year; or
(b) the tax, after such deduction, has not been paid during the
financial year, or in the subsequent year, before the expiry of the time
prescribed under sub-section (1) of section 198.
(2) However,
the provision of sub-section (1) shall not apply, if the tax has been deducted
during the last quarter of the financial year and the tax is paid before the
due date of filing the return of tax bases.
(3) An
assessee shall be allowed a deduction in respect of the amount referred to in
sub-section (1) in any other succeeding financial year if,—
(a) the amount of tax deductible at source is actually paid in the
other financial year; and
(b) such other financial year is not later than two financial years
immediately succeeding the financial year in which tax was deductible at source
under Chapter XI.
B.-Income from Employment
Income from
Employment
19. The income derived by a person from any employment
shall be computed under the head “Income from employment”.
Computation
of income from Employment
20. The income computed under the head “Income
from employment” shall be the gross salary as reduced by the aggregate amount
of the deductions referred to in section 22.
Scope of
gross salary
21. The gross salary shall be the amount of
salary due or paid (including arrears or advance) to a person, by or on behalf
of his employer or former employer, in the financial year.
Deductions
from gross salary
22. (1) The deductions for the purposes of
section 20 shall be the following :—
(a) any sum paid on account of a tax on employment within the meaning
of clause (2) of Article 276 of the Constitution;
(b) the amount received from his employer for journey by the person
between his residence and office or any other place of work, to the extent
prescribed;
(c) any such special allowance or benefit specifically granted to meet
expenses wholly, necessarily and exclusively incurred in the performance of the
duties of an office or employment of profit, as may be prescribed, to the
extent to which such expenses are actually incurred for that purpose;
(d) the amount due or received, directly or indirectly, from his employer,
in connection with his voluntary retirement or termination of service or
voluntary separation under any scheme framed for this purpose in accordance
with such guidelines as may be prescribed;
(e) the amount of any gratuity received from one or more of his
employers, subject to limits as may be prescribed, if the amount is received—
(i) on his retirement, or on his becoming
incapacitated prior to such retirement, or on termination of his employment; or
(ii) by the spouse, children or dependants on the
death of the person.
(f) the amount of any death-cum-retirement gratuity received
under the Payment of Gratuity Act, 1972 or from the Central Government, State
Government, local authority or any public sector company;
(g) the amount received in commutation of pension under a scheme of his
employer, framed in accordance with the prescribed rules, to the extent of—
(i) one-third of the pension, in a case where he
receives any gratuity; and
(ii) one-half of such pension, in any other case;
and
(h) the amount of any pension received by an individual who has been in
the service of the Central Government or State Government and has been awarded
“Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry
award as the Central Government may, by notification in the Official Gazette,
specify in this behalf.
(2) The
deduction under clauses (d) to (g) of sub-section (1) shall be
allowed if the amounts referred to therein is paid to, or deposited in, a Retirement
Benefits Account maintained with any permitted savings intermediary in
accordance with the scheme framed and prescribed by the Central Government in
this behalf.
C.-Income from house property
Income from
House Property
23. (1) The income from any house property owned
by the person shall be computed under the head “Income from house property”.
(2) The income
from any house property shall be computed under this head notwithstanding that
the letting, if any, of the property is in the nature of trade, commerce or
business.
(3) The income
from any house property owned by two or more persons having definite and
ascertainable shares shall be computed separately for each such person in
respect of his share.
(4) The
provisions of this section shall not apply,—
(a) to any portion of the property which the person occupies for the
purposes of his business, the income from which is computed under the head
“Income from business”;
(b) to any property which is not ready for use during the financial
year.
Computation
of income from house property
24. The income from a property shall be the gross
rent as reduced by the aggregate amount of the deductions referred to in
section 26.
Scope of
gross rent
25. (1) The gross rent in respect of a property
shall be the higher of the amount of contractual rent and presumptive rent, for
the financial year.
(2) The
contractual rent referred to in sub-section (1) shall be the rent receivable by
the assessee under a contract, whether in writing or otherwise.
(3) The
presumptive rent referred to in sub-section (1) shall be six per cent of—
(a) the ratable value fixed by any local authority in respect of the
property; or
(b) the cost of construction or acquisition of the property if no such
value has been fixed by the local authority.
(4) The gross
rent shall, regardless of anything to the contrary contained in sub-section
(1), be taken to be nil if the property consists of a house or part of a
house which is not let out.
(5) The
provisions of sub-section (4) shall not apply if—
(a) the house or part of the house is actually let during any part of
the financial year; or
(b) any other benefit is derived from it by the owner.
(6) The
provisions of sub-section (4) shall, in a case where a person owns more than
one house, apply only in respect of one house, which the person may specify at
his option.
Deductions
from gross rent
26. (1) The aggregate amount of deductions for
the purposes of section 24 shall be the following :—
(a) the amount of taxes levied by a local authority in respect of the
property if the amount is actually paid during the financial year;
(b) the amount of tax on services paid to the Central Government in
respect of rent, if the amount is actually paid during the financial year;
(c) a sum equal to twenty per cent of the gross rent determined under
section 25, towards repair and maintenance of the property;
(d) the amount of any interest,—
(i) on capital borrowed for the purposes of
acquiring, constructing, repairing, renewing or reconstructing the property, or
(ii) on capital borrowed for the purpose of
repayment of the capital referred to in sub-clause (i).
(2) The
aggregate amount of deduction referred to in sub-section (1) shall be nil in
respect of the property referred to in sub-section (4) of section 25.
Special
provision for advance rent received
27. The amount of rent received in advance shall
be included in the gross rent in the financial year to which the rent relates.
D.-Income from business
Income from
business
28. (1) The income from any business carried on
by the assessee at any time during the financial year shall be computed under
the head “Income from business”.
(2) For the
purpose of computing the income under the head “Income from business”, the
income of each business shall be computed separately.
(3) Any income
from a business after its discontinuance shall be deemed to be the income from
the business of the recipient in the year of receipt and shall, accordingly, be
computed under the head “Income from business”.
Distinct
and separate business
29. (1) A business shall be distinct and separate
from another business if there is no interlacing, inter-dependence or unity
embarrassing the two businesses.
(2) A business
shall be deemed to be distinct and separate from another business, if—
(a) the unit of the business is processing, producing or manufacturing
the same goods as in the other business and such unit is located physically
apart from other unit;
(b) the unit of the business is producing, processing or manufacturing
the same goods as in the other business and utilizes raw material or
manufacturing process, which is different from the raw material or the
manufacturing process of the other unit;
(c) separate books of account are maintained or capable of being
maintained, for such business; or
(d) it is a business in respect of which profits are determined under
sub-section (2) of section 30.
(3)
Speculative transactions carried on in the nature of a business (‘speculative business’)
shall be deemed to be distinct and separate from any other business.
Computation
of income from business
30. (1) The income computed under the head
“Income from business” shall be the profits of the business.
(2) The
profits of the business specified in column (2) of Table 1 shall be computed in
accordance with the rules contained in the schedule specified in the
corresponding entry in column (3) of the said Table.
Table-1
|
Sr. No. |
Nature of Business |
Schedule |
|
(1) |
(2) |
(3) |
|
1. |
Business of
operating a qualifying ship |
Tenth
Schedule |
|
2. |
Business of
mineral oil or natural gas |
Eleventh
Schedule |
|
3. |
Business of
developing a special economic zone |
Twelfth
Schedule |
|
4. |
Business specified
in Rule 1 of the Thirteenth Schedule |
Thirteenth
Schedule |
|
5. |
Business
listed in column (2) of the Table in the Fourteenth Schedule whose income is
determined on presumptive basis |
Fourteenth
Schedule |
(3) The profits
of any other business shall be the gross earnings from the business as reduced
by the amount of business expenditure incurred by the assessee.
Gross
earnings
31. (1) The gross earnings referred to in section
30 shall be the aggregate of the following :—
(i) the amount of any accrual or receipt from, or
in connection with, the business;
(ii) the value of any benefit or perquisite,
accrued or received from, or in connection with, the business; and
(iii) the value of the inventory of the business, as
on the close of the financial year.
(2) The
accruals or receipts referred to in sub-section (1) shall, without prejudice to
the generality of the provisions of that sub-section, include the following :—
(i) the amount of any compensation or other
payment, accrued or received, for—
(a) termination or modification of a business
agreement or agency; or
(b) vesting of the management of any property or
business
(ii) any consideration, accrued or received under an
agreement for non-compete;
(iii) the value of any benefit or perquisite accrued
to, or received by, a person, being a trade, professional or similar
association, in respect of specific services performed for its members;
(iv) the amount of profits on sale of any licence
obtained in connection with the business;
(v) the amount of profits on transfer of any right
or benefit (by whatever name called) accrued or received under any scheme
formulated by the Government, local authority or a corporation established
under any law;
(vi) the amount of cash assistance, subsidy or
grant, by whatever name called, received from any person for, or in connection
with, the business other than to meet any portion of the cost of any business
capital asset;
(vii) the amount of any remission, drawback or
refund of any tax, duty or cess, received from the Government;
(viii) the amount of interest or remuneration
(including salary, bonus and commission) accrued to, or received by, a
participant of an unincorporated body;
(ix) any sum received under a Keyman insurance
policy including the sum allocated by way of bonus on such policy;
(x) the amount of profit on transfer of any
business capital asset computed in accordance with the provisions of section
40;
(xi) any consideration accrued or received on
account of slump sale;
(xii) the amount of any benefit accrued to, or
received by, the person or the successor in business, if—
(a) it is by way of remission or cessation of any
trading liability or statutory liability or it is in respect of any loss or
expenditure; and
(b) the trading liability or statutory liability
or loss or expenditure has been allowed as deduction in any financial year;
(xiii) the amount of reduction, remission or cessation
of any liability by way of loan, deposit, advance or trade credit;
(xiv) the amount recovered from a trade debtor, to
the extent determined under sub-sections (4) and (5);
(xv) the amount withdrawn from any special reserve
created and maintained under any provision of this Code or the Income-tax Act,
1961, for which deduction has been allowed, if the amount is not utilised for
the purpose and within the period specified therein;
(xvi) the amount accrued or received from his
employees as their contribution to any fund for their welfare;
(xvii) the amount accrued or received on sale of any
business capital asset used for scientific research and development;
(xviii) any income from a business, received after its
discontinuance;
(xix) any consideration accrued or received in
respect of transfer of any business capital asset self generated in the course
of the business;
(xx) any amount accrued or received on account of
the cessation, termination or forfeiture of any agreement entered in the course
of the business;
(xxi) any amount accrued or received, whether as
advance, security deposit or otherwise, from the long term leasing, or transfer
of,—
(a) whole or part of any business asset; or
(b) any interest in any business asset;
(xxii) any amount accrued or received as
reimbursement of any expenditure incurred;
(xxiii) any interest accrued to, or received by, a
person being a permitted financial institution; and
(xxiv) any payment or aggregate of payments made to a
person in a day, otherwise than by an account payee cheque drawn on a bank or
account payee bank draft, if—
(a) the payment or aggregate of payments is in
respect of any expenditure referred to in sub-section (1) of section 32;
(b) the expenditure is allowable as a deduction in
any financial year;
(c) the payment or aggregate of payments exceeds a
sum of—
(I) thirty thousand rupees if the payment is made
for carriage of goods by road; and
(II) twenty thousand rupees in any other case;
(d) it has not been incurred in such cases and
under such circumstances, as may be prescribed;
(xxv) any amount standing to the credit of the Fund
referred to in section 75, if—
(a) income-tax has not been paid on such amount in
any financial year preceding the relevant financial year; and
(b) the amount is shared during the relevant
financial year, either wholly or in part, with a recognised stock exchange or
recognised commodity exchange.
(3) The gross
earnings from business shall not include the following, namely :—
(a) dividend;
(b) interest other than interest accrued to, or received by, a person
being a permitted financial institution;
(c) income from letting of any house property owned by the person,
other than income from letting of any house property in the course of running a
hotel, convention centre or cold storage;
(d) income from the transfer of an investment asset;
(e) the reduction or remission of any liability by way of loan, deposit
or advance received by a person, being an individual, from his relative.
(4) The amount
of recovery from a trade debtor, referred to in clause (xiv) of
sub-section (1), shall be the amount determined in accordance with the formula—
A-(B + C + D)
|
Where, |
A |
= |
amount recovered
from the debtor during the financial year; |
|
|
B |
= |
amount of
the debt outstanding in the account of the debtor at the beginning of the
financial year; |
|
|
C |
= |
amount of debt
in respect of the debtor transferred to any other account and not allowed as
a deduction in any financial year; |
|
|
D |
= |
amount of
debt added during the financial year in respect of such debtor; and |
(5) The amount
referred to in sub-section (4) shall be nil if the amount ‘A’ in that
sub-section is less than the amount ‘B + C + D’ therein.
Deduction
for business expenditure
32. (1) The amount of business expenditure
referred to in section 30 shall be the aggregate of the amount of,—
(a) the operating expenditure referred to in section 33, incurred by
the person for the purposes of the business carried on during the financial
year;
(b) permitted finance charges referred to in section 34, incurred by
the person for the purposes of the business carried on during the financial
year;
(c) capital allowances referred to in section 35, in respect of the
business carried on by the person during the financial year.
(2) The provisions
for deduction of capital allowances referred to in sub-section (1) shall apply,
whether or not the person has claimed the deduction in computing the total
income.
(3) The
Assessing Officer may restrict the amount of deduction under this section to
such amount as he considers appropriate having regard to the use of the asset
for the purposes of the business if such asset is not exclusively used for the
purposes of the business.
Deduction
for operating expenditure
33. (1) The amount of
operating expenditure referred to in clause (a) of sub-section (1) of
section 32 shall be the aggregate of—
(a) the amount of expenditure specified in sub-section (2), if—
(i) the expenditure is laid out or expended, wholly
and exclusively, for the purposes of the business; and
(ii) it fulfils all other conditions, if any,
specified therein; and
(b) the amount of deductions specified in sub-section (3) subject to
the fulfilment of the conditions, if any, specified therein.
(2) The amount
of expenditure referred to in clause (a) of sub-section (1) shall be the
amount of expenditure on, or on account of,—
(i) purchase of raw material, stores, spares and
consumables, or stock-in-trade;
(ii) rent actually paid for any premises if it is
occupied by the person and used by him;
(iii) repairs to buildings if it is occupied and
used by the person and the repairs are current in nature;
(iv) land revenue, local rates or municipal taxes
in respect of premises occupied and used by the person;
(v) repair to, or replacement of parts of,
machinery, plant or furniture used by the person, if the repair or replacement
is current in nature;
(vi) maintenance of computer software or hardware;
(vii) salary or wages to employees;
(viii) remuneration to any working participant to the
extent it is in accordance with the agreement of the association and relates to
the period falling after the date of the agreement;
(ix) any premium paid to effect, or to keep in
force, an insurance in respect of,—
(a) any premise occupied and used by the person;
(b) any machinery, plant or furniture used by the
person;
(c) stocks or stores belonging to the person;
(d) the health of any employee of the person; and
(e) any other asset owned by the person;
(x) any premium paid by a person, being a federal
milk co-operative society, to effect, or to keep in force, an insurance in
respect of the cattle owned by a member of a primary society engaged in
supplying milk, raised by its members, to the person;
(xi) welfare of workmen and staff;
(xii) power and fuel;
(xiii) freight, clearing and forwarding charge;
(xiv) selling expense in the nature of commission,
brokerage, discount, or warranty charge;
(xv) sales promotion including advertisement and
publicity not exceeding the amount charged to profit and loss account;
(xvi) training of employees;
(xvii) conference;
(xviii) use of hotel or boarding and lodging
facilities;
(xix) conveyance, tour or travel;
(xx) repair, running or maintenance of motor car or
aircraft;
(xxi) postage and telecommunication;
(xxii) audit and such other professional fee;
(xxiii) legal expenses;
(xxiv) entertainment and provision of hospitality;
(xxv) maintenance of any accommodation in the nature
of guest-house;
(xxvi) subscription, including entrance fee, to a
club or a trade association or the use of their facilities;
(xxvii) festival celebration;
(xxviii) salary to an employee engaged in, or on the
purchase of material used in, scientific research and development, within three
years immediately preceding the commencement of the business;
(xxix) scientific research and development related to
the business;
(xxx) contribution by a person, being an employer, to
an approved fund subject to such limits and conditions, as may be prescribed
and to the extent the amount is actually paid;
(xxxi) contribution to the employees account in any
fund, referred to in clause (xvi) of sub-section (2) of section 31, to
the extent,—
(a) the amount has been received from his
employees as their contribution to the fund; and
(b) it is actually paid.
(xxxii) any head office expenditure by a non-resident,
as is attributable to his business in India, to the extent of an amount equal
to one-half per cent of the total sales, turnover or gross receipts;
(xxxiii) cost of acquisition of the asset as in the
case of the predecessor and cost of any improvement made thereto and
expenditure incurred wholly and exclusively in connection with the transfer of
the asset, by the predecessor, if—
(a) the person is the successor in the business
reorganisation;
(b) the asset becomes the property of the person
under a scheme of business reorganisation; and
(c) the asset is sold by the person as a business
trading asset;
(xxxiv) cost of acquisition of the asset as in the
case of the transferor or the donor, and cost of any improvement made thereto
and expenditure incurred wholly and exclusively in connection with the transfer
of the asset (including the payment of gift tax, if any), by the transferor or
the donor, if—
(a) the person is the transferee or the donee;
(b) the asset becomes the property of the person
on the total or partial partition of a Hindu undivided family or under a gift or
will or an irrevocable trust; and
(c) the asset is sold by the person as a business
trading asset;
(xxxv) protecting or safeguarding the goodwill of the
person, which has necessarily to be preserved for the purpose of his business;
(xxxvi) business reorganisation, dissolution or
liquidation of the business;
(xxxvii) tax, duty, cess, royalty or fee, by whatever
name called, under any law for the time being in force, if the amount is
actually paid;
(xxxviii) bonus or commission to employees for services
rendered if—
(a) the amount would not have been payable to
employees as profits or dividends had it not been paid as bonus or commission;
and
(b) the amount is actually paid;
(xxxix) encashment of leave to the credit of his
employees, to the extent the amount is actually paid; and
(xl) gratuity to his employees on their retirement
or on termination of their employment, to the extent the amount is actually
paid;
(xli) the objects and purposes of a body corporate,
authorised by the Central, State or Provincial Act under which it is
constituted or established and notified by the Central Government in the
Official Gazette for the purposes of this clause;
(xlii) the amount paid by a public financial institution
by way of contribution to a credit guarantee fund trust for small industries
which is notified by the Central Government in the Official Gazette for the
purposes of this clause; and
(xliii) the amount of any other expenditure.
(3) The amount
of deductions referred to in clause (b) of sub-section (1) shall be the
following :—
(a) the value of inventory of the business, as at the beginning of the
financial year;
(b) loss of inventory, or money, on account of theft, robbery, fraud or
embezzlement, occurring in the course of the business, if the inventory, or the
money, is written off in the books of account;
(c) any amount credited to the provision for bad and doubtful debts
account, not exceeding one per cent of the aggregate average advances computed
in the prescribed manner if,—
(i) the person is a permitted financial
institution;
(ii) the amount is charged to the profit and loss
account for the financial year in accordance with the prudential norms of the
Reserve Bank of India in this regard; and
(iii) the amount of trade debt or part thereof
written off as irrecoverable in the books of the person is debited to the
provision for bad and doubtful debts account;
(d) the debit balance, if any, on the last day of the financial year,
in the provision for bad and doubtful debts account made under clause (c),
if the balance has been transferred to the profit and loss account of the
financial year;
(e) trade debt or part thereof, if,—
(i) the person is not a permitted financial
institution; and
(ii) the amount is written off as irrecoverable in
the books of the person;
(f) payment to a creditor, determined in accordance with the formula—
A-(B + C)
|
Where- |
A |
= |
amount paid to
the creditor during the financial year in discharge of existing or remitted
liability which has been included in the total income by virtue of clause (xiii)
of sub-section (2) of section 31; |
|
|
B |
= |
amount of liability
outstanding in the account of the creditor at the beginning of the financial
year; |
|
|
C |
= |
amount of
liability added during the financial year in respect of the creditor; and |
the amount ‘A’ is greater than the
amount of ‘B+C’;
(g) the networth of any undertaking transferred under a slump sale;
(4)
Notwithstanding anything to the contrary contained in sub-section (2) or
sub-section (3) the amount of operating expenditure shall not include the
amount of expenditure, being in the nature of, or on account of,—
(a) personal expenses of the person;
(b) capital expenditure including expenditure in respect of which
capital allowance is allowable under section 35;
(c) finance charges;
(d) any unascertained liability of the person;
(e) remuneration payable to any sleeping participant;
(f) any expenditure incurred by a person on advertisement in any
souvenir, brochure, tract, pamphlet or the like published by a political party;
(g) wealth-tax; and
(h) any rate or tax,—
(i) levied on the profits of any business;
(ii) assessed at a proportion of, or otherwise on
the basis of, the profits of any business; or
(iii) paid which is eligible for relief of tax under
section 206 or section 258, as the case may be; and
(i) any dividend declared or distributed.
(5) Any amount
of expenditure or deduction referred to in sub-section (1) or sub-section (2)
or under section 34 or under section 35, which is not allowable by reason of
the fact that the expenditure is in violation of the condition, if any, or is
in excess of the amount, if any, specified therein, shall not be allowed as a
deduction under clause (xliii) of sub-section (2) only on the reasoning
that it is laid out or expended, wholly and exclusively, for the purposes of
business.
(6) The
deduction in respect of the amount referred to in clause (xxx), and
clauses (xxxvii) to (xl), of sub-section (2) shall,
notwithstanding anything contained in sub-section (1), be allowed in the
financial year in which the amount is actually paid or in the financial year in
which the liability has arisen, whichever is later.
Deductions
for permitted finance charges
34. (1) The amount of permitted finance charges
referred to in clause (b) of sub-section (1) of section 32 shall be :—
(a) the amount of interest paid on any capital borrowed or debt
incurred;
(b) the amount of interest paid to trade creditors;
(c) the amount of interest paid to any participant to the extent it is
in accordance with the agreement of the association and relates to the period
falling after the date of the agreement;
(d) the amount of any charge or fee paid in respect of any credit
facility which has not been utilized;
(e) the amount of any incidental financial charges;
(f) the proportionate amount of discount or premium payable on any bond
or debenture issued by the person, calculated in the manner as may be
prescribed.
(2) The amount
of permitted finance charges referred to in sub-section (1) shall not include—
(a) any amount paid in respect of capital borrowed or debt incurred for
acquisition of a capital asset (whether capitalized in the books of account or
not) for any period—
(i) in the case of a new business, prior to the
date of commencement of such business; and
(ii) in any other case, prior to the date on which
such asset was first put to use; and
(b) any amount of incidental financial charges for issue of debentures,
bonds or share capital.
(3) The amount
of interest on any capital borrowed or debt incurred, which is payable to any
permitted financial institution, shall be allowed as a deduction, regardless of
anything contained in sub-section (1), in the financial year in which the
amount is actually paid or in the financial year in which the liability has
accrued, whichever is later.
(4) Any
interest referred to in sub-section (3) which has been converted into a loan or
borrowing shall not be deemed to have been actually paid for the purposes of
that sub-section.
(5) For the
purposes of this section, ‘capital borrowed’ shall include recurring subscriptions
received periodically from shareholders, or subscribers, in Mutual Benefit
Societies, which fulfils such conditions as may be prescribed.
Computation
of capital allowances
35. (1) The amount of capital allowances referred
to in clause (c) of sub-section (1) of section 32 shall be the aggregate
of the amount in respect of,—
(a) depreciation of business capital assets;
(b) initial depreciation of business capital assets;
(c) terminal allowance; and
(d) scientific research and development allowance.
(2) The
depreciation, initial depreciation or terminal allowance, referred to in
sub-section (1), shall be allowed in respect of any business capital asset if
the asset is,—
(a) owned, wholly or partly, by the person; and
(b) used for the purposes of the business of the person.
(3) The
condition referred to in clause (a) of sub-section (2) shall not apply
in the case of a business capital asset being a capital expenditure on any
building which is held by the person under a lease or other right of occupancy.
(4) A business
capital asset shall be deemed to be owned by the person if he is a lessee in
terms of a financial lease.
Computation
of depreciation
36. (1) The amount of depreciation of business
capital assets referred to in section 35 shall be the aggregate of the
following :—
(a) such percentage of the adjusted value of any block of assets as
specified in the Fifteenth Schedule, in respect of all the business capital
assets forming part of the relevant block of assets specified therein; and
(b) nil, in respect of any other business capital asset not
forming part of any block of assets specified in the Fifteenth Schedule.
(2) The
depreciation allowance on assets referred to in section 35 shall, regardless of
the fact that all business capital assets in any block of assets have ceased to
exist by reason of being demolished, destroyed, discarded or transferred, be
allowed to a person in respect of the block of asset if the adjusted value of
the block of assets is greater than zero.
(3) The provision
of sub-section (2) shall not apply to any block of asset in respect of which
the percentage specified in the Fifteenth Schedule for computing depreciation
under sub-section (1) is zero.
(4) The
depreciation in respect of any business capital asset shall, regardless of
anything to the contrary contained in any other provision of the Code, be
deemed to have been actually allowed if,—
(a) the asset does not form part of any block of assets specified in
the Fifteenth Schedule; or
(b) the expenditure incurred for acquiring the asset has been allowed
as a deduction under any provision of this Code.
Deduction
for initial depreciation
37. (1) A person shall be allowed, in addition to
depreciation, an initial depreciation of business capital assets if,—
(a) the person is engaged in the business of manufacture or production
of any article or thing;
(b) the asset is a new asset forming part of the class of assets
‘Machinery and Plant’ in the Fifteenth Schedule;
(c) the asset was not used either within or outside
(d) the asset is not installed in any office premises or any
residential accommodation, including accommodation in the nature of a guest
house;
(e) the asset is not in the nature of any office appliances; and
(f) the whole of the actual cost of the asset is not allowed as a
deduction (whether by way of depreciation or otherwise) in computing the income
under the head “Income from business” of any one financial year.
(2) The
initial depreciation referred to in sub-section (1) shall be,—
(a) an amount equal to twenty per cent of the actual cost of the asset;
and
(b) allowed in the financial year in which the asset is installed and
used for the purposes of the business of the person.
(3) The
deduction under this section in respect of such asset shall be restricted to
fifty per cent of the sum referred to in sub-section (2) if—
(a) the asset is acquired by the assessee during the financial year;
and
(b) is used for the purposes of business for a period of less than one
hundred and eighty days in the relevant financial year.
Deduction
for terminal allowance
38. (1) A person shall be allowed a terminal
allowance in respect of a block of asset if,—
(a) the block of assets have ceased to exist by reason of being
demo-lished, destroyed, discarded or transferred during the financial year; and
(b) the percentage specified in the Fifteenth Schedule for computing
depreciation in respect of the block is zero.
(2) The
terminal allowance referred to in sub-section (1) shall be computed in
accordance with the formula—
A + B - C
|
Where |
A |
= |
the written
down value of the block of asset at the beginning of the financial year; |
|
|
B |
= |
the actual cost
of any asset falling within that block, acquired during the financial year;
and |
|
|
C |
= |
the amount
accrued or received in respect of the assets which are demolised, destroyed,
discarded or transferred during the financial year together with the value of
the carcass or the scrap, if any. |
(3) The
terminal allowance referred to in sub-section (1) shall be treated as ‘nil’,
if the net result of the computation, thereunder, is negative.
Deduction
for scientific research and development allowance
39. (1) A company shall be allowed a deduction
equal to one hundred and fifty per cent of the expenditure incurred on,—
(a) creating and maintaining an in-house facility for scientific
research and development; and
(b) carrying out scientific research and development in the in-house
facility.
(2) The
deduction under sub-section (1) shall be allowed if,—
(a) the company creates and maintains an in-house facility for carrying
out scientific research and development;
(b) the research facility is approved by the Central Government on the
basis of recommendation of the prescribed authority;
(c) the company enters into an agreement with the prescribed authority
for co-operation in the research and development facility and for audit of the
accounts maintained for that facility.
(3) The
approval granted by the prescribed authority to a predecessor shall be deemed
to have been granted to the successor if the approval is transferred to the
successor as a result of a business reorganisation.
(4) The
deduction under this section shall not be allowed to a company in respect of
the expenditure referred to in sub-section (1), if the expenditure is incurred
in the course of its business which is in the nature of scientific research and
development.
(5) The
provisions of sections 32 to 38 shall, as far as may be, apply to the
expenditure in respect of which deduction is not allowed under sub-section (4).
(6) The Board
may prescribe by rules the procedure for grant of approval by the prescribed
authority.
Profit on
transfer of a business capital asset
40. (1) The profits from transfer of a business
capital asset shall be computed in accordance with the formula -
A - (B + C)
|
Where |
A |
= |
the amount accrued
or received in respect of the asset, which is transferred, discarded,
demolished or destroyed during the financial year together with the amount of
scrap value, if any; |
|
|
B |
= |
the written
down value of,- (i) the block of asset at the beginning of the
financial year if the asset forms part of the block of asset specified in the
Fourteenth Schedule; and (ii) the asset at the beginning of the financial
year, in any other case. |
|
|
C |
= |
the actual cost
of any asset falling within that block, acquired during the financial year. |
(2) The profit
referred to in sub-section (1) shall be treated as ‘nil’, if the net
result of the computation, thereunder, is negative.
Special
provisions relating to business reorganisation
41. (1) The deduction for any capital allowance
referred to in section 35 shall, in a case where business reorganisation has
taken place during financial year, be allowed in accordance with the provisions
of this section.
(2) The amount
of deduction allowable to the predecessor shall be determined in accordance
with the formula -
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
the amount
of deduction allowable as if the business reorganisation had not taken place; |
|
|
B |
= |
the number
of days comprised in the period beginning with the 1st day of the financial
year and ending on the day immediately preceding the date of business
reorganisation; |
|
|
C |
= |
the total
number of days in the financial year in which the business reorganisation has
taken place. |
(3) The amount
of deduction to the successor shall be determined in accordance with the
formula -
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
the amount of
deduction allowable as if the business reorganisation had not taken place; |
|
|
B |
= |
the number
of days comprised in the period beginning with the date of business
reorganisation and ending on the last day of the financial year; and |
|
|
C |
= |
the total
number of days in the financial year in which the business reorganisation has
taken place. |
Meaning of
actual cost
42. (1) The actual cost of a business asset to
the assessee shall be computed in accordance with the formula-
|
[A - (B + C)] - (D × |
A) |
|
|
|
E |
|
|
Where |
A |
= |
cost of the
business asset to the assessee including the interest paid on the capital
borrowed for acquiring the asset for the period before the asset is put to
use; |
|
|
B |
= |
the amount paid
or payable as interest in connection with the acquisition of the asset for
any period after the asset is first put to use if the amount is included in
the amount ‘A’; |
|
|
C |
= |
the amount
of additional duty leviable under section 3 of the customs Tariff Act, 1975
or the amount of duty of excise, in respect of which a claim of credit has
been made and allowed under the Central Excise Rules, 1944; |
|
|
D |
= |
the amount
of subsidy, grant or reimbursement (by whatever name called) received by the assessee,
directly or indirectly, from the Central Government, a State Government, any
authority established under any law or by any other person in respect of, or
with reference to, any asset including the relevant asset; |
|
|
E |
= |
cost of all
the assets in respect of or with reference to which the amount ‘D’ is so
received. |
(2) The
Assessing Officer may, notwithstanding anything contained in sub-section (1),
determine, with the previous approval of the Joint Commissioner, the actual
cost if -
(a) the assets were business assets at any time before the date of
acquisition by the assessee; and
(b) the Assessing Officer is satisfied that the main purpose of the
transfer of the assets, directly or indirectly to the assessee, was the
reduction of a liability to income-tax (by claiming depreciation with reference
to an enhanced cost).
(3) The actual
cost of the business asset to the assessee shall be the deemed written down
value, if -
(a) the asset is acquired by the assessee by way of gift or inheritance
or under a slump sale; or
(b) the asset is converted by the assessee into a business asset in any
financial year; or
(c) the assessee is transferee holding or a transferee subsidiary
company.
(4) The actual
cost of a business asset to the assessee shall, in a case of sale and buy back
transaction in the business asset, be the lower of the following:-
(a) the actual price for which the asset is re-acquired by him; and
(b) the deemed written down value.
(5) The actual
cost of the business asset to a transferee assessee shall be the written down
value of the asset at the beginning of the financial year in the case of the
transferor if the transferor re-acquires the asset by way of lease, hire or
otherwise from the transferee assessee.
(6) The actual
cost of an asset to an assessee shall be the actual cost of the asset, as
reduced by an amount equal to the amount of depreciation calculated at the rate
in force that would have been allowable had the asset been used in India for
the said purposes since the date of its acquisition by the assessee if,—
(a) the assessee is a non-resident;
(b) the asset was acquired by him outside
(c) the asset is brought by him to
(7) The actual
cost of an asset being the prescribed preliminary expenses shall not exceed an
amount equivalent to five per cent of -
(a) the cost of the project, or
(b) at the option of the assessee being an Indian company, the capital
employed in the business.
(8) The actual
cost of an asset shall be treated as ‘nil’, if—
(a) deduction in respect of the cost of the asset has been allowed or
is allowable to the assessee under The Eleventh Schedule or The Twelfth
Schedule or The Thirteenth Schedule; or
(b) deduction in respect of the cost of the asset has been allowed or
is allowable under any of the aforesaid Schedules to any other person and the
assessee has acquired or received the asset by any of the ‘special modes of
acquisition’.
(9) The Board
may, for the purposes of determining the actual cost of a business asset,
prescribe-
(a) any other cost which may be included in determining the actual
cost; and
(b) the method of determining the actual cost in the circumstances
which are not provided for under this section.
(10) For the
purposes of this section, deemed written down value of a business asset shall
be the actual cost to the assessee or the previous owner, as the case may be,
when he first acquired the asset as reduced by the aggregate amount of
depreciation that would have been allowable to the assessee or the previous
owner, as the case may be, for the preceding financial year as if the asset was
the only asset in the relevant block of assets.
Meaning of
written down value, adjusted value of assets, etc.
43. (1) The written down value of any block of
asset at the beginning of the financial year shall be the written down value of
the block of assets at the close of the immediately preceding financial year.
(2) The
written down value of the block of assets at the close of the immediately
preceding financial year shall be the adjusted value of the block of assets in
the immediately preceding financial year as reduced by,—
(a) the amount of capital allowance, if any, allowed under section 35
during that year; and
(b) any expenditure incurred for acquiring the asset to the extent
allowed as a deduction in the financial year under any provision of this Code.
(3) The
adjusted value of any block of asset for any financial year shall be computed
in accordance with the formula -
(A+B) - (C+D+E)
|
Where |
A |
= |
the written
down value of the block of assets at the beginning of the financial year; |
|
|
B |
= |
actual cost
of any asset falling within the block, acquired during the financial year; |
|
|
C |
= |
moneys receivable
in respect of any asset falling within the block, which is sold or discarded
or demolished or destroyed during the financial year; |
|
|
D |
= |
amount of
the scrap value, if any; |
|
|
E |
= |
the aggregate
of the deemed written down value of the assets transferred by any of the
modes referred to in sub-section (3) of section 42. |
(4) The
adjusted value of any block of asset under sub-section (3) shall be ‘nil’
if the amount (C+D+E) exceeds the amount (A+B); or
(5) The
adjusted value of the block of assets acquired by a successor in a business
reorganisation for the financial year in which the business reorganisation has
taken place shall be the amount which would have been taken as the adjusted
value of the block of assets as if the business reorganisation had not taken
place.
(6) The
written down value of the block of assets acquired by a successor in a business
reorganisation on the last day of the financial year in which the business
reorganisation has taken place shall be determined in accordance with the
formula—
A - (B + C)
|
Where |
A |
= |
the adjusted
value determined under sub-section (5); |
|
|
B |
= |
the amount of
deduction allowed to the predecessor under sub-section (3) of section 41 in
respect of the asset; |
|
|
C |
= |
the amount
of deduction allowed to the successor under sub-section (4) of section 41 in
respect of the asset. |
(7) The written
down value of a block of asset comprising of any asset acquired in any
financial year from a country outside
A + (B-C) - D
|
Where A |
|
= |
the written down
value of the block of asset comprising of any asset acquired in any financial
year from a country outside India as determined in accordance with
sub-section (6) of section 42; |
|
|
B |
= |
the amount of
liability of the assessee, expressed in Indian rupees at the time of making
payment towards - (a) the whole or a part of the cost of the
asset; or (b) repayment of the whole or a part of the
moneys borrowed by him from any person, directly or indirectly, in any
foreign currency specifically for the purpose of acquiring the asset along
with interest, if any, |
|
|
C |
= |
the amount
of liability existing at the time of acquisition of the asset; |
|
|
D |
= |
the whole or
any part of the liability met, directly or indirectly, by any other person or
authority. |
(8) The amount
of liability of the assessee, expressed in Indian rupees at the time of making payment,
shall, in a case where the assessee has entered into a forward contract, be
computed with reference to the rate of exchange specified in such forward
contract.
(9) The Board
may prescribe -
(a) the method of determining the written down value or the adjusted
written down value of the block of assets as on the first day of the first
financial year;
(b) the method of determining the allocation of the written down value
or the adjusted written down value of the assets between the different
businesses carried on by the assessee; and
(c) the method of determining the written down value or the adjusted
written down value of the block of assets in the circumstances which are not
provided for under this section.
(10) For the
purposes of this section, the deemed written down value shall have the meaning
assigned to it in sub-section (10) of section 42.
E. - Capital gains
Capital
gains
44. (1) The income from the transfer of any
investment asset shall be computed under the head “Capital gains”.
(2) The income
under the head “Capital gains” shall, without prejudice to the generality of
the foregoing provisions, include the following, —
(a) income from the transfer referred to in clause (c) or clause
(d) of sub-section
(1) of section 45, if,—
(i) the parent company, or its nominee, ceases to
hold the whole of the share capital of the subsidiary company; or
(ii) the investment asset is converted by the
transferee into, or treated by it as, its business trading asset;
(b) the income from the transfer referred to in clause (e) of
section 45, if any of the conditions laid down in clause (16) or clause
(81), as the case may be, of section 284 is not complied with;
(c) the amount of withdrawal referred to in sub-section (4) of section
53 to the extent determined in accordance with the formula -
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
amount of
deduction claimed under section 53; |
|
|
B |
= |
the amount withdrawn
from the account under the capital gains deposit scheme, which is not
utilised for the purposes of purchase or construction of the new investment
asset within one month from the end of the month in which the amount is
withdrawn; |
|
|
C |
= |
the net
consideration as a result of the transfer of original investment asset; and |
(d) the amount of deposit referred to in sub-section (5) of section 53
to the extent determined in accordance with the formula -
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
amount of
deduction claimed under section 53; |
|
|
B |
= |
the balance
in the account referred to in sub-section (5) of section 53, of the assessee,
as on the first day of the financial year immediately following the three financial
years from the end of the financial year in which the transfer of the
original investment asset referred to in that section is effected; |
|
|
C |
= |
the net
consideration as a result of the transfer of original investment asset. |
Income from certain transfers not to be treated as capital gains
45. The income from the following transactions
shall not be included in the computation of income under the head “Capital
gains” :—
(a) distribution of any investment asset on the total or partial
partition of a Hindu undivided family;
(b) gift, or transfer under an irrevocable trust, of any investment
asset, other than sweat equity share;
(c) transfer of any investment asset by a company to its subsidiary
company, if—
(i) the parent company or its nominees hold the
whole of the share capital of the subsidiary company,
(ii) the subsidiary company is an Indian company;
and
(iii) the subsidiary company treats the asset as an
investment asset;
(d) transfer of any investment asset by a subsidiary company to the
holding company, if
(i) the whole of the share capital of the
subsidiary company is held by the holding company or its nominees,
(ii) the holding company is an Indian company, and
(iii) the holding company treats the asset as an investment
asset;
(e) transfer of any investment asset by a predecessor to a successor in
a scheme under a business reorganisation if the successor is neither a
non-resident nor a foreign company;
(f) transfer of any investment asset situated in
(i) the transfer is effected under a scheme of
amalgamation or demerger, as the case may be; and
(ii) the transfer does not attract tax on capital gains
in the country, in which the amalgamating or demerged company is incorporated;
(g) transfer of shares of a predecessor by a shareholder under a scheme
of business reorganisation, if -
(i) the transfer is made in consideration of the
allotment to the shareholder of shares in the successor amalgamated company;
and
(ii) the successor is neither a non-resident nor a
foreign company;
(h) transfer of bonds or global depository receipts by a non-resident
to another non-resident, if the transfer is made outside
(i) transfer of any work of art, archaeological,
scientific or art collection, book, manuscript, drawing, painting, photograph
or print, to the Government or a University or the National Museum, National
Art Gallery, National Archives or any other public museum or institution of
national importance or of renown throughout any State or States and notified by
the Central Government in the Official Gazette for this purpose;
(j) transfer by way of conversion of any bonds or debentures, debenture-stock
or deposit certificates in any form, of a company into shares or debentures of
that company;
(k) transfer by way of conversion of foreign exchange convertible bond
of a company into shares or debenture of any company;
(l) transfer of any securities, if—
(i) the transfer is effected under a scheme for
lending of any securities; and
(ii) the scheme is framed in accordance with the
guidelines issued by the Securities and Exchange Board of India, or the Reserve
Bank of
(m) transfer of any investment asset, if -
(i) the transferor is a company; and
(ii) the asset of the company is distributed to its
shareholders on its liquidation;
(n) transfer of a investment asset under a will;
Financial
year of taxability
46. (1) The income from the transfer of an
investment asset specified in column 2 of the Table 2 shall be the income of
the financial year specified in column 3 of the said Table :
Table-2: Financial year of taxability
|
Sl. No. |
Nature of transfer |
Financial
year |
|
(1) |
(2) |
(3) |
|
a. |
Transfer between parent and subsidiary
company, referred to in clause (c) or clause (d) of sub-section
(1) of section 45. |
(a)
in a case where the investment asset is converted by the transferee into, or
is treated by it as, business trading asset, the financial year in which the
business trading asset is sold; |
|
|
|
(b)
in the case of any other investment asset, the financial year in which the
parent company, or its nominee, ceases to hold the whole of the share capital
of the subsidiary company. |
|
b. |
Transfer in a scheme under a business
reorganisation, referred to in clause (e) of sub-section (1) of
section 45. is not complied with. |
The
financial year in which any of the conditions referred to in clause (16)
or clause (81), as the case may be, of section 284. |
|
c. |
Transfer by way of compulsory acquisition
under any law |
The
financial year in which the compensation or its part, as determined by the
Central or State Government or the Reserve bank of |
|
d. |
Transfer referred by way of conversion into,
or its treatment as business trading asset. |
The
financial year in which the converted or treated asset is sold or otherwise
transferred. |
|
e. |
Transfer by way of - (i) contribution of the asset,
whether by way of capital or otherwise, to a company or an unincorporated
body, in which the transferor is, or becomes, a shareholder or participant,
as the case may be; or (ii) the distribution of the asset on
account of dissolution of an unincorporated body. |
The
financial year in which the asset is transferred or distributed. |
|
f. |
Transfer by way of part performance of a
contract, referred to in sub-clause (i) of clause (287) of
section 284. |
The financial
year in which the possession of the immovable property is taken or retained. |
|
g. |
Transfer by way of damage or destruction
referred to in sub-clause (m) of clause (287) of section 284. |
The
financial year in which the money or asset is received. |
|
h. |
Transfer by way of distribution of the asset
to a participant in an unincorporated body on account of his retirement from
the body. |
The
financial year in which the money or the asset is distributed. |
|
i. |
Transfer by any mode other than the modes
referred to in serial numbers a to h. |
The
financial year in which the transfer took place. |
(2) The amount
referred to in clause (c) of sub-section (2) of section 44 shall, regardless
of anything to the contrary contained in sub-section (1), be the income of the
financial year in which the capital gains bond is transferred.
(3) The
amounts referred to in clause (d) and clause (e) of sub-section
(2) of section 44 shall, regardless of anything to the contrary contained in
sub-section (1), be the income of the financial year in which the amount is
withdrawn or of the fourth financial year immediately following the financial
year in which the transfer of the original asset is effected, respectively.
Computation
of income from the transfer of any investment asset
47. (1) The income from the transfer of any
investment asset during the financial year shall be the full value of the
consideration accrued or received as a result of the transfer, as reduced by
the aggregate amount of the deductions referred to in section 49.
(2) The income
from the transfer of each investment asset during the financial year, as
computed under sub-section (1), shall be aggregated and the result of such aggregation
shall be the ‘current income from capital gains’, for the financial year.
(3) The
‘current income from capital gains’ shall be aggregated with the ‘unabsorbed
preceding year capital loss’, if any, and the result of such aggregation shall
be the income under the head ‘Capital gains’.
(4) The income
under the head ‘Capital gains’ shall be treated as ‘nil’ if the result
of aggregation under sub-section (3) is negative and the absolute value of the
net result shall be the amount of ‘unabsorbed current capital loss’, for the
financial year.
Full value
of the consideration
48. (1) The full value of the consideration shall
be the amount received by, or accruing to, the transferor, directly or
indirectly, as a result of the transfer of the investment asset.
(2) The full
value of the consideration shall, notwithstanding anything contained in
sub-section (1), be,—
(a) the amount of compensation awarded in the first instance or, as the
case may be, the consideration determined or approved in the first instance by
the Central Government or the Reserve Bank of
(b) the fair market value of the asset as on the date of the transfer,
if the transfer is by the mode specified in sub-clause (d) of clause (287)
of section 284;
(c) the amount of consideration received, if the transfer is by the
mode specified in sub-clause (e) of clause (287) of section 284;
(d) the amount recorded in the books of account of the company or
unincorporated body as the value of the investment asset, if the transfer of
the investment asset is by the mode specified in sub-clause (f) of
clause (287) of section 284;
(e) the fair market value of the asset as on the date of the transfer,
if such transfer is by the mode specified in sub-clause (g) of clause (287)
of section 284;
(f) the amount of money, or the fair market value as on the date of the
receipt of any asset, received under an insurance from an insurer, if the
transfer of the investment asset is by the mode specified in sub-clause (m)
of clause (287) of section 284;
(g) the amount of money, or the fair market value as on the date of
distribution of any asset, received from a company under liquidation or
dissolution, as reduced by the amount of dividend within the meaning of
sub-clause (iii) of clause (89) of section 284, if the person is
a shareholder of the company;
(h) the amount of money, or the fair market value as on the date of
distribution of the asset, received by the participant, if the transfer of the
asset is by the mode specified in sub-clause (o) of clause (287)
of section 284;
(i) the fair market value as on the date of
transfer of the asset, if the transfer is by the mode, and the asset is of the
nature, specified in clause (b) of sub-section (1) of section 45;
(j) the higher of the stamp duty value of the asset and the value of
the asset ascertained on reference, if any, to the Valuation Officer.
(3) The
reference to the Valuation Officer referred to in sub-section (2) shall be
made, at the option of the assessee, if—
(i) the asset is land or building; and
(ii) the consideration accrued, or received, as a
result of the transfer of the asset is less than the stamp duty value of the
asset.
Deduction
for cost of acquisition, inflation-adjustment etc.
49. (1) The deductions for the purposes of
section 47 shall, in the case of an investment asset, be the following :—
(i) the amount of expenditure, if any, incurred
wholly and exclusively in connection with the transfer of the asset;
(ii) the cost of acquisition, if any, of the asset;
and
(iii) the cost of improvement, if any, of the asset.
(2) However,
if the investment asset is transferred at any time after one year from the end
of the financial year in which the asset is acquired by the assessee, the
deductions for the purposes of section 47 shall be the following:—
(i) the amount of expenditure, if any, incurred
wholly and exclusively in connection with the transfer of the asset;
(ii) the indexed cost of acquisition, if any, of
the asset;
(iii) the indexed cost of improvement, if any, of
the asset; and
(iv) the amount of relief for rollover of the asset, as determined under
section 53.
Indexed cost
of acquisition
50. (1) The indexed cost of acquisition of an
investment asset shall be the amount determined in accordance with the formula
-
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
the cost of
acquisition of the asset; |
|
|
B |
= |
the Cost Inflation
Index for the financial year in which the asset is transferred; |
|
|
C |
= |
the Cost
Inflation Index for the financial year immediately following the financial
year in which the asset was acquired by the person or for the financial year
beginning on the first day of April 2000, whichever is later. |
(2) The
indexed cost of improvement of an investment asset shall be the amount
determined in accordance with the formula -
|
|
A × B |
|
|
|
C |
|
|
Where |
A |
= |
the cost of
improvement; |
|
|
B |
= |
the Cost
Inflation Index for the financial year in which the asset is transferred; |
|
|
C |
= |
the Cost
Inflation Index for the financial year immediately following the financial year
in which the improvement to the asset took place or for the financial year
beginning on the first day of April 2000, whichever is later. |
Cost of
acquisition of an investment asset
51. (1) The cost of acquisition of an investment
asset, other than the asset referred to in sub-section (2) to sub-section (5),
shall be,—
(a) the purchase price of the asset, or
(b) at the option of the person, the fair market value of the asset on
the 1st day of April, 2000, if the asset is acquired by the person before such
date.
(2) The cost
of acquisition of an investment asset specified in column 2 of the Seventeenth
Schedule, acquired by the mode specified in column 3 of the said Schedule,
shall be the cost specified in column 4 therein.
(3) The cost
of acquisition of an investment asset acquired by the assessee by any of the
special modes of acquisition, shall be,-
(a) the cost for which the previous owner of the asset acquired it; or
(b) at the option of the person, the fair market value of the asset on
the 1st day of April, 2000, if the asset is acquired by the previous owner or
the person before such date.
(4) The cost
of acquisition of an investment asset forming part of a bundle of investment assets
acquired by any participant, on distribution of the asset to him on account of
his retirement from any unincorporated body, shall be the amount determined in
accordance with the formula -
A - (B + C)
|
where, |
A |
= |
the amount payable
to the participant as appearing in the books of account of the unincorporated
body on the date of distribution; |
|
|
B |
= |
any amount
attributable to the change in the value of the bundle on account of revaluation
of the bundle, if any, up to the date of distribution; and |
|
|
C |
= |
the cost of
acquisition of any other asset, if any, forming part of the bundle acquired
by the participant, on distribution of the asset to him on account of his
retirement from any incorporated body if the cost of acquisition has been
allowed as a deduction under section 49 in any earlier financial year. |
(5) The cost
of acquisition of an investment asset shall, regardless of anything to the contrary
contained in this section, be nil, if,—
(a) the asset is acquired by self-generation; or
(b) the cost of acquisition of the asset to the person or previous
owner, if any, is incapable of being determined or ascertained, for any reason.
(6) The Board
may, for the purposes of sub-section (1), prescribe the cost of acquisition of
any investment asset and the method of determination thereof, having regard to
the nature of the investment asset, mode of acquisition and the circumstances
in which the asset became the property of the person.
Cost of
improvement
52. (1) The cost of improvement of an investment
asset shall be any expenditure of a capital nature incurred in making any
additions or alterations to the asset,-
(a) by the person; or
(b) by the previous owner, if the asset is acquired by any special
modes of acquisition.
(2) The cost
of improvement of the investment asset, referred to in sub-section (1), shall,
in a case where the cost of acquisition of the asset is taken as fair market
value of the asset as on the 1st day of April, 2000, not include any capital
expenditure referred therein, which is incurred before the 1st day of April,
2000.
(3) The cost
of improvement of an investment asset shall, regardless of anything to the
contrary contained in sub-section (1), be ‘nil’ in relation to,—
(a) an investment asset acquired by self-generation;
(b) any investment asset if the cost of improvement is incapable of
being determined or ascertained, for any reason; and
(c) any undertaking transferred in slump sale.
Relief for
rollover of investment asset
53. (1) An individual or a Hindu undivided family
shall be allowed a deduction, in respect of rollover of any original investment
asset, from the capital gain arising from the transfer of the asset in
accordance with the provisions of this section.
(2) The
deduction referred to in sub-section (1) shall be computed in accordance with
the formula -
|
|
A × |
(B+C+D) |
|
|
E |
|
|
Where |
A |
= |
the amount of
capital gains arising from the transfer of the original asset; |
|
|
B |
= |
the amount
invested for purchase or in construction of the new asset within one year
before the beginning of the financial year in which the transfer of original investment
asset is effected; |
|
|
C |
= |
the amount
invested for purchase or in construction of the new asset during the
financial year in which the transfer of original investment asset is
effected; |
|
|
D |
= |
the amount deposited
in an account in any post office in accordance with the Capital Gains Deposit
Scheme framed by the Central Government in this behalf, by the end of the
financial year in which the transfer of original investment asset is
effected; |
|
|
E |
= |
the net
consideration received as a result of the transfer of the original asset. |
(3) The deduction computed under sub-section (2) shall not exceed the amount of capital gains arising from the transfer of the investment assets.
(4) Any amount
withdrawn from the account under the Capital Gains Deposit Scheme shall be
utilised within one month from the end of the month in which the amount is
withdrawn, for the purposes of purchase or construction of the new asset.
(5) The amount
deposited in the account under the Capital Gains Deposit Scheme shall be
utilised for the purposes of purchase or construction of the new asset within
three years from the end of the financial year in which the transfer of the
original asset is affected.
(6) The
deduction under this section in respect of capital gains arising from an
investment asset, specified in column (2) of Table-3, shall be allowed with
reference to the corresponding new investment asset referred to in column (3)
of the Table, subject to the fulfilment of conditions specified in column (4)
therein.
Table-3 : Deduction in respect of capital gains
|
Sl. No. |
Description of in the original investment asset |
Description of the new investment asset |
Conditions |
|
(1) |
(2) |
(3) |
(4) |
|
1. |
Agricultural land |
One or more
pieces of agricultural land. |
The original
investment asset was- (i) an agricultural land during two years
immediately preceding the financial year in which the asset is transferred;
and (ii) acquired prior to one year before the
beginning of the financial year in which the transfer of the asset took
place. |
|
2. |
Any investment
asset |
Residential
house. |
(i) The assessee does not own any residential house,
other than the new investment asset, on the date of transfer of the original
investment asset; and (ii) The original investment asset was acquired
prior to one year before the beginning of the financial year in which the
transfer of the asset took place. |
|
3. |
Any investment
asset |
Deposit in an
account maintained under the Capital Gains Savings Scheme |
(i) The original investment asset was acquired
prior to one year before the beginning of the financial year in which the transfer
of asset took place; and (ii) The deposit is made within a period of sixty
days from the date of transfer of the original investment asset. |
F.-Income from residuary sources
Income from
residuary sources
54. The income of every kind falling under the
class ‘income from ordinary sources’, shall be computed under the head “Income
from residuary sources”, if it is not required to be included in computing the
income under any of the heads specified in items A to D of section 14.
Computation
of income from residuary sources
55. The income computed under the head “Income
from residuary sources” shall be the gross residuary income as reduced by the
amounts referred to in section 57.
Gross
residuary income
56. (1) The gross residuary income shall include
all accruals, or receipts, in the nature of income, which do not form part of,-
(a) income from special sources; and
(b) income under any of the heads specified in items A to D of section
14.
(2) The gross
residuary income shall, regardless of anything to the contrary contained in
Part-B to Part-E of this Chapter and without prejudice to the generality of the
provisions of sub-section (1), include the following, namely:—
(a) dividends, other than dividends in respect of which dividend
distribution tax has been paid under section 99;
(b) interest, other than interest accrued to, or received by, permitted
financial institutions;
(c) income from the activity of owning and maintaining horses for
running in horse race;
(d) any amount received from his employees as contributions to any fund
set up for their welfare, if the income is not included under the head “Income
from business”;
(e) income from machinery, plant or furniture belonging to the person
and let on hire, if the income is not included under the head “Income from
business”;
(f) any sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy;
(g) any amount received under a Keyman insurance policy including the
sum allocated by way of bonus on such policy, if such income is not included
under the heads “Income from employment” or “Income from business”;
(h) the aggregate of any moneys and the value of any specified property
received, without consideration, by an individual or a Hindu undivided family;
(i) the amount of voluntary contribution received
by a person, other than an individual or a Hindu undivided family, from any
other person;
(j) any amount received, or retained, on account of settlement or
breach of any contract, if not included under the head “Income from business”;
(k) any payment or aggregate of payments made to a person in a day,
otherwise than by an account payee cheque drawn on a bank or account payee bank
draft, if -
(i) the payment or aggregate of payments is in
respect of any expenditure referred to in clause (a) of sub-section (1)
of section 57;
(ii) the expenditure is allowable as a deduction in
any financial year;
(iii) the payment or aggregate of payments exceeds a
sum of-
(A) thirty thousand rupees if the payment is made for carriage of goods
by road; and
(B) twenty thousand rupees in any other case; and
(iv) it has not been incurred in such cases and
under such circumstances, as may be prescribed;
(l) any amount found credited in the books of an
person maintained for the financial year, if -
(i) the person offers no explanation about the
nature and source thereof; or
(ii) the person offers an explanation but fails to
substantiate the explanation; or
(iii) the explanation offered by him is not, in the
opinion of the Assessing Officer, satisfactory;
(m) the value of any investment made by the person in the financial
year to the extent for which,—
(i) the person offers no explanation about the
nature and source of the investments; or
(ii) the person offers an explanation but fails to
substantiate the explanation; or
(iii) the explanation offered by him is not, in the
opinion of the Assessing Officer, satisfactory;
(n) the value of any money, bullion, jewellery or other valuable
article owned by the person to the extent for which,—
(i) the person offers no explanation about the
nature and source of acquisition of the money, bullion, jewellery or other
valuable article; or
(ii) the person offers an explanation but fails to
substantiate the explanation; or
(iii) the explanation offered by him is not, in the
opinion of the Assessing Officer, satisfactory;
(o) the amount of any expenditure incurred by the person in the
financial year, if—
(i) the person offers no explanation about the
source of such expenditure or part thereof; or
(ii) the explanation, if any, offered by him is
not, in the opinion of the Assessing Officer, satisfactory;
(p) any amount received as loan or deposit, otherwise than by an
account payee cheque or account payee bank draft, from any person, if the
aggregate amount of such loan or deposit exceeds twenty thousand rupees;
(q) any repayment of loan or deposit, otherwise than by an account
payee cheque or account payee bank draft, if the aggregate amount, including
interest, due to the payee, either in his own name or jointly with any other
person, on the date of such repayment exceeds twenty thousand rupees;
(r) any amount received, or withdrawn, under any circumstances, from
any account maintained with any permitted savings intermediaries, referred to
in sub-section (2) of section 66, representing,—
(i) the principal amount of the savings; or
(ii) interest, dividend, bonus, capital
appreciation or any other form of return on the investment, by whatever name
called;
(s) any amount deemed to be the income under sub-section (6) of section
71.
(t) the value of the net assets, held by any person on the first day of
the financial year in which the person ceases to be a non-profit organisation,
determined in the prescribed manner,
(u) any consideration accrued, or received, in respect of transfer of any
business asset, which is self-generated, if the consideration is not included
under the head ‘Income from business’;
(v) any amount accrued, or received, on account of the cessation,
termination or forfeiture of any agreement entered by the person, if the amount
is not included under the head ‘Income from business’;
(w) any amount accrued, or received, as reimbursement of any
expenditure incurred by the person, if the amount is not included under the
head ‘Income from business’;
(x) any amount received, or withdrawn, under any circumstances from the
account maintained under the Capital Gains Savings Scheme representing the
principal amount or any accretion thereto;
(y) any amount received, or withdrawn, under any circumstances from the
Retirement Benefit Account referred to in sub-section (2) of section 22,
representing the principal amount or any accretion thereto; and
(z) any amount accrued, or received, as advance, security deposit or
otherwise, from the long term leasing or transfer of whole or part of, or any
interest in, any investment asset.
(3) The amount
referred to in clause (h) of sub-section (2) shall not include any
amount received —
(a) from any relative;
(b) on the occasion of the marriage of the individual;
(c) under a will or by way of inheritance;
(d) in contemplation of death of the payer;
(e) from any local authority; or
(f) from any non-profit organisation.
(4) For the
purposes of this section,-
(a) ‘relative’ shall not include any person referred to in sub-clause (g)
of clause (233) of section 284;
(b) ‘specified property’ shall mean-
(i) immovable property being land or building or
both;
(ii) shares and securities;
(iii) jewellery;
(iv) archaeological collections;
(v) drawings;
(vi) paintings;
(vii) sculptures; or
(viii) any work of art;
(c) the assessee shall be deemed not to have received, or withdrawn,
any amount in the financial year from any account maintained with any permitted
savings intermediary, if the amount is used for,—
(i) purchasing an annuity plan; or
(ii) rolling over the amount from one account with
the permitted savings intermediary to any other account with the same or any
other permitted savings intermediary; and
(d) value of any property referred to in clause (h) of
sub-section (2) shall be,—
(i) the stamp duty value in the case of an
immovable property as reduced by the amount of consideration, if any, paid by
the assessee; and
(ii) the fair market value in the case of any other
property as reduced by the amount of consideration, if any, paid by the
assessee.
Deductions
57. (1) The amount of deductions referred to in
section 55 shall be the aggregate of -
(a) the amount of expenditure specified in sub-section (2), if -
(i) the expenditure is laid out or expanded,
wholly and exclusively, for the purposes of making or earning the gross
residuary income; and
(ii) it fulfils all other conditions, if any,
specified therein; and
(b) the amount of deductions specified in sub-section (3) subject to
the fulfilment of the conditions, if any, specified therein;
(2) The amount
of expenditure referred to in clause (a) of sub-section (1) shall be the
following :—
(a) any reasonable sum paid by way of remuneration or commission;
(b) the amount determined, so far as may be, in accordance with the
provisions of clause (ii), or clause (iii), of sub-section (2) of
section 33;
(c) the amount determined, so far as may be, in accordance with the
provisions of clause (xxxi) of sub-section (2) of section 33 in respect
of income of the nature referred to in clause (d) of sub-section (2) of
section 56;
(d) the amount determined, so far as may be, in accordance with the
provisions of section 35 and subject to the provisions of sub-section (3) of
section 32 in respect of income of the nature referred to in clause (e)
of sub-section (2) of section 56; and
(e) any other expenditure, not being in the nature of capital
expenditure.
(3) The amount
of deduction referred to in clause (b) of sub-section (1) shall be the
following —
(a) any sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy, if -
(i) the premium payable for any of the years
during the term of the policy does not exceed five per cent of the actual
capital sum assured; and
(ii) the sum is received only upon completion of
the original period of contract of the insurance or upon the death of the
insured;
(b) the amount equal to thirty-three and one-third per cent of income
or fifteen thousand rupees, whichever is less, in respect of family pension;
and
(c) the aggregate amount referred to in clause (h) of
sub-section (2) of section 56 to the extent the aggregate does not exceed fifty
thousand rupees.
(4) The amount
of deduction referred to in section 55 shall, in the case of the income
referred to in sub-section (6) of section 85, be a sum equal to fifty per cent
of the income, regardless of anything to the contrary contained in this
section.
(5) The
following amounts shall, regardless of anything to the contrary contained in
this section, not be allowed as a deduction, namely :—
(a) any amount relating to personal expenses of the person;
(b) any amount paid on account of wealth-tax; or
(c) any sum received under a Keyman insurance policy;
(6) The
provisions of sub-section (6) of section 33 shall, so far as may be, apply in
computing the income under this head as they apply in computing the income
under the head “Income from business”.
G. - Aggregation of income
Aggregation
of income under the class ‘Income from Ordinary Sources’
58. (1) The income under any head of income,
other than ‘Capital gains’, for any financial year shall be the aggregate of
the amount of income computed in respect of each source of income falling under
that head of income, for the financial year.
(2) The income
under any head of income for any financial year, as computed under sub-section
(1), shall be aggregated with the income under any other head of income
computed under that sub-section or section 47, for the financial year; and the
net result of the aggregation shall be the ‘current income from ordinary
sources’, for the financial year.
(3) The
‘current income from ordinary sources’ shall be aggregated with the ‘unabsorbed
preceding year loss from the ordinary sources’, if any; and the net result of
the aggregation shall be the ‘gross total income from ordinary sources’, for
the financial year.
(4) The ‘gross
total income from ordinary sources’, for the financial year, shall be treated
as ‘nil’, if the net result of the aggregation under sub-section (3) is
negative; and the absolute value of the net result shall be the amount of
‘unabsorbed current loss from ordinary sources’, for the financial year.
Aggregation
of income under the class ‘Income from Special Sources’
59. (1) The income from any special source
referred to in rule 3 of the First Schedule shall be the ‘current income from
the special source’, for the financial year.
(2) The
‘current income from the special source’ referred to in sub-section (1) shall
be aggregated with the ‘unabsorbed preceding year loss from the special
source’, if any; and the net result of the aggregation shall be the ‘gross
total income from the special source’, for the financial year.
(3) The ‘gross
total income from the special source’ referred to in sub-section (2) shall be
treated as ‘nil’, if the net result of the aggregation under sub-section
(3) is negative; and the absolute value of the net result shall be the amount
of ‘unabsorbed current loss from the special source’, for the financial year.
(4) The ‘gross
total income from any special source’ computed under the foregoing provisions
shall be aggregated with the ‘gross total income from any other special
source’, computed under the foregoing provisions, for the financial year; and
the net result of the aggregation shall be the ‘total income from special
sources’, for the financial year.
Determination
of total income
60. The total income of a person for any
financial year shall be computed in accordance with the formula—
(A - B) + C
|
Where |
A |
= |
the ‘gross total
income from ordinary sources’, for the financial year; |
|
|
B |
= |
the
aggregate amount of deductions allowed under sub-chapter I; and |
|
|
C |
= |
the ‘total
income from special sources’, for the financial year. |
Special provisions
relating to business reorganisation
61. (1) The provisions of this section shall
apply, if the successor satisfies the test of continuity of business.
(2) The
‘unabsorbed current loss from ordinary sources’ of the predecessor, in respect
of the financial year in which business reorganisation has taken place, shall
be deemed to be the ‘unabsorbed preceeding year loss from ordinary sources’ of
the successor in respect of the financial year; and the provisions of section
58 shall apply accordingly.
(3) The
‘unabsorbed current loss from special source’ of the predecessor for the
financial year in which business reorganisation has taken place, shall be
deemed to be the ‘unabsorbed preceding year loss from that special source’ of
the successor for the financial year; and the provisions of section 59 shall
apply accordingly.
(4) The
provision of this section shall not apply to a successor, if—
(a) the predecessor is a sole proprietary concern or an unincorporated
body; and
(b) the shareholding of the sole proprietor or the participant, as the
case may be, ceases to be less than fifty per cent of the total value of the
shares of the successor company at any time during the period of five years
immediately succeding the financial year in which the business reorganisation
takes place.
(5) The total
income of the financial year in which the business reorganisation took place
and all the subsequent financial years shall, regardless of anything to the
contrary contained in this Code, be rectified as if the provisions of this
section had never been given effect to in those financial years if the test of
continuity of business, or any of the conditions specified in sub-section (4),
is not satisfied at any time during five financial years immediately succeeding
the financial year in which the business reorganisation takes place.
Aggregation
of losses in case of change in constitution of unincorporated body
62. (1) The amount of ‘unabsorbed current loss
from ordinary sources’ calculated under sub-section (4) of section 58, for the
financial year ending on the date of the retirement, or death, of a
participant, shall be reduced by the amount in proportion of the share of the
retired, or deceased, participant.
(2) The amount
so reduced under sub-section (1) shall be the ‘unabsorbed preceding year loss
from ordinary sources’, for the financial year beginning on the date
immediately following the date of retirement, or death, of a participant for
the purposes of sub-section (3) of section 58.
(3) The amount
of ‘unabsorbed current loss from the special source’ calculated under
sub-section (3) of section 59, for the financial year ending on the date of the
retirement, or death, of a participant, shall be reduced by the amount in
proportion of the share of the retired, or deceased, participant.
(4) The amount
so reduced under sub-section (3) shall be the ‘unabsorbed preceding year loss
from the special source’, for the financial year beginning on the date
immediately following the date of retirement, or death, of a participant for
the purposes of sub-section (2) of section 59.
(5) The
provisions of this section shall apply notwithstanding anything to the contrary
contained in any other provision of this Code.
(6) For the purposes
of this Code, any reference to the ‘unabsorbed preceding year loss from
ordinary sources’ and ‘unabsorbed preceding year loss from the special source’
in respect of an unincorporated body where a change has occurred in its
constitution due to death, or retirement, of its participant, shall be
construed as a reference to the amount so reduced under sub-section (1) and
sub-section (3) respectively.
Aggregation
of losses in the case of certain companies
63. (1) A closely-held company shall, regardless
of anything to the contrary contained in this Chapter, not be allowed to
aggregate any ‘unabsorbed preceding year loss from ordinary sources’ or
‘unabsorbed preceding year loss from the special source’ with the income of the
financial year unless it satisfies the test of continuity of ownership.
(2) The
closely-held company shall satisfy the test of continuity of ownership referred
to in sub-section (1), if—
(a) the shares of the company beneficially held by persons, carrying
not less than fifty-one per cent of the voting power on the last day of the
financial year immediately preceding the relevant financial year, are held by
the same persons on the last day of the relevant financial year.
(3) For the
purposes of calculating the percentage of voting power under sub-section (2),—
(a) any change in the voting power in the relevant financial year due
to the death of a shareholder or on account of transfer of shares by way of
gift to any relative of the donor shareholder shall be ignored;
(b) any change in the shareholding of an Indian company, which is a
subsidiary of a foreign company, as a result of amalgamation or demerger of a
foreign company, shall be ignored, if fifty-one per cent shareholders of the
amalgamating or demerged foreign company continue to be the shareholders of the
amalgamated or the resulting foreign company.
Aggregation
of loss not to be allowed in the case of filing of return after due date
64. The amount of ‘unabsorbed current capital
loss’, ‘unabsorbed current loss from ordinary sources’ and the ‘unabsorbed
current loss from the special source’, for the financial year shall, regardless
of anything contained in any provision of this Code, be deemed to be ‘nil’,
if the return of income for the financial year is not furnished by the due date.
H. - Tax incentives
Deductions
to be made in computing total income
65. (1) A person shall be allowed the deductions
specified in this sub-chapter from his ‘gross total income from ordinary
sources’, for the financial year.
(2) The
aggregate amount of the deductions under this sub-chapter shall not exceed the
‘gross total income from ordinary sources’, for the financial year.
(3) The
aggregate amount of deductions under section 66 and section 67 shall not exceed
three hundred thousand rupees in any financial year.
(4) Any sum,
which qualifies for a deduction under this sub-chapter in any financial year,
shall not qualify for deduction—
(a) under any other provision of this Code for the same or any other
financial year; or
(b) in the case of any other person.
(5) The
provisions of sub-section (4) shall apply irrespective of whether full
deduction has been allowed, or not, in respect of the sum referred therein.
Deductions
for savings
66. (1) A person, being an individual or a Hindu
undivided family, shall be allowed a deduction in respect of the aggregate of
the sums referred to in sub-section (2) as does not exceed three hundred
thousand rupees.
(2) The sums
referred to in sub-section (1) shall be any sum paid to, or deposited in, any
account maintained with any permitted savings intermediary, during the
financial year.
(3) The sums
paid to, or deposited with, any account maintained with the permitted savings
intermediary shall include any sums paid for, or on behalf of, the assessee.
(4) The sums referred
to in sub-section (2) shall not include any sum paid to, or deposited, in any
account maintained with the permitted savings intermediary if the sum
represents the roll over of any amount received, or withdrawn, from one account
with the permitted savings intermediary to any other account with the same or
any other permitted savings intermediary;
(5) The
payment to, or deposit with, the permitted savings intermediary shall be made
in accordance with the scheme framed and prescribed by the Central Government
in this behalf.
Deductions
in respect of children’s education
67. (1) A person, being an individual or a Hindu
undivided family, shall be allowed a deduction in respect of any sum actually
paid during the financial year, if the sum is—
(a) paid as tuition fee to any university, college, school or other
educational institution situated within India; and
(b) for the purpose of full-time education of any two children of such
individual or Hindu undivided family.
(2) For the
purposes of this section,—
(a) tuition fee shall not include any payment towards any development
fees or donation or payment of similar nature;
(b) full time education shall include play schooling or pre-schooling.
Deduction
in respect of interest on loan taken for higher education
68. (1) A person, being an individual, shall be
allowed a deduction in respect of any amount actually paid by him in the
financial year by way of interest on loan taken by him from any financial
institution for the purpose of,—
(a) pursuing his higher education; or
(b) higher education of his relatives.
(2) The
deduction specified in sub-section (1) shall be allowed in respect of the
initial financial year and seven financial years immediately succeeding the
initial financial year or until the interest referred to in sub-section (1) is
paid by the person in full, whichever is earlier.
(3) For the
purposes of this section,—
(a) “financial institution” means a banking company or any other
financial institution which the Central Government may, by notification in the
Official Gazette, specify in this behalf;
(b) “higher education” means any course of study pursued after passing
the senior secondary examination, or its equivalent, conducted by any board, or
university, recognised by the Central or State Government or local authority or
by any other authority authorised by the Government or local authority to do
so;
(c) “initial financial year” means the financial year in which the
person begins to pay the interest on the loan; and
(d) “relative” means,—
(i) the spouse of the individual;
(ii) the child of the individual; or
(iii) the student for whom the individual is the
legal guardian.
Deduction
in respect of health insurance premia
69. (1) A person, being an individual or a Hindu undivided
family, shall be allowed a deduction in respect of any sum actually paid during
the financial year to effect, or to keep in force, an insurance on the health
of any specified person.
(2) The amount
of deduction under sub-section (1) shall not exceed in the aggregate—
(a) twenty thousand rupees, if the amount is paid in respect of a
specified person, who is a senior citizen; and
(b) fifteen thousand rupees, in any other case.
(3) A person,
being an individual, shall be allowed a further deduction in respect of any sum
actually paid during the financial year to effect, or to keep in force, an
insurance on the health of any of his parents.
(4) The amount
of deduction under sub-section (3) shall not exceed in the aggregate—
(a) twenty thousand rupees, if the amount is paid in respect of any of
the parents, who is a senior citizen; and
(b) fifteen thousand rupees, in any other case.
(5) The
insurance referred to in this section shall be in accordance with a health insurance
scheme framed in this behalf by any insurer and approved by the Insurance
Regulatory and Development Authority.
(6) For the
purposes of this section, “specified person” means,—
(a) the individual;
(b) the spouse;
(c) any dependant child of the individual; and
(d) any member of the Hindu undivided family.
Deduction
in respect of medical treatment, etc.
70. (1) An individual shall be allowed a
deduction in respect of any amount actually paid during the financial year for
medical treatment of the prescribed disease or ailment of any specified person.
(2) The amount
of deduction under sub-section (1) shall not exceed in the aggregate—
(a) sixty thousand rupees, if the amount is paid in respect of any
specified person, who is a senior citizen; and
(b) forty thousand rupees, in any other case.
(3) The
deduction under this section shall be reduced by the amount received, if any,
under an insurance from an insurer for the medical treatment of the specified
person.
(4) The
deduction under this section shall not be allowed unless the person obtains a
certificate in the prescribed form from a prescribed specialist working in a
Government hospital.
(5) For the
purposes of this section,—
(a) “specified person” means,—
(i) the individual,
(ii) the spouse;
(iii) any dependant child of the individual;
(iv) any of the dependant parents of the
individual; and
(v) any member of the Hindu undivided family; and
(b) “Government hospital” includes,—
(i) a dispensary established and run by a department
of the Government for the medical treatment of Government employees and members
of their family;
(ii) a hospital maintained by a local authority;
and
(iii) any other hospital with which an agreement has
been entered into by the Government for the treatment of its employees.
Deduction
in respect of maintenance of a disabled dependant
71. (1) A person, being an individual or a Hindu
undivided family, shall be allowed a deduction in respect of—
(a) any expenditure incurred during the financial year for the medical
treatment, nursing or training and rehabilitation of a disabled dependant; or
(b) any amount actually paid or deposited during the financial year
under a scheme framed by any insurer and approved by the Board in this behalf,
for the maintenance of a disabled dependant.
(2) The amount
of deduction under sub-section (1) shall not exceed in the aggregate—
(a) one hundred thousand rupees, if the dependant is a person with
severe disability; and
(b) fifty thousand rupees, in any other case.
(3) The
deduction in respect of the amount referred to in clause (b) of
sub-section (1) shall be allowed, if the scheme referred to therein provides
for payment of annuity or lump sum amount for the benefit of the disabled
dependant in the event of the death of the individual.
(4) The
person, claiming a deduction under this section, shall obtain a certificate
issued by the medical authority in the prescribed form and manner.
(5) The
deduction under this section shall be allowed during the period of validity of
the certificate referred to in sub-section (4).
(6) The amount
received by the person under the scheme referred to in clause (b) of
sub-section (1) upon the disabled dependant predeceasing him shall be deemed to
be the income of the person for the financial year in which the amount is
received by him.
(7) For the
purposes of this section,—
(a) “dependant” means the spouse, any child or any parent of the
individual, or any member of the Hindu undivided family, if,—
(i) he is mainly dependant on such individual, or
Hindu undivided family, for his support and maintenance; and
(ii) his annual income is less than twenty-four
thousand rupees;
(b) “disabled dependant” means a dependant who is referred to as person
in,—
(i) clause (t) of section 2 of the Persons
with Disabilities (Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995; or
(ii) clause (j) of section 2 of the National
Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation
and Multiple Disabilities Act, 1999;
Deduction
in respect of donations to certain funds, non-profit organisations, etc.
72. (1) A person shall be allowed a deduction of—
(a) one and one-fourth times of the amount of money actually paid by
him in the financial year as donation to any person specified in Part-A of the
Sixteenth Schedule;
(b) hundred per cent of the amount of money actually paid by him in the
financial year as donation to any person specified in Part-B of the Sixteenth
Schedule;
(c) fifty per cent of the aggregate of the amount of money actually
paid by him in the financial year as donation to any person specified in Part-C
of the Sixteenth Schedule.
(2) The
aggregate of the amount of money referred to in clause (c) of
sub-section (1) shall be limited to ten per cent of the gross total income, if
the aggregate exceeds ten per cent of the gross total income.
(3) The
deduction under this section shall not be allowed in respect of any amount of
money paid to any person referred to in sub-section (1) if,—
(a) the amount is laid out or expended during the financial year for
any religious activity; or
(b) any activity of the donee is intended for, or actually benefit, any
particular caste, not being a Scheduled Caste or Scheduled Tribe.
(4) The
donation to any person specified in Part-C of the Sixteenth Schedule shall be
eligible for deduction under sub-section (1), if the donee obtains the approval
of the prescribed authority in accordance with the procedure and subject to
such conditions, as may be prescribed.
(5) The
deduction under sub-section (1) shall not be denied to a donor merely on the
consideration that, subsequent to the donation, the donee, being a non-profit
organisation, has ceased to be so.
Deduction
in respect of political contributions
73. (1) A person shall be allowed a deduction in
respect of any contribution made by him in the financial year to any political
party or electoral trust.
(2) The
deduction under sub-section (1) shall not exceed five per cent of,—
(a) the average of the net profit determined in accordance with the
provisions of section 349 and section 350 of the Companies Act during the three
immediately preceding financial years, in the case of a company; and
(b) the ‘gross total income from ordinary sources’, in any other case.
(3) For the
purposes of this section, the word “contribution”, with its grammatical
variation, shall have the meaning assigned to it under section 293A of the
Companies Act, 1956.
Deduction
in respect of interest income on bonds
74. (1) A person shall be allowed a deduction of
the amount specified in sub-section (2), if the amount is included in the
‘gross total income from ordinary sources’.
(2) The amount
referred to in sub-section (1) shall be the income by way of interest on bonds—
(a) issued by a local authority or a State Pooled Finance Entity; and
(b) notified by the Central Government.
(3) The income
referred to in sub-section (2) shall be the gross interest on the bonds as
reduced by the expenses incurred for earning the interest.
(4) The
expenses referred to in sub-section (3) shall be determined in accordance with
the method prescribed under clause (a) of sub-section (1) of section 17.
Deduction
in respect of income of Investor Protection Fund
75. (1) A person shall be allowed in the
financial year a deduction of the amount specified in sub-section (2), if such
amount is included in the gross total income from ordinary sources.
(2) The amount
referred to in sub-section (1) shall be the contribution received from any
recognised stock exchange, or recognised commodity exchange, and the members
thereof.
(3) The
deduction under sub-section (1) shall be allowed if—
(a) the person is a Investor Protection Fund set up, either jointly or separately,
by recognised stock exchanges or recognised commodity exchanges; and
(b) the Fund is notified by the Central Government.
Deduction
in respect of certain income of trade unions
76. (1) A person shall be allowed a deduction of
the amount specified in sub-section (2), if such amount is included in the
‘gross total income from ordinary sources’.
(2) The amount
referred to in sub-section (1) shall be the income chargeable under the heads
“Income from house property” and “Income from other sources”.
(3) The
deduction under sub-section (1) shall be allowed if the person is—
(a) a registered union within the meaning of the Trade Unions Act,
1926; or
(b) an association of registered unions referred to in sub-clause (a).
Deduction
in respect of royalty income, etc., of authors of certain books
77. (1) A person shall be allowed a deduction of
an amount specified in sub-section (4) in respect of any income referred to in
sub-section (3), if such income is included in his ‘gross total income from
ordinary sources’.
(2) The
deduction under sub-section (1) shall be allowed to a person, if he—
(a) is a resident individual; and
(b) is an author of,—
(i) any book which is a work of literary, artistic
or scientific nature; or
(ii) any other book certified as text-book by a
prescribed authority.
(3) The income
referred to in sub-section (1) shall be any income, derived by the person in
the exercise of his profession, by way of—
(a) lump sum consideration for the assignment or grant of any of his
interest in the copyright of the book referred to in sub-section (2); or
(b) royalty or copyright fees (whether receivable in lump sum or
otherwise) in respect of the book referred to in sub-section (2).
(4) The amount
of deduction under sub-section (1) shall be the amount of income referred to in
sub-section (3) to the extent it does not exceed three hundred thousand rupees.
(5) For the
purposes of this section, “books” shall not include brochures, commentaries,
diaries, guides, journals, magazines, newspapers, pamphlets, tracts and other
publications of similar nature by whatever name called.
Deduction
in respect of royalty on patents
78. (1) A person shall be allowed a deduction of
an amount specified in sub-section (4) in respect of any income referred to in
sub-section (3), if such income is included in his ‘gross total income from
ordinary sources’.
(2) The
deduction under sub-section (1) shall be allowed to a person, if he is a
resident individual and a patentee.
(3) The income
referred to in sub-section (1) shall be any income received by the person by
way of royalty in respect of a patent registered on or after the 1st day of
April, 2003 under the Patents Act, 1970.
(4) The amount
of deduction under sub-section (1) shall be the amount of income referred to in
sub-section (3) to the extent it does not exceed,—
(a) the amount of royalty allowable under the terms and conditions of a
license settled by the Controller under the Patents Act, 1970, if a compulsory
licence is granted in respect of any patent under that Act; and
(b) three hundred thousand rupees.
Deduction
in case of a person with disability
79. (1) A person shall be allowed a deduction of
an amount specified in sub-section (2) subject to the conditions specified in
sub-section (3).
(2) The amount
of deduction under sub-section (1) shall be—
(a) one hundred thousand rupees, if he is a person with severe
disability; and
(b) fifty thousand rupees, if he is a person with disability.
(3) The
deduction under sub-section (1) shall be allowed, if the person—
(a) is a resident individual; and
(b) obtains a certificate from a medical authority in the prescribed
form and manner.
(4) The
deduction under this section shall be allowed during the period of validity of the
certificate referred to in sub-section (3).
Deduction
in respect of income of co-operative society from banking activities
80. (1) A person, being a primary co-operative
society, shall be allowed a deduction to the extent of profits derived from the
business of providing banking, or credit, facility to its members.
(2) For the
purposes of this section ‘primary co-operative society’ means,—
(a) a ‘primary agricultural credit society’ within the meaning of Part
V of the Banking Regulation Act, 1949; or
(b) a “primary co-operative agricultural and rural development bank”,
which—
(i) has its area of operation confined to a taluk;
and
(ii) is mainly engaged in providing long-term
credit for agricultural and rural development activities.
Deduction
in respect of income of primary co-operative societies
81. (1) A person, being a primary co-operative
society, shall be allowed a deduction in respect of the aggregate of the
amounts referred to in sub-section (2).
(2) The amount
referred to in sub-section (1) shall be—
(a) the amount of profits derived from agriculture or
agriculture-related activity; and
(b) the amount of income derived from any other activity, to the extent
it does not exceed one hundred thousand rupees.
(3) For the
purposes of this section,—
(a) “agriculture-related activities” means the following activities,
namely :—
(i) purchase of agricultural implements, seeds,
livestock or other articles intended for agriculture for the purpose of
supplying them to its members;
(ii) the collective disposal of,—
(A) agricultural produce grown by its members; or
(B) dairy or poultry produce of its members; and
(iii) fishing or allied activities, that is to say,
the catching, curing, processing, preserving, storing or marketing of fish or the
purchase of material and equipment in connection therewith for the purpose of
supplying them to its members;
(b) “primary co-operative society” means a co-operative society whose
rules and bye-laws restrict the voting rights to individuals engaged in agriculture
or agricultural-related activities.
Expenditure
for promoting family planning and preventing HIV-aids
82. A company shall be allowed a deduction of an
amount equal to the expenditure incurred for the purposes of,—
(a) promoting family planning amongst its employees; or
(b) preventing HIV-aids amongst its employees.
Maintenance
of accounts
83. (1) Every person shall keep and maintain such
books of account and other documents as may enable the Assessing Officer to
compute his total income in accordance with the provisions of this Code.
(2) Every
person who has entered into an international transaction shall keep and
maintain such information and document in respect thereof, as may be prescribed.
(3) The person
referred to in sub-section (1) shall be the following :—
(a) any person carrying on legal, medical, engineering, architectural
profession or profession of accountancy, technical consultancy, interior
decoration or any other profession as is notified by the Board in the Official
Gazette;
(b) any other person carrying on business, if,—
(i) his income from the business exceeds two lakh
rupees;
(ii) his total turnover or gross receipts, as the
case may be, in the business exceeds ten lakh rupees in any one of the three
financial years immediately preceding the relevant financial year; or
(iii) in a case where the business is newly set up
in any financial year, his income from the business is likely to exceed two
lakh rupees or his total turnover or gross receipts, as the case may be, in the
business is likely to exceed ten lakh rupees, during such financial year.
(4) The books
of account referred to in sub-section (1) shall be the following, namely,—
(a) a cash book;
(b) a journal, if the accounts are maintained according to the
mercantile system of accounting;
(c) a ledger;
(d) register of daily inventory of business trading asset;
(e) carbon copies of serially numbered bills issued by the person, if the
value of the bill exceeds fifty rupees;
(f) carbon copies or counterfoils of serially numbered receipts issued
by the person, if the value of the bill exceeds fifty rupees;
(g) original bills or receipts issued to the person in respect of
expenditure incurred by him, if the amount of the expenditure exceeds fifty
rupees;
(h) payment vouchers prepared and signed by the person in respect of
expenditure not exceeding fifty rupees, if there are no bills or receipts for
such expenditure.
(5) The bills
or receipts issued to any person shall contain the name, address and such other
particulars as may be prescribed.
(6) The Board
may, having regard to the nature of the business carried on by any class of
persons, prescribe—
(a) any other books of account and documents to be kept and maintained;
(b) the particulars to be contained in the books of account and
documents; and
(c) the form and the manner in, and the place at, which the books of
account and other documents shall be kept and maintained.
(7) The Board
may prescribe the period for which the books of account and other documents to
be kept and maintained under this section shall be retained.
Tax audit
84. Every person, who is required to keep and
maintain books of account under section 83 shall get his accounts for the
financial year audited if,—
(a) in a case where the person is carrying on any profession, the gross
receipts of the profession exceed ten lakh rupees in the financial year; and
(b) in a case where the person is carrying on any business, the total
turnover or gross receipts, as the case may be, of the business exceed forty
lakh rupees in the financial year.
(2) The audit
of the accounts referred to in sub-section (1) shall be performed by an
accountant and the report of audit obtained before the due date.
(3) The report
of audit referred to in sub-section (2) shall be obtained in the prescribed
form duly signed and verified by such accountant and setting forth such
particulars as may be prescribed.
(4) The
provisions of sub-section (1) shall not apply to the business where the income
there from is determined under rule 1 of Table of the Fourteenth Schedule.
(5) A person
shall be deemed to have complied with the provisions of sub-section (1), if the
person—
(a) gets the accounts of his business audited as required by, or under,
any other law before the due date; and
(b) obtains by the due date the report of the audit as required under
such other law and a further report by an accountant in the form prescribed
under sub-section (3).
Method of
accounting
85. (1) Income chargeable under the head “Income
from business” or “Income from other sources” shall be computed in accordance
with either cash or mercantile system of accounting regularly employed by the
person.
(2) The Central
Government may notify in the Official Gazette from time to time accounting
standards to be followed by any class of person or in respect of any class of
income.
(3) The
valuation of purchase and inventory for the purposes of determining the income chargeable
under the head “Income from business” shall, regardless of anything to the
contrary contained in sub-section (1), be—
(a) in accordance with the method of accounting regularly employed by
the person; and
(b) further adjusted to include the amount of any tax, duty, cess or
fee (by whatever name called) actually paid or incurred by the assessee to
bring the goods to the place of its location and condition as on the date of
valuation.
(4) The value
of sale of goods for the purposes of determining the income chargeable under
the head “Income from business” shall, regardless of anything to the contrary
contained in sub-section (1), be determined—
(a) in accordance with the method of accounting regularly employed by
the assessee; and
(b) further adjusted to include the amount of any tax, duty, cess or
fee (by whatever name called) leviable on the sale of the goods.
(5) The
interest on bad or doubtful debts of any permitted financial institution shall,
regardless of anything to the contrary contained in the foregoing provisions,
be included in the total income for the earlier of,—
(a) the financial year in which the interest is credited to the profit
and loss account of the permitted financial institution; and
(b) the financial year in which the interest is actually received by
the permitted financial institution.
(6) The
interest received by a person on compensation, or an enhanced compensation,
shall, regardless of anything to the contrary contained in sub-section (1), be
included in the total income of the financial year in which it is received.
(7) For the
purposes of this section,—
(a) any tax, duty, cess or fee (by whatever name called) under any law
for the time being in force, shall include all such payment regardless of any
right arising as a consequence to such payment;
(b) ‘bad or doubtful debts’ shall be the debts as may be prescribed,
having regard to the guidelines issued by the Reserve Bank of
Chapter-IV
Special provisions relating to computation of
total income of non-profit organisations
Applicability
of this Chapter
86. The provisions of this Chapter shall be
applicable to a non-profit organisation.
Total
income of a non-profit organisation
87. The total income of any non-profit
organisation shall be computed in accordance with the provisions of this
Chapter.
Computation
of total income of a non-profit organisation
88. (1) Subject to the provisions of this Chapter,
the total income of any non-profit organisation shall be the aggregate of the
following, namely :—
(a) income from permitted welfare activities; and
(b) any income arising from the transfer of any investment asset being
a financial asset.
(2) The income
from any permitted welfare activities referred to in clause (a) of
sub-section (1) shall be the gross receipts, during the financial year, from
the permitted welfare activities as reduced by the amount of outgoings in
relation to the activities, calculated in accordance with the cash system of
accounting.
(3) The income
referred to in clause (b) of sub-section (1) shall be computed in
accordance with the provisions of sections 44 to 53.
Gross
receipts in the case of a non-profit organisation
89. (1) The gross receipts from the permitted
welfare activities referred to in sub-section (2) of section 88 shall be the
aggregate of the following, namely :—
(a) the amount of voluntary contributions received;
(b) any rent received in respect of a property consisting of any
buildings or lands appurtenant thereto;
(c) the amount of income derived from any business carried on by it,
if—
(i) the business is incidental to the permitted
welfare activity so carried on; and
(ii) the permitted welfare activity so carried on
does not involve any activity referred to in sub-clause (vi) of clause (g)
of section 96;
(d) full value of the consideration received from the transfer of any
investment asset, not being a financial asset;
(e) full value of the consideration received from the transfer of any
business capital asset, if—
(i) the business is incidental to the permitted
welfare activity carried on by it; and
(ii) the permitted welfare activity so carried on
does not involve any activity referred to in sub-clause (vi) of clause (g)
of section 96;
(f) the amount of any income received from any investment of its funds
or assets; and
(g) the amount of any incoming, realization, proceed, donation or
subscription, received from any source.
(2) The gross
receipts referred to in sub-section (1) shall not include,—
(a) any loan, borrowings and advances during the financial year; and
(b) any receipt which is includible in clause (b) of sub-section
(1) of section 88.
Outgoings
in the case of a non-profit organisation
90. The amount of outgoings referred to in
section 88 shall be the aggregate of—
(a) voluntary contributions received during the financial year by the
non-profit organisation made with a specific direction that they shall form
part of the corpus of the non-profit organisation.
(b) the amount actually paid during the financial year for any
expenditure, not being a capital expenditure, incurred wholly and exclusively
for earning or obtaining any receipts referred to in section 95;
(c) the amount actually paid during the financial year for any
expenditure, not being a capital expenditure, incurred for the purposes of
carrying out the permitted welfare activity;
(d) the amount actually paid during the financial year for any capital
expenditure for the purposes of any business, if—
(i) the business is incidental to the permitted
welfare activity carried on by it; and
(ii) the permitted welfare activity so carried on
does not involve any activity referred to in sub-clause (vi) of clause (g)
of section 96;
(e) the amount actually paid during the financial year for any capital
expenditure in relation to any investment asset, not being a financial asset;
(f) any amount, other than any loan or advance, actually paid during
the financial year to any other non-profit organisation engaged in similar
permitted welfare activity; and
(g) any amount applied outside
(i) the amount is applied for an activity which
tends to promote international welfare in which
(ii) the non-profit organisation is notified by the
Central Government in this behalf.
Prohibited
forms and modes of investment
91. (1) The forms and modes of investment
referred to in sub-clause (xi) of clause (d) of section 96 shall
be the following, namely :—
(a) investment in the capital or equity, as the case may be, of an
associated concern;
(b) investment in any bond, debenture or any other debt instrument
issued by an associated concern;
(c) deposit with an associated concern; and
(d) any other form or modes of investment as may be prescribed.
Deemed use
or application of funds or assets for the benefit of interested person
92. The funds or the assets of the non-profit
organisation shall be deemed to have been used or applied for the benefit of an
interested person, if—
(a) the funds or the assets of the non-profit organisation are, or
continue to be, lent to any interested person, for any period during the
financial year without either adequate security or adequate interest or both;
or
(b) the land, building or other asset of the non-profit organisation
is, or continues to be, made available for the use of any interested person,
for any period during the financial year without charging adequate rent or
other compensation; or
(c) any amount is paid by way of salary, allowance or otherwise during
the financial year to any interested person, out of the resources of the
non-profit organisation for services rendered by that person to such
organisation and the amount so paid is in excess of what may be reasonably paid
for such services; or
(d) the services of the non-profit organisation are made available to
any interested person, during the financial year without adequate remuneration
or other compensation; or
(e) any share, security or other property is purchased by or on behalf
of the non-profit organisation from any interested person, during the financial
year for consideration which is more than adequate; or
(f) any share, security or other property is sold by or on behalf of
the non-profit organisation to any interested person, during the financial year
for consideration which is less than adequate; or
(g) any funds or property of the non-profit organisation, is diverted
during the financial year in favour of any interested person where the income
or the value of property or, as the case may be, the aggregate of the income
and the value of the property exceeds one thousand rupees; or
(h) any funds of the non-profit organisation are, or continue to
remain, invested for any period during the financial year, in any concern in
which any interested person has a substantial interest and such investment
exceeds five per cent of the capital of that concern provided that the
investment is in one of the forms specified in section; or
(i) any income in the nature referred to in
section 9 is included in the total income of the organisation.
Registration
of the non-profit organisation
93. (1) A non-profit organisation shall make an
application for its registration in the prescribed manner to the Chief
Commissioner or Commissioner.
(2) The Chief
Commissioner or Commissioner, on receipt of the application for registration of
a non-profit organisation made under sub-section (1) may call for such
documents or information from the trust or institution as he thinks necessary
in order to satisfy himself about the objects of the non-profit organisation
and may also make such inquiries as he may deem necessary in this behalf.
(3) The Chief
Commissioner or Commissioner shall pass an order in writing,—
(a) registering the non-profit organisation if he is satisfied about
its objects; or
(b) refusing to register the non-profit organisation if he is not
satisfied about its objects or any of the terms of the instrument creating it
are inconsistent with sub-clauses (i) to (iv) of the clause (d)
of section 96.
(4) The order
under sub-section (3) shall be passed within three months from the end of the
month in which the application under section (1) was received.
(5) The
registration granted under sub-section (3) shall be valid from the financial
year in which application under sub-section (1) was made.
Consequences
of conversion of a non-profit organisation
94. (1) A non-profit organisation shall be liable
to income-tax at the rate of thirty per cent in respect of its net worth if,—
(a) it converts into any form of organisation which does not qualify as
a non-profit organisation; or
(b) it ceases to be a non-profit organisation in the financial year and
any two financial years out of four financial years immediately preceding the
relevant financial year;
(c) fails to transfer, upon its dissolution, all its assets to any
other non-profit organisation.
(2) For the
purposes of this section,—
(a) net worth shall be computed as on,—
(i) the date of conversion of the non-profit
organisation in a case falling under clause (a) of sub-section (1); and
(ii) the last day of the financial year in a case
falling under clause (b) of sub-section (1);
(b) ‘net worth’ means the aggregate value of the total assets of the non-profit
organisation as reduced by the value of liabilities of the organisation;
(c) the value of the total assets and liabilities shall be computed in
accordance with the rules of valuation prescribed in this behalf.
Provisions
of this chapter not to apply in certain cases
95. The provisions of this Chapter shall not
apply to any person who—
(a) holds any business under trust, regardless of any specific
direction that—
(i) the business shall form part of the corpus of
such person; or
(ii) the income from the business shall be applied
only for permitted welfare activity;
(b) carries on any business if—
(i) the business is not incidental to the
permitted welfare activity carried on by it; and
(ii) the permitted welfare activity so carried on
does not involve any activity referred to in sub-clause (vi) of clause (g)
of section 96; or
(c) ceases to be a non-profit organisation at any time during the
financial year.
Interpretations
96. In this Chapter, unless the context otherwise
requires,—
(a) a business shall be incidental to the permitted welfare activity if
the business is carried on in the course of the actual carrying out of the
permitted welfare activity;
(b) “advancement of any other object of general public utility” shall
not be a permitted welfare activity if it involves the carrying on of any
activity in the nature of trade, commerce or business, or any activity of
rendering any service in relation to any trade, commerce or business, for a
cess, fee or any other consideration, irrespective of nature of use,
application or retention, of the income from such activity;
(c) “associated concern” shall have the meaning assigned to ‘associated
enterprises’ in section 113, with the modification that for the word
‘enterprise’ with all its grammatical variation, the word ‘concern’ with its
corresponding grammatical variation shall be substituted;
(d) “non-profit organisation” means an organisation, by whatever name
called, including a trust, if—
(i) it is established for the benefit of the
general public;
(ii) it is established for carrying on permitted
welfare activities;
(iii) it is not established for the benefit of any
particular caste;
(iv) it is not established for the benefit of any
of its members;
(v) it actually carries on the permitted welfare
activities during the financial year;
(vi) the actual beneficiaries of its activities are
the general public;
(vii) it does not intend to apply its surplus or
other income or use its assets or incur expenditure, directly or indirectly,
for the benefit of any interested person;
(viii) any expenditure by the organisation does not
ensure, directly or indirectly, for the benefit of any interested person;
(ix) the funds or assets of the organisation are
not used or applied or deemed to have been used or applied, directly or
indirectly, for the benefit of interested person;
(x) the surplus, if any, accruing from its
permitted activities does not ensure, directly or indirectly, for the benefit
of any interested person;
(xi) the funds or the assets of the non-profit
organisation are not invested or held, at any time during the financial year,
in any of the forms or modes specified in section 91;
(xii) it maintains such books of account and in the
manner, as may be prescribed;
(xiii) it is registered as such under section 93; and
(xiv) it obtains a report of audit in prescribed
form from an accountant before due date of filing of the return in respect of,—
(A) the accounts of business, if any, carried on by it in accordance
with the provisions of section 84; and
(B) its accounts relating to the permitted welfare activities in a case
where the gross receipts referred to in section 89 exceeds one lakh fifty
thousand rupees;
(e) “general public” means the body of unascertained persons
sufficiently defined by some common quality of public or impersonal nature;
(f) “interested person” in relation to a non-profit organisation
means,—
(i) the founder of the organisation or the author
of the trust;
(ii) any person whose total contribution to the
organisation up to the end of the relevant financial year exceeds fifty
thousand rupees;
(iii) a member of the Hindu undivided family if the
author or founder or person is the family;
(iv) any manager, by whatever name called, of the
organisation or trustee of the trust;
(v) any relative of the author, founder, member,
trustee or manager;
(vi) any concern in which any of the persons
referred to in clauses (i) to (v) has a substantial interest;
(g) “permitted welfare activity” means any activity,—
(i) involving the relief of the poor;
(ii) for the advancement of education;
(iii) for providing medical relief;
(iv) for the preservation of environment (including
watersheds, forests and wildlife;
(v) for the preservation of monuments or places or
objects of artistic or historic interest; or
(vi) for the advancement of any other object of
general public utility;
(h) “trust” includes any legal obligation.
Chapter-V
Computation of the value of gross assets
Computation
of the value of gross assets
97. (1) The value of gross assets referred to in
Paragraph A of the Second Schedule shall, subject to the provisions of this
Chapter, be computed in accordance with the formula—
A+B+C-D-E
|
Where |
A |
= |
the value of
the gross block of fixed assets of the company as on the close of the
financial year; |
|
|
B |
= |
the value of
the capital work-in-progress of the company as on the close of the financial
year; |
|
|
C |
= |
the book value
of all other assets of the company as on the close of the financial year; |
|
|
D |
= |
the
accumulated depreciation on the value of the gross block of fixed assets,
claimed up to the last day of the relevant financial year; |
|
|
E |
= |
the amount of
debit balance of profit and loss account, if included in the amount ‘C’. |
Preparation
of balance sheet for computing gross assets
98. (1) Every company shall, for the purposes of section
97, prepare his balance sheet for the relevant financial year in accordance
with the provisions of Part I of Schedule VI to the Companies Act, 1956.
(2) The
company shall, for the purposes of preparing the balance sheet referred to in
sub-section (1), adopt the same accounting policies, the accounting standards
adopted for preparing its accounts including profit and loss account and the
method and rates adopted for calculating the depreciation as have been adopted
for the purpose of preparing the accounts—
(a) laid by the company at its annual general meeting in accordance
with the provisions of section 210 of the Companies Act, 1956; or
(b) delivered to the Registrar under section 594 of the Companies Act,
1956.
(3) The
company shall, in a case where the financial year adopted under the Companies
Act, 1956 is different from the financial year under this Code, adopt the same
accounting policies, the accounting standards adopted for preparing its
accounts including profit and loss account and the method and rates adopted for
calculating the depreciation as have been adopted for preparing the accounts
for such financial year or part of such financial year falling within the
relevant financial year.
(4) Every
other person, in respect of whom the foregoing provisions of this section does
not apply, shall also prepare its balance sheet and profit and loss account as
if the foregoing provisions of this section apply.
(5) The Board
may prescribe such rules, as may be necessary, to modify the provisions of sub-sections
(1) to (3) for the purposes of enabling the preparation of the balance sheet
and profit and loss account under sub-section (4).
Part-B
Dividend Distribution Tax
Chapter-VI
Special provisions relating to tax on
distributed income
Tax on dividends
distributed
99. (1) Subject to the provisions of this Code,
every domestic company shall be liable to dividend distribution tax, at the
rate specified in Paragraph B of the Second Schedule and in the manner provided
therein, on any amount declared by the company by way of dividends.
(2) The amount
referred to in sub-section (1) shall be reduced by,—
(a) the amount of dividend, if any, received by the domestic company
during the financial year, if—
(i) such dividend is received from its subsidiary;
(ii) the subsidiary has paid tax under this section
on such dividend; and
(iii) the domestic company is not a subsidiary of
any other company; and
(b) the amount of dividend, if any paid to—
(i) any pass-thru entity; or
(ii) any person for, or on behalf of, the pass-thru
entity.
(3) The same
amount of dividend, referred to in clause (a) of sub-section (2), shall
not be taken into account for reducing the amount, referred to in sub-section
(1), more than once.
(4) The
liability to dividend distribution tax shall be discharged by way of
self-assessment or any other mode, as the case may be, in accordance with the
provisions of this Code.
(5) Without
prejudice to the foregoing and subject to the provisions of this Code, every
domestic company may be charged in respect of its liability to dividend
distribution tax referred to in sub-section (1).
(6) The
dividend distribution tax charged under the foregoing provisions shall be
collected after allowing credit for pre-paid taxes, if any, in accordance with
the provisions of this Code.
(7) For the
purposes of this sub-section, a company shall be a subsidiary of another
company, if such other company holds more than half in nominal value of the
equity share capital of the company.
Part-C
Branch Profits Tax
Chapter-VII
Charge of Branch Profits Tax
Tax on
branch profits
100. (1) Subject to the provisions of this Code,
every foreign company shall be liable to branch profits tax, at the rate
specified in Paragraph C of the Second Schedule, on its branch profits.
(2) The branch
profits referred to in sub-section (1) shall be the total income for the
financial year as reduced by the amount of income-tax thereon.
(3) The
liability to branch profits tax shall be discharged by payment of pre-paid
taxes in accordance with the provisions of this Code as if the branch profits
tax was income-tax.
(4) Without
prejudice to the foregoing and subject to the provisions of this Code, every
foreign company may be charged in respect of its liability to branch profits
tax referred to in sub-section (1).
(5) The branch
profits tax charged under the foregoing provisions shall be collected after
allowing credit for pre-paid taxes, if any, in accordance with the provisions
of this Code.
Part-D
Wealth-tax
Chapter-VIII
Charge of Wealth-tax
Charge of
wealth-tax
101. (1) Subject to the provisions of this Code,
every individual, Hindu undivided family and private discretionary trust shall
be liable to wealth-tax on the net wealth on the valuation date in the
financial year at the rate specified in Paragraph D of the Second Schedule.
(2) The
liability to wealth-tax shall be discharged by payment of pre-paid taxes in
accordance with the provisions of this Code.
(3) Without
prejudice to the foregoing and subject to the provisions of this Code, every
individual, Hindu undivided family and private discretionary trust may be
charged in respect of his liability to wealth-tax referred to in sub-section
(1).
(4) The
wealth-tax charged under the foregoing provisions shall be collected after
allowing credit for pre-paid taxes, if any, in accordance with the provisions
of this Code.
Computation
of net wealth
102. (1) The net wealth of a person shall be the
amount computed in accordance with the formula—
A-B
|
Where |
A |
= |
the aggregate
of the value on the valuation date, of all the assets, wherever located,
belonging to the person, computed in accordance with the provisions of
sub-section (3); |
|
|
B |
= |
the aggregate
of the value on the valuation date, of all the debts, owed by the person,
which have been incurred in relation to the said assets. |
(2) The assets
referred to in sub-section (1) shall not include the following :—
(a) any property held by the person under trust, or other legal
obligation, for carrying out any permitted welfare activity in India;
(b) the interest of the person in the coparcenary property of any Hindu
undivided family of which he is a member;
(c) any one building in the occupation of a Ruler, being a building
which immediately before the commencement of the Constitution (Twenty-sixth
Amendment) Act, 1971, was his official residence by virtue of a declaration by
the Central Government under paragraph 13 of the Merged States (Taxation
Concessions) Order, 1949, or paragraph 15 of the Part-B States (Taxation
Concessions) Order, 1950;
(d) jewellery in the possession of any Ruler, not being his personal
property, which has been recognised as his heirloom,—
(i) by the Central Government before the
commencement of this Code; or
(ii) by the Board at the time of his first
assessment to wealth-tax under the Wealth-tax Act, 1957;
(e) the value of the assets located outside India if, during the financial
year ending on the valuation date, the person is,—
(i) an individual who is not a citizen of India;
or
(ii) an individual or a Hindu undivided family not
resident in India; and
(f) any one house or part of a house or a plot of land belonging to an
individual or a Hindu undivided family which is acquired or constructed before
the 1st day of April, 2000.
(3) The value
of any asset, other than cash, referred to in sub-section (1), shall be
determined in the prescribed manner.
Net wealth
to include certain assets
103. (1) The following assets shall be deemed to
be belonging to the person, being an individual, and included in computing his
net wealth,—
(a) the value of asset which on the valuation date are held (whether in
the form they were transferred or otherwise)—
(i) by the spouse of such individual to whom such
asset has been transferred by the individual, directly or indirectly, otherwise
than for adequate consideration or in connection with an agreement to live
apart;
(ii) by a minor child, not being a person with
disability or person with severe disability, of such individual;
(iii) by a person to whom such asset has been
transferred by the individual, directly or indirectly, otherwise than for
adequate consideration for the immediate or deferred benefit of the spouse of
the individual;
(iv) by a trust to whom such asset has been
transferred by the individual, if the transfer is revocable during the life
time of the beneficiary of the trust;
(v) by a person, not being a trust, to whom such
asset has been transferred by the individual, if the transfer is revocable
during the life time of the person;
(b) the value of any converted property;
(c) the value of his interest in the asset of an unincorporated body in
which he is a participant, (to be included in definition of asset).
(2) The
provisions of sub-section (1) shall not apply in respect of such asset as has
been acquired by the minor child out of his income referred to in sub-clauses (i)
and (ii) of clause (b) of sub-section (1) of section 8 and which
are held by him on the valuation date.
(3) For the
purposes of this section, -
(a) the asset referred to in sub-clause (ii) or sub-clause (iii)
of clause (a) of sub-section (1) shall be included in the net wealth of
-
(i) the parent who is the guardian of the minor
child, if the other parent is not a guardian; or
(ii) the parent whose net wealth (excluding the
asset referred to in those sub-clauses) is higher, if both the parents are
guardians of the child;
(b) a transfer shall be deemed to be revocable if, -
(i) it contains any provision for the re-transfer,
directly or indirectly, of the whole or any part of the income or asset to the
transferor; or
(ii) it, in any way, gives the transferor a right to
re-assume power, directly or indirectly, over the whole or any part of the
income or asset;
(c) the person shall, regardless of anything to the contrary contained
in this Code or any other law for the time being in force, be deemed to be the
owner of a building or part thereof, if he is a member of a co-operative
society, company or other association of persons and the building or part
thereof is allotted or leased to him under a house building scheme of the
society, company or association, as the case may be; and
(d) the holder of an impartible estate shall be deemed to be the
individual owner of all the properties comprised in the estate.
(e) the value of any assets transferred under an irrevocable transfer
shall be liable to be included in computing the net wealth of the transfer in
which the power to revoke vests in him.
PART - E
PREVENTION OF ABUSE OF THE CODE
CHAPTER - IX
SPECIAL PROVISIONS TO PREVENT EVASION
Disallowance
of expenditure having regard to fair market value
104. A person shall not be allowed a deduction
under this Code in respect of so much of the expenditure, whether capital or
revenue in nature, as is considered by the Assessing Officer to be excessive or
unreasonable if,—
(a) the payment in respect of the expenditure has been, or is to be,
made to any associated person; and
(b) the expenditure is excessive, or unreasonable, having regard to,—
(i) the fair market value of the goods, services
or facilities for which the payment is made;
(ii) the legitimate needs of the business of the
person; or
(iii) the benefit derived by, or accruing to, the
person therefrom.
Computation
of income from international transaction having regard to arm’s length price
105. (1) The amount of any income, or expense,
arising from an international transaction shall be determined having regard to
the arm’s length price.
(2) The
allocation or apportionment of, or any contribution to, any cost or expense
incurred in connection with a benefit, service or facility provided to any associated
enterprise shall be determined having regard to the arm’s length price of such
benefit, service or facility, as the case may be, if -
(a) two or more associated enterprises have entered into a mutual
agreement or arrangement for the allocation or apportionment of, or any
contribution to, such cost or expense; and
(b) the benefit, service or facility provided to any one or more
associated enterprises involves an international transaction.
(3) The
provisions of this section shall not apply in a case, if the determination
under sub-section (1), or sub-section (2), has the effect of reducing the
income chargeable to tax, or increasing the loss computed, on the basis of
entries made in the books of account in respect of the financial year in which the
international tax transaction was entered.
Computation
of arm’s length price
106. (1) The arm’s length price in relation
to an international transaction shall be determined by any of the prescribed
methods, being the most appropriate method.
(2) The most
appropriate method referred to in sub-section (1) shall be determined in the
prescribed manner, having regard to the nature of transaction, class of
associated enterprises, functions performed by such enterprises or such other
relevant factors.
(3) The most
appropriate method determined under sub-section (2) shall be applied, for
determination of arm’s length price, in the prescribed manner.
(4) The arm’s
length price shall be -
(a) the price determined by the most appropriate method, if only one
price is determined by the method; or
(b) the arithmetical mean of the prices determined by the most
appropriate method, if more than one price is determined by the method.
(5) The price
at which the international transaction has actually been undertaken shall be
deemed to be the arm’s length price if the variation between the arm’s length
price determined under sub-section (4) and the price at which the international
transaction has actually been undertaken does not exceed five per cent of the
later.
(6) The income
of an associated enterprise shall not be recomputed by reason of determination
of arm’s length price in the case of the other associated enterprise.
(7) No
deduction under sub-chapter-I of Chapter III shall be allowed in respect of the
amount of income by which the total income of the assessee is enhanced after
computation of income under this section.
(8) The
determination of arm’s length price shall be subject to safe harbour rules, as
may be framed by the Board in this behalf.
Advance
pricing agreement
107. (1) The Board, with the approval of the
Central Government, may enter into an advance pricing agreement with any person
in respect of the arm’s length price in relation to an international
transaction which may be entered into by that person on the basis of the
prescribed method being the most appropriate method.
(2) The arm’s
length price referred to in sub-section (1) shall be determined by the Board in
the manner provided in sub-sections (1) to (4) of section 106.
(3) However,
the Board may make such other adjustments to the price determined under
sub-section (2), as may be necessary or expedient to do so, to arrive at the
arm’s length price at which the advance pricing agreement may be entered into.
(4) The arm’s
length price of any international transaction, in respect of which the advance
pricing agreement has been entered into, shall be the arm’s length price in
relation to the international transaction for the purposes of this Code,
regardless of anything to the contrary contained in any other provision of this
Code.
(5) The
agreement referred to in sub-section (1) shall be valid for such financial
years as specified in the agreement which in no case shall exceed five
consecutive financial years.
(6) The
advance pricing agreement entered into shall be binding only -
(a) on the applicant in whose case the agreement has been entered into;
(b) in respect of the transaction in relation to which the agreement
has been entered into; and
(c) on the Commissioner, and the income-tax authorities subordinate to
him, in respect of the person and the said transaction.
(7) However,
the agreement referred to in sub-section (1) shall not be binding, if there is
a change in law on the basis of which the agreement has been entered into.
(8) The Board may,
by order, declare an agreement to be void ab initio if it finds that the
agreement has been obtained by the person by fraud or misrepresentation of
facts.
(9) Upon
declaring the agreement to be void ab initio, all the provisions of this
Code shall, after excluding the period beginning with the date of such
agreement and ending with the date of order under sub-section (8), apply to the
person as if such agreement had never been entered into.
(10) A copy of
the order made under sub-section (8) shall be sent to the person and the
Commissioner.
(11) For the
purposes of this section, the Board may frame a Scheme, by notification in the
Official Gazette, so as to enable it to enter into advance pricing agreement in
respect of an international transaction.
Avoidance
of income-tax by transactions resulting in transfer of income to non-residents
108. (1) The total income of a person shall
include all income accruing to any non-resident, if—
(a) the income accrues by virtue of a transfer of any asset by the
person, either alone or in conjunction with associated operations, directly or
indirectly, to the non-resident;
(b) the person, -
(i) acquires any rights by virtue of which he has
power to enjoy, whether forthwith or in the future, such income; or
(ii) is entitled to receive, or has received, any
capital sum, the payment whereof is in any way connected with the transfer or
any associated operations; and
(c) the income would have been included in the total income of the
person, had the transfer not taken place.
(2) A person
shall be deemed to have the power to enjoy the income of a non-resident, if -
(a) the income is in fact so dealt with by the person so as to be
calculated at some point of time and, whether in the form of income or not, to
ensure for the benefit of the person,
(b) the accrual or receipt of the income operates to increase the value
to the person of any assets held by him or for his benefit,
(c) the person receives, or is entitled to receive, at any time any
benefit provided, or to be provided, out of that income, or out of moneys,
which are or will be available for the purpose by reason of the effect, or
successive effects, of the associated operations on that income and assets
which represent that income,
(d) such person has power by means of the exercise of any power of
appointment or power of revocation or otherwise to obtain for himself, whether
with or without the consent of any other person, the beneficial enjoyment of
the income, or
(e) the person is able, in any manner whatsoever and whether directly
or indirectly, to control the application of the income.
(3) For the
purposes of determining whether a person has power to enjoy the income, regard
shall be had to -
(a) the substantial result and effect of the transfer and any associated
operations; and
(b) all benefits which may at any time accrue to such person as a
result of the transfer and any associated operations, irrespective of the
nature or form of the benefits.
(4) The
provisions of this section shall not apply if the person referred to in
sub-section (1) shows to the satisfaction of the Assessing Officer that the
transfer and all associated operations were bona fide commercial
transactions and were not designed for the purpose of avoiding liability to
taxation.
Avoidance of
tax by sale and buy-back transaction in security
109. The total income of any person shall include
any interest accruing from any security owned by any other person if,—
(a) the person undertakes a transaction relating to sale and buy-back
of the security;
(b) the interest accrues to the other person as a result of such
transaction;
(c) the income would have been included in the total income of the
person, had the transfer not taken place.
Avoidance
of tax by buy and sale-back transaction in security
110. (1) The transaction relating to buy and
sale-back of the security under section 69 shall, in the case of the other
person referred to therein, be ignored and no account shall be taken of the
transaction in computing the income if the interest accruing to the other
person is not included in his total income by virtue of the provisions of that
section.
(2) The loss,
if any, arising to a person on account of any buy and sale-back transaction in
any security undertaken by him, shall be ignored for the purposes of computing
his total income, if any other income accruing to the person on such security
is not included in his total income.
(3) The loss,
referred to in sub-section (2), shall be ignored to the extent such loss does
not exceed the amount of any other income referred to therein.
Broken-period
income accruing from a debt instrument
111. The income accruing from a debt instrument,
transferred by a person at any time during the financial year, shall not be
less than the amount of broken-period income from the instrument.
General
anti-avoidance rule
112. (1) Any arrangement entered into by a person
may be declared as an impermissible avoidance arrangement and the consequences,
under this Code, of the arrangement may be determined by,—
(a) disregarding, combining or re-characterising any step in, or a part
or whole of, the impermissible avoidance arrangement;
(b) treating the impermissible avoidance arrangement -
(i) as if it had not been entered into or carried
out; or
(ii) in such other manner as in the circumstances
of the case the Commissioner deems appropriate for the prevention or diminution
of the relevant tax benefit.
(c) treating parties who are connected persons in relation to each
other as one and the same person; or
(d) disregarding any accommodating party or treating any accommodating
party and any other party as one and the same person;
(e) deeming persons who are connected persons in relation to each other
to be one and the same person;
(f) re-allocating, amongst the parties to the arrangement, -
(i) any accrual, or receipt, of a capital or
revenue nature; or
(ii) any expenditure, deduction, relief or rebate;
(g) re-characterising -
(i) any equity into debt or vice versa;
(ii) any accrual, or receipt, of a capital or revenue
nature; or
(iii) any expenditure, deduction, relief or rebate;
(2) The
provisions of this section may be applied in the alternative for, or in
addition to, any other basis for making an assessment.
Interpretation
113. For the purposes of this part, -
(1)
“accommodating party” means a party to an arrangement who, as a direct or
indirect result of his participation, derives any amount in connection with the
arrangement, which would, -
(a) be included in his total income which would have otherwise been
included in the total income of another party;
(b) not be included in his total income which would have otherwise been
included in the total income of another party;
(c) be treated as a deductible expenditure, or allowable loss, by the
party which would have otherwise constituted a non-deductible expenditure, or
non-allowable loss, in the hands of another party; or
(d) result in pre-payment by any other party;
(2) “arm’s
length price” means a price which is applied, or proposed to be applied, in a
transaction between persons, enterprises or undertakings, other than associated
enterprises, in uncontrolled, unrelated or independent conditions;
(3)
“arrangement” means any step in, or a part or whole of, any transaction,
operation, scheme, agreement or understanding, whether enforceable or not, and
includes any of the foregoing involving the alienation of property;
(4) “asset”
includes property, or right, of any kind;
(5)
“associated enterprises” means two enterprises which are associated with each
other at any time during the financial year, by virtue of -
(a) one enterprise holding, directly or indirectly, shares carrying ten
per cent, or more, of the voting power in the other enterprise;
(b) any person or enterprise holding, directly or indirectly, shares
carrying ten per cent, or more, of the voting power in each of such
enterprises;
(c) a loan advanced by one enterprise to the other enterprise and the
loan constitutes twenty-six per cent, or more, of the book value of the total
assets of the other enterprise;
(d) one enterprise guaranteeing ten per cent, or more, of the total
borrowings of the other enterprise;
(e) more than one-third of the board of directors, or members, of the
governing board, or one or more executive directors, or executive members, of
the governing board of one enterprise, being appointed by the other enterprise;
(f) more than one-third of the directors, or members, of the governing
board, or one or more of the executive directors, or executive members, of the governing
board, of each of the two enterprises, being appointed by the same person or
persons;
(g) the manufacture, or processing, of any goods or articles of, or
carrying on the business by, one enterprise being wholly dependent on the use
of know-how, patents, copyrights, trade-marks, brands, licences, franchises, or
any other business or commercial rights of similar nature, or any data,
documentation, drawing or specification relating to any patent, invention,
model, design, secret formula or process, of which the other enterprise is the
owner or in respect of which the other enterprise has exclusive rights;
(h) two-third, or more, of the raw materials and consumables required
for the manufacture, or processing, of goods or articles carried out by one enterprise,
being supplied by the other enterprise, or by persons specified by the other
enterprise, and the prices and other conditions relating to the supply are
influenced by such other enterprise;
(i) the goods or articles manufactured, or
processed, by one enterprise, being sold to the other enterprise or to persons
specified by the other enterprise, and the prices and other conditions relating
thereto are influenced by such other enterprise;
(j) one enterprise being controlled by an individual, and the other
enterprise being also controlled by such individual or his relative, or jointly
by such individual and his relative;
(k) one enterprise being controlled by a Hindu undivided family, and
the other enterprise being also controlled by a member of such Hindu undivided
family or by a relative of a member of such Hindu undivided family or jointly
by such member and his relative;
(l) one enterprise holding ten per cent, or more,
interest in another enterprise being an unincorporated body; or
(m) there existing between the two enterprises, any relationship of
mutual interest, as may be prescribed;
(6)
“associated operation” in relation to any transfer means an operation of any
kind effected by the transferor in relation to -
(a) any asset transferred;
(b) any asset representing, directly or indirectly, any asset so
transferred;
(c) the income accruing from any asset so transferred; or
(d) any asset representing, directly or indirectly, the accumulations
of income accruing from any asset so transferred;
(7)
“associated person”, in relation to a person, means -
(a) any relative of the person, if the person is an individual;
(b) any director of the company or any relative of such director, if
the person is a company;
(c) any participant in an unincorporated body or any relative of such
participant, if the person is an unincorporated body;
(d) any member of the Hindu undivided family or any relative of such
member, if the person is a Hindu undivided family;
(e) any individual who has a substantial interest in the business of
the person or any relative of such individual;
(f) a company, unincorporated body or Hindu undivided family having a
substantial interest in the business of the person or any director, participant,
or member of the company, body or family, or any relative of such director,
participant or member;
(g) a company, unincorporated body or Hindu undivided family, whose
director, participant, or member have a substantial interest in the business of
the person; or family or any relative of such director, participant or member;
(h) any other person who carries on a business, if,—
(i) the person being an individual, or any
relative of such person, has a substantial interest in the business of that
other person; or
(ii) the person being a company, unincorporated
body or Hindu undivided family, or any director, participant or member of such
company, body or family, or any relative of such director, participant or member,
has a substantial interest in the business of that other person;
(8) “benefit”
includes a payment of any kind;
(9) “broken
period income” shall be calculated as if the income from such securities had
accrued from day-to-day and been apportioned accordingly for the broken period;
(10) “bona
fide purpose” shall not include any purpose which —
(a) has created rights or obligations that would not normally be
created between persons dealing at arm’s length; or
(b) would result, directly or indirectly, in the misuse, or abuse, of
the provisions of this Code;
(11) “capital
sum” means—
(a) any sum paid by way of a loan or repayment of a loan; or
(b) any other sum paid otherwise than as income, being a sum which is
not paid for full consideration in money or money’s worth;
(12)
“enterprise” in relation to an international transaction includes—
(a) a person who is, or has been, or is likely to be, engaged in any
business, industrial, commercial, financial, construction, mining, research,
investment or any other similar activity, whether such activity is carried on
directly or through one, or more, of its units, divisions or subsidiaries,
wherever located; and
(b) the permanent establishment of the person referred to in sub-clause
(a);
(13) “funds”
includes, -
(a) any cash;
(b) cash equivalents; and
(c) any right, or obligation, to receive, or pay, the cash or cash
equivalent;
(14)
“impermissible avoidance arrangement” means a step in, or a part or whole of,
an arrangement, whose main purpose is to obtain a tax benefit and it, -
(a) creates rights, or obligations, which would not normally be created
between persons dealing at arm’s length;
(b) results, directly or indirectly, in the misuse, or abuse, of the
provisions of this Code;
(c) lacks commercial substance, in whole or in part; or
(d) is entered into, or carried out, by means, or in a manner, which
would not normally be employed for bona fide purposes;
(15)
“international transaction” means,—
(a) a transaction between two or more associated enterprises, either or
all of whom is a non-resident, in the nature of -
(i) purchase, sale or lease, of tangible or
intangible property;
(ii) supply of service;
(iii) lending, or borrowing, money;
(iv) any other transaction, which has a bearing on
the income, loss or asset of any one or more of the enterprises; or
(v) a mutual agreement or arrangement between two
or more associated enterprises for the allocation or apportionment of, or any
contribution to, any cost or expense incurred, or to be incurred, in connection
with a benefit, service or facility provided, or to be provided, to any one or
more of the enterprises.
(b) a transaction entered into by two or more persons, not being
associated enterprises, if -
(i) one, or more, of the persons is a
non-resident;
(ii) the transaction is of the nature referred to
in items (i) to (iv) of sub-clause (a); and
(iii) there exists a prior agreement in relation to
the relevant transaction between such other person and the associated
enterprise; or the terms of the relevant transaction are determined in
substance between such other person and the associated enterprise;
(16)
“interest” includes dividend;
(17) “lacks
commercial substance” - A step in, or a part or whole of, an arrangement shall
be deemed to be lacking commercial substance, if—
(a) it would result in a significant tax benefit for any party to the
arrangement (but for the provisions of section 112) but does not have a
significant effect upon the business risks, or net cash flows, of that party
apart from any effect attributable to the tax benefit that would be obtained
but for the provisions of section 112;
(b) the legal substance, or effect, of the avoidance arrangement as a
whole is inconsistent with, or differs significantly from, the legal form of
its individual steps; or
(c) it includes, or involves, -
(i) round trip financing without regard to, -
(A) whether or not the round tripped amounts can be traced to funds
transferred to, or received by, any party in connection with the avoidance
arrangement;
(B) the time, or sequence, in which round tripped amounts are
transferred or received; or
(C) the means by, or manner in, which round tripped amounts are
transferred or received.
(ii) an accommodating or tax indifferent party;
(iii) any element that have the effect of offsetting
or cancelling each other; or
(iv) a transaction which is conducted through one
or more persons and disguises the nature, location, source, ownership, or control,
of the fund;
(18) “party”
means party to the arrangement;
(19) “round
trip financing” includes financing in which, -
(a) funds are transferred among the parties to the arrangement
(hereinafter referred to as ‘round tripped amounts’); and
(b) the transfer of the funds would, -
(i) result, directly or indirectly, in a tax
benefit but for the provisions of section 112; or
(ii) significantly reduce, offset or eliminate any
business risk incurred by any party to the arrangement;
(20) “similar
security” means security which entitles its holder to the same rights against
the same person as to capital and interest and the same remedies for the
enforcement of those rights, regardless of any difference in the -
(a) total nominal amounts of the respective security;
(b) form in which it is held; or
(c) manner in which it can be transferred;
(21)
“substantial interest in the business” - A person shall be deemed to have a
substantial interest in the business, if, -
(a) in a case where the business is carried on by
a company, such person is, at any time during the financial year, the
beneficial owner of equity shares carrying twenty per cent, or more, of the
voting power; or
(b) in any other case, such person is, at any time
during the financial year, beneficially entitled to twenty per cent, or more,
of the profits of such business.
(22) “tax
benefit” means,—
(a) a reduction, avoidance or deferral of tax or other amount payable
under this Code in the relevant financial year or any other financial year;
(b) an increase in a refund of tax or other amount under this Code in
the relevant financial year or any other financial year;
(c) a reduction, avoidance or deferral of tax or other amount that would
be payable under this Code but for a tax treaty, in the relevant financial year
or any other financial year; or
(d) an increase in a refund of tax or other amount under this Code as a
result of a tax treaty, in the relevant financial year or any other financial
year;
(23)
“transaction” in relation to an international transaction shall include an
arrangement, understanding or action in concert,—
(a) whether or not such arrangement, understanding or action is formal
or in writing; or
(b) whether or not such arrangement, understanding or action is
intended to be enforceable by legal proceeding;
(24)
“transaction relating to buy and sale-back of the security” means a transaction
where a person buys a security, and sales or transfers the same, or similar,
security.
(25)
“transaction relating to sale and buy-back of the security” means a transaction
where a person, being the owner of any security, sells or transfers the
security, and buys-back or reacquires the same, or similar, security;
(26)
“transfer” in relation to any right includes the creation of the right.
Presumption
of purpose
114. (1) An arrangement shall be presumed to have
been entered into, or carried out, for the main purpose of obtaining a tax
benefit unless the person obtaining the tax benefit proves that obtaining the
tax benefit was not the main purpose of the arrangement.
(2) An
arrangement shall be presumed to have been entered into, or carried out, for
the main purpose of obtaining a tax benefit, if the main purpose of a step in,
or part of, the arrangement is to obtain a tax benefit, regardless of the fact
that the main purpose of whole arrangement may not be to obtain a tax benefit.
Part-F
Tax Administration and procedure
Chapter-X
Tax Administration and procedure
A. - Tax administration
Establishment
of institutions
115. The Central Government shall, for the
purposes of this Code, establish the following :—
(a) Central Board of Direct Taxes;
(b) Income-tax Department;
(c) Authority for Advance Ruling; and
(d) Income-tax Appellate Tribunal.
Establishment
of the Central Board of Direct Taxes
116. (1) The Central Government shall establish,
for the purposes of this Code, a Board by the name of the Central Board of
Direct Taxes.
(2) The head
office of the Board shall be at New Delhi.
Management
of the Board
117. (1) The Board shall consist of a Chairman and
not less than six Members, as may be appointed by the Central Government in
accordance with the rules made in this behalf.
(2) The
general superintendence, direction and management of the affairs of the Board
shall vest in a Board of Members, which may exercise all powers and do all acts
and things which may be exercised or done by the Board.
(3) Save as
otherwise provided by rules, the Chairman shall have the powers of general
superintendence and direction of all the affairs of the Board and may also
exercise all powers and do all acts and things which may be exercised or done
by the Board or any Member thereof.
Delegation
118. (1) The Board may, by general or special
order in writing, delegate to any Member subject to such conditions, if any, as
may be specified in the order, such of its powers and functions under this Code
as it may deem necessary.
(2) Save as
otherwise provided by rules, a Member shall have the powers of general
superintendence and direction of such affairs of the Board as may be assigned
to him by the Central Government.
(3) The Member
shall exercise all the powers and do all acts and things which may be exercised
or done by that Board in respect of the work so assigned to him under
sub-section (2).
Term of
office and conditions of service of Chairman and Members of the Board
119. The term of office and other conditions of
service of the Chairman and the Members referred to in section 117 shall be
such as may be prescribed.
Meetings
120. (1) The Board shall meet at such times and
places, and shall observe such rules of procedure in regard to the transaction
of business at its meetings as may be provided by rules.
(2) The
Chairman or, if for any reason, he is unable to attend a meeting of the Board,
any other Member chosen by the Members present from amongst themselves at the
meeting, shall preside at the meeting.
(3) All
questions which come up before any meeting of the Board shall be decided by consensus.
Secretariat
of the Board
121. (1) The Board may, subject to the prescribed
rules, appoint Secretaries, Joint Secretaries, Deputy Secretaries, Under
Secretaries and such other officers and employees as it considers necessary for
the efficient discharge of its functions under this Code.
(2) The term
and other conditions of service of officers and employees of the Board
appointed under sub-section (1) shall be such as may be determined by rules.
Attached
offices of the Board
122. The Board may, with the approval of the
Central Government, establish Directorates by notification in the Official
Gazette to assist the Board in the discharge of its functions.
Subordinate
offices of the Board
123. (1) The Board may, with the approval of the Central
Government, establish by notification in the Official Gazette, subordinate
offices at such places as is considered necessary for the purposes of this
Code.
(2) The
subordinate offices established under sub-section (1) shall be organizational
units consisting of income-tax authorities and executive and ministerial staff,
employed in the execution of this Code.
Functions
of the Board
124. (1) Subject to the provisions of this Code,
it shall be the duty of the Board to collect revenues in a fair and transparent
manner.
(2) For the
purposes of sub-section (1), the Board shall,—
(a) formulate strategies for—
(i) effectively and efficiently detecting and
penalizing non-compliance with the provisions of this Code;
(ii) providing quality taxpayers’ service to
promote voluntary compliance;
(iii) educating taxpayers;
(iv) promoting tax literacy;
(v) redressal of taxpayers’ grievances; and
(vi) performing such other functions as may be
assigned by the Central Government from time to time to the Income-tax
Department;
(b) supervise and regulate the functions of the Income-tax Department;
(c) call for information and record from any bank or any other
authority or Board or corporation established or constituted by or under any
Central, State of Provincial Act in respect of any transaction which is under
investigation or inquiry by the Board or Income-tax Department;
(d) call from or furnish to any such agencies, as may be prescribed by
the Central Government, such information as may be considered necessary by the
Board for the efficient discharge of its functions; and
(e) perform such other functions as may be prescribed.
Grants by
the Central Government
125. (1) The Board shall prepare an estimate of
the sums of money which may be required in any financial year for meeting the
following expenditure :—
(a) the salaries, allowances and other remuneration of the Members,
officers, and other employees of the Board, its attached offices and the
Income-tax Department; and
(b) the expenses of the Board, its attached offices and the Income-tax
Department in the discharge of its functions under this Code.
(2) The
estimate prepared under sub-section (1) shall, on approval by the Central
Government with such modifications as may be considered necessary on the basis
of discussion with the Board, be presented to the Parliament for due
appropriation by law.
(3) The
Central Government shall, after due appropriation under sub-section (2), make
to the Board grants of the amount so appropriated for being utilised for the purposes
referred to in sub-section (1).
(4) The
administration of the grant referred to in sub-section (3) shall, regardless of
anything contained in any other law or rules, vest in the Board.
Accounts
and audit
126. (1) The Board shall maintain proper accounts
of the grant referred to in section 125 and other relevant records and prepare
an annual statement of the accounts in such form as may be prescribed by the
Central Government in consultation with the Comptroller and Auditor-General of
India.
(2) The
accounts of the grant shall be audited by the Comptroller and Auditor-General
of India at such intervals as may be specified by him.
(3) The
Comptroller and Auditor-General of India and any other person appointed by him
in connection with the audit of the accounts of the grant shall have the same
rights and privileges and authority in connection with such audit as the
Comptroller and Auditor-General generally has in connection with the audit of
the Government accounts.
(4) The
accounts of the grant as certified by the Comptroller and Auditor-General of
India or any other person appointed by him in this behalf together with the
audit report thereon shall be forwarded annually to the Central Government and
that Government shall cause the same to be laid before each House of
Parliament.
Power of
Central Government to issue directions
127. (1) The Board shall, in exercise of its
powers or the performance of its functions under this Code, be bound by such
directions on questions of policy as the Central Government may give in writing
to it from time to time.
(2) The Board
shall, as far as practicable, be given an opportunity to express its views
before any direction is given under sub-section (1).
(3) The
decision of the Central Government whether a question is one of policy or not
shall be final.
Returns and
reports
128. (1) The Board shall furnish to the Central
Government at such time and in such form and manner as may be prescribed or as
the Central Government may direct, such returns and statements and such particulars
in regard to its functions and duties, as the Central Government may, from time
to time, require.
(2) Without
prejudice to the provisions of sub-section (1), the Board shall, within ninety
days after the end of each financial year, submit to the Central Government a
report in such form, as may be prescribed, giving a true and full account of
its activities, policy and programmes during the immediately preceding
financial year.
(3) A copy of
the report received under sub-section (2) shall be laid, as soon as may be
after it is received, before each House of Parliament.
Establishment
of the Income-tax Department
129. The Board shall, with the approval of the
Central Government, establish an Income-tax Department (hereafter referred to
as ‘Department’) for the purpose of this Code.
Income-tax
authorities
130. There shall be the following classes of
income-tax authorities for the purpose of this Code, namely :—
(a) Chief Commissioners of Income-tax or Directors-General of
Income-tax,
(b) Commissioners of Income-tax or Directors of Income-tax or
Commissioners of Income-tax (Appeals),
(c) Additional Commissioners of Income-tax or Additional Directors of
Income-tax,
(d) Joint Commissioners of Income-tax or Joint Directors of Income-tax,
(e) Deputy Commissioners of Income-tax or Deputy Directors of
Income-tax,
(f) Assistant Commissioners of Income-tax or Assistant Directors of
Income-tax,
(g) Transfer Pricing Officers,
(h) Income-tax Officers,
(i) Tax Recovery Officers,
(j) Inspectors of Income-tax.
Appointment
and control of income-tax authorities
131. (1) The Central Government may appoint such
persons as it thinks fit to be income-tax authorities in accordance with the
rules prescribed in this behalf.
(2) The
Central Government may authorise the Board to appoint income-tax authorities,
below the rank of an Assistant Commissioner, subject to the rules and orders of
the Central Government in this behalf.
(3) The Board
may authorise an income-tax authority (not below the rank of Commissioner of
Income-tax) to appoint the income-tax authorities referred to in sub-section
(2), subject to the rules and orders of the Central Government in this behalf.
(4) The Board
may authorize an income-tax authority to appoint such executive or ministerial
staff, as may be necessary to assist it in the execution of its functions,
subject to the rules and orders of the Central Government in this behalf.
(5) The Board
may prescribe, by rules, that any income-tax authority shall be subordinate to
such other income-tax authority, as may be specified therein.
(6) The
instructions, directions or orders of an income-tax authority shall be binding
on any other income-tax authority, executive and ministerial staff, subordinate
to him.
Power of
higher authorities
132. (1) Any income-tax authority, above the rank
of Assessing Officer, shall have all the powers that an Assessing Officer has
under this Code for making enquiries on any issue in a proceeding pending with
the authority.
(2) The
subordinate officer shall cease to exercise the power to hold the enquiry
referred to in sub-section (1) in respect of the issue, while the superior
officer exercises the power therein.
Instructions
by the Board
133. (1) The Board may issue orders, instructions,
directions or circulars for the proper and efficient management of this Code,
if it considers it necessary or expedient so to do.
(2) The Board
shall not issue any order or instruction or direction or circular under
sub-section (1) so as to—
(a) require any income-tax authority to make a particular assessment or
to dispose of a particular case in a particular manner;
(b) interfere with the discretion of the Commissioner (Appeals) in the
exercise of his appellate functions;
(c) extend the date specified under this Code for completion of any
proceedings or issuing any notice or taking any action by any income-tax
authority;
(d) relax any requirement or condition contained in any of the
provisions of the Code in relation to grant of any deduction or any other
relief under this Code;
(e) admit any application or claim for any exemption, deduction, refund
or any other relief under this Code after the expiry of the period specified by
or under this Code for making the application or claim;
(f) exempt any income, partly or fully, liable to tax under the Code,
unless otherwise provided.
(3) The
income-tax authorities and all other persons employed in the execution of this
Code shall observe and follow the orders, instructions, directions and
circulars issued by the Board under this section.
(4) All public
orders and circulars issued by the Board under this section shall be notified
in the Official Gazette.
(5) All
internal orders, instructions, directions and circulars issued by the Board under
this section shall be published in a tax bulletin or on the intranet of the
Income-tax Department.
Jurisdiction
of income-tax authorities
134. (1) The Board may, by notification in the
Official Gazette, assign jurisdiction for the exercise of the powers and
performance of the functions by all, or any of, the income-tax authorities.
(2) The Board
may, by notification in the Official Gazette, authorise any income-tax
authority to assign jurisdiction to all, or any of, the other income-tax
authorities, who are subordinate to it, for the exercise of the powers and
performance of the functions.
(3) The
income-tax authorities shall exercise all, or any of, the powers and perform
all, or any of, the functions conferred on, or assigned to, them by or under
this Code.
(4) The
income-tax authorities authorized under sub-section (2) may, by notification in
the Official Gazette, assign jurisdiction for the exercise of the powers and
performance of the functions by all, or any of, the income-tax authorities who
are subordinate to it.
(5) The
jurisdiction under sub-section (1) may be assigned having regard to any one or
more of the following criteria, namely :—
(a) territorial area;
(b) person or class of persons;
(c) tax bases or class of tax base; and
(d) cases or class of cases.
(6) The Board
may, by notification in the Official Gazette, authorize any Director General or
Director to perform such functions of any other income-tax authority as may be
assigned to him by the Board.
(7) The Chief
Commissioner, if authorized by the Board, may direct two or more Assessing
Officers (whether of same rank or not) to exercise and perform, concurrently,
the powers and functions conferred on, or assigned to, them.
(8) The
Assessing Officer being lower in rank shall follow the directions of the
Assessing Officer being higher in rank, if two or more Assessing Officers of
different class have been directed under sub-section (7) to exercise and
perform concurrently.
(9) The Board
may direct any income-tax authority being an authority higher in rank, to
exercise the powers and perform the functions of the income-tax authority being
an authority lower in rank.
Jurisdiction
of Assessing Officers
135. (1) The Assessing Officer who has been vested
with jurisdiction over any area, by virtue of any direction or order issued
under section 134, shall, within the limits of such area, have jurisdiction in
respect of—
(a) any person carrying on a business, if—
(i) in a case where the business is carried on in
more places than one, the principal place of his business is situate within the
area; or
(ii) in any other case, the place at which he
carries on his business is situate within the area; and
(b) any other person residing within the area.
(2) Any
dispute relating to jurisdiction of any Assessing Officer shall be decided by
the Chief Commissioner under whom the Assessing Officer function.
(3) Any
dispute relating to jurisdiction of the Assessing Officer where it relates to areas
within the jurisdiction of different Chief Commissioners shall be decided by
consensus between the Chief Commissioners and if they are not in agreement, by
the Board, or by such Chief Commissioner as the Board may direct.
(4) No person
shall be entitled to question the jurisdiction of an Assessing Officer—
(a) after the expiry of one month from the date on which he was served
with the notice under sub-section (1) of section 157, if the person has
furnished a return under sub-section (1) of section 148;
(b) after the expiry of the time allowed by the notice under
sub-section (1) of section 151, under sub-section (1) of section 152 or under
sub-section (1) of section 166, if no return has been filed;
(c) after the completion of assessment.
(5) The Assessing
Officer shall refer to the Chief Commissioner any objection raised by the
assessee relating to his jurisdiction if the Assessing Officer is not satisfied
with the correctness of such objection.
(6) Every
Assessing Officer shall have all the powers conferred by, or under, this Code
on an Assessing Officer in respect of the tax base accruing, or receipt, within
the area over which he has been vested with jurisdiction under section 134,
regardless of anything contained in this section or in any direction or order
issued under section 134.
Power to
transfer cases
136. (1) The Chief Commissioner or Commissioner
may transfer a case from any Assessing Officer subordinate to him to any other
Assessing Officer subordinate to him,
(2) The Chief
Commissioner may pass an order transfering out a case from any Assessing
Officer subordinate to him to any Assessing Officer subordinate to any other
Chief Commissioner, if there is agreement with the other Chief Commissioner.
(3) The Board,
or the Chief Commissioner as may be authorised by the Board, may pass the order
transferring out a case from any Assessing Officer subordinate to a Chief
Commissioner to any Assessing Officer subordiante to any other Chief
Commissioner, if there is no agreement between the Chief Commissioners.
(4) Any order
under this section shall be passed after giving the person, whose case is being
transferred, an opportunity of being heard in the matter, wherever it is
possible to do so, and after recording the reasons for the transfer.
(5) However,
it shall not be necessary to provide an opportunity of being heard in the
matter, if the case is being transferred from an Assessing Officer to another
Assessing Officer located in the same city.
(6) The
transfer of a case under this section may be made at any stage of the
proceedings, and it shall not be necessary to re-issue any notice already
issued by the transferor Assessing Officer.
Change of
incumbent
137. (1) The income-tax authority who succeeds
another authority as a result of change in jurisdiction or any other reason,
shall continue the proceeding from the stage at which it was left by his
predecessor.
(2) However,
an assessee may demand that he may be allowed an opportunity of being heard
before passing any order under this Code in his case.
Powers
regarding discovery, production of evidence, etc.
138. (1) The prescribed income-tax authorities
shall, in the course of any proceeding under, or for making any enquiry or
investigation for the purposes of, this Code, have the same powers as are vested
in a court under the Code of Civil Procedure, 1908 when trying a suit, in
respect of the following matters, namely :—
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a
banking company and examining him on oath;
(c) compelling the production of books of account and other documents;
and
(d) issuing commissions.
(2) Any
income-tax authority prescribed for the purposes of sub-section (1) may,
subject to the rules made in this behalf, impound any books of account and
other documents produced before it and retain them in its custody for such
period as he thinks fit.
(3) The
income-tax authority below the rank of Joint Commissioner shall not—
(a) impound any books of account or other documents without recording
his reasons for so doing; or
(b) retain in his custody any such books or documents for a period
exceeding fifteen days (exclusive of holidays) without obtaining the approval
of the Chief Commissioner or Commissioner.
Search and
seizure
139. (1) The Competent Investigating Authority may
authorise any Authorised Officer to carry out search and seizure operation, if
he has, in consequence of information in his possession, reason to believe that—
(a) any person to whom a summon under sub-section (1) of section 138,
or a notice under section 151 or section 152 or section 157was issued, has
omitted, or failed, to furnish the material as required by such summon or
notice;
(b) any person to whom a summon or notice as aforesaid has been or
might be issued will not, or would not, produce or cause to be produced, any
material which will be useful for, or relevant to, any proceeding under the
Income-tax Act, 1961, or the Wealth-tax Act, 1957, or under this Code, or
(c) any person is in possession of any material which represents either
wholly or partly the tax base or property which has not been, or would not be,
disclosed for the purposes of the Income-tax Act, 1961, or the Wealth-tax Act,
1957, or this Code (hereinafter in this section referred to as the undisclosed
tax base or property).
(2) The
Authorised Officer shall, in pursuance to an authorisation issued under
sub-section (1), carry out the search and seizure operation and, for this
purpose, have all the powers to—
(a) enter and search any building, place, vessel, vehicle or aircraft
where the Competent Investigating Authority has reason to suspect that any
material, referred to in sub-section (1), are kept;
(b) break open the lock of any door, box, locker, safe, almirah or
other receptacle or exercising the powers conferred by clause (a) where
the keys thereof are not available;
(c) search any person who has got out of, or is about to get into, or is
in, the building, place, vessel, vehicle or aircraft, if the Authorised Officer
has reason to suspect that such person has secreted about his person any such
material;
(d) require any person who is found to be in possession or control of
any type of material, being books of account or other document, maintained in
the form of electronic record as defined in clause (i) of sub-section
(1) of section 2 of the Information Technology Act, 2000, to afford the
Authorised Officer the necessary facility to inspect such material;
(e) seize any such material, not being stock-in-trade, found as a
result of such search;
(f) seize any stock-in-trade of bullion, precious or semi-precious
stones or jewellery, found as a result of such search;
(g) place marks of identification on any material, being books of
account or other documents, or make or cause to be made extracts or copies
therefrom;
(h) make a note or an inventory of any such material.
(3) A
Competent Investigating Authority may exercise the powers of search and seizure
conferred under sub-section (1), if he exercises jurisdiction over the person
referred to in sub-section (1).
(4) However,
the Competent Investigating Authority may also exercise the powers of search
and seizure conferred under sub-section (1), if—
(a) the building, place, vessel, vehicle or aircraft, referred to in
sub-section (2), is located within the area of his jurisdiction regardless of
the fact that he does not have jurisdiction over the person referred to in
sub-section (1); and
(b) he has reason to believe that any delay in getting the
authorisation from the Competent Investigating Authority having jurisdiction
over such person may be prejudicial to the interests of the revenue.
(5) The
Competent Investigating Authority may issue a consequential authorisation to
any Authorised Officer to exercise the powers under sub-section (2) in respect
of any building, place, vessel, vehicle or aircraft, if he, in consequence of
information in his possession, has reason to suspect that any material in
respect of which an authorisation under sub-section (1) has been issued by the
same, or any other, Competent Investigating Authority are, or is, kept in any
such building, place, vessel, vehicle or aircraft.
(6) The
Authorised Officer may requisition the services of any police officer or of any
officer of the Central Government, or of both, to assist him for all or any of
the purposes specified in sub-section (2) and it shall be the duty of every
such officer to comply with such requisition.
(7) The Authorised
Officer, if he is satisfied that it is not practicable to seize any material,
may serve an order on the owner or the person, who is in immediate possession
or control of such material, that he shall not remove, part with or otherwise
deal with it except with his previous permission.
(8) The order
under sub-section (7) shall remain in force for a period not exceeding two
months from the end of the month in which the order was served and the
Authorised Officer may take such steps as may be necessary for ensuring
compliance with the order.
(9) The
Authorised Officer may, during the course of the search or seizure, examine on
oath any person who is found to be in possession or control of any material and
any statement made by such person during such examination may thereafter be
used in evidence in any proceeding under the Income-tax Act, 1961 or the
Wealth-tax Act, 1957 or under this Code.
(10) The
provisions of the Code of Criminal Procedure, 1973, relating to search and seizure
shall apply, so far as may be, to search and seizure operation under this
section.
(11) The Board
may make rules—
(a) to provide for the procedure to be followed by the authorised
officer—
(i) for obtaining ingress into any building, place
vessel, vehicle or aircraft to be searched where free ingress thereto is not
available; and
(ii) for ensuring safe custody of any material
seized; and
(b) any other matter in relation to search and seizure operation under
this section.
Powers to
requisition material taken into custody
140. (1) The Competent Investigating Authority may
authorise any income-tax authority (hereinafter referred to as the
“Requisitioning Officer”) to require any officer or authority to deliver the
material, which have been taken into custody by such officer or authority under
any other law for the time being in force, to the Requisitioning Officer.
(2) The
authorisation under sub-section (1) shall be issued by the Competent
Investigating Authority if he has, in consequence of information in his
possession, reasons to believe that—
(a) any person to whom a summons under sub-section (1) of section 138,
or a notice under section 151 or section 152 or section 157 was issued, has
omitted or failed to produce, or cause to be produced, such material; or
(b) any person to whom a summons or notice as aforesaid has been or
might be issued will not, or would not, produce or cause to be produced, such
material which will be useful for, or relevant to, any proceeding under the
Income-tax Act, 1961 or the Wealth-tax Act, 1957 or under this Code; or
(c) any person is in possession of any material which represents either
wholly or partly tax base or property which has not been, or would not be,
disclosed for the purposes of the Income-tax Act, 1961 or the Wealth-tax Act,
1957 or under this Code.
(3) The
officer or authority referred to in sub-section (1) shall deliver the material
to the Requisitioning Officer either forthwith or when such officer or
authority is of the opinion that it is no longer necessary to retain the same
in his or its custody.
Retention
and release of books of account or documents seized or requisitioned
141. (1) The Authorised Officer shall hand over
the books of account or document seized under section 139, within a period of sixty
days from the date on which last of the authorisation for search was executed,
to the Assessing Officer, if the authorised officer has no jurisdiction over
the person from whom the books of account or documents were seized.
(2) The
Requisitioning Officer shall hand over the books of account or document
delivered under section 140, within a period of sixty days from the date on
which books of account or document were received, to the Assessing Officer, if
the Requisitioning Officer has no jurisdiction over the person from whom the
books of account or documents were taken into custody under any other law for
the time being in force.
(3) The
officers, referred to in sub-sections (1) and (2), shall, on an application
made by the person referred therein, allow him to make copies of, or take
extracts from, the books of account or document seized or requisitioned.
(4) The
officers, referred to in sub-sections (1) and (2), may retain the books of
account or documents, seized or requisitioned, up to a period of thirty days
from the date of assessment under section 169.
(5) The
officers, referred to in sub-sections (1) and (2), may retain the books of
account or documents seized beyond the period specified in sub-section (4)
after obtaining the approval of the Chief Commissioner or Commissioner.
(6) The Chief
Commissioner, or Commissioner, shall not allow the retention of the books of
account seized beyond a period of thirty days from the date on which the
proceedings under this Code, for which such books of account or document are
relevant, are completed.
(7) The
officer, referred to in sub-sections (1) and (2), may, with the approval of the
Chief Commissioner or Commissioner, return any books of account or document
before completion of assessment or any other relevant proceedings, after
retaining a copy or extract of such books of account or document, if he is
satisfied that the return of such books of account or document shall not
adversely affect the interest of revenue.
Delivery of
material belonging to other persons
142. The Assessing Officer, having jurisdiction
over the person in whose case search and seizure operation was carried out
under section 139, or requisition was made under section 140, shall hand over any
material to the Assessing Officer having jurisdiction over another person, if
he is satisfied that the material seized, or requisitioned, belongs to the
other person.
Retention
and application of seized or requisitioned assets
143. (1) The Assessing Officer may recover the
amount of any liability, referred to in sub-section (2),—
(a) out of the material, other than books of account or documents,
(hereinafter referred to as ‘assets’) seized under section 139 or requisitioned
under section 140; or
(b) by any other mode laid down under this Code.
(2) The amount
of any liability shall be the aggregate of—
(a) the amount of any liability existing under this Code, the
Income-tax Act, 1961, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, the
Interest-tax Act, 1974 and the Expenditure-tax Act, 1987, till the date of
search under section 139 or requisition under section 140;
(b) the amount of any liability under this Code, or under any of the
Acts referred to in clause (a), determined after the date of the search,
or requisition, and till the date of completion of the assessment in
consequence to the search or the requisition;
(c) the amount of any liability determined on completion of the
assessment in consequence to the search or the requisition; and
(d) the amount of any liability under this Code, or under any of the
Acts referred to in clause (a), determined after the completion of the
assessment in consequence to the search, or the requisition, and till the date
of release of the assets.
(3) The
Assessing Officer may recover the existing liability referred to in clause (a)
of sub-section (2) and release the remaining portion of the asset, if any,
within a period of one hundred and twenty days from the date on which last of
the authorisations for search under section 139 was executed, to the person
from whose custody the assets were seized, if—
(a) an application is made by the person within thirty days from the
end of the month in which the assets were seized;
(b) the nature and source of the asset is explained by the person to
the satisfaction of the Assessing Officer; and
(c) the prior approval of the Chief Commissioner or Commissioner is
obtained.
(4) The
assets, other than money, shall be deemed to be under distraint as if such
distraint was effected by the Assessing Officer or, as the case may be, the Tax
Recovery Officer and the recovery of any liability out of such assets shall be
effected in the manner laid down in the Fifth Schedule.
(5) The
Assessing Officer shall release, within the time and subject to such conditions
prescribed, to the person from whose custody the assets were seized, any asset
or proceeds thereof, which remains after the liabilities referred to in
sub-section (1) are discharged.
(6) The
Assessing Officer may release any seized or requisitioned asset (other than
cash) before making assessment in consequence of search or requisition, if the
concerned person deposits with the Assessing Officer an amount of money equal
to the value of such asset on the date of the release and the amount so
deposited shall be deemed to be cash seized or requisitioned for the purposes
of this Code.
Power to
call for information
144. (1) For the purposes of this Code, the Board
may, regardless of anything to the contrary contained in any law for the time
being in force, require—
(a) any prescribed person to furnish the prescribed information within
such time and in such form and manner as may be prescribed; and
(b) any prescribed income-tax authority to call for the prescribed
information in such form and manner as may be prescribed.
(2) Any
income-tax authority, not below the rank of an Income-tax Officer, may require
any person to furnish any information as may be useful for, or relevant to any
enquiry or proceeding, pending before him under this Code, in such form, manner
and within such time as may be specified by him.
(3) Without
prejudice to the generality of the definition of the term ‘person’, it shall,
for the purposes of this section, include a banking company or any officer
thereof.
Power of
survey
145. (1) The prescribed income-tax authority may
enter, or authorise any other income-tax authority to enter, any place at which
a business is carried out by a person, if—
(a) he has reason to suspect that the person has not complied with the provisions
of this Code; and
(b) the place is—
(i) within the limits of the area assigned to him;
or
(ii) occupied by any person in respect of whom he
exercises jurisdiction.
(2) The
income-tax authority, referred to in sub-section (1), shall enter any place of
business referred to therein only during the hours at which such place is open
for the conduct of business and, in the case of any other place, only after
sunrise and before sunset.
(3) On
entering the place, the income-tax authority may require any person, who may be
attending in any manner to the business at the place, to—
(a) afford him to inspect the books of account or documents available
at the place;
(b) afford him to check or verify the cash, stock or other valuable
article or thing found there; and
(c) furnish any information relevant, or useful, for the proceedings
under this Code, or the Income-tax Act, 1961, in respect of the person or any
other person.
(4) For the
purposes of this section, any place at which a business is carried out includes
a place—
(a) which is not the principal place of such business;
(b) where any business or activity is being carried out and the tax
base relating to such business or activity is not to be included in the total
tax base under any provision of this Code;
(c) where any of the books of account, documents, cash, stock-in-trade
or valuables, relating to the business, or activity, referred to in sub-clause
(b), are kept; or
(d) where any of the books of account, documents or other record containing
the particulars regarding deduction of tax at source, or collection of tax at
source, made, or required to be made, under this Code, are kept.
(5) On
entering the place, the income-tax authority may—
(a) place marks of identification on the books of account, documents or
record inspected by him and take extracts, or copies, therefrom;
(b) impound any books of account, documents or record inspected by him,
after recording the reasons for doing so;
(c) make an inventory of cash, stock or valuables; or
(d) examine on oath any person if his statement would be useful for, or
relevant to, any proceeding under this Code.
(6) The
statement made by any person under clause (d) of sub-section (5) may be
used in evidence in any proceeding under this Code.
(7) The
income-tax authority acting under this section shall, on no account, remove or
cause to be removed from the place wherein he has entered any cash, stock or
other valuable article or thing.
(8) The
income-tax authority shall not retain any books of account, documents or record
impounded by him under this section beyond a period of one month without the
approval of the Commissioner.
(9) The
income-tax authority, other than an Inspector, shall have all the powers under sub-section
(1) of section 138 for enforcing compliance, if a person refuses, or evades,
to—
(a) afford the facility to the income-tax authority to inspect books of
account or other documents;
(b) allow checking or verifying any cash, stock or other valuable
article or thing;
(c) furnish any information; or
(d) have his statement recorded.
Power to
disclose information in respect of assessee
146. (1) No information in respect of any assessee
shall be provided to any person by,—
(a) the Board;
(b) any officer, authority or executive and ministerial staff, in the
secretariat, attached office or subordinate office of the Board; or
(c) any person, agency or authority engaged in any manner in the
administration of this Code.
(2) However,
the Board, or any person specified by it by an order in this behalf, may
furnish, or cause to be furnished, any information in respect of an assessee to
any other person performing any functions under—
(a) any law relating to the imposition of any tax, duty or cess, or to dealings
in foreign currency; or
(b) any other law as the Central Government may, if in its opinion it
is necessary so to do in the public interest, specify by notification in the
Official Gazette in this behalf.
(3) The
information referred to in sub-section (2) shall be only such information which
fulfils the following conditions—
(a) the information is received or obtained by the Board, or any person
specified by it by an order under that sub-section, in the performance of its
or his functions under this Code; and
(b) the information is, in the opinion of the person furnishing the
information, necessary for the purpose of enabling the other person receiving
the information to perform the functions under the laws referred to in that
sub-section.
(4) The Chief
Commissioner or Commissioner may furnish, or cause to be furnished, to any
person any information relating to any assessee received or obtained by any
income-tax authority in the performance of his functions under this Code, if—
(a) the person makes an application to the Chief Commissioner or
Commissioner in the prescribed form; and
(b) the Chief Commissioner or Commissioner is satisfied that it is in
the public interest so to do.
(5) The
decision of the Chief Commissioner or Commissioner under sub-section (4) shall
be final and shall not be called in question in any court of law.
(6) The
Central Government may, regardless of anything to the contrary contained in
this section, direct by order notified in the Official Gazette that no
information shall be furnished under sub-section (2) or sub-section (4) in
respect of such matters relating to such class of assessees, or to such
authorities, as may be specified in the order.
Proceedings
before tax authorities to be judicial proceedings
147. (1) Any proceeding under this Code before an
income-tax authority shall be deemed to be a judicial proceeding within the
meaning of section 193 and section 228 of the Indian Penal Code, 1860, and for
the purposes of section 196 of the Indian Penal Code, 1860.
(2) Every
income-tax authority shall be deemed to be a Civil Court for the purposes of
section 189, but not for the purposes of Chapter XXVI of the Code of Criminal
Procedure, 1973.
B. - Assessment Procedure
Self-reporting
of tax bases
148. (1) Every person shall furnish a return of
tax bases before the due date.
(2) The person
referred to in sub-section (1) shall,—
(a) in relation to income, be the following :—
(i) an individual, if his gross total income from
ordinary sources exceeds the threshold limit;
(ii) a company;
(iii) a firm;
(iv) a non-profit organisation;
(v) a political party;
(vi) any person who intends to carry forward the
loss or any part thereof in accordance with the provisions of this Code;
(vii) any person who derives any income from special
sources and is liable to pay income-tax thereon; and
(viii) any other person, if his gross total income
from ordinary sources exceeds the threshold limit;
(b) in relation to dividend distributed, be the following :—
(i) a company resident in India; and
(ii) a mutual fund;
(c) in relation to net wealth, be an individual, a Hindu undivided
family or a private discretionary trust, if their net wealth exceeds the
maximum amount which is not liable to wealth-tax.
(3) The return
of tax bases referred to in sub-section (1) shall be a return in respect of the
tax bases of the person referred to in sub-section (2) or the tax bases of any
other person in respect of which such person is assessable for the relevant
financial year.
(4) The return
of tax bases shall be,—
(a) verified in the prescribed form and manner and setting forth such
other particulars as may be prescribed; and
(b) furnished to the Income-tax Department or such other authority or
agency as may be prescribed.
(5) The forms
of the return referred to in sub-section (4) shall, in such cases as may be
prescribed, require the assessee to furnish particulars relating to the
following :—
(a) income exempt from tax;
(b) assets of the prescribed nature and value;
(c) bank account and credit card held;
(d) expenditure exceeding the prescribed limits incurred by him; and
(e) such other outgoings as may be prescribed.
(6) A person
may, if he discovers any omission or any wrong statement in the return of tax
bases furnished by him under sub-section (1), revise such return at any time
before the expiry of twenty-one months from the end of the relevant financial
year or before the completion of the assessment, whichever is earlier.
(7) A person
may furnish the return for any financial year at any time before the expiry of
twenty-one months from the end of the relevant financial year or before the
completion of the assessment, whichever is earlier if—
(a) such person has not furnished a return by the due date; and
(b) no notice under sub-section (1) if section 151 or sub-section (1)
of section 152 has been served on him.
(8) The
Assessing Officer may, if he finds that the return has not been furnished by
any person in the prescribed form and manner or does not contain the particulars,
as required under sub-section (4), intimate to such person the deficiency and
allow an opportunity to such person to remove the deficiency within thirty days
from the service of the intimation.
(9) The
Assessing Officer shall treat the return filed by a person as invalid, if the
deficiency referred to in sub-section (8) is not removed within the time
allowed and the provisions of the Code shall apply as if the person had failed
to furnish the return.
(10) The
return of tax bases of a person specified in column (2) of the Table 5 below
shall be signed and verified by a person specified in Column (3) of the said
Table :—
Table 5
|
Sl. No. |
Person
furnishing the return |
Person to
sign and verify the return |
|
(1) |
(2) |
(3) |
|
(1) |
Individual being
mentally incapacitated from attending his affairs |
(a)
guardian of the individual; or (b)
any other person duly competent to act on his behalf |
|
(2) |
Any other
Individual |
(a)
Individual himself; or (b)
any person duly authorized by the individual in this regard, if the
individual is absent from India or for some other reason it is not possible
for him to sign the return, and other person holds a valid power of attorney
from the individual to do so. |
|
(3) |
Hindu undivided
family |
(a)
Karta of the family; or (b)
any other adult member of the family if the karta is absent from India or is
mentally incapacitated from attending to his affairs |
|
(4) |
Company not being
resident in India |
Any person
who holds a valid power of attorney from the company to do so |
|
(5) |
(a)
Company which is being wound court or otherwise; or (b)
company where any person has been appointed as the receiver of any assets of
the company |
Liquidator
referred to in clause (g) of sub-section (1) of section 170 |
|
(6) |
Company whose
management has been taken over by the Central Government or any State
Government under any law |
Principal
officer of the company |
|
(7) |
Any other company |
(a)
Managing director of the company, or (b) any
director of the company if there is no managing director or the managing
director, for any unavoidable reason is not able to sign and verify the
return |
|
(8) |
Firm |
(a)
managing partner of the firm; or (b)
any partner (not being a minor) of the firm if there is no managing partner
or the managing partner, for any unavoidable reason, is not able to sign and
verify the return |
|
(9) |
Limited liability
partnership |
(a)
designated partner of the limited liability partnership; or (b) any
partner (not being a minor) of the limited liability partnership if there is
no designated partner or the designated partner, for any unavoidable reason,
is not able to sign and verify the return |
|
(10) |
Local authority |
Principal
officer of the authority |
|
(11) |
Political party |
Chief
executive officer ( whether such Chief executive officer is known as
secretary or by any other designation) of the party |
|
(12) |
Any other
association of persons |
Any member or
the principal officer of the association |
|
(13) |
Any other person |
(a)
person himself; or (b)
any person competent to act on this behalf. |
(11) Any
person who is otherwise not required to furnish a return of tax bases under sub-section
(1) may furnish a return of tax bases before the expiry of the twenty one
months from the end of the relevant financial year and all the provisions of
this Code shall, as far as may be, apply as if it is a return furnished under
that sub-section.
Reporting
of international transaction
149. (1) Every person who has entered into an
international transaction during the financial year shall furnish a report of
the transaction to the Transfer Pricing Officer on or before the due date.
(2) The report
referred to in sub-section (1) shall be obtained from an accountant in the
prescribed form duly signed and verified in the prescribed manner by such
accountant.
Tax Return
Preparer
150. (1) The Board may, without prejudice to the
provisions of section 148, frame a Tax Return Preparer Scheme so as to allow a
Tax Return Preparer to prepare and furnish the return of tax bases of any
specified class of persons, in accordance with the Scheme.
(2) Every Tax
Return Preparer shall affix his signature on the return so prepared by him.
(3) The Scheme
framed by the Board under this section may provide for the following namely :—
(a) the manner in which and the period for which the Tax Return
Preparers shall be authorised under sub-section (4);
(b) the eligibility criteria for a person to qualify as a Tax Return
Preparer;
(c) the code of conduct for the Tax Return Preparer;
(d) the duties and obligations of the Tax Return Preparer;
(e) the circumstances under which the authorisation given to a Tax
Return Preparer may be withdrawn;
(f) any other matter which is required to be, or may be, specified by
the Scheme for the purposes of this section.
(4) For the
purposes of this section, -
(a) “Tax Return Preparer” means any individual who has been authorised
to act as a Tax Return Preparer under the Scheme framed under this section;
(b) “Tax Return Preparer Scheme” means a Scheme framed by the Board and
notified in the Official Gazette, providing for preparing and furnishing of the
return of tax bases through a Tax Return Preparer; and
(c) “specified class of persons” means any person who is required to
furnish a return of income under this Code, other than a company or a person,
whose accounts are required to be audited under section 84.
Issue of
notice to stop-filer
151. (1) The Assessing Officer may serve a notice
on a stop-filer within twenty-one months from the end of the relevant financial
year requiring such person to furnish a return of tax bases for the relevant
financial year.
(2) The person
in receipt of notice issued under sub-section (1) shall furnish the return
within thirty days from the date of receipt of the notice and the return shall
be furnished and verified, in the prescribed form and manner and setting forth
such other particulars as may be prescribed.
Issue of
notice to non-filer
152. (1) The Assessing Officer may serve a notice
on a non-filer within twenty-one months from the end of the relevant financial
year requiring him to furnish a return of tax bases for the relevant financial
year.
(2) The person
in receipt of notice issued under sub-section (1) shall furnish the return
within thirty days from the date of receipt of the notice and the return shall
be furnished and verified, in the prescribed form and manner and setting forth
such other particulars as may be prescribed.
Self-assessment
tax
153. (1) The assessee shall be liable to pay
before furnishing the return of tax bases, the aggregate of the following
amounts as self-assessment tax :—
(a) the amount of tax payable on the basis of the return required to be
furnished under this Code for any financial year as reduced by the amount of
tax paid and tax credit, if any, under this Code for such financial year; and
(b) the amount of interest payable under any provisions of this Code for
such financial year.
(2) The amount
paid as self-assessment tax for any financial year shall first be adjusted
towards the interest payable under any provisions of this Code and the balance,
if any, shall be adjusted towards the tax payable, if the amount of the
self-assessment tax paid falls short of the self-assessment tax payable under
sub-section (1).
Acknowledgement
of return
154. On receipt of any return of tax bases for any
financial year, the Department, or any other person authorised by the Board in
this behalf, shall issue an electronic acknowledgement for receipt of the
return.
Processing
of return
155. (1) The Department shall process the return
received under section 154 in the following manner, namely :—
(a) the tax bases shall be computed after making the following
adjustments, namely :—
(i) any arithmetical error in the return; and
(ii) an incorrect claim, if such incorrect claim is
apparent from the existence of any information in the return.
(b) the tax and interest, if any, shall be computed on the basis of the
tax base computed under clause (a); and
(c) the sum payable by, or the amount of refund due to, the assessee
shall be determined after adjustment of the tax and interest, if any, computed
under clause (b) by any pre-paid taxes and any other amount paid by way
of tax and interest.
(2) The
Department shall send an intimation in the prescribed form to the assessee
specifying the tax bases so computed, the liability to pay tax on such tax
bases, the amount of credit allowed for prepaid taxes and the sum payable by,
or refundable to, him and such other particulars as may be prescribed.
(3) The
Department shall not send any notice of demand under section 168 in respect of
any sum payable on account of any adjustment made under sub-section (1), if the
return is processed after the expiry of twelve months from the end of the month
in which the return is furnished.
(4) The
Department may make a scheme for centralised processing of returns, for the
purposes of processing the return under sub-section (1), with a view to
expeditiously determining the tax payable by, or the refund due to, the
assessee.
(5) For the
purposes of this section, -
(a) “an incorrect claim apparent from the existence of any information
in the return” shall mean a claim, on the basis of an entry, in the
return -
(i) of an item, which is inconsistent with another
entry of the same, or some other item, in such return;
(ii) in respect of which information required to be
supplied to substantiate such entry has not been so furnished; or
(iii) in respect of a deduction, where such
deduction exceeds the specified statutory limit which may have been expressed
as monetary amount, percentage, ratio or fraction;
(b) any sum payable on account of any adjustment made under sub-section
(3) means the aggregate of, -
(i) tax payable on the tax base determined
pursuant to processing under sub-section (1) as reduced by the tax payable on
the tax base declared in the return; and
(ii) the interest payable on the amount determined
under sub-clause (i).
Selection
of return for scrutiny assessment
156. (1) The Department, or the prescribed
Directorate, may, -
(a) after processing the return in the manner provided in section 155, select
any return for the purposes of scrutiny assessment; or
(b) select any case for the purposes of scrutiny assessment, if -
(i) a return has been treated as invalid under
sub-section (9) of section 148; or
(ii) no return has been filed in pursuance to a
notice under sub-section (1) of section 151 or a notice under sub-section (1)
of section 152.
(2) The
selection referred to in sub-section (1) shall be made in accordance with the
risk management strategy framed by the Board in this behalf.
(3) The Department,
or the prescribed Directorate, shall communicate to the assessee in writing
about the selection referred to in clause (a), or clause (b), of
sub-section (1).
(4) However,
the communication referred to in sub-section (3) shall not be served on the
assessee after four months from the end of the financial year in which -
(a) the return is furnished, if the return is selected under clause (a)
of sub-section (1);
(b) the return has been treated as invalid, if the case is selected
under sub-clause (i) of clause (b) of sub-section (1); or
(c) the notice was issued, if the case is selected under sub-clause (ii)
of clause (b) of sub-section (1).
(5) No
information relating to the risk management strategy framed by the Board shall,
regardless of anything to the contrary contained in any other Act for the time
being in force, be revealed to any person.
Notice for
scrutiny assessment
157. (1) For the purposes of making a scrutiny
assessment under this Code, the Assessing Officer shall serve on any assessee a
notice requiring him, on a date to be specified therein, -
(a) to attend his office or to produce, or cause to be produced, any
evidence, if any, on which the assessee may rely in support of the return or
case;
(b) to produce, or cause to be produced, such accounts or documents
(not relating to a period more than three years prior to the relevant financial
year) as the Assessing Officer may require; or
(c) to furnish in writing, and verified in the prescribed manner,
information in such form and on such point or matter (including a statement of
all assets and liabilities of the assessee, whether included in the accounts or
not) as the Assessing Officer may require.
(2) However,
the Assessing Officer shall obtain the previous approval of the Joint Commissioner
before requiring the assessee to furnish the statement of all his assets and
liabilities not included in the accounts for the relevant financial year.
(3) The
Assessing Officer may make such inquiry, as he considers necessary, for the
purposes of obtaining full information in respect of tax bases of any person
for the relevant financial year.
(4) For the
purposes of this section an assessee means -
(a) an assessee whose return, or case, has been selected for scrutiny
assessment under section 156; or
(b) an assessee who has been served with a notice under section 166.
Special
Audit
158. (1) The Assessing Officer may direct the
assessee to get his accounts audited by an accountant, if at any stage of the
proceeding, he is of the opinion that, having regard to the nature and
complexity of the accounts of the assessee and the interests of revenue, it is
necessary to do so.
(2) The
Assessing Officer shall not issue any direction under sub-section (1) unless
the assessee has been given a reasonable opportunity of being heard and prior
approval of the Chief Commissioner or Commissioner has been obtained.
(3) The
provisions of sub-section (1) shall have effect regardless of the fact that the
accounts of the assessee have been audited under any other law for the time
being in force or otherwise.
(4) The
accountant shall, for the purposes of sub-section (1), be nominated by the
Chief Commissioner or Commissioner.
(5) The
accountant shall furnish a report of the audit referred to in sub-section (1)
in the prescribed form duly signed and verified by him and setting forth such
particulars as may be prescribed and such other particulars as the Assessing
Officer may require.
(6) The
accountant shall furnish the report referred to in sub-section (5) within the
time allowed by the Assessing Officer.
(7) The
Assessing Officer may extend the time allowed under sub-section (6) by such
further period or periods as he thinks fit, for reasons to be recorded in
writing.
(8) However,
the aggregate of the period allowed under sub-section (6) and the further
period or periods allowed under sub-section (7) shall not exceed one hundred
and eighty two days from the date on which the direction under sub-section (1)
is received by the assessee.
(9) The
accountant shall furnish the report referred to in sub-section (5) to the
Assessing Officer and a copy of the same to the assessee.
(10) The
remuneration of the accountant and other expenses of any audit under
sub-section (1) shall be determined and paid by the Chief Commissioner or
Commissioner in accordance with such guidelines as may be prescribed.
Determination
of value of assets
159. (1) The Assessing Officer may, for the
purposes of assessment, require a Valuation Officer to make and report to him
an estimate of the value of any asset, investment or expenditure.
(2) In
pursuance to a reference made under sub-section (1), the Valuation Officer
shall, for the purpose of estimating the value of the asset, investment or
expenditure, and subject to the rules in this behalf, have all the powers to—
(a) enter any land, building or other place belonging to, or occupied
by, the person in connection with whose assessment the reference has been made;
(b) require any person in charge of, or in occupation or possession of,
the land, building or other place to afford him the necessary facility to
survey or inspect the land, building or other place;
(c) inspect any asset in respect of which the reference has been made;
(d) inspect any books of account, document or record which may be
relevant for the purpose of making the estimate of the value of the asset,
investment or expenditure, in respect of which the reference has been made;
(e) gather any other information relating to the asset, investment or
expenditure, which may be relevant for the purposes of estimating the value.
(3) The
Valuation Officer shall, by order in writing, estimate the value of the asset,
investment or expenditure after taking into account, -
(a) such evidence as the assessee may produce; and
(b) the material in his possession, in respect of which an opportunity
of being heard has been provided to the assessee.
(4) The
Valuation Officer may estimate the value of the asset, investment or
expenditure to the best of his judgment, if the assessee does not co-operate or
comply with his direction.
(5) The
Valuation Officer shall serve a copy of his estimate under sub-section (3) or
sub-section (4), as the case may be, on the Assessing Officer and the assessee.
(6) The Assessing
Officer shall, on receipt of the report of the Valuation Officer, proceed to
compute the tax bases of the assessee in conformity with the value estimated by
the Valuation Officer.
Determination
of arm’s length price
160. (1) The Transfer Pricing Officer may select
any international transaction for the purposes of determining the arm’s length
price in relation to the transaction.
(2) The
selection referred to in sub-section (1) shall be made in accordance with the
risk management strategy framed by the Board in this behalf.
(3) The
Transfer Pricing Officer shall communicate to the assessee in writing about the
selection of the transaction entered into by him.
(4) However,
the communication, referred to in sub-section (3), shall not be served on the assessee
after two months from the end of the financial year in which the report is
furnished to, or the information about the transaction is received by, the
Transfer Pricing Officer.
(5) The
Transfer Pricing Officer shall also serve a copy of the communication referred
to in sub-section (2) to the Assessing Officer within seven days from the date
on which the communication is sent to the assessee.
(6) The
Transfer Pricing Officer may, upon selection under sub-section (1), serve on
the assessee a notice requiring him, on a date to be specified therein, -
(a) to attend his office or to produce, or cause to be produced, any
evidence, if any, on which the assessee may rely in support of the computation
made by him of the arm’s length price in relation to the international
transaction; or
(b) to produce, or cause to be produced, such accounts or documents as
the Transfer Pricing Officer may require.
(7) The
Transfer Pricing Officer shall determine the arm’s length price in relation to
the international transaction in accordance with the provisions of section 106
after taking into account, -
(a) such evidence as the assessee may produce; and
(b) the material in his possession, in respect of which an opportunity
of being heard has been provided to the assessee.
(8) The
Transfer Pricing Officer may determine the arm’s length price in relation to
the international transaction to the best of his judgment, if the assessee does
not co-operate or comply with his direction.
(9) The
Transfer Pricing Officer shall serve a report of his determination under
sub-section (7) or sub-section (8), as the case may be, on the Assessing
Officer and the assessee.
(10) No
determination under sub-section (7) or sub-section (8) shall be made, or report
of such determination served as required by sub-section (9), after forty-two
months from the end of the financial year in which the international
transaction is entered into.
(11) The
Transfer Pricing Officer may, for the purposes of determining the arm’s length
price under this section, exercise all, or any, of the powers specified in
section 138 or section 144.
(12) No
information relating to risk management strategy framed by the Board shall,
regardless of anything to the contrary contained in any other Act for the time
being in force, be revealed to any assessee or any member of the public.
Determination
of an impermissible avoidance arrangement and consequences thereof.
161. (1) The Commissioner shall, for the purposes
of determining the consequences under section 112, serve on the assessee a
notice requiring him, on a date to be specified therein to produce, or cause to
be produced, any evidence or particulars -
(a) which may be required for the purposes of determining the
consequences; or
(b) on which the assessee may rely in support of his claim that the
provisions of section 112 are not applicable to his case.
(2) On the day
specified in the notice issued under sub-section (1), or as soon afterwards as
may be, the Commissioner shall, by an order in writing, determine the
consequences, if any, under section 112 after, -
(a) hearing such evidence and after taking into account such
particulars as the assessee may produce; and
(b) taking into account all relevant material which he has gathered.
(3) Upon the determining
the consequences, if any, the Commissioner shall issue direction to the
Assessing Officer to make such adjustment to the total income, or the tax
liability, in the case of the assessee and any other party to the arrangement,
that are necessary, appropriate and consistent.
(4) No order
under sub-section (2) shall be issued after twelve months from the end of the
month in which the notice under sub-section (1) is issued.
Assessment
162. (1) The Assessing Officer shall, in pursuance
to a notice issued under sub-section (1) of section 157, by an order in
writing, make a scrutiny assessment of the tax bases of the assessee after
taking into account,
(a) the evidence furnished by the assessee;
(b) the report of the Valuation Officer;
(c) the order of the Transfer Pricing Officer;
(d) the direction of the Commissioner under section 161; and
(e) the material in his possession, in respect of which an opportunity
of being heard has been provided to the assessee.
(2) The
Assessing Officer shall, on the basis of the scrutiny assessment, determine the
sum payable by, or refundable to, the assessee after adjusting the sum paid by,
or refunded to, the assessee in pursuance to the intimation issued under
sub-section (2) of section 155.
(3) The Assessing
Officer shall, regardless of anything to the contrary contained in this Act, in
the first instance, forward a draft of the proposed order of assessment
(hereinafter in this section referred to as the draft order) to the assessee if
he proposes to make any variation in the income or loss returned which is
prejudicial to the interest of such assessee.
(4) On receipt
of the draft order, the assessee shall, within thirty days of the receipt by
him of the draft order, -
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation to, -
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(5) The
Assessing Officer shall complete the assessment on the basis of the draft
order, if -
(a) the assessee intimates to the Assessing Officer the acceptance of
the variation; or
(b) no objections are received within the period specified in
sub-section (2).
(6) The
Assessing Officer shall, notwithstanding anything contained in section 146, pass
the assessment order under sub-section (3) within one month from the end of the
month in which, -
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(7) Upon receipt
of the directions issued under sub-section (5), the Assessing Officer shall, in
conformity with the directions, complete the assessment within one month from
the end of the month in which the direction is received notwithstanding
anything to the contrary contained in section 146.
(8) No
opportunity of being heard shall be required to be provided to the assessee for
the purposes of sub-section (7).
(9) The
provisions of sub-section (3) shall not apply if the variation is less than
twenty five hundred thousand rupees.
Best
judgment assessment
163. (1) The Assessing Officer shall make the
assessment of the tax base to the best of his judgment, if -
(a) the assessee fails to, -
(i) comply with all the terms of a notice issued
under sub-section (1) of section 157;
(ii) comply with a direction issued under section
158; or
(iii) make the return in response to notice under
section 166; or
(b) the assessee fails to regularly follow the method of accounting
provided in sub-section (1), or the accounting standards notified under
sub-section (2), of section 85; or
(c) he is not satisfied about the correctness or completeness of the
accounts of the assessee.
(2) The
Assessing Officer shall, in making the assessment under sub-section (1), take
into account all relevant material which he has gathered or is available on
record.
(3) The
Assessing Officer shall, before making the assessment under sub-section (1),
provide the assessee an opportunity of being heard by serving a notice calling
upon the assessee to show cause, on a date and time to be specified in the
notice, why the assessment should not be completed to the best of his judgment.
(4) It shall
not be necessary to give an opportunity under sub-section (3) before the making
of an assessment under this section, in a case where a notice under section 157
has been issued.
Directions
for assessment by Joint Commissioner or Commissioner
164. (1) A Joint Commissioner may, on a reference
being made to him by the Assessing Officer or on his own motion, call for and
examine the record of any proceeding in which a scrutiny assessment is pending,
if he considers it necessary or expedient so to do.
(2) The Joint
Commissioner may issue such direction as he thinks fit for the guidance of the
Assessing Officer so as to enable him to complete the scrutiny assessment
referred to in sub-section (1).
(3) The Joint
Commissioner may seek the direction of the Commissioner for the purposes of
issuing direction to the Assessing Officer so as to enable the Assessing
Officer to complete the scrutiny assessment referred to in sub-section (1).
(4) The
Commissioner may, on a reference being made to him under sub-section (3) or on
his own motion, call for and examine the record of any proceeding in which a
scrutiny assessment is pending, if he considers it necessary or expedient so to
do.
(5) The
Commissioner may issue such direction as he thinks fit for the guidance of the
Assessing Officer, or the Joint Commissioner, so as to enable the Assessing
Officer to complete the scrutiny assessment.
(6) The
Commissioner or Joint Commissioner shall not issue any direction which are
prejudicial to the assessee unless an opportunity of being heard is given to
the assessee.
(7) Any
direction issued under this section shall be binding on all the income-tax
authorities subordinate to the authority issuing the direction.
(8) The
reference to Joint Commissioner in sub-section (1) and sub-section (2) shall be
construed as a reference to Commissioner, if the Joint Commissioner is the
Assessing Officer.
(9) For the
purposes of this section, any direction as to the lines on which an
investigation connected with the scrutiny assessment should be made shall not
be a direction prejudicial to the assessee.
Direction
for assessment by Dispute Resolution Panel
165. (1) The Dispute Resolution Panel may, in a
case where any objection is received under sub-section (2), -
(a) call for and examine the record of any proceeding relating to the
draft order;
(b) make such further enquiry, as it thinks fit; or
(c) cause any further enquiry to be made by any income-tax authority
and report the result of the same to it.
(2) The
Dispute Resolution Panel shall, in the case referred to in sub-section (1),
issue such direction, as it thinks fit, for the guidance of the Assessing
Officer to enable him to complete the scrutiny assessment.
(3) The
Dispute Resolution Panel shall issue the direction referred to in sub-section
(2), after considering the, -
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or
Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(4) The
Dispute Resolution Panel may confirm, reduce or enhance the variations proposed
in the draft order.
(5) The
Dispute Resolution Panel shall not set aside any proposed variation or issue
any direction under sub-section (2) for further enquiry and passing of the
assessment order.
(6) If the
Members of the Dispute Resolution Panel differ in opinion on any point, the
point shall be decided according to the opinion of the majority.
(7) Every
direction issued by the Dispute Resolution Panel shall be binding on the
Assessing Officer.
(8) No
direction under sub-section (2) shall be issued unless an opportunity of being
heard is given to the assessee and the Assessing Officer on such directions
which are prejudicial to their interest.
(9) No
direction under sub-section (2) shall be issued after nine months from the end
of the month in which the draft order is forwarded to the eligible assessee.
(10) The Board
may make rules for the efficient functioning of the Dispute Resolution Panel
with a view to expeditiously dispose of the objections filed, under sub-section
(2), by the eligible assessee.
Reopening
of assessment
166. (1) The Assessing Officer shall, for reasons
to be recorded in writing, reopen a case for reassessment, if he has reason to
believe that any tax base liable to tax has escaped assessment for the relevant
financial year.
(2) The
Assessing Officer shall, for reopening a case, serve on the assessee a notice requiring
him to furnish, within thirty days, a return of tax bases for any financial
year.
(3) The notice
issued under sub-section (2) shall specify the reasons for reopening the case.
(4) The tax
base liable to tax shall be deemed to have escaped assessment in the following
cases, namely :—
(a) where the tax base for the relevant financial year exceeds the
maximum amount not liable to tax but, -
(i) the return of the tax base has not been
furnished;
(ii) no notice has been issued under section 151 or
section 152; and
(iii) the time limitation for issuing such notice
has expired;
(b) where a return of tax bases has been furnished by the assessee,
but -
(i) no communication has been received under
section 156;
(ii) the time limitation for issuance of such
communication has expired; and
(iii) the assessee has understated the tax bases, or
has claimed excessive loss, deduction, allowance or relief, in the return;
(c) where a scrutiny assessment has been made under section 162 or
section 163, but, -
(i) the tax bases liable to tax has been
under-assessed;
(ii) the tax bases have been assessed at too low a
rate;
(iii) the tax bases have been made the subject of
relief to which the assessee is not entitled to, under this Code;
(iv) excessive loss or depreciation allowance or
any other allowance under this Code has been computed;
(v) the assessment has not been made in accordance
with any decision, prejudicial to the assessee, rendered by, -
(A) Appellate Tribunal, National Tax Tribunal, High Court or Supreme
Court in the case of the assessee or any other person under this Code, the
Income-tax Act, 1961; or
(B) a court in the case of the assessee or any other person under any
other law;
(vi) the computation or assessment has not been made
in accordance with any order, direction, instruction or circular issued by the
Board;
(vii) the computation or assessment has not been
made by the Assessing Officer in accordance with any order, direction, instruction
or circular issued, before making of the assessment, by an authority to whom
the Assessing Officer is subordinate; or
(viii) any objection has been raised, or observation
made, by the Comptroller and Auditor General of India to the effect that the
assessment has not been made in accordance with the provisions of this Code or
the Income-tax Act, 1961;
(d) where search and seizure operation has been carried out under
section 139, or material has been obtained in pursuance to a requisition under section
140, in the case of the person;
(e) where any material which has been seized, or obtained in pursuance
to a requisition, has a bearing on the determination of the tax bases of a
person other than the person referred to in clause (d).
(5) The person
in receipt of notice issued under sub-section (2) shall furnish the return
within thirty days from the date of receipt of the notice and the return shall
be furnished and verified, in the prescribed form and manner and setting forth
such other particulars as may be prescribed.
(6) The notice
under sub-section (2) shall be issued, -
(a) for the seven financial years immediately preceding the financial
year in which the search and seizure operation has been carried out or the
material has been obtained; and
(b) within seven years from the end of the relevant financial year in
any other case.
(7) However,
the notice under sub-section (2) for any financial year may be issued at any
time, if -
(a) the reassessment is to be made in consequence of, or to give effect
to, any finding, or direction, contained in an order passed, -
(i) by any authority or Court in any proceeding
under this Code by way of appeal, reference or revision; or
(ii) by a Court in any proceeding under any other
law; and
(b) the period referred to in sub-section (6) for issue of such notice
had not expired at the time the order, which was the subject-matter of appeal,
reference or revision was made.
(8) No notice
under sub-section (2) shall be issued by the Assessing Officer unless the Chief
Commissioner or Commissioner, -
(a) is satisfied on the reasons recorded by the Assessing Officer, that
it is a fit case for the issue of such notice; and
(b) he grants his approval for issue of such notice by the Assessing
Officer.
(9) Any
assessment proceeding relating to any financial year falling within the period
of seven financial years referred to in sub-section (6) shall abate if it is
pending on the date of the initiation of the search, or on the date of
obtaining the material, as the case may be.
(10) The
provisions of this section shall also apply in the case of any other person, as
if a search and seizure operation has been carried out under section 139 in his
case, if any material which has a bearing on the determination of the tax bases
of such other person, has been -
(a) seized in the course of search and seizure under section 139 in the
case of the person referred to in clause (d) of sub-section (4); or
(b) obtained in pursuance to the requisition under section 140 in the case
of the person referred to in clause (d) of sub-section (4).
(11) On
receipt of a return in pursuance to a notice under sub-section (2), or after
the expiry of time prescribed for furnishing the return in pursuance to such
notice, the Assessing Officer shall, by an order in writing, make the
reassessment of the total income and the provisions of sections 157 to 164
shall apply accordingly.
(12) For the
purposes of this section, -
(a) date of initiation of search, or the date of obtaining the material
under sub-section (9) to sub-section (11) shall be construed as reference to
the date of receiving the material by the Assessing Officer having jurisdiction
over such other person;
(b) reassessment shall include any other part of the tax base liable to
tax which has escaped assessment and which comes to the notice of the Assessing
Officer subsequently in the course of reassessment proceeding regardless that
the fact of such part of the tax base having escaped assessment has not been
included in the reasons recorded for re-opening under sub-section (1); and
(c) reopening a case for reassessment shall include opening a case for
assessment where return for a tax base has not been furnished before the issue
of notice under sub-section (2).
Rectification
of mistake
167. (1) An income-tax authority may amend any
order passed, or intimation issued, by it under this Code so as to rectify any
mistake apparent from the record.
(2) Subject to
sub-section (4), no amendment under this section shall be made after two years
from the end of the financial year in which the order sought to be amended was
passed.
(3) For the
purposes of this section, a mistake in the order, or intimation, sought to be
amended shall, without prejudice to the generality of sub-section (1), be deemed
to be apparent from the record, if the order, or intimation, is not in
accordance with -
(a) the decision of the Supreme Court, or the jurisdictional High
Court, rendered subsequent to the passing of such order or intimation;
(b) the amendment to this Code made subsequent to the passing of such
order or intimation;
(c) any finding, or direction, contained in an order passed in the case
of the assessee for any other financial year by -
(i) any authority, or Court, in any proceeding
under this Code by way of appeal, reference or revision; or
(ii) a Court in any proceeding under any other law
insofar as it has a bearing on the liability under this Code; or
(d) any finding, or direction, contained in an order passed in the case
of any other assessee for any financial year by -
(i) any income-tax authority under the Code; or
(ii) by a court in any proceeding under any law
insofar as it has a bearing on the liability under this Code.
(4) The
income-tax authority shall not make any amendment, which has the effect of
enhancing an assessment or reducing a refund or otherwise increasing the
liability of the assessee, unless the authority concerned has given to the
assessee a reasonable opportunity of being heard.
(5) The
income-tax authority concerned may make an amendment, -
(a) on its own motion; or
(b) on the application made to it by the assessee or, as the case may
be, by the Assessing Officer.
(6) Any
application received by an authority for amendment of an order shall be decided
within a period of six months from the end of the month in which such
application is received by it, failing which an order shall be deemed to have
been made rejecting such application.
(7) In a case
where the order has been decided in appeal or revision, the power of the
authority to amend the order, or intimation, shall be restricted to matters
other than those decided in appeal or revision.
(8) Without
prejudice to the generality of the foregoing provisions, mistake apparent from
record in relation to an order, or intimation, shall include a mistake which
becomes apparent under any prescribed circumstances arising after the date of
passing of the order or intimation.
(9) The Board
may prescribe the date from which the period of two years specified under sub-section
(2) shall be reckoned for the purposes of amendment.
Notice of
demand
168. Any sum payable in consequence of any order
made, or intimation issued, under this Code shall be demanded by an income-tax
authority by serving upon the assessee a notice of demand in the prescribed
form and manner.
Time limits
for completion of assessment or reassessments
169. (1) The Assessing Officer shall, subject to
the provisions of the section, not make -
(a) any order of assessment under section 162 or section 163 after the
expiry of -
(i) twenty-one months from the end of the
financial year in which the return is furnished;
(ii) twenty-one months from the end of the
financial year in which a notice under section 151 or section 152 was served,
if no return is furnished;
(b) any order of reassessment under section 166 after the expiry of
twenty-one months from the end of the financial year -
(i) in which the last of the authorisations was
executed in the case of a person where search and seizure operation was carried
out under section 139 or the material was obtained in pursuance to a
requisition under section 140;
(ii) in which any material belonging to the person
referred to in section 185 is handed over to his Assessing Officer under that
sub-section;
(iii) in which the notice under section 166 is
served, in any other case;
(c) any order of assessment in pursuance of an order under section 186
or section 190, setting aside or cancelling an assessment, after the expiry of
twelve months from the end of the financial year in which the order is received
by the Commissioner;
(d) any order of assessment in pursuance of an order under section 194,
after the expiry of twelve months from the end of the financial year in which
the order is passed under that section;
(e) any order of assessment, reassessment or recomputation in pursuance
to the revival of any proceeding under this Code, after the expiry of twelve
months from the end of the financial year in which the order of revival of the
proceedings is received by the Commissioner.
(2) The
Assessing Officer shall, in a case where an international transaction has been
selected under section 160, not make an order of assessment for the financial
year after the expiry of the period of twenty one months referred to in sub-section
(1) or three months from the end of the month in which the report under that
section is received, whichever is later.
(3) The
provisions of sub-section (1) and sub-section (2) shall not apply in respect of
assessment, reassessment or recomputation to be made in consequence of, or to
give effect to, any finding or direction contained in any order -
(a) under section 186, section 190, section 192 or section 193; or
(b) of any court in a proceeding otherwise then by way of appeal or reference
under this Code.
(4) In
computing the period of limitation for the purpose of sub-section (1) and
sub-section (2), the following period or time shall not be included, namely :—
(a) the period commencing the date on which the application for Advance
Pricing Arrangement is filed by the assessee and ending with -
(i) the date on which the order rejecting the
application is received by the Commissioner; or
(ii) the date on which the copy of the Advance
Pricing Agreement, entered under section 107, is received by the Commissioner;
(b) the time taken in reopening the whole or any part of the proceeding
or in giving an opportunity to the assessee to be re-heard under section 137;
(c) the period during which the assessment proceeding is stayed by an order
or injunction of any court;
(d) the period commencing from the date on which the Assessing Officer
directs the assessee to get his accounts audited under section 158 and ending
with the last date on which the assessee is required to furnish a report of
such audit under that sub-section;
(e) the period commencing from the first day of the month in which the
notice under section 161 is served on the assessee and ending with the last day
of the month in which the order under that section is passed;
(f) the period commencing from the date on which an application is made
before the Authority for Advance Rulings under sub-section (1) of section 152
and ending with the date on which the order rejecting the application is
received by the Commissioner under sub-section (9) of that section; or
(g) the period commencing from the date on which an application is made
before the Authority for Advance Rulings under sub-section (1) of section 152
and ending with the date on which the advance ruling pronounced by it is
received by the Commissioner under sub-section (13) of that section.
(5) The period
of limitation available to the Assessing Officer for making an order of
assessment, reassessment or recomputation, shall not be less than sixty days,
if the period immediately after the exclusion of the time or period specified
in sub-section (4) is less than sixty days.
(6) For the
purpose of clause (c) and clause (d) of sub-section (1), -
(a) assessment of any income for a financial year shall be deemed to
have been made in pursuance of an order under section 186, section 190 or
section 194 for that financial year, if the order under those sections relates
to another financial year and the income is excluded from the total income of
the assessee for such other financial year; or
(b) assessment of any income in the case of an assessee shall be deemed
to have been made in pursuance of an order under section 186, section 190 or
section 194 for that assessee, if the order under those sections relates to
another assessee and the income is excluded from the total income of such other
assessee.
C. - Procedure for assessment in special cases
Representative
assessee
170. (1) For the purposes of this Code,
“representative assessees” in respect of an assessee means -
(a) the agent of a non-resident, if the assessee is a non-resident;
(b) the guardian, or manager, of a minor, lunatic or idiot, if the
assessee is a minor, lunatic or idiot;
(c) the Court of Wards, the Administrator-General, the Official
Trustee, any receiver or manager (including any person, whatever be his
designation, who manages property on behalf of the assessee) appointed by, or
under, any order of a court, if such person receives, or is entitled to
receive, income on behalf, or for the benefit, of the assessee;
(d) a trustee appointed under an oral trust, or a trust declared by a
duly executed instrument in writing whether testamentary or otherwise, if the
assessee is a trust;
(e) the legal representative, or the executor, if the assessee dies;
(f) a participant, or the legal representative of the deceased
participant, in the case of dissolution of an unincorporated body; and
(g) the Liquidator appointed under section 448, or section 490, of the
Companies Act, 1956 in the case of a company.
(2) The “agent”
in relation to a non-resident includes -
(a) any person in India -
(i) who is employed by, or on behalf of, the
non-resident;
(ii) who has any business connection with the
non-resident;
(iii) from, or through, whom the non-resident is in
receipt of any income, whether directly or indirectly; or
(iv) who is the trustee of the non-resident; and
(b) any other person who has acquired, by means of transfer, a capital
asset in India from the non-resident.
(3) A broker
in India who, in respect of any transactions, does not deal directly with, or
on behalf of, a non-resident principal but deals with, or through, a
non-resident broker shall not be deemed to be an agent under this section in
respect of such transactions, if the following conditions are fulfilled, namely
:—
(a) the transactions are carried on in the ordinary course of business
through the first mentioned broker; and
(b) the non-resident broker is carrying on such transactions in the
ordinary course of his business and not as a principal.
(4) The
“executor” in relation to the estate of a deceased person means -
(a) an individual, if such individual is the only executor; or
(b) an association of persons comprising all the executors, if there
are more than one executor.
(5) No person
shall be treated as the agent of a non-resident unless he has had an
opportunity of being heard by the Assessing Officer as to his liability to be
treated as such.
Rights and
obligations of a representative assessee
171. (1) Every representative assessee shall, in
his representative capacity, be liable to assessment only in respect of the tax
base of the person represented by him.
(2) Every
representative assessee shall be subject to the same duties, responsibilities
and liabilities as if the tax bases accrued to him or received, or owned, by
him.
(3) The tax on
tax bases of the representative assessee shall be levied upon, and recovered
from, him in the manner, and to the extent, as it would have been leviable
upon, and recoverable from, the person represented by him.
(4) Any
representative assessee, or any person who apprehends that he may be assessed
as a representative assessee, may retain a sum equal to his estimated liability
under this Chapter out of the money payable by him to the person on whose behalf
he is liable to pay tax (hereinafter in this section referred to as the
principal).
(5) The
representative assessee, or the person referred to in sub-section (4), in the
event of disagreement between him and the principal as to the amount to be so retained,
may apply to the Assessing Officer for a certificate stating the amount to be
so retained pending final settlement of the liability.
(6) Upon
receipt of the application under sub-section (5), the Assessing Officer shall
issue, within one month from the date of receipt of the application, the
certificate stating the amount to be retained by the representative assessee or
the person.
(7) The
certificate issued under sub-section (6) shall be the warrant for retaining the
amount specified therein by the representative assessee or the person.
(8) The amount
recoverable from the representative assessee, or the person, at the time of
final settlement shall not exceed the amount specified in such certificate,
except to the extent to which the representative assessee, or the person, may
have additional assets of the principal at that time.
(9) Every
representative assessee who, as such, pays any sum under this Code, shall be
entitled to -
(a) recover the sum so paid from the principal; or
(b) retain an amount equal to the sum so paid out of any moneys that
may be in his possession, or may come to him, in his representative capacity.
(10) In the
case of a representative assessee referred to in clause (e), clause (f)
or clause (g) of sub-section (1) of section 170, -
(a) any proceeding taken against the principal before his death or its
dissolution or the appointment of the Liquidator, shall be deemed to have been
taken against the representative assessee and may be continued against him from
the stage at which it stood on the date of the death or dissolution or the
appointment; and
(b) any proceeding which could have been taken against the principal
may be taken against the representative assessee, if the principal had survived
or existed or the Liquidator had not been appointed.
Direct
assessment or recovery not barred
172. Nothing in the foregoing sections in this
Chapter shall prevent -
(a) the direct assessment of the principal; or
(b) the recovery of any sum payable under this Code from the principal.
Remedy
against property in cases of representative assessee
173. The Assessing Officer shall have the same
remedy against all property of any kind vested in, or under the control or
management of, any representative assessee as he would have against the property
of the principal, in as full and ample a manner, whether the demand is raised
against the representative assessee or against the principal direct.
Assessment
upon business reorganisation
174. (1) The assessment of the predecessor and the
successor shall, in respect of the financial year in which the business
reorganisation is undertaken, be made in the manner provided in this section.
(2) The
predecessor shall be assessed in respect of the income for the period beginning
with the first day of the financial year and ending on the day immediately
preceding the date of business reorganisation.
(3) The
successor shall be assessed in respect of the income for the period beginning
with the date of business reorganisation and ending on the last day of the financial
year.
(4) Any
proceeding under this Code taken against the predecessor shall be deemed to
have been taken against the successor and may be continued against the
successor from the stage at which it stood on the date of the business
reorganisation, if the predecessor does not exist or cannot be found.
(5) Any
proceeding under this Code may be taken against the successor, which could have
been taken against the predecessor if he existed or was found.
Assessment
after partition of a Hindu undivided family
175. (1) A Hindu family, hitherto assessed as
undivided, shall be deemed, for the purposes of this Code, to continue to be a
Hindu undivided family, except where, and insofar as, a finding of partition
has been given under this section in respect of the Hindu undivided family.
(2) The
Assessing Officer shall -
(a) make an enquiry into the claim of partition made by, or on behalf
of, any member of a Hindu family, hitherto assessed as undivided, at the time
of making the assessment;
(b) give notice of the enquiry to all members of the family; and
(c) record a finding as to whether there has been a total, or partial,
partition of the joint family property and, if there has been such a partition,
the date on which it has taken place;
(3) The tax
bases of the Hindu family, hitherto assessed as undivided, shall, for the
financial year in which the partition took place, be the tax bases in respect
of the period up to the date of partition, as if no partition had taken place.
(4) Each
member, or group of members, of the Hindu family, hitherto assessed as
undivided, shall be jointly and severely liable for tax on the tax bases of any
financial year or period, up to the date of partition, and shall be recovered
from him, or them, accordingly.
(5) For the
purposes of this section, the several liability of any member, or group of
members, shall be computed according to the portion of the joint family
property allotted to him, or to them, upon the partition.
(6) The
provisions of this section shall, so far as may be, apply in relation to the
levy and collection of any penalty, interest, fine or other sum in respect of
any period up to date of the partition, whether total or partial, of a Hindu
undivided family as they apply in relation to the levy and collection of tax in
respect of any such period.
(7) For the
purposes of this Code, no claim of partial partition of a family shall be
enquired into, or partition recognised, and -
(a) the family shall continue to be assessed under this Code as if no
partial partition had taken place; and
(b) the liability of the family and its members under this Code, before
or after the partial partition, shall remain the same.
(8) In this
section,—
(a) “partition” means—
(i) where the property admits of a physical division,
such division of the property, but a physical division of the income without a
physical division of a property producing the income shall not be deemed to be
a partition; or
(ii) where the property does not admit of a
physical division, then such division as the property admits of, but a mere
severance of status shall not be deemed to be a partition;
(b) “partial partition” means a partition which is partial as regards
the persons constituting the Hindu undivided family, or the properties belonging
to the Hindu undivided family, or both.
Assessment
of non-resident in respect of the shipping business
176. (1) The assessment of the income from the
business of operation of ships (including an arrangement such as slot charter,
space charter or joint charter) shall, regardless of anything to the contrary
contained in any other provisions of this Code, be made in accordance with the
provisions of this section.
(2) The master
of a ship belonging to, or chartered by, a non-resident shall, before the departure
of the ship, furnish to the Assessing Officer a return of the full amount of
transportation charges accrued to, or received by, the owner or charterer,
since the last arrival of the ship in that port.
(3) The
requirement of furnishing the return shall be deemed to have been complied
with, if -
(a) the Assessing Officer is satisfied that -
(i) it is not possible for the master of the ship
to furnish the return before the departure of the ship from the port; and
(ii) the master of the ship has made satisfactory
arrangements for furnishing the return and payment of tax; and
(b) the return is furnished within thirty days of the departure of the
ship by any person authorized by the master of the ship.
(4) On receipt
of the return, the Assessing Officer shall -
(a) assess the income referred to in sub-section (1), after calling for
such documents as he deems fit; and
(b) determine the sum payable as tax thereon at the rates applicable to
the total income of a foreign company.
(5) The sum
determined under sub-section (4) shall be payable by the master of the ship or
any other person authorised by him.
(6) A port
clearance shall not be granted to the ship until the Commissioner of Customs,
or other officer duly authorised to grant it, is satisfied that the tax
assessable under this section has been duly paid or that satisfactory
arrangements have been made for the payment.
(7) Nothing in
this section shall prevent the assessment of the income, referred to in
sub-section (1), for the relevant financial year of the owner, or charterer, of
the ship in accordance with the other provisions of this Code, at his option.
(8) Any
payment of tax made under this section shall be treated as advance tax, in case
an assessment is made as envisaged in sub-section (7).
Assessment
of persons leaving India
177. (1) An Assessing Officer may charge any
individual, in respect of his liability to pay tax relating to the tax bases
for part of a financial year, in that financial year, if -
(a) it appears to him that the individual may leave India during the
financial year or shortly after its expiry; and
(b) has no intention of returning to India.
(2) The part
of a financial year, referred to in sub-section (1), shall be the period
beginning with the first day of the financial year and ending with the probable
date of his departure from India.
(3) For the
purposes of charging the individual, as required by sub-section (1), the
Assessing Officer may require the individual to furnish the returns of tax
bases within the time specified therein, which shall not be less than seven
days.
(4) The
Assessing Officer shall, regardless of anything to the contrary contained in
any other provisions of this Code, also require the individual to furnish the
returns of tax bases, within the time specified therein, which shall not be
less than seven days, -
(a) for the financial year for which the due date for filing of return
has not expired; and
(b) for such other financial years for which no return of tax bases has
been filed which was otherwise required to be filed.
(5) The
Assessing Officer shall, upon receipt of the return, or after the expiry of the
time allowed for furnishing the return under sub-section (3) or sub-section
(4), proceed to make assessment in accordance with the provisions of this Code
insofar as they apply.
Assessment
of entity formed for a particular event or purpose
178. (1) An Assessing Officer may, where it
appears to him that an unincorporated body formed for a particular event or
purpose is likely to be dissolved in the financial year or shortly after its
expiry, charge to tax in that financial year the tax bases of the
unincorporated body for the period from the beginning of the financial year up
to the likely date of its dissolution.
(2) The
provisions of section 177 shall apply to any proceeding under this section as
they apply in the case of a person leaving India.
Assessment
of persons likely to transfer property to avoid tax
179. (1) An Assessing Officer may, where it appears
to him that any person is likely to charge, sell, transfer, dispose of or
otherwise part with any of his assets with a view to avoiding payment of any
liability under this Code, charge to tax in that financial year the tax bases
of such person for the period from the beginning of the financial year to the
date when the Assessing Officer commences proceedings under this section.
(2) The
provisions of section 177 shall apply to any proceeding under this section as
they apply in the case of a person leaving India.
Assessment
of firm in case of change in its constitution
180. (1) The Assessing Officer shall, in a case
where a change has occurred in the constitution of an unincorporated body, make
only one assessment in respect of the entire financial year in which the change
has occurred.
(2) For the
purposes of this section, a change in the constitution of an unincorporated
body is said to have taken place, if -
(a) one, or more, of the participants ceased to be participants;
(b) one, or more, new participants are admitted; or
(c) all the participants continue with a change in their respective
shares or in the shares of some of them.
(3) The
provisions of this section shall not apply, if the change in constitution is on
account of the death of a participant or on account of the retirement of all
the participants.
Assessment
on the retirement or death of the participant
181. (1) The Assessing Officer shall make separate
assessments on any two unincorporated bodies, if -
(a) one unincorporated body succeeds another unincorporated body; and
(b) the succession is by virtue of retirement of all participants in
the unincorporated body or death of any of the participants.
(2) The
separate assessments shall be made in accordance with the provisions of section
174 as if -
(a) the unincorporated body, succeeding the other unincorporated body,
is the successor; and
(b) the unincorporated body being succeeded is the predecessor.
Assessment
of a deductor or collector
182. (1) The Assessing Officer shall assess every
return filed under section 199 or section 202, as if it were a return of tax
bases referred to in section 148, and all the other provisions of this Code
shall, as far as may be, apply accordingly.
(2) The
Assessing Officer shall, in a case where a person has failed to file the return
under section 199 or section 202, issue a notice to the person requiring him to
furnish the return within the time specified therein and all the other
provisions of this Code shall, as far as may be, apply as if it were a return
under sub-section (1).
D. - Appeals and revision
Appeal to
Commissioner (Appeals)
183. (1) An aggrieved assessee may appeal to the
Commissioner (Appeals) against the following :—
(a) any order passed by any income-tax authority below the rank of the Commissioner;
and
(b) an intimation issued by the Department.
(2) A person
may appeal to the Commissioner (Appeals) for a declaration that no tax was
deductible by him on any income payable by him to a non-resident, if the person
-
(a) is required to bear the liability in respect of the tax deductible
on the income under any agreement or other arrangement; and
(b) has paid the taxes to the credit of the Central Government.
(3) No appeal
shall lie under this section against the following orders, namely:—
(a) an interim order passed by an income-tax authority in any
proceedings under this Code;
(b) an order passed by an income-tax authority with the approval of the
Chief Commissioner; and
(c) an order passed by an Assessing Officer in pursuance of the
direction of the Dispute Resolution Panel.
Form of
appeal and limitation
184. (1) Every appeal under section 183 shall be
in the prescribed form and shall be verified in the prescribed manner.
(2) Every
appeal filed by an assessee under section 183 shall be accompanied by a
prescribed fee.
(3) The appeal
filed by an assessee under section 183 shall be presented within thirty days of
the following:—
(a) the date of service of the notice of demand, if the appeal relates
to any order or intimation in pursuance of which such notice of demand is
issued;
(b) the date on which the period of six months for disposing of the
application expired, if the appeal relates to not disposing of the application
for rectification under section 167;
(c) the date of payment of the tax to the Central Government, if the
appeal is filed under sub-section (2) of section 183; and
(d) the date on which the communication of the order sought to be
appealed against is served, if the appeal relates to any other matter.
(4) The appeal
filed by the Commissioner under section 183 shall be presented within three
months from the end of the month in which the assessment order, to which the
appeal relates, is passed.
(5) The
Commissioner (Appeals) may admit an appeal after the expiration of the period
specified in sub-section (3), if -
(a) he is satisfied that the appellant had sufficient cause for not
presenting it within that time; and
(b) the delay in filing the appeal does not exceed one year.
(6) No appeal
under this section shall be admitted unless, at the time of filing of the
appeal, -
(a) the assessee has paid the tax due in accordance with the return
furnished;
(b) the assessee has paid an amount equal to the amount of advance-tax
which was payable by him, if no return has been filed by the assessee.
(7) The
Commissioner (Appeals) may, on an application made by the assessee, exempt him
from the operation of the provisions of clause (b) of sub-section (6)
for any good and sufficient reason to be recorded in writing.
Procedure
in appeal
185. (1) The Commissioner (Appeals) shall fix a
day and place for the hearing of the appeal, and shall give notice of the same
to the appellant and the Assessing Officer against whose order the appeal is
preferred.
(2) The following
shall have the right to be heard at the hearing of the appeal, namely:—
(a) the appellant, either in person or by an authorised representative;
(b) the Assessing Officer, either in person or by a representative.
(3) The
Commissioner (Appeals) shall have the power to adjourn the hearing of the
appeal from time to time.
(4) The
Commissioner (Appeals) may, before disposing of any appeal, make such further
inquiry as he thinks fit.
(5) The
Commissioner (Appeals) may, during the proceedings before him, direct the
Assessing Officer to make inquiry and report the result of the same to him on
such points arising out of any new question of fact or law.
(6) The
Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to
go into any ground of appeal not specified in the grounds of appeal, if the
Commissioner (Appeals) is satisfied that the omission of that ground from the
form of appeal was not wilful or unreasonable.
(7) The order
of the Commissioner (Appeals), disposing of the appeal shall be in writing and
shall state the points for determination, the decision thereon and the reason
for the decision.
(8) In every
appeal, the Commissioner (Appeals), where it is possible, may hear and decide
such appeal within a period of one year from the end of the financial year in
which such appeal is filed before him under section 183.
(9) On the
disposal of the appeal, the Commissioner (Appeals) shall communicate the order
passed by him to the assessee and to the Chief Commissioner or Commissioner.
Powers of
the Commissioner (Appeals)
186. (1) In disposing of an appeal, the
Commissioner (Appeals), shall have the following powers, namely:—
(a) in an appeal against an order of assessment, he may confirm,
reduce, enhance or annul the assessment;
(b) in an appeal against an order imposing a penalty, he may confirm or
cancel such order or vary it so as either to enhance or to reduce the penalty;
(c) in any other case, he may determine the issues arising in the
appeal and pass such orders thereon, as he thinks fit.
(2) The
Commissioner (Appeals) may consider and decide any matter which was not
considered by the Assessing Officer.
(3) The
Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce
the amount of refund unless the appellant has had a reasonable opportunity of
showing cause against such enhancement or reduction.
(4) In
disposing of an appeal, the Commissioner (Appeals), may consider and decide any
matter arising out of the proceedings in which the order appealed against was
passed, notwithstanding that such matter was not raised before the Commissioner
(Appeals) by the appellant.
Appellate
Tribunal
187. (1) The Central Government shall constitute
an Appellate Tribunal consisting of as many Judicial and Accountant Members as
it thinks fit to exercise the powers and discharge the functions conferred on
the Appellate Tribunal by this Code.
(2) A Judicial
Member shall be a person -
(i) who has for at least ten years held a judicial
office in the territory of India;
(ii) who has been a member of the Indian Legal
Service and has held a post in Grade I of that Service, or any equivalent or
higher post, for at least three years; or
(iii) who has been an advocate for at least ten
years.
(3) An
Accountant Member shall be a person -
(a) who has for at least ten years been in the practice of accountancy
as a chartered accountant under the Chartered Accountants Act, 1949; or
(b) who has been a member of the Indian Revenue Service and has held
the post of Additional Commissioner of Income-tax or any equivalent or higher
post for at least three years.
(4) The
Central Government may appoint one or more Members of the Appellate Tribunal to
be Vice-President or, as the case may be, Vice-Presidents thereof.
(5) The
Central Government may appoint one of the Vice-Presidents of the Appellate
Tribunal to be the Senior Vice-President thereof.
(6) The
Central Government shall appoint the Senior Vice-President or one of the
Vice-Presidents of the Appellate Tribunal to be the President thereof.
(7) The Senior
Vice-President or a Vice-President shall exercise such of the powers and
perform such of the functions of the President as may be delegated to him by
the President by a general or special order in writing.
(8) For the
purpose of sub-section (2), -
(a) in computing the period during which a person has held judicial
office in the territory of India, there shall be included any period, after he
has held any judicial office, during which the person has been an advocate or
has held the office of a Member of a Tribunal or any post, under the Union or a
State, requiring special knowledge of law;
(b) in computing the period during which a person has been an advocate,
there shall be included any period during which the person has held judicial
office or the office of a Member of a Tribunal or any post, under the Union or
a State, requiring special knowledge of law after he became an advocate.
Appeals to
the Appellate Tribunal
188. (1) An aggrieved assessee may appeal to the
Appellate Tribunal against the following:—
(a) an order passed by a Commissioner (Appeals);
(b) an order passed under section 93;
(c) an order passed by an income-tax authority with the approval of the
Chief Commissioner; and
(d) an order passed by an Assessing Officer in pursuance of the
direction of the Dispute Resolution Panel.
(2) The
Commissioner may, if he objects to any order passed by a Commissioner
(Appeals), direct the Assessing Officer to appeal to the Appellate Tribunal
against the order.
(3) Every
appeal under sub-section (1), or sub-section (2), shall be filed within sixty
days of the date on which the order sought to be appealed against is
communicated to the assessee or to the Commissioner, as the case may be.
(4) The
Assessing Officer or the assessee may, on receipt of notice that an appeal
against the order of the Commissioner (Appeals) has been preferred under
sub-section (1) or sub-section (2) by the other party, file a memorandum of
cross-objection against any part of the order of the Commissioner (Appeals)
within thirty days of the receipt of the notice.
(5) The
memorandum of cross objection shall be disposed of by the Appellate Tribunal as
if it were an appeal presented within the time specified in sub-section (3).
(6) The
Appellate Tribunal may admit an appeal, or a memorandum of cross-objection,
after the expiration of the period specified in sub-section (3) or sub-section
(4), if -
(a) it is satisfied that the appellant had sufficient cause for not
presenting it within that time; and
(b) the delay in filing the appeal does not exceed one year.
(7) An appeal,
or the memorandum of cross-objection, to the Appellate Tribunal shall be in the
prescribed form and shall be verified in the prescribed manner.
(8) The appeal
by an assessee shall be accompanied by a fee of one thousand rupees.
(9) However,
if the total income, in a case to which the appeal relates, as computed by the
Assessing Officer is more than five hundred thousand rupees, the appeal shall be
accompanied by a fee of one per cent of the total income as computed, subject
to a maximum of ten thousand rupees.
Stay of
demand by the Appellate Tribunal
189. (1) An assessee may make an application to
the Appellate Tribunal for stay of demand relating to the appeal filed by him
and such application shall be accompanied by a fee of one thousand rupees.
(2) The
Appellate Tribunal may, after giving both the parties to the appeal an
opportunity of being heard, pass such orders on stay application as it deems
fit.
(3) The
Appellate Tribunal shall not grant stay under sub-section (2) for a period of
more than one hundred and eighty days from the date of passing the order for
stay.
(4) The
Appellate Tribunal may extend the period of stay allowed under sub-section (2),
if -
(a) the assessee makes an application seeking further extension of the
period of stay; and
(b) the Appellate Tribunal is satisfied that the delay in disposing of
the appeal is not attributable to the assessee.
(5) However,
the aggregate of the period originally allowed under sub-section (2) and the
period or periods extended sub-section (4) shall not, in any case, exceed three
hundred and sixty-five days from the date of passing the order of stay under
sub-section (2).
(6) The
Appellate Tribunal shall dispose of the appeal during the period of stay and
where it fails to do so, the stay order shall stand vacated on the expiry of
the period of stay allowed under sub-section (2) or the period or periods
extended under sub-section (4), regardless of the fact that the delay in
disposing the appeal is not attributable to the assessee.
Orders of
the Appellate Tribunal
190. (1) The Appellate Tribunal may, after giving
both the parties to the appeal an opportunity of being heard, pass such orders
thereon as it thinks fit.
(2) The
Appellate Tribunal may, at any time within four years from the date of the
order, with a view to rectifying any mistake apparent from the record, amend
any order passed by it under sub-section (1), and shall make such amendment if
the mistake is brought to its notice by the assessee or the Assessing Officer.
(3) An
amendment which has the effect of enhancing an assessment or reducing a refund
or otherwise increasing the liability of the assessee, shall not be made under
sub-section (2) unless the Appellate Tribunal has allowed the assessee a
reasonable opportunity of being heard.
(4) The
Appellate Tribunal, where it is possible, may hear and decide the appeal within
a period of two years from the end of the financial year in which the appeal is
filed under section 188.
(5) The
Appellate Tribunal shall send a copy of any orders passed under this section to
the assessee and to the Commissioner.
(6) The orders
passed by the Appellate Tribunal shall be final, subject to the provisions of
section 192.
Procedure
of the Appellate Tribunal
191. (1) The powers and functions of the Appellate
Tribunal may be exercised and discharged by Benches constituted by the
President of the Appellate Tribunal from among the members thereof.
(2) Subject to
the provisions contained in sub-section (3), a Bench shall consist of one
Judicial Member and one Accountant Member.
(3) The
President or any other Member of the Appellate Tribunal authorized in this
behalf by the Central Government may, sitting singly, dispose of any case which
has been allotted to the Bench of which he is a Member and which pertains to an
assessee, not being a company or a non-resident, whose tax bases as computed by
the Assessing Officer in the case does not exceed five lakh rupees.
(4) The
President may, for the disposal of any particular case, constitute a Special
Bench consisting of three or more Members, one of whom shall necessarily be a
Judicial Member and one an Accountant Member.
(5) The
President shall, on a reference received from the Board for the disposal of any
particular case, constitute a Special Bench comprising of five Members or more,
two of whom shall necessarily be Judicial Members and two Accountant Members.
(6) Any point
shall, in a case where the Members of a Bench differ in opinion on the point,
be decided according to the opinion of the majority, if there is a majority.
(7) The
Members of a Bench shall, in a case where they are equally divided in opinion
on any point or points, state the point or points on which they differ and the
case shall be referred by the President of the Appellate Tribunal for hearing
on such point or points by one or more of the other Members of the Appellate
Tribunal.
(8) The point or
points referred to in sub-section (7) shall be decided according to the opinion
of the majority of the Members of the Appellate Tribunal who have heard the
case, including those who first heard it.
(9) Subject to
the provisions of this Code, the Appellate Tribunal shall have powers to
regulate its own procedure and the procedure of Benches thereof in all matters
arising out of the exercise of its powers or of the discharge of its functions,
including the place at which the Benches shall hold their sittings.
(10) The
Appellate Tribunal shall, for the purpose of discharging its functions, have
all the powers which are vested in the Income-tax authorities under section
181.
(11) Any
proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding
within the meaning of sections 193 and section 228 of the Indian Penal Code and
for the purpose of section 196 of the Indian Penal Code.
(12) The
Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of
section 195 and Chapter XXXV of the Code of Criminal Procedure, 1973.
Appeals to
the National Tax Tribunal
192. (1) An appeal shall lie to the National Tax
Tribunal, from an order passed in appeal by the Appellate Tribunal.
(2) The powers
and functions of the National Tax Tribunal, and the procedure before it, shall
be as set out in the National Tax Tribunal Act, 2005.
(3) The order
passed by the National Tax Tribunal shall be final as per section 17 of the
National Tax Tribunal Act, 2005 but for an appeal to the Supreme Court under
section 24 of that Act.
(4) The
Assessing Officer shall give effect to the order of the National Tax Tribunal
on the basis of certified copy of the judgment delivered by the Tribunal in an
appeal filed before it or in any matter transferred to it under the National
Tax Tribunal Act, 2005.
(5) Tax shall
be payable in accordance with the assessment made in any case notwithstanding
that an appeal has been preferred to the National Tax Tribunal.
Appeals to
the Supreme Court
193. (1) An appeal shall lie to the Supreme Court
from any order of the National Tax Tribunal on the basis of a certificate of
fitness by the National Tax Tribunal.
(2) The
provisions of the Code of Civil Procedure, 1908, relating to appeals to the
Supreme Court shall, so far as may be, apply in the case of appeals under
sub-section (1) as they apply in the case of appeals from decrees of a High
Court.
(3) The
Assessing Officer shall give effect to the order of the Supreme Court on the
basis of certified copy of the judgment delivered by the Court in an appeal
filed before it.
(4) Tax shall
be payable in accordance with the assessment made in any case regardless of the
fact that an appeal has been preferred to the Supreme Court.
Revision of
orders prejudicial to revenue
194. (1) The Commissioner may, for the purposes of
revising any order passed in any proceeding under this Code before any
income-tax authority subordinate to him, call for, and examine, all available
records relating thereto.
(2) The
Commissioner may, after giving the assessee an opportunity of being heard, pass
an order (hereafter referred to as the revision order) as the circumstances of
the case justifies, if he is satisfied that the order sought to be revised is
erroneous insofar as it is prejudicial to the interest of the revenue.
(3) The
Commissioner may make, or cause to be made, such enquiry as he deems necessary
for the purposes of passing an order under sub-section (2).
(4) The
revision order passed by the Commissioner under sub-section (2) may have the
effect of enhancing or modifying the assessment but shall not be an order
cancelling the assessment and directing a fresh assessment.
(5) The power
of the Commissioner under sub-section (2) for revising an order shall not
extend to such matters, -
(a) against which an appeal is pending before the Commissioner
(Appeals); or
(b) as has been considered and decided in any appeal.
(6) No order
under sub-section (2) shall be made after the expiry of two years from the end
of the financial year in which the order sought to be revised was passed.
(7) In
computing the period of limitation under sub-section (6), the following shall
not be included:—
(a) the time taken in giving an opportunity to the assessee to be
reheard under section 137.
(b) any period during which any proceeding under this section is stayed
by an order, or injunction, of any Court.
(8) Without
prejudice to the generality of the foregoing provisions, an order passed by an
income-tax authority shall be deemed to be erroneous insofar as it is
prejudicial to the interests of the revenue, if -
(a) the order is passed without making inquiries or verification which,
in the opinion of the Commissioner, should have been made;
(b) the order is passed allowing any relief without probing into the
claim;
(c) the order has not been made in accordance with any order,
direction or instruction issued by the Board under section 133;
(d) the order has not been passed in accordance with any decision,
prejudicial to the assessee, rendered by, -
(i) Appellate Tribunal, National Tax Tribunal,
High Court or Supreme Court in the case of the assessee or any other person
under this Code, the Income-tax Act, 1961 or the Indian Income-tax Act, 1922;
or
(ii) a court under any other law; or
(e) the order has been made following the order of a jurisdictional
High Court or the National Tax Tribunal but a special leave petition has been
granted by the Supreme Court against the said decision of the High Court or the
National Tax Tribunal subsequent to the passing of the order.
(9) An order
passed by an income-tax authority shall not be considered to be erroneous
insofar as it is prejudicial to the interests of the revenue, if -
(a) the order has been made adopting one of the courses permissible in
law; or
(b) the order has been made by holding a view sustainable in law
regardless of the existence of another view sustainable in law to which the
Commissioner is in agreement.
CHAPTER - XI
COLLECTION AND RECOVERY
A. - Deduction at source
Liability
to deduct tax at source
195. (1) Any person responsible for making
specified payment shall, at the time of the payment, deduct income-tax
therefrom at the appropriate rate.
(2) The
specified payment, referred to in sub-section (1), shall be the payment of the nature
specified in Column 2 of -
(a) the Third Schedule, if the deductee is a resident; and
(b) the Fourth Schedule, if the deductee is a non-resident.
(3) The
appropriate rate referred to in sub-section (1) shall, in respect of a specified
payment, be the rate specified in the corresponding entry in Column 3 of -
(a) the Third Schedule, if the deductee is a resident; and
(b) the Fourth Schedule, if the deductee is a non-resident.
(4) However,
the appropriate rate referred to in sub-section (1) shall, in a case where the
deductee has failed to furnish his Permanent Account Number to the deductor, be
the higher of the following rates:—
(a) twenty per cent; and
(b) the rate specified in sub-section (3).
Payment of
income and deduction of tax
196. (1) For the purposes of section 195, the
payment of income shall be deemed to have been made, if the amount payable has
been settled -
(a) in cash;
(b) by issue of a cheque or draft;
(c) by credit to any account, whether called “Suspense account” or by
any other name; or
(d) by any other mode as may be prescribed.
(2) The
deductor shall, before making the payment of income, ensure that the tax
deductible in respect of the income has been paid, if the payment is wholly, or
partly, in kind.
(3) The
deductor may, at the time of making any deduction of tax from the income liable
to be taxed under the head “Income from employment”, increase or reduce the
amount to be deducted from a deductee for the purposes of adjusting any
deficiency, or excess, arising out of any previous deduction or non-deduction
during the financial year in respect of such deductee.
(4) For the
purposes of deduction of tax, the income shall be increased to such amount as
would, after deduction of tax thereon at the rates specified in the Third
Schedule or the Fourth Schedule, be equal to the net amount payable under an
agreement, or any other arrangement, if the tax chargeable on any income is to
be borne by the deductor in pursuance to such agreement or arrangement.
Certificate
for no deduction of tax
197. (1) The deductee may make an application, in
the prescribed form and manner, to the Assessing Officer seeking a certificate
for no deduction of income-tax from payments to be received by him.
(2) The
deductor may make an application, in the prescribed form and manner, to the
Assessing Officer seeking a certificate for no deduction of income-tax from
payments to be made by him to a non-resident deductee.
(3) The
Assessing Officer shall give to the deductee or the deductor, as the case may
be, such certificate as may be appropriate, if he is satisfied that the total
income of the deductee justifies no deduction of income-tax.
(4) The
deductor shall not deduct any tax until -
(a) the certificate issued under sub-section (3) is cancelled by the
Assessing Officer; or
(b) the expiry of the validity of the certificate.
(5) The Board
may, having regard to the convenience of the deductee and the interests of revenue,
prescribe the cases in which, and the circumstances under which, an application
may be made for the grant of the certificate and the conditions subject to
which such certificate may be granted and providing for all other matters
connected therewith.
Payment of
tax deducted, certificate to deductee, etc.
198. (1) Every deductor shall pay the sum
deducted to the credit of the Central Government within the time, and in the
manner, prescribed.
(2) Every
deductor shall furnish, within the prescribed time, to the deductee a
certificate to the effect that tax has been deducted and specifying the
particulars as may be prescribed.
(3) Every
deductor shall deliver, or cause to be delivered, a return of tax deduction in
accordance with sub-section (4).
(4) The Board
shall prescribe the following in respect of the return of tax deduction:—
(a) the period in respect of which the return is to be furnished;
(b) the form of the return and the particulars therein;
(c) the manner of verification of the return;
(d) the time by, and the medium in, which the return is to be
delivered;
(e) the income-tax authority, or any other person, authorised to
receive the return; and
(f) any other matters connected therewith.
Reporting
of payments without deduction of tax
199. (1) Every deductor shall deliver, or cause to
be delivered, a return in respect of payment of interest to residents without
deduction of tax.
(2) The
deductor referred to in sub-section (1) shall be any -
(a) permitted financial institution; or
(b) co-operative society.
(3) The
Central Government may, by notification in the Official Gazette, require any
deductor to deliver, or cause to be delivered, a return in respect of any
payment without deduction of tax.
(4) The Board
shall prescribe the following in respect of the return under this section:—
(a) the period in respect of which the return is to be furnished;
(b) the form of the return and the particulars therein;
(c) the manner of verification of the return;
(d) the time by, and the medium in, which the return is to be
delivered;
(e) the income-tax authority, or any other person,
authorised to receive the return; and
(f) any other matters connected therewith.
No
deduction of tax in certain cases
200. No tax shall be deducted from the following:—
(a) any payment, other than salary, made by an individual or a Hindu
undivided family if the individual or the Hindu undivided family is not liable
to audit of accounts under section 84 during the financial year immediately
preceding the financial year in which the payment is made;
(b) any interest payable on any security of the Central Government or a
State Government;
(c) any interest on debenture payable to an individual, if -
(i) the debentures are issued by a widely held
company;
(ii) the debentures are listed in a recognised sock
exchange in India; and
(iii) the aggregate amount payable during the
financial year does not exceed two thousand five hundred rupees;
(d) Any interest on time deposits payable, if -
(i) the time deposits are made with a banking
company or a co-operative bank or a housing-finance public company; and
(ii) the aggregate amount payable by a branch of
the bank or company during the financial year does not exceed ten thousand
rupees;
(e) any other interest payable if the aggregate amount of the payments
during the financial year does not exceed five thousand rupees;
(f) any interest payable to, -
(i) any banking company;
(ii) any co-operative bank;
(iii) any financial corporation established by or
under a Central or State or Provincial Act;
(iv) any insurer;
(v) any mutual fund; or
(vi) any institution, association or body, or class
of institutions, associations or bodies, which the Central Government may, for
reasons to be recorded in writing, notify in this behalf in the Official
Gazette;
(g) any interest payable by a firm to a partner of the firm;
(h) any interest payable in respect of deposits under any scheme framed
by the Central Government and notified by it in this behalf in the Official
Gazette;
(i) any interest payable in respect of deposits
(other than time deposits) with a banking company or a co-operative bank;
(j) any interest payable by the Central Government under any provisions
of this Code or the Income-tax Act, 1961;
(k) any interest payable on the amount of compensation awarded by the
Motor Accidents Claims Tribunal, if the aggregate of the amounts of such
interest paid, or credited, during the financial year does not exceed one
hundred thousand rupees;
(l) any amount payable on maturity, or redemption,
of a zero coupon bond;
(m) any payment for carriage of goods by road transport if the payee
furnishes his Permanent Account Number to the payer;
(n) any payment to a contractor in respect of works contract, service
contract, advertising, broadcasting and telecasting, supply of labour for
carrying out any works, or service, contract or carriage of goods or passengers
by any mode of transport, other than by railways, if -
(i) the amount of any payment during the financial
year does not exceed twenty thousand rupees; and
(ii) the aggregate amount of the payments during
the financial year does not exceed fifty thousand rupees;
(o) any payment of commission or brokerage, if the aggregate amount of
the payments during the financial year does not exceed five thousand rupees;
(p) any payment of rent, if the aggregate amount of the payments during
the financial year does not exceed one hundred and twenty thousand rupees;
(q) any payment of compensation on acquisition of immovable property,
if the aggregate amount of the payments during the financial year does not
exceed one hundred thousand rupees.
Credit for
tax deducted
201. The Board may, for the purposes of giving
credit in respect of tax deducted, make such rules for the purposes of -
(a) giving credit to the deductee, or any other person;
(b) the financial year for which such credit may be given; and
(c) any other matter connected therewith.
B. - Collection at source
Tax
collection at source
202. (1) Any person, being a seller, lessor or
licensor, who is responsible for collecting any amount on account of any
transaction specified in column (2) of Table-6, shall collect from the buyer,
lessee or licensee, as the case may be, a sum, equal to the percentage as
specified in corresponding entry in column (3) of the said Table, of such
amount as income-tax.
Table-6
|
Sl. No. |
Nature of
goods or contract or license or lease |
Percentage |
|
(1) |
(2) |
(3) |
|
(i) |
Sale of
alcoholic liquor for human consumption |
3 per cent |
|
(ii) |
Sale of
tendu leaves |
3 per cent |
|
(iii) |
Sale of
timber obtained under a forest lease or otherwise |
3 per cent |
|
(iv) |
Sale of any
other forest produce not being timber or tendu leaves |
3 per cent |
|
(v) |
Sale of
scrap |
3 per cent |
|
(vi) |
Grant of
lease or licence or contract for parking lot |
3 per cent |
|
(vii) |
Grant of
lease or licence or contract for toll plaza |
3 per cent |
|
(viii) |
Grant of
lease or licence or contract for mining or quarrying |
3 per cent |
(2) For the purposes of sub-section (1), the payment of income shall be deemed to have been made, if the amount receivable has been settled, -
(a) in cash;
(b) by issue of a cheque or draft;
(c) by credit to any account, whether called “Suspense account” or by
any other name; or
(d) by any other mode as may be prescribed.
(3) Any person
collecting any amount under sub-section (1) shall pay the sum so collected to
the credit of the Central Government within the time, and in the manner,
prescribed.
(4) Every
person responsible for collecting any amount under sub-section (1) shall
furnish, within the prescribed time, to the buyer, lessee or licensee referred
to in sub-section (1), a certificate of tax collection, as prescribed.
(5) Every
person aforesaid shall deliver, or cause to be delivered, a return of tax
collection, as may be prescribed.
(6) The Board
shall prescribe the following in respect of the return of tax collection:—
(a) the period in respect of which the return is to be furnished;
(b) the form of the return and the particulars therein;
(c) the manner of verification of the return;
(d) the time by, and the medium in, which the return is to be
delivered;
(e) the income-tax authority, or any other person, authorised to
receive the return; and
(f) any other matters connected therewith.
Certain
definitions
203. For purposes of this sub-chapter, -
(a) “buyer” means a person who obtains in any sale, by way of auction,
tender, or any other mode, goods of the nature specified in the Table in
sub-section (1) or the right to receive any such goods but does not
include, -
(i) a public sector company, the Central
Government, a State Government, an embassy, a high commission, legation,
commission, consulate and trade representation of a foreign State, and a club;
or
(ii) a buyer in the retail sale of such goods,
purchased by him for personal consumption;
(b) “lessee or licensee” means a person other than a public sector
company who is granted a lease or licence or is awarded a contract;
(c) “lessor or licensor” means a person who grants a lease or licence
or enters into a contract or otherwise transfers, wholly or partly, any right
or interest to a lessee or licensee,
(d) “scrap” means waste from the manufacture or mechanical working of
materials which is unusable because of breakage, wear and tear and other
reasons;
(e) “seller” means, -
(i) the Central Government, a State Government or
any local authority;
(ii) a corporation, or authority, established by,
or under, a Central, State, or Provincial Act;
(iii) any company, firm or co-operative society; and
(iv) an individual or a Hindu undivided family, if
the total sales, gross receipts or turnover from the business carried on by him
exceed the monetary limits specified in sub-section (1) of section 84 during
the financial year immediately preceding the financial year in which the goods
of the nature specified in column 2 of Table 6 against entry numbers (i)
to (v).
C. - Advance tax
Liability
to pay advance income-tax
204. (1) Every assessee shall be liable to pay
advance income-tax during any financial year in respect of his total income of
the financial year, if the amount of advance income-tax payable exceeds ten
thousand rupees.
(2) The amount
of advance income-tax payable by an assessee in the financial year shall be
computed in the following manner :
(a) the assessee shall first estimate his total income and calculate
income-tax thereon at the rates in force in the financial year;
(b) the income-tax so calculated shall be reduced by -
(i) the amount of income-tax which would be
deductible or collectible at source during the financial year from any income
which is taken into account in estimating the total income;
(ii) the amount of credit under section 206,
allowed to be set off in the financial year; and
(c) the balance amount of income-tax shall be the advance income-tax
payable.
(3) The advance
income-tax, in the case of a company, shall be payable in four instalments
during the financial year on or before the dates specified in Column 1 of Table
7 and shall be equal to the amount specified in corresponding entry in Column 2
of the Table;
TABLE-7
Date of instalment |
Amount payable |
|
(1) |
(2) |
|
On or before
the 15th June |
Not less
than fifteen per cent of the advance income-tax. |
|
On or before
the 15th September |
Not less than
forty-five per cent of the advance income-tax, as reduced by the amount, if
any, paid in the earlier instalment. |
|
On or before
the 15th December |
Not less
than seventy-five per cent of the advance income-tax as reduced by the amount
or amounts, if any, paid in the earlier instalment or instalments. |
|
On or before
the 15th March |
The whole
amount of the advance income-tax as reduced by the amount or amounts, if any,
paid in the earlier instalment or instalments. |
(4) However, the
advance income-tax, in case of any other person, shall be payable in three
instalments, during the financial year on or before the dates specified in
Column 1 of Table 8 and shall be equal to the amount specified in corresponding
entry in Column 2 of the Table.
TABLE-8
Date of instalment |
Amount payable |
|
(1) |
(2) |
|
On or before
the 15th September |
Not less
than thirty per cent of the advance income-tax. |
|
On or before
the 15th December |
Not less than
sixty per cent of the advance income-tax, as reduced by the amount, if any,
paid in the earlier instalment. |
|
On or before
the 15th March |
The whole
amount of the advance income-tax as reduced by the amount or amounts, if any,
paid in the earlier instalment or instalments. |
(5) The
assessee may increase or reduce the advance income-tax payable in the remaining
instalment to accord with the estimate of his total income and make payment of such
advance income-tax in the remaining instalment accordingly.
(6) Any amount
of advance income-tax paid after 15th March but before the expiry of the
financial year shall be treated as advance income-tax paid during the financial
year.
D. - Tax credit for relief in respect of arrears or advance receipts
Tax relief
for arrears or advance receipts
205. (1) The Assessing Officer shall, on an
application made to him by any person, grant such relief as may be prescribed,
if -
(a) the person is in receipt in any financial year of any arrears, or
advance, of salary or family pension relating to any other financial year; or
(b) the accumulated balance due to the person participating in an
approved provident fund is included in his total income.
(2) The relief
referred to in sub-section (1) shall not be allowed in respect of any
compensation received towards retrenchment or voluntary retirement.
E. - Foreign tax credit
Foreign tax
credit
206. (1) An assessee shall be allowed a credit in respect
of income-tax paid by deduction, or otherwise, in any other country under the
law in force in that country, in accordance with the provisions of this
section.
(2) An
assessee shall be allowed a credit against the Indian income-tax payable by him
in respect of his income which has accrued during the financial year outside
India, of the amount determined in accordance with the Agreement entered into
with such other country under section 258.
(3) However,
in a case where there is no agreement under section 258 with the other country,
the amount referred to in sub-section (2) shall be determined -
(a) at the Indian rate of tax or the rate of tax of the other country,
whichever is lower; or
(b) at the Indian rate of tax, if both the rates are equal.
(4) An
assessee shall, regardless of anything contained in sub-section (3), not be
entitled to credit against the Indian income-tax payable by him in respect of
any income referred to therein, if -
(i) the income is also deemed to accrue in India;
and
(ii) no Agreement under section 258 has been
entered into with the other country in which the income has accrued.
(5) The
Central Government may prescribe the method for computing the amount of credit,
the manner of claiming credit and such other particulars as are necessary for
the relief or avoidance of double taxation.
F. - Payment of dividend distribution tax
Payment of
dividend distribution tax
207. The principal officer of the resident company
shall pay the dividend distribution tax referred to in section 99 to the credit
of the Central Government within fourteen days from the date of distribution,
or payment, of dividend, whichever is earlier.
G. - Payment of wealth-tax
Payment of
wealth-tax
208. The wealth-tax referred to in section 101
shall be payable by the due date.
H. - Interest
Interest
payable to the Central Government
209. (1) An assessee shall be liable to pay simple
interest at the rate of one per cent per month, or part of a month, on any
shortfall in the amount payable by him under this Code for the period from the
day immediately following the date on which such amount was payable to the date
of actual payment.
(2) The
liability to pay interest under sub-section (1) shall be computed at periodical
intervals.
Interest
payable to the assessee
210. (1) An assessee shall be entitled to receive
simple interest at the rate of one-half per cent per month, or part of a month,
on any amount receivable by him under this Code in respect of any financial year
for the period from the day immediately following the expiry of that financial
year or the date on which such amount was paid, whichever is later, to the date
on which the refund is granted.
(2) An
assessee shall be entitled to receive simple interest at the rate of one-half
per cent per month, or part of a month, on the amount of interest receivable by
him under sub-section (1) for the period from the date of grant of refund under
that sub-section to the date of actual payment of such interest, if such
interest is not paid to him along with the refund.
Manner of
computation of interest and waiver thereof to be prescribed
211. (1) The Board may prescribe the manner of
computation of interest payable by, or to the, assessee and all other matters connected
therewith.
(2) The Board
may, having regard to the hardship caused to the assessee and the interest of
revenue, prescribe the circumstances, manner and all other connected matters
for providing relief by reducing the interest payable or refunding the interest
paid so, however, that the aggregate of the amount so reduced, or refunded,
shall not exceed fifty per cent of the total interest payable.
I. - Refund
Refunds
212. (1) An assessee shall be entitled to a refund
of the excess of any amount paid by him or on his behalf, or treated as paid by
him or on his behalf, for any financial year, over the amount with which he is
liable under this Code, and such refund shall be issued in the prescribed
manner.
(2) An
assessee shall, in a case where an assessment is set aside or cancelled or an
order of fresh assessment is directed to be made in an appeal, or any other
proceeding under the Code, be entitled to the refund only on the making of the
fresh assessment.
(3) The amount
of refund determined under sub-section (1), or sub-section (2), shall be
reduced by the amount, if any, remaining payable under this Code by the
assessee to whom the refund is due, and the balance amount of refund, if any,
shall be issued, along with an intimation to this effect to the assessee.
J. - Recovery
Recovery by
Assessing Officer
213. (1) Any amount specified as payable in a
notice of demand shall be paid within thirty days of the service of the notice,
to the credit of the Central Government in the manner prescribed.
(2) The Assessing
Officer may, on an application made by the assessee, before the expiry of the
period of thirty days, or during the pendency of appeal with the Commissioner
(Appeals), extend the time for payment, or allow payment by instalments,
subject to such conditions as he may think fit to impose in the circumstances
of the case.
(3) An
assessee shall be deemed to be in default, if the tax arrear is not paid within
the time allowed under sub-section (1) or extended under sub-section (2), as
the case may be.
(4) The
assessee shall be deemed to be in default in respect of the whole of the amount
outstanding, if he commits defaults in paying any one of the instalments within
the time fixed under sub-section (2).
(5) The
Assessing Officer may recover the amount in respect of which the assessee is in
default, or is deemed to be in default, by any one, or more, of the modes
provided in section 215.
(6) The
Assessing Officer shall cease to exercise power for recovery of any amount
after the end of one year from the end of the financial year in which the
notice of demand referred to in sub-section (1) was issued.
(7) The
Assessing Officer may, regardless of anything contained in sub-section (6),
cease to exercise, with the prior approval of the Commissioner, power for recovery
of any amount before the expiry of the period of limitation in sub-section (6).
(8) Upon
ceasing of the power of the Assessing Officer to recover the demand, all the
powers relating to recovery of the amount shall vest in the Tax Recovery
Officer.
Recovery by
Tax Recovery Officer
214. (1) The record of the Income-tax Department
containing the tax arrears from any assessee on the date on which Tax Recovery
Officer assumes jurisdiction shall be deemed to be a statement of tax arrears
from such assessee (such statement being hereafter in this Chapter and in the
Fifth Schedule referred to as “certificate”).
(2) The
certificate under sub-section (1) shall stand amended from time to time
consequent to any proceeding under this Code and the Tax Recovery Officer shall
recover the amount so modified.
(3) The Tax
Recovery Officer may rectify any mistake apparent from the record.
(4) The Tax
Recovery Officer shall have the power to extend the time for payment, or allow
payment by instalments, subject to such conditions as he may think fit to
impose in the circumstances of the case.
(5) The Tax
Recovery Officer shall proceed to recover from the assessee the amount
specified in the certificate by one, or more, of the modes referred to in
section 258 or in the Fifth Schedule.
Modes of
recovery
215. (1) The Assessing Officer, or Tax Recovery
Officer, may require the employer of the assessee to deduct from any payment to
the assessee such amount as is sufficient to meet the tax arrears from the
assessee.
(2) Upon requisition
under sub-section (1), the employer shall comply with the requisition and shall
pay the sum so deducted to the credit of the Central Government in the
prescribed manner.
(3) Any part of
the salary exempt from attachment in execution of a decree of a civil court
under section 60 of the Code of Civil Procedure, 1908, shall be exempt from any
requisition made under sub-section (1).
(4) The
Assessing Officer, or Tax Recovery Officer, may, by notice in writing, require
any debtor of the assessee to pay such amount, not exceeding the amount of
debt, as is sufficient to meet the tax arrears.
(5) Upon
receipt of the notice under sub-section (4), the debtor shall comply with the
requisition and shall pay the sum to the credit of the Central Government in
the prescribed manner within the time (not being before the debt becomes due to
the assessee) specified in the notice.
(6) A copy of
the notice issued under sub-section (4) shall be forwarded to the assessee at
his last address known to the Assessing Officer, or Tax Recovery Officer, and
in the case of a joint account to all the joint holders at their last addresses
known to the Assessing Officer or Tax Recovery Officer.
(7) It shall
not be necessary for any pass book, deposit receipt, policy or any other
document to be produced for the purpose of any entry, endorsement or the like
being made before payment is made, regardless of any rule, practice or
requirement to the contrary if the notice under sub-section (4) is issued to a
post office, banking company or an insurer,
(8) Any claim
in respect of any property, in relation to which a notice under sub-section (4)
has been issued, arising after the date of the notice, shall be void as against
any demand contained in the notice.
(9) A person
to whom a notice under sub-section (4) has been issued, shall not be required
to pay the amount of tax arrears specified therein, or part thereof, if he
objects to it by a statement on oath that the sum demanded, or any part
thereof, is not due to the assessee or that he does not hold any money for, or
on account of, the assessee.
(10) The
person referred to in sub-section (9) shall be personally liable to the
Assessing Officer, or Tax Recovery Officer, to the extent of his own liability
to the assessee on the date of the notice, or to the extent of the assessee’s
liability for any sum due under this Code, whichever is less, if it is
discovered that the statement made by him was false in any respect.
(11) The
Assessing Officer, or Tax Recovery Officer, may amend, or revoke, any notice
issued under sub-section (4) or extend the time for making any payment in
pursuance of such notice.
(12) The
Assessing Officer, or Tax Recovery Officer, shall grant a receipt for any amount
paid in compliance with a notice issued under sub-section (4), and the person
so paying shall be fully discharged from his liability to the assessee to the
extent of the amount so paid.
(13) Any
person discharging any liability to the assessee after receipt of a notice
under sub-section (4) shall be personally liable to the Assessing Officer, or
Tax Recovery Officer, to the extent of his own liability to the assessee so
discharged or to the extent of the assessee’s liability for any sum due under
this Code, whichever is less.
(14) The
debtor to whom a notice under sub-section (4) is sent may be proceeded against
for the realization of the amount as if it was a tax arrear from him, in the
manner provided in this section and the Fifth Schedule, if he fails to make
payment in pursuance thereof to the Assessing Officer or Tax Recovery Officer.
(15) The
Assessing Officer, or Tax Recovery Officer, may apply to the Court, in whose
custody there is money belonging to the assessee, for payment to him of the
entire amount of such money, or, if it is more than the tax due, an amount
sufficient to discharge the tax liability.
(16) The
Assessing Officer, or Tax Recovery Officer, shall effect the recovery of any
tax arrear in the same manner as attachment and sale of any movable property
under the Fifth Schedule, if he is so authorised by the Chief Commissioner, or
Commissioner, by general or special order.
(17) For the
purposes of this section,—
(a) debtor in relation to an assessee means,—
(i) any person from whom money is due, or may
become due, to the assessee; or
(ii) any person who holds, or may subsequently
hold, money for, or on account of, the assessee; or
(iii) any person who holds, or may subsequently
hold, any money for, or on account of, the assessee jointly with any other
person; and
(b) shares of the joint holders in the account shall be presumed, until
the contrary is proved, to be equal.
Tax
Recovery Officer by whom recovery is to be effected
216. (1) The Tax Recovery Officer competent to
take action under section 215 shall be the Tax Recovery Officer—
(a) within whose jurisdiction—
(i) the assessee carries on his business;
(ii) the principal place of the business of the
assessees is situate;
(iii) the assessee resides; or
(iv) any movable or immovable property of the
assessee is situate; or
(b) who has been assigned jurisdiction under section 134.
(2) The Tax
Recovery Officer, referred to in sub-section (1), may send a certificate, in
the prescribed manner, specifying the tax arrears to be recovered, to another
Tax Recovery Officer within whose jurisdiction the assessee resides or has
property, if the Tax Recovery Officer—
(a) is not able to recover the entire amount by sale of the property,
movable or immovable, within his jurisdiction, or
(b) is of the opinion that, for the purpose of expediting, or securing,
the recovery of the whole, or any part, of the amount under this Chapter, it is
necessary so to do.
(3) The other
Tax Recovery Officer shall, on receipt of the certificate, assume jurisdiction
for recovery of the amount of tax arrears specified therein and proceed to
recover the amount in accordance with the provisions of this sub-Chapter.
Recovery of
tax arrear in respect of non-resident from his assets
217. The amount of tax arrears due from a
non-resident may be recovered from—
(a) any asset of the non-resident, wherever located; or
(b) any amount payable by any person to the non-resident.
Recovery in
the case of a company in liquidation
218. (1) The Liquidator shall inform the Assessing
Officer, who has jurisdiction to assess the income of the company, of his
appointment within thirty days of his becoming the Liquidator.
(2) The
Assessing Officer shall, within three months from the date on which he receives
the information, intimate to the Liquidator the amount which, in his opinion,
would be sufficient to provide for any tax arrears or any amount which is
likely to become payable thereafter, by the company under this Code or under
any law repealed by this Code.
(3) The
Liquidator—
(a) shall not part with any of the assets of the company, or the
properties, in his custody until he has been intimated by the Assessing Officer
under sub-section (2); and
(b) on being so intimated, shall set aside an amount equal to the amount
intimated.
(4) Upon
receipt of the intimation from the Assessing Officer under sub-section (2), the
amount so intimated shall, regardless of anything contained in any other law
for the time being in force, be the first charge on the assets of the company
remaining after payment of the following dues :—
(a) workmen’s dues; and
(b) debts due to secured creditors to the extent such debts rank under
clause (iii) of the proviso to sub-section (1) of section 529 of the
Companies Act, 1956 pari passu with such dues.
(5) The
Liquidator shall be personally liable for the payment of the amount payable by
the company, if he—
(a) fails to inform in accordance with sub-section (1); or
(b) fails to set aside the amount as required by sub-section (3).
(6) The
obligations and liabilities attached to the Liquidator under this section shall
attach to all the Liquidators jointly and severally in a case where there are
more than one Liquidator.
(7) The
provisions of this section shall prevail over anything to the contrary
contained in any other law in force.
(8) For the
purposes of this section,—
(a) “Liquidator” in relation to a company shall include a receiver of
the assets of the company;
(b) “workmen’s” and “workmen’s dues” shall have the meaning assigned to
it in section 529 of the Companies Act, 1956.
Liability
of manager of a company
219. (1) Every person being a manager during the
financial year shall be, jointly and severally, liable for the payment of any
amount due under this Code in respect of the company for the financial year, if
the amount cannot be recovered from the company.
(2) The
provisions of sub-section (1) shall not apply, if the manager proves that
non-recovery cannot be attributed to any neglect, misfeasance or breach of duty
on his part in relation to the affairs of the company.
(3) The
provisions of this section shall prevail over anything contrary contained in
the Companies Act, 1956.
(4) For the
purposes of this section, “manager” shall include a managing director and both
shall have the meaning respectively assigned to them in clause (24) and clause
(26) of section 2 of the Companies Act, 1956.
Joint and
several liability of participants
220. Every person, being a participant in an
unincorporated body during the financial year, or the representative assessee
of the deceased participant, shall be jointly and severally liable, along with
the unincorporated body, for payment of any amount payable by the
unincorporated body under this Code and all the provisions of this Code shall
apply accordingly.
Recovery of
tax in pursuance of agreements with foreign countries
221. (1) The Board may forward a certificate to
any Tax Recovery Officer for recovery of any amount under the corresponding law
in force in any country outside India from a person having property in India,
if such country, or any authority under the Government of that country, has
entered into an agreement with India under sub-section (1) of section 258 for
the purposes specified in clause (d) thereof.
(2) On receipt
of the certificate under sub-section (1) from the Board, the Tax Recovery
Officer shall—
(a) proceed to recover the amount specified in the certificate in the
manner in which he would proceed to recover the amount specified in a
certificate under section 215; and
(b) remit any sum so recovered by him to the Board after deducting his
expenses in connection with the recovery proceedings.
(3) The Tax
Recovery Officer may, in a case where an assessee has property in a country
outside India, forward a certificate to the Board for recovery of the tax
arrears from the assessee, if the Central Government has entered into an
agreement with that country under sub-section (1) of section 258 for the
purposes specified in clause (d) thereof.
(4) On receipt
of the certificate under sub-section (3) from the Tax Recovery Officer, the
Board may take such action thereon as it may deem appropriate having regard to
the terms of the agreement with such country.
Tax
clearance certificate in certain cases
222. (1) No person shall leave the territory of
India unless he furnishes to the prescribed authority an undertaking to the
effect that he has made satisfactory arrangement for discharging his tax
liability, if any, in respect of any income liable to tax in India.
(2) The prescribed
authority shall, on receipt of the undertaking, immediately issue to the person
a no objection certificate for leaving India.
(3) The owner,
or charterer, of any ship, or aircraft, shall be personally liable to pay the
whole, or any part, of the amount payable under this Code by any person
required to obtain a no objection certificate in accordance with the foregoing
sub-sections, if the person leaves India, without the possession of the
certificate, in the ship, or aircraft, of the owner or the charterer.
(4) The owner,
or charterer, of any ship, or aircraft, under sub-section (3), shall be deemed
to be an assessee in default in respect of the liability created under
sub-section (3) and such amount shall be recoverable from him in the manner
provided in this Chapter as if it were tax arrears.
(5) The Board
may, having regard to the interests of revenue, prescribe the circumstances,
the form and the manner, in which the undertaking is to be furnished, and any
other matter connected therewith.
(6) For the
purposes of this section, the expression “owner” and “charterer” include any
representative, agent or employee empowered by the owner, or charterer, to
allow persons to travel by the ship or aircraft.
Recovery by
suit or under other law not effected
223. (1) The several modes of recovery specified
in this Chapter shall not affect in any way,—
(a) any other law for the time being in force relating to the recovery
of debts due to Government; or
(b) the right of the Government to institute a suit for the recovery of
the tax arrears from the assessee.
(2) It shall
be lawful for the Assessing Officer, or the Government, to have recourse to any
such law or suit, regardless of the fact that the tax arrears are being
recovered from the assessee by any mode specified in this sub-chapter.
Chapter-XII
Penalties
Penalty for
under-reporting of tax base
224. (1) Every person shall be liable to a penalty
if he has wilfully under reported the tax base for any financial year.
(2) The penalty
referred to in sub-section (1) shall be a sum which shall not be less than, but
which shall not exceed two times, the amount of tax payable in respect of the
amount of tax base under reported for the financial year.
(3) A person
shall be deemed to have wilfully under reported the tax base, if—
(a) he has failed to file the return of tax bases by the due date, as
required by sub-section (1) of section 148;
(b) the tax base assessed is greater than the tax base disclosed in the
return of tax bases; or
(c) the tax base reassessed is greater than the tax base assessed
immediately before the reassessment.
(4) The amount
of tax base under reported shall be the aggregate amount of the addition, or
disallowance, made by the Assessing Officer, Commissioner or Commissioner
(Appeals), as the case may be.
(5) The
aggregate amount of the addition, or disallowance, made by the Assessing
Officer in assessment, or reassessment, shall,—
(a) in a case where no return of tax base has been filed as required by
any provision of this Code, be the assessed tax base, as reduced by the maximum
amount not chargeable to tax;
(b) in a case where the return of tax base has been filed as required
by section 148, be the amount of the tax base assessed, as reduced by the tax base
disclosed in the return so filed;
(c) in a case where the return has been filed as required by section
151 or section 153, be the aggregate of,—
(i) the tax base disclosed in the return so filed,
as reduced by the maximum amount not chargeable to tax; and
(ii) the amount of the tax base assessed, as
reduced by the tax base disclosed in the return so filed;
(d) in a case where no return of tax base has been filed as required by
section 148, section 151 or section 152 but the return of tax base has been
filed as required by section 166, be the tax base reassessed, as reduced by the
maximum amount not chargeable to tax; and
(e) in a case where a return of tax base has been filed as required by
section 148, section 151 or section 152 and the return of the tax base has also
been filed as required by section 166, be the amount of the tax base
reassessed, as reduced by the tax base assessed immediately before the
reassessment.
(6) The
aggregate amount of the addition, or disallowance, made by the Commissioner in
revision, shall be tax base assessed consequent to revision, as reduced by the
tax base assessed in the order so revised.
(7) The
aggregate amount of the addition, or disallowance, made by the Commissioner
(Appeals) in appeal, shall be the aggregate of all enhancements made by the
Commissioner (Appeals) in the order under appeal.
(8) The
aggregate amount of the addition, or disallowance, referred to in sub-sections
(5) to (7) shall include—
(a) the amount of any money or the value of bullion, jewellery or other
valuable article or thing, hereinafter referred to as ‘assets’, found in the
possession of the assessee, or under his control, in the course of search under
section 139, if—
(i) the assessee claims that such assets have been
acquired by him by utilising (wholly or in part) his income for any financial
year which has ended before the date of search;
(ii) the due date for filing the return of tax base
for the financial year has expired; and
(iii) the return of tax base for the financial year
has—
(A) not been furnished before the date of the search; or
(B) been furnished before the date of search but such income has not
been declared therein;
(b) the amount, or value, of assets belonging to the assessee and
deli-vered to the requisitioning officer under sub-section (4) of section 140
or handed over to the Assessing Officer under section 142, if—
(i) the assessee claims that such assets have been
acquired by him by utilising (wholly or partly) his income for any financial
year which has ended before the date of search during the course of which the
assets were seized;
(ii) the due date for filing the return of tax base
for the financial year has expired; and
(iii) the return of tax base for the financial year
has—
(A) not been furnished before the date of search during the course of
which the assets were seized; or
(B) been furnished before the date of search but such income has not
been declared therein;
(c) any tax base based on any entry in any books of account or other
documents or transactions, if—
(i) the assessee claims that such entry in the
books of account or other documents or transactions represents his tax base,
wholly or in part, for any financial year which has ended before the date of
search during the course of which the assets were seized;
(ii) the due date for filing the return of tax base
for the financial year has expired; and
(iii) the return of tax base for the financial year
has—
(A) not been furnished before the date of search during the course of
which the assets were seized; or
(B) been furnished before the date of search but such income has not
been declared therein;
(9) However,
the aggregate amount of the addition, or disallowance, referred to in
sub-sections (5) to (7) shall not include the following :—
(a) amount relating to addition, or disallowance, in respect of which
the assessee offers an explanation and the Assessing Officer is satisfied that
:—
(i) the explanation is bona fide;
(ii) the assessee has disclosed all the facts material
to the addition or disallowance; and
(iii) the assessee has disclosed all the facts
relating to the explanation.
(b) amount relating to addition, or disallowance, determined on the
basis of an estimate by the Assessing Officer, if the accounts are correct and
complete to the satisfaction of the Assessing Officer but the method employed
is such that, in the opinion of the Assessing Officer, the income cannot
properly be deduced therefrom;
(c) the amount relating to addition, or disallowance, pertaining to any
issue, determined on the basis of an estimate by the Assessing Officer, if the
assessee,—
(i) has, on his own, estimated a lower amount of
addition or disallowance on the same issue;
(ii) has included such amount in the computation of
his tax base; and
(iii) has disclosed all the facts material to the
addition or disallowance;
(d) the amount of tax base in respect of which the liability to tax has
been discharged by way of pre-paid taxes; and
(e) the amount of undisclosed tax base referred to in section 225.
(10) The tax
payable in respect of the aggregate amount of the addition, or disallowance,
shall be the amount of tax calculated on the aggregate amount of the addition,
or disallowance, made by the Assessing Officer, in assessment,—
(a) at the maximum marginal rate in the case to which Paragraph A or
Paragraph B of Rule I of the First Schedule applies; and
(b) at the rate specified in Rule I of the First Schedule, in all other
cases.
(11) No addition,
or disallowance, of an amount shall form the basis for imposition of penalty,
if—
(a) the same amount of the addition, or disallowance, has formed the
basis of imposition of penalty in the case of the person for the same or any
other financial year; or
(b) the amount relates to any addition, or disallowance, made pursuant
to the adjustment under section 155.
(12) The
penalty referred to in sub-section (1) shall be imposed, by an order in
writing, by the—
(a) Assessing Officer, if the amount of tax base under reported is
determined in assessment, or reassessment;
(b) Commissioner, if the amount of tax base under reported is
determined in revision of the tax base by the Commissioner; or
(c) Commissioner (Appeals), if the amount of tax base under reported is
determined in appeal against an assessment, or a reassessment.
Penalty
where search has been initiated
225. (1) Every person shall, regardless of
anything to the contrary contained in any other provision of this Code, be
liable to a penalty in respect of the undisclosed tax base for the specified
financial year, if a search and seizure operation has been conducted under
section 139 in the case of the person.
(2) The
penalty referred to in sub-section (1) shall be a sum equal to ten per cent of
the undisclosed tax base for the specified financial year.
(3) The
provisions of sub-section (1) shall not apply, if the assessee,—
(a) in the course of the search, in a statement under sub-section (9)
of section 139, admits the undisclosed income and specifies the manner in which
such tax base has been derived;
(b) substantiates the manner in which the undisclosed tax base was
derived; and
(c) pays the tax, together with interest, if any, in respect of the
undisclosed tax base.
(4) The
penalty referred to in sub-section (1) shall be imposed, by an order in
writing, by the Assessing Officer.
(5) For the
purposes of this section,—
(a) “undisclosed tax base” means—
(i) any tax base of the specified financial year represented,
either wholly or partly, by any money, bullion, jewellery or other valuable
article or thing or any entry in the books of account or other document or any
transaction, found in the course of a search under section 139, which has—
(A) not been recorded on or before the date of search in the books of
account or other documents maintained in the normal course relating to the
specified financial year; or
(B) otherwise not been disclosed to the Chief Commissioner or
Commissioner before the date of the search; or
(ii) any tax base of the specified financial year
represented, either wholly or partly, by any entry in respect of an expense
recorded in the books of account or other documents maintained in the normal
course relating to the specified financial year which is found to be false and
would not have been found to be so had the search not been conducted;
(b) “specified financial year” means the financial year—
(i) which has ended before the date of search, but
the due date for filing the return of tax bases for such year has not expired
before the date of search and the assessee has not furnished the return of tax
bases for the financial year before the said date; or
(ii) in which search was conducted.
Penalty for
other defaults
226. (1) Every person shall be liable to a penalty
if he has, without reasonable cause, failed to—
(a) keep and maintain any such books of account and other documents as
required by section 83 for any financial year or to retain such books of
account and other documents in accordance with the rules made thereunder;
(b) get his accounts audited in respect of any financial year as
required by sub-section (1) and sub-section (2) of section 84 or obtain a
report of such audit as required by sub-section (3) of that section;
(c) furnish a report to the Transfer Pricing Officer as required by
sub-section (1) of section 149 or obtain the report as required by sub-section
(2) of the said section;
(d) deduct the whole, or any part of, the tax as required by the
provisions of sub-chapter-A of Chapter XI;
(e) collect the whole, or any part of, the tax as required by the
provisions of sub-chapter-B of Chapter XI;
(f) pay the whole, or any part of, the tax as required by section 198
or section 202;
(g) furnish the return of tax base under section 148 by the due date;
(h) furnish the prescribed information as required under section 144;
(i) answer any question put to him by an
income-tax authority in the exercise of its powers under this Code, if he was
otherwise legally bound to state the truth of any matter touching the subject
of his assessment;
(j) sign any statement made by him in the course of any proceedings
under this Code, which an income-tax authority may legally require him to sign;
(k) attend or produce books of account or documents at the place or
time, if he is required to attend or to give evidence or produce books of
account or other documents, at certain place and time in response to summons
issued under sub-section (1) of section 138;
(l) furnish in time the return of tax deduction as
required under section 198;
(m) failed to furnish in time the return of tax collection as required
under section 202;
(n) furnish a certificate to the deductee as required by section 198;
(o) furnish a certificate to the buyer, lessee or licencee as required
by section 202;
(p) deduct and pay tax as required by sub-section (2) of section 215;
(q) deliver, or cause to be delivered, a return in respect of payment
of interest as required by sub-section (1) of section 199;
(r) deliver, or cause to be delivered, a return in respect of payment
as required by sub-section (3) of section 199;
(s) comply with the provisions of section 259;
(t) comply with the provisions of section 260; or
(u) comply with a notice issued under section 157.
(2) The sum
referred to in sub-section (1) shall be any sum—
(a) which shall not be less than fifty thousand rupees but which shall
not exceed two hundred thousand rupees, in the cases referred to in clause (a),
clause (b) or clause (c) of sub-section (1);
(b) which shall not be less than twenty five per cent but which shall
not exceed the amount, of tax deductible or collectible or payable, as the case
may be, in the cases referred to in clause (d), clause (e) or
clause (f) of sub-section (1);
(c) equal to five thousand rupees, in the case referred to in clause (g)
of sub-section (1);
(d) which shall not be less than five thousand rupees but which shall
not exceed one hundred thousand rupees, in any other case referred to in sub-section
(1).
Procedure
227. (1) The income-tax authority shall, for the
purposes of imposing any penalty under this Chapter, issue a notice to any
assessee requiring him to show cause why the penalty should not be imposed on
him.
(2) The
income-tax authority for the purposes of sub-section (1) shall be—
(a) the income-tax authority referred to in sub-section (12) of section
224, if the penalty is imposable under the said section;
(b) the Assessing Officer, if the penalty is imposable under section
225; and
(c) the income-tax authority before whom the default has been
committed, if the penalty is imposable under section 226.
(3) The notice
referred to in sub-section (1) shall be issued only during the pendency of any
proceedings under this Code for the relevant financial year.
(4) An order
imposing a penalty under this Chapter shall be made with the approval of the
Joint Commissioner, if—
(a) the penalty exceeds one hundred thousand rupees and the income-tax
authority levying the penalty is in the rank of Income-tax Officer; or
(b) the penalty exceeds five hundred thousand rupees and the income-tax
authority levying the penalty is in the rank of Assistant Commissioner or
Deputy Commissioner.
(5) The proceedings
under this Code shall be deemed to be pending for the relevant financial year,
if—
(a) a notice of demand has been issued under section 168 in consequence
of any order made or intimation issued under this Code for the relevant
financial year and the sum or part thereof, specified therein, remains unpaid;
(b) an appeal has been filed against any order made or intimation
issued under this Code for the relevant financial year.
(6) Every
order or penalty issued under this Chapter shall be accompanied by a notice of
demand in respect of the amount of penalty imposed and the notice of demand
shall be deemed to be a notice under section 168.
Bar of
limitation for imposing penalty
228. (1) No order imposing a penalty under this Chapter
shall be passed after the expiry of one year from the end of the financial year
in which the notice for imposition of penalty issued under section 227.
(2) An order
imposing, or dropping the proceedings for imposing, the penalty under this
Chapter may be revised, or revived, as the case may be, on the basis of
assessment of the tax base, as revised after giving effect to the order of
Commissioner (Appeals), Appellate Tribunal, the National Tax Tribunal or the
Supreme Court or order of revision under section 194.
(3) An order
revising the penalty under sub-section (2) shall not be passed after the expiry
of six months from the end of the month in which order of the Commissioner
(Appeals), the Appellate Tribunal, National Tax Tribunal or the Supreme Court
is received by the Chief Commissioner or the Commissioner or the order of
revision under section 194 is passed.
(4) In
computing the period of limitation for the purposes of this section, the
following time or period shall not be included :—
(a) the time taken in giving an opportunity to the assessee to be
reheard under section 137; and
(b) any period during which a proceeding under this Chapter for the
levy of penalty is stayed by an order, or injunction, of any court.
Chapter-XIII
Prosecution
Chapter not
in derogation of any other law or any other provision of this Code
229. (1) The provisions of this Chapter are in
addition to, and not in derogation of, the provisions of any other law
providing for prosecution for offences thereunder.
(2) The provisions
of this Chapter shall be independent of any order under this Code that may be
made, or has not been made, on any person and it shall be no defence that the
order has not been made on account of time limitation or for any other reason.
Contravention
of any restraint order
230. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to two years and with fine,
if such person contravenes any restraint order referred to in sub-section (7)
of section 139.
(2) The fine
referred to in sub-section (1) shall not be less than fifty thousand rupees or
more than five lakh rupees.
Failure to
comply with the provisions of clause (d) of sub-section (2) of section
139
231. (1) A person, who is required to afford to
the Authorised Officer the necessary facility to inspect the books of account
or other documents as required under the provisions of clause (d) of
sub-section (2) of section 139, shall be punishable with rigorous imprisonment
for a term which may extend to two years and with fine, if such person fails to
afford such facility to the officer.
(2) The fine
referred to in sub-section (1) shall not be less than fifty thousand rupees or
more than five lakh rupees.
Removal, concealment,
transfer or delivery of property to thwart tax recovery
232. (1) If a person fraudulently removes,
conceals, transfers or delivers to any person, any property or any interest
therein, intending thereby to prevent that property or interest therein from
being taken in execution of a certificate under the provisions of the Fifth
Schedule, he shall be punishable with rigorous imprisonment for a term which
shall not be less than six months, but which may extend to two years, and with
fine.
(2) The fine
referred to in sub-section (1), shall not be less than fifty thousand rupees or
more than five lakh rupees.
Failure to
comply with the provisions of sub-sections (1) and (3) of section 218
233. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to two years and with fine,
if such person—
(a) fails to give the information as required by sub-section (1) of
section 218;
(b) fails to set aside the amount as required by sub-section (3) of
that section; or
(c) parts with any of the assets of the company, or the properties, in
his custordy in contravention of the provisions of the aforesaid sub-section.
(2) The fine
referred to in sub-section (1) shall not be less than fifty thousand rupees or
more than five lakh rupees.
Failure to
pay the tax deducted or collected at source or to pay the dividend distribution
tax
234. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to two years and with fine,
if he fails to pay to the credit of the Central Government—
(a) the tax deducted, or collected, at source by him as required by, or
under, the provisions of sub-chapter-A or sub-chapter-B of Chapter XI; or
(b) the dividend distribution tax under section 207.
(2) The fine
referred to in sub-section (1) shall not be less than three per cent of the tax
referred to therein, for each month of default, or part thereof, for the period
commencing from the date on which the amount was required to be paid to the
credit of the Central Government and ending with the date of payment or the
date of conviction, whichever is earlier.
Wilful
attempt to evade tax, etc.
235. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to seven years and with fine,
if he wilfully attempts in any manner to evade any liability, under this Code,
in respect of tax, interest or penalty.
(2) A person
shall be punishable with rigorous imprisonment for a term which shall not be
less than three months but which may extend to three years and with fine, if a
person wilfully attempts in any manner to evade the payment of any liability,
under this Code, in respect of tax, interest or penalty.
(3) For the
purposes of this section, a wilful attempt to evade any liability, under this
Code, in respect of tax, interest or penalty, or its payment, shall include a
case where any person—
(a) has in the possession, or control, any books of account or other
documents, relevant to any proceeding under this Code, containing a false entry
or statement; or
(b) makes, or causes to be made, any false entry, or statement, in such
books of account or other documents; or
(c) wilfully omits, or causes to be omitted, any relevant entry, or
statement, in such books of account or other documents; or
(d) causes any other circumstance to exist which will have the effect
of enabling such person to evade any liability, under this Code, in respect of
tax, penalty or interest, or the payment thereof.
(4) The fine
referred to in sub-section (1) or sub-section (2) shall not be less than fifty
thousand rupees or more than five lakh rupees.
Failure to
furnish returns of tax bases
236. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to two years and with fine,
if he fails to furnish in due time the return of tax base which he is required
to furnish under sub-section (1) of section 148 or by notice given under
section 151 or section 152 or section 166.
(2) The
provisions of sub-section (1) shall not apply, if—
(a) the return of tax base has been voluntarily filed by the person; or
(b) the tax payable by the person on the tax bases determined on
assessment, or reassessment, as reduced by pre-paid taxes does not exceed
twenty-five thousand rupees.
(3) The fine
referred to in sub-section (1) shall be a sum calculated at a rate which shall
not be less than one hundred rupees or more than five hundred rupees, for every
day during which the default continues.
Failure to
furnish other returns, statements, reports, etc.
237. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to two years and with fine,
if he fails to furnish—
(a) in due time any return, statement or report which he is required to
furnish under this Code; or
(b) after receipt of a notice to do so, any return, statement or report
which he is required to furnish under his Code.
(2) The
provisions of sub-section (1) shall not apply if the return, statement or
report has been voluntarily furnished by the person.
(3) The fine referred
to in sub-section (1) shall be a sum calculated at a rate which shall not be
less than fifty rupees or more than two hundred and fifty rupees, for every day
during which the default continues.
Failure to
comply with direction under this Code
238. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to one year and with fine, if
he wilfully fails to comply with any direction issued to him under this Code.
(2) The fine
referred to in sub-section (1) shall be a sum calculated at a rate which shall
not be less than twenty rupees or more than one hundred rupees for every day
during which the default continues.
False
statement in verification, etc.
239. (1) A person shall be punishable with
rigorous imprisonment for a term which shall not be less than six months but
which may extend to seven years and with fine, if he—
(a) makes a false statement in any verification under this Code, or
under any rule made under this Code; or
(b) delivers an account or statement which is false, and which he
either knows or believes to be false, or does not believe to be true.
(2) The fine
referred to in sub-section (1) shall not be less than fifty thousand rupees or
more than five lakh rupees.
Falsification
of books of account or documents, etc.
240. (1) A person shall be punishable with
rigorous imprisonment for a term which may extend to seven years and with fine,
if he makes, or causes to be made, any entry, or statement, which is false and
which he either knows to be false or does not believe to be true, in any books
of account or other document relevant to, or useful, in any proceedings against
him, or any other person, under this Code.
(2) The fine
referred to in sub-section (1) shall be a sum calculated at a rate which shall
not be less than twenty rupees or more than one hundred rupees, for every day
during which the default continues.
Abetment of
false return, etc.
241. (1) A person shall be punishable with
rigorous imprisonment for a term which shall not be less than six months but
which may extend to seven years and with fine, if he abets, or induces, in any
manner another person to—
(a) make and deliver, or cause to be delivered, an account, statement
or declaration relating to any income chargeable to tax which is false and which
he either knows to be false or does not believe to be true; or
(b) commit an offence under sub-section (1) of section 235.
(2) The fine
referred to in sub-section (1) shall be a sum which shall not be less than fifty
thousand rupees or more than five hundred thousand rupees.
Offences by
companies, etc.
242. (1) If an offence under this Code has been
committed by a company then, regardless of anything to the contrary contained
in this Chapter,—
(a) such company shall be punished only with a fine; and
(b) every person, who, at the time the offence was committed, was in
charge of, and was responsible to, the company for the conduct of its business,
shall be punished with imprisonment and fine.
(2) The
company and the persons referred to in clause (b) of sub-section (1)
shall be liable to be proceeded against and punished in accordance with the
provisions of this Code.
(3) The
persons referred to in clause (b) of sub-section (1) shall not be liable
to any punishment if he proves that—
(a) the offence was committed without his knowledge, consent or
connivance;
(b) the offence cannot be attributed to any neglect on his part; or
(c) he had exercised all due diligence to prevent the commission of
such offence.
(4) Any director,
manager, secretary or any other officer of the company shall also be punished
with imprisonment and fine, if it is proved that—
(a) the offence was committed with his knowledge, consent or
connivance;
(b) the offence can be attributed to any neglect on his part; or
(c) he had not exercised all due diligence to prevent the commission of
such offence.
(5) For the
purposes of this section,—
(a) “company” means a body corporate, and includes—
(i) an unincorporated body; and
(ii) a Hindu undivided family; and
(b) “director”, in relation to—
(i) an unincorporated body means a participant in
the body;
(ii) a Hindu undivided family, means an adult
member of the family; and
(iii) a company, means a whole-time director, or
where there is no such director, any other director or manager or officer, who
is in-charge of the affairs of the company.
Proof of
entries in records or documents
243. (1) Entries in the records, or other documents,
in the custody of an income-tax authority shall be admitted in evidence in any
proceeding for the prosecution of any person for an offence under this Chapter.
(2) The
entries referred to in sub-section (1) may be proved by the production of—
(a) the records or other documents (containing such entries) in the
custody of the income-tax authority; or
(b) a copy of the entries certified by that authority, as true copy of
those contained in the records or other documents in its custody.
Presumption
as to assets, books of account, etc., in certain cases
244. The provisions of section 277 shall, so far
as may be, apply in relation to any material found in the possession or control
of any person, if the material—
(a) have been seized under section 139 or requisitioned under section
140; and
(b) are tendered by the prosecution in evidence against—
(i) such person; or
(ii) such person and the other person referred to
in section 241.
Presumption
as to culpable mental state
245. (1) The Court shall presume the existence of
a culpable mental state on the part of the accused in a prosecution for any
offence under this Code which requires such mental state on the part of the
accused.
(2) It shall
be a defence for the accused to prove the fact that he had no culpable mental
state with respect to the act charged as an offence in that prosecution.
(3) For the
purposes of this section “culpable mental state” includes intention, motive,
knowledge of a fact, or belief in, or reason to believe, a fact.
(4) For the purposes
of this section, a fact is said to be proved when the court believes that its
existence is established by a preponderance of probability.
Prosecution
to be at the instance of Chief Commissioner or Commissioner
246. (1) A person shall not be proceeded against
for an offence under sections 230 to 241 except with the previous sanction of
the Commissioner or Commissioner (Appeals).
(2) The Chief
Commissioner may issue such instruction, or direction, to the aforesaid
income-tax authorities as he may deem fit for institution of proceeding under
this sub-section.
(3) The Chief
Commissioner may compound, either before or after the institution of
proceeding, an offence under this Chapter at the prescribed rates.
(4) The Board
may issue order, instruction or direction (including instruction or direction
to obtain the previous approval of the Board) to any income-tax authority for
the proper composition of offences under this section.
(5) An offence
in relation to which a punishment has been awarded by a court shall not be
compounded.
(6) Any
statement made, or account or other document produced, by a person before any
income-tax authority, other than an Inspector, shall be admissible as evidence for
the purpose of any proceeding which has been taken against the person under
sub-section (1), regardless of the fact that the offence in respect of which
such proceeding was taken would be compounded.
Certain
offences to be non-cognizable
247. An offence punishable under section 234,
section 235, section 236, section 239 or section 241 shall be deemed to be
non-cognizable within the meaning of the Code of Criminal Procedure, 1973,
regardless of anything contained in that Code.
Disclosure
of information by public servants
248. (1) If a public servant furnishes any
information, or produces any document, in contravention of the provisions of
section 268, he shall be punishable with imprisonment for a term which may
extend to six months, and with fine.
(2) No
prosecution shall be instituted under this section except with the previous
sanction of the Central Government, which may be accorded only after giving
such public servant an opportunity of being heard.
Chapter-XIV
Advance Ruling
Definitions
249. In this Chapter, unless the context otherwise
requires,—
(a) “advance ruling” means a ruling by the Authority on a
question raised by the applicant under section 252 within the scope as
specified under section 250;
(b) “applicant” means any person who makes an application under
sub-section (1) of section 252;
(c) “application” means an application made to the Authority
under sub-section (1) of section 252;
(d) “Authority” means the Authority for Advance Rulings
constituted under section 251;
(e) “Chairman” means the Chairman of the Authority;
(f) “Member” means a Member of the Authority and includes the
Chairman.
Scope of
Ruling
250. An applicant,
specified in column (2) of the Table 9, may seek ruling on such matter as
specified in the corresponding entry of column (3) of the said Table.
Table 9
|
Sr. No. |
Applicant |
Scope of ruling |
|
(1) |
(2) |
(3) |
|
(i) |
Non-resident |
A
determination in relation to a transaction which has been undertaken, or is proposed
to be undertaken, by the applicant, and such determination shall include the
determination of any question of law, or of fact, specified in the
application. |
|
(ii) |
Resident |
A determination
in relation to the tax liability of a non-resident arising out of a
transaction which has been undertaken, or is proposed to be undertaken, by
the applicant with such non-resident, and such determination shall include
the determination of any question of law, or of fact, specified in the
application. |
|
(iii) |
Any class of
residents, as notified by the Central Government in the Official Gazette in
this behalf. |
A
determination in respect of an issue relating to computation of tax bases
which is pending before any income-tax authority, or the Ap- pellate
Tribunal, and such determination shall include the determination of any
question of law or of fact relating to such computation of tax bases
specified in the application. |
Authority for
Advance Ruling
251. (1) The Central Government shall constitute
an Authority for Advance Ruling for the purposes of pronouncing an advance
ruling.
(2) The
Authority shall consist of the following Members appointed by the Central
Government, namely :—
(a) a Chairman, who is a retired Judge of the Supreme Court;
(b) an officer of the Indian Revenue Service who is a Chief
Commissioner;
(c) an officer of the Indian Legal Service who is an Additional
Secretary to the Government of India.
(3) The salaries
and allowances payable to, and the terms and conditions of service of, the
Members shall be such as may be prescribed.
(4) The
Central Government shall provide the Authority with such officers and staff, as
may be necessary, for the efficient exercise of the powers of the Authority
under this Code.
(5) The office
of the Authority shall be located in Delhi.
(6) No
proceeding before, or pronouncement of advance ruling by, the Authority shall
be questioned, or shall be invalid, on the ground merely of the existence of
any vacancy, or defect, in the constitution of the Authority.
Procedure
for advance ruling
252. (1) An applicant may make an application for
seeking advance ruling, under this Chapter, stating the question on which the
advance ruling is sought.
(2) The
application shall be made in such form and manner as may be prescribed, and be
accompanied by a fee of two thousand five hundred rupees.
(3) An
applicant may withdraw an application within thirty days from the date of
filing of the application.
(4) On receipt
of an application, the Authority shall cause a copy thereof to be forwarded to
the Commissioner and, if necessary, call upon him to furnish the relevant
records.
(5) The
Authority may, after examining the application and the records called for, by
an order in writing, either allow, or reject, the application.
(6) No
application shall be rejected under sub-section (5) unless an opportunity has
been given to the applicant of being heard and reasons for such rejection shall
be given in that order.
(7) The
Authority shall not allow the application where the question raised in the
application,—
(a) is already pending before any income-tax authority, Appellate
Tribunal or any court;
(b) involves determination of fair market value of any property;
(c) relates to a transaction or issue which is designed prima facie
for the avoidance of income-tax.
(8) However,
in the case of any person falling with the class of persons notified under
section 250, the Authority may allow the application even if the question
raised therein is pending before any income-tax authority or Appellate
Tribunal.
(9) A copy of
every order made under sub-section (5) shall be sent to the applicant and to
the Commissioner.
(10) The
Authority shall, in a case where an application is allowed under sub-section
(5), pronounce its advance ruling on the question specified in the application,
after examining such further material as may be placed before it by the
applicant or obtained by the Authority.
(11) The
Authority shall, before pronouncing its Advance Ruling, provide an opportunity
of being heard to the applicant or to the Commissioner.
(12) The
Authority shall pronounce its Advance Ruling in writing within six months of
the receipt of the application.
(13) A copy of
the Advance Ruling pronounced by the Authority, duly signed by the Members and
certified in the prescribed manner shall be sent to the applicant and to the
Commissioner, as soon as may be, after such pronouncement.
Income-tax
authority or Appellate Tribunal not to proceed in certain cases
253. No income-tax authority, or the Appellate
Tribunal, shall proceed to decide any issue in respect of which an application
has been made by a person falling with the class of persons notified under
section 250.
Applicability
of Advance Ruling
254. (1) The Advance Ruling pronounced by the
Authority under section 252 shall be binding only —
(a) on the applicant in whose case the Advance Ruling has been
pronounced;
(b) in respect of the transaction in relation to which the Advance
Ruling has been pronounced; and
(c) on the Commissioner, and the income-tax authorities subordinate to
him, in respect of the applicant and the said transaction.
(2) However,
the Advance Ruling referred to in sub-section (1) shall not be binding, if there
is a change in law, or fact, on the basis of which the Advance Ruling has been
pronounced.
Advance
Ruling to be void in certain circumstances
255. (1) The Authority may, by order, declare an
Advance Ruling to be void ab initio if it finds that the Ruling has been
obtained by the applicant by fraud or misrepresentation of facts.
(2) Upon
declaring the Ruling to be void ab initio, all the provisions of this
Code shall apply (after excluding the period beginning with the date of such
advance ruling and ending with the date of order under this sub-section) to the
applicant as if such advance ruling had never been made.
(3) A copy of
the order made under sub-section (1) shall be sent to the applicant and the
Commissioner.
Powers of
the Authority
256. (1) The Authority shall, for the purpose of
exercising its powers, have all the powers of a civil court under the Code of
Civil Procedure, 1908 as are referred to in section 138 of this Code.
(2) The
Authority shall be deemed to be a civil court for the purposes of section 195
of the Code of Criminal Procedure, 1973, but not for the purposes of Chapter
XXVI of the said Code.
(3) Every
proceeding before the Authority shall be deemed to be a judicial proceeding
within the meaning of sections 193 and 228 of the Indian Penal Code, and for
the purpose of section 190 of the said Code.
Procedure
of Authority
257. The Authority shall, subject to the
provisions of this Chapter, have power to regulate its own procedure in all
matters arising out of the exercise of its powers under this Code.
Part-G
General
Chapter-XV
Agreement
with foreign countries
258. (1) The Central Government may enter into an
agreement with the Government of any other country—
(a) for the granting of relief in respect of —
(i) income on which income-tax has been paid both
under this Code and under the corresponding law in force in that country; or
(ii) income-tax chargeable under this Code and
under the corresponding law in force in that country to promote mutual economic
relations, trade and investment;
(b) for the avoidance of double taxation of income under this Act and
under the corresponding law in force in that country;
(c) for exchange of information for the prevention of evasion or avoidance
of income-tax chargeable under this Act or under the corresponding law in force
in that country, or investigation of cases of such evasion or avoidance;
(d) for recovery of income-tax under this Act and under the
corresponding law in force in that country; or
(e) for carrying out any other purpose of this Act or the corresponding
law in force in that country.
(2) The
Central Government may enter into an agreement with the Government of any
specified territory outside India for the purposes specified in sub-section
(1).
(3) Any
specified association in India may enter into an agreement with any specified
association in the specified territory outside India for the purposes specified
in sub-section (1).
(4) The
Central Government may, by notification in the Official Gazette, make such
provisions as may be necessary for implementing the agreements.
(5) A person
shall not be entitled to claim relief under the provisions of the agreement
unless a certificate of his being a resident in the other country or specified
territory is obtained by him from the tax authority of that country or
specified territory, in the prescribed form.
(6) The
provisions of this Code shall not be regarded as discriminatory against the
foreign company merely on the consideration that the liability of the foreign
company to pay tax is calculated at a rate higher than the rate at which the
liability of a domestic company is calculated.
(7) Any term
used in the agreement, but not defined in this Code or in the agreement
referred to in sub-section (1), shall have the meaning assigned to it in the
notification issued by the Central Government in the Official Gazette in this
behalf, having regard to the fact that the meaning is not inconsistent with the
provisions of this Code or the Agreement.
(8) For the
purposes of determining the relationship between a provision of a treaty and
this Code, -
(a) neither the treaty nor the Code shall have a preferential status by
reason of its being a treaty or law; and
(b) the provision which is later in time shall prevail.
Permanent
account number
259. (1) Every prescribed person shall make an
application for the allotment of a permanent account number and the applicant
shall be allotted a permanent account number.
(2) Any person
not falling under sub-section (1) may make an application for a permanent
account number and he shall also be allotted a permanent account number.
(3) A
permanent account number may, having regard to the nature of transactions as
may be prescribed, be allotted to any other person, whether or not an
application is made by him.
(4) Any person
who has been allotted a permanent account number shall quote the number in the
transactions, or documents, as may be prescribed.
(5) The Board
shall prescribe the following in respect of the permanent account number :—
(a) the form and the manner in which an application may be made for the
allotment of a permanent account number and the particulars which such
application shall contain;
(b) the income-tax authority, or any other person, authorised to
receive the application or allot the permanent account number;
(c) the categories of transactions in relation to which Permanent
Account Numbers shall be quoted by every person in the documents pertaining to
such transactions;
(d) the categories of documents in which such numbers shall be quoted
by every person;
(e) class, or classes, of persons to whom the provisions of this
section shall not apply;
(f) the form and the manner in which the person who has not been
allotted a Permanent Account Number shall make his declaration;
(g) the manner in which the Permanent Account Number shall be quoted in
respect of the categories of transactions referred to in clause (c); and
(h) any other matters connected therewith.
Tax account
number
260. (1) Every person liable to deduct tax at
source, or collect tax at source, shall make an application for the allotment
of a tax account number and the applicant shall be allotted a tax account
number.
(2) Any person
who has been allotted a tax account number shall quote the number in the
transactions, or documents, as may be prescribed.
Document
Identification Number
261. (1) The Department, every income-tax
authority, or any other person acting on behalf of the Department or the
income-tax authority, shall allot a computer generated Document Identification
Number in respect of every notice, order, letter or any correspondence issued
by him to any other income-tax authority or assessee or any other person and
such number shall be quoted thereon.
(2) Any
notice, order, letter or any correspondence, issued by the Department, any
income-tax authority or any other person acting on behalf of the Department or
the income-tax authority, shall be treated as invalid and shall be deemed never
to have been issued if it does not bear a Document Identification Number
referred to in sub-section (1).
(3) The
Department, every income-tax authority, or any other person acting on behalf of
the Department or the income-tax authority, shall accept any document, letter
or correspondence from any person only after allotting and quoting a computer
generated Document Identification Number.
(4) Any
document, letter or correspondence, received by the Department, any income-tax
authority or any other person acting on behalf of the Department or the
income-tax authority, shall be treated as invalid and shall be deemed never to
have been received if it does not bear a Document Identification Number
referred to in sub-section (3).
Certain
transfers to be void
262. (1) A charge on, or transfer of, any asset of
a person in favour of any other person, shall be void as against any claim in
respect of any sum payable by the person under this Code, if the person creates
a charge on, or transfers, any of his asset in favour of the other person
during the pendency of any proceeding under this Code or after the completion
thereof.
(2) The
charge, or transfer, referred to in sub-section (1) shall not be void, if it is
made—
(a) for adequate consideration and,—
(i) without notice of the pendency of such
proceeding; or
(ii) without notice of such sum payable by the
assessee; or
(b) with the previous permission of the Assessing Officer.
(3) This section
applies to cases where the amount of sum payable, or likely to be payable,
under this Code exceeds five thousand rupees and the asset charged, or
transferred, exceed ten thousand rupees in value.
(4) For the
purposes of this section, “asset” shall not include any business trading asset.
Provisional
attachment to protect revenue in certain cases
263. (1) An Assessing Officer may attach
provisionally, by order in writing, any property belonging to the assessee in
the manner provided in the Fifth Schedule, if he is of the opinion that it is
necessary to do so for the purpose of protecting the interest of the revenue.
(2) The order
referred to in sub-section (1) shall be issued with the prior approval of the
Chief Commissioner or Commissioner.
(3) Every such
order shall cease to have effect after the expiry of a period of six months
from the date of the order made under sub-section (1).
(4) The Chief
Commissioner or Commissioner may, for reasons to be recorded in writing, extend
the aforesaid period by such further period or periods as he thinks fit, so,
however, that the total period of extension shall not in any case exceed two
years.
Service of
notice generally
264. (1) The service of any notice, summon,
requisition, order or any other communication under this Code (hereinafter in
this section referred to as “communication”) may be made by delivering or
transmitting a copy thereof, to the person therein named,—
(a) by post or by such courier service as may be approved by the Board;
(b) in such manner as provided under the Code of Civil Procedure, 1908
for the purposes of service of summons;
(c) in the form of any electronic record as provided in Chapter IV of
the Information Technology Act, 2000; or
(d) by any other means of transmission of documents (including fax
message or electronic mail message) as provided by rules made by the Board in
this behalf.
(2) A notice,
requisition, order or any communication under this Code which is sent by post,
or courier service, shall be deemed to have been served on the person to whom
it is addressed on the fifth day after the day on which the notice,
requisition, order or communication is sent.
(3) The
provision of sub-section (2) shall apply regardless of the fact that the
notice, requisition, order or communication has not been actually received by
the person.
(4) However,
the person shall, on an application made by him, be entitled to a copy of the
notice, requisition, order or communication.
(5) The Board
may make rules providing for the addresses (including the address for
electronic mail or electronic mail message) to which the communication referred
to in sub-section (1) may be delivered or transmitted to the person therein
named.
Authentication
of notices and other documents
265. (1) A notice or any other document required
to be issued, served or given for the purposes of this Code by any income-tax
authority shall be authenticated in manuscript by that authority.
(2) Every
notice or other document to be issued, served or given for the purposes of this
Code by any income-tax authority shall be deemed to be authenticated, if the
name and office of a designated income-tax authority is printed, stamped or
otherwise written thereon.
(3) For the
purposes of this section, a designated income-tax authority shall mean any
income-tax authority authorised by the Board to issue, serve or give such
notice or other document after authentication in the manner as provided in
sub-section (2).
Notice
deemed to be valid in certain circumstances
266. (1) A notice which is required to be served
upon a person for the purposes of assessment under this Code shall be deemed to
have been duly served upon him in accordance with the provision of this Code if
the person has appeared in any proceeding or co-operated in any enquiry
relating to an assessment.
(2) The
person, referred to in sub-section (1), shall be precluded from taking any
objection in any proceeding or inquiry under this Act that the notice was —
(a) not served upon him;
(b) not served upon him in time; or
(c) served upon him in an improper manner.
(3) However,
the provisions of this section shall not apply, if the assessee has raised the
objection before the completion of the assessment.
Service of
notice when family is disrupted or unincorporated body is dissolved
267. (1) Any notice under this Code in respect of
the tax bases of a Hindu family shall, in a case where a finding of total
partition has been recorded by the Assessing Officer under section 175 in
respect of any Hindu family, be served on the person who was the last manager
of the Hindu family.
(2) However,
if the last manager of the Hindu family is dead, then the notice shall be
served on all adults who were members of the Hindu family immediately before
the partition.
(3) The notice
under this Code, in respect of the tax bases of an unincorporated body, shall,
in a case where the unincorporated body is dissolved, may be served on any
person who was a participant (not being a minor) immediately before its
dissolution.
Publication
of information respecting assessees in certain cases
268. (1) The Central Government may, if it is of
the opinion that it is necessary, or expedient, in the public interest, cause
to be published in any manner the name and any other particular relating to any
proceeding, or prosecution, under this Code in respect of—
(a) any assessee;
(b) any participant of an unincorporated body; or
(c) any director, managing agent, secretary, treasurer, or manager of
the company.
(2) No
publication under this section shall be made in relation to any penalty imposed
under this Code until the time for presenting an appeal to the Commissioner
(Appeals) has expired without an appeal having been presented or the appeal, if
presented, has been disposed of.
Appearance
by registered valuer in certain matters
269. (1) Any assessee who is entitled, or
required, to attend before any income-tax authority, or the Appellate Tribunal,
in connection with any matter relating to the valuation of any asset, may
attend through a registered valuer.
(2) However,
the provisions of sub-section (1) shall not apply in a case where the assessee
is required to attend personally for examination on oath, or affirmation, under
section 138.
Appearance
by authorised representative
270. (1) Any assessee who is entitled, or
required, to attend before any income-tax authority, or the Appellate Tribunal,
in connection with any proceeding under this Code, may attend through an
authorised representative.
(2) However,
the provisions of sub-section (1) shall not apply in a case where the assessee
is required to attend personally for examination on oath, or affirmation, under
section 138.
(3) For the
purposes of this section, “authorised representative” means a person authorised
by the assessee in writing to appear on his behalf, being
(a) a person related to the assessee in any manner, or a person
regularly employed by the assessee;
(b) any officer of a Scheduled Bank with which the assessee maintains a
current account or has other regular dealings;
(c) any legal practitioner who is entitled to practice in any civil
court in India; or
(d) an accountant;
(e) any person who has passed any accountancy examination recognised in
this behalf by the Board; or
(f) any person who has acquired such educational qualifications as the
Board may prescribe for this purpose.
(4) The
following persons shall not be qualified to represent an assessee under
sub-section (1) :—
(a) a person who has been dismissed or removed from Government service;
(b) a legal practitioner, or an accountant, who is found guilty of
misconduct in his professional capacity by any authority entitled to institute
disciplinary proceedings against him;
(c) a person, not being a legal practitioner or an accountant, who is found
guilty of misconduct in connection with any income-tax proceedings by the
prescribed authority.
(5) The Chief
Commissioner may, by an order in writing, specify the period of
disqualification under sub-section (4), having regard to the nature of misconduct.
Rounding
off of tax bases, tax, etc.
271. (1) The amount of tax base computed in
accordance with the foregoing provisions of this Code shall be rounded off to
the nearest multiple of hundred rupees.
(2) Any amount
payable, or receivable, by the assessee under the provisions of this Code shall
be rounded off to the nearest multiple of ten rupees.
(3) The Board
may prescribe the method of rounding off under sub-section (1) or sub-section
(2).
Indemnity
272. Every person deducting, retaining, or paying any
tax in pursuance of this Code in respect of income belonging to another person
is hereby indemnified for the deduction, retention, or payment thereof.
Power to
tender immunity from prosecution
273. (1) The Central Government may tender
immunity to any person from—
(a) prosecution for any offence under this Code, the Indian Penal Code,
or any other Central Act for the time being in force; and
(b) the imposition of any penalty under this Code.
(2) The
immunity under sub-section (1) shall be granted by the Central Government, if—
(a) the person makes a full and true disclosure of the whole
circumstances relating to the concealment of income or evasion of payment of
tax on income;
(b) it is of the opinion that it is necessary, or expedient, so to do;
and
(c) the reasons for the opinion is recorded in writing.
(3) A tender
of immunity made to, and accepted by, the person concerned, shall, to the
extent to which the immunity extends, render him immune from—
(a) prosecution for any offence in respect of which the tender was
made; or
(b) the imposition of any penalty under this Code.
(4) The
immunity granted under this section shall be deemed to have been withdrawn, if
the Central Government records a finding to the effect that the person to whom
the immunity has been tendered has -
(a) wilfully concealed any particular which has the effect of altering
the opinion formed under sub-section (2);
(b) given any false evidence; or
(c) not complied with any condition on which the tender was made.
(5) The
person, whose immunity has been withdrawn under sub-section (4), may be tried
for the offence in respect of which the tender of immunity was made or for any
other offence of which he appears to have been guilty in connection with the
same matter and shall also become liable to the imposition of any penalty under
this Code to which he would otherwise have been liable.
Cognizance
of offences
274. No Court inferior to that of a Presidency
Magistrate or a Magistrate of the First Class shall try any offence under this
Code.
Section 360
of the Code of Criminal Procedure, 1973, and the Probation of Offenders Act,
1958, not to apply
275. The provisions of section 360 of the Code of
Criminal Procedure, 1973, or the Probation of Offenders Act, 1958, shall not
apply to a person convicted of an offence under this Code, if the person is of
eighteen years of age or more.
Return of
tax base, etc., not to be invalid on certain grounds
276. A return of tax bases, assessment, notice,
summon or any other proceeding, under this Code shall be deemed to be valid,
regardless of the fact that there is a mistake, defect or omission in the
return of tax bases, assessment, notice, summon or other proceeding, if the
return of income, assessment, notice, summon or any other proceeding is in
substance and effect in conformity with, or according to the intent and purpose
of, this Code.
Presumption
as to material found
277. (1) For the purposes of any proceeding under
this Code, where any material found in the possession, or control, of any
person in the course of a search under section 139 or survey under section 144,
it shall be presumed that—
(a) the material belongs to such person;
(b) the contents of the material, being books of account and other documents,
are true;
(c) the signature and every other part of the books of account and
other documents which purport to be in the handwriting of any particular
person, or which may reasonably be assumed to have been signed by, or to be in
the handwriting of, any particular person, are in that person’s handwriting;
and
(d) a document which purport to be stamped, executed or attested, it
was duly stamped and executed or attested by the person by whom it purports to
have been so executed or attested.
(2) The presumption
under sub-section (1) shall also apply to a case, where any materail has been
delivered to the requisitioning officer in accordance with the provisions of
section 140 as if they had been found in the possession, or control, of the
person referred to in section 140.
Bar of
suits in civil courts
278. (1) No suit shall be brought in any civil
court to set aside, or modify, any proceeding taken, or order made, under this
Code.
(2) No
prosecution, suit or other proceeding shall lie against the Government, or any
officer of the Government, for anything in good faith done, or intended to be
done, under this Code.
Power to
rescind
279. (1) The Central Government, the Board, or any
income-tax authority, shall have all the powers to rescind any notification,
approval or order issued by it under any provision of this Code for reasons to
be recorded in writing.
(2) The powers
conferred under sub-section (1) shall be exercised only after the assessee has been
given a reasonable opportunity of showing cause against the proposed
withdrawal.
Power to
make rules
280. (1) The Board may, subject to the control of
the Central Government, by notification in the Gazette of India, make rules for
the whole or any part of India for carrying out the purposes of this Code.
(2) In
particular, and without prejudice to the generality of the foregoing power,
such rules may provide for all or any of the following matters :—
(a) the characterization, timing and the situs of any income and
expenditure;
(b) the ascertainment and determination of any class of income;
(c) the manner in which and the procedure by which the income shall be
arrived at, in the case of—
(i) agriculture income;
(ii) a person residing outside India;
(iii) a person whose total income includes income
referred to in section 8;
(d) the determination of the amount of expenditure allowable under this
Code in such manner, to such extent, and on such basis and conditions, as
appears to the Board to be proper and reasonable;
(e) the methods by which an estimate of any income liable to tax, or
expenditure liable to deduction, may be made, if such income or expenditure
cannot be definitely ascertained, or can be ascertained only with an amount of
trouble and expense to the assessee which in the opinion of the Board is
unreasonable;
(f) the form and manner in which any document, application, claim,
return or information may be made or furnished and the fees that may be levied
in respect of any document, application or claim;
(g) the class or classes of persons who shall be required to furnish
any document, application, claim, return or information in electronic form;
(h) the form and manner in which a document, application, claim, return
or information may be furnished electronically;
(i) the document, statement, receipt, certificate
or report which, regardless of anything to the contrary contained in this Code,
may not be furnished along with the return but shall be produced before the
Assessing Officer on demand;
(j) the computer resource or the electronic record to which a document,
application, claim, return or information may be transmitted electronically;
(k) the manner in which any document, application, claim, return or
information required to be filed under this Code may be verified;
(l) the authority, agency or organisation who may
receive any application, claim, return or information on behalf of the Board or
the Department;
(m) the procedure to be followed in calculating interest payable by
assessees or interest payable by Government to assessees under any provision of
this Code, including the rounding off of the period for which such interest is
to be calculated in cases where such period includes a fraction of a month, and
specifying the circumstances in which and the extent to which petty amounts of
interest payable by assessees may be ignored;
(n) the form and manner in which any appeal or cross-objection may be
filed under this Code, the fee payable in respect thereof and the manner in
which intimation of any such order as is referred to in clause (d) of
sub-section (3) of section 184 may be served;
(o) the circumstances in which, the conditions subject to which and the
manner in which, the Commissioner (Appeals) may permit an appellant to produce
evidence which he did not produce or which he was not allowed to produce before
the Assessing Officer;
(p) the maintenance of a register of persons referred to in section
270, other than legal practitioners or accountants, practising before income-tax
authorities and for the constitution of and the procedure to be followed by the
authority referred to in sub-section (4) of that section;
(q) the issue of certificate verifying the payment of tax by assessees;
(r) the authority to be prescribed for any of the purposes of this
Code;
(s) the procedure for giving effect to the terms of any agreement for
the granting of relief in respect of double taxation or for the avoidance of double
taxation which may be entered into by the Central Government under this Code;
and
(t) any other matter which by this Code is to be, or may be,
prescribed.
(3) Any order
made, proceeding initiated or conducted, or liability or obligation discharged,
in accordance with the Rules framed under this section shall be deemed to be
duly made, initiated, conducted or discharged, in accordance with the
provisions of this Code.
(4) The power
to make rules conferred by this section shall include the power to give
retrospective effect, from a date not earlier than the date of commencement of
this Code, to the rules or any of them and, unless the contrary is permitted,
no retrospective effect shall be given to any rule so as to prejudicially
affect the interests of assessees.
Rules and
certain notifications to be placed before Parliament
281. (1) The Central Government shall cause to be
laid before each House of Parliament, while it is in session for a total period
of thirty days, every rule, notification, approval, circular or order issued,
and scheme framed, by the Central Government or the Board under any provision
of this Code.
(2) The rule,
notification, approval, circular, order or scheme shall be laid as soon as may
be after they are made or issued.
(3) The total
period of thirty days referred to in sub-section (1) may be comprised in one
session or in two or more successive sessions.
(4) The rule,
notification, approval, circular, order or scheme shall stand modified, or
cease to have effect, if both Houses agree to carry out any modification
thereto or agree that it should not be made, issued or granted.
(5) However,
any such modification, or annulment, shall be without prejudice to the validity
of anything previously done under that rule, notification, approval, circular,
order or scheme.
Repeals and
savings
282. (1) The Income-tax Act, 1961, is hereby
repealed.
(2) Regardless
of the repeal of the Income-tax Act, 1961 (hereinafter referred to as the
repealed Act),—
(a) where a return of income has been filed before the commencement of
this Code by any person for any assessment year, proceedings for the assessment
of that person for that year may be taken and continued as if this Code had not
been enacted;
(b) where a return of income is filed after the commencement of this
Code, otherwise than in pursuance of a notice under section 148 of the repealed
Act, by any person for the assessment year ending on the 31st day of March,
2011, or any earlier year, the assessment of that person for that year shall be
made in accordance with the procedure specified in this Code;
(c) any proceeding pending on the commencement of this Code before any
income-tax authority, the Appellate Tribunal or any court, by way of appeal,
reference, or revision, shall be continued and disposed of as if this Code had
not been enacted;
(d) where in respect of any assessment year after the year ending on
the 31st day of March, 2000,—
(i) a notice under section 148 of the repealed Act
had been issued before the commencement of this Code, the proceedings in
pursuance of the notice may be continued and disposed of as if this Code had
not been enacted;
(ii) any income liable to tax has escaped
assessment within the meaning of that expression in section 166 and no
proceedings under section 147 of the repealed Act in respect of any such income
are pending at the commencement of this Code, a notice under section 166 may be
issued with respect to that financial year and all the provisions of this Code
shall apply accordingly;
(e) any proceeding for the imposition of a penalty in respect of any
assessment completed before the first day of April, 2010, may be initiated and
any such penalty may be imposed as if this Code had not been enacted;
(f) any proceeding for the imposition of a penalty in respect of any
assessment for the year ending on the 31st day of March, 2011, or any earlier
year, which is completed on or after the 1st day of April, 2010, may be
initiated and any such penalty may be imposed under this Code;
(g) any election or declaration made, or option exercised, by an
assessee under any provision of the repealed Act and in force immediately
before the commencement of this Code shall be deemed to have been an election
or declaration made, or option exercised, under the corresponding provision of
this Code;
(h) where, in respect of any assessment completed before the
commencement of this Code, a refund falls due after such commencement, or
default is made after such commencement in the payment of any sum due under
such completed assessment, the provisions of this Code relating to interest
payable by the Central Government on refunds and interest payable by the
assessee for default shall apply;
(i) any sum payable under the repealed Act may be
recovered under this Code, but without prejudice to any action already taken
for the recovery of such sum under the repealed Act;
(j) any agreement entered into under section 90 or section 90A of the
repealed Act shall, so far as it is not inconsistent with section 258 of this
Code, be deemed to have been entered into under section 258 of this Code and
shall continue in force accordingly;
(k) any appointment made under any provision of the repealed Act, or
the Central Board of Revenue Act, shall, so far as it is not inconsistent with
the corresponding provisions of this Code, be deemed to have been made under
the corresponding provision aforesaid and shall continue in force accordingly;
(l) any order made under any provision of the
repealed Act shall, so far as it is not inconsistent with the corresponding
provisions of this Code, be deemed to have been made under the corresponding
provision aforesaid and shall continue in force accordingly;
(m) where the period prescribed for any application, appeal, reference
or revision under the repealed Act had expired on or before the commencement of
this Code, nothing in this Code shall be construed as enabling any such
application, appeal, reference or revision to be made under this Code by reason
only of the fact that a longer period therefor is prescribed or provision is
made for extension of time in suitable cases by the appropriate authority;
(n) the deduction under section 80-IA, section 80-IAB, section 80-IB,
section 80-IC, section 80-ID, section 80-IE or section 80-JJA of the repealed Act
shall continue to be allowed under this Code if the assessee is eligible for
such deduction for the assessment year beginning on the 1st day of April, 2010
so however that—
(i) the amount of profits eligible for deduction
under the aforesaid provisions are calculated in accordance with the provisions
of this Code; and
(ii) the period for which the deduction is allowed
under the aforesaid provisions shall not include a period for which the
deduction was otherwise not allowable under the repealed Act.
(3) For the
purposes of this section, “assessment year” shall have the same meaning
assigned to it in the Income-tax Act, 1961 as it stood prior to its repeal.
Power to
remove difficulties
283. (1) The Central Government may, by general or
special order, do anything which appears to it to be necessary, or expedient,
for the purpose of removing any difficulty which arises in giving effect to the
provisions of this Code.
(2) However,
no order under sub-section (1) shall be inconsistent with the provision under which
the difficulty arises.
(3) In
particular, and without prejudice to the generality of the foregoing power, any
such order may provide for the adaptations, or modifications, subject to which
the repealed Act shall apply in relation to the assessments for the assessment
year ending on the 31st day of March, 2012, or any earlier year.
(4) For the
purposes of this section, “assessment year” shall have the same meaning
assigned to it in the Income-tax Act, 1961 as it stood prior to its repeal.
Part-H
Definitions
Chapter-XVI
Definitions
284. In this Code, unless the context requires
otherwise, —
1. “absolute value” means the numerical value without regards
to its sign.
2. “accountant” - means,—
(a) a chartered accountant within the meaning of the
Chartered Accountants Act, 1949, and
(b) any person who is entitled to act as an
auditor of companies under sub-section (2) of section 226 of the Companies Act,
1956;
3. “accrual” in relation to income, expenditure or liability,
with its grammatical variations, shall include income, expenditure or liability
which has arisen;
4. “accumulated profits” in relation to dividend means —
(a) all profits of the company of three
consecutive financial years immediately preceding the financial year in which
its undertaking is compulsorily acquired in the case where the company is in
liquidation consequent to such compulsory acquisition by,—
(i) the Government; or
(ii) a corporation owned or controlled by the
Government under any law for the time being in force; and
(b) all profits of the company up to the date of
distribution or payment of dividend or up to the date of liquidation, as the
case may be, in any other case ;
5. “actual cost” in relation to a business capital asset shall
be the cost computed under section 42;
6. “advance-tax” means the advance income-tax payable in
accordance with the provisions of section 204; and
7. “advance ruling” shall have the meaning assigned to it in
section 249;
8. “agreement” includes any arrangement or understanding or
action in concert, whether or not such arrangement, understanding or action,
is—
(a) in writing;
(b) formal; or
(c) intended to be enforceable by legal
proceedings;
9. “agreement of association” means,—
(a) a partnership deed in relation to a firm; or
(b) an oral, or written, agreement between the
participants of any other unincorporated body;
10. “agreement for non-compete” means an agreement for,—
(a) not carrying out any activity in relation to
any business; or
(b) not sharing any,-
(i) know-how, patent, copyright, trade-mark,
license, franchise or any other business or commercial right of similar nature;
or
(ii) information or technique likely to assist in
the trading or manufacture or processing of goods or provision for services;
11. “agricultural income” means the following income —
(a) any profits and gains derived from cultivation
of agricultural land;
(b) any rent derived from any agricultural land;
(c) any rent derived from any farm house; and
(d) any income derived from saplings or seedlings
grown in a nursery;
12. “agricultural land” means any land situated in India which
is used for agricultural purposes and,-
(a) is assessed to land revenue in India; or
(b) is subject to a local rate assessed and
collected by officers of the Government as such;
13. “amalgamated company” means —
(a) a company with which amalgamating company or
companies merge; or
(b) a company formed as a result of merger of two
or more amalgamating companies;
14. “amalgamating company” means —
(a) a company which merges with another company,
or
(b) a company which merges with another company to
form a new company;
15. “amalgamating co-operative” means —
(a) a co-operative which merges with another
co-operative; or
(b) every co-operative merging to form a new
co-operative;
16. “amalgamation” in relation to, —
(a) a company means the merger of an amalgamating
company or companies with an amalgamated company, if
(i) all the assets and liabilities of the amalgamating
company immediately before the merger become the assets and liabilities of the
amalgamated company;
(ii) shareholders holding seventy five per cent or
more, in value of the shares in the amalgamating company (other than shares
already held by the amalgamated company or its nominee or its subsidiary,
immediately before the merger), become shareholders of the amalgamated company;
and
(iii) the scheme of amalgamation is in accordance
with the provisions of the Companies Act, 1956; and
(b) a co-operative society means the merger of an
amalgamating co-operative with an amalgamated co-operative, if -
(i) all the assets and liabilities of the
amalgamating co-operative immediately before the merger become the assets and
liabilities of the amalgamated co-operative;
(ii) the members holding seventy-five per cent or
more voting rights in the amalgamating co-operative become members of the
amalgamated co-operative; and
(iii) the shareholders holding seventy-five per cent
or more in value of the shares in the amalgamating co-operative (other than the
shares held by the amalgamated co-operative or its nominee or its subsidiary,
immediately before the merger) become shareholders of the amalgamated
co-operative; or
(c) an unincorporated body or a proprietary concern
means the succession of an amalgamating unincorporated body or proprietary
concern with an amalgamated company if,—
(i) all the assets and liabilities of the body or
concern relating to the business immediately before the succession become the
assets and liabilities of the amalgamated company;
(ii) the participants of the body or the proprietor
of the concern do not receive any consideration or benefit, directly or
indirectly, in any form or manner, other than by way of allotment of shares in the
amalgamated company;
(iii) the aggregate of the shareholding in the
amalgamated company of the participants of the body or the proprietor of the
concern, upon succession, is not less than fifty per cent of the total value of
the shares in the company; and
(iv) in the case of an amalgamating unincorporated
body, all the participants immediately before the succession become the
shareholders of the company in the same proportion in which their capital
accounts stood in the books of the body on the date of the succession;
17. “Appellate Tribunal” means the Appellate Tribunal
constituted under section 187;
18. “approved fund” means —
(a) an approved provident fund;
(b) an approved superannuation fund;
(c) an approved gratuity fund; or
(d) a fund established under the Coal Mines
Provident Fund and Miscellaneous Provisions Act, 1948;
(e) Deposit-Linked Insurance Fund;
19. “approved gratuity fund” means a gratuity fund which has
been approved by the Board in accordance with the scheme framed and prescribed
by the Central Government in this behalf;
20. “approved provident fund” means a provident fund which has
been approved by the Pension Fund Regulatory Development Authority in
accordance with the scheme framed and prescribed by the Central Government in
this behalf;
21. “approved superannuation fund” means a superannuation fund
which has been approved by the Pension Fund Regulatory Development Authority in
accordance with the scheme framed and prescribed by the Central Government in
this behalf;
22. “arm’s length price” shall have the meaning assigned in
section 113;
23. “assessee” means every person —
(a) who is required to file a return of his tax
base;
(b) who files a return of his tax base, regardless
of the fact that he is otherwise not required to do so;
(c) who is required to furnish any information or
document under this Code;
(d) in respect of whom any proceeding under this
Code has been initiated;
(e) by whom any tax, or any other sum of money, is
payable under this Code;
(f) to whom any amount of refund is payable under
this Code;
(g) who is deemed to be an assessee under any
provision of this Code;or
(h) who is an assessee in default;
24. “assessee in default” means,—
(a) an assessee who has failed to fulfil his
obligation under this Code and has consequently failed to make payment of any
amount due from him to the Central Government; or
(b) an assessee who is deemed to be assessee in
default under any provision of this Code;
25. “Assessing Officer” means the Income-tax Officer, Assistant
Commissioner, Assistant Director, Deputy Commissioner, Deputy Director, Joint
Commissioner, Joint Director, Additional Commissioner or Additional Director,
who is vested with the relevant jurisdiction by virtue of direction or order
issued under section 177 or any other provision of this Code;
26. “assessment” includes —
(a) an intimation under section 155 if no
communication has been served on the assessee under section 156;
(b) reassessment;
(c) any order under section 167rectifying any
mistake apparent from the record;
(d) any order giving effect to the directions of
an Appellate Authority; and
(e) any order under section 194;
27. “asset” means—
(a) a business asset;or
(b) an investment asset;
28. “Assistant Commissioner” means a person appointed to be an
Assistant Commissioner of Income-tax under section 130;
29. “associated concern” shall have the meaning assigned to it
in section 96;
30. “Assistant Director” means a person appointed to be an
Assistant Director of Income-tax under section 130;
31. “associated enterprise” shall have the meaning assigned to
it in section 113;
32. “associated operation” shall have the meaning assigned to it
in section 113;
33. “associated person” shall have the meaning assigned to it in
section 113;
34. “Board” means the Central Board of Direct Taxes constituted
under the Central Boards of Revenue Act, 1963 and notified by the Central
Government for the purposes of this Code;
35. “backward classes” means such classes of citizens, other
than the Scheduled Castes and the Scheduled Tribes, as may be notified, from
time to time, by the Central Government or any State Government;
36. “banking company” means a company to which the Banking
Regulation Act, 1949, applies;
37. “block of assets” means a group of business capital assets
falling within a class of business capital assets, for which the same
percentage of depreciation is prescribed;
38. “books” or “books of account” includes ledgers,
day-books, cash books, account-books, stock register and other books, kept —
(a) in the written form;
(b) as data stored in a disc, floppy, tape or any
other form of electro-magnetic data storage device; or
(c) as print outs of the data stored in any of the
form referred to in clause (ii);
39. “broken-period income” means the income for the period
commencing from the date on which the debt instrument is acquired by the person
or the beginning of the financial year, whichever is later, and ending on the
date on which the security is sold, and calculated in the prescribed manner;
40. “business” includes—
(a) any trade, commerce or manufacture;
(b) any adventure, or concern of that nature;
(c) any profession;and
(d) any vocation;
41. “business asset” means—
(a) business trading asset; or
(b) business capital asset;
42. “business capital asset” means,-
(a) any capital asset self-generated in the course
of business;
(b) any intangible capital asset in the nature
of,—
(i) goodwill of a business,
(ii) a trade mark or brand name associated with the
business,
(iii) a right to manufacture or produce any article
or thing,
(iv) right to carry on any business,
(v) tenancy right in respect of premises occupied by
the assessee and used by him for the purposes of his business, or
(vi) licence, right or permit (by whatever name
called) acquired in connection with, or in the course of, any business;
(c) any tangible capital asset in the nature of a
building, machinery, plant or furniture;or
(d) any other capital asset connected with or used
for the purposes of any business of the assessee;
43. “business connection” in relation to a non-resident shall
include any business activity carried out through a person who, acting on
behalf of the non-resident,—
(a) has an authority to conclude contracts on
behalf of the non-resident in India, and habitually exercises it, unless his
activities are limited to the purchase of goods or merchandise for the
non-resident;
(b) has no such authority, but habitually
maintains in India a stock of goods or merchandise from which he regularly
delivers them on behalf of the non-resident; or
(c) habitually secures orders in India, mainly or
wholly for the non-resident or for that non-resident and its associated
enterprise, and
44. “business reorganisation” means reorganisation of business
of two or more residents, involving—
(a) an amalgamation;
(b) a merger under a scheme sanctioned and brought
into force by the Central Government under the Banking Regulation Act, 1949; or
(c) a demerger;
45. “business trading asset” means stock-in-trade, consumable
stores or raw materials held for the purposes of business;
46. “capital asset” means property of any kind held by an
assessee other than business trading asset;
47. “capital employed in the business” in relation to actual
cost means the aggregate of the paid-up share capital, debentures and long-term
borrowings—
(a) in a case where the prescribed expenditure is
incurred before the commencement of the business, as on the last day of the
financial year in which the business of the company commences;
(b) in any other case as on the last day of the
financial year in which the extension of the business is completed, or the new
business commences production or operation, insofar as such capital, debentures
and long-term borrowings have been issued or obtained in connection with the
extension of the business or the setting up of the new business of the company;
48. “capital gains” means the income as computed under section
47;
49. “Capital Gains Savings Scheme” means the scheme framed and
prescribed by the Central Government in this behalf;
50. “card game and other game of any sort” includes any game
show, an entertainment programme on television or electronic mode, in which
people compete to win prizes or any other similar game;
51. “Chief Commissioner” means a person appointed to be a Chief
Commissioner of Income-tax or Director General of Income-tax under section 130;
52. “child” in relation to an individual, includes a step-child
and an adopted child of that individual;
53. “closely-held company” means a company which is not a widely
held company;
54. “Coffee Board” means the Coffee Board constituted under
section 4 of the Coffee Act, 1942;
55. “cold chain facility” means a chain of facilities for
storage or transportation of agricultural and forest produce, meat and meat
products, poultry, marine and dairy products, products of horticulture,
floriculture and apiculture and processed food items under scientifically
controlled conditions including refrigeration and other facilities necessary
for the preservation of such produce;
56. “Colombo Declaration” means a declaration issued in Colombo
on the 21st day of December, 1991 by the Heads of State or Government of the
Member Countries of South Asian Association for Regional Co-operation
established on the 8th day of December, 1985 by the Charter of the South Asian
Association for Regional Co-operation;
57. “Commissioner (Appeals)” means a person appointed to be a
Commissioner of Income-tax (Appeals) under section 125;
58. “Commissioner” means a person appointed to be a Commissioner
of Income-tax or a Director of Income-tax under section 130;
59. “communiao dos bens” means the system of community of
property under the Portuguese Civil Code of 1860 in force in the State of Goa
and in the Union territories of Dadra and Nagar Haveli and Daman and Diu;
60. “company” means—
(a) any Indian company,
(b) any body incorporated by or under the laws of
a country outside India, or
(c) any person who is or was assessable or was
assessed as a company under the Indian Income-tax Act, 1922, or the Income-tax
Act, 1961;
61. “Competent Investigating Authority” means any income-tax authority
prescribed as such;
62. “Comptroller and Auditor-General of India” means the
Comptroller and Auditor General of India appointed under Article 148 of the
Constitution of India;
63. “computer software” means—
(a) any computer programme recorded on any disc,
tape, perforated media or other information storage device; or
(b) any customized electronic data or any product
or service of similar nature, as may be notified by the Board;
64. “Controller of Insurance” shall have the meaning assigned to
it in clause (5B) of section 2 of the Insurance Act, 1938;
65. “converted property” means—
(a) any property having been the separate property
of an individual has been converted by the individual into property belonging to
the family through the act of impressing such separate property with the
character of property belonging to the family or throwing it into the common
stock of the family; or
(b) any property which has been transferred by the
individual, directly or indirectly, to the family otherwise than for adequate
consideration;
66. “co-operative bank” shall have the meanings assigned to it
in Part V of the Banking Regulation Act, 1949;
67. “co-operative sector company” means a company in which not
less than fifty-one per cent of the paid-up equity share capital is
beneficially held by, one or more co-operative societies throughout the
financial year;
68. “co-operative society” means a co-operative society registered
under the Co-operative Societies Act, 1912 or under any State or Provincial Act
for the time being in force for the registration of co-operative societies;
69. “Cost Inflation Index” in relation to a financial year means
the index as the Central Government may specify by Notification in the Official
Gazette, having regard to seventy-five per cent of the average rise in the
consumer price index for urban manual employees for the immediately preceding
financial year;
70. “cost of construction” in relation to a building means all
expenditure incurred on—
(a) cost of land;
(b) cost of construction of the property; and
(c) cost of improvement of the property other than
the cost met directly or indirectly by any other person or authority;
71. “cost of the project” in relation to actual cost means the
actual cost of the fixed assets, being land, buildings (including expenditure
on development of land and buildings), leaseholds, plant, machinery, furniture,
fittings and railway sidings, which are shown in the books of the assessee—
(a) in a case where the prescribed expenditure is
incurred before the commencement of the business, as on the last day of the
financial year in which the business of the assessee commences;
(b) in any other case, as on the last day of the
financial year in which the extension of the business is completed, or the new
business commences production or operation, insofar as such fixed assets have
been acquired or developed in connection with the extension of the business or the
setting up of the new business of the assessee;
72. “cultivation” includes any process ordinarily employed by a
cultivator or receiver of rent in kind to render the produce raised or received
by him fit to be taken to market;
73. “current income from ordinary sources” means the net result
of the aggregation under sub-section (3) of section 58;
74. “current income from the special source” means the income
referred to in sub-section (2) of section 59;
75. “date of setting up of a business” means—
(a) in the case of business of manufacturing,
production or processing of goods, the date on which the manufacture,
production or processing of the goods begins after successful trial run of the
plant; or
(b) in any other case, the date on which it is
ready to commence its commercial operations;
76. “debt” includes a loan or borrowing;
77. “debt instrument” means a paper or electronic obligation
that enables the borrower to raise funds by promising to repay the lender, or
investor, in accordance with the terms of a contract and includes note, bond,
certificate, mortgage, lease, loan, borrowing or other agreement between the
borrower and the lender;
78. “deduction of tax at source” or “collection of tax at
source” with all their grammatical variations, mean deduction or collection
of tax under Chapter XI;
79. “deductor” means a person responsible for making any payment
in respect of which he is liable to deduct tax at source under sub-chapter A of
Chapter-XI;
80. “demerged company” means—
(a) the company whose undertaking is transferred,
pursuant to a demerger, to a resulting company; or
(b) the authority or the body constituted or
established under a Central, State or Provincial Act, or a local authority or a
public sector company, which is split up or reconstructed, to form a resulting
company;
81. “demerger” means—
(a) the transfer, pursuant to a scheme of
arrangement under sections 391 to 394 of the Companies Act, 1956, by a demerged
company of one or more of its undertakings to any resulting company, if—
(i) all the assets and liabilities of the
undertaking or undertakings immediately before the transfer become the assets
and liabilities of the resulting company;
(ii) the assets and the liabilities are transferred
at values (other than change in the value of assets consequent to their
revaluation) appearing in its books of account immediately before the transfer;
(iii) the resulting company issues, in consideration
of the transfer, its equity shares to the shareholders of the demerged company
on a proportionate basis;
(iv) the shareholders holding seventy-five per cent
or more, in value of the shares in the demerged company (other than shares
already held by the resulting company or its nominee or its subsidiary,
immediately before the transfer), become shareholders of the resulting company
or companies, otherwise than as a result of the acquisition of the assets of
the demerged company or any undertaking thereof by the resulting company;
(v) the transfer of the undertaking is on a going
concern basis; and
(vi) the transfer is in accordance with such other
conditions as may be notified by the Central Government having regard to the
necessity to ensure that the transfer is for genuine business purposes; or
(b) the splitting up, or the reconstruction, of
any authority or a body constituted or established under a Central, State or
Provincial Act, or a local authority or a public sector company to form a
resulting company, in accordance with the conditions as may be notified by the
Central Government;
82. “Deposit-linked Insurance Fund” means a fund established
under the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948;
83. “Deputy Commissioner” means a person appointed to be a
Deputy Commissioner of Income-tax under section 130;
84. “Deputy Director” means a person appointed to be a Deputy
Director of Income-tax under section 130;
85. “Director” means a person appointed to be a Director of
Income-tax under section 130;
86. “Director General” means a person appointed to be a Director
General of Income-tax under section 130;
87. “director”, “manager” and “managing agent”, in
relation to a company, have the meanings respectively assigned to them in the
Companies Act, 1956;
88. “Dispute Resolution Panel” means a collegium comprising of
three Commissioners of Income-tax constituted by the Board for this purpose;
89. “dividend” distributed or paid by a company,—
(a) shall include the following, namely:—
(i) any distribution by a company of accumulated profits,
whether capitalised or not, if such distribution entails the release by the
company to its shareholders of all or any part of the assets of the company;
(ii) any distribution to its shareholders by a
company of debentures, debenture-stock, or deposit certificates in any form,
whether with or without interest, and any distribution to shareholders of its
preference shares by way of bonus, to the extent to which the company possesses
accumulated profits, whether capitalised or not;
(iii) any distribution made to the shareholders
(other than shareholders not entitled in the event of liquidation to
participate in the surplus assets) of a company on its liquidation, to the
extent to which the distribution is attributable to the accumulated profits of the
company immediately before its liquidation, whether capitalised or not;
(iv) any distribution to its shareholders (other
than shareholders not entitled in the event of liquidation to participate in
the surplus assets) by a company on the reduction of its capital, to the extent
to which the company possesses accumulated profits, whether such accumulated
profits have been capitalised or not; and
(v) any payment by a closely-held company, to the
extent of its accumulated profits, if such payment is—
(A) by way of advance or loan to a shareholder being the beneficial
owner of equity shares holding not less than ten per cent of the voting power;
or
(B) by way of advance or loan to any Hindu undivided family, or a firm,
or an association of persons, or a body of individuals, or a company (hereafter
in this clause referred to as the said concern), in which such shareholder is a
member or a partner or a shareholder, and in which he has a substantial
interest; or
(C) to any person on behalf, or for the individual benefit, of such
shareholder; and
(b) shall not include the following, namely:—
(i) any advance or loan made to a shareholder or
the said concern by a company in the ordinary course of its business, where the
lending of money is a substantial part of the business of the company;
(ii) any dividend paid by a company which is set
off by the company against the whole or any part of any sum previously paid by
it and treated as a dividend within the meaning of sub-clause (e) to the
extent to which it is so set off;
(iii) any payment made by a company on purchase of
its own shares from a shareholder in accordance with the provisions of section
77A of the Companies Act, 1956; and
(iv) any distribution of shares pursuant to a
demerger by the resulting company to the shareholders of the demerged company
(whether or not there is a reduction of capital in the demerged company);
90. “dividend distribution tax” means the tax chargeable under
section 99;
91. “document” includes an electronic record as defined in
clause (t) of sub-section (1) of section 2 of the Information Technology Act,
2000;
92. “domestic company” means a company which is resident in
India;
93. “disaster” shall have the meaning assigned to it under clause
(d) of section 2 of the Disaster Management Act, 2005;
94. “due date” means,—
(a) in relation to the return of tax bases,—
(i) the 30th June following the financial year if
the person is not a company and does not derive any income from business; or
(ii) the 31st August following the financial year,
in all other cases; or
(b) in relation to any other return, the date as
may be prescribed for such return;
95. “electoral trust” means a trust so approved by the Board in
accordance with rules made in this regard by the Central Government.
96. “employer” means an entity which controls and directs an
individual under an express or implied contract of employment and is obligated
to pay compensation to him;
97. “equity oriented” in relation to a scheme means the scheme—
(a) of a Mutual Fund registered under the
Securities and Exchange Board of India Act, 1992 or regulations made
thereunder; and
(b) which invests sixty-five per cent or more of
its investible funds in the form of equity shares in domestic companies,
computed with reference to the annual average of the monthly averages of the
opening and closing figures;
98. “equity shares” means equity shares within the meaning of
section 85 of the Companies Act, 1956;
99. “execution of an authorisation for search or requisition”,
with all its grammatical variations - an authorisation for search, or
requisition, shall be deemed to have been executed,—
(a) in the case of a search, on the conclusion of
the search as recorded in the last panchnama drawn in relation to the person in
whose case the authorisation has been issued; or
(b) in the case of requisition under section 140,
on the date on which all the books of account, other documents or assets are
received by the Requisitioning Officer;
100. “ex-serviceman” means—
(a) a person who has served in any rank, whether
as combatant or non-combatant, in the armed forces of the Union or armed forces
of the Indian States before the commencement of the Constitution (but excluding
the Assam Rifles, Defence Security Corps, General Reserve Engineering Force,
Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a
continuous period of not less than six months after attestation and has been
released, otherwise than by way of dismissal or discharge on account of
misconduct or inefficiency, or
(b) in the case of a deceased or incapacitated
ex-serviceman it includes his wife, children, father, mother, minor brother,
widowed daughter and widowed sister, wholly dependant upon such ex-serviceman
immediately before his death or incapacitation;
101. “fair market value”, in relation to an asset, means such
price as may be determined in accordance with the rules made under this Code;
102. “family” in relation to an individual, means—
(a) the spouse and children of the individual; and
(b) the parents, brothers or sisters of the
individual, if mainly dependant on the individual;
103. “family pension” means a regular monthly amount payable by the
employer to a person belonging to the family of an employee in the event of the
death of the employee;
104. “farm house” means any building which fulfils all the
following conditions—
(a) it is situated on, or in the immediate
vicinity of, the agricultural land;
(b) the building is used—
(i) as a dwelling house, store-house, or other
out-building, for agricultural purpose; or
(ii) to carry out any process to render the produce
raised or received by the owner fit to be taken to the market;and
(c) the building is—
(i) occupied by the cultivator or the receiver of
rent-in-kind;or
(ii) owned and occupied by the receiver of rent;
105. “fees for technical services”—
(a) means any consideration (including any lump
sum consideration) paid or payable directly or indirectly for—
(i) rendering of any managerial, technical or
consultancy services;
(ii) provision of services of technical or other
personnel; or
(iii) development and transfer of a design, drawing,
plan or software, or any other service of similar nature; and
(b) does not include consideration for any
construction, assembly, mining or like project undertaken by the recipient or
consideration which would be income of the recipient chargeable under the head
“Income from employment”;
106. “finance charges” means—
(a) any interest; or
(b) any incidental financial charges;
107. “financial intermediary” means stock broker or sub-broker or
such other intermediary registered under section 12 of the Securities and Exchange
Board of India Act, 1992 or the Depositories Act, 1996;
108. “financial lease” and its grammatical variation, means a
lease transaction where—
(a) contract for lease is entered into between two
parties for leasing of a specific asset;
(b) such contract is for use and occupation of the
asset by the lessee;
(c) the lease payment is calculated so as to cover
the full cost of the asset together with the interest charges; and
(d) the lessee is entitled to own, or has the
option to own, the asset at the end of the lease period after making the lease
payment;
109. “financial year” means—
(a) the period beginning with the date of setting
up of a business and ending with the 31st day of March following the date of
setting up of such business;
(b) the period beginning with the date on which a
source of income newly comes into existence and ending with the 31 st day of
March following the date on which such new source comes into existence;
(c) the period beginning with the 1 st day of the
financial year and ending with the date of discontinuance of the business or
dissolution of the unincorporated body or liquidation of the company, as the
case may be;
(d) the period beginning with the 1 st day of the
financial year and ending with the date of retirement or death of a participant
of the unincorporated body;
(e) the period immediately following the date of
retirement, or death, of a participant of the unincorporated body and ending
with the date of retirement, or death, of another participant or the 31 st day
of March following the date of the retirement, or death, as the case may be; or
(f) the period of twelve months commencing from
the 1st day of April of the relevant year in any other case.
110. “firm” shall have the meaning assigned to it in the Indian
Partnership Act, 1932 and shall include a limited liability partnership as
defined in the Limited Liability Partnership Act, 2008;
111. “foreign company” means a company which is not a domestic
company;
112. “foreign currency” shall have the meanings assigned to it in
section 2 of the Foreign Exchange Management Act, 1999;
113. “forward contract” means a contract with an authorised
dealer, as defined in section 2 of the Foreign Exchange Management Act, 1999
(42 of 1999), for providing a specified sum in a foreign currency on or after a
stipulated future date at the rate of exchange specified in the contract;
114. “general public” shall have the same meaning assigned to in
section 96;
115. “Global Depository Receipts” means any instrument (by whatever
name called)—
(a) created by the Overseas Depository Bank
outside India against issue of foreign currency convertible bonds or ordinary
shares, of a domestic company; and
(b) issued to non-residents;
116. “gross total income” for a financial year means the aggregate
of the gross total income from ordinary sources and the gross total income from
special sources, for that financial year;
117. “gross total income from ordinary sources” of a financial
year means the net result of the aggregation under sub-section (3) or
sub-section (4) of section 58, for that financial year.
118. “gross total income from the special source” of a financial
year means the net result of the aggregation under sub-section (2) or
sub-section (3) of section 59, for that special source for that financial year.
119. “head office expenditure” means executive and general
administration expenditure incurred by the assessee outside India, including
expenditure incurred in respect of—
(a) rent, rates, taxes, repairs or insurance of
any premises outside India used for the purposes of the business or profession;
(b) salary, wages, annuity, pension, fees, bonus,
commission, gratuity, perquisites or profits in lieu of or in addition to
salary, whether paid or allowed to any employee or other person employed in, or
managing the affairs of, any office outside India;
(c) travelling by any employee or other person
employed in, or managing the affairs of, any office outside India; and
(d) such other matters connected with executive
and general administration as may be prescribed;
120. “heavy goods vehicle” shall have the meaning assigned to it
in section 2 of Motor Vehicle Act, 1988;
121. “horse race” means a horse race upon which wagering or betting
is made;
122. “hospital” includes a dispensary or a clinic or a nursing
home;
123. “house property” means,—
(a) any building or land appurtenant thereto; or
(b) any building along with any machinery, plant,
furniture or any other facility if the letting of such building is inseparable
from the letting of the machinery, plant, furniture or facility;
124. “housing development company” means any public sector company
which is engaged in providing long-term finance for construction or purchase of
houses in India for residential purposes;
125. “housing-finance public company” means a company,—
(a) which is a public company;
(b) whose main object is carrying on the business
of providing long-term finance for construction or purchase of houses in India
for residential purposes; and
(c) which is registered in accordance with the
Housing Finance Companies (NHB) Directions, 1989 given under section 30 and
section 31 of the National Housing Bank Act, 1987;
126. “however” shall mean an alternative intention, or a contrast,
with the previous section, sub-section, clause, sub-clause, item or phrase, as
the case may be, and a modification of it under such circumstances as specified
therein.
127. “incidental financial charges” means any fee, commission,
brokerage, premium, tax payable or any other similar expenditure incurred for
the purposes of borrowing or raising capital or incurring any debt or in
respect of any credit facility which has not been utilized;
128. “income” includes,—
(a) gross salary referred to in section 21;
(b) gross rent referred to in section 25;
(c) the amount of any accrual or receipt from the
businesses referred to in column (2) of Table-1 in sub-section (2) of section
30;
(d) gross earnings from the business referred to
in section 31;
(e) full value of the consideration received or
accruing as a result of the transfer of any investment asset referred to in
section 48;
(f) gross residuary income referred to in section
56;
(g) voluntary contributions received by any person
other than an individual or a Hindu undivided family;
(h) any sum deducted at source on payment
received, in accordance with the provisions of Chapter XI; and
(i) income of the nature referred to in column (3)
of Table in Rule 3 of the First Schedule;
129. “income from business” means the profits of the business as
computed under section 30;
130. “income under the head ‘Capital gains’” means the income as
computed under sub-section (4) or (5) of section 47;
131. “income under the head ‘Income from business’” means the
income in respect of that head, as computed under sub-section (1) of section
58;
132. “income from employment” means the income as computed under
sections 20;
133. “income under the head ‘Income from employment’” means the
income in respect of that head, as computed under sub-section (1) of section
58;
134. “income from house property” means the income as computed
under section 24;
135. “income under the head ‘Income from house property’” means
the income in respect of that head, as computed under sub-section (1) of
section 58;
136. “income from residuary sources” means the income as computed
under section 55;
137. “income under the head ‘Income from residuary sources’” means
the income in respect of the head, as computed under sub-section (1) of section
58;
138. “income-tax” in relation to ,—
(a) India, means the income-tax payable under
section 2; and
(b) any foreign country, includes any excess
profits tax or business profits tax charged on the profits by the Government of
any part of that country or a local authority in that country;
139. “Income-tax Department” means the organisation of subordinate
offices comprising all income-tax authorities and executive and ministerial
staff employed in the execution of this Code;
140. “Income-tax Officer” means a person appointed to be an
Income-tax Officer under section 130;
141. “India” means—
(a) the territory of India as referred to in
article 1 of the Constitution;
(b) its territorial waters, continental shelf,
exclusive economic zone or any other maritime zone as defined in the
Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other
Maritime Zones Act, 1976;
(c) the air space above its territory and
territorial waters; or
(d) the seabed and the subsoil underlying the
territorial waters;
142. “Indian company” means a body corporate which,-
(a) is registered or established by or under,—
(i) the Companies Act, 1956; or
(ii) a Central, State or Provincial Act;
(iii) any law relating to companies formerly in
force in any part of India other than the State of Jammu and Kashmir;
(iv) any law for the time being in force in the
State of Jammu and Kashmir; and
(b) has its registered or, as the case may be,
principal office in India;
143. “Indian income-tax” means income-tax charged in accordance
with the provisions of this Code;
144. “Indian rate of tax” means the rate determined by dividing
the amount of Indian income-tax after deduction of any relief due under the
provisions of this Code but before deduction of any relief due under section
206, by the total income;
145. “Indian ship” shall have the same meaning assigned to it in
clause (18) of section 3 of the Merchant Shipping Act, 1958;
146. “infrastructure facility” means the following facilities:-
(a) a road including toll road, a bridge or a rail
system;
(b) a highway project including housing or other
activities being an integral part of the highway project;
(c) a water supply project, water treatment
system, irrigation project, sanitation and sewerage system or solid waste
management system; and
(d) a port, airport, inland waterway or inland
port;
147. “Inspector of Income-tax” means a person appointed to be an
Inspector of Income-tax under section 130;
148. “insurer” means an Indian insurance company under clause (7A)
of section 2 of the Insurance Act, 1938, which has been granted a certificate
of registration under section 3 of that Act;
149. “interest” means any amount payable to any person (including
any participant), in any manner, in respect of any borrowing or debt incurred
or any other similar right or obligation;
150. “interested person” shall have the same meaning assigned to
it in section 96;
151. “investment asset” means any capital asset which is not a
business capital asset;
152. “jewellery” in relation to a capital asset, includes —
(a) ornaments made of gold, silver, platinum or
any other precious metal or any alloy containing one or more of such precious
metals, whether or not containing any precious or semi-precious stone, and
whether or not worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or
not set in any furniture, utensil or other article or worked or sewn into any
wearing apparel;
153. “Joint Commissioner” means a person appointed to be a Joint
Commissioner of Income-tax, an Additional Commissioner of Income-tax, a Joint
Director of Income-tax or an Additional Director of Income-tax under section
130;
154. “Joint Director” means a person appointed to be a Joint
Director of Income-tax or an Additional Director of Income-tax under section
130;
155. “Keyman insurance policy” means a life insurance policy taken
by —
(a) an employer on the life of an employee or a
former employee; or
(b) a person on the life of another person who is,
or was, connected in any manner whatsoever with the business of the
first-mentioned person;
156. “khadi” and “village industries” have the meanings respectively
assigned to them in the Khadi and Village Industries Commission Act, 1956 ;
157. “know-how” means any industrial information or technique
likely to assist in the manufacture or processing of goods or in the working of
a mine, oil-well or other sources of mineral deposits (including searching for
discovery or testing of deposits for the winning of access thereto);
158. “legal representative” has the meaning assigned to it in
clause (11) of section 2 of the Code of Civil Procedure, 1908;
159. “liabilities” in relation to a demerger or slump sale shall
include—
(a) the liabilities which arise out of the
activities or operations of the undertaking;
(b) the specific loans or borrowings (including
debentures) raised, incurred and utilised solely for the activities or
operations of the undertaking; and
(c) in cases, other than those referred to in
clause (a) or clause (b), so much of the amounts of general or
multipurpose borrowings, if any, of the assessee as stand in the same
proportion which the value of the assets transferred in a demerger or slump
sale bears to the total value of the assets of such assessee immediately before
the demerger or slump sale;
160. “life insurer” means an insurer who is wholly engaged in the
business of providing assurance on the life of human beings;
161. “light goods vehicle” means a vehicle which is not a heavy
goods vehicle;
162. “local authority” means—
(a) Panchayat as referred to in clause (d)
of article 243 of the Constitution;
(b) Municipality as referred to in clause (e)
of article 243P of the Constitution;
(c) Municipal Committee and District Board,
legally entitled to, or entrusted by the Government with, the control or
management of a Municipal or local fund; or
(d) Cantonment Board as defined in section 3 of
the Contonments Act, 1924;
163. “long-term borrowings” means—
(a) moneys borrowed from the Government, a
scheduled bank or a financial institution where the terms of the borrowings provide
for the repayment during a period of not less than five years, or
(b) moneys borrowed or debt incurred in a foreign
country for the purchase of capital plant and machinery outside India, where
the terms of the borrowings provide for the repayment during a period of not
less than seven years;
164. “long-term finance” means any loan or advance where the terms
under which moneys are loaned or advanced provide for repayment along with
interest thereof during a period of not less than five years;
165. “long-term leasing” means,—
(a) lease for a term of not less than twelve
years; or
(b) a lease which provides for the extension of
the term ‘thereof’ by a further term or terms, if the aggregate of the term for
which such lease is to be granted and the further term or terms for which it
can so extended is not less than twelve years;
166. “lottery” includes winnings from prizes awarded to any person
by draw of lots or by chance or in any other manner whatsoever, under any
scheme or arrangement by whatever name called;
167. “manufacture”, with its grammatical variations, means a
change in a non-living physical object or article or thing,—
(a) resulting in transformation of the object or
article or thing into a new and distinct object or article or thing having a
different name, character and use; or
(b) bringing into existence of a new and distinct
object or article or thing with a different chemical composition or integral
structure;
168. “material” includes any books of account, document, money,
bullion, jewellery or other valuable article or thing;
169. “maximum marginal rate” means the rate of income-tax
applicable in relation to the highest slab of income in the case of an
individual, as specified in the First Schedule;
170. “medical authority” means,—
(i) the medical authority referred to in clause (p)
of section 2 of the Persons with Disabilities (Equal Opportunities, Protection
of Rights and Full Participation) Act, 1995; or
(ii) such other medical authority as may be
notified by the Central Government for this purpose.
171. “mineral” includes a group of associated minerals specified
in Part A or Part B, respectively, of the Eighteenth Schedule;
172. “mineral oil” shall have the meaning assigned to it in the
Eleventh Schedule;
173. “mutual benefit finance company” means a company, —
(a) which carries on, as its principal business,
the business of acceptance of deposits from its members; and
(b) which is a Nidhi or Mutual Benefit Society
within the meaning of section 620A of the Companies Act, 1956;
174. “mutual fund” means,—
(a) a Mutual Fund registered as such under the
Securities and Exchange Board of India Act, 1992;
(b) a venture capital company; or
(c) a venture capital fund.
175. “NABARD” means the National Bank for Agriculture and Rural
Development established under section 3 of the National Bank for Agriculture
and Rural Development Act, 1981;
176. “National Housing Bank” means the National Housing Bank
established under section 3 of the National Housing Bank Act, 1987;
177. “National Tax Tribunal” means the National Tax Tribunal
established under the National Tax Tribunal Act, 2005;
178. “net worth” shall,—
(a) in relation to a demerged company, mean the aggregate
of the paid-up share capital and general reserves as appearing in the books of
account of the demerged company immediately before the demerger; and
(b) in relation to an undertaking or division
transferred under slump sale, means the value determined in the prescribed
manner;
179. “new investment asset” means the new investment asset within
the meaning of section 53;
180. “New Pension System Trust” means the New Pension System Trust
established on the 27th day of February, 2008 under the provisions of the
Indian Trusts Act, 1882;
181. “non-filer” in relation to a financial year means a person,—
(a) who has not furnished,—
(i) a return of tax bases for the financial year;
and
(ii) a return of tax bases for two immediately
preceding financial years; and
(b) who has not been issued any notice under
section 151 in respect of the relevant financial year and two immediately
preceding financial years;
182. “non-profit organisation” shall have the same meaning
assigned to it in section 96;
183. “non-resident” means a person who is not a resident;
184. “non-resident deductee” means a person who is non-resident in
India and receives any amount which is liable to deduction of tax at source
under Chapter XI;
185. “notice” means the legal instrumentality by which intimation
is provided;
186. “option” in relation to sweat equity shares means a right but
not an obligation, granted to an employee to apply for the sweat equity shares
at a predetermined price;
187. “original investment asset” means an investment asset in
respect of which deduction under section 53 is claimed;
188. “Overseas Depository Bank” means a bank authorised by the
issuing company to issue Global Depository Receipts against issue of Foreign
Currency Convertible Bonds or ordinary shares of the issuing company;
189. “owner” in relation to a house property and land appurtenant
thereto shall include,—
(a) an individual who transfers otherwise than for
adequate consideration any house property to his or her spouse, not being a
transfer in connection with an agreement to live apart, or to a minor child not
being a married daughter;
(b) the holder of an impartible estate;
(c) a member of a co-operative society, company or
other association of persons to whom a building or part thereof is allotted or
leased under a house building scheme of the society, company or association;
and
(d) a person who is allowed to take or retain
possession of any building or part thereof in part performance of a contract of
the nature referred to in section 53A of the Transfer of Property Act, 1882.
190. “paid” shall,—
(a) in relation to “Income from business” or
“Income from residuary sources”, mean incurred or actually paid, according to
the method of accounting on the basis of which the income under those heads are
computed; and
(b) in all other cases, mean actually paid;
191. “participant” means,—
(a) a partner in relation to a firm; or
(b) a member in relation to an association of
persons or body of individuals;
192. “partner” shall have the meaning assigned to it in the Indian
Partnership Act, 1932 and shall include,—
(a) a partner of a limited liability partnership
as defined in the Limited Liability Partnership Act, 2008; and
(b) any person who, being a minor, has been
admitted to the benefits of partnership;
193. “partnership” shall have the meaning assigned to it in the
Indian Partnership Act, 1932 and shall include a limited liability partnership
as defined in the Limited Liability Partnership Act, 2008;
194. “pass-thru entity” means,—
(a) the New Pension System Trust;
(b) mutual fund;
(c) approved provident fund;
(d) approved superannuation fund;
(e) life insurance company;
195. “patent”, “patentee” and “controller” in relation to patent
shall have the meaning respectively assigned to them under section 2 of the
Patents Act, 1970;
196. “pension fund” means a pension fund registered with an
authority specified for this purpose;
197. “permanent account number” means a number allotted to a
person under this Code for the purposes of identification of that person;
198. “permanent establishment” in relation to a non-resident
includes a fixed place of business through which the business of the enterprise
is wholly or partly carried on;
199. “permitted derivative transaction” means any transaction in
derivatives, if—
(a) it is carried out electronically on
screen-based systems of a recognised stock exchange;
(b) it is carried out by a bank or mutual fund or
any other person, through a financial intermediary; and
(c) it is supported by a time stamped contract
note issued by the financial intermediary to every client indicating in the
contract note—
(i) the unique client identity number allotted
under any relevant Act; and
(ii) the permanent account number allotted under
this Code;
200. “permitted financial institution” means,—
(a) a banking company or a scheduled bank;
(b) a non-banking financial company;
(c) a public financial institution;
(d) State financial corporations;
(e) State industrial investment corporations; or
(f) a housing-finance development company;
201. “permitted savings intermediaries” means,—
(a) approved provident fund;
(b) approved superannuation fund;
(c) life insurer; and
(d) New Pension System Trust;
202. “permitted welfare activity” shall have the meaning assigned
to it in section 96;
203. “person” includes—
(a) an individual;
(b) a Hindu undivided family;
(c) a company;
(d) a co-operative society;
(e) a firm;
(f) a non-profit organisation;
(g) an office, or establishment, of Central
Government or the Government of a State;
(h) an association of persons;
(i) a body of individuals;
(j) a local authority;
(k) any other artificial juridical person; and
(l) any other society;
204. “person having a substantial interest in a concern”, with all
its grammatical variation, means—
(a) a person who is the beneficial owner
(including the beneficial ownership held by one or more of his relatives, in
case the person is an individual) of equity shares carrying not less than
twenty per cent of the voting power, at any time during the financial year, in
a concern being a company; and
(b) a person who is, at any time during the
financial year, beneficially entitled (including the income which is
beneficially entitled to one or more of his relative, in case the person is an
individual) to not less than twenty per cent of the income in any other
concern;
205. “person of Indian origin” means a person if he, or either of
his parents, or any of his grand parents, was born in undivided India;
206. “person responsible for making specified payment” means,—
(a) an employer, if the payment is in the nature
of salary;
(b) any person, if the payment is in the nature
specified in column 2 of the Third Schedule or the Fourth Schedule;
207. “person with disability” means,—
(i) a person referred to in clause (t) of
section 2 of the Persons With Disabilities (Equal Opportunities, Protection of
Rights and Full Participation) Act, 1995; or
(ii) clause (j) of section 2 of the National
Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation
and Multiple Disabilities Act, 1999.
208. “person with severe disability” means,—
(i) a person with eighty per cent or more of one
or more disabilities, as referred to in sub-section (4) of section 56 of the
Persons With Disabilities (Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995; or
(ii) a person with severe disability referred to in
clause (o) of section 2 of the National Trust for Welfare of Persons
with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act,
1999.
209. “personal effect” in relation to a capital asset means any
movable property (including wearing apparel and furniture) held for personal
use by the assessee or any member of his family dependant on him, but
excludes,—
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; and
(f) any work of art;
210. “perquisite” means the following amenity, facility, privilege
or service, whether convertible into money or not, provided directly or
indirectly to the assessee by his employer, whether by way of reimbursement or
otherwise :—
(a) the value of any accommodation computed in the
prescribed manner;
(b) any sum payable to effect an assurance on life
or to effect a contract for an annuity;
(c) any sum payable to any permitted savings
intermediaries;
(d) the value of any sweat equity share allotted
or transferred, as on the date on which the option is exercised by the
assessee;
(e) the value of any obligation which, but for
payment by the employer, would have been payable by the assessee, computed in
the prescribed manner; and
(f) the value of any other amenity, facility,
privilege or service, computed in the prescribed manner;
211. “plant” includes ships, vehicles, books, scientific apparatus
and surgical equipment but does not include tea bushes, livestock, buildings
and furniture and fittings;
212. “political party” means a recognised political party under
The Election Symbols (Reservation and Allotment) Order, 1968 issued vide
S.O.2959, dated 31st August, 1968, as amended from time to time.
213. “predecessor” in relation to a business reorganisation means—
(a) the amalgamating company, in the case of
amalgamation;
(b) the merging company in the case of business
reorganisation referred to in sub-clause (b) of clause (44);
(c) the demerged company, in the case of demerger;
or
(d) the unincorporated body or the proprietary
concern, in the case of business reorganisation referred to in sub-clause (a)
of clause (44);
214. “preference shares” means preference shares within the
meaning of section 85 of the Companies Act, 1956;
215. “pre-paid taxes” means tax paid by way of—
(a) tax deduction at source on payment received;
(b) tax collection at source on payment made;
(c) advance-tax;
(d) self-assessment tax; or
(e) foreign tax credit;
216. “prescribed” means prescribed by rules made under this Code;
217. “primary co-operative agricultural and rural development bank”
means a society having its area of operation confined to a taluk and the
principal object of which is to provide for long-term credit for agricultural
and rural development activities;
218. “principal officer” in relation to a person, being a local
authority or any other public body or a company or an unincorporated body,
means—
(a) the secretary, treasurer, manager or agent of
the person, or
(b) any person connected with the management or
administration of the person upon whom the Assessing Officer has served a
notice of his intention of treating him as the principal officer thereof;
219. “private discretionary trust” means any entity, whether
incorporated or not, which fulfils the following conditions :—
(a) the shares of its beneficiaries are
indeterminate or unknown;
(b) it is not a non-profit organisation; and
(c) it is not registered under any law of the
Central, State or Provincial Government for the regulation of the religious
endowments;
220. “profits in lieu of, or in addition to, any salary” includes—
(a) the amount of any compensation due to or
received by an assessee from his employer or former employer at or in
connection with his voluntary retirement or the termination of his employment
or the modification of the terms and conditions relating thereto;
(b) any sum received under a Keyman insurance
policy including the sum allocated by way of bonus on such policy, if any part
of the contribution to the policy is made by his employer or former employer;
and
(c) any amount due to or received, directly or
indirectly, by any assessee from any person—
(i) before his joining any employment with that
person; or
(ii) after cessation of his employment with that
person;
221. “public company” shall have the meaning assigned to it in
section 3 of the Companies Act, 1956;
222. “public financial institution” shall have the meaning
assigned to it in section 4A of the Companies Act, 1956;
223. “public sector bank” means—
(a) the State Bank of India constituted under the
State Bank of India Act, 1955,
(b) a subsidiary bank as defined in the State Bank
of India (Subsidiary Banks) Act, 1959,
(c) a corresponding new Bank constituted under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970, or
(d) a corresponding new Bank constituted under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980;
224. “public sector company” means—
(a) any corporation established by or under any
Central, State or Provincial Act, or
(b) a Government company as defined in section 617
of the Companies Act, 1956;
225. “public servant” shall have the same meaning as in section 21
of the Indian Penal Code, 1860;
226. “rate of exchange” means the rate of exchange determined or
recognised by the Central Government for the conversion of Indian rupee into
foreign currency or vice versa;
227. “rate of tax of the other country” means income-tax and
surcharge or cess thereon, if any, actually paid in the other country in
accordance with the corresponding laws in force in the said country after
deduction of all relief due, but before deduction of any relief due in the said
country in respect of double taxation, divided by the whole amount of the
income as assessed in the said country;
228. “rate in force”, in relation to a financial year means the
rate of income-tax specified for the relevant purpose—
(a) in this Code;
(b) in the Finance Act of the relevant year; or
(c) in the relevant agreement entered into by the
Central Government under section 258;
229. “reassessment” means any assessment of tax base in pursuance
to a notice issued under section 166, whether or not,—
(a) a return of tax bases has been filed before, or
after, the issue of the notice; or
(b) an assessment of the tax base has been made
before the issue of this notice;
230. “recognised stock exchange” means a recognised stock exchange
as referred to in clause (f) of section 2 of the Securities Contracts
(Regulation) Act, 1956 and which fulfils such conditions as may be prescribed
and notified by the Central Government for this purpose;
231. “recognised commodity exchanges” means a “registered
association” as defined in clause (jj) of section 2 of the Forward
Contracts (Regulation) Act, 1952;
232. “registered valuer” means a person registered as such by the
Board for determining the value of any asset in accordance with the procedure
as may be prescribed;
233. “relative”, in relation to an individual, means—
(a) spouse of the individual;
(b) brother or sister of the individual;
(c) brother or sister of the spouse of the
individual;
(d) brother or sister of either of the parents of
the individual;
(e) any lineal ascendant or descendant of the
individual;
(f) any lineal ascendant or descendant of the
spouse of the individual;
(h) spouse of the person referred to in
sub-clauses (b) to (f); or
(g) any lineal descendant of a brother or sister
of either the individual or of the spouse of the individual;
234. “remission or cessation of any liability” shall include the
remission or cessation of any liability,—
(a) by a unilateral act by the assessee by way of
writing off such liability in his account or creating a reserve(by whatever
name called); or
(b) by virtue of there being no transaction with
the creditor during the period of three years from the end of the financial
year in which the last transaction took place;
235. “rent” in relation to a house property means any income
derived, directly or indirectly, from letting of the property;
236. “Reserve Bank of India” means the Bank constituted under
sub-section (1) of section 3 of the Reserve Bank of India Act, 1934;
237. “resident” means a person who is resident in India within the
meaning of section 4;
238. “resident deductee” means a person who is resident and
receives any amount liable to deduction of tax at source under Chapter XI;
239. “resulting company” means—
(a) one or more companies (including a wholly owned
subsidiary thereof) to which the undertaking of the demerged company is
transferred in a demerger; or
(b) any authority, body, local authority or a
company established, constituted or formed as a result of demerger;
240. “royalty” means consideration (including any lump sum
consideration but excluding any consideration which would be the income of the
recipient chargeable under the head “Capital gains”) for—
(a) the transfer of all or any rights (including
the granting of a licence) in respect of a patent, invention, model, design,
secret formula, process, trade mark or similar property;
(b) the imparting of any information concerning
the working of, or the use of, a patent, invention, model, design, secret
formula, process, trade mark or similar property;
(c) the use of any patent, invention, model,
design, secret formula, process, trade mark or similar property;
(d) the imparting of any information concerning
technical, industrial, commercial or scientific knowledge, experience or skill;
(e) the use or right to use of any industrial,
commercial or scientific equipment including ship or aircraft but excluding the
amount, referred to in item numbers 10 and 11 of Table in the Fourteenth
Schedule, which is subjected to tax in accordance with the provision of that
schedule;
(f) the use or right to use of transmission by
satellite, cable, optic fiber or similar technology;
(g) the transfer of all or any rights (including
the granting of a licence) in respect of :—
(i) any copyright, literary, artistic or
scientific work; or
(ii) cinematographic films or work on films, tapes
or any other means of reproduction; or
(iii) live coverage of any event;
(h) the rendering of any services in connection
with the activities referred to in sub-clauses (a) to (g);
241. “Rubber Board” means the Rubber Board constituted under
sub-section (1) of section 4 of the Rubber Board Act, 1947;
242. “rural area” means any area not being an urban area;
243. “safe harbour”, in relation to computation of arm’s length
price, means circumstances in which the income-tax authorities shall accept the
transfer price declared by the assessee;
244. “salary” includes,—
(a) wages;
(b) remuneration;
(c) any allowance, concession or assistance;
(d) any fees or commissions;
(e) perquisites;
(f) profits in lieu of, or in addition to, any
salary;
(g) any advance or arrear of salary;
(h) any allowance granted to the employee to—
(i) meet his personal expenses at the place where
the duties of his office or employment of profit are ordinarily performed by
him or at a place where he ordinarily resides; or
(ii) compensate him for the increased cost of
living;
(i) any allowance or benefit, granted to the
employee to meet expenses wholly, necessarily and exclusively for the performance
of the duties of an office or employment of profit;
(j) any allowance in the nature of personal
allowance granted to remunerate or compensate the assessee for performing
duties of a special nature relating to his office or employment;
(k) any amount receivable, directly or indirectly,
by an employee from his employer, in connection with his voluntary retirement
or termination of service or voluntary separation;
(l) any payment received by an employee in respect
of any period of leave not availed by him;
(m) the contribution made by the employer in the
financial year, to the account of an employee maintained with the permitted
savings intermediaries referred to in sub-section (2) of section 66;
(n) any contribution by the employer to any fund
other than an approved fund or the interest, if any, on such contributions;
(o) any annuity, pension or any commutation
thereof;
(p) any gratuity;
245. “scheduled bank” means any bank listed in the Second Schedule
to the Reserve Bank of India Act, 1934;
246. “Scheduled Caste” and “Scheduled Tribe” shall have the
meanings respectively assigned to them in clauses (24) and (25) of article 366
of the Constitution;
247. “scientific research and development” shall mean systemic
investigation and search in a field of technology, natural or applied science
(including agriculture, animal husbandary or fisheries) if,—
(a) it is carried out by the assessee by means of
experiment or analysis;
(b) it is in the nature of,—
(i) basic research, namely, work undertaken for the
advancement of scientific knowledge without a specific practical application in
view;
(ii) applied research, namely, work undertaken for
the advancement of scientific knowledge with a specific practical application
in view; or
(iii) experimental development, namely, work
undertaken for the purpose of achieving technological advancement for the
purpose of creating new, or improving existing materials, devices, products or
processes, including incremental improvements thereto; and
(c) it is not in the nature of,—
(i) market research or sales promotion;
(ii) quality control or routine testing of
materials, devices, products or processes;
(iii) research in the social sciences or the
humanities;
(iv) prospecting, exploring or drilling for, or
producing, minerals, petroleum or natural gas;
(v) the commercial production of a new or improved
material, device or product or the commercial use of a new or improved process;
(vi) style changes; or
(vii) routine data collection;
248. “security” shall have the meaning assigned to it in clause (h)
of section 2 of the Securities Contracts (Regulation) Act, 1956;
249. “Securities and Exchange Board of India” means the Board
established under section 3 of the Securities and Exchange Board of India Act,
1992;
250. “self-assessment tax” means the tax paid after the financial
year but before filing the return of tax bases;
251. “senior citizen” means an individual resident in India who is
of the age of sixty-five years or more at any time during the financial year;
252. “service” means service of any description which is made
available to potential users and includes the provision of services in
connection with business of any industrial or commercial nature such as
accounting, banking, merchant banking, communication, conveying of news or
information, advertising, entertainment, amusement, education, financing,
insurance, chit funds, real estate, construction, transport, storage,
processing, supply of electrical or other energy, boarding and lodging;
253. “Sikkimese” means,—
(a) an individual, whose name is recorded in the
register maintained under the Sikkim Subjects Regulation, 1961 read with the
Sikkim Subject Rules, 1961 (herein after referred to as the “Register of Sikkim
Subjects”), immediately before the 26th day of April, 1975;
(b) an individual, whose name is included in the
Register of Sikkim Subjects by virtue of the Government of India Order No.
26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number dated
the 8th April, 1991; or
(c) any other individual, whose name does not
appear in the Register of Sikkim Subjects, but it is established beyond doubt
that the name of such individual’s father or husband or paternal grandfather or
brother from the same father has been recorded in that register;
254. “slump sale” means the sale of any undertaking for a lump sum
consideration without values being assigned to the individual assets and
liabilities in such sale, other than the assignment of values to the assets or
liabilities for the sole purpose of payment of stamp duty, registration fees or
other similar taxes or fees;
255. “society” means a society registered under the Societies
Registration Act, 1860 or under any law corresponding to that Act in force in
any part of India;
256. “sold” includes a transfer by way of exchange or a compulsory
acquisition under any law for the time being in force but does not include a
transfer, in a scheme of business reorganisation, of any asset by the
predecessor to the successor;
257. “special modes of acquisition” means,—
(a) acquisition of converted property by a Hindu
Undivided Family; and
(b) acquisition by any person in any of the
following manners,—